| Mon 4 Mar 2002, 0:00 | | Rmb Holdings - Unaudited Results Announcement For |
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December 2001
RMB Holdings
Unaudited results announcement for the six months ended 31 December 2001
"Notwithstanding an extremely volatile and uncertain business environment,
RMBH produced inherently sound and satisfying operating results"
Headline earnings per share up 56% to 78,9 cents
Operational headline earnings per share up 20% to 61,0 cents
Dividend per share up 20% to 14,2 cents
The RMBH group at a glance
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 retail, corporate and merchant banking, as well as
instalment sale and property finance (principally under the First National
Bank, 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 61,2%)
OUTsurance is a direct personal lines 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.
Glenrand M.I.B Limited ("Glenrand M.I.B")
(effective interest 18,6%)
Glenrand M.I.B is an international financial services group focused on
providing risk advisory services and solutions, employee benefits and
investment advisory services and solutions, selected risk products and
healthcare administration services.
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
The RMBH group experienced a challenging half-year to 31 December 2001. This
period was dominated by the events of 11 September 2001, the subsequent
slowdown of the United States economy and the precipitous fall of the rand
against the US dollar. These resulted in an uncertain and volatile domestic
business environment.
Against this background, a more than doubling of our reported headline
earnings from R463m to R938m, with headline earnings per share increasing by
56% to 78,9 cents per share (2000: 50,7 cents) merits closer analysis.
In this regard, two factors are of relevance.
The share exchange transaction, in terms of which RMBH acquired an
additional 7,8% interest in FirstRand, in exchange for issuing new RMBH
ordinary shares to the Remgro group, took effect on 1 January 2001. The
results for the six-month period ended 31 December 2000 thus include an
effective 25% of the FirstRand group, while that of the period ended 31
December 2001 incorporates 32,8% of FirstRand. The impact of this change on
RMBH may be illustrated as follows:
Six months to 31 December 2001 2000 %
Rm Rm Change
RMBH headline earnings
as reported 938 463 103
Impact of additional 7,8%
interest in FirstRand (207) - -
Headline earnings before
Remgro transaction 731 463 58
As such increased interest in FirstRand was financed through the issue of
new RMBH shares, it is earnings neutral when expressed on a headline
earnings per share basis.
The second factor is linked to the decline of the rand against the US dollar
during the last quarter of 2001. The FirstRand Banking group, as an integral
part of its activities, has significant foreign currency assets and
liabilities. As a result of the rand's decline it has, in accordance with
Generally Accepted Accounting Practice on integral foreign operations,
included R714m of unrealised currency profits in its income for the period
(2000: R53m). It appears prudent to give consideration to the true
operational trend arising from the group's activities. The FirstRand Banking
group thus breaks down its unrealised currency gain into two elements,
namely:
* That element of the gain that can be ascribed to the interest differential
between the two currencies - which it regards as being an inherent part of
its ongoing operational activities (amounting to R64m in the current
period); and
* The balance of the unrealised currency gain (R650m) that it highlights as
being exceptional in size and probably non-recurring.
By decomposing the unrealised currency gain in this manner, a clearer
analysis of the underlying operational and business trends are obtained. If
such analysis is consistently applied to RMBH's results, the following trend
arises:
Six months to 31 December 2001 2000 Change
Rm Rm %
RMBH headline earnings
as reported 938 463 103
Attributable portion
(32,8%) of exceptional
translation gain of R650m (213) - -
Operational headline earnings 725 463 57
On an operational headline
earnings per share basis,
the following result
is derived:
Six months to 31 December 2001 2000 Change
Cents Cents %
RMBH headline earnings
per share as reported 78,9 50,7 56
Attributable portion of
exceptional translation
gain (17,9) - -
RMBH operational headline
earnings per share 61,0 50,7 20
Given the extremely volatile and uncertain business environment encountered
during the period, we believe that the operational trend highlighted above
is not only inherently sound and sustainable, but also very satisfying.
Based on such underlying operational trend, RMBH has declared an interim
dividend of 14,2 cents per share, representing a 20% increase over the
previous period.
