Investec Limited (Botswana) – Pre-close trading update and trading statement

Investec today announces its scheduled pre-close trading update for the interim period ending 30 September 2022 (1H2023). An investor conference call will be held today at 09:00 UK time /10:00 South African time. Please register for the call at www.investec.com/investorrelations.

Commentary on the Group’s financial performance in this pre-close trading update represents the five months ended 31 August 2022 and compares forecast 1H2023 to 1H2022 (30 September 2021).

1H2023 earnings update and guidance

For the six months ending 30 September 2022, the Group expects:

• Adjusted operating profit before tax between £372.6 million and £406.2 million(1H2022: £325.7 million).
• The UK business’ adjusted operating profit to be at least 20% higher than prior period (1H2022: £133.8 million).
• The Southern African business’ adjusted operating profit to be at least 10% ahead of prior period in Rands (1H2022: R3 828 million, £191.9 million).
• Adjusted earnings per share between 30.0p and 33.0p (or 14% to 25% ahead of prior period) (1H2022: 26.3p).
• Basic earnings per share between 46.5p and 51.p (or 84% to 104% ahead of prior period) (1H2022: 25.0p), positively impacted by the gain on the implementation of the Ninety One distribution in May 2022.
• Headline earnings per share between 30.0p and 34.0p (or 21% to 38% ahead of prior period) (1H2022: 24.7p).
• ROE to be within the Group’s FY2024 target range of 12% to 16%.

The above expectations are predicated on the following year to date performance:

The operating performance reflects the benefits from continued strategic execution and the diversity in the Group’s revenue streams. The prevailing uncertain and volatile macro environment has had a negative impact on certain market facing businesses.

Pre-provision adjusted operating profit increased, supported by continued client acquisition, positive effects from rising global interest rates and higher average advances.

• The positive revenue trajectory experienced in the last financial year continued. Net interest income benefitted from higher average lending books and higher interest margin given the rising interest rate environment. Non-interest revenue growth was underpinned by increased client activity, higher lending turnover and net positive contribution from investment income, partly offset by lower fees from some of our market facing businesses.
• Fixed operating expenditure increased, driven by inflationary pressure on salaries, investment in technology and normalisation of certain business expenses as COVID-19 related restrictions were removed. Variable remuneration grew in line with revenue.

The cost to income ratio improved as revenue grew faster than costs and is expected to be within our FY2024 targets.

In line with the guidance provided in May 2022, the credit loss ratio normalised towards the through-the-cycle range. This is largely driven by the deterioration in the macro-economic outlook and limited specific impairments, partly offset by higher recoveries in South Africa.

Post-model overlays have been maintained.

For the five months period ended 31 August 2022:

• The Wealth & Investment business FUM declined by 2.7% to £61.7 billion, driven by market volatility which was partly offset by net inflows of £48 million (discretionary net inflows: £324 million and non-discretionary net outflows: £276 million).
• Within Specialist Banking, core loans grew by 7.8% annualised to £30.9 billion, driven by corporate lending in both geographies and residential mortgage growth predominantly in the UK.

The Group is well capitalised with strong liquidity, above Board approved minimums, and is well positioned to continue to support its clients and pursue growth opportunities in line with our strategic objectives. Investec remains committed to the achievement of its medium-term targets.

The group distributed 15% of Ninety One on 30 May 2022, retaining a 10% interest.

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