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RNS
Investec PLC   -  INVP   

Final Results

Released 07:00 16-May-2019

RNS Number : 1851Z
Investec PLC
16 May 2019
 

Investec plc and Investec Limited (combined results)

Unaudited combined consolidated financial results for the year ended 31 March 2019

This announcement covers the statutory results of Investec plc and Investec Limited (together "the Investec group" or "the group") for the year ended 31 March 2019.

 

Group operational performance supported by our client franchises

 

·     The group has delivered a sound operational performance supported by substantial net inflows, good loan book growth in home currency, and a significantly improved performance from the UK Specialist Banking business.

·     This is against a challenging operating environment with weak economic growth in both South Africa and the UK, the group's two core banking markets, as well as mixed equity market performance over the year.

·     The Asset Management business generated substantial net inflows supporting higher average funds under management and annuity fees.

·     The Bank and Wealth business benefitted from client acquisition and growth in key earnings drivers.

·     The Specialist Banking business performance was supported by loan book growth. A reduction in impairments was partly offset by a weak performance from the investment portfolio.

·     The Wealth & Investment business generated positive discretionary net inflows. Reported results were affected by certain non-recurring items.   

·     Operating costs grew faster than revenue. Revenue growth and cost containment remain priorities as outlined over the past year.

·     ROE improved from 12.1% to 12.9%.

 

Overview of results

 

Group adjusted operating profit increased 9.4% year-on-year to GBP664.5 million. The combined South African businesses reported adjusted operating profit 1.8% ahead of the prior period in Rands, whilst the combined UK and Other businesses posted a 36.1% increase in adjusted operating profit in Pounds Sterling. Overall group results have been negatively impacted by the depreciation of the average Rand: Pound Sterling exchange rate of 4.8% over the year. Key earnings drivers have been negatively impacted by the depreciation of the closing Rand: Pound Sterling exchange rate of 13.1% over the year.

Salient features1

31 March 2019

31 March 2018

% change

Neutral

Currency

% change

Adjusted operating profit (GBP'm)

664.5

607.5

9.4%

12.6%

Adjusted earnings attributable to shareholders (GBP'm)

519.3

491.1

5.8%

9.2%

Adjusted basic earnings per share (pence)

55.1

53.2

3.6%

7.0%

Basic earnings per share (pence)

52.0

51.2

1.6%

4.9%

Dividend per share (pence)

24.5

24.0

2.1%

 

Dividend cover (times)

2.2

2.2

 

 

Dividend payout ratio

44.5%

45.1%

 

 

Annuity income as a % of total operating income

76.9%

76.2%

 

 

Credit loss ratio

0.31%

0.61%

 

 

Cost to income ratio (net of non-controlling interests)2

69.9%

68.3%

 

 

Return on adjusted average shareholders' equity

 12.9%

12.1%

 

 

Third party assets under management (GBP'bn)

167.2

160.6

4.1%

8.3%

Customer accounts (deposits) (GBP'bn)

31.3

31.0

1.0%

8.7%

Core loans and advances (GBP'bn)

24.9

25.1

(0.8%)

6.8%

Cash and near cash (GBP'bn)

13.3

12.8

3.6%

10.0%

             

1Refer to definitions in the Notes.

2The group has changed its cost to income ratio definition to exclude operating profits or losses attributable to other non-controlling interests. Refer to definitions in the Notes for further detail.

·      The group maintained a sound capital position with common equity tier one (CET1) ratios of 10.8% for Investec plc and 10.5% for Investec Limited. Investec Limited has received regulatory permission to adopt the Foundation Internal Ratings Based (FIRB) approach, effective 1 April 2019, resulting in a pro-forma CET1 ratio of 11.6% had the FIRB approach been applied as of 31 March 2019. Leverage ratios are robust and remain comfortably ahead of the group's target of 6%.

·      The proposed demerger and separate listing of Investec Asset Management (still subject to regulatory and shareholder approvals) is progressing well.

 

Fani Titi and Hendrik du Toit, Joint Chief Executive Officers of Investec said:

"We are implementing our strategy to simplify, focus and grow with discipline.  We are committed to the demerger and listing of the Asset Management business and the positioning of the Bank and Wealth business for long-term growth. In spite of a challenging operating environment, these results speak to strong support from our clients."

Enquiries

 

Investec Investor Relations

Results: Carly Newton: +44 (0) 20 7597 4493 / +44 (0) 77 3046 4908 (mobile)

General enquiries: +27 (0) 11 286 7070 or +44 (0) 20 7597 5546

 

Brunswick (SA PR advisers)

Marina Bidoli

Tel: +27 (0) 11 502 7405 / +27 (0) 83 253 0478 (mobile)

 

Lansons (UK PR advisers)

Tom Baldock

Tel: +44 (0) 20 7566 9716 / +44 (0) 78 6010 1715 (mobile)

 

Presentation/conference call details

 

A presentation on the results will commence at 9:00 UK time/10:00 SA time on 16 May 2019. Viewing and telephone conference options as below:

·      Live on South African TV (Business Day TV channel 412 DSTV)

·      A live and delayed video webcast at www.investec.com

·      Toll free numbers for the telephone conference facilities

‒    SA participants: 011 535 3500

‒    UK participants: 0808 143 3720

‒    rest of Europe and other participants: +27 11 535 3500

‒    Australian participants: 0 280 152 168

‒    USA participants: 1 855 242 3083 

 

About Investec

Investec is an international specialist bank and asset manager that provides a diverse range of financial products and services to a select client base in three principal markets - the UK and Europe, South Africa and Asia/Australia as well as certain other countries. The group was established in 1974 and currently has approximately 10 500 employees.

 

Investec focuses on delivering distinctive profitable solutions for its clients in three core areas of activity namely, Asset Management, Wealth & Investment and Specialist Banking.

 

·      IAM: A leading global asset manager with GBP111 billion in assets under management (as at 31 March 2019), well diversified by asset class and region.

 

·      Wealth & Investment Business: One of the leading UK and South African private client investment managers with over GBP55 billion in assets under management as at 31 March 2019.

 

·      Specialist Banking Business: Market-leading specialist corporate and institutional banking, investment and private banking activities in South Africa and the UK with GBP25 billion in core loans and advances and GBP31 billion in customer deposits as at 31 March 2019.

 

 

In July 2002 the Investec group implemented a dual listed company structure with listings on the London and Johannesburg Stock Exchanges. On 14 September 2018, the board of directors of the Investec group announced the proposed demerger and separate listing of the Investec Asset Management business subject to regulatory and shareholder approvals. The combined group's current market capitalisation is approximately GBP4.9 billion.

 

Investec plc and Investec Limited (combined results)

Unaudited combined consolidated financial results for the year ended 31 March 2019

 

Business unit review

Asset Management

Assets under management have increased by 7.3% to GBP111.4 billion as at 31 March 2019. Substantial net inflows of GBP6.1 billion supported higher average assets under management, together with favourable market and currency movements. Asset Management adjusted operating profit increased by 0.7% to GBP179.4 million (2018: GBP178.0 million). Earnings were impacted by lower performance fees in South Africa and higher costs in the UK, including ongoing investment in the business, Markets in Financial Instruments Directive II (MiFID II) and new premises costs.

 

Bank and Wealth

Adjusted operating profit from the combined Bank and Wealth business increased by 13.0% to GBP485.2 million (2018: GBP429.5 million).

 

Specialist Banking - adjusted operating profit increased by 18.0% to GBP448.9 million (2018: GBP380.5 million).

The South African business reported an increase in adjusted operating profit in Rands of 2.3%. Earnings were supported by growth in private client interest and fee income and an increase in associate earnings from a realisation in the IEP Group. This was partially offset by subdued corporate activity levels and a weaker performance from the equity and investment property portfolios; impacted by a weak domestic economy. Overall net core loans grew 5.6% to R271.2 billion at 31 March 2019. Costs increased ahead of revenue, impacted by the prior-year rental provision release. The credit loss ratio amounted to 0.28%, remaining flat at the lower end of its long term average, despite the business reporting an increase in impairments.

