| Thu 1 Mar 2001, 0:00 | | Rmbh - Interim Results |
|
RMB HOLDINGS LIMITED
Reg. No 1987/005115/06
("RMBH")
Interim Results and Dividend Announcement for the six months ended 31 December
2000
"In Remgro we have found a worthy successor to Anglo American. Their
contribution in taking our business forward, will be invaluable." - G T
Ferreira, Chairman
Headline earnings per share up 27%
Dividend per share up 27%
THE RMBH GROUP
RMBH is the holding company of some of South Africa's leading financial
services companies. It acts as a seedbed for the establishment of
entrepreneurial financial services businesses with high growth potential which
are at the forefront of technological and product innovation in financial
services. Many of the products, and the companies that distribute them, did not
even exist five years ago. RMBH's interests include:
FirstRand Limited ("FirstRand" or the "FirstRand group")
(effective interest from 1 January 2001: 32,8% - previously 25%)
The FirstRand group is a uniquely structured financial services group with
critical mass in both banking and insurance. Its operations are a consolidation
of:
- FirstRand Bank Holdings Limited (the "FirstRand Banking group"), where
FirstRand is involved in consumer, corporate and merchant banking, as well as
instalment sale and property finance (principally under the First National Bank
("FNB"), Rand Merchant Bank, WesBank, Ansbacher, eBucks.com and Origin brand
names); and
- Momentum Group Limited (the "Momentum group"), which includes life assurance,
asset management and health insurance activities (principally under the
Momentum Life, Momentum Wealth, RMB Asset Management, Futuregrowth and
Discovery brand names).
As a consequence it is well poised to capitalise on the blurring of boundaries
and convergence within the financial services sector.
RMB Structured Insurance Limited ("RMBSI")
(effective interest from 1 March 2001: 100% - previously 70,0%)
RMBSI is a short-term insurer creating individual financial risk solutions to
South Africa's top companies by using sophisticated risk techniques and
innovative financial structures.
OUTsurance Limited ("OUTsurance") (effective interest 57,6%)
OUTsurance is a direct personal lines short-term insurer. Pioneer of the
OUTbonus concept, it has grown rapidly by applying a scientific approach to
risk selection, product design and claims management
Glenrand M.I.B Limited ("Glenrand M.I.B") (effective interest 18,5%)
Glenrand M.I.B ranks among the largest risk advisory, benefit services and
investment advisory services groups in South Africa. It focuses on providing
corporate and specialist risk solutions, reinsurance solutions and specialist
risk management advice, healthcare and retirement funding solutions, personal
financial planning and related investment advice to a broad spectrum of clients
Global Resorts (SA) (Pty) Limited ("Global Resorts") (effective interest 48,0%)
Global Resorts is a leading player in the gaming industry in South Africa. It
designs, develops and operates multi-faceted casino, hotel and entertainment
facilities and has an interest in three casinos, the principal of which is
Caesars Gauteng.
OVERVIEW OF RESULTS FOR THE SIX MONTH PERIOD
RMBH experienced an exciting and successful half year to 31 December 2000 and
continues to deliver above average long-term growth in headline earnings per
share. Over the last
5 years our headline earnings have increased at an annual compound growth rate
of 40% per annum.
The FirstRand group - still contributing the largest component of our earnings
- reported pleasing results. The FirstRand Banking group reported a 28%
increase in headline earnings, while the Momentum group increased headline
earnings by 18%. This enabled RMBH itself to report an increase in headline
earnings per share for the half year to 31 December 2000 of 27% to 50,72 cents
per share (1999: 40,05 cents).
With effect from 1 January 2001, RMBH acquired a further 7,8% interest in
FirstRand. This brings our interest in FirstRand to 32,8%.
REVIEW OF OPERATIONS
FirstRand group
Increase in FirstRand Shareholding
During May 2000, the Anglo American and De Beers groups (then collectively the
second largest shareholder in FirstRand after RMBH) indicated that they were
returning to their core commodity and minerals focus. Consequently their
investment in FirstRand no longer fell within their narrowed investment focus,
and they wished to dispose thereof.
With effect from 1 January 2001, Remgro Limited ("Remgro") acquired a 17,1%
interest in FirstRand from Anglo American in exchange for a portfolio of
commodity shares. In a further transaction Remgro transferred 7,8% of FirstRand
to RMBH. This transfer, which raised RMBH's interest in FirstRand to 32,8%, was
financed by the issue of new RMBH shares to Remgro, giving it a 23,1% interest
in RMBH.
Remgro and RMBH have a sound relationship spanning many years and we anticipate
that their contribution in taking RMBH's business forward will be of great
value.
