REG - Investec PLC - Half-year Report
17/11/2022 07:00
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RNS Number : 6903G Investec PLC 17 November 2022
Investec Limited Investec plc
Incorporated in the Republic of South Africa Incorporated in England and Wales
Registration number 1925/002833/06
Registration number 3633621
JSE share code: INL
LSE share code: INVP
JSE hybrid code: INPR JSE share code: INP
ISIN: GB00B17BBQ50
JSE debt code: INLV LEI: 2138007Z3U5GWDN3MY22
NSX share code: IVD
BSE share code: INVESTEC
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Investec (comprising Investec plc and Investec Limited) - Reviewed combined
consolidated financial results for the six months ended 30 September 2022
Group results summary for the six months ended 30 September 2022 (1H2023)
compared to 30 September 2021 (1H2022)
• The Group continues to successfully navigate the uncertain macro
backdrop that has persisted since the onset of the pandemic and has made
significant progress against the strategic goals outlined at the 2019 Capital
Markets Day
• Adjusted earnings per share increased 25.1% to 32.9p (1H2022: 26.3p),
at the top end of previous guidance.
• Funds under management (FUM) decreased 7.6% to £59.0 billion (31
March 2022: £63.8 billion) reflecting the year-to-date decline in global
markets. Net inflows were £202 million, with £464 million in discretionary
FUM inflows partly offset by £261 million net outflows in non-discretionary
FUM
• Net core loans grew 7.1% annualised to £31.0 billion (31 March 2022:
£29.9 billion) largely driven by corporate lending in both core geographies
and UK residential mortgage lending
• Revenue grew 18.9% as momentum continued in our client franchises in a
highly volatile and uncertain operating environment and benefitted from rising
global interest rates
• The cost to income ratio improved to 60.5% (1H2022: 64.0%)
• Pre-provision adjusted operating profit increased 29.5% to £435.2
million (1H2022: £336.0 million), demonstrating the strength and diversity of
our client franchises
• Asset quality remains strong and well covered by collateral. Expected
credit losses (ECL) impairment charges increased to £30.2 million (1H2022:
£10.2 million), resulting in a credit loss ratio (CLR) of 15bps (1H2022:
7bps)
• Return on equity (ROE) was 13.0% (1H2022: 11.2%) and return on
tangible equity (ROTE) was 13.9% (1H2022: 12.1%)
• Tangible net asset value (TNAV) per share has remained flat at 475.3p
(31 March 2022: 476.6p). Net asset value (NAV) per share was 507.9p (31 March
2022: 510.0p). Strong earnings generation offset by the distribution of a 15%
shareholding in Ninety One to shareholders
• The Group continued to make progress on its capital optimisation
strategy. In conjunction with the initial share purchase programme previously
announced, the Board has approved a proposed share purchase and a share
buyback programme of up to R7 billion (c.£350 million) to be executed over
the next 18 months
• Maintained strong capital and liquidity positions allowing us to
navigate the current uncertain environment and support identified growth
initiatives
• The Board has proposed an interim dividend of 13.5p per share
(1H2022:11.0p), resulting in a payout ratio of 41.0%.
Fani Titi, Group Chief Executive commented:
"The Group's earnings growth momentum continued, underpinned by strong
revenues from our diversified client franchises and a focused approach to
support our clients. We achieved adjusted earnings per share of 32.9p, a 25.1%
improvement on the prior period, and at the top end of the previous guidance.
Rising global interest rates, client acquisition and strong asset quality
supported these results.
We have made good progress on our capital optimisation strategy as we seek to
return excess capital from the South African balance sheet to shareholders.
Today, we announce our intention to purchase and buy back up to R7 billion of
our shares.
I am also pleased that the Board has proposed an interim dividend of 13.5p per
share, a 22.7% increase on the prior period.
We have strong liquidity and capital levels and are well positioned to support
all our stakeholders, including our clients, our people, and communities
around us. We are proud of the progress we are making to entrench
sustainability across every aspect of our business."
Key financial data
This announcement covers the results of Investec plc and Investec Limited
(together "the Investec Group" or "Investec" or "the Group") for the six month
period ended 30 September 2022 (1H2023). Unless stated otherwise, comparatives
relate to the Group's operations for the six month period ended 30 September
2021 (1H2022). The average Rand/Pound Sterling exchange rate appreciated by
c.1% relative to 1H2022.
Basic earnings per share were positively impacted by a gain of £155.1 million
on implementation of the distribution of a 15% shareholding in Ninety One to
shareholders on 30 May 2022.
Performance 1H2023 1H2022 Variance % Neutral currency
change % change
Total operating income before expected credit losses (£'m) 1 131.3 951.1 180.1 18.9% 18.6%
Operating costs (£'m) (667.4) (598.5) (68.9) 11.5% 11.2%
Adjusted operating profit (£'m) 405.0 325.7 79.3 24.3% 23.9%
Adjusted earnings attributable to shareholders (£'m) 298.2 242.3 55.9 23.1% 22.7%
Adjusted basic earnings per share (pence) 32.9 26.3 6.6 25.1% 24.7%
Basic earnings per share (pence) 50.6 25.0 25.6 102.4% 101.6%
Headline earnings per share (pence) 32.0 24.7 7.3 29.6% 29.1%
Dividend per share (pence) 13.5 11.0 2.5 22.7%
Dividend payout ratio 41.0% 41.8%
CLR (credit loss ratio) 0.15% 0.07%
Cost to income ratio 60.5% 64.0%
ROE (return on equity) 13.0% 11.2%
ROTE (return on tangible equity) 13.9% 12.1%
Balance sheet 1H2023 FY2022 Variance % change Neutral currency % change
Funds under management (£'bn) 59.0 63.8 (4.8) (7.6%) (6.4%)
Customer accounts (deposits) (£'bn) 40.5 40.1 0.4 1.1% 3.4%
Net core loans and advances (£'bn) 31.0 29.9 1.1 3.5% 5.8%
Cash and near cash (£'bn) 15.9 17.2 (1.3) (7.3%) (3.4%)
NAV per share (pence) 507.9 510.0 (2.1) (0.4%) (0.4%)
TNAV per share (pence) 475.3 476.6 (1.2) (0.3%) (0.3%)
Salient features by geography 1H2023 1H2022 Variance % change % change in Rands
Investec Limited (Southern Africa)
Adjusted operating profit (£'m) 230.6 190.4 40.2 21.1% 20.4%
Cost to income ratio 52.0% 53.4%
ROE 14.8% 11.8%
ROTE 14.9% 11.9%
CET1 14.1% 13.9%
Leverage 7.1% 7.6%
Investec plc (UK & Other)
Adjusted operating profit (£'m) 174.4 135.4 39.0 28.8% n/a
Cost to income ratio 67.3% 72.8%
ROE 11.1% 10.7%
ROTE 12.6% 12.4%
CET1 11.1% 11.1%
Leverage 8.1% 7.8%
Capital optimisation
Progress on AIRB:
Investec Limited is at the final stage of the approval process to migrate the
remaining portfolios to Advanced Internal Ratings Based (AIRB) approach for
capital measurement. On successful conversion to AIRB, the Group anticipate a
200bps uplift to the CET1 ratio reported at 30 September 2022. Investec plc is
in the early stages of a process to migrate from the Standardised approach to
the Internal Ratings Based (IRB) approach.
IEP Group restructure:
Post period end, the following restructure was approved by the shareholders of
IEP and the Bud Group:
• The IEP Group and Bud Group shareholders have approved a restructure
to facilitate an exit by certain IEP shareholders, including Investec, by way
of a share buyback. The restructure entails the transfer of certain assets to
a Newco, to facilitate the orderly disposal of those assets
• Newco has entered into binding transaction agreements to dispose of
certain chemical assets that constitute a significant portion of IEP's
carrying value in Investec's financial statements
• Both the restructure and the chemical assets disposal are subject to
regulatory approvals and other conditions precedent typical for a transaction
of this nature. Whilst the chemical assets disposal is anticipated to be
concluded during 2023, the balance of the asset disposal process is
anticipated to conclude over the next 24 months, subject to market conditions.
Share purchase and buy-back:
On 3 October 2022, the Group announced a c.£60 million (or R1.2 billion)
share purchase programme pursuant to which Investec Limited would purchase
Investec plc ordinary shares (the "PLC Share Purchase Programme").
In conjunction with the PLC Share Purchase Programme, the Board has now
approved a proposed share purchase and a share buy-back programme of up to a
total of R7 billion (c.£350 million), pursuant to which Investec Limited
would purchase Investec plc ordinary shares and would buy back its own shares
(the "Investec Purchase and Buyback Programme"). Investec anticipates that
this programme will be executed over the next 18 months subject to market
conditions. A further announcement about the commencement of the Investec
Purchase and Buyback Programme is expected to be made in due course.
The Investec Purchase and Buyback Programme is in line with previously
communicated strategic priorities that the Group intends to optimise its
capital base given the capital surplus position in South Africa. To date,
under the PLC Share Purchase Programme, Investec Limited has purchased
approximately 6.9 million shares of Investec plc; these shares will be treated
as treasury shares by the Group.
Shares acquired by Investec Limited under the Investec Purchase and Buyback
Programme will be additional to the 10 million Investec Limited shares that
were repurchased and cancelled by Investec Limited in the last twelve months.
Outlook
The Group continues to successfully navigate the uncertain macro backdrop that
has persisted since the onset of the pandemic and has made significant
progress against the strategic goals outlined at the 2019 Capital Markets Day.
We have strong capital and robust liquidity levels, are firmly committed to
our medium-term targets and well positioned to pursue identified growth
initiatives in our chosen markets.
FY2023 guidance:
Based on financial performance for 1H2023, current business momentum and the
increased uncertainty captured in the updated macro-economic forecast for the
second half of the financial year, the Group currently expects:
• Revenue to be underpinned by rising interest rates, book growth, and
client activity
• The cost to income ratio to remain within the Group target of <63%,
notwithstanding inflationary pressures and continued investment for identified
growth initiatives
• Normalisation of expected credit loss impairment charges and
consequent credit loss ratio increase towards the Group's through-the-cycle
(TTC) range of 25-35bps
• South Africa to continue to operate with a surplus capital position
given excess capital generation and the anticipated CET1 uplift on full
implementation of AIRB
• To continue the return of excess capital to shareholders
• ROE to remain within the 12-16% Group target range.
