Investec plc · LSE:INVP
Investec — H1 2003 Earnings Presentation
44 slides from Investec's earnings presentation, 2002
Slide 1: Interim results presentation 2002
Investec Interim results presentation 2002
Slide 2: Summary of Results
Summary of Results
Slide 3: Snapshot of results – UK GAAP
Snapshot of results – UK GAAP 30 Sep % 30 Sep 31 Mar 2002 Change 2001 2002 Headline attributable earnings 43 867 2.3 42 898 115 777 ( £’000) Headline EPS (pence) 47.6 1.5 46.9 126.8 DPS (pence) 26.0 0.4 25.9 53.8 Headline return on average 11.9 12.0 17.6 shareholders’ funds (%) Cost to income ratio
Slide 4: Snapshot of results – SA GAAP
Snapshot of results – SA GAAP 30 Sep % 30 Sep 31 Mar 2002 Change 2001 2002 Headline earnings (R’mn) 968 27.5 760 1 684 Headline EPS (cents) 1 004.0 21.3 827.9 1 840.4 Cost to income (%) 70.3 - 66.5 68.0 Headline return on average tangible 24.0 - 22.9 24.2 shareholders’ funds (%) Total capital resour
Slide 5: Global positioning and review
Global positioning and review
Slide 6: Operating environment
Operating environment • Difficult operating environment characterised by: - Weak equity markets and economic slow down - Continued political uncertainty in Southern Africa - Increasing corporate governance concerns - Average R/£ exchange rate declined by 36% compared to the same period last year
Slide 7: Investec operating environment
Investec operating environment • The weakness in the group’s equity related activities was partially offset by the strong performance from the group’s global private banking operations, South African financial markets and assurance activities
Slide 8: Assets by geography
Assets by geography USA Israel 3.1% 4.6% UK, Europe & Australia SA & Other 55.7% 36.6% 6mths ended 30 Sep 2002
Slide 9: Operating profit by geography
Operating profit* by geography (£'mn) 40 34.1 35.5 34.7 Sep-01 35 30 25 Sep-02 20 16.8 15 10 4.0 2.6 1.5 5 0 -5 -10 -6.4 Southern Africa & UK, Europe & Israel USA Other Australia *Before tax and goodwill amortisation
Slide 10: UK & Europe
UK & Europe • Weak performance from UK operations: - Equity related activities severely impacted by volatile markets - Lack of corporate and capital market activity affected advisory activities - Strong performance from private banking - Weak performance from financial market activities - Developing
Slide 11: Australia
Australia • Solid performance overall - Received full banking licence in August - Private Client division benefited from refocus and rationalisation - Investment Banking, while susceptible to weak equity markets, continued to see good deal flow - Continue to build on reputation, quality client list
Slide 12: Southern Africa & Other
Southern Africa & Other • Strong performance from all SA activities except Private Equity and Direct Investments which were negatively impacted by the weak market conditions • Strong growth in Rand terms dampened by the depreciation of the Rand relative to sterling for the equivalent period last yea
Slide 13: USA
USA • During the period Investec has undertaken a strategic review of the US business: - Sold the private client stockbroking business to management - Sold the Clearing Division of Investec Ernst to Fiserv Securities in August for US$44 million - Support services and infrastructure was streamlined •
Slide 14: Israel
Israel • Posted satisfactory results in a fragile political and economic environment • Sterling results negatively impacted by the weakness of the shekel against the pound • Average £:NIS exchange rate for the period was 7.23 compared to 6.02 in the previous year • Notwithstanding this, the followin
Slide 15: Divisional review
Divisional review
Slide 16: Operating profit by division
Operating profit* by division £'mn 40 Sep-01 Sep-02 29.6 30 26.7 25.9 29.1 17.8 19.9 18.6 20 10 0 -10 -2.6 -20 -16.4 -30 -25.7 Investment Private Client Treasury & Asset Group Banking Activities Specialised Management Services & Finance Other *Before tax and goodwill amortisation
Slide 17: Investment Banking
Investment Banking • Prolonged weakness in financial markets resulting in poor performances across all markets • Subdued trading volumes severely impacting the Securities businesses • Lack of corporate advisory and capital market activity impacting corporate finance activities, particularly in the U
Slide 18: Investment Banking Salient financial features
Investment Banking { Includes: Corporate Finance, Institutional Research, Sales and Trading, Private Equity, Direct Investments Salient financial features 30 Sep % 30 Sep 31 Mar UK GAAP 2002 Change 2001 2002 Operating income (£’000) 30 668 (49.8) 61 155 114 550 Operating expenses (£’000) (32 215) 4.
