| Wed 16 Sep 2009, 11:50 | | RMH - RMB Holdings - Summarised Audited Results Announcement And Cash |
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RMH
RMH
RMH - RMB Holdings - Summarised, Audited Results Announcement And Cash
Dividend Declaration For The Year Ended 30 June 2009
RMB Holdings
(Incorporated in the Republic of South Africa)
(Registration number 1987/005115/06)
Share code: RMH
ISIN: ZAE000024501
("RMBH" or "the Group")
Summarised, audited results announcement and cash dividend declaration for the
year ended 30 June 2009
- Normalised earnings R2,5 billion or 207,9 cents -30%
- Dividends R1,2 billion or 99 cents -30%
- Intrinsic value R30,3 billion or 2 509 cents +7%
Overview of results
The financial year to 30 June 2009 has been the most challenging in RMBH`s
more than twenty year history.
The operating environment during the year was characterised by negative
economic growth, continued market illiquidity and further declines in asset
values.
Whilst there are early indications that the global economy has begun to
stabilise, the outlook remains challenging. First world/western economies
continue to be under severe stress. The unwinding of massive fiscal and
monetary stimulus packages, coupled with the rebuilding of balance sheets,
will weigh on global demand for a protracted period. It is expected that the
eastern economies may emerge with more vigour than the western economies.
The South African economy is still suffering the effects of the cyclically
high interest rates of 2008, falling commodity prices, a marked slowdown in
exports, as well as declining domestic demand. This has resulted in a
significant slowdown in GDP growth. Job losses are increasing and the
manufacturing sector is still contracting.
Over the last eighteen months the SARB reduced interest rates by a cumulative
4,5%, resulting in a current prime overdraft rate of 10,5% pa - the same as
its low point in the previous cycle. For the Group`s franchises, this is
positive in the medium to long term as it eventually results in the reduction
of bad debts and non-performing loans and improved customer affordability
levels. However, given the high levels of customer indebtedness that still has
to work through the system, the short term impact of the FirstRand Banking
Group`s deposits and income from the capital endowments is negative. The
benefit of reducing interest rates can therefore only be expected to
positively impact earnings in late 2009 or early 2010.
While the performance of our major investment, FirstRand (pro forma normalised
earnings down 31%), has broadly been in line with its "big four" banking
peers, the outcome achieved is disappointing. This is particularly so, given
that the broad negative trends experienced by all participants, was in our
case exacerbated by losses from international strategies that we embarked
upon. These have since been terminated.
The resultant outcome reported at the RMBH level was:
Cents per % change
Year ended 30 June Rbillion share on prior year
* Attributable earnings 2,49 207,1 (40)
* Headline earnings 2,64 219,7 (30)
* Normalised earnings 2,51 207,9 (30)
Total dividends payable to RMBH shareholders for the year ended 30 June 2009
amounts to 99,0 cents (2008: 141,5 cents), representing a year-on-year
decrease of 30%, in line with the underlying earnings performance.
The precipitous decline in equity markets during the first half of the
financial year (JSE All share index -29%) showed signs of stabilising in the
second half (+3%). While not immune to these market gyrations, the intrinsic
value of the Group`s investment portfolio did, due to its diversification
within the broader Southern African financial services sector, reflect some
resilience:
As at 30 June
Rbillion 2009 2008 % change
Intrinsic value 30,3 28,4 +7
RMBH market capitalisation 28,4 25,4 +12
Sources of income
Predominantly sourced from Southern Africa, our well-diversified income stream
is drawn from the full spectrum of financial services:
The significant shifts in relative contributions between years can be ascribed
to the impact of the international dislocation on the performance of RMB`s
proprietary trading activities, countered by the strong growth in Discovery`s
risk assurance and wealth management initiatives as well as the strong
performance of OUTsurance`s personal lines business.
Group capital position
At the centre, RMBH has a moderate level of gearing. At the end of June 2009
our borrowings amounted to some R1,3 billion (2008: R1,2 billion), directed
largely at the funding raised for the Discovery acquisition in November 2007,
funding our commitment to Youi (OUTSurance`s Australian initiative) and the
emerging markets portfolio.
At present the only material funding requirement identified for the current
year is some R100 million required to support OUTsurance`s international
expansion. We do not foresee any further short-term capital requirements from
the other companies in which RMBH is invested.
