| Thu 2 Mar 2006, 9:32 | | RMBH - Summarised |
|
RMH
RMH
RMBH - Summarised, Unaudited Results for the Six Months Ended 31 December 2005
RMB Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1987/005115/06
Share code: RMH
ISIN code: ZAE000024501
("RMBH")
SUMMARISED, UNAUDITED RESULTS ANNOUNCEMENT
for the SIX MONTHS ENDED 31 DECEMBER 2005
"A very positive economic environment provided a basis for strong organic growth
for the RMBH Group which - despite the short-term distortions of our BEE
initiatives - produced an excellent outcome for the six months to December 2005"
GT Ferreira - Chairman
- Headline earnings
+16%
to 121,0 cents or R1,44 billion
- Interim dividend
+20%
to 50,5 cents or R0,6 billion
- Intrinsic value
+25%
to 2 820 cents or R33,5 billion
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: 32,9%*)
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 three subsidiary groups under FirstRand Bank
Holdings Limited, Momentum Group Limited and Discovery Holdings Limited.
The FirstRand Banking Group provides customers with a comprehensive range of
products and services according to specific target market segments. First
National Bank services the retail, business and medium corporate segments. In
addition it provides transactional services to the group"s large corporate
clients. Rand Merchant Bank is responsible for large corporate segment, to which
it provides loans, value added advisory and structuring services; while WesBank
is South Africa"s dominant movable asset financier. The balance of the Banking
group includes its African banking subsidiaries and Banking Group Treasury.
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.
Discovery Group (66,5% held) services the health insurance and life assurance
markets.
- OUTsurance Group ("OUTsurance") - held via FirstRand STI Holdings Limited
(effective interest: 63,1%*)
The OUTsurance group 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.
- RMB Structured Insurance Limited ("RMBSI") (effective interest: 81,1%*)
RMBSI holds both short-term and life assurance licences. It creates individual
insurance and financial risk solutions for South Africa"s large corporations by
using sophisticated risk techniques and innovative financial structures.
- Glenrand M.I.B Limited ("Glenrand M.I.B") (effective interest: 16,9%*)
Glenrand M.I.B is a financial services group focused on providing risk advisory
services and solutions, employee benefits and investment advisory services.
* The effective interest held by RMBH in these businesses shows variations
between years as a result of the implementation of IFRS which, in this context,
prescribes adjustment for the impact of staff share incentive schemes and the
elimination of treasury shares.
OVERVIEW OF RESULTS
The South African economy remained strong during the six month period ended 31
December 2005, characterised by renewed strength in the Rand, lower inflation,
stable domestic interest rates and sharply higher equity markets. In particular:
- The Rand strengthened by 5% to R6,32: US$1 at 31 December 2005, mainly due to
the run in precious metal prices, with the US$ gold price increasing by almost
19% over the period,
- Despite the rising oil price and resultant petrol price increases, CPIX
inflation performed better than expected, at the mid-point of the South African
Reserve Bank"s targeted range of 3% - 6% with an average CPIX for the six month
period of 4,3%,
- Demand for credit accelerated, with private sector credit extension increasing
by more than 20% on a year-on-year basis, reflecting households" strong appetite
for asset-backed credit, and
- Equity markets continued to reflect strong gains, with the JSE ALSI 40 Index
increasing by 28% during the six months under review, with strong demand for
retail investment products.
This very positive economic environment provided strong organic growth
opportunities for most of the RMBH Group. Over the six month period:
- FirstRand grew its operational earnings by +19%
- OUTsurance increased its headline earnings by +43%
- RMBSI grew headline earnings by +32%.
The transition to IFRS and a number of non-recurring events both in the current
period and the prior periods (including Momentum"s settlement with the National
Treasury, the 100 cents per share extraordinary return of capital to RMBH
shareholders plus the FirstRand and RMBSI BEE transactions, which decreased our
effective interest in those groups) have the potential to cloud the progression
from a strong operational trend to reported headline earnings.
Notwithstanding, at the RMBH level there was, what we believe to be an excellent
outcome for the six months to 31 December 2005 with:
- Headline Earnings per share growing by +16% to 121,0 cents (2004: 104,0
cents).
Given the strong underlying operational trend reflected by the group"s headline
earnings, RMBH declared an interim dividend of 50,5 cents per share representing
an increase of 20% and a dividend cover ratio (on headline earnings) of 2,4
times.
REVIEW OF OPERATIONS
FIRSTRAND GROUP
Summary of FirstRand financial results
Six months ended 31 December Restated
Restated % Year
ended
Rm 2005 2004 change 30 June
2005
Headline earnings derived
from:
FirstRand Banking Group 3 658 2 844 29 6 062
Momentum Group 652 583 12 1 270
Discovery Group 101 118 (14) 324
FirstRand Limited (102) (116) (12) (304)
Share Trust consolidation (134) (78) 72 (155)
4 175 3 351 25 7 197
Non-cum non-redeem (114) - - (68)
preference share
dividends
Adjustment for FirstRand (131) - - -
shares held by
policyholders
FirstRand Headline 3 930 3 351 17 7 129
Earnings
Attributable to RMBH* 1 251 1 119 12 2 365
* After consolidation eliminations and impact of BEE
Transaction.