Enquiries
Investec Investor Relations
Results: Qaqambile Dwayi
Tel: +27 (0) 11 291 0129
Carly Newton
Tel: +44 (0) 20 7597 4493
General enquiries:
Tel: +27 (0) 11 286 7070 or investorrelations@investec.com
Brunswick (SA PR advisers)
Graeme Coetzee
Tel: +27 (0) 63 685 6053
Lansons (UK PR advisers)
Tom Baldock
Tel: +44 (0) 78 6010 1715
Presentation/conference call details
Investec management will host its interim results presentation live from
Johannesburg on Thursday 17 November at 11h00 (SA)/9h00 (UK) time.
Please register for the presentation at: www.investec.com/investorrelations
A live video webcast of the presentation will be available on www.investec.com
About Investec
Investec partners with private, institutional, and corporate clients, offering
international banking, investments, and wealth management services in two
principal markets, South Africa, and the UK, as well as certain other
countries. The Group was established in 1974 and currently has 8,500+
employees.
Investec has a dual listed company structure with primary listings on the
London and Johannesburg Stock Exchanges.
Johannesburg and London
Sponsor: Investec Bank Limited
Group financial performance
Overview
Pre-provision adjusted operating profit increased, supported by continued
client acquisition resulting in higher average advances, rising interest rates
and increased client activity. Fee income in our Wealth & Investment
businesses was negatively impacted by the effects of the market sell off on
average FUM.
Fixed operating expenditure reflects the inflationary pressures and continued
investment in technology and people, while variable remuneration increased
given strong business performance.
Impairments were driven by updated forward looking macro-economic scenarios
since FY2022 for the UK Bank partly offset by net model releases and
recoveries in South Africa.
Pre-provision adjusted operating profit increased 29.5% to £435.2 million
(1H2022: £336.0 million).
Revenue increased 18.9% to £1 131.3 million
(1H2022: £951.1 million)
Net interest income increased 31.5% to £604.8 million (1H2022: £459.8
million) driven by higher average interest earning assets and rising interest
rates.
Non-interest revenue (NIR) increased 7.1% to £526.5 million (1H2022: £491.4
million).
• Net fee and commission income increased 1.8% to £398.3 million
(1H2022: £391.2 million) due to improved corporate client activity in South
Africa, and in certain client franchises in the UK. This was partly offset by
lower fee income from Wealth & Investment and UK equity capital markets
activity due to market volatility and uncertainty during the period
• Investment income increased to £28.6 million (1H2022:
£3.5 million), reflecting dividends received and realised gains on disposal
of investments. This includes dividends received from Ninety One following the
reclassification of this investment post the 15% distribution in May 2022.
Ninety One results were previously equity accounted and reported in the
post-taxation profit of associates and joint ventures line on the income
statement
• Share of post-taxation profit of associates and joint venture holdings
decreased to £27.5 million (1H2022: £41.5 million). The impact of lower
associate earnings following the distribution of Ninety One in May 2022 was
partly offset by higher earnings from IEP given improvement in the operational
performance of the underlying investee companies within IEP
• Trading income arising from customer flow increased to £69.4 million
from £65.1 million in the prior period, due to strong growth in client
trading in both geographies, offset by lower mark-to-market (MTM) gains on IPF
balance sheet hedging activities
• Net trading gains arising from balance sheet management and other
trading activities were £9.4 million compared to a loss of £18.5 million in
the prior period. The gains arise from MTM movements in the value of currency
and interest rate hedges on the balance sheet
• Other operating loss of £6.7 million (1H2022: £8.5 million income)
includes fair value movements of Ninety One shares held in the Group's staff
share scheme to settle Ninety One share awards resulting from the initial
demerger in 2020 and the distribution completed in May 2022. These shares are
included in the Group's balance sheet in other assets. The corresponding
liability is reflected in other liabilities with changes in the value of the
liability expensed through staff expenses in operating costs.
Expected credit loss (ECL) impairment charges increased by £20.0 million to
£30.2 million (1H2022: £10.2 million) resulting in a credit loss ratio of
15bps (1H2022: 7bps)
Asset quality remains strong, with exposures to a carefully defined target
market well covered by collateral. The ECL charges increase was primarily
driven by the deterioration in the UK forward-looking macro-economic outlook
since March 2022 and Stage 3 ECL charge which remains below historical
experience. This was partly offset by net model and management overlay
releases and recoveries in SA. Given the uncertain economic outlook, the Group
has maintained a level of post-model management overlays to account for risks
assessed as inadequately reflected in the models.
Operating costs increased 11.5% to £667.4 million (1H2022: £598.5 million)
Fixed operating expenditure increased by 9.8% due to inflationary pressures,
investment in technology and people and post-pandemic normalisation in
discretionary expenditure. The cost to income ratio improved to 60.5% from
64.0% in the prior period
Since September 2019, fixed costs increased 3.9%, while revenue grew by 17.9%
reflecting the heightened focus on cost discipline whilst continuing to
generate strong revenue growth.
Taxation
The taxation charge on adjusted operating profit was £86.6 million (1H2022:
£63.7 million), resulting in an effective tax rate of 21.3% (1H2022: 21.2%).
In the UK, the effective tax rate is 22.8% (1H2022: 10.8%).
The lower effective tax rate in 1H2022 was due to higher deferred tax assets
on the back of higher enacted tax rates. In SA, the effective tax rate
normalised to 20.3% (1H2022: 27.3%), the higher rate in the prior period was
driven by the impairment of certain deferred tax assets.
Profit or loss attributable to non-controlling interests
The profit attributable to non-controlling interests is £28.7 million
compared to £16.7 million in the prior period and is attributable to the
non-controlling interests in the Investec Property Fund (IPF).
Funding and liquidity
Customer deposits grew 2.1% annualised to £40.5 billion (31 March 2022:
£40.1 billion) at 30 September 2022. Cash and near cash of £15.9 billion
(£8.5 billion in Investec plc and R149.2 billion in Investec Limited) at 30
September 2022 represents approximately 39.2% of customer deposits. Loans and
advances to customers as a percentage of customer deposits was 75.8%. The
Group comfortably exceeds Basel liquidity requirements for the Liquidity
Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).
Investec Bank Limited (consolidated Group) ended the period to 30 September
2022 with the three-month average of its LCR at 157.7% and an NSFR of 115.6%.
Investec plc reported a LCR of 366% and a NSFR of 136% at 30 September 2022.
Capital adequacy and leverage ratios
Capital and leverage ratios remain sound, ahead of Board-approved minimum
targets and regulatory requirements. The CET1 and leverage ratio were 14.1%
and 7.1% for Investec Limited (increased AIRB scope) and 11.1% and 8.1% for
Investec plc (Standardised approach) respectively.
Investec Limited made progress through the completion of the six months
parallel run as part of the application to adopt AIRB for the measurement of
capital on certain portfolios currently on the Foundation Internal Ratings
Based (FIRB) approach. On full adoption of AIRB, the pro-forma CET1 ratio
would increase by 200bps.
Segmental performance
Wealth & Investment
Adjusted operating profit from the Wealth & Investment businesses
decreased 4.0% to £55.4 million (1H2022: £57.7 million) impacted by the
decline in market levels in the period under review.
Wealth & Investment Southern Africa UK & Other Total
1H2023 1H2022^ Variance 1H2023 1H2022^ Variance 1H2023 1H2022
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income 56.0 53.7 2.3 4.4% 3.7% 169.9 169.6 0.3 0.2% 225.9 223.3
Operating costs (40.8) (39.7) (1.1) 3.0% 2.3% (129.7) (125.9) (3.8) 3.0% (170.5) (165.5)
Adjusted operating profit 15.2 14.0 1.2 8.3% 7.6% 40.3 43.7 (3.4) (7.9%) 55.4 57.7
Totals and variance determined in £'000 which may result in rounding
differences
^Restated. Following a strategic review, our Swiss operations have been
earmarked to play a key role in the Group's strategic expansion of its
international wealth services. To ensure strategic alignment, the operational
results of the Switzerland wealth business are now reported as part of the
Southern Africa Wealth & Investment division (previously reported as part
of UK & Other Wealth & Investment). The comparative period has been
restated to reflect this change. There has been no change in the legal or
ownership structures.
Southern Africa Wealth & Investment (in Rands)
Adjusted operating profit for SA Wealth & Investment increased by 8.3% to
£15.2 million and in Rands increased by 7.6% to R300.7 million.
Total FUM decreased by 3.7% since March 2022 to £19.7 billion (31 March 2022:
£20.5 billion) with discretionary and annuity net inflows of R2.1 billion
offset by net outflows in non-discretionary FUM and foreign currency
translation losses at period end due to Rand/Pound Sterling movements.
Revenue grew by 4.4% underpinned by inflows into the offshore investment range
in the prior and current periods in discretionary portfolios and rising
interest rates. Non-discretionary brokerage decreased markedly in the current
period due to lower trading volumes given the heightened market volatility.
Operating costs increased 3.0%, driven by higher technology spend,
inflationary pressures and post-pandemic normalisation of business expenses.
Operating margins improved to 27.1% from 26.1% in 1H2022.
UK & Other Wealth & Investment
Adjusted operating profit for UK & Other Wealth & Investment decreased
7.9% to £40.3 million (1H2022: £43.7 million), reflecting the volatile and
uncertain operating environment.
FUM decreased by 9.4% to £38.8 billion impacted by the declining market
levels since 31 March 2022 (FY2022: £42.9 billion). Net inflows for 1H2023
were £443 million translating to a net organic growth in FUM of 2.1%
(annualised). The elevated market volatility resulted in subdued client
activity and delays in investment decisions, negatively impacting both inflows
and commission-based fee income.
Revenue was flat, positively impacted by net organic flows in the current
period and prior year and base rate increases which were offset by lower fee
income due to lower average FUM given market sell off. Commission based income
was also negatively impacted by the market conditions.
Operating costs were up 3.0% due to investment in technology, post-pandemic
normalisation in discretionary expenditure and inflationary pressures.
Operating margin was 23.6% (1H2022: 26.0%).
Specialist Banking
Adjusted operating profit from Specialist Banking increased 28.6% to £331.6
million (1H2022: £257.9 million). Pre-provision adjusted operating profit
increased 35.3% to £360.9 million (1H2022: £266.8 million).
