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INVESTEC LIMITED - Unaudited combined consolidated 17 Nov 2016
INL INP 201611170013A
Unaudited combined consolidated financial results for the six months ended 30 September 2016
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
2016
INVESTEC PLC AND
INVESTEC LIMITED
(COMBINED RESULTS)
Unaudited combined
consolidated financial
results for the six months
ended 30 September 2016
Investec, the International specialist bank and asset manager, announces its results
for the six months ended 30 September 2016
This announcement covers the results of the Investec group for the six
months ended 30 September 2016.
Basis of presentation
Statutory basis
Statutory information is set out in a separate section in this announcement. In
order to present a more meaningful view of the group's performance the results
continue to be presented on an ongoing basis as explained further below.
Ongoing basis
The results presented on an ongoing basis exclude items that in
management's view could distort the comparison of performance between
periods. Based on this principle, the remaining legacy business in the UK
continues to be excluded from underlying profit.
This basis of presentation is consistent with the approach adopted for the
year ended 31 March 2016. 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 six months ended 30 September 2015. Group
results have been marginally impacted by the 3.4% depreciation of the
average Rand: Pounds Sterling exchange rate over the period. Amounts
represented on a currency neutral basis for income statement items assume
that the relevant average exchange rates remain the same for the six month
period to 30 September 2016 when compared to the prior period. Balance
sheet items have been impacted by a 15.4% appreciation of the average
Rand: Pounds Sterling exchange rate since 31 March 2016. Amounts
represented on a currency neutral basis for balance sheet items assume that
the relevant closing exchange rates remain the same at 30 September 2016
when compared to 31 March 2016.
Overview of results
Sound growth in underlying client franchise businesses
- The first half of the group's financial year continued to see high levels of
macro uncertainty in its key operating geographies.
- Nevertheless, the group's businesses have been resilient, with continued
target market penetration reflected in growth in key earnings drivers and
client driven revenue lines.
- The Asset Management and Wealth & Investment businesses have
benefited from higher funds under management supported by a recovery
in equity markets and net inflows of GBP1.8 billion.
- Operating fundamentals in the Specialist Banking business were
supported by sound levels of corporate and private client activity. Results
were however behind the prior year as a result of a change in accounting
treatment from fair value to equity accounting for the assets transferred
to Investec Equity Partners. In addition the group reported a write down
on an investment in the Hong Kong portfolio.
- Growth in costs reflects planned investment in growing the client
franchise businesses.
- Geographical and operational diversity continues to support a
sustainable recurring income base and earnings through varying market
conditions.
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 0.7% to GBP281.4 million (2015:
GBP279.4 million) - an increase of 1.6% on a currency neutral basis.
- Statutory adjusted earnings per share (EPS) before goodwill, acquired
intangibles and non-operating items increased 1.8% from 22.3 pence to
22.7 pence - an increase of 2.2% on a currency neutral basis.
Sound growth in key earnings drivers in the ongoing business
- Ongoing operating profit decreased 0.2% to GBP314.5million (2015:
GBP315.0 million) - an increase of 0.6% on a currency neutral basis.
- Ongoing adjusted EPS before goodwill, acquired intangibles and non-
operating items increased 0.8% from 25.5 pence to 25.7 pence - an
increase of 1.2% on a currency neutral basis.
- Recurring income as a percentage of total operating income amounted
to 72.4% (2015: 71.6%).
- The annualised credit loss charge as a percentage of average gross
core loans and advances amounted to 0.19% (2015: 0.22%), with
impairments increasing marginally.
- Third party assets under management increased 16.5% to GBP141.8
billion (31 March 2016: GBP121.7billion) - an increase of 10.3% on a
currency neutral basis.
- Customer accounts (deposits) increased 17.7% to GBP28.3 billion
(31 March 2016: GBP24.0 billion) - an increase of 7.3% on a currency
neutral basis.
- Core loans and advances increased 16.1% to GBP20.4 billion (31 March
2016: GBP17.5 billion) - an increase of 4.0% on a currency neutral basis.
The UK legacy portfolio continues to be actively managed down
- The legacy portfolio reduced from GBP583 million at 31 March 2016 to
GBP535 million largely through asset sales, redemptions and write-offs.
- The legacy business reported a loss before taxation of GBP33.0 million
(2015:GBP35.5 million).