Financial overview
The positive economic environment provided a basis for strong organic growth for
all FirstRand"s businesses.
In particular, the FirstRand Banking Group produced headline earnings growth of
29% to R3,7 billion.
- Sustained low interest rates continued to result in very strong advances
growth which was offset by margin pressure,
- The banking group"s infrastructure investment strategies resulted in continued
high growth in expenses. This notwithstanding, the overall cost to income ratio
improved to 53,8%, reflecting the banking group"s sustained operational
leverage, and
- Strong equity markets and a high level of BEE activity impacted the banking
group"s investment banking operations positively.
Momentum Group grew headline earnings, excluding the National Treasury
settlement and IFRS, by 25% to R742 million, with earnings attributable to
ordinary shareholders increasing 33%. If the settlement and IFRS adjustments are
included the headline earnings increased by 12%. These results were
characterised by:
- Strong retail new business growth, particularly in individual risk and
discretionary lump sum investments,
- The positive impact of the Sage acquisition,
- Significant growth in asset management earnings due to increased equity market
growth and strong retail product inflows, and
- Investment income on shareholder assets reduced as a result of recent
acquisitions.
Discovery Group delivered a strong performance for the year under review with
headline earnings, excluding the impact of its BEE transaction, increasing by
64% to R296 million. (R152 million after the BEE transaction, a reduction of
16%).
Operational review
FirstRand Banking group
The Banking Group produced excellent results for the six months to 31 December
2005, benefiting from very strong performances from RMB, FNB and WesBank.
Exceptional growth in consumer credit demand, particularly for asset backed
finance, combined with increased client numbers and transaction volumes was very
positive for both FNB and WesBank. The strong equity markets were very positive
for RMB"s equity businesses, particularly private equity, equity trading and
corporate finance.
First National Bank
FNB produced excellent results with profit before taxation increasing by 18% to
R2,503 billion.
The buoyant South African economy, strong consumer demand for credit, a
significant increase in customer numbers, market share gains and excellent
volume growth, all contributed to this increased profitability, despite low
interest rates continuing to place pressure on margins.
Bad debts remained low at 0,3% (2004 - 0,4%) of advances, due in the main to the
continued benign interest rate environment.
Non interest income grew by 22% as a result of increased customer numbers and
higher transactional volumes, particularly in the Mass, Consumer and Commercial
segments and Card Issuing and Card Acquiring. Average fee increases were kept
below inflation.
Operating expenses increased by 18%. Major contributors to this increase were
HomeLoans (where acquisition costs are expensed as incurred), branch and other
infrastructure enhancements, investments in growth initiatives and variable
costs associated with the increased transactional volumes resulting in the base
cost increasing by only 8%.
Advances increased by R27 billion or 29%, with HomeLoans, Card Issuing, Wealth
and Commercial being the major contributors.
The growth in customer numbers resulted from the increased sales focus and
success in cross-selling to existing FNB customers and the successful launch of
the Discovery Card, all of which contributed to an increase of 34% in new
customer accounts.
Corporate advances have continued to decline as a result of low credit demand
and increased pricing competition.
Rand Merchant Bank
RMB produced an exceptionally strong performance in the first half of 2006 with
the equity businesses dominating due to buoyant equity markets and sustained low
interest rates. The robust economic environment and strong BEE activity were
also conducive to good originated debt and advisory services performances. The
proprietary trading and arbitrage businesses enjoyed varied success in the
volatile and often unpredictable forex, debt, credit and commodity markets. The
strategic focus on equity businesses in prior years has yielded a more balanced
portfolio of businesses.
Private Equity produced an exceptional performance, generating 90% growth on the
prior year comparative with the continued favourable trading environment
conducive to realisations both locally and abroad. The robust market conditions
and strong earnings projections also boosted unrealised profits in the remainder
of the portfolio.
WesBank
WesBank had an exceptionally good six months with earnings increasing by 31% due
mainly to increases in new business volumes and market share. Advances increased
by R15,1 billion, up 26%, and new business written was R25 billion, an increase
of 34% over the previous period. Car sales continued at record highs with the
number of new units sold for the six-month period increasing by 24% over the
corresponding prior period. This trend is expected to continue. Non-interest
revenue increased by 31% as a result of the high new business volumes, greater
penetration of insurance products and an increase in the contribution from
WesBank Auto.
African subsidiaries
The growth in profitability was driven mainly by the largest subsidiaries, FNB
Botswana and FNB Namibia. Botswana continued to perform well with profit before
tax increasing by 15% in Pula terms. Namibia grew income before tax by 7% to
N$160,0 million (9% at headline earnings level). Swaziland faced continued
challenging conditions as a result of the depressed state of the economy.
