INP / INL - Investec - Unaudited consolidated financial results in Pounds
Thu, 13 Nov 2008
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INL INP
INP / INL - Investec - Unaudited consolidated financial results in Pounds
Sterling for the six months to 30 September 2008 and dividend declaration
Investec plc Investec Limited
(Registration number (Registration number
3633621) 1925/002833/06)
JSE Code: INP JSE Code: INL
ISIN: GB00B17BBQ50 ISIN: ZAE000081949
Registered office Registered office
2 Gresham Street 100 Grayston Drive
London, EC2V 7QP Sandown
United Kingdom Sandton 2196
Transfer secretaries Transfer secretaries
Computershare Investor Computershare Investor
Services (Pty) Ltd Services (Pty) Ltd
70 Marshall Street 70 Marshall Street
Johannesburg, 2001 Johannesburg, 2001
Company secretary: D Miller+ Company secretary: B Coetsee
Investec plc and Investec Limited (combined results)
Unaudited consolidated financial results in Pounds Sterling for the six months
to 30 September 2008
Salient Features
30 Sept. 30 Sept. % 31 March
2008 2007 Change 2008
Operating profit before
241,758 244,535 (1.1%) 508,717
goodwill, non-operating
items, taxation and after
minorities (GBP`000)
Adjusted earnings before 165,632 160,858 3.0% 344,695
goodwill and non-
operating items (GBP`000)
Adjusted earnings per 26.3 27.3 (3.7%) 56.9
share (before goodwill
and non-operating items)
(pence)
Earnings attributable to 189,504 182,624 3.8% 391,558
shareholders (GBP`000)
Earnings per share 25.6 26.9 (4.8%) 57.7
(pence)
Headline earnings per 25.4 25.8 (1.6%) 49.7
share (pence)
Dividends per share 8.0 11.5 (30.4%) 25.0
(pence)
Dividends per share 128.0 159.5 (19.8%) 361.5
(cents)
Combined consolidated income statement
6 months to 6 months to Year to
30 Sept. 30 Sept. 31 March
GBP`000 2008 2007 2008
Interest income 1,335,403 789,780 2,083,380
Interest expense (991,775) (566,678) (1,499,960)
Net interest income 343,628 223,102 583,420
Fee and commission income 332,610 312,940 614,357
Fee and commission expense (30,822) (35,238) (63,061)
Principal transactions 82,298 108,492 276,705
Operating income from 7,724 6,369 12,138
associates
Investment income on assurance 26,682 57,375 89,593
activities
Premiums and reinsurance 13,106 29,446 40,849
recoveries on insurance
contracts
Other operating (loss)/income (13,744) 28,142 50,043
Other income 417,854 507,526 1,020,624
Claims and reinsurance premiums (37,753) (83,375) (120,358)
on insurance business
Total operating income net of 723,729 647,253 1,483,686
insurance claims
Impairment losses on loans and (76,780) (11,738) (114,185)
advances
Operating income 646,949 635,515 1,369,501
Administrative expenses (405,480) (371,245) (807,500)
Depreciation and amortisation (14,439) (10,019) (24,330)
of property, equipment and
software
Operating profit before 227,030 254,251 537,671
goodwill
Goodwill - - (62,765)
Operating profit 227,030 254,251 474,906
Profit on disposal of group - - 72,855
operations
Profit before taxation 227,030 254,251 547,761
Taxation (52,254) (61,911) (127,249)
Profit after taxation 174,776 192,340 420,512
Earnings attributable to (14,728) 9,716 28,954
minority interests
Earnings attributable to 189,504 182,624 391,558
shareholders
174,776 192,340 420,512
Earnings attributable to 189,504 182,624 391,558
shareholders
Goodwill - - 62,765
Profit on disposal of group - - (64,345)
operations
Preference dividends paid (28 749) (24,217) (41,779)
Additional earnings 4,877 2,451 (3,504)
attributable to other equity
holders
Adjusted earnings before 165,632 160,858
344,695
goodwill and non-operating
items
Adjustments to derive headline (6,000) (9,175) (43,196)
earnings
Headline earnings 159,632 151,683 301,499
Earnings per share (pence)
- basic 25.6 26.9 57.7
- diluted 24.5 24.8 54.0
Adjusted earnings per share
(pence)
- basic 26.3 27.3 56.9
- diluted 25.2 25.2 53.2
Headline earnings per share
(pence)
