Investec plc · LSE:INVP
Investec — H1 2001 Earnings Presentation
70 slides from Investec's earnings presentation, 2001
Slide 1: Investec Group Limited Interim Results Presentation 2001
Investec Group Limited Interim Results Presentation 2001
Slide 2: Snapshot of results
Snapshot of results
Slide 3: 2001 interim results in a snapshot
Investec Group… 2001 interim results in a snapshot 30 Sept % 30 Sept 31 Mar 2001 change 2000 2001 Headline Attributable Earnings 760 31.0 580 1 314 (R’mn) Headline EPS (cents) 827.9 15.1 719.3 1 628.2 DPS (cents) 375.0 21.0 310.0 750.0 Return on Equity (%) 26.4 - 24.3 26.9 Assets Under Administratio
Slide 4: Headline and attributable earnings
Headline and attributable earnings 30 Sept 30 Sept 31 Mar R’mn 2001 2000 2001 Headline Earnings 760 580 1314 Headline Adjustments (202) (233) (468) Share of Associates Exceptional Items 82 (100) (156) Goodwill Amortised (284) (133) (312) Attributable Earnings 558 347 846
Slide 5: Operating environment
Operating environment • The Group experienced a mixed operating environment overall: - Banking and interest rate activities benefited from declining interest rates - Equity related activities negatively impacted by weak equity markets - US and Israeli operations further impacted by market disruption
Slide 6: Operating environment
Operating environment • Overall credible financial results = Benefits of balanced portfolio effect • The Group’s conservative risk management and prudent liquidity policies, in addition to its regional and product diversity, contained the effects of weak financial markets
Slide 7: Divisional review
Divisional review as © Investec
Slide 8: Divisional review
Divisional review • Difficult period for Investment Banking Ð 32% • Mixed performance from Private Client Ð 9% Activities • Credible performance from Treasury Ï 29% and Finance Group • Strong financial performance by Asset Ï 34% Management • Property Activities Ï 100%
Slide 9: Contribution analysis
Contribution analysis % of headline NIBT (excluding “other” activities) Asset Management & Assurance Investment Activities Banking 22.2% (9.9%) 28.5% (43.8%) Sept 2001 (Sept 2000) Private Client Activities 18.4% (21.1%) Treasury & Finance Group 30.9% (25.2%)
Slide 10: Investment Banking
Investment Banking { Includes: Corporate Finance, Institutional Stockbroking, Private Equity, Direct Investments 30 Sept 30 Sept % 2001 2000 Change Net Operating Income (R’mn) 617 660 (6.5) Operating Expenses (R’mn) 292 185 57.8 Headline NIBT (R’mn) 325 475 (31.6) Cost to Income Ratio (%) 47.3 28.1
Slide 11: Investment Banking - developments
Investment Banking - developments • SA Corporate Finance - experienced satisfactory results in a challenging yet opportunistic operating environment • Institutional Stockbroking SA -Structured Equity Desk performed well supplementing deflated revenue stream arising out of depressed agency volumes •
Slide 12: Investment Banking - developments
Investment Banking - developments • Australia - the acquisition of Wentworth’s has substantially raised Investec’s profile and credibility in the market with a number of deals concluded • IHC – Headline NIBT down 54%, but coming off a high base. Notwithstanding: - Succeeded in diversifying its reven
Slide 13: Treasury and Finance Group
Treasury and Finance Group { Includes: majority of the Group’s Financial Markets, Deposit-Taking, Corporate Lending and Structuring Activities 30 Sept 30 Sept % 2001 2000 Change Net Operating Income (R’mn) 601 464 29.5 Operating Expenses (R’mn) 248 191 29.8 Headline NIBT (R’mn) 353 273 29.3 Cost to
Slide 14: Treasury and Finance Group - developments
