Investec plc · LSE:INVP
Investec — H1 FY2015 Earnings Presentation
36 slides from Investec's earnings presentation, Nov 20, 2014
Slide 1: Results presentation
Results presentation For the six months ended 30 September 2014
Slide 2: Proviso
Proviso o 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: o the further development of standards and interpretations under IFRS applicable to past,
Slide 3: Highlights for the six month period
Highlights for the six month period o We have successfully executed on our strategy to sell certain non-core or non- performing businesses o We had good net inflows in the Wealth & Investments and Asset Management businesses o The UK Corporate and Institutional Banking business performed well o The
Slide 4: The six months in review
Out of the Ordinary® 6 Investec The six months in review
Slide 5: Reasonable operating environment
Reasonable operating environment Positive equity market performance with interest rates up in SA, flat in UK and US, and down in Euro Equity markets Interest rates (3 month interbank) 120 7 115 SA 6 110 5 Rebased to 100 105 4 % 100 Since Since Mar-14 Sep-13 3 95 JSE 3.3% 12.0% FTSE -0.6% 2.6% 2 90 E
Slide 6: Reasonable operating environment
Reasonable operating environment Results still impacted by the depreciation of the average Rand: Pounds Sterling exchange rate of 19% over the period Exchange rates 140 125 Since Since Mar-14 Sep-13 Rebased to 100 £ / ZAR +4.4% +12.5% 110 £ / A$ +2.8% +6.9% £ / Euro +5.8% +6.7% £ / US$ -3.0% 0% 95 +
Slide 7: Diversified business model
Diversified business model Supporting generation of annuity revenue of 77% Geographic diversity Operating income o SA: ∆ 21.5% in Rands o Asset Management ∆ 6.6% o UK and Other: ∆ 17.6% in Pounds o Wealth & Investment ∆ 23.3% o Specialist Banking ∆ 6.0% Operating profit* % contribution to group by g
Slide 8: Continued growth in key earnings drivers
Continued growth in key earnings drivers Third party assets under management Customer accounts (deposits) and loans Customer accounts Up 5.6% Up 6.9% Core loans and advances Up 6.3% £’bn £’bn 140 30 120% Up Customer accounts Down 1.6% 5.3% Core loans and advances Down Down6.8% 6.9% 120 25 100% 100 2
Slide 9: Impairments continue downward trend
Impairments continue downward trend Impairment analysis by geography £’mn 160 140 120 100 80 60 40 20 0 Sep-07* Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 -20 South Africa UK and Europe *A negative number represents a recovery. 9
Slide 10: Costs up in certain performing businesses
Costs up in certain performing businesses Jaws ratio Cost to income / Operating margin Asset Management £’mn Operating costs Operating income 1200 % Sep-13 Mar-14 Sep-14 ∆ 0.2% ∆ 2.4% Operating income up 50 1.1% to £952mn 40 34.3 34.7 35.7 o Headcount up 50 people to 30 1000 support growth 20 o Inve
Slide 11: Resulting in an improved group performance
Resulting in an improved group performance Negatively impacted by the Rand % change on currency Sep-14 Sep-13 % change neutral basis^^ Operating profit* before tax (£’000) 240 769 221 677 8.6% 21.8% Adjusted attributable earnings** ^(£’000) 169 065 163 220 3.6% 16.4% Adjusted EPS**^(pence) 19.7 19.0
Slide 12: Strong Rand performance – up 27%
Strong Rand performance – up 27% Sep-14 Sep-13 % change Operating profit* before taxation (R’mn) 4 286 3 376 26.9% Adjusted attributable earnings**^ (R’mn) 3 002 2 486 20.8% Adjusted EPS* (cents) 350 289 21.1% DPS (cents) 146 131 11.5% Sep-14 Mar-14 % change Net asset value per share (cents) 6 557 6
Slide 13: Progress made on our financial targets
Progress made on our financial targets Target Sep-14 Mar-14 Sep-13 ROE 12-16% 10.7% 10.0% 10.0% Tangible ROE 12.9% 12.3% 12.3% 16.3% Adjusted* EPS growth Target: 10% > UKRPI Currency neutral 3.7% 5.3% (2.6%) Cost to income Target: < 65% 67.8% 67.6% 67.7% Dividend cover (times) Target: 1.7-3.5 times