- basic 25.4 25.8 49.7
- diluted 24.3 23.8 46.6
Dividends per share 8.0 11.5 25.0
Number of weighted average 629.0 589.0 606.2
shares
- basic (millions)
Combined consolidated cash flow statement
6 months to 6 months to Year to
30 Sept. 30 Sept. 31 March
GBP`000 2008 2007 2008
Cash inflows from operations 284,850 253,562
610,450
Increase in operating assets (1,163,368) (106,769) (655,805)
Increase in operating 666,641 319,089 1,080,433
liabilities
Net cash (outflow)/inflow (211,877) 465,882 1,035,078
from operating activities
Net cash outflow from (22,981) (27,054) (65,642)
investing activities
Net cash outflow from (83,206) (93,696) (54,893)
financing activities
Effects of exchange rate 53,136 24,999 (97,791)
changes on cash and cash
equivalents
Net (decrease)/increase in (264,928) 370,131 816,752
cash and cash equivalents
Cash and cash equivalents at 1,951,876 1,135,124 1,135,124
the beginning of the period
Cash and cash equivalents at 1,686,948 1,505,255 1,951,876
the end of the period
Cash and cash equivalents is defined as including: cash and balances at central
banks, on demand loans and advances to banks and cash equivalent advances to
customers (all of which have a maturity profile of less than three months).
Combined consolidated balance sheet at
30 Sept. 31 March 30 Sept.
GBP`000 2008 2008 2007
Assets
Cash and balances at central banks 410,744 788,472 163,515
Loans and advances to banks 2,574,796 2,153,773 2,349,889
Cash equivalent advances to 484,996 504,382 686,623
customers
Reverse repurchase agreements and 1,124,368 794,153 1,172,429
cash collateral on securities
borrowed
Trading securities 2,134,927 1,984,580 2,029,407
Derivative financial instruments 1,261,730 1,305,264 872,115
Investment securities 809,348 1,130,872 1,940,166
Loans and advances to customers 13,882,520 12,249,759 11,298,193
Loans and advances to customers - 1,697,373
1,796,376 1,757,422
Kensington warehouse assets
Securitised assets 5,547,412 6,082,975 6,664,984
Interest in associated 87,045 82,576 77,412
undertakings
Deferred taxation assets 87,259 84,493 69,767
Other assets 1,001,754 882,209 991,610
Property and equipment 150,468 141,352 134,235
Investment properties 161,207 134,975 98,081
Goodwill 273,928 271,932 317,137
Intangible assets 31,584 31,506 38,947
31,721,459 30,419,649 30,661,932
Other financial instruments at
fair value through income in
respect of
- liabilities to customers 3,308,208 2,878,894 3,159,979
- assets related to reinsurance 909,121 805,009 974,189
contracts
35,938,788 34,103,552 34,796,100
Liabilities
Deposits by banks 3,703,112 3,489,032 2,943,203
Deposits by banks - Kensington 1,389,603 1,778,438 1,641,177
warehouse funding
Derivative financial instruments 862,124 881,577 680,389
Other trading liabilities 451,856 450,580 357,781
Repurchase agreements and
cash 1,165,651 382,384 561,469
collateral on securities lent
Customer accounts 12,898,703 12,133,120 12,315,991
Debt securities in issue 875,818 777,769 1,138,820
Liabilities arising on 5,371,746 5,760,208 6,358,378
securitisation
Current taxation liabilities 125,561 132,657 108,975
Deferred taxation liabilities 98,233 79,172 64,493
Other liabilities 1,308,836 1,279,372 1,348,016
Pension fund liabilities - - 1,200
28,251,243 27,144,309 27,519,892
Liabilities to customers under 3,288,073 2,862,916 3,138,415
investment contracts
Insurance liabilities, including 20,135 15,978 21,564
unit-linked liabilities
Reinsured liabilities 909,121 805,009 974,189
32,468,572 30,828,212 31,654,060
Subordinated liabilities 1,110,783 1,065,321 984,146
(including convertible debt)
33,579,355 31,893,533 32,638,206
Equity
Called up share capital 177 177 176
Share premium 1,399,993 1,360,450 1,356,826
Treasury shares (126,955) (114,904) (120,538)
Equity portion of convertible - 2,191 2,191
instruments
Perpetual preference shares 283,668 272,335 294,698
Other reserves (66,665) (42,057) 44,359