The intrinsic value of the Group`s investment portfolio showed some recovery
during the year under review. The values at year end may be summarised as
follows:
As at 30 June
Rm 2009 2008 % change
Market value of listed interests
(Firstrand, Discovery) 27 655 25 790 +7
Director`s valuation of unlisted 3 457 3 128 +11
interests (OUTsurance, RMBSI)
Net funding (781) (527) -
Total intrinsic value 30 331 28 391 +7
Per RMBH share (cents) 2 509 2 348 +7
At 30 June 2009 RMBH`s market capitalisation amounted to
R28,4 billion or 2 345 cents per share, (2008: R25,4 billion) representing a
6,5% discount (2008: 11%) to the Group`s underlying intrinsic value.
Dividend payment
Our practice is to pay out to RMBH shareholders any dividend received from
FirstRand. Dividends received from RMBH`s other investments are used to
service any funding commitments that we may have at the centre, after which
the balance remaining is also paid to shareholders. While FirstRand seeks to
structure its dividend policy on the basis of a sustainable long term trend,
the current year`s outcome compelled it to reduce its dividend payment by some
32% between years. Notwithstanding that our other investments paid dividends
in line with, or exceeding their earnings growth, the overall trend of RMBH`s
net dividend receipts reflected that of FirstRand.
Consequently, the Board resolved to declare a final dividend of 45,0 cents per
share (2008: 72,5 cents). Such final dividend, together with the interim
dividend of 54,0 cents brings the total dividends for the year ended 30 June
2009 to 99,0 cents
(2008: 141,5 cents). This represents a year-on-year decrease of 30% and a
dividend cover ratio (on normalised earnings) of 2,1 times (2008: 2,1 times).
Strategic initiatives
Economic upheavals, such as that experienced globally (and the consequential
knock-on effects flowing through to domestic markets), necessarily calls for
reflection as to the appropriateness of and refinement to the Group`s
strategies. At present, this debate is particularly pertinent at FirstRand and
Discovery.
FirstRand expounds an increased focus on client driven activities rather than
proprietary trading or investment activities in both its South African and
international operations. In addition the Group`s secondary market activities
will link to client activities or leverage the existing primary market
positions.
As regards future international expansion, FirstRand`s emphasis will be on
establishing client franchises in markets where the Group has a demonstrable
competitive advantage as opposed to principle trading activities that are
outside the Group`s core business and markets. Consequently:
* FirstRand has exited certain off-shore activities (equities trading and
SPJi), but will continue with those businesses where it has a long track
record of successful asset origination and a demonstrated competitive
advantage (private equity in Australia and RMB Resources). This approach will
improve the quality and sustainability of earnings and create more shareholder
value over the long term; while, in future;
* Africa will be its primary focus and FirstRand will leverage off its
position in other markets to provide support to its strategy in Africa. Thus,
FirstRand`s strategy in India will be focused on supporting FirstRand`s
African expansion activities by focusing on the trade corridor between India
and Africa. The Group`s ability to offer Indian companies expertise in African
markets will be its key competitive advantage. Similarly, FirstRand has
identified the China-Africa trade corridor as a growth opportunity and post
the year-end announced a strategic co-operation agreement with China
Construction Bank Corporation (globally the second largest bank by market
capitalisation); and
* Momentum Group has built a presence in eleven African countries and will
also look for opportunities to collaborate with FNB. There has been some early
progress in Namibia where the life insurance subsidiary of FNB`s Namibian
operation, which is the current market leader in the entry-level segment, has
now added Momentum`s Myriad life-cover offering to its suite of products.
While "Greenfields" remains FirstRand`s primary entry approach to new markets,
it will consider corporate action and the acquisition of appropriate operating
platforms in order to accelerate its refocussed expansion strategy.
While it must be said that the environment in which Discovery operates is
complex, it remains convinced that this is precisely the right time to pursue
growth and expansion successfully. Its central strategy of integration between
the foundational Vitality and its other businesses has been very successful.
Discovery continues to open pathways for innovation, created by these
"integration assets and methodologies". Given its significant position and
unique assets, it is pursuing additional expansion within South Africa and a
considerable amount of work has been done on the potential launch of further
products in the broader financial sector.
