| Wed 17 Sep 2008, 13:00 | | RMH - RMB Holdings Limited - Summarised Audited R |
|
RMH
RMH
RMH - RMB Holdings Limited - Summarised, Audited Results Announcement And Cash
Dividend Declaration For The Year Ended 30 June 2008
RMB Holdings Limited ("RMBH")
Registration number 1987/005115/06
Share code RMH & ISIN code ZAE000024501
SUMMARISED, AUDITED
RESULTS ANNOUNCEMENT AND
CASH DIVIDEND DECLARATION
FOR THE YEAR ENDED 30 JUNE 2008
OVERVIEW OF RESULTS
A year ago, in the 2007 report to shareholders, we drew attention to the turmoil
that had been visited upon global financial markets. We highlighted that the
resultant contagion would also impact on South Africa and that given the
challenges ahead, a group such as ours would need to proceed with
circumspection.
In the year to 30 June 2008, global financial markets continued to experience
unprecedented turmoil, with significantly differing viewpoints as to how long
this will last and what still lies beyond the horizon. The on-going stress in
the international credit markets continued to create weakness and volatility
while higher inflation, resulting in slowing economic growth, raised recession
concerns in some of the major industrialised economies.
In South Africa, inflation continued to rise, mainly driven by energy and food
prices. This, combined with a cumulative 250 basis point increase in interest
rates (on the back of a similar rise in the previous year), put severe strain on
consumers. As a result, retail asset growth slowed and bad debt levels increased
which, as expected, negatively impacted retail lending portfolios.
Corporate demand for credit continued to show resilience with capital
expenditure, infrastructure development and corporate action providing good
growth opportunities for the Group`s corporate and investment banking divisions.
Certain segments within the SME space are feeling the impact of the credit
cycle, however large corporate balance sheets remain strong and relatively under
leveraged.
The local equity, currency and interest rate markets were characterised by
increased activity which assisted the fixed income and proprietary trading areas
of the Group and increased trading volumes and structuring opportunities. Severe
dislocations in the international equity markets resulted in significant losses
in FirstRand`s international trading portfolios.
The insurance businesses showed good earnings growth despite tough conditions
characterised by lower equity markets and increased interest rates. Given Group
practice to invest significantly all of the capital deployed in our assurers in
cash and near-cash instruments, they were largely spared the capital decay
experienced by their peer group.
In the main, the Group was able to avoid the contagion arising from this
unsettled financial environment. However, as discussed in our review of the
outcome at the FirstRand Banking Group, we were unable to isolate the greater
group results from two specific factors, namely:
* A dramatic increase of impairments in its retail lending operations; and
* Trading losses arising from a particularly severe dislocation in international
equity markets.
The severity of these two factors resulted in the first ever year on year
decline in earnings reported by RMBH to our ordinary shareholders, namely:
%
change on
Rm prior year
Attributable earnings 4 122 -
Headline earnings 3 714 (5)
Normalised earnings (unaudited) 3 577 (10)
On a per share basis this translates to:
Cents change on
per share prior year
Attributable earnings 345,9 (1)
Headline earnings 311,7 (6)
Normalised earnings (unaudited) 297,5 (11)
Note: The difference in the percentage change in the per share calculations
arises as a result of the fresh issue of RMBH shares during the year to fund
part of the Discovery acquisition.
SOURCES OF INCOME
Predominantly sourced from Southern Africa, our well-diversified income stream
is drawn from the full spectrum of financial services:
GROUP CAPITAL POSITION
At the centre, RMBH has relatively little borrowings. At the end of June 2008
our borrowings amounted to some R1,2 billion (2007: R0,4 billion), directed
largely at the emerging markets portfolio and funding raised for the Discovery
acquisition.
At present the only material funding requirement identified for RMBH in 2009 is
some R150 million required to support OUTsurance`s international expansion. We
have sufficient banking facilities available to meet this. We do not foresee any
further capital requirements from the other companies in which RMBH is invested.
