Investec Finance PLC

Half Yearly Report

RNS Number : 0877T
Investec Finance PLC
30 November 2011
 



Investec Finance plc - the company

Incorporated in England and Wales

Registration number 4111949

Un-audited condensed Financial Statements for the six months ended 30 September 2011

 

Zebra Capital Plans Retails Structured Products Programme

Interim Management Report

The Interim Management Report is issued by Investec Finance plc in accordance with the UK Listing Authority's Disclosure and Transparency Rules. Unless otherwise stated, performance and figures highlighted below refer to the six months ended 30 September 2011 and the corresponding period in the previous year.

 

Principal activity and business review

Investec Finance plc (the 'Company') is a wholly owned subsidiary of Investec Bank plc ("IBP") which is in turn a wholly-owned subsidiary of Investec plc (the 'Investec Group'), which is listed on the London Stock Exchange.

 

The principal activity of the company is to engage in financial arrangements and transactions and to assist in financing the operations of the Investec Group. In previous years the company has issued Guaranteed Subordinated Step-Up notes, a fixed coupon sterling bond, a Euro denominated floating rate note and has issued Euro Commercial Paper. In each case the proceeds have been on-lent to the company's parent on similar terms so as to minimise liquidity & market risk (e.g. interest rate and foreign currency risk). The company will continue to operate in this capacity for the foreseeable future.

 

On 9 May 2008, the company launched a GBP3,000,000,000 Zebra Capital Plans Retail Structured Products Programme (the 'Programme').  In terms of the Programme, the company may from time to time issue notes (the 'Zebra Plan Notes') that are linked to the performance of one or more preference shares issued by Zebra Capital II Limited, a company incorporated in the Cayman Islands.  The payment of all amounts due in respect of the Notes will be unconditionally and irrevocably guaranteed by Investec Bank plc on an unsubordinated basis.  After each issue, applications will be made for the Notes to be admitted to listing on the Official List of the UKLA and to trading on the Regulated Market of the London Stock Exchange.  As a result, and in terms of the Programme, the company is required to publicly release its results.

 

Performance overview and principal risks

The results for the half-year are shown on page 4.

 

During the current period no new Notes have been issued under the terms of the Programme.  The Company does not expect to issue any further new Notes under this Programme as IBP has created a notes platform, the GBP4,000,000,000 Zebra Capital Plans Retail Structured Products Programme, under which new structured product launches have been made since September 2009.

 

The debt security in issue, a 5 year bond with a coupon of 3 month US dollar libor plus 40 basis points and a face value of USD 25,000,000, was repaid on 6 June 2011.  The matching lending to IBP was also repaid on that date. 

 

Any market risk with respect to the performance of the preference shares issued by Zebra Capital II Limited is matched with IBP.  Any liquidity risk, interest rate risk or foreign currency risk is eliminated as the terms and currency of the Notes are matched with the terms and currency of the lending to IBP.  As such, all material principal risks and uncertainties are mitigated.

 

The financial risks are managed at the Investec plc group level. The company's risk management is further discussed in note 16.

 

 


 

Going concern

On the basis of current financial projections the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future and accordingly the going concern basis is adopted in the preparation of these financial statements.

Un-audited condensed financial statements

The un-audited condensed financial statements have not been audited or reviewed by the company's auditors pursuant to the Auditing Practices Board guidance Review of Interim Financial Information.

 

This document includes an un-audited condensed set of financial statements produced by the Company for the six months ended 30 September 2011. This document will also be available on Investec's website at www.investec.com/GroupLinks/InvestorRelations/.

 

Enquires and further information:

Investec Company Secretarial

Investec Bank plc

Telephone: 020 7597 4541

2 Gresham Street, London, EC2V 7QP

United Kingdom                                                                                                                          

 

Dated:   29 November 2011


 

The directors confirm that, to the best of their knowledge:

¨      the un-audited condensed set of financial statements has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) and the Companies Act 2006, gives a true and fair view of assets, liabilities, financial position and results of the company for that period; and

¨      the interim management report of the company includes a fair review of the development and performance of the business and the position of the company together with a description of the principal risks and uncertainties that they face as required by the FSA Disclosure Rules and Transparency Rules4.2.7, and

 

¨      the un-audited condensed Financial Statements have not been audited or reviewed by the company's auditors in pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

 

Neither the company nor the directors accept any liability to any person in relation to the half-yearly financial report except to the extent that such liability could arise under English law.  Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.

