Interim Results
Investec PLC
27 November 2003
27 November 2003
Investec plc (incorporating the results of Investec Limited)
Unaudited consolidated financial results in UK GAAP Pounds Sterling for the six
months ended 30 September 2003
Investec announces interim results for the six months ended 30 September 2003
Investec, the international specialist banking group, announces today its
interim results for the six months ended 30 September 2003.
Financial highlights
•Operating profit of £58.1 million (2002: £48.5 million)*
- Operating profit: Southern Africa of £30.4million, 52.2% of overall
(2002: £35.5 million, 73.2%)*
- Operating profit: UK & Europe, Australia, Israel and the US of £27.7
million, 47.8% of overall (2002: £13.0 million, 26.8%)*
•Profit before tax of £62.9 million (2002: £53.0 million)*
•Profit after tax of £50.2 million (2002: £44.8 million)*
•Earnings per share of 49.2p (2002: 47.6p)*
•Total dividends per share of 28p (2002: 26p)
Business highlights
•A significant turnaround in the performance of the UK operations:
operating profit before exceptional items and amortisation of goodwill
increased 55.3% to £21.1 million (2002: £13.6 million)
•Particularly robust performances from Investment Banking and Private
Client Activities:
•Investment banking operating profit before exceptional items and
amortisation of goodwill increased significantly to £20.1 million (2002:
£0.1 million)
•Private Client Activities increased operating profit before exceptional
items and amortisation of goodwill 52.3% to £25.1 million (2002: 16.5
million)
•Investec welcomed the introduction of the Financial Sector Charter in
South Africa during the period under review and believes that the group is
reasonably well-positioned to implement its principles of transformation and
empowerment. Prior to the Charter's release, the group announced that
Investec Limited had entered into an empowerment partnership with Peu
Investment Group, Tiso Group and a broad-based Entrepreneurship Development
Trust.
*before exceptional items and amortisation of goodwill, totalling -£22.2
million
(2002:-£40.9 million)
Stephen Koseff, Chief Executive of Investec, said:
'Investec's strong niche focus and clear strategy of specialistion has supported
the group through a challenging period. While proceeding with caution, we are
encouraged by the economic environment and market sentiment and will continue to
focus on building core businesses across all the regions in which we operate.'
Bernard Kantor, Managing Director of Investec, said:
'We have achieved solid growth during the first half reflecting the benefits of
improved financial markets and the successful rationalisation and restructuring
of the group's operations. All of our four key businesses areas achieved good
growth particularly in the UK where the investment bank benefited from a reduced
cost base and increased corporate activity.'
For further information please contact:
Investec +27 11 286 7070 Citigate Dewe Rogerson 020 7638 9571
Stephen Koseff, Chief Executive Jonathan Clare
Bernard Kantor, Managing Director Simon Rigby
Ursula Munitich, Investor Relations Sara Batchelor
A webcast of the presentation will be available at 9am (UK time) via
www.investec.com
Overall performance
After a period of intensive rationalisation and strategic realignment, the group
(comprising Investec Limited and Investec plc) has refocused its activities
resulting in an increase in basic earnings per share (EPS) before exceptional
items and goodwill amortisation of 3.4% from 47.6 pence to 49.2 pence.
Salient features of the six month period were:
•Investec Bank Limited issued R1.5 billion (£127.5 million)
non-cumulative, non-redeemable and non-participating preference shares.
•The proportion of Investec's operating profit before exceptional items
and amortisation of goodwill shifted significantly towards Investec plc. The
proportion earned in the group's Southern African operations reduced from
73.2% to 52.2%.
•Administrative expenses declined by 6.1% reflecting the successful
rationalisation and restructuring of the group's operations in the last
financial year, particularly in the United Kingdom (UK) and in the United
States (US).
•Operating profit before exceptional items and goodwill amortisation of
the group's continuing operations increased from £54.8 million to £58.1
million. This was largely attributable to a turnaround in the performance of
the UK operations, and was achieved despite a mixed performance by the South
African businesses.
•Investec welcomed the introduction of the Financial Sector Charter in
South Africa (SA) during the period under review and believes that the group
is reasonably well-positioned to implement its principles of transformation
and empowerment. Prior to the Charter's release, the group announced that
Investec Limited had entered into an empowerment partnership with Peu
Investment Group, Tiso Group and a broad-based Entrepreneurship Development
Trust.
•Dividends of 28 pence per share equating to a dividend cover of 1.8 based
on the combined group's EPS before exceptional items and goodwill
amortisation, as determined in UK GAAP are proposed.
Presentation of financial information
Investec Limited and Investec plc
In July 2002, Investec Group Limited (now Investec Limited), which is
headquartered in South Africa, implemented a Dual Listed Companies (DLC)
structure, and listed its principal non-Southern African businesses on the
London Stock Exchange. For further information, see Investec's web site
www.investec.com/investorrelations.
Under the contractual arrangements of the DLC structure, Investec Limited and
Investec plc effectively form a single economic enterprise in which the economic
and voting rights of shareholders are equalised. In accordance with this
structure, 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 interim results for Investec plc present the results and
financial position of the combined DLC group under UK GAAP, denominated in
Pounds Sterling. In the commentary below, all references to Investec or the
group relate to the combined DLC group comprising Investec Limited and Investec
plc.
Investec previously reported its consolidated results in accordance with SA
GAAP, denominated in Rands and UK GAAP, denominated in Pounds Sterling. In terms
of the new JSE Securities Exchange South Africa (JSE) listing requirements the
group is now only required to report its consolidated results in accordance with
UK GAAP, denominated in Pounds Sterling. However, because SA GAAP differs in
certain respects from UK GAAP, the group sets out a high-level reconciliation
and summary of the principal differences.
