Investec profits surge to £701m

Substantial net inflows

OUTGOING Investec chief executive Stephen Koseff yesterday reported a 5.6 percent surge in operating profits to £701 million (R11.82 billion) for the year to end March in his last results for the company.

Koseff, who is stepping down in October after 40 years of helping build the bank and money manager, said the group managed to up its profits from £663.7m recorded last year despite a R220m loss in Steinhoff International investments during the period.

Koseff said the performance was underpinned by sound growth in loans and funds under management as well a solid recurring income base despite a challenging backdrop in South Africa and the UK.

He said the company’s Wealth & Investment and Asset Management businesses generated substantial net inflows with Asset Management exceeding £100bn of funds under management for the first time.

“We have implemented an orderly succession plan and feel confident that we are handing over a business that is well placed to continue to grow both its market position and profitability over the foreseeable future,” he said.

Asset management operating profit increased 8 percent to £178m, up from £164.8m supported by higher average funds under management arising from strong net inflows of £5.4bn and favourable market and currency movements.

Wealth & Investment operating profit increased by 5.7 percent to £98.6m, up from £93.2m. The group said the business benefited from higher average funds under management supported by higher equity market levels and solid net inflows of £2bn while total funds under management amounted to £56bn, up from £54.8bn.

The UK and other businesses reported a 9.3 percent decrease in operating profit while the local unit reported an increase in operating profit of 6.9 percent. The group’s overall adjusted earnings per share before goodwill, acquired intangibles and non-operating items increased by 13.3 percent to 61.3 pence.

The group said the board proposed a final dividend of 13.5 pence per ordinary share, equating to a full year dividend of 24 pence, up by 4.34 percent as compared to last year’s 23 pence, adding that Brexit and political uncertainty in South Africa continued to affect corporate and consumer confidence in the two markets.

Ron Klipin, a senior analyst at Cratos Capital, said that the results reflected a mixed operating environment in UK and SA, with net inflows of £7.3bn for asset and wealth management.

“Sterling was up by 6.6 percent as compared to the rand and it was positive for results,” Klipin said. “Annuity fees are up 14.2 percent but trading income decreased 19.4 percent. Fees and operating income were down 15.7 percent due to the impact of Steinhoff losses. The cost to income ratio is up 8 percent, due to increased operating costs. Operating costs rose due partly to ongoing investment and expansion. Impairments increased by around £36m.”

Nesan Nair, a senior portfolio manager at Sasfin Securities, said the stronger rand dampened the company’s overall performance.

“I do not think the results were too bad, except that the rand was stronger against the pound since the last reporting period,” he said.

Investec shares gained 1.45 percent on the JSE yesterday to close at R96.41.