| Thu 19 May 2005, 10:20 | | Financial Report |
|
Investec Limited Investec plc
(Registration number (Registration number
1925/002833/06) 3633621)
JSE Code: INL JSE Code: INP
ISIN: ZAE000040531 ISIN: GB0031773103
Company secretary: S Noik Company secretary: R Vardy
Directors: H S Herman (Chairman), S Koseff* (Chief Executive), B
Kantor* (Managing). S E Abrahams, G F O Alford, G R Burger*, C A
Carolus, H Fukuda (OBE), G M T Howe, D E Jowell, I R Kantor, Sir
Chips Keswick, M P Malungani, A Tapnack*, P R S Thomas, F Titi.
*Executive
Investec plc (incorporating the results of Investec Limited)
Consolidated UK GAAP financial results in Pounds Sterling for the
year ended 31 March 2005
Salient Features
31 March % 31 March*
2005 Change 2004
Operating profit before goodwill 208,343 57.5 132,260
and taxation (GBP'000)
Earnings before goodwill and 151,146 42.3 106,203
exceptional items (GBP'000)
Profit attributable to shareholders 100,524 45.9 68,906
(GBP'000)
Earnings per share before goodwill 140.8 35.6 103.8
and exceptional items (pence)
Earnings per share (pence) 81.5 35.8 60.0
Headline earnings per share (pence) 141.7 36.9 103.5
Dividends per share (pence) 67.0 15.5 58.0
Consolidated profit and loss account for the year ended 31 March
2005
Before
goodwill Goodwill
and and
exceptional exceptional
GBP'000 items items Total
Interest receivable - 81,061 - 81,061
interest income arising
from debt securities
Interest receivable - 639,526 - 639,526
other interest income
Interest payable (587,901) - (587,901)
Net interest income 132,686 - 132,686
Dividend income 9,887 - 9,887
Fees and commissions 434,978 - 434,978
receivable
- Annuity 325,527 - 325,527
- Deal 109,451 - 109,451
Fees and commission (23,611) - (23,611)
payable
Dealing profits 68,747 - 68,747
Income from long-term 7,763 - 7,763
assurance business
Return on shareholder's 42,837 - 42,837
funds in the long-term
assurance business
Other operating income 19,278 - 19,278
Other income 559,879 - 559,879
Total operating income 692,565 - 692,565
Administrative expenses (452,848) - (452,848)
Depreciation and (10,040) (51,807) (61,847)
amortisation
- tangible fixed assets (10,040) - (10,040)
- amortisation and - (51,807) (51,807)
impairment of goodwill
Provision for bad and (21,334) - (21,334)
doubtful debts
Operating profit 208,343 (51,807) 156,536
Share of income of 14,045 (3,197) 10,848
associated companies
Exceptional items - (8,635) (8,635)
Provision for losses on - - -
termination and disposal
of group operations -
discontinued
Losses on termination - (3,492) (3,492)
and disposal of group
operations -
discontinued
Less provision made last - 3,492 3,492
year
(Loss)/profit on - (8,635) (8,635)
termination and disposal
of group operations -
continuing
Profit on ordinary 222,388 (63,639) 158,749
activities before
taxation
Tax on profit on (57,265) - (57,265)
ordinary activities
Tax on profit on (57,265) - (57,265)
ordinary continuing
activities
Tax on termination and - - -
disposal of group
operations - continuing
Profit on ordinary 165,123 (63,639) 101,484
activities after
taxation
Minority interests - (960) - (960)
equity
Profit attributable to 164,163 (63,639) 100,524
shareholders
Dividends - including (83,606) - (83,606)
non-equity
Retained profit for the 80,557 (63,639) 16,918
year
Profit attributable to 100,524
shareholders
Amortisation and 51,807
impairment of goodwill
Loss/(profit) on 8,635
termination and disposal
of group operations (net
of taxation and minority
interest)
Provision for losses on -
termination and disposal
of group operations (net
of deferred tax)
Amortisation of goodwill 3,197
of associates
Preference dividends (13,017)
Earnings before goodwill 151,146
and exceptional items
Earnings per share
(pence)
- Basic 81.5
- Diluted 79.0
Excluding goodwill and
exceptional items
- Basic 140.8
- Diluted 133.0
Dividends per share 67.0
(pence)
Weighted number of 107.4
ordinary shares in issue
(million)
2004*
Before
goodwill Goodwill
and and
exceptional exceptional
GBP'000 items items Total
Interest receivable - 91,845 - 91,845
interest income arising
from debt securities
Interest receivable - 588,188 - 588,188
other interest income
Interest payable (574,822) - (574,822)
Net interest income 105,211 - 105,211
Dividend income 3,450 - 3,450
Fees and commissions 340,712 - 340,712
receivable
- Annuity 266,373 - 266,373
- Deal 74,339 - 74,339
Fees and commission (20,046) - (20,046)
payable
Dealing profits 90,127 - 90,127
Income from long-term 5,082 - 5,082
assurance business
Return on shareholder's 24,122 - 24,122
funds in the long-term
assurance business
Other operating income 12,196 - 12,196