Discovery Health operates in a complex environment marked by continuous
regulatory and policy shifts. Due to its size and impact, Discovery Health is
committed to building and improving the healthcare system - not for its
members alone, but for all South Africans. Its aim is to work with Government
in its pursuit of healthcare reform and the implementation of a National
Health Insurance System (NHI) to the benefit of all South Africans. Discovery
Health is convinced that the NHI will require the constructive and creative co-
operation of all stakeholders to make it workable and sustainable. To this
end, Discovery will continue to make available its expertise and resources,
and will engage positively and constructively.
Discovery will continue to build out its international expansion plans on the
basis of partnering in joint ventures with foreign partners. It is exploring a
number of new initiatives in this area.
Outlook for the coming year
We believe that the operating environment will remain tough for the rest of
2009 with a slow improvement from 2010 as lower interest rates and fiscal
stimulus begin to have a positive impact.
The South African economy is still facing significant difficulties. The
consumer will remain under pressure in the medium term, despite the recent
easing of interest rates, and therefore volumes in the retail segment will
continue to be subdued and bad debts will unwind very slowly given the high
levels of consumer debt that still exist. House prices are in the near term
expected to continue to fall, resulting in lower recovery rates on mortgage
security. Wholesale lending portfolios, which have been resilient for a large
part of the economic downturn, are now showing signs of stress. Job losses are
increasing and the manufacturing sector is still contracting.
At FirstRand these issues, combined with low asset growth and transaction
volumes, means that FNB and WesBank`s earnings will remain under pressure.
Further mark to market losses on the remaining legacy portfolios in RMB cannot
be ruled out and the private equity realisations in the first half of the year
to June 2008 will not be repeated in the current financial year. Momentum`s
inherently defensive business model due to its diversified product range,
strong distribution model, upper-income target market focus, capital efficient
liability mix and the conservative investment mandate used to manage
Momentum`s capital, will continue to provide protection to earnings.
Against a macro background of subdued economic activity FirstRand believes
that top line growth will remain under pressure. However, the Group expects
non-performing loans and bad debts to start to unwind in the large lending
books such as vehicle finance and mortgages, and that these ratios will start
to show improvement in the first six months of the year to June 2010.
Of our other investments, both Discovery and OUTsurance are well positioned in
their respective market segments and should continue to extract superior
growth therefrom. Their respective international initiatives should also begin
to gain traction during the current year.
Given its size in local markets, and the incremental nature of our
international strategies, it will be difficult for the Group to track back to
previous levels of earnings growth in the short term. However, the Board
anticipates that RMBH will over time deliver acceptable real returns to
shareholders.
For and on behalf of the Board
GT Ferreira P Cooper
Chairman Chief Operating Officer
Sandton
16 September 2009
FirstRand Group
Against what must be the most difficult macro background in FirstRand`s
history (exacerbated by losses from certain international strategies which
have since been terminated), FirstRand`s portfolio of banking and insurance
businesses produced a disappointing outcome. Its pro forma normalised earnings
decreased 31% to R7,2 billion, with a normalised return on equity (ROE) of 14%
(2008: 22%). The relative contributions to normalised earnings were as
follows:
Year ended 30 June %
Rm 2009 2008 change
Pro-forma normalised earnings for
ordinary shareholders derived from:
- FirstRand Banking Group 6 056 8 814 (31)
- Momentum Group 1 649 2 004 (18)
- FirstRand Ltd (inc. pref. div. (554) (420) (32)
payments)
Group normalised earnings 7 151 10 398 (31)
Attributable to RMBH* 2 057 3 103 (34)
* After adjusting for the impact of the Discovery unbundling and consolidation
eliminations
FirstRand Banking Group
The FirstRand Banking Group`s corporate and commercial banking franchises
which operate in the primary and secondary markets, produced acceptable
performances, as did the retail franchises despite the difficult consumer
credit cycle. However, the absolute size of retail bad debts, particularly in
the residential mortgages portfolio, combined with the losses emanating from
the legacy portfolios in the investment bank, significantly impacted overall
profitability. Declining asset growth, combined with the negative impact of
faster than anticipated reducing interest rates on capital and endowment
balances, also placed pressure on earnings.