Specialist Banking Southern Africa UK & Other Total
1H2023 1H2022 Variance 1H2023 1H2022 Variance 1H2023 1H2022
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income (before ECL) 407.0 352.7 54.3 15.4% 14.6% 435.7 328.7 107.0 32.5% 842.7 681.4
ECL impairment charges (1.4) (4.0) 2.6 (63.9%) (71.6%) 27.9 (4.9) (23.0) >100% (29.3) (8.9)
Operating costs (202.6) (175.6) (27.1) 15.4% 14.6% (279.2) (239.4) (39.8) 16.6% (481.8) (414.9)
(Profit) /loss attributable to NCI - 0.3 (0.3) (100.0%) (100.0%) - - - -% - 0.3
Adjusted operating profit 202.9 173.4 29.6 17.0% 16.4% 128.6 84.5 44.1 52.3% 331.6 257.9
Totals and variance determined in £'000 which may result in rounding
differences.
Southern Africa Specialist Banking (in Rands)
Adjusted operating profit increased 16.4% to R4 026 million (1H2022: R3 461
million).
Revenue increased 14.6%, positively impacted by higher average interest
earning assets, rising interest rates, increased client activity and continued
client acquisition in line with our growth strategy. This was also supported
by positive investment income.
Net interest income increased 14.3% driven by higher average interest earning
assets and rising interest rates.
Non-interest revenue increased 15.1% driven by:
• Higher fee income from increased utilisation of trade finance
facilities and higher investment banking fees
• Investment income largely benefitted from non-repeat of prior period
negative FV adjustments
• Trading income from customer flow grew as heightened volatility and
rising interest rates drove increased client activity levels
- partially offset by
• Balance sheet management and other trading income reflects MTM losses
on certain interest rate and currency swaps. These are timing differences
arising where hedge accounting could not be applied to an economic hedge in
terms of IFRS accounting
• Other operating income was negatively impacted by MTM losses since
year end on Ninety One Limited shares held as assets in Group's balance sheet
to fulfil employee share scheme obligations.
Expected credit loss impairment charges decreased 71.6%. ECL on core loans was
a net recovery, resulting in a 1bps recovery in the current period versus a
credit loss ratio of 4bps in the prior period. ECL net recovery was primarily
driven by net model releases, reversal of impairments and recoveries on
previously impaired loans. During the period, management overlays of R30
million relating to the residential mortgage book were released. The remaining
management overlay at 30 September 2022 of R189 million (31 March 2022: R219
million) accounts for emerging risks assessed as inadequately reflected in the
forward-looking model for commercial real estate lending clients.
The cost to income ratio was 49.8% (1H2022: 49.7%). Operating costs increased
14.6% driven by higher personnel expenses due to salary increases, increased
headcount, variable remuneration and the post-pandemic normalisation of
discretionary expenditure. Fixed costs increased 13.9%. This follows periods
of well contained cost growth, resulting in a 5.4% compounded annual growth
rate since September 2019.
Net core loans grew by 10.3% annualised to R313.7 billion (31 March 2022:
R298.4 billion). Corporate lending portfolios grew by 16.6% year to date,
driven by an increase in corporate credit demand. Advances to private clients
reported subdued growth of 1.5% year to date as modest growth in other
portfolios within Private Banking was largely offset by muted growth in
commercial real estate lending as clients remained risk off.
UK & Other Specialist Banking
Adjusted operating profit increased by 52.3% to £128.6 million (1H2022:
£84.5 million). Continued client acquisition supported the annualised loan
book growth of 12.8% since 31 March 2022. Operating income growth was
underpinned by higher average book, higher fees, rising interest rates and
sustained client activity.
Net interest income increased 40.8% driven by higher average interest earning
assets, with average lending books up 15.3% relative to 1H2022, and the
positive effect of rising global interest rates.
Non-interest revenue increased 13.8% due to:
• Higher fees from increased activity levels in the private equity and
power and infrastructure client franchises
• Investment income driven by dividend income and realised gains on
disposal of investments
• Increase in trading income from customer flows supported by higher
hedging demand from clients given market volatility
• Trading income from balance sheet management and other trading
activities growth was supported by the non-repeat of costs associated with the
early redemption of a senior bond in the prior period
- offset by
• Lower fees and trading income from equity capital markets activities
given the volatile and uncertain environment.
ECL impairment charges totalled £27.9 million, resulting in a credit loss
ratio of 32bps (1H2022: 9bps). The increase in ECL charges was driven by the
deterioration in forward-looking macro-economic assumptions, updated scenario
weightings in our ECL models and Stage 3 ECL charges albeit still below
historical experience. This follows limited impairment charges in the prior
period given the significant government support available to UK households and
companies during the pandemic. The management overlay of £16.8 million has
been retained to account for the uncertainty that remains in the
macro-economic environment, in particular, the ongoing UK political
environment and associated market volatility.
The cost to income ratio improved to 64.1% (1H2022: 72.8%). Operating costs
increased by 16.6% period-on-period primarily driven by an increase in
variable remuneration in line with business performance, inflationary
pressures and investment in people and technology. Fixed operating costs
increased by 7.0%. The fixed operating costs trajectory since September 2019
reflects the impact of various strategic actions; with 1H2023 costs 1.7% ahead
of September 2019 costs while revenue is 25.5% higher over the same period.
Net core loans grew by 12.8% annualised to £15.3 billion (31 March 2022:
£14.4 billion) driven by residential mortgages (up 7.9%) and strong demand
for corporate credit across multiple portfolios. A portion of the loan growth
was the translation effects from the weakening of the Pound Sterling against
the US Dollar and Euro during the period.
Group Investments
Group Investments includes the circa 10% holding in Ninety One, 47.4% stake in
the IEP Group, 24.31% held in the Investec Property Fund (IPF) and other
equity investments.
Group Investments Southern Africa UK & Other Total
1H2023 1H2022 Variance 1H2023 1H2022 Variance 1H2023 1H2022
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income (net of ECL charges) 49.7 28.6 21.1 73.7% 72.2% 12.1 16.5 (4.4) (26.9%) 61.8 46.5
Operating costs (0.8) (0.9) 0.1 (6.0%) (7.2%) - - - - (0.8) (0.9)
(Profit) attributable to NCI (28.7) (17.0) (11.7) (68.6%) (66.8%) - - - - (28.7) (17.0)
Adjusted operating profit 20.1 10.7 9.4 88.8% 87.8% 12.1 16.5 (4.4) (26.9%) 32.2 27.2
Totals and variance determined in £'000 which may result in rounding
differences..
Adjusted operating profit from Group Investments increased by 18.6% to £32.2
million (1H2022: £27.2 million) driven by:
• Continued improvement in the operational performance of the underlying
investee companies within IEP
• No repeat of prior period write downs on some of the group's equity
investments.
• Net positive contribution from IPF
- offset by
• Lower share of associate earnings from Ninety One following the 15%
distribution in May 2022 and consequent derecognition as an investment in
associate.
Further information
Additional information on each of the business units is provided in the Group
interim results analyst book published on the Group's website:
http://www.investec.com.
On behalf of the boards of Investec plc and Investec Limited
Philip Hourquebie Fani Titi
Chair Group Chief Executive
16 November 2022
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, these half-year results reflect the results and financial
position of the combined DLC Group under UK adopted International Financial
Reporting Standards (IFRS) which comply with IFRS as issued by the
International Accounting Standards Board (IASB), 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.
Following a review of the liquidity, capital position, profitability, the
business model and operational risks facing the business, the directors have a
reasonable expectation that the Investec Group will be a going concern for a
period of at least 12 months. The results for the six months ended
30 September 2022 has accordingly been prepared on the going concern basis.
Unless the context indicates otherwise, all comparatives included in the
commentary above relate to the six months ended 30 September 2021.
Amounts represented on a neutral currency basis for income statement items
assume that the relevant average exchange rates for the six months ended 30
September 2022 remain the same as those in the prior period. Amounts
represented on a neutral currency basis for balance sheet items assume that
the relevant closing exchange rates at 30 September 2022 remain the same as
those at 31 March 2022.
Neutral currency information is considered as pro-forma financial information
as per the JSE Listings Requirements and is therefore the responsibility of
the Group's Board of Directors. Pro-forma financial information was prepared
for illustrative purposes and because of its nature may not fairly present the
issuer's financial position, changes in equity, or results of operations..
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 condition of these 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:
Six months ended Six months ended Year ended
30 September 2022 30 September 2021 31
Ma
rc
h
20
22
Currency Closing Average Closing Average Closing Average
per GBP1.00
South African Rand 20.05 19.80 20.29 19.94 19.24 20.28
Euro 1.14 1.17 1.16 1.16 1.18 1.18
US Dollar 1.11 1.22 1.35 1.39 1.31 1.37
Profit Forecast
The following matters highlighted in this announcement contain forward-looking
statements:
• Revenue to be underpinned by rising interest rates, book growth, and
client activity
• The cost to income ratio to remain within the Group target of <63%,
notwithstanding inflationary pressures and continued investment for identified
growth initiatives
• Normalisation of expected credit loss impairment charges and
consequent credit loss ratio increase towards the Group's through-the-cycle
(TTC) range of 25-35bps.
• South Africa to continue to operate with a surplus capital position
given excess capital generation and the anticipated CET1 uplift on full
implementation of AIRB
• To continue the return of excess capital to shareholders
• ROE to remain within the 12-16% Group target range.
The basis of preparation of this statement and the assumptions upon which it
was based are set out below. This statement is subject to various risks and
uncertainties and other factors - 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 in this Profit Forecast.
Any forward-looking statements made are based on the knowledge of the Group at
16 November 2022.
This forward-looking statement represents a profit forecast under the Listing
Rules. The Profit Forecast relates to the year ending 31 March 2023.
The financial information on which the Profit Forecast was based is the
responsibility of the Directors of the Group and has not been reviewed and
reported on by the Group's auditors.
Basis of preparation
The Profit Forecast has been properly compiled using the assumptions stated
below, and on a basis consistent with the accounting policies adopted in the
Group's 31 March 2022 audited annual financial statements, which are in
accordance with IFRS.