The intrinsic value of the Group`s investment portfolio was not spared the
decline equity markets experienced during the period under review. The values at
year end may be summarised as follows:
2008 2007 %
As at 30 June Rm Rm Change
Market value of listed interests
(FirstRand, Discovery, Glenrand MIB) 25 790 38 353 (33)
Director`s valuation of unlisted
interests
(OUTsurance, RMBSI) 3 128 2 769 13
Net cash resources/investments (527) 283 -
Total intrinsic value 28 391 41 405 (31)
Per RMBH share (cents) 2 348 3 486 (33)
At 30 June 2008 RMBH`s market capitalisation amounted to R25,4 billion or 2 100c
per share, (2007: R39,0 billion) representing an 11% discount (2007: 6%) to the
group`s underlying
intrinsic value.
Dividend Payment
The Board has resolved to declare a final dividend of 72,5 cents per share
(2007: 80,0 cents).
Such final dividend, together with the interim dividend of 69,0 cents brings the
total dividends for the year ended 30 June 2008 to 141,5 cents (2007: 141,5
cents). This represents a dividend cover ratio (on normalised earnings) of 2,1
times (2007: 2,4 times).
OUTLOOK FOR THE COMING YEAR
We expect that global and local capital markets will continue to see unusually
high levels of uncertainty and conditions for the South African consumer will
remain difficult. It is anticipated that credit market conditions will continue
to be challenging. Factors such as the impact of the recent electricity price
increases and the new municipal rates structures currently being introduced will
add further pressure to consumers` cash flow.
At FirstRand:
* The Banking Group will continue to actively manage its credit portfolio in the
light of strained macro-economic conditions. The focus is on the appropriate
level of risk appetite that is set in origination strategies and the
implementation of credit portfolio hedges where appropriate. Stable or possibly
declining interest rates are expected to provide some support to improvements in
credit conditions in the second half of the year; and
* Momentum Group will continue to experience the effects of continuing
investment market volatility. New business volumes and the retention of existing
clients will remain under pressure as the levels of disposable income continue
to decline. The good new business growth experienced over the past few years,
together with the ongoing product, channel and geographic diversification, and
recent improvements in relative investment performance, should benefit
Momentum`s future earnings growth.
We believe that the South Africa interest rate cycle may have reached its peak,
but it is difficult to predict or time the end of the current credit cycle. Our
group is actively managing its businesses to ensure that they are well
positioned to benefit quickly as the cycle improves.
Of our other investments, both Discovery and OUTsurance are well positioned in
their respective market segments and should continue to deliver superior growth.
Given current economic uncertainties we are of the view that it would not be
prudent to set narrowly circumscribed growth targets. We do however believe
that, given the diversified and inherently superior nature of our portfolio of
businesses, the group should over the medium term revert to delivering real
growth in earnings.
For and on behalf of the Board
GT Ferreira P Cooper
Chairman Chief Operating Officer
Sandton
17 September 2008
CASH DIVIDEND DECLARATION
Notice is hereby given that a final cash dividend of 72,5 cents per share was
declared on
17 September 2008 in respect of the financial year ended 30 June 2008.
Shareholders` attention is drawn to the following important dates:
* Last day to trade in order to Friday, 17 October 2008
participate in this dividend
* Shares commence trading "ex dividend" Monday 20 October 2008
on
* The record date for the dividend Friday, 24 October 2008
payment will be
* Dividend payment date Monday, 27 October 2008
No dematerialisation or rematerialisation of share certificates may be done
between Monday, 20 October 2008 and Friday, 24 October 2008 (both days
inclusive).
By order of the Board
A L Maher
Company Secretary
17 September 2008
FIRSTRAND GROUP
While the negative outcome in its trading portfolios and significant cyclical
increases in retail bad debts were dampened by the diversified nature of the
FirstRand Banking Group`s portfolio, the severity thereof brought about a 13%
decline in its normalised earnings.
Momentum Group demonstrated remarkable resilience in a difficult trading
environment, increasing normalised earnings by 20%.
The FirstRand Group achieved a normalised return on equity of 22% per annum
(2007: 29%).
