Investec Plc · LSE:INVP
Investec — Investor Presentation (March 2004)
42 slides from Investec's investor presentation, Mar 16, 2004
Slide 1: Investor Briefing
Investor Briefing Tuesday, 16th March 2004
Slide 2: Operational Review
Operational Review ay Oo Investec
Slide 3: Proviso on reporting period
• Proviso: Unless otherwise stated, figures and trends discussed in the operational review relate to the five month period to 29 February 2004 (i.e. 2H04)
Slide 4: Overview
Overview • The results for the majority of the group’s businesses to 29 February 2004 continue to reflect similar trends experienced in the first half of the year – UK, Europe and Australia continue to show improved results in comparison to last year – SA should enjoy better second half results with
Slide 5: Operating Environment
Operating Environment 29 Feb 2004 30 Sep 2003 % Move 31 Mar 2003 JSE ALSI 10 895.9 8 925.69 22.1% 7 679.88 FTSE All Share Index 2 243.4 2 027.7 10.6% 1 735.70 29 Feb 2004 30 Sep 2003 31 Mar 2003 Currency per £1.00 Close Ave Close Ave Close Ave South African Rand 12.39 11.96 11.93 12.25 12.51 15.04 U
Slide 6: Operational Review: Southern Africa
Operational Review: Southern Africa
Slide 7: Private Banking
Private Banking • The Private Banking operations continue to perform well • Activity levels remain high • Loan portfolio: R22.5 billion (Sep 03: R19.8 billion) • Securitised portfolio (included above): R2.3 billion (Sep 03: R900 million) • Retail deposit booksize: R9.4 billion (Sep 03: R7.6 billion)
Slide 8: Private Client Stockbroking and Portfolio Management
Private Client Stockbroking and Portfolio Management • Market volumes were under pressure for the 3rd quarter but have improved in the final quarter • FUM:R39.9 billion (Sep 03: R32.3 billion) – Discretionary: R5.4 billion (Sep 03: R5.1 billion) – Non-discretionary: R34.5 billion (Sep 03: R27.2 bill
Slide 9: Investment Banking
Investment Banking • SA Corporate Finance: – Current pipeline of deals remains stable – BEE and restructuring still key opportunities – Renewed interest in IPOs as markets start to improve – Dealmakers 2003: Ranked 1st ito dealflow as Investment Advisers and Sponsor in the M&A category for 2003 • SA
Slide 10: Investment Banking
Investment Banking • Private Equity: – Should post good 2H04 results: • Upliftment in value of portfolios • Continued realisations • Direct Investments: – 2H04 performance not expected to equal 1H04 performance – But still expect solid results driven by recognition of the NAIL transaction which has
Slide 11: Treasury and Specialised Finance
Treasury and Specialised Finance • Trading Activities: – Improved performance in 2H04 – Further restructuring of proprietary activities – Losses curtailed and activities are profitable
Slide 12: Treasury and Specialised Finance
Treasury and Specialised Finance Banking Activities: • Core advances book: R11.4 billion (Sep 03: R9.8 billion) – Good growth in terms of structured finance deals – 72 structured finance deals done to date (40 deals in prior year) – Difficult environment for project finance – Margin squeeze continue
Slide 13: Asset Management – SA and UK
Asset Management – SA and UK • Recent equity rally recovery positive • Revenue (volume) growth is the concerning factor, justifying Investec’s international search for growth Key developments: • Continued to optimise resources and focus of major business units • Excellent investment performance, esp
Slide 14: Asset Management – SA and UK
Asset Management – SA and UK Market recognition: • Global Investor’s Firm to Watch 2004 • Runner-up, European specialist manager of the year, Financial News • Best all rounder over the last three years, Professional Adviser • S&P overall offshore group winner, onshore runner-up • Financial Adviser f
Slide 15: Asset Management – SA and UK
Asset Management – SA and UK FUM Total Institutional Retail £ million 30 Sept 2003 18 815 13 853 4 962 29 Feb 2004 20 011 14 630 5 381 R million 30 Sept 2003 217 426 160 090 57 336 29 Feb 2004 246 394 180 132 66 262
Slide 16: Asset Management – SA and UK
Asset Management – SA and UK FUM Total SA UK & Other £ million 30 Sept 2003 18 815 10 996 7 819 29 Feb 2004 20 011 11 640 8 371 R million 30 Sept 2003 217 426 127 073 90 353 29 Feb 2004 246 394 143 322 103 072
Slide 17: Asset Management – SA and UK
Asset Management – SA and UK Sales (gross flows) - for the 11 months to 29 February 2004: Clients £ million Products £ million Institutional 2 519 Fixed Interest & Cash 3 379 Retail 2 801 Equity 1 312 5 320 Balanced 629 5 320
Slide 18: Assurance Activities
Assurance Activities Objectives and developments: • Current focus is on a risk only business (death and disability) • Currently 4th largest player in industry with market share of 10% • Opportunity exists for group as we are not linking product to administration and thus do not compete headon with t
Slide 19: Assurance Activities
Assurance Activities Objectives and developments: • Discontinued business: – Manage and wind down: • Industrial Business • Guaranteed funds • Linked funds – transferred to IAM – Headcount reduced from 780 to around 170
Slide 20: Assurance Activities
Assurance Activities • Earnings: not possible to give any specific guidance until actuarial valuation for 31 March 2004 is completed As at 30 September 2003 Discontinued Risk Total R millions Business Business Present value of inforce (PVIF) 48.3 178.2 226.5 Cost of CAR (10.4) (13.6) (24.0) STC (2.3
Slide 21: Other Activities - Property