Maintained a sound balance sheet
- Capital remained well in excess of current regulatory requirements. The
group is comfortable with its common equity tier 1 ratio target at a 10%
level, as its current leverage ratios for both Investec Limited and Investec
plc are above 7%.
- Liquidity remained strong with cash and near cash balances amounting
to GBP13.1 billion.
Dividend increase of 5.3%
The board declared a dividend of 10.0 pence per ordinary share (2015:
9.5 pence) resulting in a dividend cover based on the group's adjusted EPS
before goodwill and non-operating items of 2.3 times (2015: 2.3 times),
consistent with the group's dividend policy.
Stephen Koseff, Chief Executive Officer of Investec said:
"These results show the long term strength and diversity of our business,
delivering sustainable recurring client-driven income streams amidst high
levels of macro uncertainty. We are pleased with the growth in net interest
income and fees and commissions, as well as good fund management
inflows. We continue to invest with confidence in our business to build even
stronger franchises."
Bernard Kantor, Managing Director of Investec said:
"We have built a highly regarded asset management and wealth
management business as well as a leading specialist banking business in
South Africa. We are making good progress in the development of our UK
specialist banking franchise. We continue to focus on enhancing our returns
on capital invested."
For further information please contact:
Investec +27 (0) 11 286 7070 or +44 (0) 20 7597 5546
Stephen Koseff, Chief Executive Officer
Bernard Kantor, Managing Director
Ursula Nobrega, Investor Relations (mobile:+27 (0) 82 552 8808)
Carly Lunz, Investor Relations (+44 (0) 20 7597 4493)
Brunswick (SA PR advisers)
Marina Bidoli
Tel: +2711 502 7405 / +2783 253 0478
Newgate (UK PR advisers)
Jonathan Clare/Jason Nisse/Alistair Kellie/Charlotte Coulson
Tel: +44 (0)20 7680 6550
Presentation/conference call details
A presentation on the results will commence at 9:00 UK time/11:00 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 select client base in
three principal markets - the UK and Europe, South Africa and Asia/Australia
as well as certain other countries. The group was established in 1974 and
currently has approximately 9 300 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
GBP4.7 billion.
Investec plc and Investec Limited (combined results)
Unaudited combined consolidated financial results for the six months ended
30 September 2016
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")
decreased 0.2% to GBP314.5 million (2015: GBP315.0 million) - an increase
of 0.8% on a currency neutral basis.
The combined South African businesses reported operating profit 0.5%
behind the prior period (in Rands), whilst the combined UK and Other
businesses posted a 1.3% increase in operating profit in Pounds Sterling.
Business unit review - ongoing basis
Asset Management
Asset Management operating profit increased by 16.6% to GBP82.3 million
(2015: GBP70.6 million). The business benefited from higher average funds
under management supported by a recovery in equity markets and net
inflows of GBP1.1 billion; as well as higher performance fees in South Africa.
Total funds under management amount to GBP89.8 billion (31 March 2016:
GBP75.7 billion).
Wealth & Investment
Wealth & Investment operating profit increased by 14.1% to GBP43.2 million
(2015: GBP37.9 million) supported by higher average funds under
management and net inflows of GBP0.7 billion. Total funds under
management amount to GBP51.3 billion (31 March 2016: GBP45.5 billion).
Specialist Banking
Specialist Banking operating profit decreased by 7.1% to GBP212.8 million
(2015: GBP229.2 million). The business continued to experience good levels
of client activity supported by a deepening of the franchise; however results
were impacted by a decline in investment income.
The South African business reported a decrease in operating profit in Rands
of 9.2% as a consequence of the change in accounting treatment related
to the assets transferred to Investec Equity Partners (refer to additional
information). Excluding the impact of this transaction operating profit was
comfortably ahead of the prior period. The division reported solid growth in net
interest income and net fee and commission income supported by continued
growth in the Private Banking client base, reasonable corporate activity and an
increase in the scale of the property fund business. Core loans and advances
increased 3.4% to R225.3 billion (31 March 2016: R218.0 billion). The credit
loss ratio on average core loans and advances amounted to 0.29% (2015:
0.26%), remaining at the lower end of its long term average, despite the
business reporting a moderate increase in impairments.
The UK and Other businesses reported a 3.6% decrease in operating
profit. Notwithstanding Brexit-driven volatility, the division recorded a
strong performance in its customer flow trading business and robust
levels of activity across its lending and advisory businesses. Results were
negatively impacted by the write down of an investment in the Hong Kong
portfolio. Costs increased as the group continued to deliberately invest in IT
infrastructure and headcount to grow the franchise, notably the build out of
the private client banking offering. Core loans amounted to GBP7.8 billion,
an increase of 4.8% on a currency neutral basis, and impairments declined
marginally over the period.
