Investec Share Price Slumps on Profit Warning

on Sep 18, 2013

iNVEZZ, Wednesday, September 18: Investec Plc.’s (LON:INVP) share price yesterday slumped after the financial services provider listed in London and Johannesburg said that adjusted earnings per share for the six months ending September 30 could fall by as much as 10 percent.

The group, which has a bank and money manager in the U.K and South Africa, said in a statement that profits were expected to plummet due to a weaker rand, a loss at its Australian unit and poor deal flow in the UK.
Investec, which reports in sterling, generates more than 60% of operating profits from South Africa. British operations account for about a third of the group’s profits.

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A 16-percent fall in the rand since April means that loans, deposits and assets under management for the half-year would all come in lower when Investec reports results in November, The Times noted.
Lending dropped six percent to £17.4 billion in the five months to the end of August and assets under management fell four percent to £106.2 billion. Impairments at a group level are likely to decrease by a quarter, while expenses are expected to increase moderately, the company said in the trading update.

“The period under review was again characterized by volatility in the macro and geopolitical environment, all of which will have an impact on the group’s expected results,” Investec said.
**Restructuring Australian Unit**
The group added that it was restructuring its Australian unit, which contributed 11 percent of total revenue last year, to focus on private banking, corporate advisory and property funds. The restructuring involves cutting 15 percent of Investec’s Australian staff, or 70 employees.

Investec’s Australian business had swung to profit in the year to March but is expected to post a loss in the interim period to the end of September due to restructuring and a rise in impairments. Chief Executive Stephen Koseff also said at an investor briefing that Investec had taken a $9 million hit on an Australian loan.
“There is practically no growth. The market was pricing in at least some modest improvement in operating performance,” Reuters quoted Khaya Gobodo, portfolio manager at asset manager Afena Capital, as saying. “If Australia was bad but other bits were very good, we would be fine. Australia is a bit of a surprise and the fact that the UK has gone backwards is also not good.”

!m[First-half Profits May Fall 10% on Weaker Rand and Australian Loss](/uploads/story/5543/thumbs/pic1_inline.jpg)
The Investec share price yesterday closed 3.6 percent lower at 425.80p in London, the biggest daily fall since June 5, after having slid as much as seven percent earlier in the day. The fall exceeded the 1.8 percent drop of the FTSE 350 Banks Index. In Johannesburg, Investec shares fell the most in almost three weeks, closing 3.1 percent lower at 67 rand.
The stock, which has gained 14 percent this year, has outperformed bigger rivals such as FirstRand and Standard Bank even though the Anglo-South African financial services group has been hit harder by the weakness in the global economy, Reuters said.
**In today’s London trading, Investec shares were down 1.48 percent at 419.50 as of 11:39 BST**
**As of 11:16 BST buy Investec shares at 420.30p**
**As of 11:16 BST sell Investec shares at 420.00p**


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