Investec revised disclosures

RNS Number : 1117D

Investec PLC

11 May 2012

 



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.

 

Investec plc and Investec Limited ("Investec") combined results

Reclassifications and enhancements to the disclosures for the results for the year ended 31 March 2011 (as previously reported)

Overview

In terms of Investec's recent presentations and announcements you would be aware that the Investec Group has positioned its strategic discussions around three core business areas namely, Asset Management, Wealth & Investment and Specialist Banking.

In some respects the Group feels that it has historically overcomplicated its external disclosures by elaborating on six core areas of business. As you would have already seen in the Group's recent presentations all the banking businesses have been combined under one broader umbrella of the Specialist Bank.

As a result the Group has chosen to refine some of its disclosures which are explained further below.

The Group believes that these refinements provide greater clarity on the key income and balance sheet drivers of its business.

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

Investec will be hosting a conference call at 11:00 SA time (10:00 UK time) on 11 May, 2012, to go through these refinements.

Details pertaining to the conference call can be found at www.investec.com

For further information contact:

Investec Investor Relations

Tel: [phone]

Tel: [phone]

email: [e-mail]

Investec plc and Investec Limited

Combined consolidated income statement

Unaudited

Commentary on income statement reclassifications

·      The previously reported principal transaction income line item has been split into the following line items:

o  Investment income: income, other than margin, from securities held for the purpose of generating interest yield, dividends and capital appreciation

o  Client flow trading income: income from trading activities arising from making and facilitating client activities

o  Income from balance sheet management and other trading activities: includes proprietary trading income and other gains and losses as well as income earned from the balance sheet management desk

·      With the continued reduction in insurance activity, it is deemed appropriate to move the associated line items to other operating income

	For the year ended 31 March 2011	For the year ended 31 March 2011
GBP'000	NEW FORMAT	AS PREVIOUSLY REPORTED	Reclassifications
Interest income	2 238 783	2 238 783	-
Interest expense	(1 557 314)	(1 557 314)	-
Net interest income	681 469	681 469	-
Fee and commission income	896 300	896 300	-
Fee and commission expense	(108 642)	(108 642)	-
Principal transactions	-	418 686	-418 686
Investment income	254 943	-	254 943
Trading income
-       From customer flow	76 447	-	76 447
-       From balance sheet management and other trading activities	87 296	-	87 296
Investment income on assurance activities	-	64 834	(64 834)
Premiums and reinsurance recoveries on insurance contracts	-	6 110	(6 110)
Other operating income	67 173	54 003	13 170
Claims and reinsurance premiums on insurance business	-	(57 774)	57 774
Total operating income before impairment losses on loans and advances	1 954 986	1 954 986	-
Impairment losses on loans and advances	(318 230)	(318 230)	-
Operating income	1 636 756	1 636 756	-
Operating costs	(1 196 865)	(1 196 865)	-
Depreciation on operating leased assets	(16 447)	(16 447)	-
Operating profit before goodwill	423 444	423 444	-
Impairment of goodwill	(6 888)	(6 888)	-
Amortisation of acquired intangibles	(6 341)	(6 341)	-
Operating profit	410 215	410 215	-
Profit arising from associate converted to subsidiary	73 465	73 465	-
Net loss on disposal of group operations	(17 302)	(17 302)	-
Profit before taxation	466 378	466 378	-
Taxation on operating profit before goodwill	(65 075)	(65 075)	-
Taxation on acquired intangibles and acquisition/ disposal of group operations	6 610	6 610	-
Profit after taxation	407 913	407 913	-
Operating losses attributable to non-controlling interests	10 962	10 962	-
Non operating losses attributable to non-controlling interests	1 641	1 641	-
Earnings attributable to shareholders	420 516	420 516	-

Investec plc and Investec Limited

Combined consolidated balance sheet

Unaudited

Commentary on balance sheet reclassifications

The main driver behind the revision to the balance sheet is to enable a better read of Investec's exposures and to minimise reconciliation points to the detailed risk disclosures in the annual report.

