| Thu 21 May 2015, 10:15 | | INVESTEC PLC - Unaudited combined consolidated fin |
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INL INPR INP 201505210009A
Unaudited combined consolidated financial results for the year ended 31 March 2015
Investec plc
Incorporated in England and Wales
(Registration number 3633621)
JSE share code: INP
LSE share code: INVP
ISIN: GB00B17BBQ50
Investec Limited
Incorporated in the Republic of South Africa
Registration number 1925/002833/06)
JSE share code: INL
NSX share code: IVD
BSE share code: INVESTEC
ISIN: ZAE000081949
Investec plc and Investec Limited
(combined results)
Unaudited combined consolidated
financial results for the year ended
31 March 2015
Investec, the international specialist bank and asset manager, announces today its results
for the year ended 31 March 2015
This announcement covers the results of the Investec group for the year ended
31 March 2015.
BASIS OF PRESENTATION
Statutory basis
Statutory information is set out in a separate section in this announcement.
The sale of businesses during the financial year (further detail is provided in
the "Notes to the commentary section") have had a significant effect on the
comparability of the group's financial position and results. As a result, comparison
on a statutory basis of the 2015 results with 2014 would be less meaningful.
Ongoing basis
In order to present a more meaningful view of the group'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. Based on this
principle, the following items are excluded from underlying profit:
- the results of the businesses sold i.e. Investec Bank (Australia) Limited, the
UK Kensington business and the Start (Irish) mortgage business;
- the remaining legacy business in the UK.
A reconciliation between the statutory and ongoing income statement is provided.
Unless the context indicates otherwise, all comparatives included in the
commentary relate to the year-ended 31 March 2014. Group results have been
negatively impacted by the depreciation of the Rand: Pounds Sterling exchange
rate of 10.5% over the period. Amounts represented on a currency neutral basis
for income statement items assume that the average exchange rates of the
group's relevant exchange rates, remain the same for the year to 31 March 2015
when compared to the year to 31 March 2014.
Overview of the results
DELIVERING ON THE GROUP'S STRATEGIC OBJECTIVES – CONTINUED TO
GROW CORE FRANCHISES AND SIMPLIFIED THE SPECIALIST BANKING
BUSINESS THROUGH RESTRUCTURING AND STRATEGIC SALES
- Continued investments in Asset Management and Wealth & Investment
platforms – supported net inflows in excess of GBP5.8 billion.
- The core corporate banking franchise in both the UK and South Africa
performed well, benefiting from increased client activity.
- The Private Banking and Wealth & Investment businesses in South Africa
further entrenched their position as one of the leading integrated private client
businesses in the country, successfully launching a number of new products,
broadening their client base and leveraging their global platform ("One Place").
- The UK Private Banking business enhanced its offering through the launch
of its Private Bank Account and the development of its online and digital
platforms.
- Geographical and operational diversity continued to support a high recurring
income base with a sound balance of earnings generated between capital
light businesses and capital intensive businesses.
STATUTORY OPERATING PROFIT SALIENT FEATURES
- Statutory operating profit before goodwill, acquired intangibles, non-operating
items and taxation and after other non-controlling interests ("operating profit")
increased 9.4% to GBP493.2 million (2014: GBP450.7 million) – an increase
of 18.0% on a currency neutral basis.
- Statutory adjusted earnings per share (EPS) before goodwill, acquired
intangibles and non-operating items increased 4.0% from 37.9 pence to
39.4 pence – an increase of 12.4% on a currency neutral basis.
- The group posted a non-operating net loss after tax of GBP113.7 million on
the sale of subsidiaries.
SOLID PERFORMANCE FROM THE ONGOING BUSINESS
- Ongoing operating profit increased 15.0% to GBP580.7 million
(2014: GBP504.9 million) – an increase of 22.6% on a currency neutral basis.
- Ongoing adjusted EPS before goodwill, acquired intangibles and non-
operating items increased 10.2% from 43.1 pence to 47.5 pence – an
increase of 17.9% on a currency neutral basis.
- Third party assets under management increased 13.7% to GBP124.1 billion
(2014: GBP109.2 billion).
- Customer accounts (deposits) increased 7.3% to GBP22.6 billion
(2014: GBP21.1 billion).
- Core loans and advances increased 15.4% to GBP16.5 billion
(2014: GBP14.3 billion).
CONTINUED TO ACTIVELY MANAGE DOWN THE UK LEGACY PORTFOLIO
- The legacy portfolio reduced from GBP3.4 billion at 31 March 2014
to GBP0.7 billion largely through strategic sales (mentioned above),
redemptions, write-offs and transfers to the ongoing book on the back
of improved performance in these loans.
- The legacy business reported a loss before taxation of GBP107.7 million
(2014: GBP69.1 million) as the group accelerated the clearance of the
portfolio, which resulted in an increase in impairments on these assets.
MAINTAINED A SOUND BALANCE SHEET
- Capital remained well in excess of current regulatory requirements. Investec
Limited should achieve a common equity tier 1 ratio target of above 10%
by March 2016 and Investec plc already achieves this target. The group is
comfortable with its common equity tier 1 ratio target at a 10% level, as its
leverage ratios for both Investec Limited and Investec plc are well above 7%.
- Liquidity remained strong with cash and near cash balances amounting to
GBP10.0 billion.