Other income 455,643 - 455,643
Total operating income 560,854 - 560,854
Administrative expenses (395,188) - (395,188)
Depreciation and (12,448) (50,644) (63,092)
amortisation
- tangible fixed assets (12,448) - (12,448)
- amortisation and - (50,644) (50,644)
impairment of goodwill
Provision for bad and (20,958) - (20,958)
doubtful debts
Operating profit 132,260 (50,644) 81,616
Share of income of 11,205 (2,132) 9,073
associated companies
Exceptional items - 8,529 8,529
Provision for losses on - (5,103) (5,103)
termination and disposal
of group operations -
discontinued
Losses on termination and - (24 328) (24 328)
disposal of group
operations - discontinued
Less provision made last - 19,225 19,225
year
(Loss)/profit on - 13,632 13,632
termination and disposal
of group operations -
continuing
Profit on ordinary 143,465 (44,247) 99,218
activities before taxation
Tax on profit on ordinary (27,821) (678) (28,499)
activities
Tax on profit on ordinary (27,821) - (27,821)
continuing activities
Tax on termination and - (678) (678)
disposal of group
operations - continuing
Profit on ordinary 115,644 (44,925) 70,719
activities after taxation
Minority interests - (1,888) 75 (1,813)
equity
Profit attributable to 113,756 (44,850) 68,906
shareholders
Dividends - including non- (63,709) - (63,709)
equity
Retained profit for the 50,047 (44,850) 5,197
year
Profit attributable to 68,906
shareholders
Amortisation and 50,644
impairment of goodwill
Loss/(profit) on (13,029)
termination and disposal
of group operations (net
of taxation and minority
interest)
Provision for losses on 5,103
termination and disposal
of group operations (net
of deferred tax)
Amortisation of goodwill 2,132
of associates
Preference dividends (7,553)
Earnings before goodwill 106,203
and exceptional items
Earnings per share (pence)
- Basic 60.0
- Diluted 59.6
Excluding goodwill and
exceptional items
- Basic 103.8
- Diluted 100.8
Dividends per share 58.0
(pence)
Weighted number of 102.3
ordinary shares in issue
(million)
Consolidated statement of recognised gains and losses for the year
ended 31 March
GBP'000 2005 2004*
Profit for the year attributable to 100,524 68,906
shareholders
Translation differences on foreign currency (2,724) (5,203)
net investments - equity
Translation differences on foreign currency (10,472) 1,099
net investments - perpetual preference shares
Unrealised surplus on revaluation of 4,478 13,982
investment properties
Actuarial gains/(losses) net of deferred tax 2,370 (1,294)
recognised on pension fund schemes
Total recognised gains and losses for the year 94,176 77,490
Prior year adjustments in respect of changes (43)
in accounting policies relating to the
adoption of UITF 38
Total gains and losses since last annual 94,133
report
Consolidated cash flow statement for the year ended 31 March
GBP'000 2005 2004*
Net cash inflow from trading activities 281,114 166,911
Increase/(decrease) in other operating 1,085,756 (656,282)
assets/liabilities
Net cash inflow/(outflow) from operating 1,366,870 (489,371)
activities
Dividends received from associated 4,893 3,769
undertakings
Net cash outflow from return on investments (71,966) (52,663)
and servicing of finance
Taxation (21,764) (31,917)
Net cash (outflow)/inflow from capital (460,102) 332,532
expenditure and financial investment
Net cash (outflow)/inflow from acquisitions (70,224) 40,227
and disposals
Ordinary share dividends paid (60,749) (52,810)
Net cash inflow from financing 194,465 389,225
Increase in cash 881,423 138,992
Cash and demand bank balances at beginning 1,172,894 1,033,902
of year
Cash and demand bank balances at end of 2,054,317 1,172,894
year
Consolidated balance sheet at 31 March
GBP'000 2005 2004*
Assets
Cash and balances at central banks 105,130 363,862
Treasury bills and other eligible bills 323,622 332,208
Loans and advances to banks 2,961,809 1,704,715
Loans and advances to customers 7,391,038 6,347,032
Debt securities 1,986,864 1,466,437
Equity shares 439,963 418,254
Interests in associated undertakings 3,559 70,006
Other participating interests 9,124 9,135
Intangible fixed assets 193,317 251,508
Tangible fixed assets 125,022 146,326
Other assets 1,202,305 1,081,131
Prepayments and accrued income 122,899 81,511
Long-term assurance business attributable 230,885 265,315
to the shareholder
15,095,537 12,537,440
Long-term assurance assets attributable 2,815,137 2,781,335
to policyholders
17,910,674 15,318,775
Liabilities
Deposits by banks 912,320 1,233,609
Customer accounts 6,805,429 7,211,292
Debt securities in issue 1,925,124 621,857
Other liabilities 3,737,901 1,969,855
Accruals and deferred income 226,763 185,600