Source of income
Pie graph
REVIEW OF OPERATIONS
FirstRand group
Summary of FirstRand financial results
Year
Six months to ended
31 December 30 June
2001 2000 Change 2001
Rm Unaudited Unaudited % Audited
Headline
earnings from:
- FirstRand
Banking group 2 185 1 279 71 2 795
Operational
earnings 1 535 1 279 20 2 795
Exceptional
translation gain 650 - - -
- Momentum group 501 423 18 943
- FirstRand (7) (17) 59 (41)
Attributable to
FirstRand
shareholders 2 679 1 685 59 3 697
Attributable
to RMBH* 876 421 108 1 078
*After consolidation eliminations, but including exceptional translation
gain of R213m in current period.
Operating environment and financial results
As indicated, the six-month period to 31 December 2001 was characterised by
an uncertain domestic business environment, increased trading volatility and
a decrease in investor confidence. Notwithstanding this, FirstRand with its
diversified earnings base, reported pleasing results.
FirstRand Banking group
The rand exchange rate decline resulted in a large increase in the rand
value of the FirstRand Banking group's dollar denominated assets and
liabilities. The FirstRand Banking group benefited from a continued
improvement in the credit quality of its core client base as a result of the
stable interest rate environment. These were partially offset by the
underperformance of its US corporate debt portfolios. The impact of the
retail bank's outward focus has not yet been fully realised and strong
growth in fee and commission income is expected to continue for the
remainder of the financial year. The group's trading teams were able to
capitalise on the volatile conditions arising from the deterioration of the
rand.
The FirstRand Banking group was able to restrict the increase in its core
operational expenditure, resulting in a further improvement in the cost-to-
income ratio to 57,2% (2000: 59,5%).
Momentum group
The Momentum group increased headline earnings by 18% to R501m, comprising
an increase of 17% in group operating profit and an increase of 23% in the
investment income on shareholders' assets.
The individual business division of the group achieved a satisfactory
increase of 15% in operating profits, notwithstanding further restrictions
on its ability to offer its customers international investments. Discovery
Health produced outstanding results, increasing headline earnings by 71%
during the six-month period.
Both FirstRand Banking group and Momentum group remain adequately
capitalised.
DIRECTLY HELD INSURANCE INTERESTS
RMB Structured Insurance
RMBSI reported a 19% increase in headline earnings, which amounted to
R15,2m. (2000: R12,5m). Such increase arose primarily as a result of
investment income derived from the larger capital base maintained to support
statutory solvency requirements.
RMBH's share of attributable earnings for the six months to 31 December 2001
increased from R8,8m (70% interest) to R15,2m.
OUTsurance
OUTsurance continues to reap the benefits of its direct sales business
model. In the six months to 31 December 2001 record sales volumes, a
reduction in management expense ratios and good client retention contributed
to a profitable underwriting result. Coupled with substantially higher than
anticipated investment income, such result enabled OUTsurance to report
headline earnings of R25,4m for the six-month period. This represents an
improvement of some 180% over the prior period.
RMBH's attributable share of OUTsurance's income for the period amounted to
R15,6m (2000: R5,3m).
OTHER FINANCIAL SERVICES INTERESTS
Glenrand M.I.B
Glenrand M.I.B reported a dramatic turn around for the six-month period.
Exceptional revenue growth in the group's risk advisory services business,
coupled with the inclusion for the first time of results from the Protector
group (engaged in the provision, management and administration of employee
health benefits), translated into a 90% increase in headline earnings per
share.
RMBH's share of attributable earnings from Glenrand M.I.B amounted to R5,6m
(2000: R2,3m).
GAMING INTERESTS
Global Resorts
The permanent facilities at Caesars Gauteng were opened during December
2000. The results for the six months under review are thus not directly
comparable with that of the prior period.
The global upheavals experienced during the first half of the six-month
period under review had a negative impact on operations at Caesars Gauteng.
However, corrective steps taken by management had the desired effect and the
facility exceeded budget for the period. The other two casino complexes
performed in line with expectation. The launch of the Internet gaming
initiative has proven to be more complex than anticipated and initial
results have been disappointing. All development and start-up costs (R7,5m)
have been expensed and the project is currently being re-evaluated.