Treasury and Finance Group - developments • Solid performance – particularly by the division’s banking related activities • Trading activities impacted by: - Difficult operating environment - Business development • Risk management - stood up in volatile times
Slide 15: Treasury and Finance Group - developments
Treasury and Finance Group - developments • SA Project Finance team - appointed as sole arranger and joint underwriter of the first infrastructure bonds to be listed on the Bond Exchange (iro the Platinum Toll Road project) • Irish Project Finance team rated “No 1 Global Water Advisor” iro PPP initi
Slide 16: Private Client Activities
Private Client Activities { Includes: Private Banking, Private Client Portfolio Management and Stockbroking 30 Sept 30 Sept % 2001 2000 Change Net Operating Income (R’mn) 883 756 16.8 Operating Expenses (R’mn) 673 526 28.0 Headline NIBT (R’mn) 210 230 (8.7) Cost to Income Ratio (%) 72.0 66.5 -
Slide 17: Private Banking - developments
Private Banking - developments • Impressive performance from Private Banking with headline NIBT up 28% excluding Australia which is still in a development stage • The declining interest rate environment benefited operations in both the UK and SA • The Group grew its lending book from R20.2bn in Marc
Slide 18: Private Banking - developments
Private Banking - developments • SA – Continued to expand and enhance product offering, entrenching its market positioning • UK - notable performance as a result of: - Recent trust and fiduciary acquisitions - Division continues to position itself as a fully-fledged niched private bank • Australia -
Slide 19: Private Client Stockbroking - developments
Private Client Stockbroking - developments • Headline NIBT for Private Client Stockbroking down 43% • Earnings negatively impacted by low market volumes, investor apathy and an aversion to equities • Global FUM increased by 8.3% to R148.8bn since year-end - ISL FUM increased marginally by 7% to R19.
Slide 20: Private Client Stockbroking - developments
Private Client Stockbroking - developments • CSC acquired two teams from the Gerrard Group – focus on providing a comprehensive international offering • US – performance lagging - Average margin balances declined from $561m to $321m
Slide 21: Asset Management
Asset Management { Includes: Institutional, Retail and Investment Trust Asset Management and Linked Product Provider Business 30 Sept 30 Sept % 2001 2000 Change Net Operating Income (R’mn) 533 426 25.1 Operating Expenses (R’mn) 390 319 22.3 Headline NIBT (R’mn) 143 107 33.6 Cost to Income Ratio (%)
Slide 22: Asset Management - developments
Asset Management - developments • Strong profit growth from Asset Management with headline NIBT up 34% • Profit largely attributable to the leverage effect of additional Fedsure assets on top of scalable SA institutional platform • Assets under management have grown 30.8% from R172bn to R225bn - Gro
Slide 23: Asset Management - developments
Asset Management - developments • Retail funds performed well – weathering turbulent markets - Created appropriate Dublin-listed UCITS product range aimed at the European market - Offshore funds listed in Guernsey and Dublin - net inflows of R1.5bn - UK Unit Trust Business: R900mn net inflows • The
Slide 24: Asset Management - developments
Asset Management - developments • The UK Institutional business continued to win fixed income mandates - R3bn net inflows in this area • The SA Personal Investments business successfully integrated Fedsure businesses to form the largest Unit Trust and Linked Product complex in SA • In summary, the c
Slide 25: Other business lines