It is noted that there are no measurement changes nor are there any changes to total assets, liabilities and equity.

Each category of reclassification is noted below:

·      Cash equivalent corporate paper

Cash equivalent advances to customers has been renamed to "non-sovereign, non-bank cash placements". These balances represent short term placements in corporates that run an in-house treasury function.

·      Loans and securitisation

To better align the balance sheet with the Group's risk management disclosures, loans and advances and securitised assets that form part of our "core" lending activities has been separated from assets that are in warehoused facilities and structured credit investments arising out of our securitisation and principal finance activities. This has resulted in a need to split loans and advances and securitised assets into two balance sheet categories for each. Securitised liabilities has been split into two line items to enable the relationship with securitised assets to be clearly identified.

·      Securities reclassification

The Group's previous balance sheet split securities (other than lending related) into two key line items being trading and investment securities. This classification was driven by the accounting rule sets that mainly distinguish between instruments fair valued through profit and loss, those carried at amortised cost (held to maturity) and those fair valued through equity (available for sale). The Group is of the view that disclosure of the nature of exposures on the balance sheet, distinguishing between instruments held to manage balance sheet liquidity, as principal exposure and balance sheet instruments arising from trading desk activities provides more meaningful disclosure on the face of the balance sheet. The line item "securities arising from trading securities" includes all instruments (other than derivative instruments) that are held on balance sheet in relation to trading activities.

GBP'000	As at 31 March 2011	As at 31 March 2011	Reclassifications	Cash equivalent corporate paper	Loans and securitisation	Securities reclassification
	NEW FORMAT	AS PREVIOUSLY REPORTED
Assets
Cash and balances at central banks	1 769 078	1 769 078	-	-	-	-
Loans and advances to banks	1 468 705	1 468 705	-	-	-	-
Cash equivalent advances to customers	-	535 983	(535 983)	(535 983)	-	-
Reverse repurchase agreements and cash collateral on securities borrowed	2 467 775	2 467 775	-	-	-	-
Non-sovereign and non-bank cash placements	535 983	-	535 983	535 983	-	-
Sovereign debt securities	3 532 100	-	3 532 100	-	-	3 532 100
Bank debt securities	3 006 129	-	3 006 129	-	-	3 006 129
Other debt securities	267 132	-	267 132	-	-	267 132
Trading securities	-	5 114 322	(5 114 322)	-	-	(5 114 322)
Securities arising from trading activities	743 487	-	743 487	-	-	743 487
Derivative financial instruments	1 799 204	1 799 204	-	-	-	-
Investment securities	-	3 328 609	(3 328 609)	-	-	(3 328 609)
Loans and advances to customers	17 692 356	18 758 524	(1 066 168)	-	(1 066 168)	-
Securitised assets	-	4 924 293	(4 924 293)	-	(4 924 293)	-
Own originated loans and advances to customers securitised	1 065 782	-	1 065 782	-	1 065 782	-
Other loans and advances	1 066 168	-	1 066 168	-	1 066 168	-
Warehouse assets Kensington	1 612 181	1 612 181	-	-	-	-
Other securitised assets	3 858 511	-	3 858 511	-	3 858 511	-
Investment portfolio	858 610	-	858 610	-	-	858 610
Interests in associated undertakings	23 481	23 481	-	-	-	-
Deferred taxation assets	114 838	114 838	-	-	-	-
Other assets	1 446 066	1 410 593	35 473	-	-	35 473
Property and equipment	279 801	279 801	-	-	-	-
Investment property	379 527	379 527	-	-	-	-
Goodwill	456 608	456 608	-	-	-	-
Intangible assets	136 452	136 452	-	-	-	-
	44 579 974	44 579 974	-	-	-	-
Other financial instruments at fair value through profit and loss in respect of liabilities to customers	6 361 296	6 361 296	-	-	-	-
	50 941 270	50 941 270	-	-	-	-
Liabilities
Deposits by banks	1 858 893	1 858 893	-	-	-	-
Deposits by banks Kensington	975 542	975 542	-	-	-	-
Derivative financial instruments	1 486 419	1 486 419	-	-	-	-
Other trading liabilities	716 556	716 556	-	-	-	-
Repurchase agreements and cash collateral on securities lent	1 599 646	1 599 646	-	-	-	-
Customer accounts (deposits)	24 441 260	24 441 260	-	-	-	-
Debt securities in issue	2 145 213	2 145 213	-	-	-	-
Liabilities arising on securitisation	-	4 340 864	(4 340 864)	-	(4 340 864)	-
Liabilities arising on securitisation of own originated loans and advances	1 052 281	-	1 052 281	-	1 052 281	-
Liabilities arising on securitisation of other assets	3 288 583	-	3 288 583	-	3 288 583	-
Current taxation liabilities	206 957	206 957	-	-	-	-
Deferred taxation liabilities	148 750	148 750	-	-	-	-
Other liabilities	1 411 137	1 411 137	-	-	-	-
	39 331 237	39 331 237	-	-	-	-
Liabilities to customers under investment contracts	6 358 732	6 358 732	-	-	-	-
Insurance liabilities, including unit-linked liabilities	2 564	2 564	-	-	-	-
	45 692 533	45 692 533	-	-	-	-
Subordinated liabilities	1 287 635	1 287 635	-	-	-	-
	46 980 168	46 980 168	-	-	-	-
Equity
Ordinary share capital	208	208	-	-	-	-
Perpetual preference share capital	153	153	-	-	-	-
Share premium	2 242 067	2 242 067	-	-	-	-
Treasury shares	(42 713)	(42 713)	-	-	-	-
Other reserves	315 878	315 878	-	-	-	-
Retained income	1 131 980	1 131 980	-	-	-	-
Shareholders' equity excluding non-controlling interests	3 647 573	3 647 573	-	-	-	-
Non-controlling interest	313 529	313 529	-	-	-	-
- Perpetual preferred securities issued by subsidiaries	317 997	317 997	-	-	-	-
- Non-controlling interests in partially held subsidiaries	(4 468)	(4 468)	-	-	-	-
Total equity	3 961 102	3 961 102	-	-	-	-
			-
Total liabilities and equity	50 941 270	50 941 270	-	-	-	-