Slide 14: Sound capital position
Sound capital position Capital adequacy Tier 1 Investec Bank 15.6% Investec Bank 11.2% Limited 15.3% Limited 10.8% Investec Limited 15.0% Sep-14 Investec 11.2% Sep-14 14.9% Limited 11.0% Mar-14 Mar-14 17.9% Investec Bank 12.7% Investec Bank plc 16.0% plc 11.0% 16.4% 18.8% 11.4% 13.2% Investec plc pr
Slide 15: Divisional highlights
6 Investec Divisional highlights
Slide 16: Asset Management
Asset Management Overview of performance Financial summary (£) Sep-14 Sep-13 % change o Benefited from higher average assets under management Operating profit* (mn) 76.7 71.9 6.6% o Net inflows of £2.7bn Operating profit* (mn) Currency neutral 84.1 71.9 16.9% o Total assets under management of £71.7
Slide 17: Wealth & Investment
Wealth & Investment Overview of performance Financial summary o Benefited from (£) Sep-14 Sep-13 % change o Higher average funds under management Operating profit* (mn) 38.0 30.8 23.3% o Total funds under management of £43.7bn Operating profit* (mn) Currency neutral 40.0 30.8 29.3% o Net inflows of
Slide 18: Specialist Banking
Specialist Banking Overview of performance Financial summary o Highlights for SA (£) Sep-14 Sep-13 % change o All businesses performed well o Good growth in net interest income, investment income and Operating profit* (mn) 126.1 118.9 6.0% net fee and commission income Currency neutral Operating pro
Slide 19: Specialist Banking – Drivers
Specialist Banking – Drivers Investment and trading Net interest income Net fees and commissions income £’mn £’mn £’mn 400 200 300 357.2 182.6 326.6 168.2 311.5 146.5 SA 300 150 SA SA 200 SA SA SA 200 100 129.7 94.9 SA 85.9 UK 100 UK UK 100 UK 50 UK UK SA SA UK UK UK 0 0 0 Sep-10 Sep-11 Sep-12 Sep-1
Slide 20: Specialist Banking – Costs up in neutral currency and impairments down
Specialist Banking – Costs up in neutral currency* and impairments down Costs Impairments £’mn £’mn 500 175 422.8 150 400 393.5 393.1 125 300 100 83.1 75 69.8 200 66.4 50 100 25 0 0 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 'Sep-14 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 'Sep-14 currency currency neutral neutra
Slide 21: Specialist Banking: Dealing with the UK Legacy Business
Specialist Banking Dealing with the UK Legacy Business Total net assets: Investec originated £’mn 5000 4 856 4000 3 209 3000 2 615 2 185 2 185 2000 1 402 1 760 387 1 760 136 1 261 327 62 1 121 1000 60 1798 1 511 1433 1 151 56 864 583 0 Mar-08 Mar-13 Mar-14 Sep-14 Mar-14 Sep-14 Other corporate assets
Slide 22: Specialist Banking: UK Legacy vs Ongoing
Specialist Banking UK Legacy Business – Legacy vs Ongoing 30 Sep 2014 30 Sep 2014 £'mn Ongoing Legacy Total Total income 259.7 16.7 276.4 Total impairments 3.9 (47.6) (43.7) Total expenses* (179.4) (21.1) (200.5) Depreciation on operating leased assets (0.9) (0.2) (1.1) Net profit before tax 83.3 (5
Slide 23: Specialist Banking: UK Legacy expected run off rate
Specialist Banking UK Legacy Business – Expected run off rate Total net loans: Investec and Kensington Total net loans: Investec only £’mn £’mn 8000 8000 6 892 7000 7000 6000 Expected run off 6000 Expected run off 5000 5000 4 856 3 976 4000 4000 3 427 3000 3000 2 615 2 185 2000 1 760 2000 1 760 1 44
Slide 24: Strategy and positioning
6 Investec Strategy and positioning
Slide 25: Executing our strategy: grow Asset Management
Executing our strategy … … to grow the Asset Management business Strategic focus Assets under management Today Mar-09 Sep-14 % change o Investment performance is always the priority SA (R’bn) 213.5 468.6 119.5% o Capture the multi-asset opportunity £’bn 90 UK and Other (£’bn) 13.1 46.2 252.3% o Deve
