| Fri 20 Sep 2019, 8:01 | | INVESTEC LIMITED - INL,INP : Investec (comprising Investec plc and Investec Limited) pre-close trading update |
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INL,INP : Investec (comprising Investec plc and Investec Limited) ? pre-close trading update:
Investec Limited Investec plc
Incorporated in the Republic of South Africa Incorporated in England and Wales
Registration number 1925/002833/06 Registration number 3633621
JSE share code: INL LSE share code: INVP
NSX share code: IVD JSE share code: INP
BSE share code: INVESTEC ISIN: GB00B17BBQ50
ISIN: ZAE000081949
Investec (comprising Investec plc and Investec Limited) - pre-close trading update
20 September 2019
Investec today announces its pre-close trading update ahead of its interim results for the six
months ending 30 September 2019 (1H2020), which are due for release on 21 November
2019. A conference call will be held at 9:00 (BST time) / 10:00 (South African time). Dial-in
details are in the Notes section of this announcement.
Key points:
- Further progress on simplifying and focusing the business in pursuit of disciplined
growth over the long term
- Group 1H2020 adjusted operating profit is expected to be slightly behind the prior
period (in line on a neutral currency basis) given challenging market conditions
- Adjusted earnings per share is expected to be 4%-7% lower than prior period
- The group's credit loss ratio remained low. Capital and leverage ratios remain above
targets
- At 31 August 2019, third party assets under management (AUM) increased 6.7% to
GBP178.4 billion
- The proposed demerger and separate listing of Investec Asset Management is on
track
- The Bank and Wealth business three-year financial targets remain.
The key trends set out below, unless stated otherwise, relate to the five months ended 31
August 2019, and compare forecast 1H2020 to 1H2019.
Strategic and operational overview
The group remains committed to its objective to simplify and focus the business in pursuit of
disciplined growth over the long term. The proposed demerger and separate listing of
Investec Asset Management is on track, with regulatory approval obtained in August 2019.
The Bank and Wealth business is focused on its strategic priorities of increasing discipline in
capital allocation; managing the cost base for greater efficiencies; accelerating revenue
growth; expanding connectivity across the organisation to more fully serve client needs; and
bolstering digital capabilities. In this regard the following management actions have been
executed:
- Closure of the Click
- adjusted earnings per share is expected to be approximately 4% to 7%
lower than the prior period
- basic earnings per share are expected to be approximately 10% to 13%
behind the prior period
- headline earnings per share are expected to be approximately 15% to
18% behind the prior period
- the Bank and Wealth business is expected to report adjusted operating
profit behind the prior period; and
- the Asset Management business is expected to report adjusted operating
profit ahead of the prior period.
(collectively the Profit Forecasts).
- The basis of preparation of each of these statements and the assumptions upon
which they are based are set out below. These statements are subject to various
risks and uncertainties and other factors - these factors may cause the group's,
Bank and Wealth's and/or Asset Management's actual future results,
performance or achievements in the markets in which they operate to differ from
those expressed in the Profit Forecasts
- Any forward looking statements made are based on the knowledge of the group,
Bank and Wealth and Asset Management at 19 September 2019
- These forward looking statements represent a profit forecast under the Listing
Rules. The Profit Forecasts relate to the period ending 30 September 2019
- The financial information on which the Profit Forecasts are based, is the
responsibility of the Directors of the group and have not been reviewed and
reported on by the group's auditors.
Basis of preparation
- The Profit Forecasts have been properly compiled using the assumptions stated
below, and on a basis consistent with the accounting policies adopted in the
group's March 2019 annual financial statements, which are in accordance with
IFRS and are those which the group anticipates will be applicable for the interim
period ending 30 September 2019
- The Profit Forecasts have been prepared based on (a) the unaudited
management accounts of the Investec group for the five months to 31 August
2019; and (b) the projected financial performance of the Investec group for the
remaining one month of the interim period ending 30 September 2019.
Assumptions
The Profit Forecasts have been prepared on the basis of the following assumptions
during the forecast period:
Factors outside the influence or control of the Investec Board:
- There will be no material change in the political and/or economic environment
that would materially affect the Investec group
- There will be no material change in legislation or regulation impacting on the
Investec group's operations or its accounting policies
- There will be no business disruption that will have a significant impact on the
Investec group's operations
- The Rand/Pound Sterling and US Dollar/Pound Sterling exchange rates remain
materially unchanged from the prevailing rates detailed below
- There will be no material changes in the structure of the markets, client demand
or the competitive environment.