 

The UK and Other businesses reported a significant increase in adjusted operating profit. A strong increase in net interest income was supported by loan book growth of 8.5% (to GBP10.5 billion) driven by both corporate client lending and Private Bank mortgage origination. This was largely offset by a decrease in non-interest revenue with a weaker performance from the investment portfolio and subdued levels of client trading. Impairments decreased with no repeat of substantial legacy portfolio losses. The credit loss ratio amounted to 0.38% (2018: 1.14% under the IAS 39 incurred impairment loss model). Costs increased 2.0%, broadly in line with inflation, as the investment phase in the Private Bank is now largely complete. Taken together, the bank's cost to income ratio was 77.4% (2018: 76.7%).

 

Wealth & Investment - adjusted operating profit decreased by 16.2% to GBP82.6 million (2018: GBP98.6 million).

The core global Wealth & Investment business performed in line with the prior year. However, overall reported earnings were impacted by a non-recurring investment gain realised in the prior year and the current year write-off of capitalised software in the Click & Invest business as detailed below. The underlying business generated annuity revenue growth, but lower transaction based fees. Positive discretionary net inflows were partly offset by non-discretionary outflows resulting in net inflows of GBP0.4 billion. Assets under management decreased by 1.7% to GBP55.1 billion as at 31 March 2019, primarily impacted by currency and market movements.

 

We have reviewed the Click & Invest online investment platform and decided to discontinue the service in line with the group's commitment to manage costs and allocate capital effectively. The underlying operating loss of Click & Invest was circa GBP12.8 million (2018: GBP13.5 million). In addition a circa GBP6 million write-off of capitalised software was taken in the current year. The group remains committed to developing its digital initiatives and will look to incorporate the technology into its offering.

 

Further information on key developments within each of the business units is provided in the group results analyst booklet published on the group's website: http://www.investec.com

 

Group costs

These largely relate to a portion of executive and support functions costs associated with group level activities, group brand, marketing, and corporate social responsibility initiatives. These costs are not incurred by the operating divisions and are necessary to support the operational functioning of the group. These costs decreased to GBP46.3 million (2018: GBP49.6 million). Management is committed to bringing these costs down further over time.

 

Financial statement analysis

 

Total operating income

Total operating income before expected credit loss impairment charges increased by 1.8% to GBP2,486.3 million (2018: GBP2,443.5 million).  

 

Net interest income increased by 7.2% to GBP815.4 million (2018: GBP760.4 million) driven by lending activity and endowment impact from rate rises in the UK.

 

Net fee and commission income increased by 0.9% to GBP1,373.6 million (2018: GBP1,361.2 million). Strong annuity fees from the asset and wealth management businesses, as well as a good performance from the UK investment banking business was offset by lower performance, brokerage and deal fees in the South African businesses.  

 

Investment income decreased to GBP50.0 million (2018: GBP130.0 million) reflecting a weak performance from the group's listed and unlisted investment portfolio, as well as from the investment property portfolio in South Africa.

 

Share of post taxation profit of associates of GBP68.3 million (2018: GBP46.8 million) reflects earnings in relation to the group's investment in the IEP Group. The increase is largely driven by a realisation within the IEP Group.

 

Trading income arising from customer flow decreased by 12.7% to GBP120.7 million (2018: GBP138.2 million) reflecting subdued client flow trading levels given the uncertainty in both geographies. 

 

Trading income from balance sheet management and other trading activities increased to GBP42.0 million (2018: GBP4.3 million loss). The increase is largely reflective of translation gains on foreign currency equity investments in South Africa (partially offsetting the related weaker investment income performance) as well as the unwind of the UK subordinated debt fair value adjustment (recognised on the adoption of IFRS 9) as the instrument pulls to par over its remaining term.

 

Expected credit loss (ECL) impairment charges 

The total ECL impairment charges amounted to GBP66.5 million, a substantial reduction from GBP148.6 million (under the IAS 39 incurred loss model) in the prior year, primarily reflecting a reduction in legacy impairments. The group's credit loss ratio is within its long term average range at 0.31% (2018: 0.61%). Since 1 April 2018 gross core loan Stage 3 exposures have reduced by 29% to GBP521 million driven by a reduction of legacy exposures. Net Stage 3 exposures as a percentage of net core loans subject to ECL was 1.3% (1 April 2018: 2.0%).

 

Total operating costs

Operating costs increased 3.8% to GBP1,695.0 million (2018: GBP1,632.7 million) primarily driven by higher premises costs given the prior-year rental provision release in South Africa and headcount growth to support business activity, regulatory requirements and information technology development. The cost to income ratio (net of non-controlling interests) amounted to 69.9% (2018: 68.3%).

 

Taxation

The effective tax rate amounted to 12.0% (2018: 9.6%) which remains below the group's historical effective tax rate impacted by the utilisation of tax losses and the release of provisions no longer required.   

 

Non-operational costs

Non-operational costs amounted to GBP19.5 million (2018: GBP6.0 million) and relate primarily to the restructure of the Irish branch as a consequence of Brexit and costs incurred as part of the proposed demerger and separate listing of the Investec Asset Management business.

                                                                                                                                                                                                                                                                                                                                                                                           

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests mainly comprises:

·      GBP25.7 million (2018: GBP23.8 million) profit attributable to non-controlling interests in the Asset Management business.

·      GBP58.0 million (2018: GBP52.6 million) profit attributable to non-controlling interests in the Investec Property Fund.

 

 

 

 

Balance sheet analysis

Since 31 March 2018:

·      Shareholders' equity decreased by 2.8% to GBP4.3 billion primarily as a result of the adoption of IFRS 9 on 1 April 2018 as well as from the depreciation of the closing Rand: Pounds Sterling exchange rate.

·      Net asset value per share decreased 4.1% to 434.1 pence and net tangible asset value per share (which excludes goodwill and intangible assets) decreased 3.9% to 386.0 pence, primarily as a result of the adoption of IFRS 9 as well as from the depreciation of the closing Rand: Pound Sterling exchange rate.

·      The return on adjusted average shareholders' equity increased from 12.1% to 12.9%.

 

Liquidity and funding

As at 31 March 2019 the group held GBP13.3 billion in cash and near cash balances (GBP7.0 billion in Investec plc and R118.4 billion in Investec Limited) which amounted to 42.4% of customer deposits. Cash balances increased in the UK largely driven by prefunding ahead of the restructure of the Irish branch. As a result of Brexit, deposit raising in our Irish business will no longer be undertaken and existing deposits are being unwound. The group continues to focus on maintaining an optimal overall liquidity and funding profile. Loans and advances to customers as a percentage of customer deposits amounted to 78.4% (31 March 2018: 79.6%). The group comfortably exceeds regulatory liquidity requirements for the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Investec Bank Limited (solo basis) ended the period to 31 March 2019 with the three-month average of its LCR at 135.6% and an NSFR of 115.6%. Further detail with respect to the bank's LCR and NSFR in South Africa is provided on the website. For Investec plc and Investec Bank plc (solo basis) the LCR is calculated using our own interpretations of the EU Delegated Act. The LCR reported to the PRA at 31 March 2019 was 313% for Investec plc and 291% for Investec Bank plc (solo basis). Ahead of the implementation of the final NSFR rules, the group has applied its own interpretations of regulatory guidance and definitions from the BCBS final guidelines to calculate the NSFR which was 128% for Investec plc and 126% for Investec Bank plc (solo basis). The reported NSFR and LCR may change over time with regulatory developments and guidance.

 

Capital adequacy and leverage ratios

The group maintained a sound capital position with a CET1 ratio of 10.8% for Investec plc and 10.5% for Investec Limited. Investec Limited has received regulatory permission to adopt the FIRB approach, effective 1 April 2019, resulting in a pro-forma CET1 ratio of 11.6% had the FIRB approach been applied as of 31 March 2019. Leverage ratios are robust and remain comfortably ahead of the group's target of 6%.