Investec plc and Investec Limited

Line of business segmental income statement disclosures

Unaudited

Commentary on line of business segmental reclassifications

The Group previously reported segmental disclosures by six core business lines as well as including a segment for the Group's central functions. The Group is now disclosing its segmental disclosures in three core business lines, namely, Asset Management, Wealth & Investment and Specialist Banking. In this regard:

·      The income statement format has been revised as discussed above

·      The numbers as reported previously for Asset Management and Wealth & Investment have not changed (barring the income statement reclassifications as referred to above)

·      The Property Activities, Private Banking, Investment Banking, Capital Markets and Group Services and Other divisions have now been grouped under one banner and collectively referred to as the Specialist Bank. The total operating profit has however, not changed from that which was previously reported

For the year ended 31 March 2011 NEW FORMAT	Asset Management	Wealth & Investment	Specialist Banking	Total Group
GBP'000
Net interest income	2 989	7 281	671 199	681 469
Fee and commission income	411 935	159 055	325 310	896 300
Fee and commission expense	(72 831)	(11 414)	(24 397)	(108 642)
Investment income	(40)	1 126	253 857	254 943
Trading income
-  From customer flow	-	(1 932)	78 379	76 447
-  From balance sheet management and other trading activities	-	(528)	87 824	87 296
Other operating income	2 537	2 651	61 985	67 173
Total operating income before impairment losses on loans and advances	344 590	156 239	1 454 157	1 954 986
Impairment losses on loans and advances	29	-	(318 259)	(318 230)
Operating income	344 619	156 239	1 135 898	1 636 756
Operating costs	(216 947)	(115 813)	(864 105)	(1 196 865)
Depreciation on operating leased assets	-	-	(16 447)	(16 447)
Operating profit before goodwill and acquired intangibles	127 672	40 426	255 346	423 444
Operating losses attributable to non-controlling interests	(364)	-	11 326	10 962
Operating profit before goodwill, acquired intangibles and after non-controlling interests	127 308	40 426	266 672	434 406
AS PREVIOUSLY REPORTED: Operating profit before goodwill, acquired intangibles and after non-controlling interests	127 308	40 426	266 672
Asset Management	127 308
Wealth & Investment		40 426
Property Activities			47 708
Private Banking			(91 441)
Investment Banking			67 362
Capital Markets			242 049
Group Services and Other activities			994

