20th Sep 2007 11:00
Investec PLC20 September 2007 Investec Limited Investec plcIncorporated in the Republic of South Africa Incorporated in England and WalesRegistration number 1925/002833/06 Registration number 3633621JSE share code: INL JSE share code: INPISIN: ZAE000081949 ISIN: GB00B17BBQ50 20 September 2007 Diversified portfolio of businesses drives continued growth As previously announced, Investec is today hosting an investor pre-closebriefing at 11h00 (UK time) / 12h00 (South African time) which will focus ondevelopments within the group's core business areas in the first half of thecurrent financial year. Overall group performance Operating fundamentals in the majority of our businesses have remained stronginto the first half of the 2008 financial year, despite heightened credit marketvolatility across the globe. As we have outlined previously, our strategy of maintaining a balanced businessmodel and diversified portfolio of businesses remains an important focus andshould enable the group to show continued growth over the reporting period. Weexpect a very strong performance from South Africa and Australia and areasonable performance from the UK which has been marginally impacted by theturmoil in the credit markets. Stephen Koseff, Group Chief Executive, commented: "Our focus on balancing revenue streams and achieving diversity of earnings,both geographically and operationally, has stood the group in good stead overthe period. Furthermore, the group's asset quality remains sound as a result ofdisciplined risk management. Notwithstanding the adverse impacts of difficultglobal credit markets in recent months, we have seen solid business activityacross the group in the first half of this financial year and are well placed todeliver on our financial targets and objectives." Bernard Kantor, Group Managing Director, commented: "The growth momentum experienced in our markets over the last four to five yearsis likely to be tempered over the short term as the global financial servicesindustry takes time to adjust to recent adversity. Our strategy will be toconsolidate our position and create additional operational efficiencies whilecontinuing to grow in areas where opportunities present themselves." Divisional performance Salient features of the operating performance of our core business areas arelisted below. Further details will be provided in the briefing presentationwhich can be viewed on our website. Private Banking • Strong lending turnover and transactional activity continue to drive momentum across all geographies • Very strong performance in South Africa • UK consolidating around previously reported levels after exceptional growth in the prior year • Solid performance from Australia • Since 31 March 2007: o The loan portfolio has increased 11.8% to £7.7bn o Total deposits have increased 12.9% to £6.3bn o Total funds under advice have increased 18.6% to £3bn Private Client Portfolio Management and Stockbroking • Strong performance benefiting from: o higher asset levels and volumes over the period o launch of products generating additional revenue streams • Since 31 March 2007: o Total funds under management (South African and UK) have increased 0.6% to £22bn. (Including £14.4bn relating to Rensburg Sheppards plc - this information has not been updated since the last reporting period) o Total South African funds under management have increased 3.7% to R109.5bn Capital Markets • Total loans and advances have increased 23.4% to £3.8bn since 31 March 2007 • Pipeline and levels of activity have been good across the advisory and lending areas supporting a solid performance in South Africa • Very good performance from Australia which has benefited from the integration of the Rothschild's business • The results of the UK operations are expected to be down as the recent turmoil in the credit markets has impacted the Principal Finance business • Principal Finance o Low exposure to US sub-prime representing 0.4% of group's loan portfolio: • £29mn rated BBB and below (net of fair value adjustments) • £24mn rated A to AAA - bulk in AAA and AA (net of fair value adjustments) • Additional provisions which may not crystallise: £7mn o All instruments are performing and no tranches have been downgraded o Assets held for securitisation: £470mn of which £350mn has been sold for settlement at the end of September 2007. No fair value losses expected • Kensington o Reshaping the business as result of current markets: • Altering the mix of the product offering • Tightening lending criteria • Increasing pricing o Consequence of this strategy will be lower volumes, an alignment of infrastructure and an improvement in margin o We would expect lower profitability from our initial projections for Kensington until market conditions normalise o Lines and facilities in place to support this strategy which includes non-recourse warehousing lines from third party banks and committed forward flow agreements with other financial institutions o Mortgages under management down from £7bn to £6.6bn and weighted average current LTV improving from 71% to 69% since 31 March 2007 o Improving asset quality with % accounts > 90 days in arrears decreasing to 8.96% from 9.4% since 31 March 2007 Investment Banking • Agency and Advisory o Good performance from South Africa - strong deal pipeline in place o UK and Australia - stable corporate finance pipeline in place • Direct Investments and Private Equity o South African Private Equity portfolio has performed very well underpinned by a strong performance from the underlying investments o South African Direct Investments has benefited from a good performance from our empowerment