 

 

31 March 2019

1 April 2018

31 March 2018

Investec plc1

 

 

 

Capital adequacy ratio

15.7%

15.0%

15.4%

Tier 1 ratio

12.6%

12.4%

12.9%

Common equity tier 1 ratio

10.8%

10.5%

11.0%

Common equity tier 1 ratio ('fully loaded'3)

10.4%

10.3%

11.0%

Leverage ratio (current)

7.9%

8.3%

8.5%

Leverage ratio ('fully loaded'3)

7.5%

8.0%

8.4%

 

 

 

 

Investec Limited2

 

 

 

Capital adequacy ratio

14.9%

14.5%

14.6%

Tier 1 ratio

11.2%

10.8%

11.0%

Common equity tier 1 ratio

10.5%

10.0%

10.2%

Common equity tier 1 ratio ('fully loaded'3)

10.5%

9.8%

10.2%

Leverage ratio (current)

7.6%

7.4%

7.5%

Leverage ratio ('fully loaded'3)

7.3%

6.9%

7.1%

 

1The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc this does not include the deduction of foreseeable charges and dividends when calculating CET1 capital as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling GBP 63 million for Investec plc would lower the CET1 ratio by 41bps (31 March 2018: 45bps).

2Investec Limited's capital information includes unappropriated profits. If unappropriated profits are excluded from the capital information, Investec Limited's CET1 ratio would be 27bps (31 March 2018: 25bps) lower.

3The CET 1 fully loaded ratio and the fully loaded leverage ratio assume full adoption of IFRS 9 and full adoption of all CRD IV rules or South African Prudential Authority regulations, as applicable in the relevant jurisdictions. As a result of the adoption of IFRS 9 Investec plc elected to designate its subordinated fixed rate medium-term notes due in 2022 at fair value. By the time of full adoption of IFRS 9 in 2023, these subordinated liabilities will have reached final maturity and will be redeemed at par value. The remaining interest rate portion of the fair value adjustment at 31 March 2019 of GBP18 million (post-taxation), has therefore been excluded from the fully loaded ratios as it will be released into profit and loss over the remaining life of the instrument.

 

Additional information - proposed demerger and listing of Investec Asset Management business

On 14 September 2018, the board of directors of Investec plc and Investec Limited announced that the Investec Asset Management business would become a separately listed entity. The demerger and the listing of Investec Asset Management is subject to regulatory and shareholder approvals, and is expected to be completed during the second half of 2019.

 

Outlook

The past year has seen a smooth leadership transition combined with a strategic review of the group. We are on track with the proposed demerger and separate listing of Investec Asset Management which should enhance the long-term prospects of both businesses. We are confident that we have positioned the businesses to ensure they meet their growth objectives and deliver long-term shareholder returns.

 

On behalf of the boards of Investec plc and Investec Limited

Perry Crosthwaite

Fani Titi

Hendrik du Toit

Chairman

Joint Chief Executive Officer

Joint Chief Executive Officer

 

15 May 2019

 

Notes to the commentary section above

·      Presentation of financial information

Investec operates under a Dual Listed Companies (DLC) structure with primary listings of Investec plc on the London Stock Exchange and Investec Limited on the JSE Limited.

In terms of the contracts constituting the DLC structure, Investec plc and Investec Limited effectively form a single economic enterprise in which the economic and voting rights of ordinary shareholders of the companies are maintained in equilibrium relative to each other. The directors of the two companies consider that for financial reporting purposes, the fairest presentation is achieved by combining the results and financial position of both companies.

Accordingly, the year-end results for Investec plc and Investec Limited present the results and financial position of the combined DLC group under International Financial Reporting Standards (IFRS), denominated in Pounds Sterling. In the commentary above, all references to Investec or the group relate to the combined DLC group comprising Investec plc and Investec Limited.

Unless the context indicates otherwise, all comparatives included in the commentary above relate to the year ended 31 March 2018.

 

Amounts represented on a neutral currency basis for income statement items assume that the relevant average exchange rates for the year to 31 March 2019 remain the same as those in the prior year. Amounts represented on a neutral currency basis for balance sheet items assume that the relevant closing exchange rates at 31 March 2019 remain the same as those at 31 March 2018.

 

 

·      Foreign currency impact

The group's reporting currency is Pounds Sterling. Certain of the group's operations are conducted by entities outside the UK. The results of operations and the financial position of the individual companies are reported in the local currencies in which they are domiciled, including Rands, Australian Dollars, Euros and US Dollars. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in the group's combined consolidated financial statements. In the case of the income statement, the weighted average rate for the relevant period is applied and, in the case of the balance sheet, the relevant closing rate is used. 

The following table sets out the movements in certain relevant exchange rates against Pounds Sterling over the period:

 

Year to

31 March 2019

Year to

31 March 2018

Currency per

GBP1.00

Period end

Average

Period end

Average

South African Rand

18.80

18.04

16.62

17.21

Australian Dollar

1.83

1.80

1.83

1.72

Euro

1.16

1.13

1.14

1.14

US Dollar

1.30

1.31

1.40

1.33

 

Exchange rates between local currencies and Pounds Sterling have fluctuated over the year. The most significant impact arises from the volatility of the Rand. The average exchange rate over the period has depreciated by 4.8% and the closing rate has depreciated by 13.1% since 31 March 2018.

 

·      Accounting policies and disclosures

These unaudited condensed combined consolidated financial results have been prepared in terms of the recognition and measurement criteria of International Financial Reporting Standards, and the presentation and disclosure requirements of IAS 34, 'Interim Financial Reporting'.

The accounting policies applied in the preparation of the results for the year ended 31 March 2019 are consistent with those adopted in the financial statements for the year ended 31 March 2018 except as noted below.

On 1 April 2018 the group adopted IFRS 9 'Financial Instruments' which replaced IAS 39 'Financial Instruments: Recognition and Measurement' and sets out the new requirements for the recognition and measurement of financial instruments. These requirements focus primarily on the classification and measurement of financial instruments and measurement of impairment losses based on an ECL model as opposed to an incurred loss methodology under IAS 39. Disclosure related to the initial application and the impact of the transition from IAS 39 to IFRS 9 were included in the group's transition disclosures published on 15 June 2018 which can be accessed via the Investec website at www.investec.com.

Additionally, on 1 April 2018 the group adopted IFRS 15 'Revenue from contracts with customers' which replaced IAS 18 'Revenue'. IFRS 15 provides a principles-based approach for revenue recognition and introduces the concept of recognising revenue for obligations as they are satisfied. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The group's measurement and recognition principles were aligned to the new standard and hence there has been no material impact on measurement and recognition principles or on disclosure requirements from the adoption of IFRS 15.

The financial results have been prepared under the supervision of Nishlan Samujh, the Group Finance Director. The financial statements for the year ended 31 March 2019 will be posted to stakeholders on 28 June 2019. These accounts will be available on the group's website on the same date.

 

·      Proviso

§ Please note that matters discussed in this announcement may contain forward looking statements which are subject to various risks and uncertainties and other factors, including, but not limited to:

-      changes in the political and/or economic environment that would materially affect the Investec group

-      changes in legislation or regulation impacting on the Investec group's operations or its accounting policies

-      changes in business conditions that will have a significant impact on the Investec group's operations

-      changes in exchange rates and/or tax rates from the prevailing rates outlined in this announcement

-      changes in the structure of the markets, client demand or the competitive environment.

§ A number of these factors are beyond the group's control.

§ These factors may cause the group's actual future results, performance or achievements in the markets in which it operates to differ from those expressed or implied.

§ Any forward looking statements made are based on the knowledge of the group at 15 May 2019.

§ The information in the announcement for the year ended 31 March 2019, which was approved by the board of directors on 15 May 2019, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The 31 March 2018 financial statements were filed with the registrar and were unqualified with the audit report containing no statements in respect of sections 498(2) or 498(3) of the UK Companies Act.

§ This announcement is available on the group's website: www.investec.com

 

·      Definitions

§ Adjusted operating profit refers to net profit before tax, goodwill, acquired intangibles and non-operating items but after adjusting for earnings attributable to other non-controlling interests and before non-controlling interests relating to Asset Management. Trends within the divisional sections relate to adjusted operating profit before group costs. Adjusted operating profit is considered an important measure by Investec of the profit realised by the group in the ordinary course of operations. In addition, it forms the basis of the dividend pay-out policy. Non-IFRS measures such as adjusted operating profit are considered as pro forma financial information as per the JSE Listing Requirements. The pro forma financial information is the responsibility of the group's Board of Directors.