Other business lines { Includes: Property Group, Clearing and Execution Business in USA, Reichmans, Share Capital and Centralised Funding, Central Services 30 Sept 30 Sept % R’mn 2001 2000 Change Property Group 118 59 99.7 Traded Endowments 26 - - Centralised Funding (103) (99) 4.0 Capital, Central
Slide 26: Fedsure - achieved what we set out to do
Fedsure - achieved what we set out to do Objective Action Perpetuate individual life Concluded reinsurance assurance through a transaction with Capital merger or outsourcing Alliance - majority of arrangement individual life book dealt with Critically assess EB In process of redesigning business wit
Slide 27: Fedsure - achieved what we set out to do
Fedsure - achieved what we set out to do Objective Action Integrate asset Completed full conversion by October and property 2001 - businesses are fully integrated management with Investec’s existing activities businesses Disposal of non- Sold Credit Life, Fedlife Namibia, core businesses Fedsure Gen
Slide 28: Fedsure - achieved what we set out to do
Fedsure - achieved what we set out to do Objective Action Rationalisation of Closure of SA and Fedsure head office international head offices - and central services overall staff down from 2781 to 841
Slide 29: Fedsure - developments
Fedsure - developments • All of this within the space of six and a half months from management control (19 March 2001) without business discontinuity
Slide 30: Fedsure - the facts at acquisition
Fedsure - the facts “at acquisition” { Financial Information Net Asset Value at 1 June 2001 (R’mn) Life Assurance 1 169 Free Assets 2 271 Inadmissable Assets 37 Minorities’ Interest (39) Capital Injected by Investec (1 100) International Operations 351 Balance of Financial Services (129) Total 1 391
Slide 31: Fedsure - the facts at acquisition
Fedsure - the facts “at acquisition” { Other Relevant Information Embedded Value of In-Force (R’m) 207 Excess Value of International Businesses over NAV (R’m) 364 Acquired Funds Under Management (R’bn) 48.2 Institutional 34.8 Linked Products 6.5 Unit Trusts 4.2 Property 2.7
Slide 32: Fedsure - earnings
Fedsure - earnings { Earnings attributable to Fedsure acquisition for four months to 30 September 2001 Life Financial R’mn Business Services International Total Revenue 284 76 58 418 Costs (174) (15) (31) (220) Net Income 110 61 27 198 Tax (28) (15) (7) (50) NIAT 82 46 20 148
Slide 33: Fedsure - revisit to forecasts
Fedsure - revisit to forecasts Life Financial Business Services International Total Previously disclosed projected annualised NIBT 357 227 120 704 Revised projection 300 175 100 575
Slide 34: Fedsure - income from long term assurance business
Fedsure - income from long term assurance business 4 mths ended 2 mths ended R’mn 30 Sept 2001 31 May 2001 Premium Income 1 264 675 Investment Income 655 337 Total Income 1 919 1 012 Total Outgo 2 190 1 427 Benefits Paid 1 966 1 222 Commission 50 31 Marketing and Admin Expenses 155 139 Taxation 19 3
Slide 35: Fedsure - impact on profitability
Fedsure - impact on profitability { Impact of Fedsure acquisition on interim profitability 30 Sept 30 Sept R’mn 2001 2000 Headline Earnings as reported 760 580 Associated Earnings (10) (44) Fedsure Subsidiary Earnings (148) - Headline Earnings excl. Fedsure 602 536 Weighted number of shares (million
Slide 36: Fedsure - Investec's share of Associate's exceptional items
Fedsure -Investec’s share of Associate’s exceptional items 2 mths ended May 01 Attributable to Fedsure Life 650 Reinsurance of Individual Life Business to Cap Alliance 620 Sale of Credit Life and Fedsure Namibia Life 35 Investment Gain 156 Restructure Costs (161) Other restructure costs (remaining b
Slide 37: Fedsure - Embedded Value of Fedsure Life