Lesotho performed well achieving a small maiden profit for the month of December
2005 on the back of high volumes.
Momentum Group
The Momentum Group generated a strong performance in a challenging operating
environment. Good organic growth was achieved in individual recurring risk,
savings and lump sum retail investment inflows. The integration of Sage into the
Momentum Group has progressed well.
Headline earnings before the once-off impact of the National Treasury
settlement, pre-IFRS, increased by 25% to R742 million for the six months ended
31 December 2005. Headline earnings, after the impact of the National Treasury
settlement and IFRS adjustments, increased by 12% to R652 million. Earnings
attributable to ordinary shareholders increased by 33% to R778 million.
Total assets under management and administration increased by 24% during the six
months to R334 billion mainly due to the growth in equity markets, strong net
inflows in the collective investments and linked product businesses, and the
acquisition of Sage which has increased Momentum"s asset base by 10%, and has
tripled the size of Momentum"s agency force.
Momentum"s embedded value increased from R11,8 billion at 30 June 2005 to R13,0
billion at 31 December 2005. This growth resulted mainly from the impact of
strong equity markets and a 28% increase in the value of new business compared
with the prior period. The embedded value profit represents an annualised return
of 27%.
During the period Momentum disposed of its 34% shareholding in African Life
(Aflife) to Sanlam and acquired the entire shareholding in African Life Health
from Aflife for a cash consideration of R176 million.
The insurance operations
The operating profit generated by local insurance operations increased by 25% to
R420 million. The continued strong new business growth, together with good
growth in investment markets, impacted positively on the results. The value of
new business, which represents the present value of profits from new business,
increased by 28% to R246 million. Including the turnaround in the results of the
international operations, the overall insurance operations increased operating
profit by an excellent 41% to R423 million.
The acquisition of Sage reduces Momentum"s unit cost per policy and contributes
positively to its growth strategy by providing access to an agency force that is
expected to significantly enhance future new business growth.
Asset management operations
The asset management operations generated an increase in net profit after tax of
41% to R151 million. The local asset management operations, represented mainly
by RMBAM, generated an excellent 64% increase in headline earnings. Strong
market growth in institutional business resulted in increased asset values and
consequently higher fee income, whilst a significant increase in retail
collective investment scheme net inflows has also benefited income levels.
Discovery Group
Discovery"s operating profits grew strongly by 32% during the period under
review to R526 million (2004: R399 million), despite a disappointing performance
from Destiny Health. Headline earnings and earnings per share were negatively
impacted by the once-off expense associated with Discovery"s recent BEE
transaction.
DIRECTLY HELD INSURANCE INTERESTS
OUTsurance
OUTsurance continues to grow and posted exceptional results for the six months
under review, with:
- Net earned premium income exceeding R1,0 billion, a 25% increase; while
- The underwriting result rose by 29% to R189 million; and
- Headline earnings increased by 43% to R188 million (2004: R132 million).
These results were driven by strong organic growth in both the personal lines
and business operations and continued efficiency gains. While still at an early
stage, OUTsurance"s initiative to make its sophisticated risk selection, product
design and claims management expertise available to companies in the greater
FirstRand group is showing promise.
RMBH"s attributable share of OUTsurance"s headline earnings for the six months
amounted to R117,7 million (2004: R84,7 million).
RMB Structured Insurance
RMBSI reported an excellent 32% increase in headline earnings, which amounted to
R27,0 million. (2004: R20,5 million).
The group"s core activities delivered a satisfactory performance benefiting from
strong growth in premium income in its consumer protection business (on the back
of booming retail sector activity) and an improved yield on its investment
portfolio.
RMBH"s attributable share of RMBSI"s headline earnings for the year amounted to
R21,9 million (2004: R19,6 million ), reflecting the reduction of RMBH"s
effective interest from 98% to 81% as a result of the BEE transaction with the
New Seasons Investment group during April 2005.
OTHER FINANCIAL SERVICES INTERESTS
Glenrand M.I.B
Glenrand M.I.B continues to experience soft market conditions in its Risk
Services and Benefit Consulting areas with only minor growth in revenues being
achieved, while its Re-insurance consulting business reported a decline in
revenues as a result of a lack of new business. Management believes it has
entered a turn-around phase and is focusing on new business generation, the
reduction of lost business and continued cost efficiencies.
Glenrand M.I.B"s headline earnings for the six months declined to R19,6 million
(2004: R23,2 million) with RMBH"s share thereof amounting to R3,3 million (2004:
R4,0 million).
GROUP CAPITAL POSITION
Extra-ordinary cash distribution to shareholders
RMBH reduced its share capital by repaying to shareholders, from the Company"s
share premium account, an amount of R1,19 billion, equivalent to 100 cents per
share on 7 November 2005.
