The results of InvestC Group should not have come as a surprise, as management had already told investors almost two months ago – to be precise – March 18 – that by March 2022, earnings would be close to double that of the previous fiscal year. Still, the official statistics make for an interesting read.
Adjusted earnings per share rose nearly 91% to 55.1 pence in March 2021 from 28.9 pence, Group CEO Fanny TT commented in his results presentation that earnings came in at the top of the guidelines issued after the first 11 months of the fiscal year.
While TT has presented a list of things that have contributed to the very strong recovery of Investech’s fortunes, a look at the numbers reveals that it is a significant change in the UK economy that has boosted profits.
Investec plc’s operating profit increased a whopping 138% from 6 126 million to around মিল 300 million.
SA operations also performed well, but Consec Ltd’s consistent operating profit growth was 54% (£ 387 million, compared to £ 252 million the previous year). However, one should keep in mind that last year a rather strong exchange rate slashed the SA figures, the Investec Group reported aggregate figures in Pound Sterling.
Group CFO Nislan Samuj noted that the UK economy has recovered surprisingly quickly since the relaxation of the Covid-19 restrictions.
“The UK economy is surpassing pre-epidemic levels,” he said, but warned that the extremely strong growth seen last year is expected to slow due to inflationary pressures. Investec expects the UK economy to grow at around 4% in 2022 and 2.2% in 2023.
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The SA economy has also recovered from the catastrophe of 2020, but has yet to recover to pre-epidemic levels. Samuj indicated in his presentation that the investment has increased by 1.8% in 2022 and 2% in 2023.
SA activities are still generating most of Investec’s profits, but economic growth forecasts in the UK vs. SA indicate that this may change soon.
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TT noted that the group’s results were ahead of pre-epidemic 2019 figures. Statistics show that earnings per share are slightly better than in 2019, rising from 52.5 pence in March 2019 to 55.1 pence in the last year ending March 2022.
Indicating further improvement, TT said that Investech has made good progress towards increasing its equity return from 12% to 16%. It dropped to just 6.6% in FY2021 and recovered to 11.4% in the last fiscal year.
“Every business is generating more returns than the cost of capital,” says Titi. He further mentioned that there is an opportunity to manage the capital better if some units are sitting with extra capital.
“South Africa has strong liquidity and capital to support our growth with significant capital options. We are committed to our medium term goals.
“The group is well positioned to serve its carefully selected client base and continues to navigate the uncertain perspectives arising from the ongoing inflationary pressures and the economic impact of the invasion of Ukraine,” he said.
The two listed Investec entities have a list of shares that investors expect when they hit the Covid-JSE on March 19, 2020, both of which tripled from their lows.
The share price of Investtech Limited then reached the low of R30 and was restored to its current price above R90. Investec plc runs from R28.52 to R89.
In addition, shareholders received bonuses when Investec released its assets management company, Ninety One, to its shareholders.
Titi noted that the distribution of ninety-one stacks is set to pay back billions to shareholders.
“With a 15% pending allotment of ninety-nine percent to shareholders, InvestC will return to shareholders approximately £ 1.6 billion or R32 billion cumulative value through demergers and distributions upon successful completion,” he said, referring to the May 16 price based on Ninety One’s closing shares.
The Investec board also proposed a final dividend of 14 pence per share for a total annual dividend of 25 pence, which is almost double the previous year’s 13 pence.