Investec plc · LSE:INVP
Investec — H1 FY2019 Earnings Presentation
28 slides from Investec's earnings presentation, Nov 15, 2018
Slide 1: Interim Results Presentation
Interim Results Presentation 15 November 2018
Slide 2: Proviso
Proviso Please note that matters discussed in today's presentation may contain forward looking statements which are subject to various risks and uncertainties and other factors including, but not limited to: the further development of standards and interpretations under IFRS applicable to past,
Slide 3: Highlights
Highlights Sound financial performance Improved Group ROE Substantial net inflows in Asset Management Positive momentum in the UK Specialist Bank Smooth leadership transition Good progress on the proposed demerger of Asset Management Operational focus: revenue growth, capital allocatio
Slide 4: Persistent economic and market uncertainty
Persistent economic and market uncertainty Year end 110 The SA economy has 105 been weak, impacting activity levels Rebased to 100 100 Exchange 95 Brexit and political rates uncertainty has 90 impacted corporate 85 and consumer Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-1
Slide 5: Snapshot of results
Snapshot of results Growth in operating profit* and adjusted EPS^ of 14.2% and 6.4% respectively Asset Management and Wealth & Investment have grown assets under management to £166.5bn supported by net inflows of £4.8bn The Specialist Banking business saw a substantial reduction in impairments
Slide 6: Growth in operating profit
Growth in operating profit Strong performance from the UK Specialist Banking and Asset Management businesses £'mn 370 ▲14% 39.5 (0.7) 0.6 359.3 360 350 340 330 6.9 1.4 (2.6) (0.5) 320 314.6 310 300 ▲4% in GBP ▼4% in GBP ▼0.4% in GBP ▲14% ▲9% in ZAR ▼7% ▲96% ▼3% in GBP ▲1% in ZAR ▲4% in ZAR 290 280 S
Slide 7: Diversified business model
Diversified business model Consistent contribution across geographies and businesses Operating profit* % contribution to group by geography Combined UK and Other 100% business up 40.2% in Pounds 80% UK and Other Geographic 60% Combined SA business up diversity 5.0% in Rands (0.4% in Pounds) 40%
Slide 8: Growth in key earnings drivers
Growth in key earnings drivers £’bn Third party assets under 175 167 Other 150 management up 3.7% to Third party 125 £166.5bn – (up 7.2% on a Wealth & assets 100 Investment currency neutral basis) under 75 Asset management 50 Management 25 0 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18 £’bn 35 120%
Slide 9: Supporting growth in operating performance
Supporting growth in operating performance Total operating income up 7.6% to £1,281mn £'mn 1,300 1,281.3 (23.5) 34.8 21.1 1,250 40.7 17.2 1,200 1,191.1 Operating 1,150 income 1,100 analysis 1,050 ▲11% ▲3% ▲17% ▼27% ▲50% 1,000 Sep-17 Net interest Net annuity Other fees and other Investment and Tradin
Slide 10: Balanced business model
Balanced business model Balanced between capital light and capital intensive activities Capital light activities Capital intensive activities Third party assets and Net interest, investment, advisory 55% of group income associate and trading 45% of group income income £’mn 800 700 600 Business 500 m
Slide 11: Jaws starting to widen slightly
Jaws starting to widen slightly £’mn Cost to income improved 1,500 marginally to 66.6% from 1,281 Operating income 1,300 66.9% Jaws ratio 1,100 for the Operating income up 7.6% to 900 group 853 Operating costs £1,281mn from £1,191mn 700 Operating costs up 7.2% to 500 Sep-14 Sep-15 Sep-16 Sep-1
Slide 12: Reduction in impairments
Reduction in impairments £’mn Impairment charges 70 amounted to £31.0mn (Sep-17: £59.6mn) 60 No repeat of substantial Legacy impairments 50 Annualised credit loss ratio Total 40 now within long-term average impairment range at 0.34% (Sep-17: 0.52%) Legacy and sale charge by 30 assets* geograph
Slide 13: In summary
In summary Operating profit up 14.2% to £359.3mn £'mn 460 440 28.6 (57.1) 420 90.3 400 380 (17.1) Operating profit 359.3 360 overview 340 320 314.6 300 ▲8% ▼48% ▲7% ▲86% 280 Sep-17 Total operating income Expected credit loss Operating expenses Other non-controlling Sep-18 impairment charges interest
