Investec on track for demerger. The specialist bank and asset manager says it delivered a sound performance

notwithstanding a challenging operating environment.

Fani Titi and Hendrik du Toit have presented Investec's first results since

they took over at the helm of the specialist bank and asset manager, replacing

Stephen Koseff and Bernard Kantor. And they say that they are on track for the

demerger and separate listing of Asset Management, scheduled for next year.

Reporting back for the six months to end-September, the joint CEO's said the

group delivered a sound performance in the face of rising US interest rates,

the threat of trade wards, weak growth in SA and Brexit-related uncertainty in

the UK.

Its Specialist Banking division was the standout performer over the period,

increasing operating profit by 18.8% to 245.4 million. Operating profit in SA

increased by 4.2% as the weak economy and political uncertainty resulted in

subdued activity. However, its UK and Other business grew operating profit by

96%, reflecting a big decrease in impairment charges due to no longer

incurring substantial losses on its legacy portfolio. It said earnings were

also supported by strong growth in net interest income and fee income.

Among its other divisions, Asset Management grew operating profit by 10% to

91.5 million as net inflows of 4.1 billion helped grow total funds under

management to 109.2 billion. Operating profit at its Wealth & Investment

division fell 6.3% to 46.4 million as it hired more staff for IT initiatives

and compliance requirements, and recruited more experienced portfolio managers

and financial planners to support future revenue growth.

Group operating profit increased by 14.2% to 359 million and was 17.6% higher

on a currency neutral basis. It said its results were negatively affected by

the rand, which was on average 4.1% weaker against the pound over the period.

Its SA businesses reported a 5% improvement in operating profit, while the

combined UK and other businesses grew operating profit by 40.2% in pound

terms.

Adjusted earnings before goodwill, acquired intangibles and non-operating

items increased by 8.2% to 265.3 million and were up 11.1% in neutral

currency. Adjusted EPS were up 6.4% to 28.3p and rose 9.4% on a currency

neutral basis. It's raised its interim dividend by 4.8% to 11p.

The outgoing executives have handed over a resilient business with positive

momentum and good growth potential," joint CEOs Fani Titi and Hendrik du Toit

said in a statement. "It is now up to us to implement our strategy of

simplification and greater focus, involving the demerger and separate listing

of the Asset Management business and the positioning of the Specialist Bank

and Wealth & Investment businesses for sustainable long-term growth."

Invested Limited shares closed 3.1% lower at 89.13 rand yesterday. Investec Plc

shed 3% to 89.25 rand.

Investec one of JSE's big losers on Brexit deal concerns, despite reasonable

half-year numbers. Off 3% (below 90 rand again). Yet share has been a perennial

underperformer. In pounds () the share has gained about 2.8% annually over

5yrs, in rand 5.1% and in dollars ($) -1.9%.

-- David Shapiro (@davidshapiro61) November 15, 2018