The total banking portfolio produced R6,1 billion in normalised earnings,
representing a 31% decline on 2008. Its normalised ROE declined to 13% (2008:
20%). The Banking Group`s normalised earnings were drawn from:
Year ended 30 June %
Rm 2009 2008 change
Retail Banking 1 769 2 752 (36)
- FNB Retail, FNB Africa, Wesbank
Corporate Banking 2 825 2 974 (5)
- FNB Corporate, FNB Commercial, Wesbank
Investment Banking 1 536 3 008 (49)
- RMB
Corporate Centre (74) 80
FirstRand Banking Group 6 056 8 814 (31)
FNB`s diversified retail portfolio continued to show good growth in non-
interest revenue and deposits. The Mass segment performed well on the back of
increases in revenue generating transactions and strong growth from loan
products. It also benefitted from the ongoing success of its cell-phone
banking products and services. The large retail lending portfolios,
particularly in the consumer segment, continued to experience increases in
arrears and non-performing loans and a slowdown in new business, resulting in
negative gearing which had a substantial impact on revenue growth and
profitability.
FNB Africa was able to avoid the significant impact of falling commodity
prices in its geographic areas of operation and continued to produce robust
profitability, firstly through focusing on maintaining credit quality through
the pro-active management of the credit books, and secondly on increasing
volumes and non-interest revenue.
WesBank`s normalised earnings declined 43%, impacted by significant increases
in credit defaults in the local lending business and continued contraction of
the advances book. New business was negatively impacted by lower demand in
both the retail and corporate sectors. This was further exacerbated by higher
security realisation losses, an increasing number of absconding customers and
provisions arising out of insurance cancellations.
FNB`s strong franchises in the Commercial and Corporate segments continued to
perform well, although the commercial segment`s deposit margins were
negatively impacted by the endowment effect of reducing interest rates.
RMB`s performance for the year was disappointing with normalised earnings down
49%. Its Investment Banking division (IBD), with its focus on primary market
activities and client focussed advisory, financing and execution, produced
good results, growing profits before tax 7% despite the challenging base
created in the previous year. Corporate activity and lending remained strong
and a number of significant transactions were concluded. RMB`s secondary
market activities i.e. proprietary trading and investments, and the
international legacy portfolios delivered poor performances. The legacy SPJi
off-shore portfolios encountered further market price volatility, and for the
year under review these portfolios incurred mark to market losses and
valuation declines of
R775 million. The SPJi business has now been closed down, with the remaining
illiquid positions being worked out. The equities division reported losses of
R782 million for the year, largely attributable to the continued de-risking of
its international portfolios and the default of a stock broking client.
Momentum Group
Momentum continued to be negatively affected by the significant decline and
volatility of investment markets, particularly in the first half of the
financial year. Approximately two-thirds of Momentum`s earnings base is
exposed to investment market returns, where the most significant exposure is
to equity markets. Overall normalised earnings declined 18% to R1,7 billion,
with the return on equity at 23%.
The year was characterised by excellent results from FNB Insurance. Overall,
new business volumes held up reasonably well in the retail and employee
benefits businesses. However, inflows into the asset management operations
have reduced.
Solid growth in investment income was generated on shareholders` funds
resulting from a capital preservation strategy. Despite the decline in
earnings the business produced a return on equity of 23% and Momentum`s
capitalisation level strengthened to a satisfactory 1,8 times the Capital
Adequacy Requirement.
Directly held insurance interests
Discovery Group
Discovery`s performance over the year has exceeded expectation. The year has
been characterised by sound performances across all businesses, record levels
of new business production and strong earnings growth.
Operating profit from established businesses (Discovery Health, Discovery
Life, Vitality and PruHealth) grew by 21% to R2,15 billion. The start up
businesses (Discovery Invest and PruProtect) started to gain traction while
the wind-down of Destiny proceeded according to plan. Together, the gearing
effect of these contributed to Group operating profit increasing by 32% to
R1,70 billion. Headline earnings increased by 33% to R1,24 billion.
RMBH included R315 million (2008: R161 million - being RMBH`s share of
earnings for the eight months of the financial year, after unbundling) of
Discovery`s earnings in its normalised earnings.
OUTsurance
Considering the prevailing economic conditions, the South African operations
of OUTsurance produced excellent results and grew operating profit by 28% to
R941 million.
After accounting for the start up losses of some R100 million at Youi (the
Australian based initiative) group operating profit grew by 19%. This together
with relatively flat investment income (up 3.5%) resulted in headline earnings
increasing by 14% to R654 million, on which it paid a 1,6 times covered
dividend. OUTsurance generated a 43% return on equity.