Assumptions
The Profit Forecast has been prepared on the basis of the following
assumptions during the forecast period:
Factors outside the influence or control of the Investec Board:
• There will be no material change in the political and/or economic
environment that would materially affect the Investec Group
• There will be no material change in legislation or regulation
impacting on the Investec Group's operations or its accounting policies
• There will be no business disruption that will have a significant
impact on the Investec Group's operations, whether for the economic effects of
increased geopolitical tensions or otherwise
• The Rand/Pound Sterling and US Dollar/Pound Sterling exchange rates
and the tax rates remain materially unchanged from the prevailing rates
detailed above
• There will be no material changes in the structure of the markets,
client demand or the competitive environment
• There will be no material change to the facts and circumstances
relating to legal proceedings and uncertain tax matters.
Estimates and judgements
In preparation of the Profit Forecast, the Group makes estimations and applies
judgement that could affect the reported amount of assets and liabilities
within the reporting period. Key areas in which judgement is applied include:
• Valuation of unlisted investments primarily in the private equity,
direct investments portfolios and embedded derivatives. Key valuation inputs
are based on the most relevant observable market inputs, adjusted where
necessary for factors that specifically apply to the individual investments
and recognising market volatility
• The determination of ECL against assets that are carried at amortised
cost and ECL relating to debt instruments at fair value through other
comprehensive income (FVOCI) involves the assessment of future cash flows
which is judgmental in nature
• Valuation of investment properties is performed by capitalising the
budget net income of the property at the market related yield applicable at
the time
• The Group's income tax charge and balance sheet provision are
judgmental in nature. This arises from certain transactions for which the
ultimate tax treatment can only be determined by final resolution with the
relevant local tax authorities. The Group recognises in its tax provision
certain amounts in respect of taxation that involve a degree of estimation and
uncertainty where the tax treatment cannot finally be determined until a
resolution has been reached by the relevant tax authority. The carrying amount
of this provision is often dependent on the timetable and progress of
discussions and negotiations with the relevant tax authorities, arbitration
processes and legal proceedings in the relevant tax jurisdictions in which the
Group operates. Issues can take many years to resolve and assumptions on the
likely outcome would therefore have to be made by the Group
• Where appropriate, the Group has utilised expert external advice as
well as experience of similar situations elsewhere in making any such
provisions. Determination of interest income and interest expense using the
effective interest rate method involves judgement in determining the timing
and extent of future cash flows.
Accounting policies, significant judgements and disclosures
These reviewed condensed combined consolidated financial results have been
prepared in terms of the recognition and measurement criteria of the
presentation and disclosure requirements of IAS 34, "Interim Financial
Reporting" and IFRS as adopted by the UK which comply with IFRS' as issued by
the IASB. At 30 September 2022, UK adopted IFRS are identical in all material
respects to current IFRS applicable to the Group, with differences only in the
effective dates of certain standards.
The accounting policies applied in the preparation of the results for the six
months ended 30 September 2022 are consistent with those adopted in the
financial statements for year ended 31 March 2022.
The external auditors of Investec PLC performed a review of the combined
consolidated financial results for the period ended 30 September 2022 in
fulfilment of DTR 4.2.9R(1) of the UK Financial Conduct Authority. The review
was conducted in accordance with International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial Reporting Council
and their unmodified review conclusion is available for inspection at the
registered office of Investec PLC, upon request, or on our website at
www.investec.com (http://www.investec.com) .
The financial results have been prepared under the supervision of Nishlan
Samujh, the Group Finance Director. The interim financial statements for the
six months ended 30 September 2022 are available on the Group's website:
www.investec.com
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 the economic environment caused by the resulting lockdowns
and government programmes aimed to stimulate the economy
- changes in legislation or regulation impacting 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 16 November 2022.
• The information in the Group's announcement for the six months ended
30 September 2022, which was approved by the Board of Directors on 16 November
2022, does not constitute statutory accounts as defined in Section 435 of the
UK Companies Act 2006. The 31 March 2022 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.
• The financial information on which forward-looking statements are
based is the responsibility of the Directors of the Group and has not been
reviewed and reported on by the Group's auditors.
This announcement is available on the Group's website:
www.investec.com
Definitions
• Adjusted operating profit refers to operating profit before goodwill,
acquired intangibles and strategic actions and after adjusting for earnings
attributable to other non-controlling interests. 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. Pro-forma financial
information was prepared for illustrative purposes and because of its nature
may not fairly present the issuer's financial position, changes in equity or
results of operations.
• Adjusted earnings is calculated by adjusting basic earnings
attributable to shareholders for the amortisation of acquired intangible
assets, non-operating items including strategic actions, and earnings
attributable to perpetual preference shareholders and other additional tier 1
security holders.
• 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.
• Headline earnings is adjusted earnings plus the after tax financial
effect of strategic actions and the amortisation of acquired intangible
assets. Headline earnings is an earnings measure required to be calculated and
disclosed by the JSE and is calculated in accordance with the guidance
provided in Circular 1/2021.
• Headline earnings per share (HEPS) is calculated as headline earnings
divided by the weighted average number of ordinary shares in issue during the
year.
• Basic earnings is earnings attributable to ordinary shareholders as
defined by IAS33 Earnings Per Share.
• Dividend payout ratio is calculated as the dividend per share divided
by adjusted earnings per share.
• Pre-provision adjusted operating profit is calculated as: Total
operating income before expected credit loss impairment charges, net of
operating costs and net of operating profits or losses attributable to other
non-controlling interests.
• The credit loss ratio is calculated as expected credit loss (ECL)
impairment charges on gross core loans as a percentage of average gross core
loans subject to ECL.
• The cost to income ratio is calculated as: operating costs divided by
operating income before expected credit loss impairment charges (net of
operating profits or losses attributable to other non-controlling interests).
• Return on average ordinary shareholders' equity (ROE) is calculated as
adjusted earnings attributable to ordinary shareholders divided by average
ordinary shareholders' equity.
• Return on average tangible ordinary shareholders' equity (ROTE) is
calculated as adjusted earnings attributable to ordinary shareholders divided
by average tangible ordinary shareholders' equity.
• Core loans is defined as net loans to customers plus net own
originated securitised assets.
• NCI is non-controlling interests.
Financial assistance
Shareholders are referred to Special Resolution number 30, which was approved
at the annual general meeting held on 4 August 2022, 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 April 2022 to 30 September 2022 to various Group subsidiaries.
Johannesburg and London
Sponsor: Investec Bank Limited
Exchange rates between local currencies and Pounds Sterling have fluctuated
over the period. The most significant impact arises from the volatility of the
Rand. The average Rand: Pound Sterling exchange rate over the period has
appreciated by 0.7% against the comparative six-month period ended 30
September 2021, and the closing rate has depreciated by 4.2% since 31 March
2022. The following tables provide an analysis of the impact of the Rand on
our reported numbers.
Results in Pounds Sterling Results in Rands
Six months to 30 Sept 2022 Six months to 30 Sept 2021 % Neutral currency^ Six months to 30 Sept 2022 Neutral Six months to 30 Sept 2022 Six months to 30 Sept 2021 %
change currency change
%
change
Adjusted operating profit before taxation (million) £405 £326 24.3% £404 23.9% R8 024 R6 496 23.5%
Earnings attributable to shareholders (million) £478 £250 91.2% £476 90.4% R9 470 R4 977 90.3%
Adjusted earnings attributable to shareholders (million) £298 £242 23.1% £297 22.7% R5 911 R4 832 22.3%
Adjusted earnings per share 32.9p 26.3p 25.1% 32.8p 24.7% 652c 524c 24.4%
Basic earnings per share 50.6p 25.0p 102.4% 50.4p 101.6% 1003c 499c 101.0%
Headline earnings per share 32.0p 24.7p 29.6% 31.9p 29.1% 663c 494c 34.2%
Results in Pounds Sterling Results in Rands
At 30 Sept 2022 At 31 March 2022 % Neutral currency^^ At 30 Sept 2022 Neutral At 30 Sept 2022 At 31 March 2022 %
change currency change
%
change
Net asset value per share 507.9p 510.0p (0.4%) 508p (0.4%) 10 185c 9 810c 3.8%
Tangible net asset value per share 475.3p 476.6p (0.3%) 475.4p (0.3%) 9 531c 9 167c 4.0%
Total equity (million) £5 678 £5 740 (1.1%) £5 807 1.2% R113 858 R110 410 3.1%
Total assets (million) £59 547 £58 914 1.1% £60 839 3.3% R1 194 067 R1 133 219 5.4%
Core loans (million) £30 997 £29 934 3.5% £31 659 5.8% R621 511 R575 773 7.9%
Cash and near cash balances (million) £15 904 £17 161 (7.3%) £16 220 (5.5%) R318 920 R330 089 (3.4%)
Customer accounts (deposits) (million) £40 545 £40 118 1.1% £41 466 3.4% R813 029 R771 675 5.4%
Funds under management (million) £58 981 £63 800 (7.6%) £59 748 (6.4%) R1 182 724 R1 227 209 (3.6%)
^ For income statement items we have used the average Rand: Pound Sterling
exchange rate that was applied in the prior period, i.e. 19.94.
^^ For balance sheet items we have assumed that the Rand: Pound Sterling
closing exchange rate has remained neutral since 31 March 2022.
