Home base keeps Investec on rise
May 16, 2008
By Mzwandile Jacks
Johannesburg - Investec yesterday reported a 15 percent surge in operating profit for the year to March, giving credit to a diversification strategy that was resilient to global economic shocks.
However, the London- and Johannesburg-listed private and investment banking company delivered results that missed expectations because of US write-downs.
Investec said it had taken a mark-to-market write-down of £49 million (R722 million) against US positions because of rating downgrades and the US house price performance.
In the period under review, US principal finance activities - structured finance in the US - had been negatively affected by credit issues and the liquidity crisis that arose from that country's subprime issues.
Bernard Kantor, Investec's managing director, told Business Report in an interview that the reason behind the company's overall strong performance was its good geographical spread.
"We can cope with difficult times. And we have a seasoned management team, which has been with the company for years," Kantor said.
Pretax profit lifted to £537.7 million. According to a Reuters poll, this growth was 3 percent lower than expected.
The Reuters estimate said the consensus forecast was £551 million in pretax operating profit. Adjusted earnings per share rose by 6.8 percent to 56.9p.
The board proposed a final dividend of 13.5p, bringing the total annual dividend to 25p.
This is an 8.7 percent increase in total.
A Johannesburg-based analyst said the results were a mixed bag of performances.
"They were good in South Africa and not that great in the UK because of the slowing economy there," he said.
South Africa contributed 63 percent of total operating profit to the group.
It posted a 26.5 percent increase in operating profit before goodwill, non-operating items and taxation.
The company said it had retained all its major clients in South Africa and the total value of corporate finance transactions had increased to R113 billion from R52 billion.
However, trading in South Africa was expected to soften in the near term.
Investec said there was a high level of uncertainty among private client investors and traders because of global financial market instability.
In addition to tight credit market conditions, the company said, consumers and investors alike were facing various challenges, in both new and continuing forms, such as the weak rand, local power outages, high interest rates and weakening house prices.
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