platforms marginally offset by a weaker performance from some of the listed and other unlisted investments o The UK Direct Investments and Private Equity divisions should show an improvement on prior year's performance Asset Management • Earnings growth continues to be enhanced by the momentum of UK and international business • Solid long term investment performance • Significantly widened distribution reach • Since 31 March 2007 assets under management have increased 1.5% to £30.3bn Property Activities • South African Property Activities have performed strongly • Sale of business to Growthpoint (as previously announced) still requires Competition Tribunal approval • Launched African Property Fund jointly with Investec Asset Management • Europe: Fund established to invest in real estate opportunities around the world • Australia: Newly created Property Private Equity business which will focus on property funds management • Since 31 March 2007: o Assets under administration have increased 9.3% to R28.3bn (including Growthpoint) Other Activities • Central Funding o higher cash balances underpin stronger performance across all geographies • Central Costs o in line with the prior year Other information • Effective tax rate: expected to be between 26% to 27% • Increase in earnings attributable to minorities: o Largely due to improved performance of partially owned investments that have been consolidated • Weighted number of shares in issue for the six months to 30 September 2007 expected to be approximately 582.5 million Capital • We remain well capitalised (excluding impact of Growthpoint): Capital adequacy ratio (as at 31 August 2007)Investec plc 18.3%Investec Bank UK Limited 19.2%Investec Limited 14%Investec Bank Limited 13.5% • As at 14 September 2007 we held substantial cash and near cash around the world o South Africa: R34bn o UK and Europe: £2.2bn o Australia: A$1.1bn Asset quality • Remains sound - no change in strategy regarding our target market • Net defaults remain largely unchanged since March Notes: 1. Key trends set out above, unless stated otherwise, relate to the five months ended 31August 2007, and compare the first half of the 2007 financial year (1H07) to the first half of the 2008 financial year (1H08) 2. Please note that matters discussed in the briefing and highlighted above may contain forward looking statements which are subject to various risks and uncertainties and other factors, including, but not limited to: - the further development of standards and interpretations under International Financial Reporting Standards (IFRS) applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS. - domestic and global economic and business conditions. - market related risks. • A number of these factors are beyond the group's control. • These factors may cause the group's actual future results, performance or achievements in the markets in which it operates to differ from those expressed or implied. • Any forward looking statements made are based on the knowledge of the group at today's date. 3. Our reporting currency is Pounds Sterling. Certain of our operations are conducted by entities outside the UK. The results of operations and the financial condition of our individual companies are reported in the local currencies in which they are domiciled, including Rands, Australian Dollars and Euros. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in our combined consolidated financial statements. In the case of the income statement, the weighted average rate for the relevant period is applied and, in the case of the balance sheet, the relevant closing rate is used. The following table sets out the movements in certain relevant exchange ratesagainst Pounds Sterling over the period: 31 Aug 2007 31 Mar 2007 30 Sept 2006Currency per £1.00 Period end Average Period end Average Period end AverageSouth AfricanRand 14.48 14.20 14.20 13.38 14.49 12.66AustralianDollar 2.47 2.39 2.42 2.47 2.50 2.46Euro 1.48 1.47 1.47 1.47 1.47 1.46 Presentation details: The briefing starts at 11h00 (UK times) / 12h00 (South African time) and will bebroadcast live via video conference from the group's offices in Johannesburg toLondon. The briefing will also be available via a live and recorded telephoneconference call, a live and delayed video webcast, a delayed podcast and adelayed Mp3. Further details in this regard can be found on the website at:www.investec.com Timetable: Interim period end: 30 September 2007 Release of interim results: 15 November 2007 Financial year end: 31 March 2008 For further information please contact: Investec Investor Relations UK: +44 (0) 207 597 5546 South Africa: +27 (0) 11 286 7070 [email protected] About Investec Investec is an international specialist banking group that provides a diverserange of financial products and services to a niche client base in threeprincipal markets, the United Kingdom, South Africa and Australia as wellas certain other countries. The group was established in 1974 and currently hasapproximately 5 000 permanent employees. Investec focuses on delivering distinctive profitable solutions for its clientsin five core areas of activity namely, Private Client Activities, CapitalMarkets, Investment Banking, Asset Management and Property Activities. In July 2002 the Investec group implemented a dual listed company structure withlistings on the London and Johannesburg Stock Exchanges. Management and staffown approximately 15% of the equity share capital of the group. The combinedgroup's current market capitalisation is currently approximately £3.2bn. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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