Further information on key developments within each of the business units
is provided in a detailed report published on the group's website:
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. These costs
amounted to GBP23.8million (2015: GBP22.6 million).
Financial statement analysis - ongoing basis
Total operating income
Total operating income before impairment losses on loans and advances
increased by 6.1% to GBP1,052.3 million (2015: GBP992.1 million).
Net interest income increased by 10.6% to GBP314.2 million (2015:
GBP284.1 million) driven by strong book growth in the 2016 financial year as
well as sound levels of lending activity in the current period.
Net fee and commission income increased by 14.7% to GBP608.6 million
(2015: GBP530.6 million) as a result of higher average funds under
management over the period and net inflows in the Asset Management and
Wealth Management businesses. In addition, the Specialist Banking business
benefited from an increase in the scale of the property fund business in South
Africa and from the corporate and advisory businesses, notably in the UK.
Investment income reduced materially to GBP28.8 million (2015:
GBP112.4 million) as a consequence of the change in accounting treatment
related to the assets transferred to Investec Equity Partners (refer to
additional information). In addition the group reported a write down on an
investment in the Hong Kong portfolio.
Share of post-taxation operating profit of associates of GBP9.6 million in the
current period largely reflects earnings in relation to the group's investment in
Investec Equity Partners.
Trading income arising from customer flow increased by 28.2% to
GBP73.5 million (2015: GBP57.3 million) benefiting from franchise growth
and good client activity levels. Trading income from other trading activities
reflected a profit of GBP12.4 million (2015: GBP4.3 million) largely due to
favourable balance sheet management.
Impairment losses on loans and advances
Impairments on loans and advances increased marginally from
GBP17.7 million to GBP18.0 million; however the annualised credit loss ratio
on core loans and advances remains low at 0.19% (2015: 0.22%). Since
31 March 2016 gross defaults have increased from GBP201.9 million to
GBP272.3 million largely due to an increase in defaults in the South African
banking business. The percentage of default loans (net of impairments but
before taking collateral into account) to core loans and advances amounted
to 0.90% (31 March 2016: 0.78%).
Operating costs
The ratio of total operating costs to total operating income was 66.7%
(2015: 65.4%). Total operating costs grew by 8.2% to GBP701.8 million
(2015: GBP648.6 million) reflecting planned spend on IT infrastructure
and higher headcount across divisions to support increased activity and
growth initiatives; and an increase in variable remuneration given improved
profitability in certain businesses.
Taxation
The effective tax rate amounts to 19.4% (2015:21.2%).
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests mainly comprises:
GBP9.9 million profit attributable to non-controlling interests in the Asset
Management business.
GBP17.7 million profit attributable to non-controlling interests in the Investec
Property Fund Limited.
Balance sheet analysis
Since 31 March 2016:
- Total shareholders' equity (including non-controlling interests) increased
by 16.2% to GBP4.5 billion due to foreign currency translation gains,
an increase in retained earnings and the issuance of shares during the period.
- Net asset value per share increased 14.5% to 403.5 pence and net
tangible asset value per share (which excludes goodwill and intangible
assets) increased by 18.4% to 348.5 pence.
- The annualised return on adjusted average shareholders' equity
increased from 11.5% to 12.1%.
- The annualised return on adjusted average shareholders' equity of the
ongoing business remained at 13.9%.
Liquidity and funding
As at 30 September 2016 the group held GBP13.1 billion in cash and
near cash balances (GBP6.2 billion in Investec plc and R123.9 billion in
Investec Limited) which amounted to 39.7% of its liability base. The group
defensively increased cash balances in anticipation of the EU referendum in
the UK and remains very liquid given global volatility and uncertainty in the
markets. The group continues to manage its excess liquidity and funding
profile accordingly. Loans and advances to customers as a percentage of
customer deposits amounted to 72.0% (31 March 2016: 73.6%). The group
comfortably exceeds Basel liquidity requirements for the Liquidity Coverage
Ratio (LCR) and Net Stable Funding Ratio (NSFR) in the UK. The LCR
reported to the Prudential Regulatory Authority at 30 September 2016 was
819% for Investec plc and 901% for Investec Bank plc (solo basis). Investec
Bank Limited (solo basis) ended the period to 30 September 2016 with
the three-month average of its LCR at 138.4%, which is well ahead of the
minimum levels required. Further detail with respect to the bank's LCR ratio
in the UK and 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% 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.