Its normalised earnings were drawn from the following main sources:
2008 2007 %
Year ended 30 June Rm Rm Change
Normalised earnings for ordinary
shareholders derived from (unaudited):
- NFirstRand Banking Group 8 814 10 089 (13)*
- Momentum Group 2 004 1 668 20*
- FirstRand Ltd (including preference dividend (420) (448) 6*
payments)
Group Normalised earnings (unaudited) 10 398 11 309 (8)*
Attributable to RMBH 3 103 3 494 (11)*
* FirstRand presents its unaudited normalised earnings calculation on a pro-
forma basis as if the unbunding of Discovery had taken place at the beginning of
the 2007 financial year (i.e. Discovery is excluded from both years). As RMBH
continues to hold an interest in Discovery, such adjustment is not appropriate
in its case. This difference, together with various consolidation adjustments,
gives rise to the differing rate of change in earnings between years in the two
groups.
FirstRand Banking Group
An otherwise satisfactory performance by the Group`s Banking operations was
severely diluted by two issues:
* A Dramatic Increase of Impairments in Retail Lending Operations
The significant increase in interest rates combined with higher inflation placed
serious strain on disposable income and eroded household affordability levels.
This resulted in a deteriorating consumer credit cycle which severely impacted
the Banking Group`s retail lending activities with bad debts increasing from
R2,6 billion to R4,7 billion.
While the absolute level of bad debts in the year under review highlights the
severity of the current cycle, it is not a reflection of structural asset
quality issues evident in other markets (eg. sub-prime exposures). However, at
the outset the Bank did underestimate the overall level to which interest rates
would rise. At present FirstRand Banking Group`s bad debt experience is in line
with expectations, is correctly priced for and is not out of line with its SA
peers.
* Equity Trading Losses
Losses in RMB`s equity trading division of some R1,4 billion (net, after
offsetting a R0,5 billion profit made in South Africa) (2007: R1,4 billion
profit) occurred at a time of extreme disruption and dislocation in global
equity markets and were compounded by the portfolio being long small and mid-
sized international equities. A hedging strategy employing major indices proved
ineffective as investors moved from illiquid stocks to the highly liquid
indices. In the face of worsening global markets FirstRand Banking aggressively
de-risked its exposure to these portfolios. The Banking Group is satisfied that
its risk management processes were robust and capital allocation to these
activities was within normal thresholds but recognises that the absolute
appetite for risk was inappropriate.
FNB, the commercial and retail bank, achieved a 10% growth in normalised
earnings to R4,7 billion, in an operating environment that was particularly
challenging in the second half of the financial year. FNB`s solid performance
can be ascribed to a number of operational factors, including its strong
franchise in the commercial and corporate segments (now contributing more than
50% of earnings), as well as its diversified retail portfolio which (whilst the
consumer segment experienced a slow down in growth) allowed the mass and wealth
segments to continue to perform well. The transactional and deposit businesses
continued to grow, albeit at a slower rate than the prior year while a continued
focus on efficiencies resulted in FNB`s cost to income ratio reducing by a
further 2,9% to 56,9%.
The Group`s investment bank, RMB, reported normalised earnings of R3,0 billion
for the year to June 2008, 22% lower than the previous year. Given the high base
created in the previous year (when earnings increased by some 80%) and
especially given the significant underperformance of the offshore equities
trading activities highlighted above, this is seen as a satisfactory
performance. The overall impact of the equity trading loss was mitigated to some
extent by Investment Banking, Fixed Income Currencies and Commodities (FICC) as
well as Private Equity significantly exceeding their prior year outcomes.
WesBank, the vehicle finance business` overall profitability was impacted by
significant increases in bad debts in its local lending business. The compound
effect of negative gearing has also resulted in its book growth slowing.
WesBank`s decision to exit its Australian operations has also had a material
negative impact on earnings. In total normalised earnings declined by 38% to
R0,6 billion.
FNB`s African subsidiaries performed well, growing normalised earnings by 14% to
R0,5 billion on the back of good advances growth, excellent growth in deposits
and continuing efficiency gains. Transaction volumes also grew strongly across
all of the subsidiaries. Unlike SA, the bad debt experience remained stable over
the past year.
Momentum Group
Momentum`s normalised earnings exceeded R2 billion for the first time,
increasing by a very pleasing 20%. The ongoing capital management program has
resulted in a significant increase in the return on equity to 30,3% for the
current year (2007: 25,3%).
