Investec plc and Investec Limited (LON:INVP) today announced unaudited combined consolidated financial results for the six months ended 30 September 2018
This announcement covers the statutory results of the Investec group for the six months ended 30 September 2018.
Overview of results
· The group has delivered a sound operational performance.
· This is notwithstanding a challenging operating environment. Rising US interest rates, the threat of trade wars, concerns over global growth prospects,weak economic growth in South Africa and Brexit-related uncertainty in the UK have contributed to this.
· The Asset Management and Wealth & Investment businesses have grown funds under management supported by strong net flows of GBP4.8 billion.
· The Specialist Banking business saw a substantial reduction in impairments as well as revenue growth supported by reasonable levels of client activity.
· The cost to income ratio improved marginally. Revenue growth and cost containment remain priorities.
· A solid base of annuity revenue has continued to support earnings through varying market conditions.
Overall group performance
Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests (operating profit) increased 14.2% to GBP359.3 million (2017: GBP314.6 million) – an increase of 17.6% on a currency neutral basis. Overall group results have been negatively impacted by the depreciation of the average Rand: Pounds Sterling exchange rate of approximately 4.1% over the period. The combined South African businesses reported operating profit 5.0% ahead of the prior period (in Rands), whilst the combined UK and Other businesses posted a 40.2% increase in operating profit in Pounds Sterling.
Salient features of the period under review are:
· Adjusted earnings attributable to shareholders before goodwill, acquired intangibles and non-operating items increased 8.2% to GBP265.3 million (2017: GBP245.3 million) – an increase of 11.1% on a currency neutral basis.
· Adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 6.4% from 26.6 pence to 28.3 pence – an increase of 9.4% on a currency neutral basis.
· Annuity income as a percentage of total operating income amounted to 75.5% (2017: 76.4%).
· The total income statement impairment charge reduced materially to GBP31.0 million (2017: GBP59.6 million). The annualised credit loss charge as a percentage of average gross core loans and advances subject to expected credit losses has improved to 0.34% (2017: 0.52%).
· The annualised return on adjusted average shareholders’ equity increased to 13.4% from 12.1% at 31 March 2018.
· Third party assets under management increased 3.7% to GBP166.5 billion (31 March 2018: GBP160.6 billion) – an increase of 7.2% on a currency neutral basis.
· Customer accounts (deposits) decreased 2.1% to GBP30.3 billion (31 March 2018: GBP31.0 billion) – an increase of 4.3% on a currency neutral basis.
· Core loans and advances decreased 3.7% to GBP24.2 billion (31 March 2018: GBP25.1 billion) – an increase of 2.4% on a currency neutral basis.
· The group maintained a sound capital position with common equity tier one (CET1) ratios of 10.4% for Investec plc and 10.3% for Investec Limited, ahead of the group’s CET1 ratio target. The group is comfortable with its CET1 ratio target at a 10% level, as its leverage ratios for both Investec Limited and Investec plc are above 7%.
· Liquidity remains strong with cash and near cash balances amounting to GBP12.5 billion.
· The board declared a dividend of 11.0 pence per ordinary share (2017: 10.5 pence) resulting in a dividend cover based on the group’s adjusted EPS before goodwill and non-operating items of 2.6 times (2017: 2.5 times), consistent with the group’s dividend policy.
· The proposed demerger and separate listing of Investec Asset Management (still subject to regulatory and shareholder approvals) is progressing well.
Fani Titi and Hendrik du Toit, Joint Chief Executive Officers of Investec said:
“The outgoing executives have handed over a resilient business with positive momentum and good growth potential. It is now up to us to implement our strategy of simplification and greater focus, involving the demerger and separate listing of the Asset Management business and the positioning of the Specialist Bank and Wealth & Investment businesses for sustainable long-term growth. Revenue growth, capital allocation and cost discipline remain high on our agenda.”