30 September 31 March
2016 2016
Investec plc^
Capital adequacy ratio 15.0% 15.1%
Tier 1 ratio 11.1% 10.7%
Common equity tier 1 ratio 10.9% 9.7%
Common equity tier 1 ratio (anticipated
Basel III "fully loaded"*) 10.9% 9.7%
Leverage ratio (current) 7.1% 7.0%
Leverage ratio (anticipated Basel III
"fully loaded"*) 7.0% 6.3%
Investec Limited^
Capital adequacy ratio 14.4% 14.0%
Tier 1 ratio 10.8% 10.7%
Common equity tier 1 ratio 9.8% 9.6%
Common equity tier 1 ratio
(anticipated Basel III "fully loaded"*) 9.8% 9.6%
Leverage ratio (current*) 7.3% 6.9%
Leverage ratio (anticipated Basel III
"fully loaded"*) 6.7% 6.3%
* 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 capital as now required under the
CRR and EBA technical standards. The impact of the final proposed ordinary
and preference dividends totalling GBP64 million for Investec plc would be
48bps (31 March 2016: 40bps) lower on this basis.
** Investec Limited's capital information includes unappropriated profits. If
unappropriated profits are excluded from the capital information, Investec Limited's
common equity tier 1 ratio would be 13bps (31 March 2016: 16bps) lower.
Legacy business - overview of results
Since 31 March 2016 the group's legacy portfolio in the UK has continued
to be actively managed down from GBP583 million to GBP535 million
largely through asset sales, redemptions and write-offs. The total legacy
business over the period reported a loss before taxation of GBP33.0 million
(2015:GBP35.5 million). The remaining legacy portfolio will continue
to be managed down. Given the uncertainty in the UK following the
EU referendum, the legacy book could take longer to wind down than
management's original expectation of two to four years. Total net
defaults in the legacy book amount to GBP126 million (31 March 2016:
GBP143 million).
Additional information - Investec Equity Partners
In South Africa a new investment vehicle, Investec Equity Partners,
was created on 11 January 2016 in which Investec holds a 45% stake
alongside other strategic investors who hold the remaining 55%. Investec
Principal Investments transferred certain portfolio investments to the value
of R7.6 billion to Investec Equity Partners. In exchange Investec received
R2.5 billion in cash and 45% of the shares in Investec Equity Partners
(R5.1 billion), reflected as an associate on the balance sheet. Since the date
of the transaction Investec has applied the equity accounting method to
account for its investment in the new vehicle as opposed to the fair value
accounting method previously applied to the underlying investments held.
Outlook
Uncertainty persists in the macro environment as the UK prepares for
Brexit, the US adopts a new presidential administration and South Africa
deals with economic, political and social volatility. While Investec is mindful
of the potentially challenging external circumstances, its operational and
geographic diversity is supporting a recurring income base which has proved
resilient notwithstanding fluctuating market conditions. The group remains
committed to providing value for shareholders balanced by appropriate
outcomes for stakeholders and an exceptional experience for clients.
On behalf of the boards of Investec plc and Investec Limited
Fani Titi Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
16 November 2016
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 interim 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:
Six months to Year to Six months to
Currency per 30 Sep 2016 31 Mar 2016 30 Sep 2015
Period Period Period
GBP1.00 end Average end Average end Average
South African
Rand 17.88 19.99 21.13 20.72 20.95 19.33
Australian Dollar 1.70 1.83 1.87 2.04 2.15 2.05
Euro 1.16 1.23 1.26 1.37 1.35 1.39
US Dollar 1.30 1.38 1.44 1.50 1.51 1.54
Exchange rates between local currencies and Pounds Sterling have
fluctuated over the period.
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
period to 30 September 2016 are consistent with those adopted in the
financial statements for the year ended 31 March 2016.
The financial results have been prepared under the supervision of Glynn
Burger, the Group Risk and Finance Director. The financial statements for
the six months to 30 September 2016 will be posted to stakeholders on
30 November 2016. 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 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 16 November 2016.
