Investec overcomes challenging environment in UK and SA to deliver increase in profit of 9.4%
JOHANNESBURG - Investec, the financial services group, prevailed against a challenging environment both in South Africa and in the UK to deliver a £664.5million (R12.1billion) adjusted annual operating profit that's up 9.4percent year-on-year amid weak economic growth in both of its core banking markets.
The group said: “Overall group results have been negatively impacted by the depreciation of the average rand-pound sterling exchange rate of 4.8percent over the year. Key earnings drivers have been negatively impacted by the depreciation of the closing rand-pound sterling exchange rate of 13.1percent over the year.”
Late last year, Investec plc and Investec Limited announced that the Investec Asset Management business would become a separately listed entity expected to be operational in the second half of the current year.
Group joint chief executives Fanie Titi and Hendrik du Toit said in the results announcement for the year to March 31 that the group was on track with the proposed demerger and separate listing of Investec Asset Management, which should enhance the long-term prospects of both businesses.
“We are confident that we have positioned the businesses to ensure they meet their growth objectives and deliver long-term shareholder returns.
"The past year has seen a smooth leadership transition combined with a strategic review of the group,” they said.
Investec also announced it would close its automated advice platform Click & Invest after it made an underlying operating loss of £12.8m, potentially puncturing the hype around such products among big banks trying to keep pace with digitisation and fast-changing customer demands.
“We went into the space believing the market was ready and we would have significant support,” said Titi.
Investec took a £6m write-down as a result and around 54 jobs were at risk.
The group saw trading income arising from customer flow decreased by 12.7 percent to £120.7m compared with £138.2m realised in the previous period, reflecting subdued client flow trading levels given the uncertainty in both geographies.
A similarly lacklustre performance was realised in the group's investment income, which decreased to £50m compared to £130m in 2018, again reflecting a weak performance from the group's listed and unlisted investment portfolio, as well as from the investment property portfolio in South Africa.
“Strong annuity fees from the asset and wealth management businesses, as well as a good performance from the UK investment banking business, was offset by lower performance, brokerage and deal fees in the South African businesses,” the group noted.