DIVIDEND INCREASE OF 5.3%
- The board proposes a final dividend of 11.5 pence per ordinary share
equating to a full year dividend of 20.0 pence (2014: 19.0 pence) resulting in a
dividend cover based on the group's adjusted EPS before goodwill and non-
operating items of 2.0 times (2014: 2.0 times), consistent with the group's
dividend policy.
Stephen Koseff, Chief Executive Officer of Investec said:
"The group is in the best position it has been since the mid-2000s. We have
delivered on all the strategic initiatives set out in 2013 and can now focus on
growing our three core businesses, Asset Management, Wealth & Investment and
Specialist Banking."
Bernard Kantor, Managing Director of Investec said:
"The ongoing results reflect a very satisfactory year. The performance of Wealth
& Investment and Asset Management continues to reflect the quality of the
businesses. Specialist Banking in South Africa had an excellent year while in
London, the corporate business is performing well and the private bank has dealt
with the over-riding majority of its legacy issues."
FOR FURTHER INFORMATION PLEASE CONTACT:
Investec +27 (0) 11 286 7070 or +44 20 (0) 7597 5546
Stephen Koseff, Chief Executive Officer
Bernard Kantor, Managing Director
Ursula Nobrega, Investor Relations (mobile:+27 (0) 82 552 8808)
Brunswick (SA PR advisers)
Cecilia de Almeida
+27 (0) 11 502 7300
Marina Bidoli
+27 (0) 11 502 7405
Newgate (UK PR advisers)
Jonathan Clare/Jason Nisse/Alistair Kellie/Andy Jones
+44 (0) 20 7680 6551
PRESENTATION/CONFERENCE CALL DETAILS
A presentation on the results will commence at 9:00 UK time/10:00 SA time.
Viewing options as below:
- Live on South African TV (Business day TV channel 412 DSTV)
- A live and delayed video webcast at www.investec.com
- Toll free numbers for the telephone conference facilities
- SA participants: 0800 200 648
– UK participants: 0808 162 4061
– rest of Europe and other participants: +800 246 78 700
– Australian participants: 1800 350 100
– USA participants: 1855 481 6362
ABOUT INVESTEC
Investec is an international specialist bank and asset manager that provides a
diverse range of financial products and services to a niche client base in two
principal markets, the United Kingdom and South Africa as well as certain other
countries. The group was established in 1974 and currently has approximately
8 200 employees.
Investec focuses on delivering distinctive profitable solutions for its clients in
three core areas of activity namely, Asset Management, Wealth & Investment and
Specialist Banking.
In July 2002 the Investec group implemented a dual listed company structure
with listings on the London and Johannesburg Stock Exchanges. The combined
group's current market capitalisation is approximately GBP5.4 billion.
The commentary below largely focuses on the results of the ongoing business.
OVERALL GROUP PERFORMANCE – ONGOING BASIS
Operating profit before goodwill, acquired intangibles, non-operating items and
taxation and after other non-controlling interests ("operating profit") increased
15.0% to GBP580.7 million (2014: GBP504.9 million) – an increase of 22.6% on
a currency neutral basis. Group results have been negatively impacted by the
depreciation of the average Rand: Pounds Sterling exchange rate of 10.5% over
the period. The combined South African businesses reported operating profit
28.7% ahead of the prior period in Rand, whilst the combined UK and Other
businesses posted a 11.7% increase in operating profit in Pounds Sterling.
Wealth & Investment's operating profit increased by 19.2%. Asset Management
reported operating profit 3.6% ahead of the prior period. Both divisions benefited
from higher levels of average funds under management and net inflows. Operating
profit in the Specialist Banking business increased 18.4% largely due to strong
performances from the South African banking business and the UK Corporate
and Institutional business, negatively impacted by a poor performance from the
Hong Kong investment portfolio.
Salient features of the year under review are:
- Adjusted earnings attributable to shareholders before goodwill, acquired
intangibles and non-operating items increased 10.2% to GBP409.9 million
(2014: GBP371.9 million) – an increase of 17.9% on a currency neutral basis.
- Adjusted earnings per share (EPS) before goodwill, acquired intangibles and
non-operating items increased 10.2% from 43.1 pence to 47.5 pence – an
increase of 17.9% on a currency neutral basis.
- Recurring income as a percentage of total operating income amounted to
71.9% (2014: 67.9%).
- The credit loss charge as a percentage of average gross core loans and
advances amounted to 0.26% (2014: 0.42%), with impairments decreasing
by 38.8% to GBP39.4 million.
- Third party assets under management increased 13.7% to GBP124.1 billion
(2014: GBP109.2 billion).
- Customer accounts (deposits) increased 7.3% to GBP22.6 billion
(2014: GBP21.1 billion).
- Core loans and advances increased 15.4% to GBP 16.5 billion (2014: GBP 14.3 billion).
BUSINESS UNIT REVIEW – ONGOING BASIS
Asset Management
Asset Management increased operating profit by 3.6% to GBP149.0 million (2014:
GBP143.8 million) benefiting from higher average funds under management
and net inflows of GBP3.1 billion. Total funds under management amount to
GBP77.5 billion (2014: GBP68.0 billion). Operating margin has remained in line
with the prior year at 34.2%.
Wealth & Investment
Wealth & Investment operating profit increased by 19.2% to GBP78.8 million
(2014: GBP66.1 million) supported by higher average funds under management,
net inflows of GBP2.7 billion and improved operating margins. Total funds under
management amount to GBP46.1 billion (2014: GBP40.1 billion). The division in
the UK has benefited from the investment in its platforms and the employment of
additional professional investment managers. The business in South Africa has
continued to successfully leverage off the division's global investment platform and
the group's integrated Private Client offering ("One Place").
