| Thu 4 May 2006, 16:44 | | RMB Holdings Limited - Application of new interpre |
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RMH
RMH
RMB Holdings Limited - Application of new interpretation of accounting standards
RMB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1987/005115/06)
ISIN: ZAE000024501
Share Code: RMH
("RMBH" or "the Company")
APPLICATION OF NEW INTERPRETATION OF ACCOUNTING STANDARDS:
FINANCIAL YEAR ENDED 30 JUNE 2005 AND THE SIX MONTHS ENDED 31 DECEMBER 2005
Shareholders are referred to the statement issued on SENS by the Company"s
associate FirstRand Limited ("FirstRand") earlier today (4 May 2006).
In that announcement, FirstRand advised that the calculation of its headline
earnings per share going forward will be affected by the application of a new
interpretation of the Accounting Practices Committee (the "APC") of the South
African Institute of Chartered Accountants ("SAICA"). This new interpretation
by the APC requires that profits or losses on the realisation of equity
accounted private equity investments be excluded from the calculation of
headline earnings.
FirstRand is regarded as South Africa"s pre-eminent private equity investment
house. It views private equity as a core component of its investment banking
business. In its statement FirstRand reported that:
As part of its conversion to International Financial Reporting Standards
("IFRS") and specifically IAS 28 - "Investment in Associates", FirstRand had
elected to equity account for its private equity associate investments, in
preference to "fair valuing" such investments.
The APC earlier today published Issue 8 of Circular 7/2002 - "Headline
Earnings". In terms of the changes to this Circular, profits or losses arising
on the realisation of equity accounted private equity or venture capital
investments are to be excluded from the calculation of headline earnings.
The APC"s new interpretation only impacts the computation of headline earnings
and headline earnings per share. Consequently, it does not impact FirstRand"s
normalised earnings or normalised earnings per share calculations, nor does it
impact the group"s net asset value calculations.
FirstRand highlights that the APC and SAICA are currently researching the
usefulness of headline earnings as a measure of a company"s performance and its
relevance in the light of the increased emphasis which accounting standards
place on fair value.
FirstRand does not agree with the interpretation by the APC with respect to
equity accounted private equity investments. FirstRand believes that this
interpretation contradicts the objective of calculating headline earnings, which
exclude profits and losses on disposal of businesses, in the context of a
private equity business.
RMBH agrees with and supports FirstRand"s contentions regarding the APC"s new
interpretation.
FirstRand states that this new interpretation by the APC will impact its
headline earnings and headline earnings per share going forward. In addition
to disclosing headline earnings on the basis required by SAICA, FirstRand will
continue to disclose normalised headline earnings and normalised headline
earnings per share information, which includes the profits or losses on disposal
of private equity investments. Furthermore, FirstRand will continue with its
policy of using normalised headline earnings as the basis for determining
dividend payments.
IMPACT ON RMBH
As its investment in FirstRand produces the bulk of RMBH"s earnings, it is
anticipated that the impact outlined in FirstRand"s statement will, to a large
extent, flow through to RMBH"s results.
The impact of the new interpretation on RMBH"s headline earnings and fully
diluted headline earnings per share for the year ended 30 June 2005, and on the
headline earnings and fully diluted headline earnings per share for the six-
month period ended 31 December 2005 (including its 2004 comparative), as
previously reported in terms of IFRS, may be extrapolated as follows:
Year ended Six months Six months
30 June 2005 ended ended
Rm 31 Dec 2005 31 Dec 2004
Rm Rm
Headline earnings attributable 2,629 1,436 1,235
to ordinary shareholders
Proportionate adjustment to -137 -96 -59
exclude FirstRand private
equity realisations in
accordance with APC
interpretation
Adjusted headline earnings 2,492 1,340 1,176
attributable to ordinary
shareholders (excluding private
equity realisations)
Cents Cents Cents
Basic Headline Earnings Per
Share
As previously reported 221.3 121.0 104.0
Excluding private equity 209.7 112.9 99.0
realisations
Percentage change -5.2% -6.7% -4.8%
Diluted Headline Earnings Per
Share
As previously reported 218.6 118.1 102.7
Excluding private equity 207.0 110.0 97.7
realisations
Percentage change -5.3% -6.9% -4.9%
Given the divergence between headline earnings per share as calculated under the
APC"s new interpretation and the underlying economic trend, RMBH will give
consideration, when preparing its annual financial statements for the year
ending 30 June 2006, to also disclosing normalised headline earnings and
normalised headline earnings per share information, which includes the profits
or losses on disposal of private equity investments.
The financial information above has not been reviewed and reported on by the
Company"s auditors.
4 May 2006
Sandton
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 04/05/2006 04:44:07 PM Produced by the JSE SENS Department