 

Corporate Governance Statement
The Directors are responsible for internal control of the company and for reviewing the effectiveness of those controls. Procedures have been designed for safeguarding assets against unauthorised use or disposition; for maintaining proper accounting records; and for the reliability and usefulness of financial information used within the business or for publication. Such procedures are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement, errors, losses or fraud. The procedures enable the company to comply with the regulatory obligations. Investec Finance plc also makes use of the controls at the Investec plc Group level, including audit committee.  For further details, refer to notes to the combined Investec plc and Investec Ltd consolidated financial statements, Risk Management and Corporate Governance report.

 

 

Signed on behalf of the board of directors

 

 

 

 

 

 

S Koseff

Director

 

29 November 2011


 Profit and Loss Account for the six months ended 30 September 2011



Un-audited


Un-audited


Audited



six months to


six months to


year to



30 September


30 September


31 March



2011


2010


2011


Notes

£000


£000


£000








Interest receivable from parent undertaking


3,460


17,186


33,979








Interest payable

4

(3,450)


(16,652)


(33,012)








Amortisation of bond costs


(11)


(514)


(2,620)







Fee income from parent undertaking

5

419



-







Other operating income / expenses

6

(419)



1,696







Administration expenses

7

-



-















(LOSS) / PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION


(1)



43







Taxation

8

-


-


(314)








(LOSS) / PROFIT FOR THE PERIOD


(1)


20


(271)

 

 

The above activities are continuing.

 

There are no recognised gains or losses in the current or prior period other than those passed through the profit and loss account.

 

There is no material difference between the results disclosed in the profit and loss account for current or prior period and the results on an unmodified historical cost basis.

 

The accompanying notes form part of these un-audited condensed financial statements.

 

 

 

 

 

 

 

 


 Balance Sheet at 30 September 2011



Un-audited


Audited


Un-audited



30 September


31 March


30 September



 

 


2011


2011


2010


Notes

£000


£000


£000

CURRENT ASSETS







Debtors:







   Amounts falling due within one year

9

446


17,208


6,553

   Amounts falling due after one year

9

47,198


49,238


70,674

   Amounts falling due after one year - subordinated loans

10

52,925


51,793


449,810



100,569


118,239


527,037








CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

11

-


(16,730)


(17,029)








NET CURRENT ASSETS


100,569


101,509


510,008








CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

12

(100,218)


(101,156)


(509,364)








NET ASSETS


351


353


644








CAPITAL AND RESERVES







Called up share capital

13

50


50


50

Profit and loss account

14

301


303


594








EQUITY SHAREHOLDERS' FUNDS

15

351


353


644

 

 

The accompanying notes form part of the un-audited condensed financial statements.

 

 

 

 

1.     ACCOUNTING POLICIES

Basis of presentation

The interim financial statements have been prepared in accordance with the recognition and measurement requirements of Financial Reporting Standards and the disclosure of transparency rules. The accounting policies applied in the preparation of the results for the six months ended 30 September 2011 are consistent with those adopted in the Company's audited Financial Statements for the year ended 31 March 2011, in accordance with FSA Disclosure Rules and Transparency Rules 4.2.6.

 

The information in this report for the six months to 30 September 2011, which was approved by the board of directors on 29 November 2011, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006 ("2006 Act"). Statutory accounts for the year ended 31 March 2011, which contained an unqualified audit report under Chapter 3, Part 16 of the 2006 Act and which did not contain statements under Section 498(2) or 498(3) of the 2006 Act, have been delivered to the Registrar of Companies in accordance with Section 1068 of the 2006 Act.

 

Segmental reporting

The company's business activities are to engage in financial arrangements and transactions and to assist in financing the operations of the Investec Group. The Company's activities are conducted within the UK.