Slide 14: Resulting in a sound performance
Resulting in a sound performance % change currency Sep-18 Sep-17 % change neutral basis^ Operating profit* before tax (£’mn) 359.3 314.6 14.2% 17.6% Attributable earnings** (£’mn) 265.3 245.3 8.2% 11.1% Adjusted EPS** (pence) 28.3 26.6 6.4% 9.4% Weighted number of ordinary shares in issue (million)
Slide 15: Performance against financial targets
Performance against financial targets Target Sep-18 Mar-18 Sep-17 Summary ROE (post tax) 12%-16% 13.4% 12.1% 12.5% of financial targets Cost to income < 65% 66.6% 66.9% 66.9% Dividend cover 1.7x – 3.5x 2.6x 2.2x 2.5x Note: These are medium to long-term targets which we aim to achieve through varying
Slide 16: ROE
ROE ROE within target range £’mn % ROE of 13.4% supported by 4,900 16 strong client franchise Target range: 12-16% 14.1%^ businesses 4,200 13.4% Ordinary shareholders' 12.1% 12 equity Going forward the levers for 3,500 ROE include: ROE ROE statutory — Growing our client base 2,800 post-tax trend
Slide 17: Sound balance sheet
Sound balance sheet Healthy capital ratios in excess of regulatory requirements Capital Leverage ratio as 7.5% Common equity tier 1 ratio above 10% target and total capital reported 7.4% ratios within target range of 14%-17% Capital 10.3% Leverage ratios sound, remain comfortably ahead of 6% tar
Slide 18: Divisional review
Divisional review
Slide 19: Asset Management - overview
Asset Management - overview Momentum remains positive £’mn Growth of 10.0% in operating profit to 100 83.2 91.5 £91.5mn from £83.2mn 80 Operating 60 profit 40 20 0 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 % Operating margin at 31.4% 40% 31.8% 31.4% (Sep-17: 31.8%) 30% Slight margin compression driven by
Slide 20: Asset Management – strategic priorities
Asset Management – strategic priorities Long-term focus for sustainable growth Strategic priorities Concentrate effort on our existing offering where we have differentiated strategies and performance Scale through our global distribution model – in institutional and advisor channels Capture th
Slide 21: Wealth & Investment - overview
Wealth & Investment - overview Strong platform for growth £’mn 60 Operating profit down 6.3% to 49.5 46.4 £46.4mn from £49.5mn 40 South Africa Earnings impacted by growth in Operating headcount for IT initiatives, compliance profit 20 UK and Other requirements and talent recruitment Revenue grow
Slide 22: Specialist Banking – global overview
Specialist Banking – global overview 250 £’mn 245.4 UK and Other Operating profit up 18.8% to £245.4mn statutory 206.5 from £206.5mn 200 Southern Africa UK up 96% driven by an improving cost to 150 Operating income ratio and a significant decrease in 100 profit impairments 50 Total ongoing profit
Slide 23: Specialist Banking UK and Other - overview
Specialist Banking UK and Other - overview Solid performance £'mn Other operating Net interest income up 18.7% - solid 450 income lending activity and endowment 371.1 335.7 Customer flow impact 300 trading income Net fees up 14.0% - good Analysis Investment and performance from corporate associa
Slide 24: Specialist Banking SA - overview
Specialist Banking SA - overview Reasonable performance against challenging backdrop R’bn Subdued activity against a 8 7.4 Other income 6.8 challenging backdrop 6 Customer flow Reflected in softer loan book trading income growth, client flow trading and Analysis of Investment and weaker investme
Slide 25: Investec (Bank and Wealth) – strategic priorities
Investec (Bank and Wealth) – strategic priorities Strategic focus to increase ROE in excess of CoE through… Target ROE : 11% to 15% Strategic priorities Target market client acquisition and deepening existing client relationships Establishing a high-tech and high-touch domestically relevant UK P
Slide 26: Conclusion
Conclusion
Slide 27: Committed to stakeholder value
Committed to stakeholder value • Simplify, focus and grow, with discipline • Post demerger release two independent businesses poised for long- term growth and value creation 27
Slide 28: End
End