Specialist Banking
Specialist Banking operating profit increased by 18.4% to GBP392.3 million
(2014: GBP331.4 million).
South Africa reported a strong increase in net interest income driven by loan
book growth and a positive endowment impact. The unlisted investment portfolio
performed well during the period. The group continued to grow its professional
finance business and the investment and trading property portfolios delivered
a sound performance. Corporate activity remained broadly in line with the prior
period. The business reported a decline in impairments with the credit loss ratio
on average core loans and advances improving to 0.28% (2014: 0.42%).
The UK and Other businesses reported an improvement in cost of funding and
experienced strong growth in corporate fees, notably in the corporate finance and
corporate treasury teams. Loan book growth was solid and impairments declined
over the year, with the credit loss ratio amounting to 0.20% (2014: 0.50%).
Results were negatively impacted by lower returns earned on the Hong Kong
investment portfolio.
Further information on key developments within each of the business units is
provided in a detailed report published on the group's website:
http://www.investec.com
Group costs
These largely relate to group brand and marketing costs and a portion of
executive and support functions which are associated with group level activities.
These costs are not incurred by the operating divisions and are necessary to
support the operational functioning of the group. Historically, these numbers
were reflected solely in the results of the Specialist Bank and the group has now
decided to reflect these separately. These costs amounted to GBP39.3 million
(2014: GBP36.4 million).
FINANCIAL STATEMENT ANALYSIS – ONGOING BASIS
Total operating income
Total operating income before impairment losses on loans and advances
increased by 5.5% to GBP1,887.1 million (2014: GBP1,789.1 million).
Net interest income increased by 8.9% to GBP539.0 million (2014:
GBP495.0 million) largely due to book growth, lower cost of funding in the UK and
a positive endowment impact in South Africa.
Net fee and commission income increased by 12.5% to GBP1,090.4 million
(2014: GBP969.5 million) as a result of higher average funds under management
and net inflows in the asset management and wealth management businesses.
The Specialist Banking business benefited from a solid performance from the
corporate finance and corporate treasury businesses, notably in the UK, and the
private banking business in South Africa continued to perform well.
Investment income decreased by 19.4% to GBP151.8 million (2014:
GBP188.4 million). The group's unlisted investment portfolio in the UK and
South Africa delivered a solid performance. This was offset however, by a poor
performance from the Hong Kong portfolio.
Trading income arising from customer flow increased by 3.0% to GBP106.6 million
(2014: GBP103.5 million) whilst trading income from other trading activities
reflected a loss of GBP13.0 million (2014: profit of GBP14.2 million) due to foreign
currency losses largely offset in non-controlling interests as discussed below.
Other operating income includes associate income and income earned on an
operating lease portfolio.
Impairment losses on loans and advances
Impairments on loans and advances decreased from GBP64.3 million to
GBP39.4 million. Since 31 March 2014 gross defaults have improved from
GBP256.4 million to GBP247.1 million. The percentage of default loans (net of
impairments but before taking collateral into account) to core loans and advances
amounted to 0.84% (2014: 1.01%).
Operating costs
The ratio of total operating costs to total operating income was 66.5%
(2014: 67.5%). Total operating costs grew by 4.2% to GBP1,254.0 million
(2014: GBP1,203.6 million) reflecting: an increase in headcount in the asset
management and wealth management businesses to support growth initiatives;
inflationary increases in fixed costs in the Specialist Bank in home currencies;
an increase in variable remuneration given increased profitability in certain
businesses; a reduction in costs arising from the restructure of the remaining
Australian businesses.
Taxation
The effective tax rate amounts to 19.6 % (2014:17.1%).
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests mainly comprises:
- GBP18.2 million profit attributable to non-controlling interests in the Asset
Management business.
- GBP31.7 million profit attributable to non-controlling interests in the Investec
Property Fund Limited.
- A reduction of GBP20.7 million relating to Euro denominated preferred
securities issued by a subsidiary of Investec plc which are reflected on the
balance sheet as part of non-controlling interests. (The transaction is hedged
and a forex transaction loss arising on the hedge is reflected in operating
profit before goodwill with the equal and opposite impact reflected in earnings
attributable to non-controlling interests).
Balance sheet analysis
Since 31 March 2014:
- Total shareholders' equity (including non-controlling interests) increased by
0.6% to GBP4.0 billion.
- Net asset value per share decreased 3.0% to 364.9 pence and net tangible
asset value per share (which excludes goodwill and intangible assets)
decreased by 0.3% to 308.1 pence.
- The return on adjusted average shareholders' equity of the ongoing business
increased from 13.1% to 13.8%.
Liquidity and funding
As at 31 March 2015 the group held GBP10.0 billion in cash and near cash
balances (GBP5.0 billion in Investec plc and R88.7 billion in Investec Limited)
which amounted to 38.2% of its liability base. Loans and advances to customers
as a percentage of customer deposits amounted to 74.0% (2014: 72.0%).
The group has significant surplus cash in its UK business following the sale
of Kensington and the group is actively focusing on reducing both cash and
liquidity back to normalised levels through asset growth and further liability
management, while maintaining its overall conservative approach to liquidity risk
management. The group comfortably meets Basel liquidity requirements for the
Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) in the UK.