The new group structure is as follows:
In terms of a written agreement between RMBH and Remgro, the parties have
agreed, inter alia, that RMBH will, on behalf of the parties, exercise
management control over FirstRand.
The transaction is earnings neutral at the outset, but does have a positive
impact on RMBH's net asset value. More importantly, it has removed the
uncertainty regarding Anglo American's ongoing investment in FirstRand. This
has had a positive effect on staff morale and investor sentiment.
SUMMARY OF FIRSTRAND FINANCIAL RESULTS
Year
Six months ended ended
31 December 30 June
2000 1999 % 2000
Rm Unaudited Unaudited change Audited
Headline earnings from:
- FirstRand Banking group 1 288 1 008 28 2 190
- Momentum group 423 359 18 790
- Holding company and secondary
tax on companies (26) (31) 16 (26)
Attributable to FirstRand
shareholders 1 685 1 336 26 2 954
Attributable to RMBH* 421 334 26 739
*After consolidation eliminations
OPERATING ENVIRONMENT AND FINANCIAL RESULTS
The six-month period to 31 December 2000 was characterised by difficult trading
conditions in financial markets and a stable retail interest rate environment.
Following such return to stability, consumer demand for credit has increased
moderately. Investment markets remained subdued, with investors continuing to
seek the relative security offered by guaranteed products and the rand-hedge
exposure of offshore portfolios.
The FirstRand Banking group achieved excellent results, with headline earnings
attributable to shareholders increasing by 28% to R1 288m (1999: R1 008m).
After minimal growth in advances during the six months to June 2000, the
FirstRand Banking group's advances grew by some 13%, mainly as a result of
market share gains in the mortgage and instalment sale markets and increases in
the level of offshore loans and corporate advances. The group has experienced a
significant improvement in its credit profile (both as a result of the more
stable interest rate environment as well as an increased focus on
non-performing loans), but continues to maintain conservative levels of
provisions.
Total year-on-year cost increases were restricted to 5%, continuing the trend
established during last year. Such sensible management of costs, along with the
implementation of smaller, more accountable business units, contributed to an
improvement in the efficiency (cost-to-income) ratio to 58,9% (previously
60,2%), against an achievable target of 57,5% for the full year. The FirstRand
Banking group continues to target an efficiency ratio of 55% for the financial
year to June 2002.
The FirstRand Banking group is adequately capitalised and remains confident
that, by actively managing its capital position, it will be able to comply with
the Reserve Bank's proposed new capital adequacy requirements.
The Momentum group increased operating profit after tax by 31% to R344m as a
result of pleasing performances in all significant areas. Of particular
interest is the strong growth in individual life new business volumes where the
group continued to gain market share. Reduced consumer discretionary savings
and the volatility of investment markets during the last calendar year placed
the unit trust and linked product industries under pressure. Momentum Employee
Benefits had an exceptional six months while the group's asset management
business continued to deliver top quartile investment performance with a
resultant increase in profitability. The 64%-held Discovery group continued to
produce excellent results, with a 57% increase in headline earnings per share.
The increase in operating income was diluted as a result of a strategic
decision to redeploy shareholder funds from interest-bearing instruments to
growth assets. As a consequence, the Momentum group's attributable headline
earnings increased by 18% to R423m.
The embedded value of the Momentum group (being the sum of shareholders' net
assets plus the present value of future profits from existing insurance
business) totalled R9,633bn at 31 December 2000 (30 June 2000: R9,391bn). The
embedded value profit for the six months' new business amounted to R136m.
Significantly, this represents 73% of the value of new business for the full
prior year.
The Momentum group remains more than adequately capitalised for the foreseeable
future.
EBUCKS.COM
The FirstRand group's e-commerce offering, eBucks.com, was successfully
launched in mid-October 2000. This business to consumer initiative has three
main economic activities, namely electronic financial services, a customer
appreciation plan and a secure anonymous online payment mechanism. At 31
December 2000, eBucks.com had attracted some 18 000 customers and established a
significant brand presence. Net start-up costs (R32m) have been expensed in the
period under review.
DIRECTLY HELD INSURANCE INTERESTS
RMB Structured Insurance
RMBSI had an excellent six months, largely as a result of new business gained,
the restructuring of a large transaction, and large annual premium inflows.
RMBH's attributable share of headline earnings for the six months to 31
December 2000 increased from R2m to R8,8m.
Subject to regulatory approval, RMBH will, with effect from 1 March 2001
acquire the 30% interest in RMBSI held by the Hannover Re Africa group, thereby
causing it to become a wholly owned subsidiary. The impact on earnings will not
be material. The purchase consideration of R16m will be funded from internal
resources.
OUTSURANCE
OUTsurance reported record volumes of new business in the six months to 31
December 2000, reflecting material organic growth as well as the successful
integration of the First National Insurance business acquired during the
previous financial year, with net earned premiums increasing by some 281% to
R180m.