Market value of underlying investments
Notwithstanding such return of capital to shareholders, the market value of
RMBH"s underlying investments has shown a significant increase in value over the
last six months and may be summarised as follows:
As at 31 Dec 30 June %
Rm 2005 2005 change
Market value of listed interests
(FirstRand, Glenrand M.I.B) 31 042 23 143 +34
Valuation of unlisted interests
OUTsurance, RMBSI) 1 857 1 726 +8
Net cash and other resources 593 1 950 (70)
Total intrinsic value 33 492 26 819 +25
Per RMBH share (cents) 2 820c 2 258c +25
If the 100 cents per share that was returned to shareholders during the six
month period is excluded from the opening values, the growth in intrinsic value
over the six month period amounted to 31%.
At 31 December 2005 RMBH"s market capitalisation amounted to R33,14 billion or 2
790c per share, (30 June 2005: R26,42 billion or 2 225 cents) representing a
1,1% discount (30 June 2005: 1,5%) to the group"s underlying intrinsic value.
Substantially all of RMBH"s net cash and other resources are currently invested
in a listed equity portfolio that emulates the share price performance of
FirstRand and RMBH. These funds are available for investment or, if appropriate,
to acquire FirstRand shares or to repurchase RMBH shares.
Interim dividend payment
The Board has resolved to declare an interim dividend of 50,5 cents per share
(2004: 42,0 cents), representing a 20% increase. The interim dividend is covered
2,4 times by headline earnings per share.
OUTLOOK FOR THE GROUP
The economic upswing currently experienced in South Africa does not yet show
signs of slowing and possibly represents a sustainable structural shift to an
era of low interest rates and inflation.
At FirstRand:
- Consumer credit demand, particularly asset-backed, is expected to remain
buoyant, and this will be positive for the group"s retail and wholesale banking
and vehicle financing operations,
- In addition, continued strong equity markets and BEE should drive growth from
the investment banking operations,
- The strong equity markets and the Life Industry"s settlement with the National
Treasury has created a favourable environment for our insurance businesses, and
- The challenge going into 2006 is to at least maintain growth at current levels
and improve efficiencies. Margins are likely to remain under pressure given
current low interest rates which are not expected to increase during the next
six month period.
Both OUTsurance and RMBSI have cautioned that their rate of growth are expected
slow down in the second six months. However, they remain confident of achieving
their targets.
It should be noted that IFRS continues to evolve through the issue and/or
endorsement of new Standards and Interpretations and developments in the
application of recently issued Standards. For that reason, it is possible that
the financial impact and adjustments reflected in these results may change in
respect of the year ending 30 June 2006. It is anticipated that conversion to
IFRS could result in greater volatility in reported earnings.
Barring any unforeseen external shocks and in the context of the current strong
economic growth in South Africa, we believe that the existing strategies of the
Group and diversified income streams generated from the underlying business
units positions the Group to achieve its stated objective of 10% real growth for
the year to 30 June 2006.
For and on behalf of the Board
GT Ferreira P Cooper
Chairman Chief Operating Officer
Sandton
2 March 2006
INTERIM DIVIDEND DECLARATION
Notice is hereby given that an interim dividend of 50,5 cents per share was
declared on 2 March 2006 in respect of the six months ended 31 December 2005.
Shareholders" attention is drawn to the following important dates:
Last day to trade in order to participate in this Thursday, 16 March 2006
dividend
Shares commence trading "ex dividend" on Friday, 17 March 2006
The record date for the dividend payment will be Friday, 24 March 2006
Dividend payment date Monday, 27 March 2006
No dematerialisation or rematerialisation of share certificates may be done
between Friday, 17 March 2006 and Friday, 24 March 2006 (both days inclusive).
By order of the Board
AH Arnott
Company Secretary
2 March 2006
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 and KC Shubane.
Secretary and registered office
AH Arnott BCom CA(SA)
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
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 2004 (Pty) Limited,
Ground Floor, 70 Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107
Telephone: +27 11 370 5000
Telefax: +27 11 688 5221
BASIS OF PREPARATION OF RESULTS AND ADOPTION OF IFRS
The accompanying results are:
- a consolidation of the operations of RMBH and its two subsidiary groups,
OUTsurance and RMB Structured Insurance; while
- RMBH"s proportionate interest in its associates, FirstRand and Glenrand M.I.B
has been equity accounted.
In accordance with the Listings Requirements of the JSE Limited (the "JSE"),
RMBH adopted International Financial Reporting Standards, International
Accounting Standards and interpretations issued by the International Financial
Reporting Interpretation Committee (collectively "IFRS") with effect from 1 July
2005. Prior to that, RMBH prepared its consolidated financial statements in
accordance with South African Statements of Generally Accepted Accounting
Practice ("SA GAAP").
RMBH"s first IFRS results are for this six month period ended 31 December 2005,
followed by the annual report for the financial year ending 30 June 2006. As
RMBH will publish comparative information for the previous year in that annual
report, the date of transition to IFRS is 1 July 2004 (the "transition date" -
being the start of the earliest period for which comparative information is
presented). Consequently, these interim results for the six month period ended
31 December 2005 (as well as RMBH"s annual report for the year ending 30 June
2006) include comparative information restated in accordance with IFRS, subject
to certain exemptions to full retrospective adoption.