In South Africa, the group continued to build its structural liquidity cash resources
to improve its Basel III LCR in light of regulations which were implemented from
1 January 2015. Investec Bank Limited (Solo basis) ended the year with the
three-month average of its LCR at 100.3%, which is well ahead of the minimum
levels required. Further detail with respect to the bank's LCR ratio in South Africa
is provided on the website.
Capital adequacy and leverage ratios
The group is targeting a minimum common equity tier one capital ratio above
10% by March 2016 and a total capital adequacy ratio range of 14% to 17% on
a consolidated basis for each of Investec plc and Investec Limited respectively.
The group's anticipated fully loaded Basel III common equity tier 1 capital
adequacy ratios in both Investec plc and Investec Limited are reflected in the table
below.
31 Mar 2015 31 Mar 2014
Investec plc^
Capital adequacy ratio 16.7% 15.3%
Tier 1 ratio 12.0% 10.5%
Common equity tier 1 ratio 10.2% 8.8%
Common equity tier 1 ratio
(anticipated Basel III "fully loaded"*) 10.2% 8.8%
Leverage ratio (current) 7.7% 7.4%
Leverage ratio (anticipated Basel III
"fully loaded"*) 6.6% 6.2%
Investec Limited
Capital adequacy ratio 14.7% 14.9%
Tier 1 ratio 11.3% 11.0%
Common equity tier 1 ratio 9.6% 9.4%
Common equity tier 1 ratio
(anticipated Basel III "fully loaded"*) 9.5% 9.3%
Leverage ratio (current*) 8.1% 7.8%
Leverage ratio
(anticipated Basel III "fully loaded"*) 7.2% 6.7%
*Based on the group's understanding of current and draft regulations.
"Fully loaded" is based on Basel III capital requirements as fully phased in
by 2022.
^The capital adequacy disclosures follow Investec's normal basis of presentation
so as to show a consistent basis of calculation across the jurisdictions in
which the group operates. For Investec plc this does not include the deduction
of foreseeable dividends when calculating CET1 as now required under the
CRR and EBA technical standards. The impact of the final proposed ordinary and
preference dividends totalling GBP57 million for Investec plc would be around
50 bps.
LEGACY BUSINESS – OVERVIEW OF RESULTS
The group's legacy portfolio in the UK has been actively managed down from
GBP3.4 billion at 31 March 2014 to GBP0.7 billion largely through strategic
sales (mentioned above), redemptions, write-offs and transfers (at the end of
the period) to the ongoing book on the back of improved performance in these
loans. The total legacy business over the period reported a loss before taxation of
GBP107.7 million (2014: GBP69.1 million) as the group accelerated the clearance
of the portfolio, which resulted in an increase in impairments on these assets.
The remaining legacy portfolio will continue to be managed down as the group
sees opportunities to clear the portfolio. Management believe that the remaining
legacy book will still take three to five years to wind down. Total net defaults in the
legacy book amount to GBP218 million.
OUTLOOK
Investec has successfully executed on its key strategic initiatives embarked upon
over the past two years. The resultant simplification enables the group to enhance
the operational focus to grow and develop its core businesses, so that the right
outcomes can be delivered for clients and stakeholders including acceptable
returns for shareholders.
This combined with the opportunities in Investec's two principle markets, leads
the group to feel positive about the year ahead; notwithstanding the structural
challenges in the South African economy and the intensified regulatory landscape.
On behalf of the boards of Investec plc and Investec Limited
Fani Titi Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
20 May 2015
NOTES TO THE COMMENTARY SECTION ABOVE
PRESENTATION OF FINANCIAL INFORMATION
Investec operates under a Dual Listed Companies (DLC) structure with primary
listings of Investec plc on the London Stock Exchange and Investec Limited on
the JSE Limited.
In terms of the contracts constituting the DLC structure, Investec plc and Investec
Limited effectively form a single economic enterprise in which the economic
and voting rights of ordinary shareholders of the companies are maintained in
equilibrium relative to each other. The directors of the two companies consider
that for financial reporting purposes, the fairest presentation is achieved by
combining the results and financial position of both companies.
Accordingly, the year-end results for Investec plc and Investec Limited present
the results and financial position of the combined DLC group under International
Financial Reporting Standards (IFRS), denominated in Pounds Sterling. In the
commentary above, all references to Investec or the group relate to the combined
DLC group comprising Investec plc and Investec Limited.
FOREIGN CURRENCY IMPACT
The group's reporting currency is Pounds Sterling. Certain of the group's
operations are conducted by entities outside the UK. The results of operations
and the financial position of the individual companies are reported in the local
currencies in which they are domiciled, including Rands, Australian Dollars, Euros
and US Dollars. These results are then translated into Pounds Sterling at the
applicable foreign currency exchange rates for inclusion in the group's 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 rates
against Pounds Sterling over the period:
Year to Year to
31 Mar 2015 31 Mar 2014
Currency per Period Period
GBP1.00 end Average end Average
South African Rand 17.97 17.82 17.56 16.12
Australian Dollar 1.95 1.85 1.80 1.72
Euro 1.38 1.28 1.21 1.19
US Dollar 1.49 1.62 1.67 1.59
Exchange rates between local currencies and Pounds Sterling have fluctuated
over the period. The most significant impact arises from the volatility of the Rand.
The average exchange rate over the period has depreciated by 10.5% and the
closing rate has depreciated by 2.3% since 31 March 2014.