- The information in the announcement for the six months ended
30 September 2016, which was approved by the board of directors on
16 November 2016, does not constitute statutory accounts as defined
in Section 435 of the UK Companies Act 2006. The 31 March 2016
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
Financial assistance
Shareholders are referred to the Special Resolution number 3 relating to the
provision of direct or indirect financial assistance in terms of Section 45 of
the South African Companies Act, No 71 of 2008 to related or inter-related
companies, which was approved at the annual general meeting held on
4 August 2016. Shareholders are hereby notified that in terms of S45(5)
(a) of the South African Companies Act, the board of directors of Investec
Limited provided such financial assistance during the period 1 April 2016 to
30 September 2016.
Ongoing financial information
Ongoing summarised income statement
Six months to Six months to Year to
30 September 30 September 31 March
GBP'000 2016 2015 2016
Net interest income 314 151 284 142 571 929
Net fee and commission income 608 564 530 590 1 058 340
Investment income 28 800 112 373 169 915
Share of post taxation operating profit of associates 9 639 491* 1 811*
Trading income arising from
- customer flow 73 479 57 318 110 879
- balance sheet management and other trading activities 12 370 4 304 11 617
Other operating income 5 298 2 854* 10 279*
Total operating income before impairment losses on loans and advances 1 052 301 992 072 1 934 770
Impairment losses on loans and advances (18 004) (17 741) (41 368)
Operating income 1 034 297 974 331 1 893 402
Operating costs (701 801) (648 630) (1 272 108)
Depreciation on operating leased assets - (220) (2 165)
Operating profit before goodwill, acquired intangibles and non-operating items 332 496 325 481 619 129
Profit attributable to other non-controlling interests (18 033) (10 518) (35 201)
Profit attributable to Asset Management non-controlling interests (9 924) (8 647) (16 529)
Operating profit before taxation 304 539 306 316 567 399
Taxation (62 696) (69 018) (118 151)
Preference dividends accrued (11 925) (14 708) (26 130)
Adjusted attributable earnings to ordinary shareholders 229 918 222 590 423 118
Number of weighted average shares (million) 895.7 871.8 870.5
Adjusted earnings per share (pence) 25.7 25.5 48.6
Cost to income ratio 66.7% 65.4% 65.8%
* Share of post taxation operating profit of associates shown separately from other operating income.
Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles,
non-operating items, taxation and after other non-controlling interests - ongoing business
for the six months to 30 September UK Southern Total
GBP'000 and Other Africa group
2016
Asset Management 43 116 39 138 82 254
Wealth & Investment 29 192 14 005 43 197
Specialist Banking 95 211 117 623 212 834
167 519 170 766 338 285
Group costs (17 758) (6 064) (23 822)
Total group 149 761 164 702 314 463
Other non-controlling interest - equity 18 033
Operating profit 332 496
2015
Asset Management 40 127 30 427 70 554
Wealth & Investment 25 896 11 954 37 850
Specialist Banking 98 786 130 389 229 175
164 809 172 770 337 579
Group costs (17 036) (5 580) (22 616)
Total group 147 773 167 190 314 963
Other non-controlling interest - equity 10 518
Operating profit 325 481
Reconciliation from statutory summarised income statement to ongoing summarised income
statement
Removal of:**
for the six months to 30 September 2016 Statutory UK legacy Ongoing
GBP'000 as disclosed business business
Net interest income 313 465 (686) 314 151
Net fee and commission income 608 488 (76) 608 564
Investment income 29 024 224 28 800
Share of post taxation operating profit of associates 9 639 - 9 639
Trading income arising from
- customer flow 73 438 (41) 73 479
- balance sheet management and other trading activities 12 370 - 12 370
Other operating income 5 298 - 5 298
Total operating income/(loss) before impairment losses on loans and advances 1 051 722 (579) 1 052 301
Impairment losses on loans and advances (46 591) (28 587) (18 004)
Operating income/(loss) 1 005 131 (29 166) 1 034 297
Operating costs (705 680) (3 879) (701 801)
Operating profit/(loss) before goodwill, acquired intangibles and non-operating items 299 451 (33 045) 332 496
Profit attributable to other non-controlling interests (18 033) - (18 033)
Profit attributable to Asset Management non-controlling interests (9 924) - (9 924)
Operating profit/(loss) before taxation 271 494 (33 045) 304 539
Taxation (56 279) 6 417(#) (62 696)
Preference dividends accrued (11 925) - (11 925)
Adjusted attributable earnings to ordinary shareholders 203 290 (26 628) 229 918
Number of weighted average shares (million) 895.7 895.7
Adjusted earnings per share (pence) 22.7 25.7
Cost to income ratio 67.1% 66.7%
(#) Applying the group's effective statutory taxation rate of 19.4%.