Investec plc and Investec Limited

Geographical segmental income statement disclosures

Unaudited

Commentary on geographical segmental reclassifications

·      The income statement format has been revised as discussed above

·      Total operating profit per geography agrees to numbers as previously disclosed

For the year ended 31 March 2011 NEW FORMAT	UK & Europe	Southern Africa	Australia	Total Group
GBP'000
Net interest income	270 811	338 247	72 411	681 469
Fee and commission income	523 225	333 037	40 038	896 300
Fee and commission expense	(99 473)	(5 280)	(3 889)	(108 642)
Investment income	138 193	111 904	4 846	254 943
Trading income
-       From customer flow	43 353	27 694	5 400	76 447
-       From balance sheet management and other trading activities	62 430	25 133	-267	87 296
Other operating income	51 122	18 380	-2 329	67 173
Total operating income before impairment losses on loans and advances	989 661	849 115	116 210	1 954 986
Impairment losses on loans and advances	(210 485)	(77 538)	(30 207)	(318 230)
Operating income	779 176	771 577	86 003	1 636 756
Operating costs	(640 282)	(471 013)	(85 570)	(1 196 865)
Depreciation on operating leased assets	(16 447)	-	-	(16 447)
Operating profit before goodwill and acquired intangibles	122 447	300 564	433	423 444
Operating losses attributable to non-controlling interests	11 179	(490)	273	10 962
Operating profit before goodwill, acquired intangibles and after non-controlling interests	133 626	300 074	706	434 406

Investec plc and Investec Limited

Segmental operating profit disclosures

Commentary on segmental geographic and business analysis of operating profit before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests

The Group will provide the same disclosures as it previously reported and as reflected below:

For the year ended 31 March 2011 (GBP'000)	UK & Europe	Southern Africa	Australia	Total group
Asset Management	53 002	74 306	-	127 308
Wealth and Investment	25 008	15 418	-	40 426
Specialist Banking	55 616	210 350	706	266 672
Property Activities	375	40 178	7 155	47 708
Private Banking	(84 041)	2 990	(10 390)	(91 441)
Investment Banking	8 887	65 191	(6 716)	67 362
Capital Markets	139 978	92 211	9 860	242 049
Group Services and Other Activities	(9 583)	9 780	797	994
Total group	133 626	300 074	706	434 406

Investec plc and Investec Limited

Additional income statement note disclosures

Unaudited

Commentary on additional income statement note disclosures

The Group will provide further information with respect to net interest income, net fees and commissions and investment income as reflected below