SALE OF INVESTEC BANK (AUSTRALIA) LIMITED
The sale of Investec Bank (Australia) Limited's Professional Finance and Asset
Finance and Leasing businesses and its deposit book to Bank of Queensland
Limited was effective 31 July 2014 for cash proceeds of GBP122 million.
This has resulted in the derecognition of approximately GBP1.7 billion of assets
and approximately GBP1.7 billion of liabilities associated with the businesses
sold. The group continues to have a presence in Australia, focusing on its core
activities of Specialised Finance, Corporate Advisory, Property Fund Management
and Asset Management. The remaining business will operate as a non-banking
subsidiary of the Investec group. As a result, the group has decided to no longer
report the activities of its Australian businesses separately with these activities
now reported under the "UK and Other" geographical segment and the "UK and
Other" Specialist Banking segment.
SALES OF KENSINGTON GROUP PLC AND START MORTGAGE
HOLDINGS LIMITED
On 9 September 2014 the group announced the sale of its UK intermediated
mortgage business Kensington Group plc ("Kensington") together with
certain other Investec mortgage assets to funds managed by Blackstone
Tactical Opportunities Advisors L.L.C. and TPG Special Situations Partners for
GBP180 million in cash based on a tangible net asset value of the business
of GBP165 million at 31 March 2014. This transaction became effective on
30 January 2015.
On 15 September 2014 the group announced the sale of its Irish intermediated
mortgage business Start Mortgage Holdings Limited ("Start") together with certain
other Irish mortgage assets to an affiliate of Lone Star Funds. This transaction
became effective on 4 December 2014.
This has resulted in the derecognition of approximately GBP4.1 billion of assets
and approximately GBP2 billion of external liabilities associated with these
businesses sold.
A NET LOSS ON SALE OF THESE SUBSIDIARIES WAS RECORDED
The loss on sale of subsidiaries reflected in the statutory income statement
comprises a net profit on the sale of Investec Bank (Australia) Limited offset by a
net loss on the sale of the Kensington UK and Start Irish operations.
The net loss after taxation can be analysed further as follows:
GBP'million
Net loss before goodwill and taxation (28.1)
Goodwill (64.9)
Net loss on sale of subsidiaries (93.0)
Related tax expense (20.7)
Net loss after tax (113.7)
ACCOUNTING POLICIES AND DISCLOSURES
These unaudited summarised combined consolidated financial results have been
prepared in terms of the recognition and measurement criteria of International
Financial Reporting Standards, and the presentation and disclosure requirements
of IAS 34, (Interim Financial Reporting).
The accounting policies applied in the preparation of the results for the year ended
31 March 2015 are consistent with those adopted in the financial statements for
the year ended 31 March 2014 except as noted below.
IFRIC 21 ‘LEVIES'
The group has adopted IFRIC 21 ‘Levies' from 1 April 2014. The cumulative
impact of the restatement as at 31 March 2013 is a decrease in operating costs
and other liabilities of GBP4.7 million and an increase in taxation on operating
profit before goodwill and deferred taxation liabilities of GBP1.0 million. The net
impact on retained income at 31 March 2014 is an increase of GBP2.8 million.
The financial results have been prepared under the supervision of Glynn Burger,
the Group Risk and Finance Director. The financial statements for the year ended
31 March 2015 will be posted to stakeholders on 30 June 2015. These accounts
will be available on the group's website on the same date.
PROVISO
- Please note that matters discussed in this announcement 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 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 20 May 2015.
- The information in the announcement for the year ended 31 March 2015,
which was approved by the board of directors on 20 May 2015, does not
constitute statutory accounts as defined in Section 435 of the UK Companies
Act 2006. The 31 March 2014 financial statements were filed with the
registrar and were unqualified with the audit report containing no statements
in respect of sections 498(2) or 498(3) of the UK Companies Act.