Youi`s launch has been successful and is running according to plan. Management
remains excited regarding Youi`s progress to date.
RMBH`s attributable share of OUTsurance`s normalised earnings for the year
amounted to R384 million (2008: R334 million).
RMB Structured Insurance
RMBSI creates individual insurance and financial risk solutions for large
corporates by using innovative financial structures.
One of RMBSI`s major retail sector clients terminated its relationship with
RMBSI after deciding to conduct its business on an in-house basis. Given this
loss of business and general market conditions, the fact that RMBSI reported a
15% decline in headline earnings to R79 million (2008: R93 million) is a
satisfactory outcome. After reviewing the capital adequacy requirements in the
jurisdictions in which it operates, it declared an extraordinary final
dividend of R100 million, bringing its total return to shareholders for the
year to R122 million.
RMBH`s attributable share of RMBSI`s normalised earnings for the year amounted
to R60 million (2008: R72 million).
Other financial services interests
As reported at the interim stage, RMBH disposed of its investment in Glenrand
M.I.B Limited with effect from 31 December 2008 for a consideration of R43,1
million. Glenrand`s attributable earnings for the period leading up to 31
December 2008 have been included in "Other Income" and are not material for an
appreciation of the overall outcome.
Emerging Markets Equity Portfolio
In the final quarter of 2006 RMBH built a bespoke emerging market portfolio of
selected listed financial services equities, primarily in India, Brazil and
Turkey. The portfolio was originally intended as an "entry hedge" in
anticipation of FirstRand entering these territories as part of its
international expansion.
RMBH originally invested R500 million in the portfolio. The portfolio was
designated as a "fair value through profit or loss" asset for accounting
purposes with gains and losses being recorded against income. Up to June 2008,
the portfolio had achieved a cumulative after tax gain of R146 million. The
portfolio did not escape the global market reversal during the first six
months of the financial year and at the interim reporting stage, the after tax
loss recorded on the portfolio amounted to R249 million. In the second half
the portfolio`s performance improved in line with emerging market trends and
some R71 million of the loss was clawed back. This resulted in RMBH recording
an after tax loss of R178 million for the year ended 30 June 2009, leaving the
portfolio at a value that approximated the original capital invested.
Given FirstRand`s revised international strategy with its narrower African
focus, the continued need for such a hedge portfolio became redundant.
Accordingly it was decided to liquidate the portfolio. This process was
completed in the last two months without incurring further costs.
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 32,5%*
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.
The FirstRand Banking Group provides customers with a comprehensive range of
products and services according to specific target market segments.
Banking
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
Asset Management and Unit Trust brand names.
Summarised group income statement
2009 2008
Audited Audited %
For the year ended 30 June Rm Rm change
Share of after tax results in 2 387 3 787 (37)
associate companies
Profit on sale of associate 4 -
Impairment of associate - (1)
Earned premiums net of 4 886 5 174
reinsurance
Commission and fee income 107 97
Investment income (264) 626
Income 7 120 9 683
Net claims paid (1 930) (2 937)
Investment contract benefits and (381) 82
insurance provisions
Acquisition, marketing and (1 697) (2 035)
administration expenses
Operating profit 3 112 4 793 (35)
Net finance costs (179) (152)
Profit before tax 2 933 4 641 (37)
Taxation (301) (290) (4)
Net profit for the year 2 632 4 351 (40)
Attributable to:
Equityholders of RMBH 2 485 4 122 (40)
Minority interest 147 229 (36)
2 632 4 351 (40)
Computation of headline earnings
2009 2008
Audited Audited %
For the year ended 30 June Rm Rm change
Earnings attributable to ordinary 2 485 4 122 (40)
shareholders
Adjustment for:
Profit on sale of associate (4) -
Impairment of associate - 1
Impairment of available-for-sale 14 -
assets
Other (5) 10
Share of adjustment made by
associates:
Loss/(profit) on sale of shares 9 (131)
in subsidiary and associate
Profit on sale of available-for- (16) (76)
sale financial assets
Profit on VISA listing - (344)
Impairment of available-for-sale 22 -
assets
