| |
Scope of activities |
Activities |
| • |
Portfolio management |
| • |
Stockbroking |
| • |
Alternative investments |
| • |
Investment advisory services |
| • |
Electronic trading services |
| • |
Retirement portfolios. |
|
| |
Target Market |
| • |
High net worth individuals. |
|
| |
Strategic focus |
South Africa |
| We differentiate ourselves through: |
| • |
The quality of investment professionals we employ and the relationships we build with our clients |
| • |
A dynamic and focused investment process that provides consistent and superior returns |
| • |
The provision of innovative investment products and services |
| • |
Leveraging the outstanding opportunities available to our clients within the broader Investec group. |
|
| |
Management structure |
South Africa |
| Head |
Henry Blumenthal |
| Regional head: Cape Town |
Jonathan Bloch |
|
Stephen Glanz |
| Regional head: Durban |
Craig Hudson |
| Regional head: Johannesburg |
Paul Deuchar |
| Regional head: Pietermaritzburg |
Andrew Smythe |
| Regional head: Port Elizabeth |
Andy Vogel |
| Regional head: Pretoria |
Len Olivier |
| Alternative Investments |
Peter Armitage |
| Investment Specialists |
Raymond Goss |
| Operations |
Joubert Hay |
| Finance |
Bella Ferreira |
| IT |
Lyndon Subroyen |
| Risk Management |
Alex Harding |
| Settlements |
Hennie de Waal |
| Compliance |
Bernadette Ghenne |
|
| |
Mission |
South Africa |
| To be the
premier South
African portfolio
management and
stockbroking house |
| |
Overview and financial analysis |
| • |
Operating profit increased by 7.4% to £25.9 million, contributing 6.4% to group profit |
| • |
Since 31 March 2009, private client funds under management in South Africa increased by 33.0% from R85.0 billion to R113.0 billion. |
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| |
Contribution analysis |
 |
|
| |
Operating profit^ – track record |
 |
|
| |
Income statement analysis |
| £’000 |
31 March
2010 |
31 March
2009 |
Variance |
% change |
| Net interest income |
2 392 |
2 051 |
341 |
16.6 |
| Net fee and commission income |
36 852 |
32 100 |
4 752 |
14.8 |
| Principal transactions |
1 023 |
42 |
981 |
>100.0 |
| Other operating income and operating income from associates |
11 634 |
12 044 |
(410) |
(3.4) |
| Total operating income |
51 901 |
46 237 |
5 664 |
12.2 |
| Admin expenses and depreciation |
(26 014) |
(22 135) |
(3 879) |
17.5 |
| Operating profit before goodwill, non-operating items, taxation and after minorities |
25 887 |
24 102 |
1 785 |
7.4 |
| UK and Europe |
11 637 |
12 044 |
(407) |
(3.4) |
| South Africa |
14 250 |
12 058 |
2 192 |
18.2 |
| Operating profit before goodwill, non-operating items, taxation and after minorities |
25 887 |
24 102 |
1 785 |
7.4 |
| Adjusted shareholders' equity* |
20 094 |
17 619 |
2 475 |
14.0 |
| ROE (pre-tax)* |
101.5% |
76.7% |
|
|
| Cost to income ratio excluding income from associates |
64.6% |
64.7% |
|
|
| Cost to income ratio |
50.1% |
47.9% |
|
|
| Operating profit per employee (£'000)* |
67.9 |
56.9 |
11.0 |
19.3 |
|
|
| |
| The variance in operating profit over the year can be explained as follows: |
| • |
The result of the South African Private Wealth business in local currency has been negatively impacted by lower average funds under
management and lower levels of client trading |
| • |
Investec's UK Private Client Stockbroking business, Carr Sheppards Crosthwaite, was sold to Rensburg plc on 6 May 2005. We retain
a 47.1% interest in the combined entity, Rensburg Sheppards plc. Post the 6 May 2005, the results of the combined entity Rensburg
Sheppards plc have been equity accounted and the results are included in the line item 'operating income from associates' (the £11.6 million
income reflected above is post tax of approximately £4.2 million). |
|
| |
Developments |
UK and Europe |
| • |
Rensburg Sheppards plc released its results for the year ended 31 March 2010 on 21 May 2010. Salient features of the results extracted