The results from the insurance operations were strong, with earnings increasing
27% to R1,5 billion. Momentum Insurance benefited from a turnaround in new
initiatives, better than expected risk profits and the positive contribution
from new business written in the past few years. The FNB insurance operations
produced excellent growth in earnings mainly due to good claims experience.
New business volume growth remained strong, especially in the insurance
operations where total new business inflows increased 40% to R28,9 billion.
Whilst the recurring premium new business volume growth has slowed somewhat,
risk new business reflected good growth. The value of new business showed a
solid increase of 14% to R0,6 billion.
The earnings from asset management operations declined by 13%
to R282 million. There was a strong turnaround in investment performance, with
RMB Asset Management ranked 4th out of 11 managers over 12 months and 24 months
to June 2008 in the Alexander Forbes Global Large Manager Watch.
Momentum`s capital management mandate, which requires that discretionary
shareholders assets be invested in cash or near-cash instruments, has largely
immunised the earnings from shareholder assets against the volatility
experienced in investment markets. Including the impact of higher interest
rates, the investment income earned on shareholders` funds increased by 34% to
R0,3 billion. This increase was achieved despite the impact of the R0,7 billion
special dividend paid to FirstRand in October 2007.
DIRECTLY HELD INSURANCE INTERESTS
Discovery Group
RMBH holds 25% of Discovery as a result of its unbundling by FirstRand during
November 2007 and a series of transactions subsequently concluded by RMBH.
Discovery is active in the insurance and health care funding markets in South
Africa and the United Kingdom. Its exit from the US health assurance market is
on schedule.
For Discovery, the year under review has been important and successful. Its
established businesses are performing particularly well, despite a challenging
economic environment. During the year under review Discovery successfully
launched two substantial new businesses, namely Discovery Invest and PruProtect
(a UK based life assurance JV).
Operating profits from the group`s established businesses (Discovery Health,
Discovery Life, Vitality and PruHealth) increased by 39% to R1,8 billion. After
the cost of launching Discovery Invest and PruProtect, as well as the wind down
cost of US based Destiny Health, operating profits increased by 13% to R1,3
billion. Discovery increased recurring new business premiums by 18% to R4,8
billion (excluding Destiny Health). Discovery`s embedded value increased by 16%
to R16,4 billion.
RMBH included R161 million (being its share of earnings for the last eight
months of the financial year) of Discovery`s earnings in its normalised
earnings. Prior to that Discovery`s earnings were included in FirstRand`s
earnings.
OUTsurance
The OUTsurance group is active in the short-term insurance market and continues
to grow and perform extremely well. It has become an established and trusted
brand in a relatively short space of time.
Notwithstanding current market conditions, OUTsurance posted satisfying results
for the year with gross premiums increasing by 20% to R3,6 billion (2007: R3,0
billion). Headline earnings increased by 20% to R574 million (2007: R480
million). These increases were driven by reasonable new business volumes and
better than expected claims ratios. At 30 June 2008 OUTsurance had total assets
of R3,1 billion (2007: R2,7 billion) with a solvency margin of 39,2%.
Of its new ventures, Business OUTsurance, directed at smaller commercial
enterprises, had a particularly pleasing year, exceeding budget on all levels.
OUTsurance is conducting a "soft" launch of Youi its internet based entry into
the Australian short term market and expects to escalate its activities before
the end of calendar 2008. The start up cost attaching to this program amounted
to R51 million in the 2008 financial year and has been expensed against current
income.
RMBH`s attributable share of OUTsurance`s normalised earnings for the year
amounted to R334 million (2007: R282 million).
RMB Structured Insurance
RMBSI creates individual insurance and financial risk solutions for large
corporates by using innovative financial structures.
A core element of RMBSI`s business is the provision of specialist insurance
services to the retail furniture sector. The introduction of the National Credit
Act, coupled with higher interest rates had a dampening impact on this area of
business. Notwithstanding, RMBSI increased headline earnings by 3% to
R93 million (2007: R90 million). At 30 June 2008 RMBSI had total assets of R4,2
billion and was adequately capitalised in all the jurisdictions in which it
operates.
RMBH`s attributable share of RMBSI`s normalised earnings for the year amounted
to R72 million (2007: R69 million).