Loss on sale of advances books 79 -
Impairment of goodwill 39 11
Other 21 33
Total tax effect of adjustments (4) 73
Total minority interest in (4) 15
adjustments
Headline earnings attributable to 2 636 3 714 (29)
ordinary shareholders
Sources of headline earnings
2009 2008
Audited Audited %
For the year ended 30 June Rm Rm change
Headline earnings from:
FirstRand 2 138 3 205 (33)
Discovery 332 174
OUTsurance 405 354 14
RMB Structured Insurance 62 78 (21)
2 937 3 811 (23)
Other net income/(funding costs) (301) (97) (>100)
Headline earnings 2 636 3 714 (29)
Computation of earnings per share
2009 2008
Audited Audited %
For the year ended 30 June Rm Rm change
Earnings attributable to ordinary 2 485 4 122 (40)
shareholders
Headline earnings attributable to 2 636 3 714 (29)
ordinary shareholders
Number of shares in issue (millions) 1 209 1 209
Weighted average number of shares in 1 200 1 192
issue (millions)
Earnings per share (cents) 207,1 345,9 (40)
Diluted earnings per share (cents)* 206,7 339,9 (39)
Headline earnings per share (cents) 219,7 311,7 (30)
Diluted headline earnings per share 219,3 306,3 (28)
(cents)*
Dividend per share (cents)
Interim 54,0 69,0 (22)
Final 45,0 72,5 (38)
Total 99,0 141,5 (30)
Dividend cover (relative to headline 2,2 2,2
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
2009 2008
Audited Audited
at 30 June Rm Rm
ASSETS
Property and equipment 146 113
Goodwill and other intangible assets 19 20
Investment in associate companies 20 100 19 579
Financial assets 5 565 5 953
Receivables and prepayments 532 488
Policyholders` interest 11 93
Reinsurers` share of insurance provision 112 82
Cash and cash equivalents 1 986 2 058
Total assets 28 471 28 386
EQUITY
Share capital and premium 5 191 5 197
Reserves 15 451 15 110
Capital and reserves attributable to equity
holders
of the company 20 642 20 307
Minority interest 1 099 1 044
Total equity 21 741 21 351
LIABILITIES
Financial liabilities 2 646 2 670
Insurance contract provisions 3 704 3 938
Payables and provisions 380 427
Total liabilities 6 730 7 035
Total equity and liabilities 28 471 28 386
Summarised group cash flow statement
2009 2008
Audited Audited
For the year ended 30 June Rm Rm
Cash available from operating activities 2 460 2 399
Dividends paid (1 528) (1 782)
Investment activities (364) (1 154)
Financing activities (612) 575
Net (decrease)/increase in cash and cash (44) 38
equivalents
Unrealised foreign currency translation adjustments (28) 42
Cash and cash equivalents at the beginning of the 2 058 1 978
year
Cash and cash equivalents at the end of the year 1 986 2 058
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 Non-
Capital and Treasury Equity Distri-
Shares Accounted butable-
R million Premium Reserve Reserves Reserves
Balance at 30 June 2007 4 605 (166) 9 133 512
(audited) as previously
reported
Issue of new shares 723 - - -
Net profit for the year - - - -
Dividend paid - - - -
Income of associated - - 2 275 -
companies retained
Capital invested by - - - -
minorities
Share option expense reserve - - - 1
Reserve movements relating - - - 39
to subsidiaries
Change in carrying value of - - (48) -
associate due to elimination
of treasury shares
Movement in treasury shares - 35 82 -
Reserve movements relating - - 551 -
to associates
Balance at 30 June 2008 5 328 (131) 11 993 552
(audited)
Net profit for the year - - - -
Dividend paid - - - -
Income of associated - - 1 091 -
companies retained
Capital invested by - - - -
minorities
Reserve movements relating - - - 7
to subsidiaries
Change in carrying value of - - (27) -
associate due to elimination
of treasury shares
Movement in treasury shares - (6) 13 -
Reserve movements relating - - (574) -
to associates
Balance at 30 June 2009 5 328 (137) 12 496 559
(audited)
Total
Retained Share- Minority Total
holders`
R million Earnings Funds Interest Equity
Balance at 30 June 2007 2 539 16 623 972 17 595
(audited) as previously
reported
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 value - (48) - (48)
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)
Net profit for the year 2 485 2 485 147 2 632
Dividend paid (1 530) (1 530) (181) (1 711)
Income of associated (1 091) - - -
companies retained
Capital invested by - - 100 100
minorities
Reserve movements (33) (26) (11) (37)
relating to subsidiaries
Change in carrying value - (27) - (27)
of associate due to
elimination of treasury
shares
Movement in treasury - 7 - 7
shares
Reserve movements - (574) - (574)
relating to associates
Balance at 30 June 2009 2 396 20 642 1 099 21 741
(audited)
Computation of normalised earnings
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
2008.
