Investec plc · LSE:INVP
Investec — H1 2004 Earnings Presentation
44 slides from Investec's earnings presentation, 2003
Slide 1: Investec Interim Results Presentation – 2003
Investec Interim Results Presentation – 2003
Slide 2: Summary of Results
Summary of Results ™~ @ Investec
Slide 3: Snapshot of results
Snapshot of results 30 Sep % 30 Sep 31 Mar UK GAAP 2003 Change 2002 2003 Earnings before goodwill amortisation and exceptional 47 093 7.4 43 867 88 684 items (£’000) EPS before goodwill amortisation and exceptional 49.2 3.4 47.6 97.6 items (pence) Dividends per share (pence) 28.0 7.7 26.0 54.0 Divid
Slide 4: Snapshot of results
Snapshot of results 30 Sep % 30 Sep 31 Mar UK GAAP 2003 Change 2002 2003 Return on average shareholders’ funds (%) 13.3 11.9 12.4 Return on average tangible equity NAV (%) 22.6 23.4 23.8 Cost to income ratio (%) 75.0 78.1 79.8 Total assets under administration (£mn) 43 919 8.2 40 576 40 604
Slide 5: Summary of the year
Summary of the year • Successfully rationalised and realigned the group’s operations resulting in a leaner organisation. • There was a significant turnaround in the performance of the UK operations. • Reduced costs across the group: – Investec Limited experienced a 3.1% decline in expenses in Rand t
Slide 6: Global positioning and review
Global positioning and review
Slide 7: Operating profit by geography
Operating profit* by geography 70 58.1 60 48.5 50 £ million 40 35.5 30.4 27.7 30 20 13.0 10 0 Southern UK and Other** Total group Africa Sep-02 Sep-03 *Before taxation, exceptional items and amortisation of goodwill **Including Europe, Australia, Israel, US and Discontinued Operations
Slide 8: Assets by geography
Assets by geography 30 Sept 2003 31 Mar 2003 4.8% 2.4% 5.4% 0.3% 0.3% 2.0% 37.4% 33.5% 59.0% 54.9% Southern Africa UK and Australia Israel US and Other Europe
Slide 9: Southern Africa
Southern Africa Mixed performance from the SA businesses: • Strong performance from Private Banking and Investment Banking divisions. • Solid performance from Property group. • Reasonable performance from Asset Management. • Weak performance from Treasury and Specialised Finance businesses. • Consid
Slide 10: UK and Europe
UK and Europe Noteworthy turnaround in UK performance: • Strong results from Private Banking and the Treasury and Specialised Finance operations. • Solid performance from Carr Sheppards Crosthwaite. • Improved performance from the Investment Banking activities which benefited from a reduced cost bas
Slide 11: Australia
Australia • Overall performance from the Australian business was commendable against a backdrop of a stronger stock market. • Steady activity levels. • Good progress made in its core areas of activities.
Slide 12: Israel
Israel • The economic environment remained difficult. • Negative inflation weakened performance in nominal terms. • Investec (Bank) Israel continues to leverage off the presence of the group in the US. • Assets under management increased 32.3% to NIS 13.1 billion (£1.8 billion). • Marginal fall in e
Slide 13: US
US • The heavily reduced ongoing operations posted a modest performance. • Fundamental restructuring was completed and Investec Ernst and Investec Inc. ceased operating as of 31 May 2003. • Remaining operations include several fixed income trading operations and a Nasdaq equities trading desk suppor
Slide 14: Divisional Review
Divisional Review ™~ @ Investec
Slide 15: Operating profit by business
Operating profit* by business UK GAAP (£ million) Sep-03 Sep-02 • Private Client Activities 25.1 16.4 • Investment Banking 20.1 0.1 • Treasury and Specialised Finance 15.4 14.8 • Asset Management 10.8 9.5 • Assurance 2.2 18.3 • Group and Other Services (15.5) (10.6) • Total group 58.1 48.5 *Before t
Slide 16: Contribution analysis – Operating profit