For the six month period to 31 December 2005:
- The impact of adopting IFRS is immaterial at RMBH and its two subsidiary
groups, OUTsurance and RMB Structured Insurance; and
- While the adoption of IFRS has material consequences at our associate
FirstRand (and to a lesser extent at Glenrand M.I.B), its financial reporting
impact at RMBH is, in essence, restricted to the line items recording the
outcome of RMBH"s investment in associates.
An announcement summarising the impact on RMBH of adopting IFRS has been
published simultaneously with this report.
It is important to note that the adoption of IFRS represents an accounting
change only. As such:
- It does not affect RMBH"s underlying operations or cash flows;
- Nor does it impact on the RMBH group"s statutory solvency or capital adequacy
positions.
SUMMARISED GROUP INCOME STATEMENT
Restated
Six months ended year
31 December ended
Restated % 30 June
Rm 2005 2004 change 2005
Operating profit of the 326 231 41 1 136
company and subsidiaries
Net finance income 41 14 >100 45
Profit before tax 367 245 50 1 181
Taxation (117) (86) 36 (205)
Operating profit after 250 159 57 976
tax
Share of after tax 1 302 1 111 17 2 365
results of associate
companies
Earnings attributable to 1 552 1 270 22 3 341
shareholders
Earnings attributable to (75) (47) 60 (110)
minority shareholders
Earnings attributable to 1 477 1 223 21 3 231
ordinary shareholders
Computation of headline
earnings:
Earnings attributable to 1 477 1 223 21 3 231
ordinary shareholders
Adjustment for:
Profit on sale of - - - (605)
partial interest
in FirstRand
Other 7 - - -
Share of adjustment made
by associates:
Impairment of goodwill 31 - - -
Realised (profit)/loss (55) 4 (>100) (27)
on sale of available-for-
sale assets
(Profit)/loss on sale of (27) 6 (>100) 23
subsidiary
Other 3 2 50 7
Headline earnings 1 436 1 235 16 2 629
attributable to ordinary
shareholders
COMPUTATION OF EARNINGS PER SHARE
Restated
Six months ended year
31 December ended
Restated % 30 June
Rm 2005 2004 change 2005
Number of shares in 1 188 1 188 1 188
issue (millions)
Weighted average number 1 188 1 188 1 188
of shares in issue
(millions)
Earnings per share 124,4 103,0 21 272,0
(cents)
Diluted earnings per 121,5 101,7 19 269,3
share (cents)
Headline earnings per 121,0 104,0 16 221,3
share (cents)
Diluted headline 118,1 102,7 15 218,6
earnings per share
(cents)
Dividend per share
(cents)
Interim 50,5 42,0 20 42,0
Final - - 52,0
Total 50,5 42,0 20 94,0
Dividend cover (relative 2,4 2,5 2,4
to headline earnings)
SOURCES OF HEADLINE EARNINGS
Restated
Six months ended year
31 December ended
Restated % 30 June
Rm 2005 2004 change 2005
Headline earnings from:
FirstRand (after BEE 1 251 1 119 12 2 365
dilution impact)
Glenrand M.I.B 3 4 (25) 3
OUTsurance 118 85 39 194
RMB Structured Insurance 22 20 10 51
1 394 1 228 14 2 613
RMBH and other 42 7 >100 16
Headline earnings 1 436 1 235 16 2 629
SUMMARISED GROUP CASH FLOW STATEMENT
Six months ended Restated
31 December year
ended
Restated 30 June
Rm 2005 2004 2005
Cash available from 998 646 1 516
operating activities
Cash flows for servicing (694) (618) (1 117)
of finance from
shareholders
Cash flows from return (1 188) - -
of capital to
shareholders
Cash flows on investment (938) (28) 1 725
activities
Cash flows from (10) (36) (76)
financing activities
Net change in cash and (1 832) (36) 2 048
cash equivalents
Unrealised foreign - - (7)
currency translation
adjustments included in
cash and cash
equivalents
Cash and cash 4 298 2 257 2 257
equivalents at the
beginning of the period
Cash and cash 2 466 2 221 4 298
equivalents at the end
of the period
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 GROUP BALANCE SHEET
31 December 31 December 30 June
2005 2004 2005
Restated Restated
Rm Rm Rm
ASSETS
Cash and cash 2 466 2 221 4 298
equivalents
Investments 3 149 2 268 2 117
Accounts receivable 760 484 652
Reinsurers" share of 48 6 47
insurance provisions
6 423 4 979 7 114
Investment in associate 8 671 8 991 8 555
companies
Property and equipment 103 104 106
Goodwill and other 2 878 3 054 2 700
intangible assets
Total assets 18 075 17 128 18 475
LIABILITIES AND
SHAREHOLDERS"
EQUITY
Liabilities 5 008 3 895 4 301
Funding instruments 228 244 228
Accounts payable and 1 082 888 970