Removal of:**
for the six months to 30 September 2015 Statutory UK legacy Ongoing
GBP'000 as disclosed business business
Net interest income 285 500 1 358 284 142
Net fee and commission income 533 906 3 316 530 590
Investment income 112 387 14 112 373
Share of post taxation operating profit of associates 491 - 491
Trading income arising from
- customer flow 56 895 (423) 57 318
- balance sheet management and other trading activities 4 004 (300) 4 304
Other operating income 2 854 - 2 854
Total operating income before impairment losses on loans and advances 996 037 3 965 992 072
Impairment losses on loans and advances (46 140) (28 399) (17 741)
Operating income/(loss) 949 897 (24 434) 974 331
Operating costs (659 719) (11 089) (648 630)
Depreciation on operating leased assets (220) - (220)
Operating profit/(loss) before goodwill, acquired intangibles and non-operating items 289 958 (35 523) 325 481
Profit attributable to other non-controlling interests (10 518) - (10 518)
Profit attributable to Asset Management non-controlling interests (8 647) - (8 647)
Operating profit/(loss) before taxation 270 793 (35 523) 306 316
Taxation (61 485) 7 533* (69 018)*
Preference dividends accrued (14 708) - (14 708)
Adjusted attributable earnings to ordinary shareholders 194 600 (27 990) 222 590
Number of weighted average shares (million) 871.8 871.8
Adjusted earnings per share (pence) 22.3 25.5
Cost to income ratio 66.2% 65.4%
* Applying the group's effective statutory taxation rate of 21.2%.
** The remaining legacy business in the UK.
Statutory financial information
Salient financial features
Results in Pounds Sterling Results in Rand
Neutral
currency Neutral
Six months to Six months to Six months to currency Six months to Six months to
30 September 30 September % 30 September % 30 September 30 September %
2016 2015 change 2016 change 2016 2015 change
Operating profit before
taxation* (million) GBP281.4 GBP279.4 0.7% GBP283.9 1.6% R5 592 R5 442 2.8%
Earnings attributable to
shareholders (million) GBP208.6 GBP197.6 5.6% GBP209.7 6.1% R4 132 R3 843 7.5%
Adjusted earnings
attributable to
shareholders** (million) GBP203.3 GBP194.6 4.5% GBP204.1 4.9% R4 027 R3 787 6.3%
Adjusted earnings per
share** 22.7p 22.3p 1.8% 22.8p 2.2% 449.6c 434.4c 3.5%
Basic earnings per share 26.5p 20.1p 31.8% 26.5p 31.8% 523.5c 391.6c 33.7%
Headline earnings per
share 24.8p 21.0p 18.1% 24.8p 18.1% 489.5c 410.5c 19.2%
Dividends per share 10.0p 9.5p 5.3% n/a n/a 178c 207c (14.0%)
Cost to income ratio 67.1% 66.2% 67.0%
Results in Pounds Sterling Results in Rand
Neutral
currency Neutral
At At At currency At At
30 September 31 March % 30 September % 30 September 31 March %
2016 2016 change 2016 change 2016 2016 change
Net asset value per share 403.5p 352.3p 14.5% 378.4p 7.4% 7 215c 7 444c (3.1%)
Net tangible asset value
per share 348.5p 294.3p 18.4% 323.5p 9.9% 6 232c 6 218c 0.2%
Total equity (million) GBP4 485 GBP3 859 16.2% GBP4 110 6.5% R80 198 R81 543 (1.6%)
Total assets (million) GBP52 479 GBP45 352 15.7% GBP48 078 6.0% R938 436 R958 221 (2.1%)
Core loans and advances
(million) GBP20 898 GBP18 119 15.3% GBP18 749 3.5% R373 703 R382 826 (2.4%)
Cash and near cash
balances (million) GBP13 114 GBP10 994 19.3% GBP11 926 8.8% R234 515 R232 290 1.0%
Customer (deposits)
(million) GBP28 305 GBP24 044 17.7% GBP25 803 7.3% R506 153 R508 024 (0.4%)
Third party assets under
management (million) GBP141 783 GBP121 683 16.5% GBP134 213 10.3% R2 535 391 R2 571 141 (1.4%)
Return on average
adjusted shareholders'
equity 12.1% 11.5%
Return on average risk-
weighted assets 1.40% 1.34%
Defaults (net of
impairments and before
collateral) as a percentage
of net core loans 1.48% 1.54%
Loans and advances
to customers as a
percentage of customer
deposits 72.0% 73.60%
Credit loss ratio (income
statement impairment
charge as a % of average
gross core loans and
advances) 0.48% 0.62%
* 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.