Profit and loss account 574,250 433,012 280,159
Shareholders` equity excluding 2,064,468 1,911,204 1,857,871
minority interests
Minority interests 294,965 298,815 300,023
- Perpetual preferred securities 257,134 251,637 246,272
issued by subsidiaries
- Minority interests in partially 37,831 47,178 53,751
held subsidiaries
Total equity 2,359,433 2,210,019 2,157,894
Total liabilities and equity 35,938,788 34,103,552
34,796,100
A geographical breakdown of business operating profit for the 6 months to 30
September 2008
United
Kingdom
Southern and Other Total
GBP`000 Africa Europe Australia Geographies group
Private Banking 22,614 35,080 5,532 - 63,226
Private Client
Portfolio
Management and 6,549 6,579 - - 13,128
Stockbroking
Capital Markets 31,212
39,488 1,430 - 72,130
Investment Banking 29,402 1,199 (2,045) - 28,556
Asset Management 22,495 11,189 - - 33,684
Property Activities 11,173 (363) 334 - 11,144
Group Services and 34,199 (18,287) 3,978 - 19,890
Other
Operating profit after 157,644 74,885 9,229 - 241,758
minorities
Minority interest (14,728)
Operating profit 227,030
A geographical breakdown of business operating profit for the 6 months to 30
September 2007
United
Kingdom
Southern and Other Total
GBP`000 Africa Europe Australia Geographies group
Private Banking 22,878 51,778 11,038 - 85,694
Private Client
Portfolio
Management and 8,369 5,998 - - 14,367
Stockbroking
Capital Markets 32,093 5,939 4,667 - 42,699
Investment 35,876 4,769 4,450 - 45,095
Banking
Asset 24,330 11,873 - - 36,203
Management
Property 11,959 (337) (136) - 11,486
Activities
Group Services 17,491 (9,548) 1,012 36 8,991
and Other
Operating 152,996 70,472 21,031 36 244,535
profit after
minorities
Minority 9,716
interest
Operating 254,251
profit
Summarised consolidated statement of total recognised income and
expenses
6 months to 6 months to Year to
30 Sept. 30 Sept. 31 March
GBP`000 2008 2007 2008
Profit after taxation 174,776 192,340 420,512
Fair value movements on 342 (16,279) (38,907)
available for sale assets
Foreign currency movements 64,474 19,978 (79,591)
Pension fund actuarial gains - - 7,619
Total recognised income and 239,592 196,039 309,633
expenses
Total recognised income and (4,022) 14,563 17,365
expenses attributable to
minority
shareholders
Total recognised income and 203,532 154,734 270,327
expenses attributable to
ordinary shareholders
Total recognised income and 40,082 26,742 21,941
expenses attributable to
perpetual preferred
securities
239,592 196,039 309,633
Summarised consolidated statement of changes in equity
6 months to 6 months to Year to
30 Sept. 30 Sept. 31 March
GBP`000 2008 2007 2008
Balance at the beginning of the 2,210,019 1,820,416 1,820,416
period
Foreign currency adjustments 64,474 19, 978 (79,591)
Retained profit for the period 189,504 182,624 391,558
attributable to ordinary
shareholders
Retained (loss)/profit for the (14,728) 9,716 28,954
period attributable to minority
interests
Fair value movements on available 342 (16,279) (38,907)
for sale assets
Transfer to pension fund deficit - - 7,619
Total recognised
gains and losses 239,592 196,039 309,633
for the period
Share based payments adjustments 21,857 16,638 39,182
Dividends paid to ordinary (89,092) (74,226) (145,926)
shareholders
Dividends paid to minority (28,749) (24,217) (41,779)
shareholders
Issue of ordinary shares 22,162 235,085 230,664
Share issue expenses - (65) (65)
Movement of treasury shares (12,051) (19,305) (5,625)
Cash flow hedge movements (4,477) - -
Issue of equity instruments by - 7,529 6,777
subsidiaries
Dividends and capital reductions - - (3,923)
paid to minorities
Movement of minorities on 172 - 665
disposals and acquisitions
Balance at the end of the period 2,359,433 2,157,894 2,210,019
Commentary
Investec plc and Investec Limited (combined results)
Unaudited consolidated financial results in Pounds Sterling for the six months
ended 30 September 2008.