accruals
Intangible asset related 16 - 13
liability
Short-term insurance 2 846 2 121 2 376
provisions
Liabilities to 836 642 714
policyholders
Shareholders" equity
Minority shareholders" 316 215 313
interest
Shareholders" equity 12 751 13 018 13 861
Share capital and 4 605 5 793 5 793
premium
Reserves 8 146 7 225 8 068
Total liabilities and 18 075 17 128 18 475
shareholders" equity
SUMMARISED STATEMENT OF CHANGES IN EQUITY
Equity
Share Share accounted
Rm capital premium reserves
Balance at 30 June 12 5 781 6 425
2005(audited) as previously
reported
Retrospective restatement due - - (1 068)
to implementation of IFRS
Restated balance at
30 June 2005 12 5 781 5 357
Prospective adjustment due to - - (425)
implementation of IFRS
Balance at 1 July 2005 12 5 781 4 932
Return of capital - (1 188) -
Earnings attributable to - - -
ordinary shareholders
Dividend paid - - -
Income of associated - - 826
companies retained
Transfers relating to
subsidiaries:
- Transfer to contingency - - -
reserve by short-term
insurance operations
- Transfer to non-distri-
butable reserve - - -
- Movement in revaluation - - -
reserves
- Share option expense - - -
reserve
Change in carrying value of - - 105
associate due to elimination
of treasury shares
Transfers relating to
associates:
- Currency translation - - (88)
differences
- Revaluation of cash flow - - (71)
hedges
- Revaluation of available - - 95
for sale assets
- Movement in other reserves - - 3
- Consolidation of share - - (319)
trusts
- Treasury shares in - - (140)
insurance subsidiary
- Share option reserve - - 14
Balance at 31 December 2005 12 4 593 5 357
(unaudited)
Balance at 31 December 2004 12 5 781 6 067
(unaudited) as previously
reported
Adoption of AC 501 - - - 46
Secondary Tax on companies
Retrospective restatement due - - (401)
to implementation of IFRS
Restated balance at
31 December 2004 (unaudited) 12 5 781 5 712
SUMMARISED STATEMENT OF CHANGES IN EQUITY
Non- Total
distri- share-
butable Retained holders"
Rm reserves earnings equity
Balance at 30 June 458 2 253 14 929
2005(audited) as previously
reported
Retrospective restatement due - - (1 068)
to implementation of IFRS
Restated balance at
30 June 2005 458 2 253 13 861
Prospective adjustment due to - - (425)
implementation of IFRS
Balance at 1 July 2005 458 2 253 13 436
Return of capital - - (1 188)
Earnings attributable to - 1 477 1 477
ordinary shareholders
Dividend paid - (618) (618)
Income of associated - (826) -
companies retained
Transfers relating to
subsidiaries:
- Transfer to contingency 13 (13) -
reserve by short-term
insurance operations
- Transfer to non-distri-
butable reserve 3 (3) -
- Movement in revaluation 41 - 41
reserves
- Share option expense 4 - 4
reserve
Change in carrying value of - - 105
associate due to elimination
of treasury shares
Transfers relating to
associates:
- Currency translation - - (88)
differences
- Revaluation of cash flow - - (71)
hedges
- Revaluation of available - - 95
for sale assets
- Movement in other reserves - - 3
- Consolidation of share - - (319)
trusts
- Treasury shares in - - (140)
insurance subsidiary
- Share option reserve - - 14
Balance at 31 December 2005 519 2 270 12 751
(unaudited)
Balance at 31 December 2004 420 1 090 13 370
(unaudited) as previously
reported
Adoption of AC 501 - - 3 49
Secondary Tax on companies
Retrospective restatement due - - (401)
to implementation of IFRS
Restated balance at
31 December 2004 (unaudited) 420 1 093 13 018
Web address: www.rmbh.co.za
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
UNAUDITED, SUMMARISED RESTATEMENT OF FINANCIAL INFORMATION FOR THE SIX MONTHS
ENDED 31 DECEMBER 2004, AND YEAR ENDED 30 JUNE 2005 UNDER INTERNATIONAL
FINANCIAL REPORTING STANDARDS
RECONCILIATION OF INCOME STATEMENTS
Year Six months
ended ended
30 June 31 December
Rm 2005 2004
Profit attributable to ordinary
shareholders of the company
As previously reported under SA GAAP 3 516 1 360
SA GAAP restatements (adoption of AC - 5
501 - STC)
As restated under SA GAAP 3 516 1 365
IFRS adjustments (285) (142)
Other - (1)
Associate companies (285) (141)
As reported under IFRS 3 231 1 223
Headline earnings
As previously reported under SA GAAP 2 790 1 232
SA GAAP restatements (adoption of AC - 5
501 - STC)