Combined consolidated income statement
Six months to Six months to Year to
30 September 30 September 31 March
GBP'000 2016 2015 2016
Interest income 1 037 756 849 817 1 705 640
Interest expense (724 291) (564 317) (1 131 871)
Net interest income 313 465 285 500 573 769
Fee and commission income 670 816 591 037 1 188 012
Fee and commission expense (62 328) (57 131) (126 387)
Investment income 29 024 112 387 170 408
Share of post taxation operating profit of associate 9 639 491* 1 811*
Trading income arising from
- customer flow 73 438 56 895 110 227
- balance sheet management and other trading activities 12 370 4 004 11 377
Other operating income 5 298 2 854* 10 279*
Total operating income before impairment losses on loans and advances 1 051 722 996 037 1 939 496
Impairment losses on loans and advances (46 591) (46 140) (109 516)
Operating income 1 005 131 949 897 1 829 980
Operating costs (705 680) (659 719) (1 287 021)
Depreciation on operating leased assets - (220) (2 165)
Operating profit before goodwill and acquired intangibles 299 451 289 958 540 794
Impairment of goodwill (270) (717) (1 577)
Amortisation of acquired intangibles (8 469) (7 848) (16 248)
Operating profit 290 712 281 393 522 969
Net loss on disposal of subsidiaries - (4 746) (4 778)
Profit before taxation 290 712 276 647 518 191
Taxation on operating profit before goodwill and acquired intangibles (56 279) (61 485) (103 202)
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries 2 122 1 610 5 197
Profit after taxation 236 555 216 772 420 186
Profit attributable to other non-controlling interests (18 033) (10 518) (35 201)
Profit attributable to Asset Management non-controlling interests (9 924) (8 647) (16 529)
Earnings attributable to shareholders 208 598 197 607 368 456
Impairment of goodwill 270 717 1 577
Amortisation of acquired intangibles 8 469 7 848 16 248
Net loss on disposal of subsidiaries - 4 746 4 778
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries (2 122) (1 610) (5 197)
Preference dividends paid (11 979) (22 434) (33 192)
Accrual adjustment on earnings attributable to other equity holders 54 7 726 7 062
Adjusted earnings 203 290 194 600 359 732
Headline adjustments** 18 627 (11 165) (25 012)
Headline earnings 221 917 183 435 334 720
Earnings per share (pence)
- Basic 26.5 20.1 38.5
- Diluted 25.4 19.1 36.7
Adjusted earnings per share (pence)
- Basic 22.7 22.3 41.3
- Diluted 21.8 21.2 39.4
Dividends per share (pence)
- Interim 10.0 9.5 9.5
- Final n/a n/a 11.5
Headline earnings per share (pence)
- Basic 24.8 21.0 38.5
- Diluted 23.8 20.0 36.7
Number of weighted average shares - (million) 895.7 871.8 870.5
* Share of post taxation operating profit of associates shown separately from other operating income.
** The headline earnings adjustments are made up of property revaluations, loss on disposal of subsidiaries, the impairment of goodwill and
non-current assets held for sale, gains on available for sale instruments recycled through the income statement and other gains/(losses)
on preference shares recognised directly in equity. This line represents the reconciling items from adjusted earnings to headline earnings.
Summarised combined consolidated statement of comprehensive income
Six months to Six months to Year to
30 September 30 September 31 March
GBP'000 2016 2015 2016
Profit after taxation 236 555 216 772 420 186
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* 19 912 (16 734) (31 934)
- Gains on realisation of available-for-sale assets recycled to the income statement* (8 132) (1 145) (1 961)
- Fair value movements on available-for-sale assets taken directly to other comprehensive income* 52 980 (13 757) (37 153)
- Foreign currency adjustments on translating foreign operations 375 148 (266 255) (240 875)
Items that will never be reclassified to the income statement
- Re-measurement of net defined pension liability - - 4 738
Total comprehensive income/(loss) 676 463 (81 119) 113 001
Total comprehensive income/(loss) attributable to ordinary shareholders 551 216 (67 075) 84 932
Total comprehensive income/(loss) attributable to non-controlling interests 113 268 (36 478) (5 123)
Total comprehensive income attributable to perpetual preferred securities 11 979 22 434 33 192
Total comprehensive income/(loss) 676 463 (81 119) 113 001
* Net of taxation of (GBP 19.5 million) [Six months to 30 September 2015: GBP 14.6 million, year to 31 March 2016: GBP 27.1 million].