The financial information contained in the 'Commentary' section was prepared in
accordance with UK GAAP. Rand values included in the 'Commentary' section were
translated into Pounds Sterling - in the case of the profit and loss accounts,
at the weighted average rate for the relevant period and, in the case of the
balance sheets, at the relevant period-end rate. Reuters quotes the average Rand
/Pounds Sterling exchange rate at 12.2 and 15.7 for the six months ended 30
September 2003 and 30 September 2002, respectively. This represents some 22.3%
appreciation of the Rand during the period under review.
This Rand appreciation had a positive effect on the results expressed in Pounds
Sterling of those Investec businesses that generate revenues and profits in
Rands. Where the impact of Rand appreciation is key to understanding the
performance of the group's businesses, this is noted in the 'Commentary'
section.
Dividend declaration
The dividends per share declared by Investec Limited and Investec plc are
determined with reference to the group's consolidated EPS before exceptional
items and amortisation of goodwill, denominated in Pounds Sterling and prepared
in accordance with UK GAAP.
Commentary
Unless the context indicates otherwise, all comparatives included in the
'Commentary' section relate to the corresponding period in the previous year.
Business Unit Review
Investment Banking
The group's Investment Banking division took advantage of the better market
conditions to record an improved operating profit before exceptional items and
amortisation of goodwill, increasing from a marginal profit to £20.1 million.
In SA, the Investment Banking division benefited from an upliftment in values of
its direct investment and private equity portfolios. Investec Corporate Finance
enjoyed a steady level of activity focusing on restructurings, black economic
empowerment transactions, de-listings and a number of high profile investment
banking deals. The low volumes on the JSE Securities Exchange South Africa
continued to have a negative impact on the agency business of Investec
Securities.
Improved stock market conditions and a reduced cost base in the Investment
Banking division in the UK enabled the division to a achieve a major turnaround
in performance. The level of corporate activity increased and the division
concluded a number of public-to-private deals during the period. Secondary
commissions also benefited from the higher equity market levels. Furthermore,
the rankings of Investec in the UK Small Mid-Cap Survey (2003) were encouraging,
with a number one ranking for the 'Most improved product and service'.
In Australia, Investec Wentworth benefited from the return of activity in the
IPO market and the upturn in merger and acquisition (M&A) activity. The
corporate advisory business advised on 11 deals valued at A$2.4 billion for the
six months to September 2003.
Private Client Activities
The group's Private Client Activities, comprising the Private Banking and
Private Client Portfolio Management and Stockbroking divisions, reported strong
growth in operating profit before exceptional items and amortisation of goodwill
of 52.3% to £25.1 million from £16.5 million. The group's Private Banking
operations performed particularly well. The performance of Carr Sheppards
Crosthwaite in the UK benefited from improved net inflows, largely in higher
yielding discretionary mandates, while the performance of Investec Securities in
SA was impacted by subdued market volumes in the SA market.
•Private Banking
The Private Banking division increased operating profit before exceptional items
and amortisation of goodwill by 54.7%, to £21.8 million. This performance was
driven by a solid growth in total advances and non-interest income in SA, the UK
and Australia. During the period under review, the group's private client
lending book in SA grew by 15.1% to R19.8 billion (£1.7 billion), and the
private client lending book in the UK grew by 13.7% to £1 052 million.
Investec Private Bank in SA increased operating profit despite the decline in
interest rates. A notable contribution was made by the relatively new private
client investment banking portfolio, which benefited from the sale of certain
investments held by the division and an increase in the value of others.
In the UK, strong performances were recorded across all of the Private Banking
businesses. The property lending business continued its sound performance
against the backdrop of a somewhat less buoyant market with a well-spread loan
book. Despite a strong bias in the overall lending book towards commercial and
residential property exposures, the book is well-secured and the group believes
that loan to value ratios are conservative.
The Private Client Group in Australia continued to grow its Structured Property
Finance unit strongly. During the period a new initiative was undertaken to
establish a Private Client Investment Banking business to target those clients
that fall below the radar of the investment banks.
•Private Client Portfolio Management and Stockbroking
Private Client Portfolio Management and Stockbroking recorded a creditable
performance, earning operating profit before exceptional items and amortisation
of goodwill of £3.3 million, increasing by 38.2%.
Depressed stock market volumes in SA restricted the performance of Investec
Securities, although total funds under management increased by 26.2% to R32.3
billion (£2.8 billion) from R25.6 billion (£2.0 billion) at year-end. Investec
Securities continues to focus on reducing costs and during the period a campaign
was launched to increase the awareness of Investec Securities Online, which
should provide further cost savings.
In the UK, despite the difficult operating environment, Carr Sheppards
Crosthwaite performed well with total funds under management increasing by 19.1%
to £5.6 billion from £4.7 billion at 31 March 2003. Net new inflows of £327
million were generated including the Public Guardianship Office account for £192
million with the remainder comprising a combination of private client and gross
funds, including two charities of approximately £8 million each.
Treasury and Specialised Finance
The group's Treasury and Specialised Finance division posted operating profit
before exceptional items and amortisation of goodwill of £15.4 million, an
increase of 4.1% from £14.8 million. The strong performance from the UK
operation was largely offset by the negative performance from the SA operation.
The SA Treasury and Specialised Finance division disappointed with operating
profit before exceptional items and amortisation of goodwill declining from
£18.6 million to £5.2 million. Banking Activities suffered as a result of the
general slow down in corporate activity, while the treasury desk was negatively
impacted by the rate positioning of its assets. Furthermore, difficult trading
conditions and losses on the currency and interest rate desks negatively
affected the overall performance of the division.
