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Investec Wealth & Investment profit dips on restructure costs

Investec Wealth & Investment profit dips on restructure costs

Investec's wealth arm saw a 4.2% fall in profit on restructuring costs, while its specialist banking arm saw a 30% slump in earmings. However, it funds business had a record year

In the 12 months to 31 March 2012 profit fell from £40.4 million to £38.7 million. The group attributed the fall to restructuring and sales of certain operations in the UK and Europe.

However, the division benefitted from higher average funds under management and a full contribution from the acquisition of Rensburg Sheppards, which became effective in June 2010. It also got a boost from the purchase of Williams de Broe owner Evolution, which provided a £7 billion increase in assets.

Overall assets under management in the division rose from £29.4 billion to £34.8 billion, with currency and market volatility holding back further growth.   

Meanwhile the firm's asset management business, Investec Asset Management, registered a 5% rise in operating profit from £127.3 million to £133.7 million, benefiting from higher average funds under management and a ‘competitive’ investment performance. It recorded net inflows of £5.2 billion with funds under management rising from £58.8 billion to a record £61.5 billion.  

The group said flows were generated across all seven client groups worldwide, and across its balanced range of seven distinct investment capabilities. Over the past three years, the firm has seen net inflows average in excess of £5 billion per annum and the asset management business now accounts for 37% of group profits versus 29% in the previous year.

Investec Asset Management chief executive Hendrik du Toit (pictured) said: 'We enter our third decade with confidence. Our focus remains unchanged: to manage our clients’ investments to the highest standards possible, to ensure appropriate alignment with the interests of our clients, to remain open to sensible innovation, and to generate investment insights to support our delivery to clients.

He added: 'The combination of our emerging market roots and our global footprint positions us well for the future. We have a strong culture, a broad range of investment capabilities and a stable and experienced leadership team. This has helped us navigate through these volatile times whilst maintaining our long-term focus.'

The firm's UK business fared particular well with assets within the Oeic business passing £10 billion on net inflows of £725 million. The managing director of the business, David Aird, said Alastair Mundy's Cautious Managed and Special UK Situations funds, along with emerging market debt, UK Smaller Companies and its mulit-asset proected funds were the major drivers of inflows through the course of the year.'

Going forward Aird said the UK asset management arm intends enhance its income proposition. 'The need for income is not going to go away and it's an area we are looking to build upon.'  

Investec believes the restructure will leave the wealth and business well placed for the future. ‘[The group] continues to realign its business model towards less capital intensive activities by building strong asset management and wealth management businesses thereby growing its annuity net fee and commission income,’ it said in an accompanying statement.

Banking woes

However, Investec's specialist banking division struggled in the tough conditions with profit plunging by 30.2% to £186.2 million.

The group said while the UK banking division benefited from improved margins, investment income had been negatively impacted by fewer realisations in the fixed income business. In addition, in the prior year income earned on debt buy-backs was not repeated in the current year.

Commenting on the overall numbers Investec chief executive Stephen Koseff  said: ‘These results are disappointing but reflective of very challenging market conditions. Asset management continued its strong momentum. Net interest and net fee and commission income has increased across all businesses and geographies.

He added: ‘Our main businesses have continued to deliver with the overall picture being masked by legacy issues and a weaker performance from our investment activities. Our competitive position is strong and our platforms in place. We are well positioned to benefit from an economic recovery and the continued realignment of the global financial landscape’

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Alastair Mundy
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