Net interest income for the year ended 31 March 2011
GBP'000	Balance sheet value as at 31 March 2011	Interest Received	Balance sheet value as at 31 March 2011	Interest Received	Balance sheet value as at 31 March 2011	Interest Received	Balance sheet value as at 31 March 2011	Interest Received
	UK & Europe	UK & Europe	Southern Africa	Southern Africa	Australia	Australia	Total Group	Total Group
Cash, near cash and bank debt and sovereign debt securities	4 626 562	19 642	7 147 523	306 128	1 005 685	45 459	12 779 770	371 229
Core loans and advances	5 576 252	318 102	11 106 445	979 123	2 075 441	187 343	18 758 138	1 484 568
Private Client	3 378 213	178 218	8 126 148	664 934	1 820 450	158 958	13 324 811	1 002 110
Corporate, institutional and other clients	2 198 039	139 884	2 980 297	314 189	254 991	28 385	5 433 327	482 458
Other debt securities and other loans and advances	722 836	60 109	476 998	39 345	133 466	6 746	1 333 300	106 200
Other interest earning assets	6 809 548	235 936	1 774 765	33 391	131 649	7 459	8 715 962	276 786
Total interest earning assets	17 735 198	633 789	20 505 731	1 357 987	3 346 241	247 007	41 587 170	2 238 783
GBP'000	Balance sheet value as at 31 March 2011	Interest Paid	Balance sheet value as at 31 March 2011	Interest Paid	Balance sheet value as at 31 March 2011	Interest Paid	Balance sheet value as at 31 March 2011	Interest Paid
	UK & Europe	UK & Europe	Southern Africa	Southern Africa	Australia	Australia	Total Group	Total Group
Deposits by banks and other debt related securities	3 585 032	70 911	3 432 229	68 150	1 048 452	56 577	8 065 713	195 638
Customer accounts	8 812 240	192 456	14 207 218	830 450	1 421 802	80 388	24 441 260	1 103 294
Other interest bearing liabilities	4 062 716	53 699	1 193 502	63 045	495 783	35 558	5 752 001	152 302
Subordinated liabilities	636 468	45 912	619 385	58 095	31 802	2 073	1 287 655	106 080
Total interest bearing liabilities	17 096 456	362 978	19 452 334	1 019 740	2 997 839	174 596	39 546 629	1 557 314
Net interest income		270 811		338 247		72 411		681 469

Net fees and commissions for the year ended 31 March 2011
GBP'000	UK & Europe	Southern Africa	Australia	Total Group
Fund management fees/fees for assets under management	332 621	183 994	7 580	524 195
Private client transactional fees	53 763	80 543	12 761	147 067
Corporate and institutional transactional and advisory services	136 841	68 500	19 697	225 038
Fee and commission income	523 225	333 037	40 038	896 300
Fee and commission expense	(99 473)	(5 280)	(3 889)	(108 642)
Net fees and commissions	423 752	327 757	36 149	787 658

Investment income for the year ended 31 March 2011
GBP'000	UK & Europe	Southern Africa	Australia	Total Group
Realised	124 196	31 271	4 061	159 528
Unrealised	13 054	64 915	767	78 736
Dividend income	943	37 482	18	38 443
Funding costs	-	(21 764)	-	(21 764)
Investment income	138 193	111 904	4 846	254 943

Investment income for the year ended 31 March 2011
GBP'000	Investment portfolio (listed and unlisted equities)	Debt securities (sovereign, bank and other)	Investment properties	Other asset categories	Total
Realised	29 610	89 385	-	5 201	124 196
Unrealised	13 217	(163)	-	-	13 054
Dividend income	943	-	-	-	943
Funding costs	-	-	-	-	-
Investment income: UK & Europe	43 770	89 222	-	5 201	138 193
GBP'000	Investment portfolio (listed and unlisted equities)	Debt securities (sovereign, bank and other)	Investment properties	Other asset categories	Total
Realised	26 922	3 441	908	-	31 271
Unrealised	12 072	(2 141)	54 984	-	64 915
Dividend income	36 826	37	619	-	37 482
Funding costs	(15 818)	(107)	(5 839)	-	(21 764)
Investment income: Southern Africa	60 002	1 230	50 672	-	111 904
GBP'000	Investment portfolio (listed and unlisted equities)	Debt securities (sovereign, bank and other)	Investment properties	Other asset categories	Total
Realised	130	1 578	-	2 353	4 061
Unrealised	767	-	-	-	767
Dividend income	18	-	-	-	18
Funding costs	-	-	-	-	-
Investment income: Australia	915	1 578	-	2 353	4 846

Investec plc and Investec Limited

Other disclosures

Commentary on other disclosures

The balance of the Group's non-financial statement disclosures will largely remain as previously reported

 

END

 

 

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