Cash flow statement

The company is exempt from the requirements to prepare a cash flow statement under Financial Reporting Standard 1, because a consolidated cash flow statement is included in the publicly available consolidated financial statements of its ultimate holding company, Investec plc.

Taxation

Corporation tax payable is provided on taxable profits at the current rate.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.  This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted.  Timing differences are differences between the company's taxable profits and its results as stated in the financial statements, which are capable of reversal in one or more subsequent periods.

Deferred tax is measured at a non-discounted basis at the tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date.

Related party transactions

The directors have taken advantage of the exemptions available in Financial Reporting Standard 8 from disclosing transactions with related parties which are members of Investec plc Group.

Debt instruments and associated finance costs

Guaranteed subordinated step-up notes and debt securities in issue are initially recognised at fair value and are carried in the balance sheet at amortised cost applying the effective interest rate method.

Some debt instruments are structured notes which contain both a derivative and non-derivative component. These instruments are reported on the balance at a valuation which includes the fair value of the embedded derivative.

Loans and receivables

Loans and receivables are carried in the balance sheet at amortised cost applying the effective interest rate method.

Disclosure of financial instruments

The directors have taken advantage of the disclosure exemptions available to subsidiary undertakings in Financial Reporting Standard 29. 

 



 

2.    SEGMENTAL INFORMATION

All of the company's business relates to engaging in financial arrangements and transactions and assisting in financing the operations of the Investec plc group and is carried out in the United Kingdom.

 

3.    emoluments of directors

The directors were employed and remunerated as directors or executives of Investec plc and its subsidiaries ("the group") in respect of their services to the group as a whole and their remuneration has been paid by other group companies.

 

4.    interest payable


Un-audited

Un-audited

Audited


6 months to 30 September

6 months to 30 September

Year to 31 March


2011

2010

2011


£000

£000

£000

Interest payable on subordinated step-up notes

1,098

7,750

14,812

Interest payable on subordinated callable step-up notes

560

7,691

14,678

Interest payable on debt securities in issue - less than one year

21

70

121

Value increase of the deposit element of Zebra plan notes

1,771

1,141

3,401






3,450

16,652

33,012

 

5.    Fee income from parent undertaking

On 29 June 2011 IBP issued £75,000,000 of 9.625 per cent subordinated notes due 2022 ("2022 notes")  to the Company at a premium of 104.88 pence.  This tap issue is fungible with the £500,000,000 2022 Notes issued by IBP on 17 February 2022.  The Company has on sold £39,576,000 of the 2022 Notes and as at 30 September 2011 holds £35,424,000 nominal plus premium and accrued interest with the intention of on selling this balance as and when the opportunities arise.  This transaction is funded by a loan from IBP.  The company received a fee from IBP for its participation in this transaction.

 

6.    OTHER OPERATING INCOME / EXPENSES                                                 

The Company incurred a loss on the on-sale of a portion of the 2022 notes.

 

7.    administratION expenses                                                                    

There are no administration expenses in the current period as no new notes were issued under the Programme.

 

The company has no employees in the current or prior period.



 

8.     TAXation


Un-audited


Un-audited


Audited


30 September


30 September


31 March



 

 

2011


2010


2011


£000


£000


£000

Taxation

-


-


314

 

The effective rate for the period is different from the standard rate of UK corporation tax due to the following items:








£000


£000


£000

 

Tax on profit on ordinary activities at UK rate of 26% (28%)

-


6


12

 

Non-taxable profit on debt buy back

-


-


(475)

 

Debt exchange profits

-


-


9,428

 

Utilisation on losses brought forward

-


-


(314)

 

Losses surrendered to/(from) fellow group companies for nil payment

-


(6)


(8,651)

 

Adjustment in respect of prior year

-


-


314

 







 


-


-


314

 

 

9.    Debtors: EXCLUDING SUBORDINATED LOANS


Un-audited


Audited


Un-audited


30 September


31 March


30 September


2011


2011


2010

Amounts falling due within one year

£000


£000


£000

Amounts owed by parent undertaking

445


17,207


6,236

Group relief

-


-


314

Other assets

1


1


3








446


17,208


6,553

Amounts falling due after one year






Amounts owed by parent undertaking

47,198


49,238


70,674

 

Amounts owed by the parent undertaking, due within one year, primarily represents cash at bank. Amount falling due after one year represent the proceeds of the issue of the Zebra Plan Notes and the positive fair value of the equity derivatives purchased from the parent undertaking to match the risks of the embedded equity derivatives within the Zebra Plan products.