Fedsure - Embedded Value of Fedsure Life R ‘mn Dec Mar May Sept NAV 880 1 563 2 271 2 381 VIF 1 285 967 207 264 Embedded Value 2 165 2 530 2 478 2 645
Slide 38: Fedsure - Embedded Value of Fedsure Life
Fedsure - Embedded Value of Fedsure Life { Statement of Actuarial Values of Assets and Liabilities Total Value of Assets 43 306 42 956 29 662 28 875 Inadmissable Assets for FSV - (52) (37) - Market Value of Assets 43 306 42 904 29 625 28 875 Less: Liabilities 42 426 41 341 27 354 26 494 Actuarial Va
Slide 39: Fedsure - Analysis of key movements in embedded value
Fedsure - Analysis of key movements in embedded value 1 Jan to 31 Mar Opening Embedded Value 2 165 Add: Operational Earnings 92 Additional Capital Injection 600 Norwich Merger 716 3 573 Less: Exceptional Investment Deficit (683) Annuity Mismatching (216) Inadmissable Assets (52) Other net movements
Slide 40: Fedsure - Analysis of key movements in embedded value
Fedsure - Analysis of key movements in embedded value 1 Apr to 31 May Opening Embedded Value 2 530 Add: Operational Earnings 58 Exceptional Gain Attributable to Fedsure Life 650 3 238 Less: Value of In-Force Attributable to Individual Life (429) Increase in Asset Management Charges (150) Reduction i
Slide 41: Fedsure - Analysis of key movements in embedded value
Fedsure - Analysis of key movements in embedded value 1 Jun to 30 Sep ‘01 Opening Embedded Value 2 478 Add: Operational Earnings 110 Increase in Value of In-Force 57 Closing Embedded Value 2 645
Slide 42: Geographic review
Geographic review
Slide 43: Geographic review
Geographic review Pre-Tax Post-Tax • UK & Europe Ð 8% Ð 2% • USA Ð 65% Ð 63% • Israel Ð 35% Ð 39% • Southern Africa & Other Ï 122% Ï 104%
Slide 44: Headline earnings by geography
As a result… Headline earnings by geography USA Israel 2.1% 2.1% (5.3%) (7.6%) UK & SA & Other Europe 55.1% 40.7% (33.1%) (54.0%) Sept 2001 (Sept 2000)
Slide 45: Assets by geography
As a result… Assets by geography USA Israel 3.8% 4.8% (4.9%) (5.3%) UK & SA & Other Europe 39.5% 51.9% (28.6%) (61.2%) Sept 2001 (Sept 2000)
Slide 46: Tangible NAV by geography
As a result… Tangible NAV by geography Israel 8.3% (6.7%) USA 10.8% (10.2%) UK & Europe 45.3% (51.9%) SA & Other 35.6% (31.2%) Sept 2001 (Sept 2000)
Slide 47: Salient financial features - UK & Europe
Salient financial features - UK & Europe 30 Sept 30 Sept % 2001 2000 Change Assets (R’bn) 129.8 123.3 5.3 Headline NIBT (R’mn) 381 415 (8.2) Headline NIAT (R’mn) 309 313 (1.3) Staff 1 510 1 424 6.0 Return on Tangible NAV (%) 21.5 23.7 -
Slide 48: Salient financial features - USA
Salient financial features - USA 30 Sept 30 Sept % 2001 2000 Change Assets (R’bn) 9.4 9.9 (0.1) Headline NIBT (R’mn) 27 78 (65.4) Headline NIAT (R’mn) 16 43 (62.8) Staff 747 749 (0.3) Return on Tangible NAV (%) 4.9 18.6 -
Slide 49: Salient financial features - Israel
Salient financial features - Israel 30 Sept 30 Sept % 2001 2000 Change Assets (R’bn) 12.0 10.7 12.1 Headline NIBT (R’mn) 33 51 (35.3) Headline NIAT (R’mn) 25 41 (39.0) Staff 246 228 7.9 Return on Tangible NAV (%) 6.0 16.2 -
Slide 50: Salient financial features - Southern Africa & other
Salient financial features - Southern Africa & other 30 Sept 30 Sept % 2001 2000 Change Assets (R’bn) 99.0 57.6 71.9 Headline NIBT (R’mn) 692 312 121.8 Headline NIAT (R’mn) 560 274 104.4 Staff 3 060 2 265 35.1 Return on Tangible NAV (%) 41.7 28.1 -
Slide 51: Group performance
Group performance
Slide 52: Salient financial features
Salient financial features { Balance Sheet (R’mn) 30 Sept % 30 Sept 31 Mar 2001 Change 2000 2001 Shareholders’ Funds 12 940 57.2 8 230 9 028 Total Capital Resources 15 229 59.8 9 532 11 240 Total Assets 250 214 24.1 201 634 194 732 Advances 42 671 27.3 33 525 38 062 Third Party FUM 343 606 13.8 301