Slide 26: Executing our strategy: grow Wealth & Investment
Executing our strategy … … to grow the Wealth & Investment business o We expanded our wealth business and consolidated into a single business globally through the acquisition of Williams De Broe, NCB and the balance of Rensburg Sheppards Strategic focus Funds under management Mar-09 Sep-14 % change
Slide 27: Executing our strategy: simplify Specialist Banking
Executing our strategy … … to simplify the Specialist Banking business model o We have made progress in dealing with Legacy issues and have successfully restructured and/or sold certain businesses with a view to improving returns: o Sale of the Trust businesses o Sale of the Australian Professional
Slide 28: Executing our strategy: build client franchise businesses
Executing our strategy … … to build client franchise businesses and leverage our extensive client base CLIENT FRANCHISE BUSINESSES SPECIALIST ACTIVITIES Wealth & Investment Asset Management Private Banking + Aircraft Finance Asset Finance Project Finance Resource Finance Corporate Banking and Adviso
Slide 29: Executing our strategy: grow capital light revenue
Executing our strategy … … to grow capital light revenue BUSINESS MODEL £’mn Third party assets and 800 Third party assets and advisory Net interest, investment advisory and trading income £532mn Net interest income and investment and trading £420mn 600 income Net annuity fees and Net interest incom
Slide 30: Specialist Bank strategy has shifted from reshaping to growth
Our Specialist Bank strategy has shifted from reshaping to growth Customer accounts (deposits) Core loans and advances to customers Mar-09 Sep-14 % change Mar-09 Sep-14 % change SA (R’bn) 126.9 217.6 71.5% SA (R’bn) 120.2 170.5 42.0% UK and Other (£’bn) 4.4 10.4 113.6% UK and Other (£’bn) 6.0 6.7 10
Slide 31: By growing the franchise businesses in the UK
By growing the franchise businesses in the UK For example: Asset Finance Structured Equity Derivatives Power Growth & Aviation Finance Finance Acquisition Finance African and Middle Eastern Business Jet Financier 2012, 2013, 2014 Finance Provider of the Year 31
Slide 32: Perpetuating our position in the SA corporate and institutional market
Perpetuating our position in the SA corporate and institutional market For example: Aviation Finance Corporate Finance Equity Derivatives 1st M&A number of deals Merger Market Survey – Sub-Saharan Africa (2013) African and Middle Eastern Business Jet Financier 2012, 2013, 2014 Top CFD Provider Dealm
Slide 33: Integrated solution for private clients in SA
Creating and launching an integrated solution for private clients in SA o A collaboration of Private Banking and Wealth & Investment o Aligns our products, channels, processes, operations and strategies to give clients access to our banking and investment services, both locally and internationally,
Slide 34: Same experience for UK and International private clients
Creating the same experience for UK and International private clients o Building market share in the private client transactional banking space o Further development and roll out of our digital offering 34
Slide 35: Summary of strategic priorities
Summary of strategic priorities o Maintain momentum in Asset Management by focusing on investment performance o Continue exploring opportunities to achieve a greater international reach in the Wealth & Investment business o Grow the Specialist Banking businesses o Continue the progress made with the
Slide 36: Outlook
Outlook o The group has reshaped its business model, both through the sales of businesses and the restructuring that has taken place over the past few years o Whilst economic conditions have improved in the developed world, volatility and uncertainty remain a feature. Additionally, South Africa’s ec