- This announcement is available on the group's website: www.investec.com
Ongoing financial information
Ongoing summarised income statement
for the year to 31 March % Variance
GBP'000 2015 2014 change amount
Net interest income 539 041 495 043 8.9% 43 998
Net fee and commission income 1 090 435 969 517 12.5% 120 918
Investment income 151 848 188 366 (19.4%) (36 518)
Trading income arising from
– customer flow 106 588 103 514 3.0% 3 074
– balance sheet management and other trading activities (13 041) 14 158 (192.1%) (27 199)
Other operating income 12 188 18 464 (34.0%) (6 276)
Total operating income before impairment losses on loans and advances 1 887 059 1 789 062 5.5% 97 997
Impairment losses on loans and advances (39 352) (64 326) (38.8%) 24 974
Operating income 1 847 707 1 724 736 7.1% 122 971
Operating costs (1 254 009) (1 203 551) 4.2% (50 458)
Depreciation on operating leased assets (1 294) (5 446) (76.2%) 4 152
Operating profit before goodwill and acquired intangibles 592 404 515 739 14.9% 76 665
Profit attributable to other non-controlling interests (11 701) (10 849) 7.9% (852)
Profit attributable to Asset Management non-controlling interests (18 184) (11 031) 64.8% (7 153)
Operating profit before taxation 562 519 493 859 13.9% 68 660
Taxation (116 182) (88 181) 31.8% (28 001)
Preference dividends accrued (36 427) (33 812) 7.7% (2 615)
Adjusted attributable earnings to shareholders 409 910 371 866 10.2% 38 044
Number of weighted average shares – (million) 862.7 862.6
Adjusted earnings per share (pence) 47.5 43.1 10.2%
Cost to income ratio 66.5% 67.5%
Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles,
non-operating items, taxation and after other non-controlling interests
for the year to 31 March UK Southern Total
GBP'000 and Other Africa group
2015
Asset Management 75 491 73 484 148 975
Wealth & Investment 56 871 21 910 78 781
Specialist Banking 129 341 262 918 392 259
261 703 358 312 620 015
Group costs (30 048) (9 264) (39 312)
Total group 231 655 349 048 580 703
Other non-controlling interest – equity 11 701
Operating profit 592 404
2014
Asset Management 67 585 76 234 143 819
Wealth & Investment 46 065 20 034 66 099
Specialist Banking 121 491 209 925 331 416
235 141 306 193 541 334
Group costs (27 672) (8 772) (36 444)
Total group 207 469 297 421 504 890
Other non-controlling interest – equity 10 849
Operating profit 515 739
Reconciliation from statutory summarised income statement to ongoing summarised income statement
Removal of:
UK legacy
business Sale Sale
for the year to 31 March 2015 Statutory excluding assets assets Ongoing
(GBP'000) as disclosed sale assets UK Australia business
Net interest income 634 977 12 526 71 143 12 267 539 041
Net fee and commission income 1 089 043 756 (4 876) 2 728 1 090 435
Investment income 128 334 (16 204) (5 443) (1 867) 151 848
Trading income arising from
– customer flow 106 313 350 (415) (210) 106 588
– balance sheet management and other trading activities (13 424) 19 (248) (154) (13 041)
Other operating income 12 236 – – 48 12 188
Total operating income before impairment losses on
loans and advances 1 957 479 (2 553) 60 161 12 812 1 887 059
Impairment losses on loans and advances (128 381) (83 468) (4 085) (1 476) (39 352)
Operating income 1 829 098 (86 021) 56 076 11 336 1 847 707
Operating costs (1 322 705) (21 648) (34 245) (12 803) (1 254 009)
Depreciation on operating leased assets (1 535) – (241) – (1 294)
Operating profit before goodwill and acquired intangibles 504 858 (107 669) 21 590 (1 467) 592 404
Profit attributable to other non-controlling interests (11 701) – – – (11 701)
Profit attributable to Asset Management non-controlling interests (18 184) – – – (18 184)
Operating profit before taxation 474 973 (107 669) 21 590 (1 467) 562 519
Taxation* (99 023) 21 103 (4 232) 288 (116 182)
Preference dividends accrued (36 427) – – – (36 427)
Adjusted attributable earnings to shareholders 339 523 (86 566) 17 358 (1 179) 409 910
Number of weighted average shares – (million) 862.7 862.7
Adjusted earnings per share (pence) 39.4 47.5
Cost to income ratio 67.6% 66.5%
*Applying the group effective taxation rate of 19.6%
Removal of:
UK legacy
business Sale Sale
for the year to 31 March 2014 Statutory excluding assets assets Ongoing
(GBP'000) as disclosed sale assets UK Australia business
Net interest income 651 679 19 355 94 715 42 566 495 043
Net fee and commission income 989 421 8 981 749 10 174 969 517
Investment income 166 809 (11 793) (9 764) – 188 366
Trading income arising from
– customer flow 103 914 695 (625) 330 103 514
– balance sheet management and other trading activities 10 587 (1 762) (875) (934) 14 158
Other operating income 18 554 – – 90 18 464
Total operating income before impairment losses on
loans and advances 1 940 964 15 476 84 200 52 226 1 789 062
Impairment losses on loans and advances (166 152) (59 157) (38 898) (3 771) (64 326)
Operating income 1 774 812 (43 681) 45 302 48 455 1 724 736
Operating costs (1 307 243) (25 370) (41 136) (37 186) (1 203 551)
Depreciation on operating leased assets (6 044) – (598) – (5 446)
Operating profit before goodwill and acquired intangibles 461 525 (69 051) 3 568 11 269 515 739
Profit attributable to other non-controlling interests (10 849) – – – (10 849)
Profit attributable to Asset Management non-controlling interests (11 031) – – – (11 031)
Operating profit before taxation 439 645 (69 051) 3 568 11 269 493 859
Taxation** (78 910) 11 808 (610) (1 927) (88 181)
Preference dividends accrued (33 812) – – – (33 812)
Adjusted attributable earnings to shareholders 326 923 (57 243) 2 958 9 342 371 866
Number of weighted average shares – (million) 862.6 862.6
Adjusted earnings per share (pence) 37.9 43.1
Cost to income ratio 67.6% 67.5%
**Applying the group effective taxation rate of 17.1%
Where:
- The UK legacy business is as described in the "Commentary section."
- Sale assets UK refer to the sale of Kensington and Start as discussed in the "Notes to the commentary section."
- Sale assets Australia refer to the sale of Investec (Bank) Australia Limited as discussed in the "Notes to the commentary section."
