14th Sep 2018 08:06
LONDON (Alliance News) - Investec PLC said on Friday its interim profit is expected to be ahead of last year, as it also announced plans to demerge and publicly list its Asset Management business.
Following the conclusion of a strategic review, the company said that there are "compelling" linkages between its Specialist Banking and Wealth & Investment business. However, there are "limited synergies" between both of these divisions and Investec Asset Management.
Therefore, the board has decided to demerge and publicly list the asset management unit.
"The board believes that this transaction simplifies the group and focuses IAM and the remaining group on their respective growth paths, which will enhance the long-term prospects and potential of both businesses for the benefit of their shareholders, clients and employees," Investec said in a statement on Friday.
The asset management unit had third party assets under management of GBP109 billion as at August 31.
Investec said its strategy going forward is to drive improved returns through growing market share in its niche businesses, implementing cost efficiency initiatives and driving further collaboration between the Specialist Banking and Wealth & Investment businesses.
The demerger is expected to complete within the next twelve months. It is intended that the asset management business will be listed on the London Stock Exchange with an inward listing in Johannesburg.
"The IAM management stake in the company will be retained and the remaining group may retain a minority stake in IAM. Post the implementation of the transaction, shareholders of the Investec group will have a direct shareholding in IAM in addition to their holding in the remaining group," explained Investec.
As first announced in February this year, Fani Titi and Hendrik du Toit will become joint chief executives of Investec at the start of October. Kim McFarland also will become an executive director on that date.
Stephen Koseff and Bernard Kantor will step down from their roles as CEO and managing director, respectively, on October 1. From that date they will serve as executive directors to ensure a smooth handover.
Following the implementation of the demerger, Titi will lead the remaining group and du Toit will lead the asset management unit. The structure and composition of the boards of both Investec and the demerged unit will be decided in due course, the company added.
In a separate pre-close update, Investec said that, though its first half saw "macro challenges" in both South Africa and the UK, operating profit for the period is expected to be above last year.
During the six months ending September 30, South Africa entered into a technical recession while Brexit uncertainty "persisted" in the UK.
Against this backdrop, the Asset Management business is expected to report results ahead of the prior period, while the Wealth & Investment business is expected to report results behind last year.
"Both divisions have benefited from higher levels of average funds under management supported by favourable equity markets and sound net inflows," said Investec.
The Specialist Banking business is also expected to report results ahead of last year. Within this, the UK Specialist Banking business is expected to report results "well ahead" while the South African unit performed in line with the prior period in rand terms.
Group results were dented by the depreciation of yjr rand against the pound, the company added.
Nonetheless, operating profit for the period is expected to be above last year with revenue "moderately ahead".
Costs are expected to be higher year-on-year due to growth in its headcount to support both activity levels and increased regulatory requirements.
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