Slide 19: Treasury and Specialised Finance
Treasury and Specialised Finance • Poor performance from UK activities which are still in developing stage • Good growth from SA division in Rand terms, up 19% • Overall performance affected by depreciation of the Rand and poor performance of the UK trading activities and increasing cost base due to
Slide 20: Treasury and Specialised Finance Salient financial features
Treasury and Specialised Finance { Includes: non-private client deposit-taking, corporate and public sector lending, structuring and proprietary trading activities Salient financial features 30 Sep % 30 Sep 31 Mar UK GAAP 2002 Change 2001 2002 Operating income (£’000) 49 243 (3.8) 51 184 107 820 Ope
Slide 21: Private Client Activities
Private Client Activities • Solid results particularly from Private Banking in SA and UK - SA lending book: up 10.1% to R15.2bn - UK lending book: up 6.2% to £846mn • Private Client Portfolio Management and Stockbroking suffered from declining market volumes - SA FUM: up 3.7% to R28.3bn - UK FUM: do
Slide 22: Private Client Activities Salient financial features
Private Client Activities { Includes: Private Banking, Private Client Portfolio Management and Stockbroking Salient financial features 30 Sep % 30 Sep 31 Mar UK GAAP 2002 Change 2001 2002 Operating income (£’000) 81 362 0.8 80 713 191 154 Operating expenses (£’000) (55 804) (2.0) (56 913) (133 166)
Slide 23: Asset Management & Assurance
Asset Management & Assurance • Stable contribution in sterling terms, stronger in Rand terms • Assets under management of £15.8bn (R260.8bn) declined 2.9% in sterling terms and 0.9% in Rand terms • Total net new business flows of £545mn
Slide 24: Asset Management & Assurance
Asset Management & Assurance • UK: - Commendable performance from London investment team - UK retail business grew assets under management by 19% - Continue to win fixed income mandates in the UK local authority market - UK expansion prospects are growing and developing as expected • SA: - SA busine
Slide 25: Asset Management & Assurance
Asset Management & Assurance • Increased Assurance contribution from £13mn to £18mn as a consequence of further restructuring of liabilities and improvement in the quality of the asset allocation and administration
Slide 26: Asset Management & Assurance Salient financial features
Asset Management & Assurance { Includes: Institutional, Retail and Investment Trust Asset Management and Linked Product Provider Business Salient financial features 30 Sep % 30 Sep 31 Mar UK GAAP 2002 Change 2001 2002 Operating income (£’000) 61 836 0.4 61 606 131 623 Operating expenses (£’000) (32
Slide 27: Other Activities
Other Activities 30 Sep % 30 Sep 31 Mar UK GAAP, £’000 2002 Change 2001 2002 International Trade Finance 694 41.9 489 2 424 Property Worldwide 2 952 35.9 2 172 5 781 US Clearing and Execution (772) - 564 3 855 UK Traded Endowments (2 344) - 2 188 2 531 Other activities 530 (90.2) 5 419 14 591 Centra
Slide 28: Group performance
Group performance
Slide 29: Balance Sheet
Balance Sheet UK GAAP, £’000 30 Sep % 30 Sep 31 Mar 2002 Change 2001 2002 Assets 16 125 (8.6) 17 646 16 957 Core loans and advances 3 229 2.6 3 148 3 314 Liabilities 15 200 (8.2) 16 553 15 998 Total capital resources 924 (15.4) 1 093 958 Shareholders’ funds 738 (12.9) 847 734
Slide 30: Income Statement