§ Adjusted earnings attributable to shareholders is defined as earnings attributable to shareholders before goodwill, acquired intangibles and non-operating items but after non-controlling interests and the deduction of preference dividends.

§ Adjusted basic earnings per share is calculated as adjusted earnings attributable to shareholders divided by the weighted average number of ordinary shares in issue during the year

§ Dividend cover is calculated as adjusted earnings per share divided by the dividend per share

§ Annuity income is defined as net interest income plus net annuity fees and commissions expressed as a percentage of total operating income.

§ The credit loss ratio is calculated as expected credit loss (ECL) impairment charges on gross core loans and advances as a percentage of average gross core loans and advances subject to ECL.

§ The group has changed its cost to income ratio definition to exclude operating profits or losses attributable to other non-controlling interests. As such, the cost to income ratio is calculated as: operating costs divided by operating income (net of depreciation on operating leased assets and net of operating profits or losses attributable to other non-controlling interests).

§ Return on adjusted average shareholders' equity is calculated as adjusted earnings attributable to shareholders divided by average adjusted shareholders' equity; where average adjusted shareholders' equity is ordinary shareholders' equity less goodwill and intangible assets (excluding software).

§ Core loans and advances is defined as net loans and advances to customers plus net own originated securitised assets.

 

Financial assistance

Shareholders are referred to Special Resolution number 3, which was approved at the annual general meeting held on 8 August 2018, relating to the provision of direct or indirect financial assistance in terms of Section 45 of the South African Companies Act, No 71 of 2008 to related or inter-related companies. Shareholders are hereby notified that in terms of S45(5)(a) of the South African Companies Act, the boards of directors of Investec Limited and Investec Bank Limited provided such financial assistance during the period 1 October 2018 to 31 March 2019 to various group subsidiaries.

 

Johannesburg and London

 

Sponsor: Investec Bank Limited

 

 

 

 

 

 

Statutory financial information

Salient financial features

 

Results in Pounds Sterling

     

 

 

Actual as

Actual as

 

Neutral     

 

 

reported

reported

Actual as

currency^

Neutral

 

Year to

Year to

reported

Year to

currency

 

31 March

31 March

%

31 March

%

 

2019

2018

change

2019

change

              

 

 

 

 

 

Operating profit before taxation* (million)

665

608

9.4%

684

12.6%

Earnings attributable to shareholders (million)

531

506

5.1%

549

8.6%

Adjusted earnings attributable to shareholders** (million)

519

491

5.8%

536

9.2%

Adjusted earnings per share**

55.1p

53.2p

3.6%

56.9p

7.0%

Basic earnings per share

52.0p

51.2p

1.6%

53.7p

4.9%

Dividends per share

24.5p

24.0p

2.1%

n/a

n/a

 

*

Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.

**

Before goodwill, acquired intangibles, non-operating items and after non-controlling interests.

^

For income statement items we have used the average Rand: Pounds Sterling exchange rate that was applied in the prior year, i.e. 17.21.

 

 

 

Results in Pounds Sterling

 

 

 

Actual as

Actual as

 

Neutral   

 

 

reported

reported

Actual as

currency^^

Neutral

 

Year to

At

reported

At

currency

 

31 March

31 March

%

31 March

%

 

2019

2018

change

2019

change

      

 

 

 

 

 

Net asset value per share

434.1p

452.5p

(4.1%)

456.5p

1.0%

Net tangible asset value per share

386.0p

401.5p

(3.9%)

408.1p

1.6%

Total equity (million)

5 251

5 428

(3.3%)

5 554

2.3%

Total assets (million)

57 724

57 617

0.2%

62 331

8.2%

Core loans and advances (million)

24 941

25 132

(0.8%)

26 833

6.8%

Cash and near cash balances (million)

13 288

12 825

3.6%

14 113

10.0%

Customer deposits (million)

31 307

30 987

1.0%

33 688

8.7%

Third party assets under management (million)

167 172

160 576

4.1%

173 950

8.3%

Return on average adjusted shareholders' equity

12.9%

12.1%   

 

 

 

Return on average risk-weighted assets

1.52%

1.45%

 

 

 

Stage 3/defaults net of ECL as a percentage of net core loans and

 

 

 

 

 

advances to customers subject to ECL

1.3%

1.17%

 

 

 

Loans and advances to customers as a percentage of customer deposits

78.4%

79.6%

 

 

 

Credit loss ratio (income statement impairment charge as a % of average

 

 

 

 

 

gross core loans and advances)

0.31%

0.61%

 

 

 

 

^^

For balance sheet items we have assumed that the Rand: Pounds Sterling closing exchange rate has remained neutral since 31 March 2018.

 

 

 

 

Condensed combined consolidated income statement

 

 

 

Year to

Year to

 

31 March

31 March

GBP'000

2019

2018

                 

 

 

Interest income

2 641 920

2 491 009

Interest expense

(1 826 493)

(1 730 611)

Net interest income

815 427

760 398

Fee and commission income

1 590 004

1 543 447

Fee and commission expense

(216 452)

(182 240)

Investment income

49 985

130 048

Share of post taxation profit of associates

68 317

46 823

Trading income/(loss) arising from                 

 

 

- customer flow

120 662

138 226

- balance sheet management and other trading activities

41 966

(4 307)

Other operating income

16 431

11 115

Total operating income before expected credit losses/impairment losses

2 486 340

2 443 510

Expected credit loss impairment charges*

(66 452)

-

Impairment losses on loans and advances*

-

(148 556)

Operating income

2 419 888

2 294 954

Operating costs

(1 695 012)

(1 632 740)

Depreciation on operating leased assets

(2 157)

(2 421)

Operating profit before goodwill and acquired intangibles

722 719

659 793

Impairment of goodwill

(155)

-

Amortisation of acquired intangibles

(15 816)

(16 255)

Operating profit after goodwill and acquired intangibles

706 748

643 538

Financial impact of group restructures and acquisition of subsidiaries

(19 543)

(6 039)

Profit before taxation

687 205

637 499

Taxation on operating profit before goodwill and acquired intangibles

(78 210)

(59 099)

Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries/restructurings

5 979

3 253

Profit after taxation

614 974

581 653

Profit attributable to other non-controlling interests

(58 192)

(52 288)

Profit attributable to Asset Management non-controlling interests

(25 658)

(23 817)

Earnings attributable to shareholders

531 124

505 548

Impairment of goodwill

155

-

Amortisation of acquired intangibles

15 816

16 255

Financial impact of group restructures and acquisition of subsidiaries

19 543

6 039

Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries/restructurings

(5 979)

(3 253)

Preference dividends paid

(41 560)

(32 980)

Accrual adjustment on earnings attributable to other equity holders

243

(547)

Adjusted earnings

519 342

491 062

Earnings per share (pence)                 

 

 

- Basic

52.0

51.2

- Diluted

50.9

49.8

Adjusted earnings per share (pence)                 

 

 

- Basic

55.1

53.2

- Diluted

54.0

51.7

Dividends per share (pence)                 

 

 

- Interim

11.0

10.5

- Final

13.5

13.5

Number of weighted average shares (million)

942.2

923.5

 

*

On adoption of IFRS 9, there is a move from an incurred loss model to an expected credit loss methodology.

 

 

Combined consolidated statement of total comprehensive income

 

 

            

 

 

 

Year to

Year to

 

31 March

31 March

 GBP'000

2019

2018

            

 

 

Profit after taxation

614 974

581 653

Other comprehensive income:            

 

 

Items that may be reclassified to the income statement            

 

 

Fair value movements on cash flow hedges taken directly to other comprehensive income*

1 797

    (5 746)

Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income^*

(12 918)

-

Gains on realisation of debt instruments at FVOCI recycled to the income statement^*

(7 116)

-

Gains on realisation of available-for-sale assets recycled to the income statement^*

-

    (6 676)

Fair value movements on available-for-sale assets taken directly to other comprehensive income^*

-

20 051

Foreign currency adjustments on translating foreign operations

(302 598)

   (25 300)

Items that will never be reclassified to the income statement            

 

 

Effect of rate change on deferred taxation relating to adjustment for IFRS 9*

(1 572)

-

Remeasurement of net defined pension asset

(1 924)

3 938

Gains and losses attributable to own credit risk*

8 887

-

Total comprehensive income

299 530

567 920

Total comprehensive income attributable to ordinary shareholders

252 677

451 913

Total comprehensive income attributable to non-controlling interests

5 293

83 027

Total comprehensive income attributable to perpetual preferred securities

41 560

32 980

Total comprehensive income

299 530

567 920

 

*

Net of taxation of GBP17.5 million (year to 31 March 2018: GBP11.7 million), except for the impact of rate changes on deferred tax as shown separately above.

