Investec boosts guidance after profit more than doubles and sheds 15 per cent of Ninety One
Investec today said its recovery continued in the first half of its new financial year, as profit more than doubled from the same period a year earlier.
The FTSE 250 firm said this rebound was driven by a strong earnings recovery on increased client activity across the business and lower funding costs.
As a result of the surplus capital from increased earnings, the FTSE 250 firm announced it would offload 15 per cent of its 25 per cent stake in asset manager Ninety One in shares to shareholders.
Adjusted earnings per share for the six months ended 31 September was 26.3p, 11.2 per cent higher than the previous year, and in line with its recently raised guidance of between 26 and 26.5p.
First half earnings shot up 30.5 per cent, which the Anglo-South African firm said was driven by a combination of strong client franchises and improved market conditions.
Adjusted operating profit jumped 128.6 per cent to £325.7m, up from £142.5 in the same period a year earlier.
As a result, Investec declared an interim dividend of 11p – double what it paid in the prior period, and resulting in a payout ratio of 41.8 per cent.
The FTSE 250 firm also announced it would distribute 15 per cent of its holding in Anglo-South African investment manager Ninety One, formerly known as Investec Asset Management, to shareholders – the amount it said was “surplus to our capital requirements”.
Investec’s board resolved to distribute the 15 per cent holding in shares to shareholders, but retain approximately 10 per cent interest.
“We’re in the process of reducing our group portfolio to add further value to shareholders, now that we’ve seen a recovery in the level of uncertainty in the market, paired with our significant earnings recovery,” CEO Fani Titi told reporters on a call.
“Due to that recovery, this 15 per cent was the surplus capital we could deploy, and we remain flexible about what we will do with the remaining 10 per cent in the future.”
Looking ahead, the firm updated its full year adjusted earnings per share guidance to between 48p – 53p, up from 36p – 41p at its full-year results.
“We maintain a level of conservatism for factors that remain difficult to model,” Titi told reporters, highlighting the firm’s caution around the remaining uncertainties in the economy’s recovery from Covid and expected market volatility.
“The changes made to simplify and focus the group are bearing fruit, positioning us well for the future,” Titi added.
Investec’s wealth and investment funds under management increased 8.6 per cent to £63bn, up from £58bn six months earlier, which the wealth manager said was driven by a combination of £1.5bn net inflows, market recovery and good investment performance.
Adjusted operating profit from its wealth and investment arm increased 41.4 per cent to £57.7m from £40.8m a year earlier – to which its UK business contributed more than its South African, at £42.2m, a jump of 46.1 per cent on the year.
Adjusted operating profit from its specialist banking division surged 143.8 per cent to £257.9m, up from £105.8m a year earlier. Of this total, the UK and “other” locations contributed £84.5m – a huge increase from its £12.9m performance the year before, while South Africa contributed £173.4m, up from £92.9m in the same period a year earlier.