 

10.   DEBTORS: AMOUNTS DUE AFTER ONE YEAR - SUBORDINATED LOAN


Un-audited


Audited


Un-audited


30 September


31 March


30 September


2010


2011


2010

Subordinated loans to parent undertaking

£000


£000


£000

Subordinated Step-up Notes

35,077


33,979


205,102

Undated Subordinated Callable Step-up Notes

17,848

 


17,814


244,708








52,925


51,793


449,810

The net proceeds of two issues of Step-up Notes by the company have been lent to the immediate parent undertaking, IBP on a subordinated basis.

 

Guaranteed Subordinated Step-up Notes

The term of the first loan is 1 March 2016 but it may be redeemed at any time after 1 March 2011.  As from 1 March 2011 the interest rate on the loan has been reset at 6.482 per cent in line with the interest rate on the 2016 Notes. Interest is paid annually.

Guaranteed Undated Subordinated Callable Step-up Notes

The second loan is undated but it may be redeemed at any time after 23 January 2017.  The interest rate on the loan is fixed at 6.4578 per cent until 23 January 2017 and the interest is paid semi-annually.  After 23 January 2017 the interest rate will be reset in line with the interest rate on the Perpetual Notes.

The terms of the step-up notes, which are guaranteed by IBP, are detailed in note 12.

 

11.   CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR


Un-audited


Audited


Un-audited


30 September


31 March


30 September


2011


2011


2010


£000


£000


£000

Amount owed to parent undertaking

-


1,140


1,140

Debt Securities in issue

-


15,590


15,889








-


16,730


17,029

 

The debt security in issue, a 5 year bond with a coupon of 3 month US dollar libor plus 40 basis points and a face value of USD 25,000,000, was repaid on 6 June 2011. 

 



 

 

12.   CREDITORS: AMOUNTS FALLING DUE after more than ONE YEAR


Un-audited


Audited


Un-audited


30 September


31 March


30 September


2011


2011


2010


£000


£000


£000

Guaranteed Subordinated Step-up Notes

35,077


33,979


208,787

Guaranteed Undated Subordinated Callable Step-up Notes

17,942


17,939


245,790

Valuation of structured notes issued

47,198


49,238


54,787








100,217


101,156


509,364

 

Guaranteed subordinated step-up notes

On 1 March 2004 the company issued £200,000,000 of 7.75 per cent. guaranteed subordinated step-up notes due 2016 at a discount ("2016 notes").  Interest is paid annually.  The notes are guaranteed by Investec Bank plc and are listed on the Luxembourg Stock Exchange.  The step-up notes may be redeemed by the issuer, at par, at any time after 1 March 2011, subject to the prior consent of the Financial Services Authority.  On 1 March 2011 the interest rate was reset at 6.482 per cent to become the aggregate of 3.5 per cent. and the gross redemption yield of the relevant benchmark gilt.

 

On 16 March 2011, £166,207,000 of the notes representing approximately 83.1 per cent of the total issued principal amount, were cancelled. As at the year-end 31 March 2011 the principal amount in issue was £33,793,000.

 

Guaranteed undated subordinated callable step-up notes

On 23 January 2007 the company issued £350,000,000 6.25 per cent. guaranteed undated subordinated step-up notes callable 2017 at a discount ("perpetual notes").  Interest is paid semi-annually.  The notes are guaranteed by Investec Bank plc and are listed on the Luxembourg Stock Exchange.  The step-up notes may be redeemed by the issuer, at par, at any time after 23 January 2017, subject to the prior consent of the Financial Services Authority.  On 23 January 2017 the interest rate will be reset to become three month LIBOR plus 2.11 per cent payable quarterly in arrears.