^

On adoption of IFRS 9 on 1 April 2018, the fair value reserve was introduced, replacing the available-for-sale reserve.

 

Condensed combined consolidated cash flow statement        

 

 

 

Year to

Year to

 

31 March

31 March

GBP'000

2019

2018

        

 

 

Cash inflows from operations

697 877

732 242

Increase in operating assets

 (3 283 153)

(3 352 869)

Increase in operating liabilities

3 990 382

3 075 779

Net cash inflow from operating activities

1 405 106

455 152

Net cash outflow from investing activities

(65 425)

   (37 799)

Net cash inflow from financing activities

(218 027)

45 383

Effects of exchange rate changes on cash and cash equivalents

(136 927)

   (54 085)

Net increase in cash and cash equivalents

984 727

408 651

Cash and cash equivalents at the beginning of the year

6 130 379

5 721 728

Cash and cash equivalents at the end of the year

7 115 106

6 130 379

 

Cash and cash equivalents is defined as including cash and balances at central banks, on demand loans and advances to banks and non-sovereign and non-bank cash placements (all of which have a maturity profile of less than three months).

 

Combined consolidated balance sheet       

 

 

 

 

At

At

At

 

31 March

1 April

31 March

GBP'000

2019

2018*

2018

                      

 

 

 

Assets                      

 

 

 

Cash and balances at central banks

4 992 820

   4 040 010

 4 040 512

Loans and advances to banks

2 322 821

   2 164 598

 2 165 533

Non-sovereign and non-bank cash placements

648 547

599 982

601 243

Reverse repurchase agreements and cash collateral on securities borrowed

1 768 748

   2 207 137

 2 207 477

Sovereign debt securities

4 538 223

   4 907 624

 4 910 027

Bank debt securities

717 313

591 428

587 164

Other debt securities

1 220 651

898 122

903 603

Derivative financial instruments

1 034 166

   1 345 744

 1 352 408

Securities arising from trading activities

1 859 254

1 434 391

1 434 391

Investment portfolio

1 028 976

956 560

885 499

Loans and advances to customers

24 534 753

  24 410 334

24 673 009

Own originated loans and advances to customers securitised

407 869

458 814

459 088

Other loans and advances

195 693

345 742

347 809

Other securitised assets

133 804

148 387

148 387

Interests in associated undertakings

387 750

467 852

467 852

Deferred taxation assets

248 893

242 239

157 321

Other assets

1 735 956

   1 875 357

 1 876 116

Property and equipment

261 650

233 340

233 340

Investment properties

994 645

   1 184 097

 1 184 097

Goodwill

366 870

368 803

368 803

Intangible assets

107 237

125 389

125 389

 

49 506 639

  49 005 950

49 129 068

Other financial instruments at fair value through profit or loss in respect of liabilities to customers

8 217 573

   8 487 776

 8 487 776

 

57 724 212

  57 493 726

57 616 844

Liabilities                      

 

 

 

Deposits by banks

3 016 306

   2 931 267

 2 931 267

Derivative financial instruments

1 277 233

   1 471 563

 1 471 563

Other trading liabilities

672 405

960 166

960 166

Repurchase agreements and cash collateral on securities lent

1 105 063

655 840

655 840

Customer accounts (deposits)

31 307 107

  30 985 251

30 987 173

Debt securities in issue

3 073 320

   2 717 187

 2 717 187

Liabilities arising on securitisation of own originated loans and advances

91 522

136 812

136 812

Liabilities arising on securitisation of other assets

113 711

127 853

127 853

Current taxation liabilities

162 448

185 486

185 486

Deferred taxation liabilities

23 590

32 158

32 158

Other liabilities

1 765 649

   2 019 906

 2 012 268

 

42 608 354

  42 223 489

42 217 773

Liabilities to customers under investment contracts

8 214 634

   8 484 296

 8 484 296

Insurance liabilities, including unit-linked liabilities

2 939

3 480

3 480

 

50 825 927

  50 711 265

50 705 549

Subordinated liabilities

1 647 271

   1 619 878

 1 482 987

 

52 473 198

  52 331 143

52 188 536

Equity                      

 

 

 

Ordinary share capital

245

240

240

Perpetual preference share capital

31

31

31

Share premium

2 471 506

   2 416 736

 2 416 736

Treasury shares

(189 134)

   (160 132)

 (160 132)

Other reserves

(577 491)

   (406 718)

 (345 606)

Retained income

2 611 256

   2 326 212

 2 530 825

Shareholders' equity excluding non-controlling interests

4 316 413

   4 176 369

4 442 094

Other Additional Tier 1 securities in issue

303 728

304 150

304 150

Non-controlling interests

630 873

682 064

682 064

- Perpetual preferred securities issued by subsidiaries

81 616

92 312

92 312

- Non-controlling interests in partially held subsidiaries

549 257

589 752

589 752

Total equity

5 251 014

   5 162 583

 5 428 308

Total liabilities and equity

57 724 212

  57 493 726

57 616 844

 

*

The 1 April 2018 balance sheet has been presented on an IFRS 9 basis and the comparative as at 31 March 2018 on an IAS 39 basis.

 

Condensed combined consolidated statement of changes in equity           

 

 

 

Year to

Year to

 

31 March

31 March

GBP'000

2019

2018

           

 

 

Balance at the beginning of the year

5 428 308

4 808 629

Adoption of IFRS 9

(265 725)

-

Total comprehensive income for the year

299 530

567 920

Share-based payments adjustments

72 714

69 218

Dividends paid to ordinary shareholders

(238 072)

 (227 908)

Dividends declared to perpetual preference shareholders and Other Additional Tier 1 security holders

(14 742)

(15 736)

Dividends paid to perpetual preference shareholders included in non-controlling interests and Other Additional Tier 1 security

 

 

holders

(26 818)

(17 244)

Dividends paid to non-controlling interests

(63 897)

(63 688)

Issue of ordinary shares

108 414

125 240

Issue of Other Additional Tier 1 security instruments

5 852

271 058

Issue of equity by subsidiaries

4 319

12 695

Net equity impact of non-controlling interest movements

50 643

20 057

Movement of treasury shares

(103 841)

 (121 933)

Net equity movements of interest in associated undertakings

(5 671)

-

Balance at the end of the year

5 251 014

5 428 308

 

Combined consolidated segmental analysis

Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests

       

For the year to 31 March 2019

UK and

Southern

Total

GBP'000

Other

Africa

group

                    

 

 

 

Wealth & Investment

56 363

26 250

82 613

Specialist Banking

138 566

310 329

448 895

Group costs

(31 518)

(14 825)

(46 343)

Specialist Bank and Wealth

163 411

321 754

485 165

Asset Management

107 835

71 527

179 362

Total group

271 246

393 281

664 527

Other non-controlling interest - equity

 

 

58 192

Operating profit

 

 

722 719

                    

 

 

 

For the year to 31 March 2018

UK and

Southern

Total

GBP'000

Other

Africa

group

                    

 

 

 

Wealth & Investment

69 269

29 296

98 565

Specialist Banking

59 958

320 535

380 493

Group costs

(33 789)

(15 809)

(49 598)

Specialist Bank and Wealth

95 438

334 022

429 460

Asset Management

103 918

74 127

178 045

Total group

199 356

408 149

607 505

Other non-controlling interest - equity

 

 

52 288

Operating profit

 

 

659 793

        

Fees and commission income           

 

 

 

For the year to 31 March                 

 

 

 

GBP'000

UK and Other

Southern Africa

Total Group

                 

 

 

 

2019                 

 

 

 

Asset management and wealth management

683 621

257 736

941 357

Fund management fees/fees for assets under management

807 507

226 705

 1 034 212

Private client transactional fees

47 771

36 612

84 383

Fee and commission expense

(171 657)

(5 581)

(177 238)

Specialist Banking

205 610

226 585

432 195

Corporate and institutional transactional and advisory services

206 798

191 786

398 584

Private client transactional fees

10 691

62 134

72 825

Fee and commission expense

(11 879)

(27 335)

  (39 214)

Net fee and commission income

889 231

484 321

1 373 552

  Annuity fees (net of fees payable)

675 619

422 176

1 097 795

  Deal fees

213 612

62 145

275 757

  

Included in Specialist Banking corporate and institutional and advisory services is net fee income of GBP92 million (2018: GBP105 million) for operating lease income which is out of the scope of IFRS 15 - Revenue from Contracts with Customers.