Contribution analysis – Operating profit* 30 Sept 2003 30 Sept 2002 3.1% 28.6% 14.0% 34.0% 27.1% 26.0% 14.8% 26.7% 22.9% 2.8% Private Client Activities Investment Banking Treasury and Asset Management Specialised Finance Assurance *Excluding Discontinued Operations and Other Activities and before ta
Slide 17: Group Services and Other
Group Services and Other Operating profit* UK GAAP (£ ‘000) Sep-03 Sep-02 • International Trade Finance 1 096 623 • Property Worldwide 3 973 2 675 • US Continuing businesses 162 904 • UK Traded Endowments (2 031) (2 344) • Central Funding (6 887) 2 267 • Central Costs (11 785) (8 431) • Total group
Slide 18: Central Funding
Central Funding 30 Sep 30 Sep UK GAAP (£ ‘000) 2003 2002 Net interest income 7 327 14 443 Return on shareholders funds in long-term assur 6 769 6 291 Dealing profits 5 626 5 110 Other operating income 7 667 (266) Costs in Central Funding (4 882) (3 738) 22 507 21 840 Interest and other income in Tra
Slide 19: Private Client Activities
Private Client Activities The Private Banking operations performed particularly well with solid loan portfolio growth: • SA: R19.8 billion (Mar 03: R17.2 billion). • UK: £1 052 million (Mar 03: £925 million). • Australia: A$537 million (Mar 03: A$422 million). Mixed performance from Private Client P
Slide 20: Investment Banking
Investment Banking • The SA business benefited from an uplift in market valuations of its direct investment and private equity portfolios. • In the UK, a major turnaround was achieved as a result of improved stock market conditions and a reduced cost base. • Investec Wentworth in Australia performed
Slide 21: Treasury & Specialised Finance
Treasury & Specialised Finance Banking Activities: • UK: Strong growth and pleasing performance. • SA: Suffered from the general slow down in corporate activity while the treasury desk was negatively impacted by the rate positioning of its assets. Trading Activities: • UK: Benefited from a renewed f
Slide 22: Asset Management
Asset Management Resilience from the SA business: • Developing a strong franchise in specialist products. • SA Institutional business was appointed to manage important new mandates. R1.3 billion SA mandates outside South Africa. • SA Personal Investments attracted domestic net new retail flows of R1
Slide 23: Asset Management – funds under management
Asset Management – funds under management 30 Sep 31 Mar % (£ million) 2002 2003 Change Institutional 13 853 12 478 11.0 Retail 4 962 4 350 14.1 18 815 16 828 11.8 South Africa 10 996 9 303 18.2 UK and Other 7 819 7 525 3.9 18 815 16 828 11.8
Slide 24: Financial Performance
Financial Performance ™~ @ Investec
Slide 25: Balance Sheet
Balance Sheet 30 Sep 31 Mar % UK GAAP (million) 2003 2003 Change Total assets 15 757 14 959 5.3 Core loans and advances 4 696 4 006 17.2 Total liabilities 14 572 13 946 4.5 Total capital resources 1 185 1 013 17.0 Shareholders’ funds 843 697 20.9
Slide 26: Income Statement
Income Statement 30 Sep 30 Sep % 31 Mar UK GAAP, £’000 2003 2002 Change 2003 Net interest income 43 253 61 679 (29.9) 115 915 Net non-interest income 208 389 194 751 7.0 394 034 Operating income 251 642 256 430 (1.9) 509 949 Administrative expenses (181 954) (193 726) (6.1) (392 466) Depreciation an
Slide 27: Reconciliation of Earnings – UK GAAP
Reconciliation of Earnings – UK GAAP 30 Sep 30 Sep UK GAAP, £’000 2003 2002 Attributable earnings 26 732 3 427 Amortisation and impairment of goodwill 29 780 31 409 Profit on disposal of subsidiary undertakings (13 674) - Provision for losses on disposal of group operations 5 103 8 682 Amortisation
Slide 28: Return
Return (UK GAAP) 25 23.4 22.6 20 15 13.3 11.9 10 5 0 Sep-02 Sep-03 (%) ROE Return on tangible NAV
Slide 29: Quality of earnings