Statutory financial information
Salient financial features
Results in Pounds Sterling Results in Rand
Actual Actual Neutral Results Results
as reported as reported Actual currency Neutral in Rand in Rand
Year to Year to as reported Year to currency Year to Year to
31 March 31 March % 31 March % 31 March 31 March %
2015 2014 change 2015 change 2015 2014 change
Operating profit before
taxation* (million) 493 451 9.4% 532 18.0% 8 817 7 309 20.6%
Earnings attributable to
shareholders (million) 246 331 (25.7%) 273 (17.5%) 3 970 5 329 (25.5%)
Adjusted earnings
attributable to
shareholders** (million) 340 327 4.0% 368 12.5% 6 076 5 293 14.8%
Adjusted earnings
per share** 39.4 37.9 4.0% 42.6 12.4% 703.8 613.8 14.7%
Ongoing adjusted
earnings per share** 47.5 43.1 10.2% 51.1 18.6% 850.3 697.9 21.8%
Basic earnings per share 24.4 34.3 (28.9%) 27.3 (20.4%) 387.3 552.1 (29.8%)
Headline earnings
per share 35.8 33.8 5.9 38.5 13.6% 640.3 547.7 16.9%
Dividends per share 20.0p 19.0p 5.3% 362c 327c 10.7%
Cost to income ratio 67.6% 67.6%
Actual Actual Neutral Results Results
as reported as reported Actual currency Neutral in Rand in Rand
At At as reported At currency At At
31 March 31 March % 31 March % 31 March 31 March %
2015 2014 change 2015 change 2015 2014 change
Net asset value per share 364.9 376.0 (3.0%) 365.2 (2.9%) 6 559 6 602 (0.7%)
Net tangible asset value
per share 308.1 309.0 (0.3%) 308.4 (0.2%) 5 538 5 425 2.1%
Total equity (million) 4 040 4 016 0.6% 4 087 1.8% 72 625 70 505 3.0%
Total assets (million) 44 353 47 142 (5.9%) 44 981 (4.6%) 797 218 827 649 (3.7%)
Core loans and advances
(million) 17 189 17 157 0.2% 17 430 1.6% 308 957 301 224 2.6%
Cash and near cash
balances (million) 9 975 9 136 9.2% 10 090 10.4% 179 242 160 405 11.7%
Customer deposits (million) 22 615 22 610 0.0% 22 908 1.3% 406 485 396 951 2.4%
Third party assets under
management (million) 124 106 109 189 13.7% 125 149 14.6% 2 230 197 1 917 347 16.3%
Recurring income as a %
of total operating income 74.2% 70.7%
Return on average adjusted
shareholders' equity 10.6% 10.0%
Return on average risk-
weighted assets 1.25% 1.14%
Credit loss ratio 0.68% 0.68%
Defaults (net of
impairments and before
collateral) as a percentage
of net core loans 2.07% 2.30%
Loans and advances to
customers as a
percentage of customer
deposits 74.0% 72.0%
* Before goodwill, acquired intangibles non-operating items and after other non-controlling interests
* *Before goodwill, acquired intangibles non-operating items and after non-controlling interests
Statutory financial information
Combined consolidated income statement
for the year to 31 March
GBP'000 2015 2014*
Interest income 1 790 867 1 905 383
Interest expense (1 155 890) (1 253 704)
Net interest income 634 977 651 679
Fee and commission income 1 226 257 1 136 902
Fee and commission expense (137 214) (147 481)
Investment income 128 334 166 809
Trading income arising from
– customer flow 106 313 103 914
– balance sheet management and other trading activities (13 424) 10 587
Other operating income 12 236 18 554
Total operating income before impairment losses on loans and advances 1 957 479 1 940 964
Impairment losses on loans and advances (128 381) (166 152)
Operating income 1 829 098 1 774 812
Operating costs (1 322 705) (1 307 243)
Depreciation on operating leased assets (1 535) (6 044)
Operating profit before goodwill and acquired intangibles 504 858 461 525
Impairment of goodwill (5 337) (12 797)
Amortisation of acquired intangibles (14 497) (13 393)
Operating costs arising from integration, restructuring and partial disposals of subsidiaries – (20 890)
Operating profit 485 024 414 445
Net (loss)/gain on disposal of subsidiaries (93 033) 9 821
Profit before taxation 391 991 424 266
Taxation on operating profit before goodwill and acquired intangibles (99 023) (78 910)
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries (17 574) 7 289
Profit after taxation 275 394 352 645
Profit attributable to Asset Management non-controlling interests (18 184) (11 031)
Profit attributable to other non-controlling interests (11 701) (10 849)
Earnings attributable to shareholders 245 509 330 765
Impairment of goodwill 5 337 12 797
Amortisation of acquired intangibles, net of taxation 14 497 13 393
Operating cost arising from integration, restructuring and partial disposals of subsidiaries – 20 890
Net loss/(gain) on disposal of subsidiaries 93 033 (9 821)
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries 17 574 (7 289)
Preference dividends paid (34 803) (35 268)
Accrual adjustment on earnings attributable to other equity holders (1 211) (386)
Currency hedge attributable to perpetual equity instruments (413) 1 842
Adjusted earnings 339 523 326 923
Headline adjustments (30 753) (35 362)
Headline earnings 308 770 291 561
Earnings per share (pence)
– Basic 24.4 34.3
– Diluted 23.1 32.3
Statutory adjusted earnings per share (pence)
– Basic 39.4 37.9
– Diluted 37.3 35.8
Dividends per share (pence)
– Interim 8.5 8.0
– Final 11.5 11.0
Headline earnings per share (pence)
– Basic 35.8 33.8
– Diluted 33.9 32.3
Number of weighted average shares – (million) 862.7 862.6
*Restated for IFRIC 21 detailed in commentary section
Summarised combined consolidated statement of comprehensive income
for the year to 31 March
GBP'000 2015 2014*