Pension fund liability 7,554 11,967
13,615,091 11,234,180
Long-term assurance liabilities 2,815,137 2,781,335
attributable to policyholders
16,430,228 14,015,515
Capital Resources
Subordinated liabilities (including 499,995 497,858
convertible debt)
Minority interests - equity 13,195 39,029
Called up share capital 165 165
Share premium account 1,029,242 1,027,539
Treasury shares (118,694) (101,304)
Shares to be issued 2,191 2,666
Perpetual preference shares 323,800 127,797
Revaluation reserves 47,620 43,142
Other reserves (189,663) (169,501)
Profit and loss account (127,405) (164,131)
Shareholders' funds 967,256 766,373
- equity 643,456 638,576
- non-equity 323,800 127,797
1,480,446 1,303,260
17,910,674 15,318,775
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 March 2005 or
2004. The auditors have reported on the 2004 accounts for Investec
plc; their report was unqualified and did not contain a statement
under section 237(2) or (3) of the Companies Act 1985. The
statutory accounts for 2005 for Investec plc (incorporating the
results of Investec Limited) will be finalised on the basis of the
financial information presented by the directors in this
announcement and will be delivered to the Registrar of Companies
following the company's annual general meeting.
The results of Investec Limited (incorporating the results of
Investec plc) are the same as the results presented in this
announcement.
Segmental analysis - geographical and business analysis of
operating profit before taxation, goodwill amortisation and
exceptional items - for the year ended 31 March 2005
United
Kingdom
Southern and Other
GBP'000 Africa Europe Australia geographies Total
Private 33,586 45,081 4,119 2,051 84,837
Client
Activities
Treasury 31,121 15,527 1,496 (210) 47,934
and
Specialised
Finance
Investment 26,186 15,290 3,515 2,165 47,156
Banking
Asset 40,382 5,373 - 185 45,940
Management
and
Assurance
Activities
Property 7,233 5,071 - - 12,304
Activities
Group (5,571) (25 394) 2,328 (1,191) (29,828)
Services
and Other
Activities
132,937 60,948 11,458 3,000 208,343
Segmental analysis - geographical and business analysis of
operating profit before taxation, goodwill amortisation and
exceptional items - for the year ended 31 March 2004*
United
Kingdom
Southern and Other
GBP'000 Africa Europe Australia geographies Total
Private 19,610 30,627 3,025 600 53,862
Client
Activities
Treasury 18,887 14,015 436 2,467 35,805
and
Specialised
Finance
Investment 27,147 2,939 4,312 3,321 37,719
Banking
Asset 27,322 1,614 - 257 29,193
Management
and
Assurance
Activities
Property 8,605 1,521 - - 10,126
Activities
Group (24,022) (11,982) 1,853 (294) (34,445)
Services
and Other
Activities
77,549 38,734 9,626 6,351 132,260
Consolidated statement of reconciliations of shareholders' funds
and movements in reserves for the year ended 31 March
GBP'000 2005 2004*
Balance at the beginning of year 766,373 588,466
As previously reported 808,969 639,968
Changes in accounting policies
Adoption of UITF 38: Accounting for ESOP (42,596) (51,502)
trusts
Retained profit for the year 16,918 5,197
Foreign currency adjustments - equity (2,724) (5,203)
Issue of ordinary shares/shares to be issued - 46,325
Net movement of perpetual preference shares 196,003 126,552
Issue of perpetual preference shares 207,313 127,484
Share issue expenses (838) (2,031)
Foreign currency adjustments - perpetual
preference shares (10,472) 1,099
Share premium movement on re-issue of 1,703 18,975
treasury shares
Net purchase of treasury shares (17,865) (25,571)
Actuarial gains/(losses) net of deferred tax 2,370 (1,294)
recognised on pension fund schemes
Revaluation of investment properties 4,478 13 982
Reduction of shareholding in associate - (1,056)
Balance at end of year 967,256 766,373
Reconciliation between UK and SA accounting
principles for the year ended 31 March
GBP'000 2005 2004*
Earnings before goodwill and exceptional 151,146 106,203
items attributable to ordinary shareholders
under UK GAAP
SA GAAP adjustments:
Acquisition accounting 612 3,036
Employee share option plans (2,200) (7,519)
AC 133 adjustments# 5,749 9,230
Debenture interest 5,811 8,471
Interest rate swaps (2,339) (3,224)
Embedded value earnings (2,174) (783)
Revaluation of investment properties 4,478 13,982
Treasury shares 2,345 1,427
Other (222) 482
Earnings before goodwill and exceptional 163,206 131,305
items attributable to ordinary shareholders
under SA GAAP
#AC133 is a South African accounting statement on recognition and
measurement of financial instruments. This South African standard
is based on international accounting standard IAS39.