The UK Treasury and Specialised Finance division, on the other hand, achieved a
considerable turnaround with operating profit before exceptional items and
amortisation of goodwill increasing to £8.9 million from a loss of £3.6 million.
This was largely due to the extensive restructuring of the division in the
previous financial year. The division benefited from a renewed focus on higher
margin, less capital intensive transactions and customer flows, in addition to
the growth and pleasing performance of its Banking Activities.
Asset Management
The Asset Management division achieved operating profit before exceptional items
and amortisation of goodwill of £10.9 million, which represented growth of 14.7%
in Pounds Sterling. Assets under management increased by 11.8% in Pounds
Sterling to £18.8 billion and by 3.3% in Rand to R217.4 billion in the period
under review. The key features of the first six months of the year were the
resilience of the SA business and the major strides that were made in
penetrating the UK institutional and retail funds markets.
Investec Asset Management recorded strong growth and continued expansion of the
market share of its UK retail funds. The UK retail business grew assets under
management for the reporting period by 31.1%, with net inflows of £96 million.
This contributed to it achieving an annualised market share of 2.7% of net
industry sales, up from 0.4% three years ago. The UK institutional business
continued to penetrate the market through its acceptance by major consultants
and multi-managers. The strong performance across the product range was key to
these successes. The offshore fund range took net inflows of £219 million due to
the sales effort from the Asia and UK-based teams. Flows from SA slowed as a
result of the strength of the Rand.
In SA, Investec Asset Management is developing a strong franchise in specialist
products, such as, fixed income and specialist equity products. The performance
of the balanced funds, although improved, remains a cause for special attention.
The SA institutional business was appointed to manage important new mandates
during the reporting period, including two substantial SA equity mandates won
outside SA. The SA Personal Investments business attracted domestic net new
retail flows of R1.3 billion (£110 million) during the reporting period. In
addition, a range of absolute return unit trusts was launched, complementing the
successful institutional range.
Assurance Activities
The group's SA life assurance activities, conducted by Investec Employee
Benefits (IEB) reported operating profit before exceptional items and
amortisation of goodwill of £2.2 million - a decline of 88.0%. In the
comparative period IEB had generated substantial non-recurring operational
earnings from the restructuring of its businesses and investment portfolios.
Group Services and Other Activities
Group Services and Other Activities posted an operating loss of £15.5 million
compared to the prior period loss of £4.3 million. This was largely attributable
to the weaker performance of the Central Funding division, which experienced a
decline in net interest income as a consequence of the margin squeeze that
occurred following the lowering of interest rates in South Africa and the UK.
This was further exacerbated by the investment of some of the surplus capital in
non-interest earning investments. This negative variance was almost completely
offset by a solid increase in other operating income, with the division
benefiting from an increased return on a number of investments held. Central
costs, expressed in Pounds Sterling, were negatively affected by the average
appreciation of the Rand. The group's Property Activities in SA continued to
perform well, with total assets under management increasing by 29.9% to R11.3
billion (£978 million) since the year-end. The Traded Endowments business has
continued to make a loss as a result of its traditional client base losing
confidence in the product, with the business remaining under strategic review.
Geographic Performance
The group's Southern African operations accounted for 52.2% (2002: 73.2%) of
Investec's operating profit before exceptional items and amortisation of
goodwill. This reduction was largely as a result of the increase in the
contribution from the UK operations and the closure and sale of the group's
loss-making US businesses. Highlights of the developments and the performance of
the regions in which the group operates, follow.
Southern Africa
The Southern African operations posted an operating profit before exceptional
items and amortisation of goodwill of £30.4 million, representing a decrease of
14.6%. The consistently strong performance from the Private Banking operation
was supported by a solid performance from the Investment Banking division. This
was negated by the weak performance from the Treasury and Specialised Finance
division and a considerable decline in the earnings of the group's Assurance
Activities and Central Funding division, explained elsewhere in this report.
UK
The UK operations recorded an operating profit before exceptional items and
amortisation of goodwill of £21.1 million, an increase of 55.3% over the
previous period. The strong results from the Private Banking and Treasury and
Specialised Finance divisions were supported by a solid performance from Carr
Sheppards Crosthwaite. Furthermore, the Investment Banking activities benefited
from a reduced cost base and increased corporate activity.
Australia
The Australian operating profit before exceptional items and amortisation of
goodwill increased by 16.0% to £3.8 million against a backdrop of a stronger
stock market. The business experienced sound activity levels and good progress
was made in all its core areas of activities.
US
The heavily reduced ongoing operations in the US, consisting of several fixed
income trading operations and a small equities trading desk supporting Investec
Israel's clients, posted a modest operating profit before exceptional items and
amortisation of goodwill of £0.8 million. The fundamental restructuring of the
US business was completed and, with the exception of runoff related activities,
all other businesses in Investec Ernst and Investec Inc. ceased operating as of
31 May 2003. The headcount at the end of the period was 68, all based in New
York.
Israel
The economic environment in Israel remained difficult and negative inflation
weakened performance reported in nominal terms. Operating profit before
exceptional items and amortisation of goodwill decreased by 22.2% to £2.0
million. Equity capital market activity picked up towards the end of the
reporting period boosted by the performance of international markets. Investec
Bank (Israel) continues to leverage off the presence of the group in the US,
with the Israeli Desk in New York. Assets under management increased by 32.3% to
NIS13.1 billion (£1.8 billion) from NIS9.9 billion at year-end. Furthermore,
there was a marginal fall in expenses as a result of ongoing cost control.
Financial statements analysis
Operating income
Operating income of £251.6 million declined by 1.9%. Operating income for
continuing operations increased by 7.0%. The movements in total operating income
for continuing operations are analysed further below.