OTHER FINANCIAL SERVICES INTERESTS
Glenrand M.I.B
In the year under review Glenrand M.I.B substantially completed the
restructuring of the group into a risk advisory business with core interests in
short-term insurance broking, risk advisory and claims and policy administration
capabilities.
The group`s exit from the pension fund administration business became effective
at the beginning of February 2008 with the final transfer of the residual assets
being imminent.
The continuing businesses produced 14% growth in revenue in difficult market
conditions. Notwithstanding, Glenrand M.I.B returned a disappointing overall
attributable loss of R82 million (2007: profit: R81 million) arising primarily
from increased losses in the discontinuing pension fund administration business
of R102 million (2007: R36 million) and impairment of assets.
Good progress has been made in restructuring the group`s continuing cost base.
RMBH`s share of Glenrand M.I.B`s normalised loss amounted to
R11 million (2007: earnings R2 million).
Emerging Markets Equity Portfolio
In the final quarter of 2006 RMBH, with the help of independent investment
counsel, built a bespoke emerging market portfolio of selected listed financial
services equities, primarily in India, Brazil and Turkey. RMBH has invested R500
million in the portfolio. The portfolio has been designated as a "fair value
through profit or loss" asset for accounting purposes and gains and losses are
being recorded in income.
At 30 June 2007 the portfolio was valued at R656 million. The portfolio has not
entirely avoided the volatility and contagion highlighted in our commentary
above. At 30 June 2008 it was valued at R648 million.
The after tax loss included in RMBH`s normalised earnings amounted to R7 million
(2007: profit of R154 million).
Summarised group income statement
2008 2007
Audited Audited %
for the year ended 30 June Rm Rm change
Share of after tax results in associate 3 787 3 590 5
companies
Impairment of associate (1) (13)
Earned premiums net of reinsurance 5 174 5 326
Commisson and fee income 97 72
Investment income 626 1 208
Income 9 683 10 183
Net claims paid (2 937) (2 960)
Investment contract benefits and 82 (294)
insurance provisions
Acquisition, marketing and (2 035) (2 040)
administration expenses
Operating profit 4 793 4 889 (2)
Net finance costs (152) (178)
Profit before tax 4 641 4 711 (1)
Taxation (290) (333) 13
Net profit for the year 4 351 4 378 (1)
Attributable to:
Equityholders of RMBH 4 122 4 109 -
Minority interest 229 269 (15)
4 351 4 378
Computation of headline earnings
2008 2007
Audited Audited %
for the year ended 30 June Rm Rm change
Earnings attributable to ordinary 4 122 4 109 -
shareholders
Adjustment for:
Impairment of associate 1 13
Other 10 5
Share of adjustment made by associates:
Profit on sale of shares in subsidiary and (131) (26)
associate
Profit on sale of available-for-sale (76) (283)
financial assets
Profit on VISA listing (344) -
Other 44 24
Total tax effect of adjustments 73 35
Total minority interest in adjustments 15 23
Headline earnings attributable to ordinary 3 714 3 900 (5)
shareholders
Sources of headline earnings
2008 2007
Audited Audited %
for the year ended 30 June Rm Rm change
Headline earnings from:
FirstRand 3 205 3 395 (6)
Discovery 174 -
Glenrand M.I.B (14) 2 (>100)
OUTsurance 354 299 18
RMB Structured Insurance 78 69 13
3 797 3 765
?Other net income/(funding costs) (83) 135 (>100)
Headline earnings 3 714 3 900 (5)
Computation of earnings per share
2008 2007
Audited Audited %
for the year ended 30 June Rm Rm change
Earnings attributable to ordinary 4 122 4 109 -
shareholders
Headline earnings attributable to ordinary 3 714 3 900 (5)
shareholders
Number of shares in issue (millions) 1 209 1 188
Weighted average number of shares in issue 1 192 1 175
(millions)
Earnings per share (cents) 345,9 349,7 (1)
Diluted earnings per share (cents)* 339,9 340,6 -
Headline earnings per share (cents) 311,7 332,0 (6)
Diluted headline earnings per share 306,3 323,4 (5)
(cents)*
Dividend per share (cents)
Interim 69,0 61,5 12
Final 72,5 80,0 (9)
Total 141,5 141,5 -
Dividend cover (relative to headline 2,2 2,3
earnings)
* The diluted calculations give cognisance to the impact of the similar
calculation within FirstRand. This has no impact on RMBH`s weighted average
number of shares.
