Investec warns of dampened profits

Investec warns of dampened profits

Investec is expecting its profits to drop because of "challenging market conditions", the group has warned.

In a trading update, published this morning (September 20), the company said its the lower profits were also caused by “management actions” which were set to hit its pre-tax profits by £42m.

Investec said those "actions" included a focus on "strategic priorities” — such as closing its Click and Invest robo-advice service — to cut costs.

The company announced it was closing its robo-advice business following two years of losses in May this year, while company results showed the service had lost £12.8m in the year to March.

Other cut-costing actions pursued by Investec included closing its private equity investments business in Hong Kong, a restructuring of its Irish branch due to Brexit and the sale of its Irish wealth and investment business.

In May it was announced Brewin Dolphin would pay £37.3m for Investec’s Irish business.

The group’s proposed demerger — to spin off its UK asset management business — is also anticipated to negatively impact pre-tax earnings, although the update stated the move and separate listing of Investec Asset Management was on track.

Investec’s asset management branch fared better than other sections of the group, with assets under management jumping 8.9 per cent to £121.3bn and a higher expected adjusted operating profit than the previous period.

According to the update, this good performance was supported by market levels, currency movements and net inflows of £3.3bn.

By comparison, higher costs in the UK involving technology and business growth have led to the Wealth and Investment business being expected to report operating profit below the previous period despite an increase in assets under management of 2.2 per cent to £56.4bn.

The update said: “In spite of challenging trading conditions, the group remains well positioned for the long term and continues to concentrate on the execution of its strategy of simplification, focus, and disciplined growth.”

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