Net interest income of £43.3 million decreased by 27.6% largely as a result of
the declining interest rate environment in SA, which had a negative impact on
the group's SA Treasury and Specialised Finance activities and Central Funding
division which experienced a severe margin squeeze as the group's assets
repriced quicker than its liabilities. Furthermore, net interest income was
adversely affected by the closure of the money markets and repo business in the
UK in the prior period. The group, however, continued to achieve sound growth in
its Private Banking lending portfolios.
Net fees and commissions increased by 20.8% to £146.9 million. This was largely
attributable to increased lending turnover in the Private Banking businesses,
the growth and strong performance of the UK Treasury and Specialised Finance
Banking and Advisory Activities, and the turnaround in the group's Corporate
Finance operations in the UK. Furthermore, the appreciation of the Rand against
Pounds Sterling had a positive impact on this growth, particularly in the Asset
Management division.
Dealing profits (trading income) increased by 27.7% to £35.0 million as a result
of the strong performance of the UK trading activities and improved equity
market levels, which bolstered the values of the group's Investment Banking and
Private Equity portfolios. This was partially offset by the poor trading
performance of the South African Treasury and Specialised Finance division.
The performance of the group's long-term assurance activities is discussed under
'Business Unit Review'.
The substantial growth in other operating income is mainly as a result of
realised profits on the sale of certain of the group's Investment Banking
investments, as well as an increased return on investments held by the Central
Funding division.
The group generated a return of £6.8 million on shareholders' funds of R1.8
billion (approximately £150 million), in the long-term assurance business.
Overall, annuity income as a percentage of total operating income declined from
72.3% to 67.9%.
Administrative expenses
Total administrative expenses decreased by 6.1% from £193.7 million to £181.9
million principally due to the rationalisation of the group's activities in the
US and in its UK Investment Banking operations undertaken during the 2003
financial year. Investec Limited experienced a 3.1% decline in expenses in Rand
terms, whilst the expenses of Investec plc declined by 19.8% in Pounds Sterling
terms.
The ratio of total operating expenses to total operating income decreased from
78.1% to 75.0%. The cost to income ratio in SA increased from 59.4% to 68.3%.
The ratio in the prior period was positively affected by the substantial
restructuring profits generated by the group's Assurance Activities. The cost to
income ratio for the non-SA businesses decreased from 90.4% to 80.4% as a result
of the rationalisation and restructuring of these operations and the improvement
in operating profit of the UK businesses.
Goodwill amortisation
The charge for goodwill amortisation and impairment decreased by 5.2% from £31.4
million to £29.8 million, largely as a result of the closure of the majority of
the group's US operations in the prior year. Included in the current period is
an amount of £6.3 million relating to an impairment of the Traded Endowments
business acquired through Fedsure.
Provision for bad and doubtful debts
The bad and doubtful debts charge in the income statement decreased by 35.7% to
£4.9 million.
The percentage of gross non-performing loans (NPLs) to core loans and advances
increased from 0.9% to 1.1%. Total provision coverage remains conservative both
as a percentage of gross NPLs and net NPLs (gross NPLs net of security), at
162.0% and 261.3% respectively. In addition, the group's general provision
coverage as a percentage of net loans and advances remained stable at 1.2%.
Taxation
The operational effective tax rate of the group (extracting the tax effect on
exceptional items of £3.5 million in 2002) increased from 16.9% to 21.9%. This
is mainly as a consequence of the sale and closure of the majority of the
group's operations in the US and an increase in inflation adjusted earnings in
Israel, on which taxation is paid, relative to nominal earnings as a result of
the declining inflation rate.
Share of income of associated companies
The group's main associate is Capital Alliance Limited (CAL). An amount of R54.2
million (£4.7 million) was accrued, representing Investec's share in CAL's
estimated operating earnings for the six-month period ended 30 September 2003.
Exceptional items
Exceptional items fall into two categories, namely:
•Losses on termination of the group's operations in the US amounting to
£5.1 million. The group made a final exceptional charge (including future
run-off costs) for the closure of these operations. To the extent that any
costs are incurred in future periods in excess of this charge, they will be
treated as non-exceptional operating expenses.
•A £13.7 million profit on disposal of group operations relating to the
sale of the companies, 100 Grayston Drive Property (Pty) Limited and Block E
Power Station Properties (Pty) Limited, at market value.
Capital resources
Total capital resources increased by 17.0% to £1.2 billion during the six month
period.
Total shareholders' funds increased by £145.7 million during the period under
review mainly as a result of the issue of R1.5 billion (£127.5 million) in
non-cumulative, non-redeemable and non-participating preference shares and
foreign currency adjustments of £20.5 million.
Net tangible assets grew from £397.2 million to £562.4 million.
The annualised return on average tangible equity shareholders' funds declined
from 23.4% to 22.6% and the annualised return on average total equity
shareholders' funds, inclusive of goodwill increased from 11.9% to 13.3% over
the period.
Investec plc and Investec Limited are well capitalised and capital adequacy
ratios exceed the minimum regulatory requirements. The capital adequacy applying
South African Reserve Bank rules to Investec Limited's capital base is 14.4%
(March 2003: 12.2%). The capital adequacy applying Financial Services Authority
rules to Investec plc's capital base is 14.5% (March 2003: 14.2%).
Total assets under administration
Total assets under administration increased by 8.2% from £40.6 billion at 31
March 2003 to £43.9 billion at 30 September 2003. This was mainly attributable
to growth in assets under management of £2.5 billion across all ranges of third
party funds, due to improved equity values and the appreciation of the Rand
against Pounds Sterling.