Against industry trends, OUTsurance has, since inception, consistently recorded
underwriting profits, confirming the soundness of its risk selection and
pricing models.
RMBH's attributable share of OUTsurance's income for the period amounted to
R5,3m (1999: R1m).
Other financial services interests
GLENRAND M.I.B
Glenrand M.I.B reported a 7% increase in revenue of R209m for the six-month
period. Such slowdown in revenue growth is partly ascribed to a change in the
timing of revenue recognition between the first and second half of the
financial year and this translated in a 45% decline in headline earnings per
share. RMBH's attributable share of headline earnings from this group amounted
to R2,7m (1999: R6m).
GAMING INTERESTS
GLOBAL RESORTS
All elements of the permanent facility at Caesars Gauteng were successfully
commissioned, within budget, during the last quarter of 2000. The Gauteng
gaming market showed significant growth and in the year to December 2000
exceeded R2,4bn. Notwithstanding the opening of permanent competitor
facilities, Caesars Gauteng continued to perform well with a market share in
excess of 30%.
RMBH's attributable share of headline earnings amounted to R34,6m (1999: R28m),
representing a pleasing increase of 28%.
Sources of income
NET FUNDING COST
Net funding cost substantially represents funding costs incurred in financing
RMBH's commitments at its gaming interests. Current indications are that Global
Resorts will, in line with the original project feasibility projections,
commence repaying such funding during this financial year.
Change in directorate
In terms of the above-mentioned agreement between RMBH and Remgro, Remgro may
nominate two directors to the RMBH board. In pursuance of this agreement, the
Board has:
- recorded that Mr JW Dreyer, an existing RMBH board member who is also a
non-executive director of Remgro, has been nominated as such by Remgro; and
- invited Mr DM Falck, Finance Director - Remgro, to join the RMBH board as the
second Remgro nominee.
Dividend payment
The Board has resolved to declare a 4,3 times covered interim dividend of 11,8
cents per share (1999: 9,30 cents). This is an increase of 27% over the
previous period.
OUTLOOK FOR THE GROUP
FirstRand's management is pleased with the excellent progress being made in all
divisions of that group. It believes that the transformation processes at the
retail banking operations have created a stable platform for profitable future
growth.
The Ministry of Finance has commenced a review of the tax regime operating in
the banking sector. This, together with an unexpected and material narrowing of
the exchange control regulations applicable to the creation of foreign
investment portfolios, has introduced an element of regulatory uncertainty in
the FirstRand group's operating environment. While the full impact of such
regulatory challenges is still being explored, the FirstRand group remains
confident that its shareholders can continue to expect strong real earnings
growth.
Our other investments continue to perform well. Consequently, RMBH remains
confident of delivering strong growth in earnings per share in the second half
of the financial year.
For and on behalf of the board
GT Ferreira P Cooper
Chairman Chief Operating Officer
Sandton
01 March 2001
INTERIM DIVIDEND DECLARATION
Notice is hereby given that an interim dividend of 11,8 cents per share was
declared on 28 February 2001 in respect of the half year ended 31 December
2000, payable to ordinary shareholders registered in the books of the company
at the close of business on 16 March 2001. Where electronic transfer
instructions are in place, dividends will be credited to the shareholders' bank
accounts on 30 March 2001. In the absence of such mandates, dividend cheques
will be posted to shareholders on that date.
By order of the board
PF de Beer FCIS
Company Secretary
01 March 2001
SUMMARISED GROUP INCOME STATEMENT
Year
For the six months ended ended
31 December 30 June
2000 1999 2000
Unaudited Unaudited % Audited
Rm Rm change Rm
Operating profit 31 3 >100 51
Net finance costs (9) (1) >100 (15)
Profit before tax 22 2 >100 36
Taxation (10) (3) >100 (5)
Operating profit after tax 12 (1) >100 31
Share of after-tax results
in associate companies 453 388 17 866
Earnings attributable
to shareholders before
goodwill amortisation 465 387 20 897
Net goodwill amortised (57) (59) (3) (116)
Earnings attributable to
outside shareholders (7) (1) >100 (11)
Earnings attributable to
ordinary shareholders 401 327 23 770
Earnings per share (cents) 43,93 35,79 23 84,32
Calculation of headline
earnings
Earnings attributable to
ordinary shareholders 401 327 23 770
Adjustment for:
Profit arising on disposal
of certain interests by the
FirstRand group - (29) (37)
Profit arising on disposal
of associate and subsidiary - - (44)
Net goodwill amortised 58 59 116
Other 4 9 5
Headline earnings
attributable to ordinary
shareholders 463 366 27 810
Headline earnings per
share (cents) 50,72 40,05 27 88,69
Dividend per share (cents)
- Interim 11,8 9,30 27 9,30
- Final - - 20,70
Total 11,8 9,30 27 30,00
Number of shares in
issue (millions) 914 914 914
Weighted average number of
shares in issue (millions) 914 914 914
Dividend cover 4,3 4,3 3,0
Note: RMBH disposed of its interest in an associate, Hannover Re Africa
Limited, with effect from 1 July 2000. The R98m proceeds arising on disposal
was used to reduce interest-bearing funding. To facilitate a more meaningful
comparison, the prior period results have been adjusted with the earnings
attributed to such investment (R16m) being reflected against net finance costs.
