Statutory profit down on constant currency basis at Investec

The FTSE 250 firm noted that was a decrease of 3.5% on a currency neutral basis.

Its effective tax rate amounted to 9.6%, down from 18.5% in the prior year, which was mainly down to the lower rate in South Africa following the release of provisions no longer required.

Statutory adjusted earnings per share before goodwill, acquired intangibles and non-operating items increased 10.1% to 53.2p from 48.3p for the 12 months to 31 March - an increase of 4.1% on a currency neutral basis.

Looking at its ongoing operations, Investec said ongoing operating profit increased 5.6% to £701m - an increase of 1.2% on a currency neutral basis.

Ongoing adjusted earnings per share before goodwill, acquired intangibles and non-operating items increased 13.3% to 61.3p from 54.1p, which was an improvement of 8.1% on a currency neutral basis.

Annuity income as a percentage of total operating income amounted to 76.3%, up from 72.0% year-on-year.

The company’s credit loss charge as a percentage of average gross core loans and advances amounted to 0.26%, down from 0.29% and remaining at what the board called the lower end of its long-term range, despite an increase in impairments.

Third-party assets under management increased 6.5% to £160.6bn, or an increase of 6.2% on a currency neutral basis.

Customer deposits were ahead 6.5% to £31.0bn, or up 5.9% at constant currencies.

Core loans and advances rose 11.6% to £24.8bn, or an increase of 11.0% on a currency neutral basis.

The board said the UK legacy portfolio also continued to be actively managed down, with the portfolio reduced to £313m, from £476m at 31 March 2017, through asset sales, redemptions and write-offs.

Investec said the legacy business reported a loss before taxation of £93.5m, widening from £64.6m year-on-year, reflecting an increase in impairments for accelerated exits anticipated to occur on certain legacy assets.

On the balance sheet, the firm said its capital remained in excess of current regulatory requirements.

The group was said to be “comfortable” with its common equity tier 1 ratio target at a 10% level, as its current leverage ratios for both Investec Limited and Investec plc were above 7%.

Both Investec Limited and Investec plc reported a common equity tier 1 ratio ahead of that target.

Liquidity remained “strong”, the board added, with cash and near-cash balances amounting to £12.8bn.

The board proposed a final dividend of 13.5p per ordinary share, equating to a full-year dividend of 24.0p - up from 23.0p in 2017.

That resulted in a dividend cover, based on the group's adjusted earnings per share before goodwill and non-operating items, of 2.2x, consistent with the group's dividend policy.

The dividend increase of 4.3% was in line with the currency neutral increase in adjusted earnings per share of 4.1%.

“Operating performance during the year was underpinned by sound growth in loans and funds under management and a solid recurring income base, despite a challenging backdrop in South Africa and the UK,” said chief executive Stephen Koseff.

“The Wealth & Investment and Asset Management businesses generated substantial net inflows, with Asset Management exceeding £100bn of funds under management for the first time.”

Koseff said the Specialist Bank continued to see “good” client acquisition in its core franchise businesses, which Investec had built and developed over a number of years.

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

Managing director Bernard Kantor added that over the last 40 years the company had been building a platform that was capable of being leveraged for further growth.

“Investec is now a meaningful player across many business areas, both in the UK and South Africa, and we believe the platform is robust, relevant and well positioned for future value creation.

“We are confident that Hendrik du Toit and Fani Titi, as joint chief executives from October, will lead Investec to new successes for the benefit of shareholders and all our stakeholders.”