Investec plc · LSE:INVP
Investec — H1 2008 Earnings Presentation
21 slides from Investec's earnings presentation, November 2007
Slide 1: Results presentation
Results presentation For the six months ended 30 September 2007 Proviso • 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: – the further development
Slide 2: Overview: Uncertain operating environment
Overview Uncertain operating environment 135 130 Volatile equity markets 125 Rebased to 100 120 115 110 105 100 95 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 JSE All Share FTSE All Share Australia All Ordinaries 11 10 9 Rising interest rate environment 8 7 6 5 4 3 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
Slide 3: Uncertain operating environment; Overview of results
Uncertain operating environment ABX Index 2006 Credit instability 100 80 60 Price 40 20 0 Nov-06 Dec-06 Feb-07 Mar-07 May-07 Jun-07 Jul-07 Sep-07 Oct-07 2006-2 AAA Closing Price 2006-2 AA Closing Price 2006-2 A Closing Price 2006-2 BBB Closing Price 2006-2 BBB- Closing Price 115 110 Weaker average R
Slide 4: Overview of results; Financial objectives
Overview of results (IFRS) 30 Sept 30 Sept % 31 March 2007 2006 Change 2007 Operating profit before tax* 254 251 205 291 23.8% 466 585 (£’000) Attributable earnings* (£’000) 160 858 128 676 25.0% 300 704 Adjusted EPS* (pence) 27.3 23.3 17.2% 53.3 DPS (pence) 11.5 10.0 15.0% 23.0 Average core loans a
Slide 5: Adjusted EPS growth and Return on equity
Adjusted EPS* growth 60 Target: 50 UK RPI** +10% 40 30 17.2% 20 (%) 10 Attributable earnings 0 Plc: 38.9% Limited: 61.1% -10 -20 -30 Mar-97 Mar-99 Mar-01 Mar-03 Mar-05 Mar-07 1H08 *Before goodwill and non-operating items ** UK RPI for September 2007 was 3.9% Note: Prior to 2005 the numbers are repor
Slide 6: Cost to income ratio; Capital
Cost to income ratio 90 80 58.9% 70 Target: <65% 60 50 (%) 40 30 20 UK & Europe: 68.3% Southern Africa: 51.9% 10 Australia: 50.9% 0 Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Sep- 00 01 02 03 04 05 06 07 07 Note: Prior to 2005 the numbers are reported in terms of UK GAAP and thereafter in terms of IFRS
Slide 7: Divisional review: Divisional performance
Divisional review Divisional performance Operating profit* 205.3 254.3 11.5 240 ▲ 82% 6.4 36.2 31.9 ▲ 14% 190 43.2 ▼ 24% 140 57.1 51.9 £ million 35.8 ▲ 45% 90 100.1 40 83.4 ▲ 20% -9.1 11.4 -10 Sep 06 Sep 07 Group Services and Other Private Client Activities Investment Banking Capital Markets Asset M
Slide 8: Private Banking
Private Banking Overall Snapshot • Strong lending turnover and transactional activity continued to drive Operating profit* ▲ 16.4% to £85.7 mn momentum across all geographies • Greater penetration across all areas of Core loan book^ ▲ 23.4% to £7.5 bn specialisation, notably Wealth Management and Gr
Slide 9: Private Client Portfolio Management and Stockbroking
Private Client Portfolio Management and Stockbroking Overall Snapshot • Private Client business in South Africa benefited from: Operating profit* ▲ 47.5% to £14.4 mn – the launch of new products – increased volumes and higher asset levels Funds under management^ ▲ 10.3% to £22.1 bn – an increase in
Slide 10: Capital Markets; Principal Finance
Capital Markets Overall Snapshot • Advisory, structuring and asset creation activities continued to perform well, notably in South Africa, Australia Operating profit* ▼ (24.3)% to £43.2 mn and the Equity Finance business in Ireland Core loan book^ ▲ 17.2% to £3.5 bn • Benefited from the acquisition
Slide 11: Capital Markets - Kensington
Capital Markets - Kensington • Reshaping of business continues: – Overheads cut – Tightened lending criteria – Increased pricing – Adverse new business volumes down significantly post period end • Operating profit contribution of £4.6 mn (8 Aug to 30 Sept 2007) • Forward flow agreements still operat
Slide 12: Capital Markets outlook; Investment Banking
Capital Markets Outlook Operating profit* • UK and European securitisation markets currently closed - uncertainty exists as to % of group total: 17.8% £'mn timing and form of this market going 120 forward 100 • Global liquidity issues will impact on levels of activity, in particular UK 80 • South Af
Slide 13: Investment Banking outlook; Asset Management
Investment Banking Outlook Operating profit* • Whilst market conditions are currently % of group total: 21.4% uncertain, the deal pipeline is good £'mn and should sustain momentum 115 • We continue to build value in our direct 95 investment and private equity portfolios independently of realisations
Slide 14: Asset Management outlook; Property Activities
Asset Management Outlook Operating profit* • Momentum across the business % of group total: 14.9% remains positive £'mn • A solid long-term track record and 70 growing demand for specialist high 60 performance product support the 50 fundamentals of the business 40 • Establishing presence in Australi
Slide 15: Property Activities outlook; Group Services and Other Activities
Property Activities Outlook Operating profit* • Property business post Growthpoint % of group total: 4.7% now comprises £'mn – property investment banking 20 – A property fund management business including the 15 management of listed property portfolios and private equity style 10 property fund 5 0
Slide 16: Additional aspects: Other information
Additional aspects Other information Effective tax rate from 28.3% to 25.0% Earnings attributable to minority interests £9.7 mn Operating profits in relation to investments held in the Private Equity division £5.7 mn Translation of preferred securities issued by a subsidiary of Investec plc – transa
Slide 17: Asset quality; Liquidity
Asset quality 30 Sept 31 Mar £ million 2007 2007 Total core loans and advances to customers (pre impairments) 11 803 9 990 Gross default loans 119 123 Net default loans* 35 29 Gross default loans as a % of core loans and advances to 1.01% 1.23% customers * Pre-impairments held against these loans Li
Slide 18: Strategic considerations: Balanced portfolio of businesses
Strategic considerations Balanced portfolio of businesses % contribution to operating profit* 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 Sep-07 Private Client Activities Asset Management Capital Markets Investment Banking Property Activities *Excluding Group Services and Other Activit
Slide 19: Sustainable business model
Sustainable business model Third party Proprietary risk assets and capital of advisory of £331.6 mn ▲ 37.4% ▲ 11.9% £287.5 mn Net interest (36.0% (46.5% Net fees and income of of total) of total) commissions of £223.1 mn £277.7 mn Balance operational risk Principal ▲ 4.4% Other of businesses with fi
Slide 20: Outlook
Outlook Outlook • Mixed outlook – geographies in which we operate behaving differently – Rising commodity prices supporting growth in South Africa and Australia – South African economy shifting from consumer led growth to infrastructure and corporate led growth – UK and Europe continue to experience
Slide 21: Results presentation
Results presentation For the six months ended 30 September 2007 Page 21