Summarised group balance sheet
2008 2007
Audited Audited
at 30 June Rm Rm
ASSETS
Property and equipment 113 104
Goodwill and other intangible assets 20 7
Investment in associate companies 19 579 15 193
Financial assets 5 953 5 391
Receivables and prepayments 488 675
Reinsurers` share of insurance provision 82 56
Cash and cash equivalents 2 058 1 978
Total assets 28 293 23 404
EQUITY
Share capital and premium 5 197 4 439
Reserves 15 110 12 184
Capital and reserves attributable to equity 20 307 16 623
holders of the company
Minority interest 1 044 972
Total equity 21 351 17 595
LIABILITIES
Financial liabilities 2 577 1 594
Insurance contract provisions 3 938 3 734
Payables and provisions 427 481
Total liabilities 6 942 5 809
Total equity and liabilities 28 293 23 404
Summarised group cash flow statement
2008 2007
Audited Audited
for the year ended 30 June Rm Rm
Cash available from operating activities 2 399 2 218
Dividends paid (1 782) (1 478)
Investment activities (1 154) (903)
Financing activities 575 (95)
Net increase/(decrease) in cash and cash 38 (258)
equivalents
Unrealised foreign currency translation 42 -
adjustments
Cash and cash equivalents at the beginning 1 978 2 236
of the year
Cash and cash equivalents at the end of the 2 058 1 978
year
Cash available from operating activities includes net premium receipts by short-
term insurance operations. Given the fluctuations inherent in non-recurring
structured insurance transactions, such cashflows are not necessarily directly
comparable between years.
Summarised statement of changes in equity
Share Treasury Equity Non-
Capital and Shares Accounted Distributable-
Premium Reserve Reserves Reserves
Rm Rm Rm Rm
Balance at 30 June 4 605 (140) 6 879 487
2006 (audited) as
previously reported
Net profit for the - - - -
year
Dividend paid - - - -
Income of - - 2 344 -
associated
companies retained
Capital invested by - - - -
minorities
Share option - - - 2
expense reserve
Reserve movements - - - 23
relating to
subsidiaries
Change in carrying - - 26 -
value of associate
due to elimination
of treasury shares
Movement in - (26) 113 -
treasury shares
Reserve movements - - (229) -
relating to
associates
Balance at 30 June 4 605 (166) 9 133 512
2007 (audited)
Issue of new shares 723 - - -
Net profit for the - - - -
year
Dividend paid - - - -
Income of - - 2 275 -
associated
companies retained
Capital invested by - - - -
minorities
Share option - - - 1
expense reserve
Reserve movements - - - 39
relating to
subsidiaries
Change in carrying - - (48) -
value of associate
due to elimination
of treasury shares
Movement in - 35 82 -
treasury shares
Reserve movements - - 551 -
relating to
associates
Balance at 30 June 5 328 (131) 11 993 552
2008 (audited)
Total Share-
Retained holders` Minority Total
Earnings Funds Interest Equity
Rm Rm Rm Rm
Balance at 30 June 2006 2 285 14 116 399 14 515
(audited) as previously
reported
Net profit for the year 4 109 4 109 269 4 378
Dividend paid (1 479) (1 479) (103) (1 582)
Income of associated (2 344) - - -
companies retained
Capital invested by - - 407 407
minorities
Share option expense - 2 - 2
reserve
Reserve movements (35) (12) - (12)
relating to
subsidiaries
Change in carrying - 26 - 26
value of associate due
to elimination of
treasury shares
Movement in treasury 3 90 - 90
shares
Reserve movements - (229) - (229)
relating to associates
Balance at 30 June 2007 2 539 16 623 972 17 595
(audited)
Issue of new shares - 723 - 723
Net profit for the year 4 122 4 122 229 4 351
Dividend paid (1 785) (1 785) (172) (1 957)
Income of associated (2 275) - - -
companies retained
Capital invested by - - 13 13
minorities
Share option expense - 1 - 1
reserve
Reserve movements (37) 2 2 4
relating to
subsidiaries
Change in carrying - (48) - (48)
value of associate due
to elimination of
treasury shares
Movement in treasury 1 118 - 118
shares
Reserve movements - 551 - 551
relating to associates
Balance at 30 June 2008 2 565 20 307 1 044 21 351
(audited)
Computation of normalised earnings (unaudited)
The group believes that normalised earnings more accurately reflect operational
performance. Headline earnings are adjusted to take into account non-operational
and accounting anomalies.