RMBH's share of headline income for the six-month period amounted to R36,0m
(2000: R34,6m).
Global Resorts has provided all of the funding required by its economic
empowerment partners at Caesars Gauteng. That project has now reached a
stage where such funding can be restructured. Upon finalisation, each
partner will derive a return that more clearly reflects its economic
interest in the project. Had the proposed restructuring been in place prior
to the start of the current reporting period, the earnings reported by
Global Resorts would have been approximately a third lower.
NET FUNDING COST
Net funding cost substantially represents funding costs incurred in
financing RMBH's commitment at its gaming interests. Subsequent to 31
December 2001 RMBH received a further development loan repayment of R36m
from Global Resorts. Since the opening of the permanent facilities at
Caesars Gauteng during December 2000, Global Resorts has returned 40% of the
development capital advanced to it by shareholders.
Dividend payment
The board has resolved to declare an interim dividend of 14,2 cents per
share (2000: 11,80 cents). Such payment is an increase of 20% over the
previous period and is covered 4,3 times by operational headline earnings.
Outlook for the group
FirstRand Banking group is already seeing growth in income as a result of
focusing externally on revenue growth and service. Management is confident
that, barring unforeseen circumstances, operational growth in income and
assets can be maintained for the remainder of the financial year. Increased
restrictions on its ability to offer customers international investment
opportunities will continue to place pressure on the Momentum group's new
business volumes. FirstRand, with its diversified earnings base, remains
confident that its diverse nature will enable it to maintain profit growth
relative to its peers.
Our other investments continue to perform satisfactorily. Consequently, RMBH
remains confident of delivering real 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
4 March 2002
Interim dividend declaration
Notice is hereby given that an interim dividend of 14,2 cents per share has
been declared on 28 February 2002 in respect of the half year ended 31
December 2001. The last day to trade in these shares on a cum dividend basis
is 20 March 2002 and the first day to trade ex dividend will be 22 March
2002. The record date for the dividend payment will be 28 March 2002 and the
payment date is 2 April 2002. No dematerialisation or rematerialisation of
share certificates may be done in the period 14 March 2002 to 28 March 2002
(both days inclusive).
By order of the board
PF de Beer FCIS
Company Secretary
Sandton
4 March 2002
RMB Holdings Limited ("RMBH") Registration number 1987/005115/06
Share code: RMH ISIN-code: ZAE000024501
Directors
GT Ferreira (Chairman), P Cooper (COO), LL Dippenaar, JW Dreyer, DM Falck,
PM Goss, PK Harris, KC Shubane.
Secretary and registered office
PF de Beer (FCIS), 17th Floor, 1 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 8008
Sponsor (in terms of JSE requirements)
RMB Corporate Finance, 1 Merchant Place, corner of Fredman Drive and Rivonia
Road, Sandton, 2196
Transfer secretaries
Computershare Services Limited, 2nd Floor, Edura House, 41 Fox Street,
Johannesburg, 2001
SUMMARISED GROUP INCOME STATEMENT
For the six months ended Year ended
31 December 30 June
2001 2000 2001
Unaudited Unaudited Change Audited
Rm Rm % Rm
Operating profit 63 31 103 52
Net finance costs (14) (9) 56 (16)
Profit before tax 49 22 123 36
Taxation (18) (10) 80 5
Operating profit
after tax 31 12 158 41
Share of after tax
results in associate
companies 911 453 101 1 128
Earnings attributable
to shareholders
before goodwill
amortisation 942 465 103 1 169
Net goodwill
amortised (105) (57) 84 (167)
Earnings attributable
to outside
shareholders (10) (7) 43 (18)
Earnings attributable
to ordinary
shareholders 827 401 106 984
