Interim Management Statement

RNS Number : 2098W

Investec PLC

24 July 2009

 



Investec Limited Incorporated in the Republic of South Africa Registration number 1925/002833/06   JSE share code: INL   ISIN: ZAE000081949

Investec plc  Incorporated in England and Wales Registration number 3633621 JSE share code: INP ISIN: GB00B17BBQ50

(jointly 'Investec')

As part of the dual listed company structure, Investec plc and Investec Limited notify both the London Stock Exchange and the JSE Limited of matters which are required to be disclosed under the Disclosure, Transparency and Listing Rules of the United Kingdom Listing Authority (the 'UKLA') and/or the JSE Listing Requirements.

Accordingly we advise of the following:

Investec (comprising Investec plc and Investec Limited) - Interim Management Statement

24 July 2009

Diversified business model, sound balance sheet and recurring revenue base continue to support profitability in challenging economic conditions

This Interim Management Statement is issued by Investec in accordance with the UK Listing Authority's Disclosure and Transparency rules. Unless stated otherwise, key trends and figures highlighted below refer to the three months ended 30 June 2009 and the corresponding period in the previous year.

Overview of operating fundamentals 

Investec's recurring revenue base and operational diversity have continued to support profitability across its core geographies. The group has maintained its disciplined focus on managing risk, building capital and preserving liquidity. Operating fundamentals and activity levels within the group's businesses, however, continue to be negatively impacted by weak global economic conditions. 

Salient features of the quarter to 30 June 2009 compared to the quarter to 30 June 2008 are:

• Expenses continued to be tightly managed and have declined by 7%.

• Net operating income (after expenses and minorities but before impairments on loans and advances) decreased by 12%.

• Defaults have continued to increase in line with expectations, with the credit loss ratio on core loans and advances amounting to 0.8% annualised for the quarter (2008: 0.3%).  

• The above mentioned factors have resulted in a decline in attributable earnings (see note 2) of 26%. The group is, however, trading well ahead of the last quarter of the 2009 financial year.

• The group's three core geographies remain profitable with recurring income as a percentage of total operating income amounting to approximately 65%. 

• As at 30 June 2009 the capital adequacy ratio of Investec plc (applying UK Financial Services Authority rules to its capital base) was 16.0% and the capital adequacy ratio of Investec Limited (applying South African Reserve Bank rules to its capital base) was 14.6%.

• The group has a strong liquidity position and currently has approximately GBP5.5 billion of cash and near cash available to support its activities. 

• Since 31 March 2009 (the end of the group's financial year) core loans and advances grew by 1.0% to GBP16.3 billion, customer deposits increased by 6.4% to GBP15.5 billion and third party assets under management increased by 9.7% to GBP53.6 billion. 

• The group's gearing ratio remains low at approximately 12 times and the advances to customer deposits ratio is approximately 1 times.

Additional information 

Since 30 June 2009 the group has via a tender offer acquired GBP36.7 million in aggregate principal amount of its GBP350 million Fixed/Floating Undated Subordinated Callable Step-Up Notes issued under its Euro Medium Term Note Programme (RNS announcement made on 7 July 2009) plus a further GBP12.5 million in the open market. In addition, the group has acquired GBP18.4 million principal amount of the 9.00 per cent. Kensington Group plc Callable Subordinated Notes due 2015 (RNS announcement made on 13 July 2009).

Outlook 

Notwithstanding the improvement in some financial markets since the group's year-end the global environment  remains  uncertain. Investec's geographical and operational diversity continues to enable it to navigate a steady course. Investec has a sound balance sheet and the group will continue to leverage off its existing platforms, seeking to create additional operational efficiencies and organic growth opportunities across all geographies. 

The group will be holding a pre-close briefing on 17 September 2009 at which it will provide further detail on the performance of its businesses. 