Other Activities - Property • The business has continued to perform well • The Property Business provides a comprehensive offering – Property management – Property fund management (listed and unlisted) • Eg. Growthpoint, Metboard, Tresso – Property trading and development – Listed property asset man
Slide 22: Other Activities - International Trade Finance
Other Activities - International Trade Finance • Sound performance • Macro economic environment remains supportive of imports – Book has grown to R592 million (Sep 03: R483 million)
Slide 23: Other Activities - Traded Endowments
Other Activities - Traded Endowments • The improvement in business activity experienced at the end of the 1H04 has continued • Will still make a loss in 2H04 but the business is starting to contribute to group overhead • There appears to be a renewed interest in traded endowment policies as an inves
Slide 24: Group Services
Group Services • Central Funding: – We expect an improved performance in 2H04 due to: • R1.5 billion perpetual pref issue at the end of Aug 2003 (dividends reflected as dividends on face of P&L) • Shares issued at end of November in terms of empowerment transaction • Central costs roughly in line wi
Slide 25: Operational Review: UK and Europe
Operational Review: UK and Europe
Slide 26: Private Banking
Private Banking • Continued strong performance despite a slowdown in the property market • Loan portfolio: £1.1 billion (Sep 03: R£1 billion) • The property book is well-secured • Loan to value ratios of between 65% to 70% – Stress testing: A fall off of 30% in property values would result in a nake
Slide 27: Carr Sheppards Crosthwaite
Carr Sheppards Crosthwaite • Operating environment continued to improve • FUM:£6.0 billion (Sep 03: £5.6 billion) – Discretionary: £3.9 billion (Sep 03: £3.6 billion) – Non-discretionary: £2.1 billion (Sep 03: £2.0 billion) • Restructuring of business, headcount reduced from 400 at March to 340
Slide 28: Investment Banking
Investment Banking • The investment banking pipeline appears to be building as IPO activity slowly returns to the market – We do not expect to benefit from this during 2H04 • Continued to build the quality and size of the corporate client list with the addition of 9 new clients in 2H04 • Secondary c
Slide 29: Treasury and Specialised Finance
Treasury and Specialised Finance • The banking businesses have continued to perform well • Trading activities restricted to focus on client driven flows with good results from equity derivatives • The Irish branch is performing well • Continue to improve distribution capabilities – current effort fo
Slide 30: Group Services and Other Activities
Group Services and Other Activities • The property division will benefit from a reasonable trading environment • Central funding will not benefit from a bad debt recovered in 1H04
Slide 31: Operational Review: Australia, Israel, USA
Operational Review: Australia, Israel, USA
Slide 32: Australia
Australia • The Australian operations continue to perform well • The stronger stock market has ensured a steady amount of activity in the advisory business • Private Banking is benefiting from solid loan portfolio growth • Total advances: A$575 million (Sep 03: A$537 million) • Moody’s rating of Baa
Slide 33: Israel
Israel • Notwithstanding the difficult economic environment, Israel has produced a stronger performance since Sept 2003 with improving market conditions • Mutual funds under custody: >NIS 17 billion (Sep 03: NIS 13.1 billion)
Slide 34: USA
USA • The US operation continues to make a modest profit • The approach in the US continues to be a strategy of niche low-capital usage businesses dealing with high quality institutional counterparties • Providing a platform to distribute group products from other jurisdictions into the US market
Slide 35: Additional Aspects
Additional Aspects ay Oo Investec
Slide 36: Summary Headcount by Geography
Summary Headcount by Geography 29 Feb 30 Sep 31 Mar 2004 2003 2003 SA and Other 2 632 2 636 2 935 UK and Europe 1 387 1 432 1 471 Australia 112 105 103 USA 75 68 131 Israel 211 219 234 Total number of employees 4 417 4 460 4 874
Slide 37: Capital
Capital • On 17 February 2004, Investec Bank (UK) Limited (IBUK) successfully placed a £200 million 12-year bond in the UK market to a well diversified range of investors – This is the first time that the group has undertaken a debt issue in the UK • In SA, the empowerment transaction was completed
Slide 38: Outlook
Outlook ay Oo Investec
Slide 39: Outlook
Outlook • The group has been through a period of realignment • Focus is now on delivery to our clients and revenue generation • The group continues to critically assess all its business activities and the geographies in which it operates to ensure that they generate the appropriate long-term return
Slide 40: Appendix
Appendix ay Oo Investec
Slide 41: Operating Profit as at 30 Sept 2003
Operating Profit* as at 30 Sept 2003 £ mn SA UK & Eur Aus Israel US Total PC 9.1 14.3 1.2 0.4 - 25.0 IB 15.9 1.5 1.6 1.1 - 20.1 TSF 5.2 8.9 0.1 1.2 - 15.4 AM 10.5 0.2 - 0.1 - 10.8 ASU 2.2 - - - - 2.2 GSO (12.6) (3.8) 0.9 (0.7) 0.8 (15.4) Total 30.3 21.1 3.8 2.1 0.8 58.1 *UK GAAP: Before taxation, ex
Slide 42: GSO Operating Profit as at 30 Sept 2003
GSO Operating Profit* as at 30 Sept 2003 £ mn SA UK & Eur Aus Israel US Total Int Trade Fin 0.4 0.7 - - - 1.1 Property 4.0 - - - - 4.0 Traded Endow (2.0) - - - - (2.0) Other 1.2 - - - 0.1 1.3 Central Costs (5.9) (4.5) (1.4) - - (11.8) Central Funding (10.3) - 2.3 (0.7) 0.7 (8.0) Total (12.6) (3.8) 0