* Restated for changes to accounting policies and disclosures as
detailed in the paragraph headed "Accounting policies and
disclosures".
Overall performance
We are pleased to announce that for the year ended 31 March 2005,
earnings per share (EPS) before exceptional items and amortisation
of goodwill increased 35.6% to 140.8 pence from 103.8 pence (as
restated). We have benefited from continued focus on driving
profitable growth in our key business areas and geographies,
supported by favourable economic conditions. We have achieved the
majority of our stated growth and financial return objectives and
we have made significant progress towards achieving the others.
Salient features of the financial year:
? Operating profit before exceptional items and amortisation of
goodwill increased 57.5% from GBP132.3 million to GBP208.3
million.
- Earnings attributable to ordinary shareholders before
exceptional items and amortisation of goodwill increased 42.3%
from GBP106.2 million to GBP151.1 million.
- Return on adjusted equity shareholders' funds (inclusive of
compulsorily convertible instruments) increased from 15.4% to
21.3%.
- Recurring/annuity income as a percentage of total operating
income increased from 64.8% to 65.2%.
- The ratio of total operating expenses to total operating income
improved from 72.7% to 66.8%.
- Investec Limited issued R2.3 billion (GBP207.3 million) of non-
redeemable, non-cumulative, non-participating preference shares in
February 2005.
- The board proposes an increased final dividend of 37.0 pence per
ordinary share equating to a full year dividend of 67.0 pence
(2004: 58.0 pence) and a dividend cover based on the group's EPS
before exceptional items and goodwill amortisation of 2.10 times
(2004: 1.79 times). This is consistent with our policy of
increasing our cover to the upper end of our target range of 1.7
to 2.3 times in years of strong performance.
Commentary
The financial information contained in this commentary is prepared
in accordance with UK GAAP. Rand values included in this section
are translated into Pounds Sterling - in the case of the profit
and loss account at the weighted average rate for the relevant
period, and in the case of the balance sheets at the relevant
closing rate. The average Rand/Pounds Sterling exchange rates were
11.47 and 12.02 for the years ended 31 March 2005 and 31 March
2004, respectively, representing an appreciation of the Rand of
approximately 5% during the period under review.
Unless the context indicates otherwise, all comparatives relate to
the year ended 31 March 2004.
Business unit review
Private Client Activities
Our Private Client Activities, comprising the Private Banking and
Private Client Portfolio Management and Stockbroking divisions,
reported substantial growth in operating profit before exceptional
items and amortisation of goodwill of 57.5% to GBP84.8 million
from GBP53.9 million.
* Private Banking
Operating profit before exceptional items and amortisation of
goodwill of the Private Banking division increased by 56.7% to
GBP71.1 million driven by solid growth in total advances and non-
interest income.
Strong performances were recorded across the majority of Private
Banking activities with notable performances from Specialised
Lending, Property Finance, Growth Finance and Investment
Management Activities. Since 31 March 2004, the global private
client lending book has grown by 26.5% to GBP4.3 billion and the
division increased its retail deposit book by 16.8% to GBP3.0
billion.
* rivate Client Portfolio Management and Stockbroking
Private Client Portfolio Management and Stockbroking recorded
strong growth, earning operating profit before exceptional items
and amortisation of goodwill of GBP13.7 million, an increase of
61.7%.
Improved equity market conditions and strict cost control
benefited both Carr Sheppards Crosthwaite in the UK and Private
Client Securities in SA. Since 31 March 2004, total private client
funds under management have increased by 14.0% to GBP9.7 billion
(excluding recently announced transactions).