Accounting policies and disclosures
Share options
In June 2002, Investec issued 6 736 260 options to staff at a strike price of
R164.50 per share and 770 612 options at a strike price of R170 per share. These
options have vesting periods varying between six months and five years. In
December 2002, Investec issued 1 951 431 options to staff at a strike price of
R111.32 and 1 209 524 options at a strike price of £7.93. In June 2003 Investec
issued 64 091 options at a strike price of R101.39, 91 423 options at a strike
price of R101.76 and 671 936 options at a strike price of £7.76. The Rand
options vest in tranches over five years and the Pound options vest in tranches
over nine years.
Future accounting standards are likely to require that options are valued at the
date of issue and expensed over the period that employees become entitled to
them. Had Investec applied this treatment to the options issued during the
current period, reported earnings would have decreased by £2.9 million (R35
million) in respect of the June 2002 options, £705 000 (R9 million) for the
December options, and £90 614 (R1 million) in respect of the June 2003 options.
These charges were calculated using a Black-Scholes model with an average
implied volatility for the Investec share price of 54%, independently projected
dividends, and a risk free rate appropriate to the period of the option. The
fair value of the options granted was adjusted to take into account the expected
future staff turnover rates and the vesting periods, as will be required by
proposed future accounting standards.
Restatements
Investec's accounting policy is to show trading profits net of the funding costs
of the underlying positions. During the prior period, the group conducted a
thorough evaluation of the funding costs of trading desks, as a result of which
interest charges were reallocated between trading and funding desks within the
Treasury and Specialised Finance division. Comparative figures have been
restated to be consistent with this.
In the prior year income on shareholders assets were reflected as part of
interest margin. In the current year this has been changed to reflect the return
on shareholders funds as a separate line in the consolidated profit and loss
account.
Prospects
The action taken by management to rationalise and strategically realign the
group has supported it through a challenging period. While proceeding with
caution, we are encouraged by the economic environment and market sentiment and
will continue to focus on building core businesses across all the regions in
which we operate.
On behalf of the boards of Investec Limited and Investec plc
Hugh Herman Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
Dividend announcement
Investec plc
Notice is hereby given that an interim dividend (No. 3) of 13.5 pence per
ordinary share has been declared in respect of the six months ended 30 September
2003, which together with the dividends declared by Investec Limited on the SA
DAN and SA DAS shares, equivalent to 14.5 pence per Investec plc ordinary share,
will result in a total distribution to shareholders of 28 pence (2002: 26 pence)
per ordinary share.
The relevant dates for the payment of the dividends are:
The last day to trade cum dividend:
- On the London Stock Exchange Tuesday, 16 December 2003
- On the JSE Securities Exchange South Africa Thursday, 11 December 2003
Shares commence trading ex-dividend:
- On the London Stock Exchange Wednesday, 17 December 2003
- On the JSE Securities Exchange South Africa Friday, 12 December 2003
Record date:
- On the London Stock Exchange Friday, 19 December 2003
- On the JSE Securities Exchange South Africa Friday, 19 December 2003
Payment date:
- United Kingdom register Monday, 05 January 2004
- South African register Monday, 05 January 2004
Share certificates on the South African branch register may not be
dematerialised or rematerialised between Friday, 12 December 2003 and Friday, 19
December 2003, both dates inclusive, nor may transfers between the UK and SA
registers take place between Friday, 12 December 2003 and Friday, 19 December
2003, both dates inclusive.
Shareholders registered on the South African register are advised that the total
distribution of 28 pence, equivalent to 309 cents per share, has been arrived at
using the Rand/Sterling conversion rate, as determined at 11h00 (SA time) on 26
November 2003.
By order of the board
R Vardy
Company Secretary
27 November 2003
Investec plc (incorporating the results of Investec Limited)
Unaudited consolidated UK GAAP financial results in pound sterling for
the six months ended 30 September 2003
Salient Features
30 % 30 31
September September March
2003 2002
UK GAAP Change 2003
Earnings before goodwill
amortisation and exceptional
items (£'000) 47 093 7.4 43 867 88 684
Operating profit before
goodwill amortisation and
taxation (£'000) 58 120 19.7 48 543 84 758
Earnings per share (before
goodwill amortisation and
exceptional items) (pence) 49.2 3.4 47.6 97.6
Dividend cover (times) 1.8 1.8 1.8
Dividends per share (pence) 28 7.7 26 54.0
Cost to income ratio (%) 75.0 (4.0) 78.1 79.8
Annuity income as a percentage
of operating income (%) 67.9 (6.6) 72.3 71.3
Total capital resources (£ 1 185 28.2 924 1 013
million)
Total assets under
administration
(£ millions) 43 919 8.2 40 576 40 604
Return on average 13.3 11.9 12.4
shareholders' funds (%)
Return on average tangible
shareholders' funds (%) 22.6 23.4 23.8
Weighted number of ordinary
shares in issue (millions) 95.8 92.3 90.9
Consolidated profit and loss accounts