These unaudited adjustments are consistent with those reported at 30 June 2007,
except for profit on private equity realisations.
2008 2007
Unaudited Unaudited %
For the year ended 30 June Note Rm Rm change
Headline earnings
attributable to
ordinary shareholders 3 714 3 900 (5)
RMBH`s share of adjustments
made by associates:
Treasury shares 1 157 169
Adjustment of listed
property associates
to net asset value 2 - 8
IFRS 2 share based expenses 3 43 121
3 914 4 198 (7)
Adjustment for:
RMBH shares held by 4 (48) 96
policyholders
Group treasury shares 5 (290) (312)
IFRS 2 share based expenses 3 1 2
Normalised earnings
attributable to
ordinary shareholders 3 577 3 984 (10)
Weighted average number of 1 202 1 188
shares in issue (millions)
Normalised earnings per 297,5 335,4 (11)
share (cents)
Diluted normalised earnings 297,5 335,3 (11)
per share (cents)
Dividend cover (relative to 2,1 2,4
normalised earnings)
Sources of normalised earnings (unaudited)
2008 2007
Unaudited Unaudited %
Rm Rm change
Normalised earnings from:
FirstRand 3 103 3 494 (11)
Discovery 161 -
Glenrand M.I.B (11) 2 (>100)
OUTsurance 334 282 18
RMB Structured Insurance 72 69 4
3 659 3 847 (5)
Other net income/(funding costs) (82) 137 (>100)
Normalised earnings 3 577 3 984 (10)
Notes:
1. Deconsolidation of treasury shares and "deemed" treasury shares by FirstRand
and Discovery to account for:
* the Discovery BEE transaction;
* FirstRand shares acquired to hedge liabilities under staff share schemes; and
* FirstRand shares held as policyholders assets by group insurers.
2. Adjustment of listed property and associates from net asset value to fair
value in order to match the policyholders liability which is based on the fair
value of the units held.
3. Adjustment for IFRS 2 share based expenses.
4. Deconsolidation of "deemed" RMBH`s treasury shares held for policyholders by
group insurers.
5. Adjustment to reflect earnings impact based on actual RMBH shareholding in
group companies ie. reflecting treasury shares as if they are minority
shareholders.
Basis of preparation of results
The accompanying summarised results for the year ended 30 June 2008 reflect:
* the consolidation of the operations of RMBH and its subsidiaries including
OUTsurance and
RMBSI; and
* RMBH`s proportionate interest in its associates, FirstRand, Discovery and
Glenrand M.I.B which have been equity accounted.
The annual financial statements for the year ended 30 June 2008, to which the
profit announcement relates, were prepared in accordance with:
* International Financial Reporting Standards ("IFRS"), including IAS 34:
Interim Financial Reporting;
* The requirements of the South African Companies Act, Act 61 of 1973, as
amended; and
* The Listings Requirements of the JSE Limited (the "JSE").
Such annual financial statements were audited by PricewaterhouseCoopers Inc. A
copy of their unqualified audit opinion is available for inspection at RMBH`s
registered office.
These financial statements incorporate accounting policies that are consistent
with those used in preparing the financial results for the year ended 30 June
2007. In July 2007 a new headline earnings circular, Circular 8/2007, was issued
by the South African Institute of Chartered Accountants. Circular 8/2007 sets
out specific industry exceptions that are applicable to the FirstRand Group. One
of these exceptions relates to the inclusion of profit or losses made on the
sale of private equity associates and joint ventures in headline earnings. In
previous periods the profit or losses made on sale of private equity associates
and joint ventures were excluded from headline earnings. The group has included
these profits or losses in headline earnings and has restated the 30 June 2007
headline earnings results accordingly.
