Good day, ladies and gentlemen, and welcome to Investec's Trading Update. All participants will be in listen only mode. There will be an opportunity to ask questions when prompted. Please note that this conference is being recorded. I'd now like to hand the conference over to Mr.
Fani Tete. Please go ahead, sir.
Hi, good morning. This is Fani Tete, and I'm joined on this call by Henrik Du Toit and Nishlan Samuic. We would like to thank you for joining this conference call to discuss the pre close statement that was released earlier this morning. I will give you a brief overview of our announcement this morning The group remains committed to its objective of simplifying and focusing the business in pursuit of Discipline growth over the long term. The proposed D measure and separate listing of Investec Asset Management is on track With regulatory approval obtained in August as we had announced, the bank and Wealth business is focused on its strategic priorities.
To this end, The following actions have been taken. We have closed Click and Invest as we announced in May. We sold the Irish Wealth An investment business, we've restructured the Irish branch as a consequence of Brexit, and we are running down the private equity direct investments business In Hong Kong, the above actions as well as the proposed demeasure costs are anticipated to negatively impact pretax earnings For the 6 months to September by approximately £42,000,000 This compares to a pretax earnings Drag of £22,000,000 in the prior period on a like for like basis. You will have seen the breakdown in the announcement. After adjusting operating profit in both the current and prior periods for these items, underlying performance of the group is expected to be slightly behind The prior period, although in line on a currency neutral basis, adjusted EPS is expected to be approximately 4% to 7% lower.
As you know, we've always managed the group on the basis of adjusted EPS stripping out the effects of Activities or events that are not of a long term nature or could distort performance. As a consequence of the management actions taken, basic EPS is expected to be approximately 10% to 13% behind the prior period. Turning to the divisional overview, starting off with Asset Management. The Asset Management business is expected to report adjusted operating profit ahead of the prior period. Earnings have been supported by market levels, currency movements and net inflows of £3,300,000,000 to the end of August.
The Bank and Wealth business is expected to report adjusted operating profit behind the prior period. The UK Specialist Banking business is expected to report adjusted operating profit significantly behind. Market variability and persistent uncertainty relating to Brexit And global trade wars have negatively impacted investment banking fees and trading income. However, our lending franchises have continued to perform As expected, the corporate lending and private banking businesses have shown traction in both target client acquisition and loan book growth. The South African Specialist Banking business is expected to report adjusted operating profit ahead of the prior period.
The Private Banking business has continued to see growth in its client base and a reasonable level of activity. Corporate activity levels have been Subdued affected by weak growth and low business confidence, the Wealth and Investment business is expected to report adjusted operating profit behind the prior year, While we've seen reasonable net inflows and growth in AUM, results were impacted by higher costs in the UK to support technology investment and business growth. In closing, despite challenging trading conditions, we remain well positioned We will now hand back to the moderator to take any questions you might have.
Thank you very
much, sir. The first question comes from Harry Potter of Adeel Capital Markets.
Hi, good morning. Thanks very much for the call. Just two questions, please. The first is just a basic one to confirm your Adjusted EPS guidance, does it exclude the restructuring and once the cost that you referred to? Was that only excluded from adjusted operating profit?
And then just a question around the asset growth that we're seeing in South Africa. You have referred to reasonable activity levels, but obviously Asset growth is slower and we are seeing some reasonable asset growth coming out of your peers. Is this a reflection of protecting margins, the growth that we've seen come
Hi, it's Nishlan, and I'll take the first bit of the question. I think as we've highlighted, there were 5 items that We've treated as, call it, non operational items that could be seen as discontinued for the period. We start to reflect in adjusted earnings per share. To ensure that we are comparing like with like, we have restated the comparative To remove the $22,000,000 loss that would have been embedded in those numbers. So in other words, we've picked up the comparative Basic earnings per share in the determination of the negative 4% to 7% on adjusted earnings per share basis.
Thank you. On the second question
Harry, clear on that answer.
Harry, are you clear on the answer?
Yes. So you're saying you have adjusted the base, is that?
That's correct.
Yes. So the comparative base number has Going up. If you look at adjusted earnings, it's now £22,000,000 more in The comparative period.
So the 4.4% to 7% is off that number.
Yes. Okay. Thank you. Yes.
On the second question, as Indicated in the statement, we have had a good client activity and support in the private banking business in South Africa. The corporate bank, however, has seen lower client activity given the level of confidence So overall, we've seen a growth in the loan book, more Support in the Private Banking business, lower activity given Issues around economic growth of under 1% in the country and generally a lack of investor confidence in the country. So really a tale of 2 cities, better support from private clients, more caution from corporate clients.
Okay. And I guess from your own perspective, the appetite in these conditions, would you say you're more keen to protect margin or is it still ultimately calculated?
Look, we try to support our clients as we move forward. We've never as invested tried To compete purely on price, we try to look for bespoke solutions for our clients and offer those to them. So We will always try to do what is best for our clients and obviously protect the business as far as it is possible. But the environment where revenues are much Tougher to come by. It's much more competitive.
No doubt about it.
Okay. Thank you.
We have a question from Edward West of Business Report.
Good morning.
I just wanted a little bit of insight in why the changes in the Irish business?
The Irish business. Okay, we did announce previously That we wanted to simplify the business and we want to run businesses of scale. And Thirdly, with respect to the Irish business, there is a Brexit coming. So we Decided that that business would not have the right scale for us going forward. So we decided to exit firstly the Wealth and Investment Business, which if you look at the numbers that we have shown, we are expecting a gain out of the sale of that business, But we didn't think we would get to scale and the banking business specifically would be affected by Brexit.
So we have decided to Equally wind that down. As we go forward, we will be in jurisdictions and businesses where we can have scale and We can be relevant to our client and we can compete effectively. So that would be the logic behind the restructure of the Irish business Hendrix. I think Edward,
Fully in agreement with Fani, but everything we're doing is in line with the three words we've given you, Simplify focus and growth for the long term. So we're trying to by the time we're demerging the asset management business, Which will hopefully be completed before the end of the financial year. By that time, we will present 2 very clearly focused Simplified businesses which can scale in their areas they decide to compete in. And that's really been the journey or the transition of the last year or so.
Edward, does that answer your question?
Thank you very much.
Thank
Yes. What I would like just to reiterate again is we are on a journey, as Cedric indicated, to Continue to simplify the business is to focus on our core competitive strength where we have built client franchises And we have support of our clients. And when we do demerge the 2 businesses by the end of the first quarter, We do believe that these businesses will have strong trajectories for growth in the long term. As we say, we manage for the long term. In this particular period, as clearly seen in these results, we've had a very good Growth from Asset Management, we've had good performance from our South African business, both the bank and the wealth business.
We have had headwinds in the market facing part of the bank in the U. K, specifically Investment banking fees and trading income have been affected, but this is the season we are in and our peers have been affected similarly. But we've seen in the UK banking environment growth in the private bank and growth In the corporate lending book, so all in all, a tough season, a tough trading environment, But we are on track in terms of our overall strategic thrust and execution.
100%, Fani. And I think I just want to emphasize the two points That's in assets under management across both the asset management wealth platforms, we've grown solidly And in asset creation, I. E, client acquisition or client retention in the banking side, there is a decent story. And hopefully the season will improve and one can then put the scores on the board in the more variable or more volatile parts of the business.
Thank you very much.
Thank you very much, gentlemen. Ladies and gentlemen, at this time, Please note that the call has concluded. Thank you for joining us. You may now disconnect your lines.