 

Analysis of financial assets and liabilities by category of financial instrument

 

 

 

 

     

 

 

 

 

 

 

 

Non-financial

 

 

 

Total

instruments         

 

 

Total

instruments

or scoped         

 

At 31 March 2019

instruments

at amortised

out of

 

GBP'000

at fair value

cost

IFRS 9

Total

                               

 

 

 

 

Assets                               

 

 

 

 

Cash and balances at central banks

1

4 992 819

-

4 992 820

Loans and advances to banks

-

2 322 821

-

2 322 821

Non-sovereign and non-bank cash placements

32 471

616 076

-

648 547

Reverse repurchase agreements and cash collateral on securities borrowed

549 914

1 218 834

-

1 768 748

Sovereign debt securities

4 256 811

281 412

-

4 538 223

Bank debt securities

350 134

367 179

-

717 313

Other debt securities

741 834

478 817

-

1 220 651

Derivative financial instruments

1 034 166

-

-

1 034 166

Securities arising from trading activities

1 859 254

-

-

1 859 254

Investment portfolio

1 028 976

-

-

1 026 976

Loans and advances to customers

2 025 679

22 509 074

-

24 534 753

Own originated loans and advances to customers securitised

-

407 869

-

407 869

Other loans and advances

-

195 693

-

195 693

Other securitised assets

118 169

15 635

-

133 804

Interests in associated undertakings

-

-

387 750

387 750

Deferred taxation assets

-

-

248 893

248 893

Other assets

131 853

1 041 116

562 987

1 735 956

Property and equipment

-

-

261 650

261 650

Investment properties

-

-

994 645

994 645

Goodwill

-

-

366 870

366 870

Intangible assets

-

-

107 237

107 237

 

12 129 262

34 447 345

2 930 032

49 506 639

Other financial instruments at fair value through profit or loss in respect of liabilities to customers

8 217 573

-

-

8 217 573

 

20 346 835

34 447 345

2 930 032

57 724 212

 

 

 

 

 

Liabilities                               

 

 

 

 

Deposits by banks

-

3 016 306

-

3 016 306

Derivative financial instruments

1 277 233

-

-

1 277 233

Other trading liabilities

672 405

-

-

672 405

Repurchase agreements and cash collateral on securities lent

433 790

671 273

-

1 105 063

Customer accounts (deposits)

2 372 841

28 934 266

-

31 307 107

Debt securities in issue

520 806

2 552 514

-

3 073 320

Liabilities arising on securitisation of own originated loans and advances

-

91 522

-

91 522

Liabilities arising on securitisation of other assets

113 711

-

-

113 711

Current taxation liabilities

-

-

162 448

162 448

Deferred taxation liabilities

-

-

23 590

23 590

Other liabilities

47 676

1 029 239

688 734

1 765 649

 

5 438 462

36 295 120

874 772

42 608 354

Liabilities to customers under investment contracts

8 214 634

-

-

8 214 634

Insurance liabilities, including unit-linked liabilities

2 939

-

-

2 939

 

13 656 035

36 295 120

874 772

 50 825 927

Subordinated liabilities

367 707

1 279 564

-

  1 647 271

 

14 023 742

37 574 684

874 772

 52 473 198

 

Financial instruments carried at fair value

 

The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation technique used. The different levels are identified as follows:

 

Level 1 - quoted (unadjusted) prices in active markets for identical assets or liabilities

 

Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

 

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs)

 

 

                               

 

Fair value category

          

 

 

 

 

 

Total

 

 

 

At 31 March 2019

instruments

 

 

 

GBP'000

at fair value

Level 1

Level 2

Level 3

                          

 

 

 

 

Assets                          

 

 

 

 

Cash and balances at central banks

1

1

-

-

Non-sovereign and non-bank cash placements

32 471

-

32 471

-

Reverse repurchase agreements and cash collateral on securities borrowed

549 914

-

549 914

-

Sovereign debt securities

4 256 811

4 256 811

-

-

Bank debt securities

350 134

148 918

201 216

-

Other debt securities

741 834

222 689

429 850

89 295

Derivative financial instruments

1 034 166

-

995 531

38 635

Securities arising from trading activities

1 859 254

1 827 306

24 830

7 118

Investment portfolio

1 028 976

173 587

25 418

829 971

Loans and advances to customers

2 025 679

-

816 099

1 209 580

Other securitised assets

118 169

-

-

118 169

Other assets

131 853

131 853

-

-

Other financial instruments at fair value through profit or loss in respect of liabilities to

customers

8 217 573

8 217 573

-

-

 

20 346 835

14 978 738

3 075 329

2 292 768

                          

 

 

 

 

Liabilities                          

 

 

 

 

Derivative financial instruments

1 277 233

5 857

   1 254 750

16 626

Other trading liabilities

672 405

556 125

     116 280

-

Repurchase agreements and cash collateral on securities lent

433 790

-

     433 790

-

Customer accounts (deposits)

2 372 841

-

   2 372 841

-

Debt securities in issue

520 806

-

     520 806

-

Liabilities arising on securitisation of other assets

113 711

-

-

113 711

Other liabilities

47 676

-

44 071

3 605

Liabilities to customers under investment contracts

8 214 634

-

   8 214 634

-

Insurance liabilities, including unit-linked liabilities

2 939

-

2 939

-

Subordinated liabilities

367 707

367 707

-

-

 

14 023 742

929 689

  12 960 111

133 942

Net financial assets at fair value

6 323 093

14 049 049

 (9 884 782)

2 158 826

        

Transfers between level 1 and level 2 

During the current year, there were no transfers between level 1 and level 2.

        

Level 2 financial assets and financial liabilities

The following table sets out the group's principal valuation techniques as at 31 March 2019 used in determining the fair value of its financial assets and financial liabilities that are classified within level 2 of the fair value hierarchy.

 

       

 

 

 

Valuation basis/techniques

Main assumptions

              

 

 

Assets              

 

 

Non-sovereign and non-bank cash placements

Discounted cash flow model

Yield curves

Reverse repurchase agreements and cash

Discounted cash flow model, Hermite interpolation,

Yield curves, discount rates,volatilities

collateral on securities borrowed

Black-Scholes          

 

Bank debt securities

Discounted cash flow model

Yield curves

Other debt securities

Discounted cash flow model

Yield curves, NCD curves and swap curves,

 

 

discount rates, external prices, broker quotes

Derivative financial instruments

Discounted cash flow model, Hermite interpolation,

Yield curves, risk free rate, volatilities, forex forward

 

industry standard derivative pricing models including

points and spot rates, interest rate swap curves and

 

Black-Scholes

credit curves, discount rates

Securities arising from trading activities

Standard industry derivative pricing model

Interest rate curves, implied bond spreads,

 

Discounted cash flow model

equity volatilities, yield curves

Investment portfolio

Discounted cash flow model, relative valuation model

Discount rate and fund unit price, net assets

 

Comparable quoted inputs          

 

Loans and advances to customers

Discounted cash flow model

Yield curves

              

 

 

Liabilities              

 

 

Derivative financial instruments

Discounted cash flow model, Hermite interpolation,

Yield curves, discount rates, risk free rate, volatilities,

 

industry standard derivative pricing models including

forex forward points and spot rates, interest rate

 

Black-Scholes

swap curves and credit curves

Other trading liabilities

Discounted cash flow model

Yield curves

Repurchase agreements and cash collateral on

 

 

securities lent

Discounted cash flow model, Hermite interpolation

Yield curves, discount rates

Customer accounts (deposits)

Discounted cash flow model

Yield curves, discount rates

Debt securities in issue

Discounted cash flow model

Yield curves

Other liabilities

Discounted cash flow model

Yield curves

              

The following is a reconciliation of the opening balances to the closing balances for fair value measurement in level 3 of the fair value hierarchy.

