Strong UK recovery
INVESTEC PLC: OPERATING PROFIT INCREASES BY A MASSIVE 138%
Performance is set to continue, if not improve, management says.
Investec Group’s results should not have come as a surprise, as management had already told investors some two months ago – on 18 March to be precise – that earnings for the year to March 2022 would be close to twice that of the previous financial year. Nevertheless, the formal figures make for interesting reading.
Adjusted earnings per share increased by nearly 91% to 55.1 pence (about R10.90) compared to 28.9 pence in the year to March 2021, with group chief executive Fani Titi commenting in his results presentation that earnings came in at the top end of the guidance provided after the first 11 months of the financial year.
While Titi presented a list of things that contributed to the strong recovery, a look at the numbers shows it was the remarkable turnaround in the UK economy that boosted profits.
Operating profit accounted for in Investec plc increased by a massive 138%, from £126 million (about R2.5 billion) to nearly £300 million.
The SA operations performed well, too, but the growth in adjusted operating profit at Investec Ltd was a more subdued 54% (£387 million, compared to £252 million in the previous year).
However, one should note that a rather strong exchange rate during the last year skewed the SA figures, with the Investec group reporting combined figures in pound sterling.
Group chief financial officer Nishlan Samujh noted the UK economy had recovered surprisingly fast since the relaxation of Covid restrictions.
“The UK economy is exceeding pre-pandemic levels,” he says, but warns the strong growth seen during the last year is expected to slow due to inflationary pressures. Investec expects the UK economy to grow by around four percent in 2022 and 2.2% in 2023.
The SA economy is yet to recover to pre-pandemic levels. Samujh indicated Investec had pencilled in growth of 1.8% in 2022 and two percent in 2023. SA operations are still producing most of Investec’s profits, but the predictions of economic growth in the UK versus that in SA indicate that this might change soon.
Titi said the group’s results were ahead of 2019 figures, which show earnings per share are only slightly better than in 2019, increasing from 52.5 pence in the year to March 2019 to 55.1 pence to end March 2022.
Titi also notes there are opportunities to manage capital better.
“We have strong liquidity and capital to support growth, with significant capital optionality in South Africa. We remain committed to our medium-term targets.
“The group is well positioned to serve its carefully chosen client base and continues to navigate the uncertain outlook emanating from ongoing inflationary pressures and the economic effects of the invasion of Ukraine,” he says.
We have strong liquidity and capital to support growth