 

On 16 March 2011, £226,930,000 of the notes representing approximately 64.8 per cent of the total issued principal amount, were cancelled. As at the year-end 31 March 2011 the principal amount in issue was £17,861,000.

 

Structured notes

The amounts due under the Zebra Plan Notes are linked to the performance of preference shares issued by Zebra Capital II Limited.  At the half year-end the amounts due under the notes disclosed above includes movements in the fair value of the embedded equity derivatives. As at 30 September 2011 the negative fair value of these derivatives was £1,250,651 (March 2011: £2,378,478). The company has matched this risk by entering into matching contracts with its parent. Included in amounts owed by parent undertaking after one year in note 8 above is a positive fair value of embedded derivatives of £1,250,651 (March 2011: £2,378,478).



 

 

13.   CALLED UP SHARE CAPITAL


Un-audited


Audited


Un-audited


30 September


31 March


30 September



 

 

2011


2011


2010


£000


£000


£000

Authorised:






100,000 (2010 - 100,000) ordinary shares of £1 each

100


100


100







 

Allotted, called up and fully paid






 

50,000 (2010 - 50,000) ordinary shares of £1 each

50


50


50

 

 

14.   REserves


Un-audited


Audited


Un-audited


30 September


31 March


30 September


2011


2011


2010


£000


£000


£000

Profit and loss account






At beginning of period

303


574


574

(Loss) / profit for the period

(1)


(271)


20







At end of period

302


303


594

 

15.   RECONCILIATION OF Movement in SHAREHOLDERS' funds


Un-audited


Audited


Un-audited


30 September


31 March


30 September



 

 

2011


2011


2010


£000


£000


£000

Opening shareholders' funds

353


624


624

(Loss) / profit for the period

(1)


(271)


20







Closing shareholders' funds

352


353


644

 



 

 

16.   RISK MANAGEMENT

 

As a wholly-owned subsidiary of Investec plc, the company falls under the Investec plc Group's Risk Management Framework which is set out in the combined Investec plc and Investec Limited 2011 financial statements, Risk Management and Corporate Governance report. The company's function is to raise finance for the Investec Group and its policy is to on-lend the proceeds of any financial indebtedness to its immediate parent, Investec Bank plc, on back to back terms that minimise any liquidity, currency or interest rate risk.

 

Credit risk

As all net funds raised by the company are on-lent to Investec Bank plc, the company is therefore dependent on repayment of principal and interest from Investec Bank plc for the purposes of meeting its financial obligations. Its financial obligations in respect of the Guaranteed Undated Subordinated Callable Step-up Notes, Guaranteed Subordinated Step-up Notes, US Dollar denominated floating rate note issues and Zebra Capital Plans Retail Structured Products Notes are guaranteed by Investec Bank plc.

 

Liquidity risk

Loans to Investec Bank plc are matched in terms of maturity and interest payment dates to those of the related borrowing so as to eliminate any liquidity risk.

 

Foreign currency risk

Loans to Investec Bank plc are denominated in the same currency as the related borrowing so as to ensure that the company is not exposed to foreign currency risk.

 

Market risk

Any market risk with respect to the performance of the Zebra Capital Plans Retail Structured Products Preference Share Linked Notes is matched with Investec Bank plc.  Equity derivative financial instruments written have been matched with equity derivatives purchased from Investec Bank plc providing the same terms and conditions and as such mitigating any risk.

 

Capital Management

The company manages and monitors its capital on an ongoing basis and with consideration for the ongoing commitments of the entity. The company is not regulated and therefore it is not subject to any capital adequacy requirements.

 

17.   ULTIMATE parent undertaking

 

The company's immediate parent undertaking is Investec Bank plc.

 

The company's ultimate parent undertaking and controlling party is Investec plc, a company incorporated in the United Kingdom and registered in England and Wales. The consolidated financial statements of Investec plc and Investec Bank plc are available to the public at 2 Gresham Street, London, EC2V 7QP. Investec Bank plc is the smallest group and Investec plc is the largest group in which the results of the company are consolidated.


This information is provided by RNS
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