Slide 53: Salient financial features
Salient financial features { Income Statement (R’mn) 30 Sept % 30 Sept 31 Mar 2001 Change 2000 2001 Net Interest Income 1 001 37.7 727 1 878 Provision for Bad & Doubtful 110 (0.9) 111 198 Debts Other Income 2 369 28.5 1 844 3 621 Operating Expenses 2 127 32.6 1 604 3 476 Net Income before Taxation 1
Slide 54: Growth in net tangible asset value per share
Growth in net tangible asset value per share Rands 70 10 Year CAGR to Mar 2001: 24.2% 60 50 40 30 20 10 0 1991 1993 1995 1997 1999 Sept Sept ‘00 ‘01
Slide 55: Growth in total assets
Growth in total assets R’bn 280 10 Year CAGR to Mar 2001: 52.4% 240 200 160 120 80 40 0 1991 1993 1995 1997 1999 Sept Sept ‘00 ‘01
Slide 56: Growth in assets under management
Growth in assets under management R’bn 600 10 Year CAGR to Mar 2001: 54.1% 500 400 300 200 100 0 1991 1993 1995 1997 1999 Sept Sept ‘00 ‘01
Slide 57: Operating income by type
Operating income by type 9.8% 3.4% (11.8%) Commission & Fees - Recurring 42.9% Margin Income 16.6% (44.5%) Principal Transactions (18.7%) & Trading income Commission & Fees - Once Off 27.3% Income from long-term (25.0%) assurance business Sept 2001 (Sept 2000)
Slide 58: Annuity as a % of total income
Annuity as a % of total income Percent 90 80 70 83.2 81.1 77.4 70.7 70 73.7 60 73 50 40 30 20 10 0 1996 1997 1998 1999 2000 Sep- Sep- 00 01
Slide 59: Operational issues
Operational issues as © Investec
Slide 60: Bad debt charge as a % of average advances
Bad debt charge as a % of average advances 1.2 1 0.8 1.13 0.75 0.76 0.6 0.71 0.58 0.53 0.54 0.56 0.4 0.2 0 1996 1997 1998 1999 2000 Sep- 2001 Sep- 00 01
Slide 61: Gross NPLs as a % total loans & advances
Gross NPLs as a % total loans & advances 3.5 3.0 2.5 3.03 2.6 2.0 2.1 2.0 1.8 2.0 1.5 1.65 1.63 1.0 0.5 0.0 1996 1997 1998 1999 2000 Sep- 2001 Sep- 00 01
Slide 62: Capital adequacy
Capital adequacy R’mn 30 Sept 2001 Tier 1 11 491 Tier 2 - Permanent 2 776 Tier 2 - Redeemable 1 720 Total 15 987 Capital Reserved for Non-Banking Activities (2 622) Impairments (5 944) Capital available for Banking Activities 7421 Risk Weighted Assets 49 306 Capital Adequacy Ratio 15.1%
Slide 63: Deploying capital productively
Deploying capital productively 30 Sept 30 Sept 31 Mar 2001 2000 2001 Return on Equity (%) 26.4 24.3 26.9 Return on Investment (%) 15.7 16.5 17.6 Return on RWA (%) 3.1 2.7 3.0
Slide 64: Analysis of expenses
Analysis of expenses • Excluding Fedsure’s assurance activities, the ratio of operating expenses to total income increased from 62.4% last year to 65.2%
Slide 65: Operational cost to income by geography
Operational cost to income by geography Percent 100 92.7 90 80 71.2 73.8 69.5 65.2 70 62.9 60.5 62.4 58.7 60 51.8 50 40 2000 2001 30 20 10 0 SA & UK & USA Israel Group Other Europe
Slide 66: Analysis of expenses
Analysis of expenses R’mn 30 Sept 30 Sept % 2001 2000 Change Premises 139 116 19.8 Personnel 1 221 842 45.0 Equipment 265 211 25.6 Business Expenses 411 338 21.6 Marketing Expenses 91 97 (6.2) Total 2 127 1 604 32.6
Slide 67: Analysis of expenses
Analysis of expenses • Of the growth of 32% in expenses: - 40.3% is attributable to acquisitions and new activities - 39.4% to exchange rate devaluation • Organic growth after extracting above - 6.6%
Slide 68: Looking forward
Looking forward as © Investec
Slide 69: Looking forward
Looking forward • The outlook for global markets remains uncertain • Difficult, therefore, to predict performance with any degree of certainty • These results reflect that our business model is more defensive than other investment banks • Notwithstanding difficult conditions, we were still able to s
Slide 70: www.investec.com
www.investec.com as @ Investec