Income Statement 30 Sep % 30 Sep 31 Mar UK GAAP, £’000 2002 Change 2001 2002 Net interest income 75 347 (0.8) 75 978 159 117 Net non interest income 181 083 (16.2) 216 136 459 554 Operating income 256 430 (12.2) 292 114 618 671 Administrative expenses 193 726 (3.9) 201 669 428 510 Depreciation on fi
Slide 31: Headline earnings – UK GAAP
Headline earnings – UK GAAP 30 Sep 30 Sep % £’000 2002 2001 Change Operating profit before goodwill amortisation 48 543 74 343 (34.7) Associated income pre goodwill 4 451 132 - amortisation Tax on operating activities (8 204) (17 651) - Reorganisation and restructuring - (11 836) - costs Minority in
Slide 32: Headline earnings – SA GAAP
Headline earnings – SA GAAP 30 Sep 30 Sep % R’mn 2002 2001 Change Net interest income 1 309 1 054 24.2 Provision for bad debts (120) (110) 9.1 Other income 3 093 2 656 16.4 Operating expenses (3 093) (2 466) 25.4 Associates 73 13 461 Taxation (135) (223) (39.5) Minority (8) (10) (20.0) Compulsory co
Slide 33: Return
Return (UK GAAP) 40% 30% 24.5 23.0 20% 12.0 11.9 10% 0% September September 2001 2002 ROE Return on tangible NAV
Slide 34: Quality of earnings
Quality of earnings 20% 24% 4% 3% Sep Sep 2002 2001 £256.4m £292.1m 47% 47% 29% 26% Annuity Income / Annuity Income / Total Income: 76.0% Total Income: 72.7% Annuity Income Other Income Net annuity fees and commissions Dealing profits, deal income and other income Net interest income Income from lon
Slide 35: Asset quality
Asset quality 3240 2 3220 3200 1.5 3180 1 3160 3140 0.5 3120 3100 0 September September (%) (£'mn) 2001 2002 Total core loans and advances to customers (lhs) Non-performing loans (rhs)
Slide 36: Asset quality
Asset quality 250 1.25 200 1.2 150 1.15 100 50 1.1 0 1.05 September September (%) (%) 2001 2002 Total provisions as a % of non-performing loans (lhs) General provisions as a % of net loans and advances (rhs)
Slide 37: Cost to income
Cost to income (UK GAAP) 80% 78.1 71.5 70% 60% 50% 40% September September 2001 2002
Slide 38: Administrative expenses
Administrative expenses 30 Sep % 30 Sep 31 Mar UK GAAP, £’000 2002 Change 2001 2002 Staff costs 128 485 (3.6) 133 287 275 231 Premises (excl. depreciation) 10 889 (16.2) 11 002 25 855 Equipment (excl. depreciation) 12 334 (1.0) 11 920 31 980 Business expenses 35 367 (6.1) 37 669 79 717 6 651 (14.6)
Slide 39: Cost to income
Cost to income • Increase in cost to income due to following: - Fall in Investment Banking income - US still includes costs for the full period and the up-skilling of the Investment Banking capability - Increasing costs related to development of operating units within Treasury and Specialised Financ
Slide 40: Capital adequacy
Capital adequacy • Consolidated under SARB rules - Investec Limited 16.0% - Investec plc 14.3% - Investec DLC 13.2% - Investec Bank Limited – solo 21.7% • Consolidated under FSA rules - Investec plc 14.1% - Investec Bank UK – solo 17.9%
Slide 41: Looking forward
Looking forward
Slide 42: Looking forward
Looking forward • Much progress was achieved in rationalising and refocusing some of the group’s business activities to cope with difficult market conditions particularly in the US, Israel and the UK
Slide 43: Looking forward
Looking forward • Focus in the short term will be on management of costs and risks but at the same time looking for opportunities that enhance critical mass
Slide 44: Investec
Investec Interim results presentation 2002