The impact of the above mentioned restatements is shown below:
Restatement of prior year financial information
As
As originally
R million restated stated Difference Reason
30 June 2007
Headline 3 900 3 770 130 Profit on
earnings private
equity
realisation
included in
headline
earnings
Headline
earnings
per share
(cents)
- Basic 332,0 320,9 11,1
- Diluted 323,4 312,6 10,8
Directors GT Ferreira (Chairman), P Cooper (COO), L Crouse (appointed 13
September 2008), LL Dippenaar, JW Dreyer, DM Falck (retired on 12 September
2008), PM Goss, PK Harris, Ms SEN Sebotsa (appointed 15 February 2008) and KC
Shubane.
Secretary AL Maher (appointed 14 March 2008)
Registered office and physical address 4th Floor, 4 Merchant Place, Corner of
Fredman Drive and Rivonia Road, Sandton, 2196
Postal address PO Box 786273, Sandton, 2146
Telephone +27 11 282 8000 Telefax +27 11 282 8088
Web address www.rmbh.co.za?
Sponsor (in terms of JSE Listings Requirements)?Rand Merchant Bank (A division
of FirstRand Bank Limited),1 Merchant Place, corner of Fredman Drive and Rivonia
Road, Sandton, 2196?
Transfer secretaries Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Telephone +27 11 370 5000 Telefax +27 11 688 5221
THE RMBH GROUP AT A GLANCE
RMBH is the holding company of some of South Africa`s leading financial services
companies. Our interests include:
FirstRand Limited (the "FirstRand Group")
effective interest 32,7%*
The FirstRand Group is a uniquely structured financial services group with
critical mass in both banking
and insurance. For regulatory oversight purposes, its operations are housed in
two subsidiary groups under FirstRand Bank Holdings Limited and Momentum Group
Limited.
Banking
The FirstRand Banking Group provides customers with a comprehensive range of
products and services according to specific target market segments.
First National Bank ("FNB") services the retail, business and medium corporate
segments. In addition it provides transactional services to the group`s large
corporate clients.
Rand Merchant Bank ("RMB") is responsible for the large corporate segment, to
which it provides loans, value added advisory and structuring services.
WesBank is South Africa`s dominant movable asset financier.
The balance of the Banking Group includes its African banking subsidiaries and
Banking Group Treasury.
Assurance
Momentum Group targets individuals in the middle and upper income markets,
principally under the Momentum Life, Momentum Wealth, Momentum Health and RMB
Unit Trust brand names.
effective interest 27,1%*
Discovery Holdings Limited ("Discovery")
Discovery services the health care funding and insurance markets in South Africa
and the United Kingdom. It is
in the process of winding down its health insurance business in the United
States. Discovery is pre-eminent in the development of financial services
products and operates under the Discovery Health, Discovery Life, Vitality,
PruHealth and PruProtect brand names.
effective interest 61,9%*
FirstRand Short-term Insurance Limited ("OUTsurance")
OUTsurance is a direct personal lines and small business short-term insurer.
Pioneers of the OUTbonus concept, it has grown rapidly by applying a scientific
approach to risk selection, product design and claims management.
effective interest 80,6%*
RMB Structured Insurance Limited ("RMBSI")
RMBSI holds both short-term and life assurance licences.
It creates bespoke insurance and financial risk solutions for
South Africa`s large corporations by using sophisticated risk techniques and
innovative financial structures.
effective interest 15,8%*
Glenrand M.I.B is a risk advisory business with
core interests in short-term insurance broking, risk advisory services and the
provision of claims and policy administration capabilities.
* The effective interest held by RMBH in these businesses shows variations
between years as a result of the consolidation, by such entities of:
* Treasury shares held by them;
* Shares held in them by their staff share incentive trusts; and/or
* "Deemed" treasury shares held in them by policyholders and mutual funds
managed by them; as well as
* "Deemed" treasury shares arising from BEE transactions entered into.
The effective interest held as at 30 June 2008 as recorded above can be compared
to the actual interest held by RMBH in the statutory issued share capital of the
companies as follows:
Effective Actual
* FirstRand 32,7% 30,1%
* Discovery 27,1% 25,0%
* OUTsurance 61,9% 58,6%
* RMBSI 80,6% 76,9%
* Glenrand M.I.B 15,8% 12,3%
Date: 17/09/2008 13:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