As restated under SA GAAP 2 790 1 237
IFRS adjustments (161) (2)
Other - (1)
Associate companies (161) (1)
As reported under IFRS 2 629 1 235
30 June 31 December
As reported under IFRS 2005 2004
Number of ordinary shares in issue 1 188 1 188
(millions)
Weighted number of ordinary shares in 1 188 1 188
issue (millions)
Basic earnings per share (cents) 272,0 103,0
Basic earnings per share - diluted 269,3 101,7
(cents)
Headline earnings per share (cents) 221,3 104,0
Headline earnings per share - diluted 218,6 102,7
(cents)
30 June 31 December
As previously reported 2005 2004
Number of ordinary shares in issue 1 188 1 188
(millions)
Weighted number of ordinary shares in 1 188 1 188
issue (millions)
Basic earnings per share (cents) 296,0 114,5
Basic earnings per share - diluted 291,6 112,5
(cents)
Headline earnings per share (cents) 234,9 103,7
Headline earnings per share - diluted 230,7 101,7
(cents)
RECONCILIATION OF ASSETS, LIABILITIES AND EQUITY
30 June 31 December 1 July
Rm 2005 2004 2004
ASSETS
As previously reported under 19 543 17 474 16 398
SA GAAP
SA GAAP adjustments - 55 -
Deferred tax assets - STC - 3 -
Associate companies - STC - 46 -
Reinsurers" share of insurance - 6 -
provisions
IFRS Adjustments (1 068) (401) (288)
Goodwill (1 083) (413) (311)
Associate companies 15 12 23
As reported under IFRS 18 475 17 128 16 110
LIABILITIES
As previously reported under 4 614 4 104 3 833
SA GAAP
SA GAAP adjustments
Short-term insurance - 6 -
provisions
IFRS adjustments - - -
As reported under IFRS 4 614 4 110 3 833
SHAREHOLDERS" EQUITY
As previously reported under 14 929 13 370 12 565
SA GAAP
SA GAAP adjustments - 49 -
Deferred tax assets - STC - 3 -
Associate companies - STC - 46 -
IFRS adjustments (1 068) (401) (288)
Goodwill (1 083) (413) (311)
Associate companies 15 12 23
As reported under IFRS 13 861 13 018 12 277
RECONCILIATION OF ASSETS, LIABILITIES AND EQUITY
Rm 1 July 2005
ASSETS
As reported under IFRS - 30 June 2005 18,475
IFRS adjustments
Associate companies (425)
As reported under IFRS 18 050
LIABILITIES
As reported under IFRS - 30 June 2005 4 614
As reported under IFRS 4 614
SHAREHOLDERS" EQUITY
As reported under IFRS - 30 June 2005 13 861
IFRS adjustments
Associated companies (425)
As reported under IFRS 13 436
SUMMARISED STATEMENT OF CHANGES IN EQUITY
Equity
Share Share accounted
Rm capital premium reserves
For the year ended 30 June
2004
Balance at 30 June 2004 under 12 5 781 5 232
SA GAAP
IFRS adjustments
- Goodwill - - (311)
- Associate companies - - 23
Balance at 1 July 2004 under 12 5 781 4 944
IFRS
For the period ended 31
December 2004
Balance at 31 December 2004 12 5 781 6 067
under SA GAAP
SA GAAP adjustments - - 46
Restated under SA GAAP 12 5 781 6 113
IFRS adjustments
- Goodwill - - (413)
- Associate companies - - 12
Balance at 31 December 2004 12 5 781 5 712
under IFRS
For the year ended 30 June
2005
Balance at 30 June 2005 under 12 5 781 6 425
SA GAAP
IFRS adjustments
- Goodwill - - (1 083)
- Associate companies - - 15
Balance at 30 June
2005 under IFRS 12 5 781 5 357
Balance at 30 June 2005 under 12 5 781 5 357
IFRS
IFRS adjustments
- Associate companies - - (425)
Restated balance at
1 July 2005 under IFRS 12 5 781 4 932
SUMMARISED STATEMENT OF CHANGES IN EQUITY
Non- Total
distri- share-
butable Retained holders
Rm reserves earnings equity
For the year ended 30 June
2004
Balance at 30 June 2004 under 414 1 126 12 565
SA GAAP
IFRS adjustments
- Goodwill - - (311)
- Associate companies - - 23
Balance at 1 July 2004 under 414 1 126 12 277
IFRS
For the period ended 31
December 2004
Balance at 31 December 2004 420 1 090 13 370
under SA GAAP
SA GAAP adjustments - 3 49
Restated under SA GAAP 420 1 093 13 419
IFRS adjustments
- Goodwill - - (413)
- Associate companies - - 12
Balance at 31 December 2004 420 1 093 13 018
under IFRS
For the year ended 30 June
2005
Balance at 30 June 2005 under 458 2 253 14 929
SA GAAP
IFRS adjustments
- Goodwill - - (1 083)
- Associate companies - - 15
Balance at 30 June
2005 under IFRS 458 2 253 13 861
Balance at 30 June 2005 under 458 2 253 13 861
IFRS
IFRS adjustments
- Associate companies - - (425)
Restated balance at
1 July 2005 under IFRS 458 2 253 13 436
CASH FLOW STATEMENT
None of the IFRS adjustments to the cash flow statement were material.