Profit after taxation 275 394 352 645
Other comprehensive income/(loss):
Items that may be reclassified to the income statement
Fair value movements on cash flow hedges taken directly to other comprehensive income^ (32 816) (3 582)
Gains on realisation of available-for-sale assets recycled through the income statement^ (4 660) (2 972)
Fair value movements on available-for-sale assets taken directly to other comprehensive income^ 1 037 347
Foreign currency adjustments on translating foreign operations (58 318) (407 479)
Items that will never be reclassified to the income statement
Remeasurement of net defined benefit pension liability/(asset) 6 340 (5 870)
Total comprehensive income/(loss) 186 977 (66 911)
Total comprehensive income/(loss) attributable to non-controlling interests 32 050 (12 724)
Total comprehensive income/(loss) attributable to ordinary shareholders 120 124 (89 455)
Total comprehensive income attributable to perpetual preferred securities 34 803 35 268
Total comprehensive income/(loss) 186 977 (66 911)
*Restated for IFRIC 21 detailed in commentary section
^Net of taxation of GBP4.0million (31 March 2014: GBP7.8million)
Summarised combined consolidated cash flow statement
for the year to 31 March
GBP'000 2015 2014*
Cash inflows from operations 617 363 668 725
Increase in operating assets (2 312 161) (979 947)
Increase in operating liabilities 2 291 132 1 290 173
Net cash inflow from operating activities 596 334 978 951
Net cash inflow from investing activities^ 192 347 24 313
Net cash outflow from financing activities (257 753) (234 601)
Effects of exchange rate changes on cash and cash equivalents (17 091) (281 225)
Net increase in cash and cash equivalents 513 837 487 438
Cash and cash equivalents at the beginning of the year 4 049 011 3 561 573
Cash and cash equivalents at the end of the year 4 562 848 4 049 011
*Restated for IFRIC 21 detailed in commentary section
^Includes the cash flow effects on the sale of subsidiaries detailed in the commentary section of this report.
Cash and cash equivalents is defined as including cash and balances at central banks, on demand loans and advances to banks and non-sovereign and non-bank cash
placements (all of which have a maturity profile of less than three months).
Combined consolidated balance sheet
At 31 March
GBP'000 2015 2014*
Assets
Cash and balances at central banks 2 529 562 2 080 190
Loans and advances to banks 3 045 864 3 280 179
Non-sovereign and non-bank cash placements 586 400 515 189
Reverse repurchase agreements and cash collateral on securities borrowed 1 812 156 1 388 980
Sovereign debt securities 2 958 641 3 215 432
Bank debt securities 1 161 055 1 568 097
Other debt securities 627 373 605 378
Derivative financial instruments 1 580 681 1 619 415
Securities arising from trading activities 1 086 349 870 088
Investment portfolio 947 846 825 745
Loans and advances to customers 16 740 263 16 281 612
Own originated loans and advances to customers securitised 448 647 875 755
Other loans and advances 574 830 1 693 569
Other securitised assets 780 596 3 576 526
Interests in associated undertakings 25 244 24 316
Deferred taxation assets 99 301 131 142
Other assets 1 741 713 1 474 992
Property and equipment 102 354 108 738
Investment properties 617 898 509 228
Goodwill 361 527 433 571
Intangible assets 147 227 159 169
Non-current assets classified as held for sale 40 726 41 637
38 016 253 41 278 948
Other financial instruments at fair value through profit or loss in respect of liabilities to customers 6 337 149 5 862 959
44 353 402 47 141 907
Liabilities
Deposits by banks 1 908 294 2 721 170
Derivative financial instruments 1 544 168 1 170 232
Other trading liabilities 885 003 861 412
Repurchase agreements and cash collateral on securities lent 1 284 945 1 316 087
Customer accounts (deposits) 22 614 868 22 609 784
Debt securities in issue 1 709 369 1 596 630
Liabilities arising on securitisation of own originated loans and advances 109 953 729 534
Liabilities arising on securitisation of other assets 616 909 3 041 435
Current taxation liabilities 201 790 208 041
Deferred taxation liabilities 76 481 97 116
Other liabilities 1 845 679 1 572 877
32 797 459 35 924 318
Liabilities to customers under investment contracts 6 335 326 5 861 389
Insurance liabilities, including unit-linked liabilities 1 823 1 570
39 134 608 41 787 277
Subordinated liabilities 1 178 299 1 338 752
40 312 907 43 126 029
Equity
Ordinary share capital 226 224
Perpetual preference share capital 153 153
Share premium 2 258 148 2 473 131
Treasury shares (68 065) (85 981)
Other reserves (563 985) (467 247)
Retained income 1 874 360 1 652 016
Shareholders' equity excluding non-controlling interests 3 500 837 3 572 296
Other Additional Tier 1 securities in issue 30 599 –
Non-controlling interests 509 059 443 582
– Perpetual preferred securities issued by subsidiaries 229 957 252 713
– Non-controlling interests in partially held subsidiaries 279 102 190 869
Total equity 4 040 495 4 015 878
Total liabilities and equity 44 353 402 47 141 907
*Restated for IFRIC 21 detailed in commentary section
Summarised combined consolidated statement of changes in equity
for the year ended 31 March
GBP'000 2015 2014*
Balance at the beginning of the year 4 015 878 3 945 253
Total comprehens