 

     

 

 

Loans and

Other

Other     

 

 

Investment

advances to

securitised

 

GBP'000

portfolio

customers

assets

Total

                        

 

 

 

 

Assets                        

 

 

 

 

Balance as at 31 March 2018

587 819

133 740

130 388

919 670

Adoption of IFRS 9

74 768

1 203 939

-

1 353 088

Balance as at 1 April 2018

662 587

1 337 679

130 388

2 272 758

Total gains or losses

(175)

69 261

(2 834)

83 117

 In the income statement

(175)

69 056

(2 834)

82 912

 In the statement of comprehensive income

-

205

-

205

Purchases

338 782*

1 268 572

-

1 614 263

Sales

(95 646)

(889 145)

-

(993 195)

Settlements

(60 095)

(624 061)

(9 385)

(722 997)

Transfers into level 3

12 211

3 499

-

15 710

Foreign exchange adjustments

(27 693)

43 775

-

23 108

Balance as at 31 March 2019

829 971

1 209 580

118 169

2 292 764

          

*

Includes investments acquired by the Investec Property Fund, a subsidiary of Investec Limited. 

 

 

Liabilities

 

 

 

arising on     

 

 

 

securitisation

Other

 

For the year to 31 March 2019

of other

balance     

 

GBP'000

assets

sheet liabilities

Total

                 

 

 

 

Liabilities                    

 

 

 

Balance as at 1 April 2018

127 853

15 641

143 494

Total gains or losses

(5 084)

       (12 653)

(17 737)

 In the income statement

(5 084)

       (12 653)

(17 737)

 In the statement of comprehensive income

-

-

-

Purchases

-

27 561

27 561

Sales

-

       (11 800)

(11 800)

Settlements

(9 058)

-

(9 058)

Transfers into level 3

-

2 854

2 854

Foreign exchange adjustments

-

        (1 372)

(1 372)

Balance as at 31 March 2019

113 711

20 231

133 942

     

During the year, GBP 15.7 million of level 2 instruments have been transferred into level 3 as a result of inputs to valuation models becoming unobservable in the market.

The group transfers between levels within the fair value hierarchy when the significance of the unobservable inputs change or if the valuation methods changes.

The following table quantifies the gains or (losses) included in the income statement and other comprehensive income recognised on level 3 financial instruments:

 

For the year to 31 March 2019

 

 

 

GBP'000

Total

Realised

Unrealised

 

 

 

 

Total gains or (losses) included in the income statement for the year

 

 

 

Net interest income

100 041

86 118

13 923

Investment income

(11 000)

9 675

(20 675)

Trading loss arising from customer flow

(3 272)

1 348

(4 620)

Trading income arising from balance sheet management and other trading activities

14 880

-

14 880

 

100 649

97 141

3 508

Total gains or losses recognised in other comprehensive income for the year

 

 

 

Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income

205

-

205

 

205

-

205

 

 

Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type

The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable market data. The following table shows the sensitivity of these fair values to reasonably possible alternative assumptions, determined at a transactional level:

 

 

31 March 2019

Balance sheet value GBP'000

 

Significant unobservable

input

Range of unobservable input used

Favourable changes

GBP'000

Unfavourable

Changes

GBP'000

Assets

 

 

Potential impact on income statement

Credit spreads

EBITDA

Other^

 

 

 

Other debt securities

89 295

 

8 047

(7 849)

 

 

5.8%

117

(114)

 

 

(5%)/5%

306

(306)

 

 

^

7 624

(7 429)

Derivative financial instruments

38 635

Potential impact on income statement

Volatilities

Credit spreads

 Cash flow adjustments

Underlying asset value

Other^

 

22 720

(5 882)

 

 

4.0% - 9.0%

129

(129)

 

 

7.1%

6

(9)

 

 

CPR 6.2% - 10.2%

134

(124)

 

 

^^

7 731

(3 731)

 

 

^

14 720

(1 889)

Securities arising from trading activities

7 118

Potential impact on income statement

 

 

 

 

 

Cash flow adjustments

CPR 9.2%

1 119

(1 480)

Investment portfolio

829 971

Potential impact on income statement

Price earnings multiple

Underlying asset value^

Other^

EBITDA

Precious and industrial metals prices

Cash flows

Property values

Various

 

158 957

(134 600)

 

 

3.2 x - 9.0 x

8 852

(8 563)

 

 

^^

17 229

(11 739)

 

 

^

83 729

(60 072)

 

 

*

21 470

(21 043)

 

 

(10%)/6%

2 186

(2 186)

 

 

(50%)/50%

10 568

(9 552)

 

 

(5%)/5%

10 151

(10 151)

 

 

**

4 772

(11 294)

Loans and advances to customers

1 209 580

Potential impact on income statement

Credit spreads

Price earnings multiple

Underlying asset value^^

Cash flows

EBITDA

Property values

Other^

Potential impact on other comprehensive income

Credit spreads

 

75 262

(91 448)

 

 

0.1% - 6.2%

6 327

(9 089)

 

 

4.9 x

703

(493)

 

 

^^

2 778

(2 347)

 

 

(50%)/50%

16 053

(16 053)

 

 

*

335

(335)

 

 

(5%)/5%

100

(100)

 

 

^

48 966

(63 031)

 

 

 

 

0.03% - 2.1%

 

 

1 673

 

 

(2 933)

Other securitised assets

118 169

Potential impact on income statement

Cash flow adjustments

 

 

 

 

 

CPR 6.2%

496

(473)

Total level 3 assets

2 292 768

 

 

268 274

(244 665)

Liabilities

 

Potential impact on income statement

Cash flow adjustments

Volatilities

Underlying asset value^^

 

 

 

Derivative financial instruments

16 626

 

(8 035)

8 045

 

 

CPR 6.2% - 10.2%

(107)

116

 

 

5.0% - 9.0%

(174)

174

 

 

^^

(7 754)

7 755

 

 

 

 

 

 

Liabilities arising on securitisation of other assets

113 711

Potential impact on income statement

 

Cash flow adjustments

 

 

 

 

 

 

 

 

 

 

CPR 6.2%

(365)

344

Other liabilities

3 605

Potential impact on income statement

 

 

 

 

 

Property values

(5%)/5%

(505)

505

Total level 3 liabilities

133 942

 

(8 905)

8 894

Net level 3 assets

2 158 826

 

 

 

 

* The EBITDA and cash flows has been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations

** The valuation sensitivity for certain equity investments and fair value loans have been assessed by adjusting various inputs such as expected cash flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purpose of this analysis as the sensitivity of the investments cannot be determined through the adjustment of a single input.

* The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

^ Other - The valuation sensitivity has been assessed by adjusting various inputs such as expected cash flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be determined through the adjustment of a single input.

^^ Underlying asset values are calculated by reference to a tangible asset, for example property, aircraft or shares.

Within the Hong Kong portfolio there is a connected exposure across the investment portfolio, loans and advances to customers and derivatives financial instruments lines with a balance sheet value of GBP69 million. The consideration of reasonably possible alternative assumptions with respect to the fair value of this exposure results in a favourable change of GBP95 million and an unfavourable change of GBP69 million, included within the above table.