2009 2008
Unaudited Unaudited %
For the year ended 30 June Note Rm Rm change
Headline earnings attributable
to
ordinary shareholders 2 636 3 714 (29)
RMBH`s share of adjustments
made by associates:
Treasury shares 1 103 157
IFRS 2 share based expenses (34) 43
2 705 3 914 (31)
Adjustment for:
RMBH shares held by 2 22 (48)
policyholders
Group treasury shares 3 (213) (290)
IFRS 2 share based expenses - 1
Normalised earnings 2 514 3 577 (30)
attributable to ordinary
shareholders
Weighted average number of 1 209 1 202
shares in issue (millions)
Normalised earnings per share 207,9 297,5 (30)
(cents)
Diluted normalised earnings per 207,9 297,5 (30)
share (cents)
Dividend cover (relative to 2,1 2,1
normalised earnings)
Sources of normalised earnings
2009 2008
Unaudited Unaudited %
For the year ended 30 June Rm Rm change
Normalised earnings from:
FirstRand 2 057 3 103 (34)
Discovery 315 161
OUTsurance 384 334 15
RMB Structured Insurance 60 72 (17)
2 816 3 670 (23)
Other net income/(funding costs) (302) (93) (>100)
Normalised earnings 2 514 3 577 (30)
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. Deconsolidation of "deemed" RMBH`s treasury shares held for policyholders
by group insurers.
3. Adjustment to reflect earnings impact based on actual RMBH shareholding in
group companies, i.e. reflecting treasury shares as if they are minority
shareholders.
Cash dividend declaration
Notice is hereby given that a final dividend of 45 cents per share was
declared on 16 September 2009 in respect of the financial year ended 30 June
2009.
Shareholders` attention is drawn to the following important dates:
* Last day to trade in order to participate Friday, 9 October 2009
in this dividend
* Shares commence trading "ex dividend" on Monday, 12 October 2009
* The record date for the dividend payment Friday,16 October 2009
will be
* Dividend payment date Monday,19 October 2009
No dematerialisation or rematerialisation of share certificates may be done
between Monday, 12 October 2009 and Friday, 16 October 2009 (both days
inclusive).
By order of the Board
AL Maher
Company Secretary
16 September 2009
Basis of preparation of results
The accompanying summarised results for the year ended 30 June 2009 reflect:
* the consolidation of the operations of RMBH and its subsidiaries
including OUTsurance and RMBSI; and
* RMBH`s proportionate interest in its associates, FirstRand and Discovery
which have been equity accounted.
The annual financial statements for the year ended 30 June 2009, 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
2008.
Reclassification of prior year financial information
As As
originally
R million restated stated Difference Reason
30 June 2008 "Policyholders`
Assets interest"
Policyholders` 93 - 93 represents the
interest accumulated
Liabilities profit or loss
Financial after tax
liabilities 2 670 2 577 93 attributable to
policyholders.
The balance was
reclassified
from
liabilities to
assets.
Discovery Holdings Limited ("Discovery")
Effective interest 26,7%*
Discovery services the health care funding and insurance markets
in South Africa and the United Kingdom. It is a pre-eminent developer of
integrated financial services products and operates under the Discovery
Health, Discovery Life, Discovery Invest, Discovery Card, Vitality, PruHealth
and PruProtect brand names.
FirstRand STI Holdings Limited ("OUTsurance")
Effective interest 61,9%*
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.
Youi, its direct personal lines initiative in Australia, is still in start up
phase.
RMB-SI Investments (Pty) Limited ("RMBSI")
Effective interest 80,2%*
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.
*The effective interest held by RMBH in these group entities 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 arising from BEE transactions entered into; as well
as
* "Deemed" treasury shares held in them by policyholders and mutual funds
managed by them.
The effective interest held as at 30 June 2009 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 32,5% 30,1%
* Discovery 26,7% 25,0%
* OUTsurance 61,9% 58,6%
* RMBSI 80,2% 76,9%
Date: 16/09/2009 11:50:01 Produced by the JSE SENS Department.
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