Overall performance
The Investec group reports results for the six months ended 30 September 2008
which are stable and consistent with the same period in the previous
year. The
group`s strategy of maintaining a solid recurring revenue base; geographical and
operational diversity; and strict management of liquidity and risk has enabled
it to navigate through the present challenging operating environment. The
conditions have however, negatively impacted activity levels and credit loss
ratios, resulting in a 3.7% decline in adjusted earnings per share (EPS) before
goodwill and non-operating items to 26.3 pence (2007: 27.3 pence).
The main features of the period under review are:
- Operating profit before goodwill, non-operating items and taxation and after
minorities ("operating profit") decreased 1.1% to GBP241.8 million (2007:
GBP244.5 million).
- Operating profit before impairment losses on loans and advances increased
24.3% to GBP318.5 million (2007: GBP256.3 million).
- Adjusted
earnings attributable to shareholders before goodwill and non-
operating items increased 3.0% to GBP165.6 million (2007: GBP160.9 million).
- Earnings attributable to shareholders after goodwill and non-operating items
increased 3.8% to GBP189.5 million (2007: GBP182.6 million).
- The UK and South African operations posted increases in operating profit of
6.3% and 3.0%, respectively. The Australian operations recorded operating profit
56.1% behind the prior period. The group remains geographically diversified with
the UK and Australian operations contributing 34.8% (2007: 37.4%) of total
operating profit.
- Recurring income as a percentage of total operating income amounts to 74.3%
(2007: 62.7%).
- Annualised return on adjusted average shareholders` equity decreased to 19.3%
(2007: 23.9%).
- Net asset value per share increased to 279.4 pence (31 March 2008: 260.6
pence) and net tangible asset value per share (which excludes goodwill and
intangible assets) increased to 233.2 pence (31 March 2008: 215.0 pence).
- The ratio of total operating expenses to total operating income improved to
58.0% (2007: 58.9%).
- Core loans and advances to customers increased 13.4% to GBP14.6 billion (31
March 2008: GBP12.8 billion) with gross defaults (pre collateral) as a
percentage of core loans and advances increasing to 2.5% (2007:1.7%).
- Third party assets under management increased 1.4% to GBP53.5 billion (31
March 2008: GBP52.8 billion).
- Customer accounts (deposits) increased 6.3% to GBP12.9 billion (31 March 2008:
GBP12.1 billion).
- The board declared a dividend of 8.0 pence per ordinary share (2007: 11.5
pence). Given the challenging operating environment the board has deemed it
prudent to increase the upper end of the dividend cover range from 2.3 to 3.5
times.
Business unit review
Private Client Activities
Private Client Activities, comprising Private Bank and Private Client Portfolio
Management and Stockbroking divisions, reported a decline in operating profit of
23.7% to GBP76.4 million (2007: GBP100.1 million).
- Private Banking
Operating profit from the Private Banking division decreased by 26.2% to GBP63.2
million. (2007: GBP85.7 million). Higher average advances and a diversified set
of revenues
supported a 9.9% increase in operating income. The South African
business performed well whilst the UK and Australia experienced lower levels of
activity. Impairment losses on loans and advances have increased in all
geographies as a result of the weaker credit environment. The private client
core lending book grew by 11.0% to GBP9.9 billion (31 March 2008: GBP8.9
billion) and the division increased its retail deposit book by 1.5% to GBP6.7
billion (31 March 2008: GBP6.6 billion). Funds under advice decreased 2.1% to
GBP3.6 billion (31 March 2008: GBP3.7 billion).
- Private Client Portfolio Management and Stockbroking
Private Client Portfolio Management and Stockbroking reported a decrease in
operating profit of 8.6% to GBP13.1 million (2007: GBP14.4 million). The Private
Client business in South Africa was negatively impacted by lower market volumes
and the absence of performance fees on
alternative investments. Funds under
ma