We have bolstered our Private Client Portfolio Management and
Stockbroking activities through the acquisition of the SA private
client business of HSBC and the merger of Carr Sheppards
Crosthwaite and Rensburg plc in the UK.
Treasury and Specialised Finance
The group's Treasury and Specialised Finance division posted
operating profit before exceptional items and amortisation of
goodwill of GBP47.9 million, an increase of 33.9%.
The SA business benefited from a relatively stable interest rate
environment and an improvement in dealing profits following a
disappointing performance in the prior period. The advisory and
structuring businesses in the UK and SA performed well with
notable performances from the Project Finance, Resource Finance,
Structured Finance and Financial Products divisions. These results
were somewhat offset by an unsatisfactory result recorded by the
Commodities and Equity Derivative trading operations in the UK.
Investment Banking
The group's Investment Banking division recorded an increase in
operating profit before exceptional items and amortisation of
goodwill of 25.0% from GBP37.7 million to GBP47.2 million.
The Institutional Stockbroking operations performed well against a
backdrop of favourable equity markets and the Corporate Finance
divisions posted sound results, with a solid performance reported
by the UK division. The Direct Investments and Private Equity
divisions continued to benefit from the good performance of their
underlying portfolios.
Asset Management
The Asset Management division delivered substantial growth in
operating profit before exceptional items and amortisation of
goodwill of 55.1% to GBP38.2 million from GBP24.6 million. The
division benefited from favourable market conditions with assets
under management increasing by 11.4% in Pounds Sterling to GBP22.9
billion and by 12.0% in Rands to R268.9 billion.
The UK and other international operations recorded a significant
improvement in profit due to strong net inflows across their
product ranges, with investment performance remaining strong. The
Southern African operations delivered solid financial results
boosted by a combination of performance fees and additional
revenue from rising portfolio prices over the period.
Assurance Activities
The group's SA assurance activities, conducted by Investec
Employee Benefits (IEB) reported an increase in operating profit
of 69.5% to GBP7.8 million. The business has benefited from an
increase in embedded value as a consequence of improved
efficiencies. The group risk business has been sold to Capital
Alliance Holdings Limited (CAL) through a reinsurance contract
executed on 31 December 2004, and the earnings reflect income to
the date of sale.
Property Activities
Operating profit before exceptional items and amortisation of
goodwill of the Property Activities division increased by 21.5% to
GBP12.3 million. The division benefited from an increase in funds
under management in SA and realised gains earned in the UK.
Group Services and Other Activities
Group Services and Other Activities incurred an operating loss of
GBP29.8 million compared to the prior period loss of GBP34.4
million. The SA Central Funding division benefited from an
improved capital structure and a lower interest rate environment.
These results were partially offset by a net increase in interest
costs in the UK Central Funding division following the issue of
Tier II subordinated debt of GBP200 million in March 2004.
Financial statements analysis
Operating income
Operating income increased by 23.5% to GBP692.6 million. The
movements in total operating income are analysed further below.
Net interest income increased by 26.1% to GBP132.7 million. We
recorded strong growth in Private Banking and UK Treasury and
Specialised Finance lending portfolios, with total core loans and
advances increasing by 20.7% to GBP5.8 billion. A more stable
interest rate environment in SA has led to an improvement in the
performance of the Treasury and Specialised Finance and Central
Funding divisions.
Net fees and commissions increased by 28.3% to GBP411.4 million.
This was largely attributable to increased lending turnover and
transactional activity in the Private Banking division and a sound
performance by the UK Project Finance, UK Investment Banking,
Financial Products and Property divisions. The Asset Management
and Private Client Portfolio and Stockbroking divisions benefited
from improved equity market conditions and net inflows across a
number of the product ranges.
Dealing profits decreased by 23.7% to GBP68.7 million mainly as a
result of the moderate performance of the trading investments held
within the Property and Private Banking divisions in SA and
certain other investments held directly by the group in its
corporate portfolio.
The performance of the group's long-term assurance activities is
discussed under "Business unit review".
The growth in the return on shareholder's funds in the long-term
assurance business conducted through IEB results from the
substantial increase in the average long-term assurance assets
attributable to the shareholder from GBP186.9 million to GBP248.1
million, supported by favourable capital market conditions.
Other operating income increased by 58.1% to GBP19.3 million as a
result of gains achieved on the sale of investments in the
underlying funds of the UK private equity portfolio.
Recurring/annuity income as a percentage of total operating income
increased from 64.8% to 65.2% (our target range is 70%-75%).