Estimates and judgements
In preparation of the Profit Forecasts, the group makes estimations and applies
judgement that could affect the reported amount of assets and liabilities within the next
financial year. Key areas in which judgement is applied include:
- Valuation of unlisted investments primarily in the private equity, direct
investments portfolios and embedded derivatives. Key valuation inputs are based
on the most relevant observable market inputs, adjusted where necessary for
factors that specifically apply to the individual investments and recognising
market volatility
- The determination of ECL against assets that are carried at amortised cost and
ECL relating to debt instruments at fair value through other comprehensive
income (FVOCI) involves the assessment of future cash flows which is
judgemental in nature
- Valuation of investment properties is performed twice annually by directors of
subsidiary companies who are qualified valuators. The valuation is performed by
capitalising the budget net income of the property at the market related yield
applicable at the time. Properties in Investec Property Fund are valued according
to the JSE Listings Requirements
- The group's income tax charge and balance sheet provision are judgemental in
nature. This arises from certain transactions for which the ultimate tax treatment
can only be determined by final resolution with the relevant local tax authorities.
The group recognises in its tax provision certain amounts in respect of taxation
that involve a degree of estimation and uncertainty where the tax treatment
cannot finally be determined until a resolution has been reached by the relevant
tax authority. The carrying amount of this provision is often dependent on the
timetable and progress of discussions and negotiations with the relevant tax
authorities, arbitration processes and legal proceedings in the relevant tax
jurisdictions in which the group operates. Issues can take many years to resolve
and assumptions on the likely outcome would therefore have to be made by the
group
- Where appropriate, the group has utilised expert external advice as well as
experience of similar situations elsewhere in making any such provisions.
Determination of interest income and interest expense using the effective interest
rate method involves judgement in determining the timing and extent of future
cash flows.
3. Definitions
- References to adjusted operating profit refer to net profit before tax, goodwill,
acquired intangibles and non-operating items but after adjusting for earnings
attributable to other non-controlling interests and before non-controlling interests
relating to Asset Management. Trends within the divisional sections relate to
adjusted operating profit before group costs. Adjusted operating profit is
considered an important measure by Investec of the profit realised by the group
in the ordinary course of operations. In addition, it forms the basis of the dividend
pay-out policy. Non-IFRS measures such as adjusted operating profit are
considered as pro forma financial information as per the JSE Listing
Requirements. The pro forma financial information is the responsibility of the
group's Board of Directors. This pro forma financial information has not been
reported on by the group's auditors
- The credit loss ratio is calculated as expected credit loss (ECL) impairment
charges on gross core loans and advances as a percentage of average gross
core loans and advances subject to ECL.
4. Exchange rates
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 condition of
these 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 the Pound Sterling over the period:
Five months to Year to Six months to
31-Aug-2019 31-Mar-19 30-Sep-18
Currency Period Average Period Average Period Average
end end end
per GBP1.00
South African 18.50 18.27 18.80 18.04 18.44 17.76
Rand
Australian Dollar 1.81 1.82 1.83 1.80 1.80 1.79
Euro 1.11 1.13 1.16 1.13 1.12 1.13
US Dollar 1.22 1.26 1.30 1.31 1.30 1.33
Conference call details
The conference call will commence at 9:00 (BST time) (10:00 South African time).
Telephone conference dial in numbers:
- Australia: 1 800 350 100
- Ireland: 014 860 742
- Johannesburg (Neotel): 011 535 3600
- Johannesburg (Telkom): 010 201 6800
- Other (Neotel): +27 11 535 3600
- Other (Telkom): +27 10 201 6800
- UK: 0 333 300 1418
- USA: 1 508 924 4326
Timetable:
Interim period end: 30 September 2019
Release of interim results: 21 November 2018
For further information please contact:
Investec Investor Relations
UK: +44 (0) 207 597 5546 / +44 (0) 207 597 4493
South Africa: +27 (0) 11 286 7070
investorrelations@investec.com
For media enquiries please contact:
Lansons (UK PR advisers) - Tom Baldock. Tel: +44 (0) 78 6010 1715
Brunswick (SA PR advisers) - Marina Bidoli. Tel: +27 (0) 11 502 7405 / +27 (0) 83 253 0478
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 United
Kingdom and Europe, South Africa and Asia/Australia, as well as certain other countries. The
group was established in 1974 and currently has approximately 10 500 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 GBP5.0 billion.
Johannesburg and London
Sponsor: Investec Bank Limited
Date: 20/09/2019 08:00:00
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