Accounting policies
This interim report has been prepared using accounting policies which are in
accordance with Generally Accepted Accounting Practice. Such policies are
consistent with those applied in the preparation of the audited financial
statements for the year ended 30 June 2000, with the exception of the following
- No provision has been made for dividends receivable or payable after the last
day of the reporting period. The comparative figures have not been restated.
- With effect from 1 July 2000, goodwill is being capitalised and amortised
over its estimated lifespan. The impact of such changes in accounting policy is
reflected in the computation of attributable earnings. Comparative figures have
been restated.
SUMMARISED GROUP BALANCE SHEET
31 December 30 June
2000 1999 2000
Unaudited Unaudited Audited
Rm Rm Rm
Assets
Cash and short-term funds 118 61 462
Investments and advances 1 025 796 614
Accounts receivable 220 148 419
1 363 1 005 1 495
Associated companies 4 220 3 443 3 691
Fixed assets 14 8 11
Goodwill 2 050 2 169 2 109
Total assets 7 647 6 625 7 306
Liabilities and shareholders' funds
Funding instruments 366 1 086 304
Accounts payable and accruals 133 113 492
Short-term insurance provisions 843 18 691
Total liabilities 1 342 1 217 1 487
Outside shareholders' interest 98 - 89
Shareholders' funds
Reserves 3 170 2 371 2 693
Share capital and premium 2 937 2 937 2 937
Convertible debentures 100 100 100
6 207 5 408 5 730
Total liabilities and
shareholders' funds 7 647 6 625 7 306
Note: Comparative figures have been reclassified for certain items in order to
facilitate more meaningful disclosure.
STATEMENT OF CHANGES IN EQUITY
Non-distri-
Share Share butable Retained Total
capital premium reserves earnings equity
Rm Rm Rm Rm Rm
Balance at 30 June 2000
- As previously
reported (audited) 9 2 928 1 520 1 356 5 813
- Restatement by associate - - - 10 10
- Share of associate's
non-distributable reserves - - 75 - 75
- Goodwill amortised - - (268) (268)
Restated balance at
30 June 2000 9 2 928 1 595 1 098 5 630
Earnings attributable to
ordinary shareholders - - - 401 401
Income of associated
companies retained - - 449 (449) -
Transfer to contingency
reserve - - 2 (2) -
Negative goodwill taken
to income - - (2) - (2)
Transfers relating to
the FirstRand group:
Movement on foreign
currency
translation reserves - - 75 - 75
Other - - 3 - 3
Balance at 31 December
2000 (unaudited) 9 2 928 2 122 1 048 6 107
SUMMARISED GROUP CASH FLOW STATEMENT
Year
For the six months ended ended
31 December 30 June
2000 1999 2000
Unaudited Unaudited Audited
Rm Rm Rm
Cash available from operating
activities 268 153 399
Cash flows for servicing of finance
from shareholders (189) (163) (248)
Cash flows on investment activities (432) - (236)
Cash flows from financing activities 9 - 5
Net decrease in cash and cash
equivalents (344) (10) (80)
Cash and cash equivalents acquired on
acquisition of subsidiaries - - 471
Cash and cash equivalents at the
beginning of the period 462 71 71
Cash and cash equivalents at the
end of the period 118 61 462
Directors: GT Ferreira (Chairman), P Cooper (COO), BH Adams, A Bottega
(Italian), MPC Brogan (Australian), LL Dippenaar, JW Dreyer, DM Falck, JW
Gafney, A Gore, PM Goss, RP Gouws, PK Harris, RJ Hutchison, JJ Kitshoff, JD
Krige, WE Lucas-Bull, HP Meyer, KC Shubane.
Secretary and registered office: PF de Beer FCIS, 17th Floor, 1 Merchant Place,
corner of Fredman Drive and Rivonia Road, Sandton, 2146
Postal address: PO Box 786273, Sandton, 2146
Transfer secretaries: Computershare Services Limited, 2nd Floor, Edura House,
41 Fox Street,
Johannesburg, 2001 Website: www.rmbh.co.za