Administrative expenses
Administrative expenses increased by 14.6%. Variable remuneration
increased by 41.0% to GBP106.9 million due to increased
profitability. Other operating expenses increased by 8.3% to
GBP346.0 million largely as a result of an increase in compliance,
risk management and regulatory costs, an increase in rental costs
given that the group no longer owns certain of the buildings from
which it operates, and an increase in consulting fees relating to
certain projects undertaken by us to improve efficiency which
should result in long-term cost savings.
We have made material progress towards reaching our operating
expenses to total operating income target of 65% as the ratio
improved from 72.7% to 66.8%, principally as a result of the
strong growth in operating income of 23.5%.
Goodwill amortisation and impairments
The charge for goodwill amortisation and impairment increased from
GBP50.6 million to GBP51.8 million. Included in the current period
is an amount of GBP5 million relating to negative goodwill arising
from a structured finance transaction and an impairment of GBP8.8
million in respect of the Institutional Asset Management business
in SA relating to the portfolio of businesses acquired from
Fedsure.
Provision for bad and doubtful debts
The bad and doubtful debts charge in the profit and loss account
increased marginally by 1.8% to GBP21.3 million. We have
experienced an increase in provisions as a result of book growth
mitigated by bad debt recoveries and provisions made in prior
years against certain loans, which are no longer required.
The percentage of gross non-performing loans (NPLs) to core loans
and advances decreased from 1.8% to 0.9%. Total provision coverage
remains highly satisfactory both as a percentage of gross NPLs and
net NPLs (gross NPLs net of security), at 157.9% and 409.1%
respectively. The group's general provision as a percentage of net
loans and advances has remained at approximately 1.2%.
Share of income of associated companies
The group's main associate was CAL. An amount of GBP14.0 million
before goodwill amortisation was accrued, representing Investec's
share of the estimate of CAL's operating earnings for the year
ended 31 March 2005.
Taxation
The effective tax rate of the group (excluding the tax effect of
exceptional items) increased from 21.0% to 27.5% due to the
reversal of deferred tax assets as a result of reduced
availability of assessed losses.
Exceptional items
Exceptional items comprise: GBP'million
-Profits arising on the sale of the group's investment 8.1
in CAL to Liberty Group Limited
-Reinsurance of the group risk business in IEB with (1.8)
CAL
- Profits arising on reinsurance 5.9
- Impairment of goodwill (7.7)
- Losses arising on the sale of the banking subsidiary (6.3)
in Israel largely relating to a write down in the
value of the buildings it occupied
-Closure of the Traded Endowments operation in the UK (6.4)
- Losses arising on closure (3.7)
- Impairment of goodwill (2.7)
-Losses relating to restructuring costs incurred in (2.2)
certain businesses
Total exceptional items (8.6)
Capital resources
Total capital resources increased by 13.6% to GBP1.5 billion and
total shareholders' funds increased by 26.2% to GBP967 million
largely as a result of the issue of R2.3 billion (GBP207.3
million) of non-redeemable, non-cumulative, non-participating
preference shares by Investec Limited in February 2005.
The annualised return on average total equity shareholders' funds,
inclusive of goodwill, increased from 16.6% to 23.6%. The
annualised return on adjusted shareholders' funds (inclusive of
compulsorily convertible instruments) increased from 15.4% to
21.3%, exceeding our target of 20%.
Investec plc and Investec Limited are well capitalised and capital
adequacy ratios comfortably exceed the minimum regulatory
requirements. The capital adequacy of Investec plc (applying UK
Financial Services Authority rules to its capital base) is 15.5%
(March 2004: 17.3%). The capital adequacy of Investec Limited
(applying South African Reserve Bank rules to its capital base) is
20.1% (March 2004: 15.1%).
Assets under administration
Client assets under administration increased by 12.8% from GBP30.0
billion to GBP33.9 billion with sound growth across all ranges of
funds. On balance sheet assets grew by 16.9% from GBP15.3 billion
to GBP17.9 billion largely as a result strong growth in core
advances.
Outlook
Our results reflect the benefit of strategic actions taken by
group management over the past few years to streamline the
business and achieve greater operational focus on core activities.
During 2004 we identified and implemented six key financial and
growth targets by which to measure the group's performance and as
these results demonstrate we have moved rapidly towards meeting,
or improving on those financial targets.
We continue to operate in a competitive environment where ongoing
innovation and rapid, yet careful, response to competition is
crucial. Within this challenging context we are very well
positioned with the quality and balance of our earnings sources.
We firmly believe that our niche focus, our ability to be
distinctive and the quality of our people will position us to take
advantage of market conditions and we are confident that
opportunities ahead of us will allow us to continue to grow
profitably in the forthcoming year.
On behalf of the boards of Investec plc and Investec Limited
Hugh Herman Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
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 Securities Exchange South Africa.