directly from the announcement released by the company include: |
| |
“Key points: |
| |
– |
Profit before tax of £27.0 million (2009 restated: £30.2 million*) |
| |
– |
Adjusted** profit before tax of £30.2 million (2009 restated: £36.3 million*) |
| |
– |
Basic earnings per share of 45.8 pence (2009 restated: 48.5 pence*) |
| |
– |
Adjusted** basic earnings per share of 50.1 pence (2009 restated: 58.8 pence*) |
| |
– |
Underlying rate of net organic growth in funds under management of 4.9% (2009: 1.9%) |
| |
– |
Group funds under management at 31 March 2010 of £12.90 billion (2009: £10.01 billion). |
|
|
| • |
On 30 March 2010, it was announced that Investec plc and Rensburg Sheppards plc had reached agreement on the terms of a
recommended all share offer under which Investec plc would acquire the entire issued and to be issued ordinary share capital of Rensburg
Sheppards plc not already owned by it. The offer is conditional, among other things, on certain regulatory conditions being fulfilled to the
reasonable satisfaction of Investec and Rensburg Sheppards plc, the passing of resolutions by Rensburg Sheppards plc shareholders and
the sanction of the court. Further details on the proposed transaction can be found in the Scheme Document available on our website. |
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| |
South Africa |
| • |
Global financial markets experienced one of the most impressive 12 month rallies on record as a result of unprecedented fiscal stimulus
initiatives of the major central banks in response to the global economic crisis. South African equity markets followed suit but underlying
investment activity was static in comparison |
| • |
Although overall revenues were lower year on year, the three main frontline business specialties of wealth management, stock broking and
portfolio management performed satisfactorily considering the volatile operating environment over the past year. Operating expenses were
controlled and contributed to the overall performance of the business for the reporting period. |
|
| |
| South Africa: analysis of key earnings drivers (funds under management and inflows) |
| Funds under management as at |
31 March
2010
R’million |
31 March
2009
R’million |
% change |
31 March
2010
£’million |
31 March
2009
£’million |
% change |
| Discretionary |
19 726 |
15 594 |
26.5 |
1 776 |
1 149 |
54.6 |
| Non-discretionary |
93 292 |
69 386 |
34.5 |
8 397 |
5 111 |
64.3 |
| Total |
113 018 |
84 980 |
33.0 |
10 173 |
6 260 |
62.5 |
|
| |
| |
| Net inflows/(outflows) at cost over the period |
31 March
2010
R’million |
31 March
2010
R’million |
| Discretionary |
537 |
(897) |
| Non-discretionary |
(999) |
(2 097) |
| Total |
(462) |
(2 994) |
|
| |
Further analysis of South African funds under management |
 |
| |
Outlook, risks and uncertainties |
South Africa |
| • |
We are starting to see early but selective signs of renewed private client investor confidence as financial markets (excluding parts of the
Eurozone) continue to stabilise on improved economic and corporate news flow |
| • |
Brokerage execution rates are, however, being negatively affected by a combination of new discount online dealing platforms and more
intense competition for traditional private client stockbroking market share |
| • |
Annuity income from the discretionary portfolio management speciality should benefit from higher base asset values owing both to higher
share price levels relative to last year and consistent performance |
| • |
General costs are expected to rise above the rate of inflation in the new financial year as the business invests in new technology and
additional headcount in the IT division to meet increased operational requirements related to strategic projects and general client service
delivery initiatives. The benefits of this investment should become apparent in the short term through increased business efficiencies and
a more scalable product and service distribution platform. |
|
/ Divisional review / Private Wealth