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Cape Town - The depreciation of the rand to the pound has negatively impacted the interim results of international specialist bank and asset manager Investec for the six months to September 30 2015, it announced on Thursday.
The rand depreciated on average about 8.2% against the pound over this period.
The interim results include those of Investec plc and Investec Limited [JSE:INL] as the group has a dual listed company structure with listings on the London and Johannesburg Stock Exchanges. The combined group’s current market capitalisation is about £4.7bn.
Investec group said on Thursday it is positioning itself for sustained growth with an enhanced operational focus. The group said it has successfully implemented its key strategic initiatives and continues to develop its core businesses in its principal markets.
"The macro environment is uncertain as global equity markets remain volatile and, in South Africa, social and economic challenges persist," the group said.
Stephen Koseff, CEO of Investec, said the group is, however, well placed to continue its growth despite the rand weakness and market volatility.
Positive business momentum contributed to improved results, according to the group. These include sustained improvement in the operating environment in the UK, strong growth in loan portfolios and client activity in South Africa (notwithstanding an overall weakness in macro-economic conditions) and a good performances by the specialist banking, asset management and wealth and investment businesses.
The group has also continued investment in infrastructure and digital platforms, grown and enhanced its international offering and diversified portfolio.
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“We are pleased with the progress shown by the group, with profits comfortably ahead of last year. In particular, our specialist banking businesses are benefiting from positive business momentum, as reflected in the growth in our loan books and increased client base," Stephen Koseff, CEO of Investec.
Operating profit in the specialist banking business increased 29.1%. The group said the South African specialist banking business reported results well ahead of the prior period with operating profit before tax increasing 21% from R2.1bn to R2.6bn.
"Our investment to digitise and internationalise the wealth and investment operation will place it on a strong footing to continue its growth trajectory, while good net inflows demonstrate the resilience and diversification of our asset management franchise," said Koseff. Wealth and investment’s operating profit decreased by 0.5% and asset management’s operating profit declined 8.0%.
The operating profit of the combined South African businesses rose 13.0% in rand, while the combined UK and other businesses posted a 37.8% increase in operating profit in pounds.
READ: Investec sees higher profit even as rand weakens
The group said, in order to present a more meaningful view of the its’s performance, the results are presented on an ongoing basis, excluding items that in management’s view could distort the comparison of performance between periods. Accordingly, items excluded from underlying profit - namely the results of the businesses sold - include Investec Bank (Australia), the UK Kensington business and the Start (Irish) mortgage business as well as the remaining legacy business in the UK.
Statutory operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests, increased 16.1% to £279.4m compared to the six months ended September 30 2014 - an increase of 22.5% on a currency neutral basis. Statutory adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 13.2% from 19.7 pence to 22.3p – an increase of 19.8% on a currency neutral basis.
Ongoing operating profit increased 16.5% to £315m compared to the six months ended September 30 2014 – an increase of 22.2% on a currency neutral basis. Ongoing adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 13.3% from 22.5p to 25.5p – an increase of 19.1% on a currency neutral basis. Customer accounts (deposits) decreased 4.2% to £21.7bn compared to March 31 2015 - an increase of 4.5% on a currency neutral basis. Core loans and advances decreased 2.5% to £16.1bn compared to March 31 2015 - an increase of 7.1% on a currency neutral basis.
The board declared a dividend of 9.5p per ordinary share.
In the South African businesses there was a loan growth of 9.5% to R199.4bn compared to March 31 2015 and deposits increased by 13.0% to R250.1bn compared to March 31 2015. The group said in the South African businesses private client transactional and professional finance activities performed well as well as the corporate lending, treasury and structuring businesses, the property fund management business and the investment portfolio.
The South African wealth and investment business posted an operating profit of R231mn, an increase of 19.1% over the prior period, benefiting from higher average funds under management and solid discretionary and annuity asset net inflows, according to a group statement.
The group also mentioned that in South Africa a new investment vehicle, Investec Equity Partners (IEP), has been created in which Investec will hold a 45% stake. Investec Principal Investments will transfer certain portfolio companies to this new vehicle and IEP will raise an additional R10bn of new equity and debt capital to grow the underlying companies transferred and to take advantage of future investment opportunities. This transaction is subject to regulatory approval.
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