Investec plc Reports Rise In Profits

Investec (LSE: INVP) — the international specialist banking and asset management group — published an interim management statement this morning, covering the nine months to 31 December 2013.  Its share price is up 2.6% at the time of writing.

The statement manages expectations at the outset by noting that the group’s overall results have been “negatively impacted” by adverse movement in the exchange rate for Rand-to-Sterling over the reporting period.  

Total group operating income (excluding depreciation on operating leased assets) was 1% ahead of the same period in the previous year, and impairment losses on loans and advances decreased by 26%.  However, there was a 2% rise in operating costs versus the prior year.

Operating profit (before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests) rose 12% over the same period last year, and is actually 25% up on a “currency neutral” basis.

The company reports that its Asset Management results were “moderately ahead” of the previous year, and that it’s Wealth & Investment results had “increased substantially”.  Both divisions were said to have benefited from higher levels of average funds under management and from net inflows of £2bn and £1.1bn, respectively.  

Investec also reported growth in the operating profit in its Specialist Banking business, attributing the increase to a “strong performance” at its South African banking business and an “improved performance” in the UK arm.

Looking ahead, Investec says that it has just over £8bn in cash and near-cash available to support its on-going operations. These include the transformation of its Australian banking business into a “boutique” operation that will focus on a range of corporate finance services.

And further funds may become available if Investec disposes of Kensington, its UK intermediary mortgage business, although a sale is still just at the “expression of interest” stage, with no certainty that it will happen.

Despite this morning’s rise, Investec’s share price is down almost 16% on this time last year, trailing even the FTSE 100’s unimpressive 2.8% rise over the same time. The story over five years is slightly better, however, with Investec’s share price gaining 64%, versus the FTSE 100’s 51%.