Summarised combined consolidated cash flow statement
Six months to Six months to Year to
30 September 30 September 31 March
GBP'000 2016 2015 2016
Cash inflows from operations 370 866 350 477 598 786
Increase in operating assets (652 118) (1 859 634) (4 580 570)
Increase in operating liabilities 1 829 100 1 220 550 4 602 620
Net cash inflow/(outflow) from operating activities 1 547 848 (288 607) 620 836
Net cash outflow from investing activities (30 229) (19 081) (13 925)
Net cash outflow from financing activities (32 265) (348 234) (347 741)
Effects of exchange rates on cash and cash equivalents 234 127 (181 554) (171 718)
Net increase/(decrease) in cash and cash equivalents 1 719 481 (837 476) 87 452
Cash and cash equivalents at the beginning of the period 4 650 300 4 562 848 4 562 848
Cash and cash equivalents at the end of the period 6 369 781 3 725 372 4 650 300
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
30 September 31 March 30 September
GBP'000 2016 2016 2015
Assets
Cash and balances at central banks 4 233 278 3 007 269 2 003 037
Loans and advances to banks 3 154 517 2 498 585 2 261 008
Non-sovereign and non-bank cash placements 571 405 466 573 545 878
Reverse repurchase agreements and cash collateral on securities borrowed 2 424 849 2 497 125 2 504 339
Sovereign debt securities 3 639 215 3 208 862 2 739 669
Bank debt securities 641 542 896 855 988 133
Other debt securities 1 079 256 949 950 832 494
Derivative financial instruments 1 636 619 1 580 949 1 331 618
Securities arising from trading activities 1 215 293 1 119 074 1 354 599
Investment portfolio 806 696 660 795 929 115
Loans and advances to customers 20 376 991 17 681 572 16 267 283
Own originated loans and advances to customers securitised 521 063 437 243 463 436
Other loans and advances 371 111 321 617 305 480
Other securitised assets 153 133 160 295 279 262
Interests in associated undertakings 331 294 267 099 23 809
Deferred taxation assets 98 641 112 135 94 023
Other assets 2 306 954 2 092 661 2 071 704
Property and equipment 98 632 90 888 94 231
Investment properties 1 013 204 938 879 531 835
Goodwill 370 969 368 039 368 319
Intangible assets 146 845 148 280 155 619
Non-current assets classified as held for sale 27 818 - 28 692
45 219 325 39 504 745 36 173 583
Other financial instruments at fair value through profit or loss in respect
of liabilities to customers 7 259 638 5 847 036 5 526 475
52 478 963 45 351 781 41 700 058
Liabilities
Deposits by banks 2 536 285 2 397 403 1 810 306
Derivative financial instruments 1 757 081 1 582 847 1 396 041
Other trading liabilities 983 407 957 418 1 312 201
Repurchase agreements and cash collateral on securities lent 1 048 993 971 646 877 301
Customer accounts (deposits) 28 304 921 24 044 281 21 658 505
Debt securities in issue 2 354 568 2 299 751 2 033 245
Liabilities arising on securitisation of own originated loans and advances 91 611 85 650 82 670
Liabilities arising on securitisation of other assets 112 754 120 851 197 900
Current taxation liabilities 200 390 192 255 193 243
Deferred taxation liabilities 63 586 55 486 87 040
Other liabilities 1 926 943 1 802 967 1 737 744
39 380 539 34 510 555 31 386 196
Liabilities to customers under investment contracts 7 257 222 5 845 503 5 524 800
Insurance liabilities, including unit-linked liabilities 2 416 1 533 1 675
46 640 177 40 357 591 36 912 671
Subordinated liabilities 1 353 958 1 134 883 1 121 679
47 994 135 41 492 474 38 034 350
Equity
Ordinary share capital 237 228 228
Perpetual preference share capital 38 153 153
Share premium 2 327 189 2 239 364 2 259 909
Treasury shares (138 609) (125 717) (104 395)
Other reserves