Quality of earnings 1.1% 2.7% 2.5% 7.3% 20.4% 45.7% 31.0% Sep-03 Sep-02 £251.6m £256.4m 48.0% 24.1% 17.2% Annuity Income / Annuity Income / Total Income: 67.9% Total Income: 72.3% Annuity Income Other Income Net annuity fees and commissions Dealing profits, deal income and Net interest income other
Slide 30: Quality of earnings
Quality of earnings 30 Sep 30 Sep % UK GAAP, £’000 2003 2002 Change Net interest income 43 253 61 679 (29.9) Dividend income 3 511 2 903 20.9 Fees and commissions receivable 146 877 138 112 6.3 Dealing profits 34 975 30 230 15.7 Income from long-term assurance business 2 699 18 830 (85.7) Return on
Slide 31: Amortisation of goodwill
Amortisation of goodwill • The charge for goodwill amortisation and impairment decreased by 5.2% from £31.4 million to £29.8 million. • This was largely as a result of the closure of the majority of the group’s US operations in the prior year. • Included in the current period is an amount of £6.3 mi
Slide 32: Asset Quality
Asset Quality 6000 1.52 2.0 4696 1.5 £ millions 4000 4006 1.06 1.0 (%) 2000 0.5 0 0.0 Mar-03 Sep-03 Total core loans and advances to customers (lhs) Non-performing loans as % of core loans and advances to customers (rhs)
Slide 33: Asset Quality
Asset Quality 200 1.4 1.33 162.0 150 1.3 (%) 100 136.7 1.2 (%) 50 1.15 1.1 0 1.0 Mar-03 Sep-03 Total provisions as a % of gross non-performing loans (lhs) General provisions as a % of net loans and advances to customers (rhs)
Slide 34: Cost to income
Cost to income >100% 100 87.382.6 75.7 78.1 75.0 68.3 70.3 64.0 64.0 68.2 59.4 60 (%) 20 USA SA Australia Israel group Europe Total UK & -20 Sep-02 Sep-03
Slide 35: Administrative expenses
Administrative expenses 30 Sep 30 Sep % UK GAAP, £’000 2003 2002 change Staff costs 123 035 128 485 (4.2) Premises (excl. depreciation) 10 898 10 889 0.1 Equipment (excl. depreciation) 10 399 12 334 (15.7) Business expenses 30 485 35 367 (13.8) Marketing expenses 7 137 6 651 7.3 Administrative expen
Slide 36: Taxation
Taxation • The operational effective tax rate of the group increased from 16.9% to 21.9%. 30 Sep Effective tax rate (%) 2003 Southern Africa 18.4 UK and Europe 21.6 Australia 29.3 Israel 69.4
Slide 37: Exceptional items
Exceptional items • Losses on termination of the group’s operations in the US amounting to £5.1 million: • Profit of £13.7 million on disposal of group operations relating to the sale of the companies, 100 Grayston Drive Property (Pty) Limited and Block E Power Station Properties (Pty) Limited, at m
Slide 38: Capital adequacy
Capital adequacy 30 Sep 31 Mar 2003 2003 Consolidated under SARB rules Investec Limited 14.4% 12.2% Investec Bank Limited – solo 21.1% 21.0% Consolidated under FSA rules Investec plc 14.5% 14.2% Investec Bank UK – solo 21.6% 22.2%
Slide 39: Employees
Employees 30 Sep 31 Mar 2003 2003 SA and Other 2 636 2 935 UK and Europe 1 432 1 471 Australia 105 103 USA 68 131 Israel 219 234 Total number of employees 4 460 4 874
Slide 40: Looking Forward
Looking Forward ™~ @ Investec
Slide 41: Looking forward
Looking forward • The group’s philosophy is still to grow organically and by acquisition however acquisitions must meet requirements of: – Building scale. – Fit with core areas of activities. – Generate the minimum return. – Not strain the group’s capital structure. • The group will not hesitate to
Slide 42: Looking forward
Looking forward • Continue to manage costs tightly. • Cost to income ratio declined from 78% to 75%. • Looking to improve ratio further through both cost rationalisation and revenue generation.
Slide 43: Looking forward
Looking forward • While proceeding with caution, we are encouraged by the economic environment and market sentiment and will continue to focus on building core businesses across all the regions in which we operate.
Slide 44: Investec Interim Results Presentation – 2003
Investec Interim Results Presentation – 2003