Condensed combined consolidated income statement
£'000 Six months to Six months to Year to
30 Sept 2022
30 Sept 2021 31 March 2022
Interest income 1 342 691 985 473 1 951 209
Interest expense (737 908) (525 699) (1 005 939)
Net interest income 604 783 459 774 945 270
Fee and commission income 424 451 414 181 864 639
Fee and commission expense (26 168) (22 966) (46 423)
Investment income 28 618 3 491 27 974
Share of post-taxation profit of associates and joint venture holdings 27 454 41 502 79 556
Trading income/(loss) arising from
- customer flow 69 373 65 141 128 277
- balance sheet management and other trading activities 9 408 (18 452) (21 128)
Other operating (loss)/ income (6 651) 8 461 12 190
Total operating income before expected credit loss impairment charges 1 131 268 951 132 1 990 355
Expected credit loss impairment charges (30 201) (10 237) (28 828)
Operating income 1 101 067 940 895 1 961 527
Operating costs (667 399) (598 453) (1 233 948)
Operating profit before goodwill, acquired intangibles and strategic actions 433 668 342 442 727 579
Impairment of goodwill (805) - (1 962)
Amortisation of acquired intangibles (7 978) (7 773) (15 477)
Amortisation of acquired intangibles of associates (1 542) (4 628) (9 249)
Closure and rundown of the Hong Kong direct investments business (280) (596) (1 203)
Operating profit 423 063 329 445 699 688
Net gain/(implementation costs) on distribution of associate to shareholders 154 407 - (2 427)
Profit before taxation 577 470 329 445 697 261
Taxation on operating profit before goodwill, acquired intangibles and (86 630) (63 720) (143 309)
strategic actions
Taxation on acquired intangibles and strategic actions 15 956 620 2 422
Profit after taxation 506 796 266 345 556 374
Profit attributable to non-controlling interests (28 673) (16 712) (40 170)
Earnings attributable to shareholders 478 123 249 633 516 204
Earnings attributable to ordinary shareholders 458 521 230 266 475 469
Earnings attributable to perpetual preferred securities and other Additional 19 602 19 367 40 735
Tier 1 security holders
Earnings per share
Six months to Six months to Year to
30 Sept 2022
30 Sept 2021 31 March 2022
Earnings per share - pence 50.6 25.0 52.0
Diluted earnings per share - pence 48.9 24.4 50.2
Combined consolidated statement of total comprehensive income
£'000 Six months to Six months to Year to
30 Sept 2022
30 Sept 2021 31 March 2022
Profit after taxation 506 796 266 345 556 374
Other comprehensive income:
Items that may be reclassified to the income statement
Fair value movements on cash flow hedges taken directly to other comprehensive 38 843 (5 822) (4 311)
income^
Fair value movements on debt instruments at FVOCI taken directly to other (70 679) 4 004 (301)
comprehensive income^
Gain on realisation of debt instruments at FVOCI recycled through the income (1 208) (847) (2 010)
statement^
Foreign currency adjustments on translating foreign operations (35 211) 14 903 173 160
Items that will not be reclassified to the income statement
Effect of rate change on deferred taxation relating to adjustment for IFRS 9 - 1 049 617
Fair value movements on equity instruments at FVOCI taken directly to other 1 373 1 043 3 420
comprehensive income^
Remeasurement of net defined benefit pension liability - - 40
Net gain attributable to own credit risk^ 85 4 928 11 095
Total comprehensive income 439 999 285 603 738 084
Total comprehensive income attributable to ordinary shareholders 413 897 247 456 629 300
Total comprehensive income attributable to non-controlling interests 6 500 18 780 68 049
Total comprehensive income attributable to perpetual preferred securities 19 602 19 367 40 735
Total comprehensive income 439 999 285 603 738 084
^These amounts are net of taxation of £2.2million taxation credit (30
September 2021: £3.4 million taxation charge; 31 March 2022: £3.5 million
taxation charge) except for the impact of rate changes on deferred tax as
shown separately above.
Combined consolidated balance sheet
At 30 Sept 2022 31 March 2022^ 30 Sept 2021^
£'000
Assets
Cash and balances at central banks 5 167 277 5 998 270 3 957 654
Loans and advances to banks 2 412 298 2 552 061 2 445 892
Non-sovereign and non-bank cash placements 660 133 684 983 475 875
Reverse repurchase agreements and cash collateral on securities borrowed 4 424 813 4 609 778 3 820 376
Sovereign debt securities 4 736 838 4 148 867 3 837 115
Bank debt securities 1 096 296 1 515 210 1 440 998
Other debt securities 1 263 504 1 229 287 1 246 231
Derivative financial instruments 1 811 234 1 617 240 1 206 299
Securities arising from trading activities 1 401 320 683 329 1 085 375
Investment portfolio 1 119 352 912 872 928 741
Loans and advances to customers 30 728 533 29 561 088 27 966 330
Own originated loans and advances to customers securitised 270 700 375 763 372 602
Other loans and advances 191 420 128 284 109 006
Other securitised assets 158 120 123 888 133 690
Interests in associated undertakings and joint venture holdings 347 723 734 434 695 756
Current taxation assets 59 221 33 653 38 141
Deferred taxation assets 255 300 259 370 216 290
Other assets 1 906 278 2 139 354 1 810 435
Property and equipment 296 896 335 420 344 729
Investment properties 807 313 820 555 788 540
Goodwill 257 228 258 404 259 842
Software 12 420 9 443 11 363
Other acquired intangible assets 37 527 44 152 51 700
Non-current assets classified as held for sale 38 430 79 229 75 752
59 460 174 58 854 934 53 318 732
Other financial instruments at fair value through profit or loss in respect 87 023 59 549 56 662
of liabilities to customers
59 547 197 58 914 483 53 375 394
Liabilities
Deposits by banks 3 402 916 3 178 668 2 294 873
Derivative financial instruments 2 988 558 2 608 042 2 051 243
Other trading liabilities 250 774 275 589 225 498
Repurchase agreements and cash collateral on securities lent 1 022 070 863 285 1 179 581
Customer accounts (deposits) 40 544 710 40 118 412 36 353 007
Debt securities in issue 1 691 297 2 043 640 1 971 123
Liabilities arising on securitisation of own originated loans and advances 176 287 238 370 155 200
Liabilities arising on securitisation of other assets 90 025 95 885 104 215
Current taxation liabilities 55 709 41 631 54 104
Deferred taxation liabilities 18 991 19 624 19 448
Other liabilities 2 349 474 2 315 841 1 959 885
52 590 811 51 798 987 46 368 177
Liabilities to customers under investment contracts 84 202 56 475 54 018
Insurance liabilities, including unit-linked liabilities 2 841 3 074 2 644
52 677 854 51 858 536 46 424 839
Subordinated liabilities 1 191 100 1 316 191 1 436 763
53 868 954 53 174 727 47 861 602
Equity
Ordinary share capital 247 247 247
Ordinary share premium 1 264 700 1 516 024 1 517 852
Treasury shares (344 893) (318 987) (296 714)
Other reserves (673 607) (650 228) (767 299)
Retained income 4 346 438 4 069 776 3 939 028
Ordinary shareholders' equity 4 592 885 4 616 832 4 393 114
Perpetual preference share capital and premium 153 539 174 869 174 579
Shareholders' equity excluding non-controlling interests 4 746 424 4 791 701 4 567 693
Other Additional Tier 1 securities in issue 405 093 411 683 373 705
Non-controlling interests 526 726 536 372 572 394
- Perpetual preferred securities issued by subsidiaries - - 73 006
- Non-controlling interests in partially held subsidiaries 526 726 536 372 499 388
Total equity 5 678 243 5 739 756 5 513 792
Total liabilities and equity 59 547 197 58 914 483 53 375 394
^Restated as detailed below.
Condensed consolidated statement of changes in equity
£'000 Six months to Six months to Year to
30 Sept 2022
30 Sept 2021 31 March 2022
Balance at the beginning of the period 5 739 756 5 312 496 5 312 496
Total comprehensive income 439 999 285 603 738 084
Share-based payments adjustments 2 350 9 515 23 932
Dividends paid to ordinary shareholders (134 797) (72 361) (178 418)
Dividends paid to perpetual preference shareholders included in (19 602) (19 367) (40 735)
non-controlling interests and Other Additional Tier 1 security holders
Dividends paid to non-controlling interests (16 146) (14 721) (29 287)
Share buyback of ordinary share capital (6 682) - (36 150)
Repurchase of perpetual preference shares (14 771) - (77 835)
Issue of Other Additional Tier 1 security instruments - 38 294 67 552
Net equity impact of non-controlling interest movements - - 443
Employee benefit liability recognised (9 377) - -
Movement of treasury shares (19 818) (26 718) (47 114)
Net equity movements of interests in associated undertakings - 1 051 6 788
Distribution to shareholders (282 669) - -
Balance at the end of the period 5 678 243 5 513 792 5 739 756
Condensed consolidated cash flow statement
£'000 Six months to Six months to Year to
30 Sept 2022
30 Sept 2021^ 31 March 2022
Net cash (outflow)/inflow from operating activities (710 149) 456 768 3 071 540
Net cash inflow from investing activities 10 364 35 705 35 565
Net cash outflow from financing activities (346 039) (204 181) (587 923)
Effects of exchange rates on cash and cash equivalents 6 655 6 554 90 928
Net (decrease)/ increase in cash and cash equivalents (1 039 169) 294 846 2 610 110
Cash and cash equivalents at the beginning of the period 9 099 740 6 489 630 6 489 630
Cash and cash equivalents at the end of the period 8 060 571 6 784 476 9 099 740
^Restated as detailed below.
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 segmental analysis
Segmental geographical and business analysis of adjusted operating profit
before goodwill, acquired intangibles, non-operating items, taxation and after
non-controlling interests.
Private Client
Specialist Banking
For the six months to 30 September 2022 Wealth & Investment^ Private Banking Corporate, Investment Banking and Other Group Investments Group Costs Total Group % change % of total
£'000
UK and Other 40 254 29 370 99 275 12 056 (6 568) 174 387 28.8% 43.1%
Southern Africa 15 184 89 679 113 260 20 148 (7 663) 230 608 21.1% 56.9%
Adjusted operating profit 55 438 119 049 212 535 32 204 (14 231) 404 995 24.3% 100.0%
Non-controlling interest* 28 673
Adjusted operating profit before non-controlling interests 433 668
% change (4.0%) 6.3% 45.7% 18.6% (16.5%) 24.3%
% of total 13.7% 29.4% 52.4% 8.0% (3.5)% 100.0%
Total assets £'mn 1 238 16 511 40 138 1 660 - 59 547
Private Client
Specialist Banking
For the six months to 30 September 2021 Wealth & Investment^ Private Banking Corporate, Investment Banking and Other Group Investments Group Costs Total Group % of total
£'000
UK and Other 43 715 11 290 73 205 16 490 (9 339) 135 361 41.6%
Southern Africa 14 019 100 735 72 644 10 674 (7 703) 190 369 58.4%
Adjusted operating profit 57 734 112 025 145 849 27 164 (17 042) 325 730 100.0%
Non-controlling interest* 16 712
Adjusted operating profit before non-controlling interests 342 442
% of total 17.7% 34.4% 44.8% 8.3% (5.2)% 100.0%
Total assets^^ £'mn 1 213 14 970 35 370 1 822 - 53 375
*Profit attributable to non-controlling interests predominantly relates to the
Investec Property Fund Limited.