6 Months to 30 September 2003 6 Months to 30 September 2002*
Unaudited Unaudited
Before goodwill Goodwill & Before Goodwill &
£'000 & exceptional exceptional goodwill & exceptional
items items exceptional items
Total items Total
Interest receivable -
interest income arising
from debt securities 54 170 - 54 170 65 072 - 65 072
Interest receivable -
other interest income 285 736 - 285 736 327 537 - 327 537
Interest payable (296 653) - (296 653) (330 930) - (330 930)
Net interest income 43 253 - 43 253 61 679 - 61 679
Dividend income 3 511 - 3 511 2 903 - 2 903
Fees and commissions
receivable 157 128 - 157 128 145 094 - 145 094
- Annuity 131 148 - 131 148 124 394 - 124 394
- Deal 25 980 25 980 20 700 - 20 700
Fees and commission (10 251) - (10 251) (6 982) - (6 982)
payable
Dealing profits 34 975 - 34 975 30 230 - 30 230
Income from long-term
assurance business 2 699 - 2 699 18 830 - 18 830
Return on shareholders'
funds in the long-term
assurance business 6 769 - 6 769 6 291 - 6 291
Other operating income 13 558 - 13 558 (1 615) - (1 615)
Other income 208 389 - 208 389 194 751 - 194 751
Total operating income 251 642 - 251 642 256 430 - 256 430
Administrative expenses (181 954) - (181 954) (193 726) - (193 726)
Depreciation and (6 679) (29 780) (36 459) (6 556) (31 409) (37 965)
amortisation
- tangible fixed assets (6 679) - (6 679) (6 556) - (6 556)
- amortisation &
impairment of goodwill - (29 780) (29 780) - (31 409) (31 409)
Provision for bad and
doubtful debts (4 889) - (4 889) (7 605) - (7 605)
Operating profit / 58 120 (29 780) 28 340 48 543 (31 409) 17 134
(loss)
Operating profit /
(loss) from continuing 58 120 (29 780) 28 340 54 838 (31 409) 23 429
operations
Operating loss from -
discontinued operations - - - (6 295) (6 295)
Share of income of
associated companies 4 791 (1 008) 3 783 4 451 (780) 3 671
Exceptional items - 8 571 8 571 - (5 159) (5 159)
Provision for losses on
termination and
disposal of group
operations - - (5 103) (5 103) - (5 159) (5 159)
discontinued
Impairment of goodwill
on discontinued - - - - - -
operations
Profit on termination
and disposal of group
operations - continuing - 13 674 13 674 - - -
Fundamental
reorganisation and
restructuring costs - - - - - - -
continuing
Profit / (loss) on
ordinary activities 62 911 (22 217) 40 694 52 994 (37 348) 15 646
before taxation
Tax on profit on
ordinary activities (12 727) - (12 727) (8 204) (3 523) (11 727)
Tax on profit on
continuing activities (12 727) - (12 727) (8 204) - (8 204)
Tax on loss on
discontinued activities - - - - - -
Tax on provision for
losses on termination
and disposal of group
operations - - - - - - (3 523) (3 523)
discontinued
Profit / (loss) on
ordinary activities 50 184 (22 217) 27 967 44 790 (40 871) 3 919
after taxation
Minority (1 235) - (1 235) (492) - (492)
interests-equity
Profit / (loss)
attributable to 48 949 (22 217) 26 732 44 298 (40 871) 3 427
shareholders
Dividends-including
non-equity (29 819) - (29 819) (27 349) - (27 349)
Retained profit /
(loss) for the period 19 130 (22 217) (3 087) 16 949 (40 871) (23 922)
Year to 31 March 2003*
Audited
Before goodwill Goodwill &
£'000 & exceptional items exceptional
items Total
Interest receivable - interest income arising from debt securities 171 066 - 171 066
Interest receivable - other interest income 682 254 - 682 254
Interest payable (737 405) - (737 405)
Net interest income 115 915 - 115 915
Dividend income 3 597 - 3 597
Fees and commissions receivable 331 375 - 331 375
- Annuity 286 782 - 286 782
- Deal 44 593 - 44 593
Fees and commission payable (54 768) - (54 768)
Dealing profits 45 231 - 45 231
Income from long-term assurance business 27 779 - 27 779
Return on shareholders' funds in the long-term assurance business 15 551 - 15 551
Other operating income 25 269 - 25 269
Other income 394 034 - 394 034
Total operating income 509 949 - 509 949
Administrative expenses (392 466) - (392 466)
Depreciation and amortisation (14 417) (122 302) (136 719)
- tangible fixed assets (14 417) - (14 417)
- amortisation & impairment of goodwill - (122 302) (122 302)
Provision for bad and doubtful debts (18 308) - (18 308)
Operating profit / (loss) 84 758 (122 302) (37 544)
Operating profit / (loss) from continuing operations 101 427 (116 599) (15 172)
Operating loss from discontinued operations (16 669) (5 703) (22 372)
Share of income of associated companies 11 350 (1 644) 9 706
Exceptional items - (28 757) (28 757)
Provision for losses on termination and disposal of group operations -
discontinued - (9 437) (9 437)
Impairment of goodwill on discontinued operations - (19 047) (19 047)
Profit on termination and disposal of group operations - continuing - 5 800 5 800
Fundamental reorganisation and restructuring costs - continuing - (6 073) (6 073)
Profit / (loss) on ordinary activities before taxation 96 108 (152 703) (56 595)
Tax on profit on ordinary activities (5 357) - (5 357)
Tax on profit on continuing activities 858 - 858
Tax on loss on discontinued activities (6 215) - (6 215)
Tax on provision for losses on termination and disposal of group operations -
discontinued - - -
Profit / (loss) on ordinary activities after taxation 90 751 (152 703) (61 952)
Minority interests-equity (1 646) - (1 646)
Profit / (loss) attributable to shareholders 89 105 (152 703) (63 598)
Dividends-including non-equity (53 428) - (53 428)
Retained profit / (loss) for the period 35 677 (152 703) (117 026)
* Restated for changes to accounting policies and disclosures as
detailed in the paragraph headed 'Restatements.'