Computation of
headline earnings:
Earnings attributable
to ordinary
shareholders 827 401 106 984
Adjustment for:
Net goodwill
amortised 105 57 84 167
Other 6 5 20 35
Headline earnings
attributable to
ordinary
shareholders 938 463 103 1 186
Adjustment for:
Attributable
portion of
exceptional
translation gain (213) - - -
Operational headline
earnings attributable
to ordinary
shareholders 725 463 57 1 186
Sources of operational
headline earnings:
Operational headline
earnings from:
FirstRand 663 421 57 1 078
Glenrand M.I.B 5 3 67 11
OUTsurance 16 5 220 19
RMB Structured
Insurance 15 9 67 19
Global Resorts 36 35 3 75
Operational headline
earnings before
funding costs 735 473 55 1 202
Net funding cost
and other (10) (10) - (16)
Operational headline
earnings attributable
to ordinary
shareholders 725 463 57 1 186
Computation of
earnings per share:
Number of shares
in issue
(millions) 1 188 914 1 188
Weighted average
number of shares
in issue
(millions) 1 188 914 1 050
Earnings per
share (cents) 69,6 43,9 59 93,7
Headline earnings
per share
(cents) 78,9 50,7 56 113,0
Operational
headline earnings
per share
(cents) 61,0 50,7 20 113,0
Dividend per
share (cents)
- Interim 14,20 11,80 20 11,80
- Final - - - 24,20
Total 14,20 11,80 20 36,00
Dividend cover
(relative to
operational
headline earnings) 4,3 4,3 3,1
SUMMARISED GROUP BALANCE SHEET
31 December 30 June
2001 2000 2001
Unaudited Unaudited Audited
Rm Rm Rm
Assets
Cash and short-term funds 1 091 118 1 376
Investments and advances 1 085 1 025 710
Accounts receivable 122 220 291
2 298 1 363 2 377
Associated companies 6 642 4 220 5 555
Fixed assets 17 14 15
Goodwill 3 691 2 050 3 798
Total assets 12 648 7 647 11 745
Liabilities and
shareholders' funds
Funding instruments 666 366 637
Accounts payable and
accruals 128 133 212
Short-term insurance
provisions 1 231 843 1 362
Liabilities to policyholders 126 - -
Total liabilities 2 151 1 342 2 211
Outside shareholders'
interest 112 98 97
Shareholders' funds
Share capital and
premium 5 793 2 937 5 793
Reserves 4 492 3 170 3 544
Convertible debentures 100 100 100
10 385 6 207 9 437
Total liabilities and
shareholders' funds 12 648 7 647 11 745
STATEMENT OF CHANGES IN EQUITY
Non-
distri-
Share Share butable Retained Total
capital premium reserve earnings equity
Rm Rm Rm Rm Rm
Balance
at 30 June
2001
(audited) 12 5 781 2 567 977 9 337
Earnings
attributable
to ordinary
shareholders - - - 827 827
Dividend paid - - - (287) (287)
Income of
associated
companies
retained - - 683 (683) -
Transfer to
contingency
reserve by
short-term
insurance
operations - - 3 (3) -
Negative
goodwill
taken to
income - - (2) - (2)
Transfers
relating to
associates:
Movement
on foreign
currency
translation
reserves - - 418 - 418
Other - - (15) - (15)
Investment
reserve relating
to short-term
insurance
operations - - 7 - 7
Balance at
31 December
2001
(unaudited) 12 5 781 3 661 831 10 285
SUMMARISED GROUP CASH FLOW STATEMENT
Year
For the six months ended
ended 31 December 30 June
2001 2000 2001
Unaudited Unaudited Audited
Rm Rm Rm
Cash available
from operating
activities 365 268 1 325
Cash flows for servicing
of finance from
shareholders (287) (189) (329)
Cash flows from investment
activities (363) (432) (73)
Cash flows from financing
activities - 9 (9)
Net decrease in cash and
cash equivalents (285) (344) 914
Cash and cash equivalents
at the beginning of
the period 1 376 462 462
Cash and cash
equivalents at the end
of the period 1 091 118 1 376
Preparation of accounts
This interim report has been prepared using accounting policies which are in
accordance with South African Generally Accepted Accounting Practice. Such
policies are consistent with those applied in the preparation of the
unqualified audited financial statements for the year ended 30 June 2001.
Certain prior year comparatives have been restated and/or reclassified to
facilitate a more meaningful comparison.
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