^Following a strategic review, our Swiss operations have been earmarked to
play a key role in the Group's strategic expansion of its international wealth
services. To ensure strategic alignment, the operational results of the
Switzerland wealth business are now reported as part of the Southern Africa
Wealth & Investment division (previously reported as part of UK &
Other Wealth & Investment). The comparative period has been restated to
reflect this change. There has been no change in the legal or ownership
structures.
^^Restated as detailed below.
Net fee and commission income
For the six months to 30 September 2022 UK and Southern Total
£'000 Other Africa
Wealth & Investment net fee and commission income 161 902 51 900 213 802
Fund management fees/fees for funds under management 143 457 33 379 176 836
Private client transactional fees* 18 446 19 747 38 193
Fee and commission expense (1) (1 226) (1 227)
Specialist Banking net fee and commission income 61 671 95 635 157 306
Specialist Banking fee and commission income** 69 374 110 942 180 316
Specialist Banking fee and commission expense (7 703) (15 307) (23 010)
Group Investments net fee and commission income - 27 175 27 175
Group Investments fee and commission income** - 29 106 29 106
Group Investments fee and commission expense - (1 931) (1 931)
Net fee and commission income 223 573 174 710 398 283
Annuity fees (net of fees payable) 151 754 128 027 279 781
Deal fees 71 819 46 683 118 502
*Trust and fiduciary fees amounted to £0.2 million (2021: £0.2 million) and
are included in Private client transactional fees.
**Included in Group Investments and Specialist Banking is fee and commission
income of £38.4 million (2021: £36.8 million) for operating lease income
which is out of the scope of IFRS 15 - Revenue from contracts with customers.
Net gain on distribution of associate to shareholders
On 30 May 2022, c.15% shareholding in Ninety One DLC was distributed to
ordinary shareholders. The distribution resulted in the shareholding in Ninety
One DLC being reduced from 25% to c.10%. The reduction in shareholding
resulted in the loss of significant influence and the remaining stake in
Ninety One DLC will be accounted for at fair value through other comprehensive
income.
Gain on loss of significant influence of Ninety One £'000
The gain on the distribution is calculated as follows:
Fair value of the distribution 282 669
Remaining shares held in Ninety One 244 590
Derecognition of the previously equity accounted investment in Ninety One (386 019)
Foreign currency translation reserve recycled to the income statement on 13 906
distribution
Gain on the distribution of Ninety One shares before tax 155 146
Implementation costs (739)
Gain on distribution of Ninety One shares before tax 154 407
Taxation benefit (release of deferred taxation) 14 405
Gain on distribution of Ninety One shares net of taxation and implementation 168 812
costs
Balance sheet restatements
Loans and advances to banks and other liabilities
As at 30 September 2021, within the Wealth & Investment business there was
a gross up on-balance sheet in loans and advances to banks and other
liabilities as a result of client funds being recorded on balance sheet. The
September 2021 balance sheet has been restated to correct the gross up
previously reported. This change has no impact on the income statement.
Derivative financial instruments to other assets
As at 30 September 2021 and 31 March 2022, initial margin on collateral, which
is not available as an offset to individual exposures, was recorded in
derivative financial instruments liabilities instead of other assets. The
comparative balance sheets have been restated for the reclassification. This
change has no impact on the comparative income statements.
The impact of this change on the 30 September 2021 balance sheet is:
At 30 September 2021 Restatement At 30 September 2021
as previously reported restated
£'000
Assets
Loans and advances to banks 2 602 105 (156 213) 2 445 892
Other assets 1 733 188 77 247 1 810 435
Total assets 53 454 360 (78 966) 53 375 394
Liabilities
Derivative financial instruments 1 973 996 77 247 2 051 243
Other liabilities 2 116 098 (156 213) 1 959 885
Total liabilities 47 940 568 (78 966) 47 861 602
The impact of this change on the 31 March 2022 balance sheet is:
At 31 March 2022 Restatement At 31 March 2022
as previously reported restated
£'000
Assets
Other assets 2 068 615 70 739 2 139 354
Total assets 58 843 744 70 739 58 914 483
Liabilities
Derivative financial instruments 2 537 303 70 739 2 608 042
Total liabilities 53 103 988 70 739 53 174 727
The impact of this change on the 30 September 2021 cash flow statement is:
At 30 September 2021 Restatement At 30 September 2021
as previously reported restated
£'000
Net cash outflow from operating activities 551 100 (94 332) 456 768
Cash and cash equivalents at the beginning of the year 6 551 511 (61 881) 6 489 630
Cash and cash equivalents at the end of the year 6 940 689 (156 213) 6 784 476
There is no impact on the 31 March 2022 cash flow statement.
Historical German dividend tax arbitrage transactions
Investec Bank plc has previously been notified by the Office of the Public
Prosecutor in Cologne, Germany, that it and certain of its current and former
employees may be involved in possible charges relating to historical
involvement in German dividend tax arbitrage transactions (known as cum-ex
transactions). Investigations are ongoing and no formal proceedings have been
issued against Investec Bank plc by the Office of the Public Prosecutor. In
addition, Investec Bank plc received certain enquiries in respect of client
tax reclaims for the periods 2010-2011 relating to the historical German
dividend arbitrage transactions from the German Federal Tax Office (FTO) in
Bonn. Since issuing our 31 March 2022 Annual Report, the FTO has provided more
information in relation to their claims and Investec Bank plc has sought
further information and clarification.
Investec Bank plc is co-operating with the German authorities and continues to
conduct its own internal investigation into the matters in question. A
provision is held to reflect the potential financial outflows that could arise
as a result of this matter. There are factual issues to be resolved which may
have legal consequences, including financial penalties.
In relation to potential civil claims; whilst Investec Bank plc is not a
claimant nor a defendant to any civil claims in respect of cum-ex
transactions, Investec Bank plc has received third party notices in relation
to two civil proceedings in Germany and may elect to join the proceedings as a
third party participant. Investec Bank plc has itself served third party
notices on various participants to these historic transactions in order to
preserve statute of limitation on any potential future claims that Investec
Bank plc may seek to bring against those parties, should Investec Bank plc
incur any liability in the future. Investec Bank plc has also entered into
standstill agreements with some third parties in order to suspend the
limitation period in respect of the potential civil claims. While Investec
Bank plc is not a claimant nor a defendant to any civil claims at this stage,
it cannot rule out the possibility of civil claims by or against Investec Bank
plc in future in relation to the relevant transactions.
The Group has not provided further disclosure with respect to these historical
dividend arbitrage transactions because it has concluded that such disclosure
may be expected to seriously prejudice its outcome.
Analysis of assets and liabilities by measurement category
At 30 September 2022 Total Amortised Non-financial Total
instruments at cost instruments or
fair value scoped out of
IFRS 9
£'000
Assets
Cash and balances at central banks - 5 167 277 - 5 167 277
Loans and advances to banks - 2 412 298 - 2 412 298
Non-sovereign and non-bank cash placements 19 460 640 673 - 660 133
Reverse repurchase agreements and cash collateral on securities borrowed 1 160 419 3 264 394 - 4 424 813
Sovereign debt securities 3 695 069 1 041 769 - 4 736 838
Bank debt securities 595 987 500 309 - 1 096 296
Other debt securities 446 968 816 536 - 1 263 504
Derivative financial instruments 1 811 234 - - 1 811 234
Securities arising from trading activities 1 401 320 - - 1 401 320
Investment portfolio 1 119 352 - - 1 119 352
Loans and advances to customers 2 173 708 28 554 825 - 30 728 533
Own originated loans and advances to customers securitised - 270 700 - 270 700
Other loans and advances - 191 420 - 191 420
Other securitised assets 86 320 71 800 - 158 120
Interests in associated undertakings and joint venture holdings - - 347 723 347 723
Current taxation assets - - 59 221 59 221
Deferred taxation assets - - 255 300 255 300
Other assets 404 345 969 743 532 190 1 906 278
Property and equipment - - 296 896 296 896
Investment properties - - 807 313 807 313
Goodwill - - 257 228 257 228
Software - - 12 420 12 420
Other acquired intangible assets - - 37 527 37 527
Non-current assets classified as held for sale 15 931 - 22 499 38 430
12 930 113 43 901 744 2 628 317 59 460 174
Other financial instruments at fair value through profit or loss in respect of 87 023 - - 87 023
liabilities to customers
13 017 136 43 901 744 2 628 317 59 547 197
Liabilities
Deposits by banks - 3 402 916 - 3 402 916
Derivative financial instruments 2 988 558 - - 2 988 558
Other trading liabilities 250 774 - - 250 774
Repurchase agreements and cash collateral on securities lent 214 326 807 744 - 1 022 070
Customer accounts (deposits) 3 734 638 36 810 072 - 40 544 710
Debt securities in issue 22 302 1 668 995 - 1 691 297
Liabilities arising on securitisation of own originated loans - 176 287 - 176 287
and advances
Liabilities arising on securitisation of other assets 90 025 - - 90 025
Current taxation liabilities - - 55 709 55 709
Deferred taxation liabilities - - 18 991 18 991
Other liabilities 122 216 1 416 799 810 459 2 349 474
7 422 839 44 282 813 885 159 52 590 811
Liabilities to customers under investment contracts 84 202 - - 84 202
Insurance liabilities, including unit-linked liabilities 2 841 - - 2 841
7 509 882 44 282 813 885 159 52 677 854
Subordinated liabilities - 1 191 100 - 1 191 100
7 509 882 45 473 913 885 159 53 868 954
Financial instruments 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
At 30 September 2022 Total instruments at fair value Level 1 Level 2 Level 3
£'000
Assets
Non-sovereign and non-bank cash placements 19 460 - 19 460 -
Reverse repurchase agreements and cash collateral on securities borrowed 1 160 419 - 1 160 419 -
Sovereign debt securities 3 695 069 3 695 069 - -
Bank debt securities 595 987 353 928 242 059 -
Other debt securities 446 968 101 808 238 584 106 576
Derivative financial instruments 1 811 234 758 1 750 711 59 765
Securities arising from trading activities 1 401 320 1 393 804 3 074 4 442
Investment portfolio 1 119 352 198 872 2 597 917 883
Loans and advances to customers 2 173 708 - 898 362 1 275 346
Other securitised assets 86 320 - - 86 320
Other assets 404 345 356 236 48 109 -
Non-current assets classified as held for sale 15 931 - - 15 931
Other financial instruments at fair value through profit or loss in respect of 87 023 87 023 - -
liabilities to customers
13 017 136 6 187 498 4 363 375 2 466 263
Liabilities
Derivative financial instruments 2 988 558 98 432 2 827 757 62 369
Other trading liabilities 250 774 114 976 135 798 -
Repurchase agreements and cash collateral on securities lent 214 326 - 214 326 -
Customer accounts (deposits) 3 734 638 - 3 734 638 -
Debt securities in issue 22 302 - 22 302 -
Liabilities arising on securitisation of other assets 90 025 - - 90 025
Other liabilities 122 216 - 71 202 51 014
Liabilities to customers under investment contracts 84 202 - 84 202 -
Insurance liabilities, including unit-linked liabilities 2 841 - 2 841 -
7 509 882 213 408 7 093 066 203 408
Net financial assets/(liabilities) at fair value 5 507 254 5 974 090 (2 729 691) 2 262 855
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current period.