Earnings per share
Six months Six months Year to
ended 30 ended 30
September September
2003 2002
31 March
2003
£'000 £'000 £'000
----------------------------------- ---------- ---------- ---------
Profit/(loss) attributable to 26 732 3 427 (63 598)
shareholders
Amortisation and impairment of 29 780 31 409 122 302
goodwill
Profit on termination and disposal (13 674) - (5 800)
of group operations
Provision for losses on termination
and disposal of group operations
(net of deferred tax) 5 103 8 682 28 484
Amortisation of goodwill of 1 008 780 1 644
associates
Fundamental reorganisation and - - 6 073
restructuring costs
Preference dividends (1 856) (431) (421)
---------- ---------- ---------
Earnings before goodwill and 47 093 43 867 88 684
exceptional items ---------- ---------- ---------
Earnings per share (pence)
- Basic 26.0 3.2 (70.4)
- Diluted 26.0 3.2 (70.4)
Earnings per share excluding
goodwill amortisation and ---------- ---------- ---------
exceptional items - pence per
share
Basic earnings per share excluding
goodwill and exceptional items
(pence per share) are calculated by
dividing the profit before deducting
goodwill amortisation and impairment
and exceptional items attributable
to the ordinary shareholders in
Investec by the weighted average
number of ordinary shares in issue
during the period 49.2 47.6 97.6
---------- ---------- ---------
Dividends per share (pence) 28.0 26.0 54.0
Consolidated profit and loss accounts for the six months ended 30 September
£'000 Continuing operations Discontinued
operations
--------------------- --------- -------- ------- --------- ---------
2003 2002* % 2003 2002*
change
Unaudited Unaudited Unaudited Unaudited
--------------------- --------- -------- ------- --------- ---------
Net interest 43 253 59 726 -27.6% - 1 953
income
--------- -------- ------- --------- ---------
Dividend 3 511 2 903 20.9% - -
income
Net fees and
commissions
receivable 146 877 121 564 20.8% - 16 548
Dealing 34 975 27 397 27.7% - 2 833
profits
Income from
long-term
assurance
business 2 699 18 830 -85.7% - -
Return on -
shareholders'
funds in the
long-term
assurance
business 6 769 6 291 7.6% -
Other operating 13 558 (1 453) >100% - (162)
income
--------- -------- ------- --------- ---------
Other income 208 389 175 532 18.7% - 19 219
--------- -------- ------- --------- ---------
Total operating 251 642 235 258 7.0% - 21 172
income
Administrative (181 954) (166 946) 9.0% - (26 780)
expenses
Depreciation (6 679) (5 869) 13.8% - (687)
Provision for (4 889) (7 605) -35.7% - -
bad and doubtful
debts
--------- -------- ------- --------- ---------
Operating profit
/ (loss) before
goodwill and
exceptional
items 58 120 54 838 6.0% - (6 295)
Share of income
of associated
companies before
goodwill 4 791 4 451 7.6% - -
========= ======== ======= ========= =========
Profit /(loss) -
on ordinary
activities
before taxation,
goodwill and
exceptional
items 62 911 59 289 6.1% (6 295)
========= ======== ======= ========= =========
* Restated for changes to accounting policies and disclosures as detailed in the
paragraph headed 'Restatements.'
Consolidated statements of recognised gains and losses
------------------------------- ---------- ---------- ----------
Six months Six months
ended 30 ended 30
September September*
2003 2002
£'000 Unaudited Unaudited Year to
31 March
2003*
Audited
------------------------------- ---------- ---------- ----------
Profit/(loss) for the period
attributable to shareholders 26 732 3 427 (63 598)
Currency translation
differences on foreign currency
net investments 20 515 (12 724) (13 870)
Unrealised surplus on
revaluation of investment
properties 2 033 3 212 18 265
---------- ---------- ----------
Total recognised gains and 49 280 (6 085) (59 203)
losses for the period ---------- ---------- ----------
* Restated for changes to accounting policies and disclosures as detailed in the
paragraph headed 'Restatements.'
Consolidated balance sheets
--------------------------------- ---------- ---------- ----------
30 September 30 September
2003 2002*
Unaudited
£'000 Unaudited 31 March
2003*
Audited
--------------------------------- ---------- ---------- ----------
Assets
Cash and balances at central 348 391 221 487 348 343
banks
Treasury bills and other eligible 311 422 487 019 243 019
bills
Loans and advances to banks 1 523 294 2 755 770 2 758 797
Loans and advances to customers 5 858 259 5 079 600 4 898 226
Debt securities 1 902 519 3 797 015 1 931 265
Equity shares 263 895 136 995 138 888
Interests in associated 66 099 43 051 62 422
undertakings
Other participating interests 8 890 8 750 8 750
Intangible fixed assets 280 286 338 198 299 773
Tangible fixed assets 174 297 178 383 205 982
Own shares 88 233 70 004 82 922
Other assets 1 765 340 761 098 1 211 441
Accruals and deferred income 120 297 126 718 124 390
Long-term assurance business 188 700 97 972 108 528
attributable to the shareholder ---------- ---------- ----------
12 899 922 14 102 060 12 422 746
Long-term assurance assets 2 857 111 2 022 945 2 536 319
attributable to policyholders ---------- ---------- ----------
15 757 033 16 125 005 14 959 065
---------- ---------- ----------
Liabilities
Deposits by banks 1 402 002 3 518 586 2 129 292
Customer accounts 6 907 589 7 089 082 6 354 867
Debt securities in issue 960 697 669 047 1 089 756
Other liabilities 2 212 605 1 703 446 1 580 881
Accruals and deferred income 232 061 197 541 255 281
---------- ---------- ----------
11 714 954 13 177 702 11 410 077
Long-term assurance liabilities 2 857 111 2 022 945 2 536 319
attributable to policyholders ---------- ---------- ----------
14 572 065 15 200 647 13 946 396
---------- ---------- ----------
Capital Resources
Subordinated liabilities 300 271 153 803 276 897
(including convertible debt)
Minority interests - equity 41 987 32 580 38 804
---------- ---------- ----------
Called up share capital 158 123 158
Share premium account 994 098 917 233 994 108
Shares to be issued 2 996 41 148 2 428
Perpetual preference shares 126 778 - -
Revaluation reserves 31 193 14 148 29 160
Other reserves (153 367) (179 703) (173 877)
Profit and loss account (159 146) (54 974) (155 009)
---------- ---------- ----------
Shareholders' funds 842 710 737 975 696 968
---------- ---------- ----------
- equity 715 932 737 975 696 968
- non-equity 126 778 - -
---------- ---------- ----------
---------- ---------- ----------
1 184 968 924 358 1 012 669
---------- ---------- ----------
---------- ---------- ----------
15 757 033 16 125 005 14 959 065
---------- ---------- ----------
* Restated for changes to accounting policies and disclosures as detailed in the
paragraph headed 'Restatements.'