 

 

Fair value of financial assets and liabilities at amortised cost     

 

Carrying

 

GBP'000

amount

Fair value

2019     

 

 

Assets     

 

 

Reverse repurchase agreements and cash collateral on securities borrowed

1 218 834

1 218 958

Sovereign debt securities

281 412

271 125

Bank debt securities

367 179

366 845

Other debt securities

478 817

467 820

Loans and advances to customers

22 509 074

22 561 179

Other loans and advances

195 693

197 587

Other assets

1 041 116

1 041 759

     

 

 

Liabilities     

 

 

Deposits by banks

3 016 306

3 049 306

Repurchase agreements and cash collateral on securities lent

671 273

668 870

Customer accounts (deposits)

28 934 266

28 934 451

Debt securities in issue

2 552 514

2 588 218

Other liabilities

1 029 239

1 027 905

Subordinated liabilities

1 279 564

1 361 823

 

 

 

 

 

Investec plc

Incorporated in England and Wales
Registration number 3633621
LSE ordinary share code: INVP

JSE ordinary share code: INP
ISIN: GB00B17BBQ50

Ordinary share dividend announcement

In terms of the DLC structure, Investec plc shareholders registered on the United Kingdom share register may receive all or part of their dividend entitlements through dividends declared and paid by Investec plc on their ordinary shares and/or through dividends declared and paid on the SA DAN share issued by Investec Limited.

Investec plc shareholders registered on the South African branch register may receive all or part of their dividend entitlements through dividends declared and paid by Investec plc on their ordinary shares and/or through dividends declared and paid on the SA DAS share issued by Investec Limited.

Declaration of dividend number 34

Notice is hereby given that the final dividend number 34, being a gross dividend of 13.5 pence (2018: 13.5 pence) per ordinary share has been recommended by the Board from income reserves in respect of the financial year ended 31 March 2019 payable to shareholders recorded in the shareholders' register of the company at the close of business on Friday, 26 July 2019.

·      for Investec plc shareholders, registered on the United Kingdom share register, through a dividend payment by Investec plc from income reserves of 13.5 pence per ordinary share

·      for Investec plc shareholders, registered on the South African branch register, through a dividend payment by Investec plc from income reserves of 5.5 pence per ordinary share and through a dividend paid by Investec Limited, on the SA DAS share, payable from income reserves, equivalent to 8 pence per ordinary share.

 

The relevant dates for the payment of dividend number 34 are as follows:

Last day to trade cum-dividend

On the Johannesburg Stock Exchange (JSE)                                                      Tuesday, 23 July 2019 

On the London Stock Exchange (LSE)                                                          Wednesday, 24 July 2019 

Shares commence trading ex-dividend                                                                   

On the Johannesburg Stock Exchange (JSE)                                                Wednesday, 24 July 2019

On the London Stock Exchange (LSE)                                                              Thursday, 25 July 2019

Record date (on the JSE and LSE)                                                                     Friday, 26 July 2019

Payment date (on the JSE and LSE)                                                           Monday, 12 August 2019

Share certificates on the South African branch register may not be dematerialised or rematerialised between Wednesday, 24 July 2019 and Friday, 26 July 2019, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 24 July 2019 and Friday, 26 July 2019, both dates inclusive.

Additional information for South African resident shareholders of Investec plc

·       Shareholders registered on the South African branch register are advised that the distribution of 13.5 pence, equivalent to a gross dividend of 251 cents per share, has been arrived at using the Rand/Pound Sterling average buy/sell forward rate, as determined at 11h00 (SA time) on Wednesday, 15 May 2019

·       Investec plc United Kingdom tax reference number: 2683967322360

·       The issued ordinary share capital of Investec plc is 682 121 211 ordinary shares

·       The dividend paid by Investec plc to South African resident shareholders registered on the South African branch register and the dividend paid by Investec Limited to Investec plc shareholders on the SA DAS share are subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)

·       Shareholders registered on the South African branch register who are exempt from paying the Dividend Tax will receive a net dividend of 251 cents per share, comprising 148.74074 cents per share paid by Investec Limited on the SA DAS share and 102.25926 cents per ordinary share paid by Investec plc

·       Shareholders registered on the South African branch register who are not exempt from paying the Dividend Tax will receive a net dividend of 200.8 cents per share (gross dividend of 251 cents per share less Dividend Tax of 50.2 cents per share) comprising 118.99259 cents per share paid by Investec Limited on the SA DAS share and 81.80741 cents per ordinary share paid by Investec plc.

 

By order of the board

D Miller                                                                   

Company Secretary      

15 May 2019

 

Investec plc

Incorporated in England and Wales

Registration number:      3633621

Share code:                   INPP

ISIN:                             GB00B19RX541

 

Preference share dividend announcement

 

Non-redeemable non-cumulative non-participating preference shares ("preference shares")

 

Declaration of dividend number 26

 

Notice is hereby given that preference dividend number 26 has been declared by the Board from income reserves for the period 01 October 2018 to 31 March 2019 amounting to a gross preference dividend of 8.72603 pence per preference share payable to holders of the non-redeemable non-cumulative non-participating preference shares as recorded in the books of the company at the close of business on Friday, 07 June 2019.

 

For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of 8.72603 pence per preference share is equivalent to a gross dividend of 160.82597 cents per share, which has been determined using the Rand/Pound Sterling average buy/sell forward rate as at 11h00 (SA time) on Wednesday, 15 May 2019.

 

The relevant dates relating to the payment of dividend number 26 are as follows:

 

Last day to trade cum-dividend           

On the Johannesburg Stock Exchange (JSE)                                                Tuesday, 04 June 2019

On The International Stock Exchange (TISE)                                           Wednesday, 05 June 2019

Shares commence trading ex-dividend

On the Johannesburg Stock Exchange (JSE)                                           Wednesday, 05 June 2019

On The International Stock Exchange (TISE)                                               Thursday, 06 June 2019

Record date (on the JSE and TISE)                                                             Friday, 07 June 2019

Payment date (on the JSE and TISE)                                                       Tuesday, 18 June 2019

 

Share certificates may not be dematerialised or rematerialised between Wednesday, 05 June 2019 and Friday, 07 June 2019, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 05 June 2019 and Friday, 07 June 2019, both dates inclusive.

 

Additional information for South African resident shareholders of Investec plc

·        Investec plc United Kingdom tax reference number: 2683967322360

·        The issued preference share capital of Investec plc is 2 754 587 preference shares

·        The dividend paid by Investec plc to shareholders recorded on the South African branch register is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)

·        The net dividend amounts to 128.66078 cents per preference share for preference shareholders liable to pay the Dividend Tax and 160.82597 cents per preference share for preference shareholders exempt from paying the Dividend Tax.

 

By order of the board

 

 

D Miller

Company Secretary

 

15 May 2019

 

 

Investec plc

Incorporated in England and Wales

Registration number:      3633621

JSE share code: INPPR

ISIN: GB00B4B0Q974

Rand-denominated preference share dividend announcement

 

Rand-denominated non-redeemable non-cumulative non-participating perpetual preference shares ("preference shares")

Declaration of dividend number 16

Notice is hereby given that preference dividend number 16 has been declared by the Board from income reserves for the period 01 October 2018 to 31 March 2019 amounting to a gross preference dividend of 482.09247 cents per preference share payable to holders of the Rand-denominated non-redeemable non-cumulative non-participating perpetual preference shares as recorded in the books of the company at the close of business on Friday, 07 June 2019.

The relevant dates relating to the payment of dividend number 16 are as follows:

 

Last day to trade cum-dividend

 

Tuesday, 04 June 2019 

Shares commence trading ex-dividend

Wednesday, 05 June 2019

Record date

Friday, 07 June 2019 

Payment date

Tuesday, 18 June 2019

 

Share certificates may not be dematerialised or rematerialised between Wednesday, 05 June 2019 and Friday, 07 June 2019, both dates inclusive.

Additional information for South African resident shareholders of Investec plc

·        Investec plc United Kingdom tax reference number: 2683967322360

·        The issued Rand-denominated preference share capital of Investec plc is 131 447 preference shares

·       The dividend paid by Investec plc to shareholders recorded on the South African branch register is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)

·       The net dividend amounts to 385.67398 cents per preference share for preference shareholders liable to pay the Dividend Tax and 482.09247 cents per preference share for preference shareholders exempt from paying the Dividend Tax.

 

By order of the board

D Miller

Company Secretary

15 May 2019

 


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