On behalf of the board

Hugh Herman (Chairman), Stephen Koseff (Chief Executive Officer) and Bernard Kantor (Managing Director)

Notes:

1.       The financial information on which this statement is based has not been reviewed and reported on by the group’s auditors.

2.       Attributable earnings refer to net profit before goodwill and non-operating items but after taxation and adjusting for earnings attributable to minorities and preference shareholders.

3.       Please note that matters highlighted above may contain forward looking statements which are subject to various risks and uncertainties and other factors, including, but not limited to:

–         the further development of standards and interpretations under International Financial Reporting Standards (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 24 July 2009.

4.       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 the group’s individual companies are reported in the local currencies in which they are domiciled, including Rands, Australian Dollars and Euros. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in our 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:

	3 months to  30 Jun 2009		Year to 31 Mar 2009		3 months to 30 Jun 2008
Currency  per GBP1.00	Period end	Average	Period end	Average	Period end	Average
South African Rand	12.74	12.83	13.58	14.83	15.62	15.26
Australian Dollar	2.04	2.03	2.07	2.19	2.07	2.10
Euro	1.17	1.13	1.08	1.21	1.26	1.27
US Dollar	1.65	1.54	1.43	1.73	1.99	1.98

5.    The following disclosures are made with respect to Basel II quarterly disclosure requirements:

The group holds capital well in excess of regulatory requirements and intends to perpetuate this philosophy and ensure that it remains well capitalised in a vastly changed banking world. Accordingly, as announced in November 2008, the group has adjusted its capital adequacy targets and is focusing on increasing its capital base, targeting a minimum tier one capital ratio of 11% and a total capital adequacy ratio of 14% to 17% on a consolidated basis for Investec plc and Investec Limited, respectively. Investec has made good progress in this regard and intends to meet these targets by the end of calendar year 2010.

	Investec plc	IBP*^	IBAL*	Investec Limited	IBL*
As at 30 June 2009	GBP 'mn	GBP 'mn	A$'mn	ZAR 'mn	ZAR 'mn
Primary capital (Tier 1)	1,107	936	543	16,717	14,747
Other capital (Tier 2 and 3)	742	613	152	5,123	5,123
	1,849	1,549	695	21,840	19,870
Less: deductions	-172	-161	-122	-232	-332
Net qualifying capital	1,677	1,388	573	21,608	19,538
Risk-weighted assets (banking and trading)	10,511	8,643	2,912	147,604	134,105
Capital requirements	841	691	379	14,022	12,739
Credit risk	654	545	325	11,530	10,884
Securitisation exposures	15	14	0	135	135
Equity risk	18	18	10	601	577
Market risk	44	44	2	201	122
Operational risk	110	70	42	1,555	1021
Capital adequacy ratio	16.0%	16.1%	19.7%	14.6%	14.6%
Tier 1 ratio	10.0%	10.5%	15.3%	11.2%	10.8%
Capital adequacy ratio - pre operational risk	18.4%	17.9%	22.1%	16.5%	15.8%
Tier 1 ratio - pre operational risk	11.5%	11.6%	17.2%	12.6%	11.8%

*IBP is Investec Bank plc; IBAL is Investec Bank (Australia) Limited and IBL is Investec Bank Limited. ^IBP includes IBAL. 

Timetable:

Pre-close briefing: 17 September 2009

Interim period: 30 September 2009

Release of interim results: 19 November 2009

For further information please contact:

Investec Investor Relations                        

UK: [phone]                    

South Africa: [phone]

[e-mail]

About Investec

Investec is an international specialist banking group that provides a diverse range of financial products and services to a niche client base in three principal markets, the United Kingdom, South Africa and Australia as well as certain other countries. The group was established in 1974 and currently has approximately 5 900 permanent employees.

Investec focuses on delivering distinctive profitable solutions for its clients in five core areas of activity namely, Private Client Activities, Capital Markets, Investment Banking, Asset Management and Property Activities.

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 GBP2.5 billion.

 

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