Consolidated cash flow statements
------------------------------- ----------- ----------- -----------
Six months Six months
ended 30 ended 30
September September
2003 2002*
£'000 Unaudited Unaudited Year to
31 March
2003*
Audited
------------------------------- ----------- ----------- -----------
Net cash (outflow)/inflow from (58 293) 523 338 79 262
operating activities
Net cash outflow from return on
investments and servicing of
finance (22 333) (16 912) (23 235)
Taxation (4 973) (25 341) (21 151)
Net cash inflow/(outflow) from
capital expenditure and
financial investment 25 006 (594 473) (136 590)
Net cash (outflow)/inflow from (1 055) 5 324 (9 629)
acquisitions and disposals
Ordinary share dividends paid (26 298) (26 433) (54 325)
Net cash inflow from 127 806 6 025 34 395
financing
----------- ----------- -----------
Increase/(decrease) in cash 39 860 (128 472) (131 273)
----------- ----------- -----------
Cash and demand bank balances
at beginning of the period 1 033 902 2 062 888 1 165 175
----------- ----------- -----------
Cash and demand bank balances 1 073 762 1 934 416 1 033 902
at end of the period ----------- ----------- -----------
* Restated for changes to accounting policies and disclosures as detailed in the
paragraph headed 'Restatements.'
Segmental analysis - geographical and business analysis of operating
profit before taxation, goodwill amortisation and exceptional items
For the six months ended 30 September 2003
--------------------- -------- -------- -------- -------- -------- --------
Southern United
Africa Kingdom
and
Europe
£'000 Australia Israel United Total
--------------------- -------- -------- -------- -------- States of --------
America
--------
Private Client 9 149 14 328 1 229 370 - 25 076
Activities
Treasury and 5 239 8 909 65 1 165 - 15 378
Specialised Finance
Activities
Investment Banking 15 884 1 516 1 591 1 086 - 20 077
Activities
Asset Management
Activities and
Assurance
Activities 12 735 215 - 111 - 13 061
Group Services and (12 645) (3 864) 885 (691) 843 (15 472)
Other Activities
Discontinued - - - - - -
Operations -------- -------- -------- -------- -------- --------
30 362 21 104 3 770 2 041 843 58 120
-------- -------- -------- -------- -------- --------
For the six months ended 30 September 2002*
---------------- -------- -------- -------- ------ ------- ---------- -------
Southern United United Discontinued Total
Africa Kingdom States of Operation
and America
Europe
£'000 Australia Israel
---------------- -------- -------- -------- ------ ------- ---------- -------
Private Client 5 290 9 393 656 1 124 - 16 463
Activities
Treasury and
Specialised
Finance
Activities 18 644 (3 586) (376) 94 - - 14 776
Investment
Banking
Activities 1 517 (4 576) 1 786 1 374 - - 101
Asset Management
Activities and
Assurance
Activities 26 376 1 334 - 94 - - 27 804
Group Services
and Other
Activities (16 287) 11 021 1 185 (61) (164) - (4 306)
Discontinued - - - - - (6 295) (6 295)
Operations -------- -------- -------- ------ ------- ---------- -------
35 540 13 586 3 251 2 625 (164) (6 295) 48 543
-------- -------- -------- ------ ------- ---------- -------
* Restated for changes to accounting policies and disclosures as detailed in the
paragraph headed 'Restatements.'
Consolidated statements of reconciliations of shareholders' funds and movements
on reserves
--------------------- ------------- -------------- -----------
Six months to 30 Six months Year to
September 2003 to
Unaudited 30 September 31 March
2002 2003
£'000 Unaudited* Audited*
--------------------- ------------- -------------- -----------
Balance at the 696 968 734 302 734 302
beginning of the
period
Foreign currency 20 515 (12 724) (13 870)
adjustments
Loss for the period (3 087) (23 922) (117 026)
Reduction in
shareholding of
associates (1 055) - -
Issue of perpetual 127 465 - -
preference shares
Share issues / to be 568 69 768 112 588
issued
Cancellation of - (5 189) (5 079)
shares
Conversions from - - 1
debentures
Issue expenses (697) (27 472) (32 213)
Revaluation of 2 033 3 212 18 265
investment properties ------------- -------------- -----------
---------------------
Balance at end of the 842 710 737 975 696 968
period ------------- -------------- -----------
---------------------
* Restated for changes to accounting policies and disclosures as detailed in the
paragraph headed 'Restatements.'
Further Information
Information provided on the Company's website at www.investec.com includes:
•Copies of this statement.
•The interim 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.co.za or +27 11 286 7070.
This information is provided by RNS
The company news service from the London Stock Exchange
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