Refer to the interim report for the detailed breakdown of the cash flow
statement.
BASIS OF PREPARATION OF RESULTS AND ADOPTION OF IFRS
In accordance with the Listings Requirements of the JSE Limited (the "JSE"),
RMBH adopted International Financial Reporting Standards, International
Accounting Standards and interpretations issued by the International Financial
Reporting Interpretation Committee (collectively "IFRS") with effect from 1 July
2005. Prior to that, RMBH prepared its consolidated financial statements in
accordance with South African Statements of Generally Accepted Accounting
Practice ("SA GAAP").
RMBH"s first IFRS results are for this six month period ended 31 December 2005,
followed by its annual report for the financial year ending 30 June 2006. As
RMBH will publish comparative information for the previous year in that annual
report, the date of transition to IFRS is 1 July 2004 (the "transition date" -
being the start of the earliest period for which comparative information is
presented). Consequently, these interim results for the six month period ended
31 December 2005 (as well as RMBH"s annual report for the year ending 30 June
2006) include comparative information restated in accordance with IFRS. Under
IFRS 1 certain elections and exemptions are permitted to avoid having to fully
retrospectively apply IFRS. The most significant exemption for the RMBH Group,
was the prospective adoption of IAS 32, IAS 39 and IFRS 4 from 1 July 2005.
The RMBH group comprises:
Subsidiary companies
- OUTsurance Group ("OUTsurance") - held via FirstRand STI Holdings Limited
(effective interest: 63,1%)
- RMB Structured Insurance Limited ("RMBSI") (effective interest: 81,1%)
Associated companies
- FirstRand Limited (the "FirstRand group") (effective interest: 32,9%)
- Glenrand M.I.B Limited ("Glenrand M.I.B") (effective interest: 16,9%)
The accompanying interim results announcement for the six months ended 31
December 2005 are:
- a consolidation of the operations of RMBH and its two subsidiary groups,
OUTsurance and RMB Structured Insurance; while
- RMBH"s proportionate interest in its associates, FirstRand and Glenrand M.I.B
has been equity accounted.
Material adjustments
- The impact of adopting IFRS is immaterial and below the level of rounding used
in this report at RMBH and its two subsidiary groups, OUTsurance and RMB
Structured Insurance. The most significant of these adjustments is the splitting
of property, plant and equipment into their component parts for the purpose of
calculating depreciation; and
- While the adoption of IFRS has material consequences at our associate
FirstRand (and to a lesser extent at Glenrand M.I.B), its financial reporting
impact at RMBH is, in essence, restricted to the line items recording the
outcome of RMBH"s investment in associates.
Full details of FirstRand"s IFRS adjustments are available on their website at
www.firstrand.co.za. In converting from SA GAAP to IFRS, FirstRand records the
major impact as being in the following areas:
- Applying the "incurred loss" as opposed to the "expected loss" basis in
respect of credit impairment provisioning;
- Expensing employee share option and other share-based payment costs on a fair
value basis;
- Deferral of the liability incurred on front end fees incurred to secure
investment management contracts;
- Transferring accumulated foreign currency translation reserves and
unrecognised actuarial losses on defined benefit funds on 1 July 2004 to
retained income; and
- Eliminating of deemed treasury shares and the associated gains and losses as
well as the consolidation of investment vehicles controlled by FirstRand which
were previously recognised at fair value.
The elimination of, inter alia, the deemed treasury shares held by FirstRand
impacts on the effective holding that RMBH has in that group and gives rise to a
consequential adjustment of the carrying value of RMBH"s investment in
FirstRand.
Reconciliation of transition from SA GAAP to IFRS
The schedules presented herein set out summaries of the preliminary financial
information in accordance with IFRS and reconciliations of:
- Income statements for the six months ended 31 December 2004 and the year ended
30 June 2005;
- Total assets, liabilities and equity as at 1 July 2004, 31 December 2004, 30
June 2005 and 1 July 2005; and
- Shareholders equity at 1 July 2004, 31 December 2004, 30 June 2005 and 1 July
2005.
Future changes
IFRS continues to evolve through the issue and/or endorsement of new Standards
and Interpretations and developments in the application of recently issued
Standards. For that reason, it is possible that the financial impact,
reclassifications and adjustments reflected in these results may change in
respect of the year ending 30 June 2006.
The Board acknowledges its responsibility for the preparation of the preliminary
financial information in accordance with IFRS and policies expected to be
adopted when it prepares RMBH"s first set of IFRS financial statements for the
year ending 30 June 2006.
For and on behalf of the Board
GT Ferreira P Cooper
Chairman Chief Operating Officer
Sandton
2 March 2006
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 and KC Shubane.
Secretary and registered office
AH Arnott BCom CA(SA)
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
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 2004 (Pty) Limited,
Ground Floor, 70 Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107
Telephone: +27 11 370 5000
Telefax: +27 11 688 5221
Date: 02/03/2006 09:33:22 AM Produced by the JSE SENS Department