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 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 consolidating the results and financial position of both
companies using merger accounting principles.
Accordingly, the year-end results for Investec plc present the
results and financial position of the combined DLC group under UK
GAAP, denominated in Pounds Sterling. However, because SA GAAP
differs in certain respects from UK GAAP, the group publishes a
high-level reconciliation and summary of the principal
differences. In the commentary above, all references to Investec
or the group relate to the combined DLC group comprising Investec
plc and Investec Limited.
As announced on 30 July 2004 Investec plc sold its 80.28% stake in
Investec Bank (Israel) Limited to The First International Bank of
Israel. The transaction was completed on 22 December 2004 and
hence the results of Investec Bank (Israel) Limited to that date,
have been consolidated into the group results for the year ended
31 March 2005.
Accounting policies and disclosures
The comparative information provided in the financial information
is for the year ended 31 March 2004. Other than changes noted
below, accounting policies adopted by the group are consistent
with the prior period.
Change in accounting policies since the release of the 31 March
2004 annual results
UITF 38: Accounting for ESOP trusts
The group has adopted UITF 38 in respect of accounting for
employee share incentive trusts (ESOP trusts). In summary the
impact on the adoption of the new standard is as follows:
-Own shares held by the ESOP trusts (which have not vested to
employees) are deducted from shareholders' funds (previously
included on balance sheet as an asset under "own shares").
-No gain or loss is recognised in the profit and loss account or
statement of total recognised gains and losses on the purchase,
sale or cancellation of the group's own shares held by the ESOP
trusts.
-The net finance costs of the ESOP trusts are charged to the
profit and loss account as they accrue.
Other than UITF 38, the changes in policies noted below were
already included in the 31 March 2004 annual results.
The impact of the change in accounting policies arising from the
adoption of UITF 38 is detailed below:
Year to 31 March 2004 GBP'000
Interest receivable 1 184
Interest payable -
Net interest income 1 184
Other operating income (1 063)
Profit on ordinary activities before taxation 121
Taxation -
Profit on ordinary activities after taxation 121
The impact of the change in accounting policies arising from the
adoption of UITF 38 on reserves is detailed below:
GBP'000
Reserves at 31 March 2004 as previously reported 808 969
UITF 38 (42 596)
Relating to 2004 opening reserves (51 502)
Relating to 2004 movement in reserves 8 906
-tained profit for the year 121
-Net reduction in treasury shares 5 764
-Net movement in share premium on reduction of treasury 3 021
shares
Restated total reserves at 31 March 2004 766 373
Conversion to International Financial Reporting Standards
Under regulations adopted by the European Union as well as changes
introduced to the JSE Securities Exchange South Africa listing
requirements, we are required to prepare our financial statements
in accordance with International Financial Reporting Standards
(IFRS) for the year ending 31 March 2006.
The results relating to the six months ending 30 September 2005
will be presented under IFRS, alongside restated comparative
information in accordance with IAS 34 - Interim Financial
Reporting. The date of transition to IFRS will be 1 April 2004,
being the start of the earliest period for which comparative
information will be presented in the first set of IFRS compliant
financial statements.
We have made significant progress in the conversion to IFRS. The
major differences between IFRS and UK GAAP have been identified,
and we are currently quantifying the impact. More detailed
information will be made available prior to the release of the
September 2005 interim results.
The most significant areas of impact for us due to IFRS are as
follows:
Transition to IFRS
IFRS 1 governs the conversion to and first time adoption of IFRS.
We are analysing the impact of the utilisation of certain
exemptions allowed by the standard, and will choose them in such a
fashion as to strike a balance between fair presentation and
practicability. We will disclose the impact of the transition in
accordance with this standard.
Share based payments
The introduction of IFRS 2 will result in the expensing of all
share based payments made by us. The major area of impact will be
as a result of the expense arising from share options granted to
employees under share option schemes as well as other long-term
incentive plans.
Goodwill
Existing goodwill will no longer be amortised, but tested for
impairment on an annual basis in accordance with IFRS 3 - Business
Combinations. Negative goodwill will be released to the income
statement as and when it arises.
Insurance contracts
IFRS 4 may lead to a gross-up on the balance sheet as a result of
a restriction on netting off reinsurance contracts and the related
liabilities.
Dividends
IAS 10 - Events after Balance Sheet Date will prohibit the
recognition of a liability for any dividends declared after
balance sheet date.