Measurement of financial assets and liabilities at level 2
The table below sets out information about the valuation techniques used at
the end of the reporting period in measuring financial instruments categorised
as level 2 in the fair value hierarchy:
Valuation basis/techniques Main inputs
Assets
Non-sovereign and non-bank cash placements Discounted cash flow model Yield curves
Reverse repurchase agreements and cash collateral on securities borrowed Discounted cash flow model, Hermite interpolation, Black-Scholes Yield curves, discount rates, volatilities
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, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Black-Scholes and Local Volatility rates, interest rate swap curves and credit curves
Securities arising from trading activities Standard industry derivative pricing model, Discounted cash flow model Interest rate curves, implied bond spreads, equity volatilities, yield curves
Investment portfolio Discounted cash flow model, relative valuation model comparable quoted inputs Discount rate and fund unit price, net assets
Loans and advances to customers Discounted cash flow model Yield curves
Other assets Discounted cash flow model Yield curves
Liabilities
Derivative financial instruments Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Black-Scholes and Local Volatility rates, interest rate swap curves and credit curves
Other trading liabilities Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Local Volatility rates, interest rate swap curves and credit 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, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Local Volatility rates, interest rate swap curves and credit curves
Other liabilities Discounted cash flow model Yield curves
Liabilities to customers under investment contracts Current price of underlying unitised assets Listed prices
Insurance liabilities, including unit-linked liabilities Current price of underlying unitised assets Listed prices
Level 3 financial instruments
The following tables show a reconciliation of the opening balances to the
closing balances for level 3 financial instruments. All instruments are at
fair value through profit or loss.
£'000 Investment Loans and Other securitised Other balance Total
portfolio advances to assets sheet assets
customers
Assets
Balance at 1 April 2022 873 708 1 252 232 93 087 179 641 2 398 668
Total gains or (losses) 31 762 35 863 (428) 10 595 77 792
In the income statement 31 762 42 765 (428) 10 595 84 694
In the statement of comprehensive income - (6 902) - - (6 902)
Purchases 10 921 706 508 - 84 717 513
Sales (5 097) (387 469) - (12 514) (405 080)
Issues 468 5 131 - - 5 599
Settlements (8 104) (450 371) (6 339) (10 387) (475 201)
Transfers into level 3 7 053 - - - 7 053
Foreign exchange adjustments 7 172 113 452 - 19 295 139 919
Balance at 30 September 2022 917 883 1 275 346 86 320 186 714 2 466 263
For the six months to 30 September 2022, investment portfolio of £7.1 million
was transferred from level 2 to level 3 due to significant inputs to the
valuation model becoming unobservable in the market.
£'000 Liabilities arising Other balance Total
on securitisation sheet liabilities
of other assets
Liabilities
Balance at 1 April 2022 95 885 95 187 191 072
Total losses in the income statement 47 12 080 12 127
Settlements (5 907) - (5 907)
Transfers out of level 3 - (8) (8)
Foreign exchange adjustments - 6 124 6 124
Balance at 30 September 2022 90 025 113 383 203 408
Derivative financial instrument liabilities of £8 000 were transferred from
level 3 to level 2. The Group transfers between levels within the fair value
hierarchy when the significance of the unobservable inputs change or if the
valuation methods change.
The following table quantifies the gains or (losses) included in the income
statement and statement of other comprehensive income recognised on level 3
financial instruments:
For the six months to 30 September 2022 Total Realised Unrealised
£'000
Total gains included in the income statement for the period
Net interest income 40 650 31 639 9 011
Investment income* 31 192 5 427 25 765
Trading income arising from customer flow 535 - 535
Trading income arising from balance sheet management and other trading 190 - 190
activities
72 567 37 066 35 501
Total gains or (losses) included in other comprehensive income for the period
Gain on realisation on debt instruments at FVOCI recycled through the income 433 433 -
statement
Fair value movements on debt instruments at FVOCI taken directly to other (6 902) - (6 902)
comprehensive income
(6 469) 433 (6 902)
*Included within the investment income statement balance are fair value gains
of £0.2 million presented within operational items in the income statement.
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:
At 30 September 2022 Balance sheet Significant unobservable input changed Range which unobservable input has been changed Favourable Unfavourable
value changes changes
£'000 £'000 £'000
Assets
Other debt securities 106 576 Potential impact on income statement 3 376 (6 191)
Credit spreads 1.05%-2.1% 149 (320)
Cash flow adjustments CPR 9.9% 506 (432)
Other^ ^ 2 721 (5 439)
Derivative financial instruments 59 765 Potential impact on income statement 4 811 (5 449)
Volatilities 6%-18.9% 23 (45)
Underlying asset value^^ ^^ 4 150 (4 151)
Cash flow adjustment CPR 9.9% 23 (23)
Other^ ^ 615 (1 230)
Securities arising from trading activities 4 442 Potential impact on income statement
Cash flow adjustments CPR 11.5% 575 (161)
Investment portfolio 917 883 Potential impact on income statement 109 529 (149 694)
Price earnings multiple 5.5x-14.2x 9 692 (19 307)
Underlying asset value^^ ^^ 8 902 (18 942)
EBITDA ** 12 785 (14 692)
Discount rate 13%-17% 630 (688)
Cash flows ** 1 154 (1 154)
Underlying asset value^^ ^^ 1 917 (3 342)
Precious and industrial metal prices (5%)-5% 1 366 (1 366)
Property prices # 49 929 (49 929)
Other^ ^ 23 154 (40 274)
Loans and advances to customers 1 275 346 Potential impact on income statement 28 847 (46 312)
Credit spreads 0.26%-9.83% 11 218 (22 478)
Property value ** 11 686 (11 740)
Price earnings multiple 3.5x-4.2x 1 917 (5 467)
Underlying asset value^^ ^^ 1 813 (2 202)
Other^ ^ 2 213 (4 425)
Potential impact on other comprehensive income 14 206 (25 655)
Credit spreads 0.43%-6.58% 13 717 (24 187)
Other ^ 489 (1 468)
Other securitised assets* 86 320 Potential impact on income statement
Cash flow adjustments CPR 9.9% 666 (682)
Non-current assets classified as held for sale 15 931 Potential impact on income statement
Discount rate 13%-16% 1 348 -
Total level 3 assets 2 466 263 163 358 (234 144)
Liabilities
Derivative financial instruments 62 369 Potential impact on income statement (5 128) 3 177
Volatilities 18.9% (3) 5
Underlying asset value^^ ^^ (5 125) 3 172
Liabilities arising on securitisation of other assets* 90 025 Potential impact on income statement
Cash flow adjustments CPR 9.9% (304) 309
Other liabilities 51 014 Potential impact on income statement
Property prices # (6 915) 6 915
Total level 3 liabilities 203 408 (12 347) 10 401
Net level 3 assets 2 262 855 151 011 (223 743)
*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.
∗∗The EBITDA, cash flows and property values have been stressed on an
investment-by-investment and loan-by-loan basis in order to obtain favourable
and unfavourable valuations.
#Property values are the underlying input for the valuations where the
capitalisation rate when valuing these properties has been stressed by
0.25bps.
In determining the value of level 3 financial instruments, the following are
the principal input that can require judgement:
Credit spreads
Credit spreads reflect the additional yield that a market participant would
demand for taking exposure to the credit risk of an instrument. The credit
spread for an instrument forms part of the yield used in a discounted cash
flow calculation. In general a significant increase in a credit spread in
isolation will result in a movement in fair value that is unfavourable for the
holder of a financial instrument.
Discount rates
Discount rates (including WACC) are used to adjust for the time value of money
when using a discounted cash flow valuation method. Where relevant, the
discount rate also accounts for illiquidity, market conditions and uncertainty
of future cash flows.
Volatilities
Volatility is a key input in the valuation of derivative products containing
optionality. Volatility is a measure of the variability or uncertainty in
returns for a given derivative underlying. It represents an estimate of how
much a particular underlying instrument, parameter or index will change in
value over time.
Cash flows
Cash flows relate to the future cash flows which can be expected from the
instrument and requires judgement.
EBITDA
The company's earnings before interest, taxes, depreciation and amortisation.
This is the main input into a price earnings multiple valuation method.
Price-earnings multiple
The price earnings ratio is an equity valuation multiple. It is a key driver
in the valuation of unlisted investments.
Property value and precious and industrial metals
The property value and precious and industrial metals is a key driver of
future cash flows on these investments.
Underlying asset value
In instances where cash flows have links to referenced assets, the underlying
asset value is used to determine the fair value. The underlying asset
valuation is derived using observable market prices sourced from broker
quotes, specialist valuers or other reliable pricing sources.
Fair value of financial assets and liabilities at amortised cost
At 30 September 2022 Carrying amount Fair value approximates carrying amount Balances where fair values do not approximate carrying amounts Fair value of balances that do not approximate carrying amounts
£'000
Assets
Cash and balances at central banks 5 167 277 5 167 277 - -
Loans and advances to banks 2 412 298 2 412 298 - -
Non-sovereign and non-bank cash placements 640 673 640 673 - -
Reverse repurchase agreements and cash collateral on securities borrowed 3 264 394 1 515 360 1 749 034 1 748 058
Sovereign debt securities 1 041 769 109 662 932 107 936 191
Bank debt securities 500 309 5 257 495 052 487 752
Other debt securities 816 536 229 471 587 065 573 656
Loans and advances to customers 28 554 825 14 134 058 14 420 767 14 696 300
Own originated loans and advances to customers securitised 270 700 270 700 - -
Other loans and advances 191 420 101 808 89 612 89 299
Other securitised assets 71 800 71 800 - -
Other assets 969 743 969 743 - -
43 901 744 25 628 107 18 273 637 18 531 256
Liabilities
Deposits by banks 3 402 916 900 969 2 501 947 2 568 465
Repurchase agreements and cash collateral on securities lent 807 744 536 286 271 458 276 316
Customer accounts (deposits) 36 810 072 22 475 378 14 334 694 14 286 635
Debt securities in issue 1 668 995 310 216 1 358 779 1 325 890
Liabilities arising on securitisation of own originated loans and advances 176 287 176 287 - -
Other liabilities 1 416 799 1 413 186 3 613 2 605
Subordinated liabilities 1 191 100 384 956 806 144 809 213
45 473 913 26 197 278 19 276 635 19 269 124
Investec plc
Incorporated in England and Wales
Registration number: 3633621
LSE ordinary share code: INVP
JSE ordinary share code: INP
ISIN: GB00B17BBQ50
LEI: 2138007Z3U5GWDN3MY22
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 40
Notice is hereby given that a final dividend number 40, being a gross dividend
of 13.50000 pence (2021: 11.00000 pence) per ordinary share has been declared
by the Board from income reserves in respect of the six months ended
30 September 2022, payable to shareholders recorded in the shareholders'
register of the Company at the close of business on Friday 9 December 2022.
• For Investec plc shareholders, registered on the United Kingdom share
register, through a dividend payment by Investec plc from income reserves of
13.50000 pence per ordinary share
• For Investec plc shareholders, registered on the South African branch
register, through a dividend payment by
Investec Limited, on the SA DAS share, payable from income reserves,
equivalent to 13.50000 pence per ordinary share.
The relevant dates relating to the payment of dividend number 40 are as
follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday 6 December 2022
On the London Stock Exchange (LSE) Wednesday 7 December 2022
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday 7 December 2022
On the London Stock Exchange (LSE) Thursday 8 December 2022
Record date (on the JSE and LSE) Friday 9 December 2022
Payment date (on the JSE and LSE) Monday 9 January 2023
Share certificates on the South African branch register may not be
dematerialised or rematerialised between Wednesday 7 December 2022 and Friday
9 December 2022, both dates inclusive, nor may transfers between the United
Kingdom share register and the South African branch register take place
between Wednesday 7 December 2022 and Friday 9 December 2022, 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 13.50000 pence, equivalent to a gross
dividend of 278.00000 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 16 November 2022
• Investec plc United Kingdom tax reference number: 2683967322360
• The issued ordinary share capital of Investec plc is 696 082 618
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 278.00000
cents per share paid by Investec Limited on the SA DAS share
• Shareholders registered on the South African branch register who are
not exempt from paying the Dividend Tax will receive a net dividend of
222.40000 cents per share (gross dividend of 278.00000 cents per share less
Dividend Tax of 55.60000 cents per share) per share paid by Investec Limited
on the SA DAS share.
By order of the Board
David Miller
Company Secretary
16 November 2022
Investec Limited
Incorporated in the Republic of South Africa
Registration number: 1925/002833/06
JSE share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Ordinary share dividend announcement
Declaration of dividend number 133
Notice is hereby given that final dividend number 133, being a gross dividend
of 278.00000 cents (2021: 230.00000 cents) per ordinary share has been
declared by the Board from income reserves in respect of the six months ended
30 September 2022 payable to shareholders recorded in the shareholders'
register of the Company at the close of business on Friday 9 December 2022.
The relevant dates relating to the payment of dividend number 133 are as
follows:
Last day to trade cum-dividend Tuesday 6 December 2022
Shares commence trading ex-dividend Wednesday 7 December 2022
Record date Friday 9 December 2022
Payment date Monday 9 January 2023
The final gross dividend of 278.00000 cents per ordinary share has been
determined by converting the Investec plc distribution of 13.50000 pence per
ordinary share into Rands using the Rand/Pound Sterling average buy/sell
forward rate at 11h00 (SA time) on Wednesday 16 November 2022.
Share certificates may not be dematerialised or rematerialised between
Wednesday 7 December 2022 and Friday 9 December 2022 both dates inclusive.
Additional information to take note of
• Investec Limited South African tax reference number: 9800/181/71/2
• The issued ordinary share capital of Investec Limited is 308 907 870
ordinary shares
• The dividend paid by Investec Limited is subject to South African
Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as
legislated)
• Shareholders who are exempt from paying the Dividend Tax will receive
a net dividend of 278.00000 cents per ordinary share
• Shareholders who are not exempt from paying the Dividend Tax will
receive a net dividend of 222.40000 cents per ordinary share (gross dividend
of 278.00000 cents per ordinary share less Dividend Tax of 55.60000 cents per
ordinary share).
By order of the Board
Niki van Wyk
Company Secretary
16 November 2022
Investec plc
Incorporated in England and Wales
Registration number: 3633621
Share code: INPP
ISIN: GB00B19RX541
LEI: 2138007Z3U5GWDN3MY22
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares ("preference
shares")
Declaration of dividend number 33
Notice is hereby given that preference dividend number 33 has been declared by
the Board from income reserves for the period 1 April 2022 to 30 September
2022 amounting to a gross preference dividend of 11.44521 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 9 December 2022.
For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of
11.44521 pence per preference share is equivalent to a gross dividend of
235.26659 cents per share, which has been determined using the Rand/Pound
Sterling average buy/sell forward rate as at 11h00 (SA time) on Wednesday
16 November 2022.
The relevant dates relating to the payment of dividend number 33 are as
follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday 6 December 2022
On the International Stock Exchange (TISE) Wednesday 7 December 2022
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday 7 December 2022
On the International Stock Exchange (TISE) Thursday 8 December 2022
Record date (on the JSE and TISE) Friday 9 December 2022
Payment date (on the JSE and TISE) Friday 23 December 2022
Share certificates may not be dematerialised or rematerialised between
Wednesday 7 December 2022 and Friday 9 December 2022, both dates inclusive,
nor may transfers between the United Kingdom share register and the South
African branch register take place between Wednesday 7 December 2022 and
Friday 9 December 2022 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 188.21327 cents per preference share for
preference shareholders liable to pay the Dividend Tax and 235.26659 cents per
preference share for preference shareholders exempt from paying the Dividend
Tax.
By order of the Board
David Miller
Company Secretary
16 November 2022
Investec plc
Incorporated in England and Wales
Registration number: 3633621
JSE share code: INPPR
ISIN: GB00B4B0Q974
LEI: 2138007Z3U5GWDN3MY22
Rand-denominated preference share dividend announcement
Rand-denominated non-redeemable non-cumulative non-participating perpetual
preference shares ("preference shares")
Declaration of dividend number 23
Notice is hereby given that preference dividend number 23 has been declared by
the Board from income reserves for the period 1 April 2022 to 30 September
2022 amounting to a gross preference dividend of 402.51369 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 9 December 2022.
The relevant dates relating to the payment of dividend number 23 are as
follows:
Last day to trade cum-dividend Tuesday 6 December 2022
Shares commence trading ex-dividend Wednesday 7 December 2022
Record date Friday 9 December 2022
Payment date Friday 23 December 2022
Share certificates may not be dematerialised or rematerialised between
Wednesday 7 December 2022 and Friday 9 December 2022, 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 322.01095 cents per preference share for
preference shareholders liable to pay the Dividend Tax and 402.51369 cents per
preference share for preference shareholders exempt from paying the Dividend
Tax.
By order of the Board
David Miller
Company Secretary
16 November 2022
Investec Limited
Incorporated in the Republic of South Africa
Registration number: 1925/002833/06
JSE share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000063814
LEI: 213800CU7SM6O4UWOZ70
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares ("preference
shares")
Declaration of dividend number 36
Notice is hereby given that preference dividend number 36 has been declared by
the Board from income reserves for the period 1 April 2022 to 30 September
2022 amounting to a gross preference dividend of 329.08429 cents 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 9 December 2022.
The relevant dates for the payment of dividend number 36 are as follows:
Last day to trade cum-dividend Tuesday 6 December 2022
Shares commence trading ex-dividend Wednesday 7 December 2022
Record date Friday 9 December 2022
Payment date Friday 23 December 2022
Share certificates may not be dematerialised or rematerialised between
Wednesday 7 December 2022 and Friday 9 December 2022 both dates inclusive.
Additional information to take note of
• Investec Limited South African tax reference number: 9800/181/71/2
• The issued preference share capital of Investec Limited is 26 142 992
preference shares
• The dividend paid by Investec Limited is subject to South African
Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as
legislated)
• The net dividend amounts to 263.26743 cents per preference share for
shareholders liable to pay the Dividend Tax and 329.08429 cents per preference
share for preference shareholders exempt from paying the Dividend Tax.
By order of the Board
Niki van Wyk
Company Secretary
16 November 2022
Investec plc
Incorporated in England and Wales
Registration number 3633621
JSE ordinary share code: INP
LSE ordinary share code: INVP
ISIN: GB00B17BBQ50
LEI: 2138007Z3U5GWDN3MY22
Registered office:
30 Gresham Street, London
EC2V 7QP, United Kingdom
Registrars in the United Kingdom:
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol
BS99 6ZZ, United Kingdom
Company Secretary:
David Miller
Investec Limited
Incorporated in the Republic of South Africa
Registration number 1925/002833/06
JSE ordinary share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Registered office:
100 Grayston Drive
Sandown, Sandton
2196 South Africa
Transfer secretaries in South Africa:
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank
2196 South Africa
Company Secretary:
Niki van Wyk
Directors:
Philip Hourquebie(1) (Chair)
Fani Titi(2) (Chief Executive)
Nishlan Samujh(2) (Finance Director)
Richard Wainwright(2) (Executive Director)
Ciaran Whelan(3) (Executive Director)
Henrietta Baldock(1)
Zarina Bassa(2) (Senior Independent Director)
Stephen Koseff(2)
Nicky Newton-King(2)
Jasandra Nyker(2
) Vanessa Olver(2*)
Khumo Shuenyane(2)
Philisiwe Sibiya(2
) Brian Stevenson(1)
1British
2South African
3 Irish
*Appointed 18 May 2022
David Friedland resigned 5 August 2022
Sponsor:
Investec Bank Limited
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