Financial instruments
The adoption of IAS 32 - Financial Instruments: Disclosure and
Presentation, and IAS 39 - Financial Instruments: Recognition and
Measurement will result in the following key changes:
- All derivative financial instruments will be carried at fair
value, regardless of whether they form part of the banking or
trading books. Where possible, the effect of this will be negated
by hedge accounting or treatment of related financial instruments
at fair value.
- Certain fees earned as part of lending transactions will be
spread over the life of the lending arrangement as an integral
component of the effective interest yield.
- General provisions will no longer be raised.
- Specific and portfolio impairments will be introduced, which
take into account the discounting of future cash flows.
- Certain financial assets and related liabilities may no longer
be offset, which will result in gross values on the balance sheet.
Dividend announcement
Investec plc
In terms of the DLC structure, Investec plc shareholders who are
non-South African resident shareholders may receive all or part of
their dividend entitlements through dividends declared and paid by
Investec plc on their ordinary shares and/or through dividends
declared and paid on the SA DAN share issued by Investec Limited.
Investec plc shareholders who are South African residents, may
receive all or part of their dividend entitlements through
dividends declared and paid by Investec plc on their ordinary
shares and/or through dividends declared and paid on the SA DAS
share issued by Investec Limited.
Notice is hereby given that a final dividend (No. 6) has been
proposed by the board in respect of the year ended 31 March 2005.
The Annual General Meeting of members at which the proposed
dividend will be considered for approval is scheduled to take
place on Thursday, 11 August 2005.
Shareholders in Investec plc will receive a total distribution of
37 pence (2004: 30 pence) per ordinary share, which will be paid
as follows:-
- for non-South African resident Investec plc shareholders,
through a dividend paid by Investec plc of 37 pence per ordinary
share.
- for South African resident shareholders of Investec plc, through
a dividend paid, on the SA DAS share equivalent to 37 pence per
ordinary share.
The relevant dates for the payment of the dividends are:-
Last day to trade cum-dividend:
- On the London Stock Exchange Tuesday, 26 July 2005
- On the JSE Securities Exchange South Friday, 22 July 2005
Africa
Shares commence trading ex-dividend:
- On the London Stock Exchange Wednesday, 27 July 2005
- On the JSE Securities Exchange South Monday, 25 July 2005
Africa
Record date:
- On the London Stock Exchange Friday, 29 July 2005
- On the JSE Securities Exchange South Friday, 29 July 2005
Africa
Payment date:
- United Kingdom register Monday, 15 August 2005
- South African register Monday, 15 August 2005
Share certificates on the South African branch register may not be
dematerialised or rematerialised between Monday, 25 July 2005 and
Friday, 29 July 2005, both dates inclusive, nor may transfers
between the UK and SA registers take place between Monday, 25 July
2005 and Friday, 29 July 2005, both dates inclusive.
Shareholders registered on the South African register are advised
that the total distribution of 37 pence, equivalent to 437 cents
per share, has been arrived at using the Rand/Pounds Sterling
average spot rate, as determined at 11h00 (SA time) on 18 May
2005.
By order of the board
R Vardy
Company Secretary 19 May 2005
Dividend announcement
Investec Limited
Notice is hereby given that a final dividend (No. 99) of 437 cents
(2004: 360 cents) per ordinary share has been proposed by the
board in respect of the year ended 31 March 2005. The Annual
General Meeting of members at which the proposed dividend will be
considered for approval is scheduled to take place on Thursday, 11
August 2005.
The dividend is payable to shareholders recorded in the members'
register of the company at the close of business on Friday, 22
July 2005.
The relevant dates for the payment of the dividend are:
Last day to trade cum-dividend Friday, 22 July 2005
Shares commence trading ex-dividend Monday, 25 July 2005
Record date Friday, 29 July 2005
Payment date Monday, 15 August 2005
The final dividend of 437 cents per ordinary share has been
determined by converting the Investec plc distribution of 37 pence
per ordinary share into Rands using the Rand/Pounds Sterling
average spot rate at 11h00 (SA time) on 18 May 2005.
Share certificates may not be dematerialised or rematerialised
between Monday, 25 July 2005 and Friday, 29 July 2005, both dates
inclusive.
By order of the board
S Noik
Company Secretary 19 May 2005
Further information
Information provided on the Company's website at www.investec.com
includes:
-Copies of this statement.
-The results presentation.
-Additional report produced for the investment community including
more detail on the results.
-Excel worksheets containing the salient financial information in
UK GAAP Pounds Sterling.
Alternatively for further information please contact the Investor
Relations division on e-mail investorrelations@investec.com or
telephone +27 11 286 7070 / +44 207 597 5546.
Date: 19/05/2005 08:02:30 AM Produced by the JSE SENS Department
