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RMH
RMH
RMH - RMBH - Summarised unaudited results for the six months ended 31 December
2006 and dividend declaration
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
2006
normalised earnings + 22% to 155,1 c or R1,84 billion
Interim dividend + 22% to 61,5 c or R0,73 billion
Intrinsic value + 20% to 3 387 c or R40,23 billion
FirstRand
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.
Banking
The FirstRand Banking Group provides customers with a comprehensive range of
products and services according to specific target market segments. The balance
of the Banking group includes its African banking subsidiaries and Banking Group
Treasury.
Effective interest 32,9%*
FNB
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
Rand Merchant Bank ("RMB") is responsible for the large corporate segment, to
which it provides loans; value added advisory and structuring services.
Wesbank
WesBank is a moveable asset financier. It is active in South Africa, Australia
and the United Kingdom.
Insurance
Momentum
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
Discovery Group (57%* held) services the health insurance and life assurance
markets.
Directly held insurance interests
Effective interest 62.2%*
FirstRand Short-term Insurance Limited
("OUTsurance")
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.
RMB Structured Insurance Limited ("RMBSI")
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.
Effective interest 80.0%*
RMB Structured Insurance Limited ("RMBSI")
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.
Effective interest 15.8%*
Glenrand M.I.B Limited ("Glenrand M.I.B")
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 at the end of the period in these
businesses shows variations between periods 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 held in them by policyholders and mutual funds managed
by them; as well as
"Deemed" treasury shares arising from BEE transactions entered into.
OVERVIEW OF RESULTS
The South African financial services environment remained very favourable during
the six months to 31 December 2006, reflecting a period of strong economic
activity, relative Rand stability, contained inflationary pressures, higher
domestic interest rates and very strong equity markets. In particular:
The Rand strengthened by 2,4%, from a level of R7,15: US$1 at 30 June 2006, to
R6,98: US$1 at 31 December 2006, largely due to renewed appetite for emerging
market assets, with strong foreign flows into the local equity and bond markets.
CPIX inflation remained within the South African Reserve Bank`s targeted range
of 3% to 6%, averaging 5% during the period under review.
Both consumer and business confidence remained strong. Rapid growth in
consumption expenditure and fixed investment resulted in year-on-year growth in
private sector credit extension of 25%, driven by both corporate and household
credit demand.
During the period the Central Bank continued to raise interest rates with three
increases of 50 basis points in August, October and December 2006. The prime
overdraft rate averaged 11,69% pa during the six month period (2005: 10,50% pa).
Although at an early stage, the tightening of monetary policy has shown signs of
taking effect with the absolute rate of growth in retail credit slowing.
Against this background, the FirstRand Group, in particular, produced excellent
results for the six months, growing normalised earnings by 26%, with RMB and FNB
growing normalised earnings by 75% and 26% respectively.
RMBH reported the following key income statement outcomes for ordinary
shareholders:
Attributable profit after tax + 30% to R1 856 million
(2005: R1 425 million)
Headline earnings + 23% to R1 587 million
(2005: R1 288 million)
On a per share basis this
translates to:
Attributable earnings per share + 30% to 157,7 cents
(2005: 121,6 cents)
Headline earnings per share + 23% to 134,8 cents
(2005: 109,9 cents)
In previous reports to shareholders, both FirstRand and RMBH highlighted that
certain non-operational factors and accounting anomalies impact on the
calculation of headline earnings. When such anomalies are isolated from these
results, the following trend in normalised earnings is derived for the six month
period to 31 December 2006:
Normalised Earnings + 22% to R1 842 million
(2005: R1 505 million)
- per ordinary share + 22% to 155,1 cents
(2005: 126,7 cents)
We believe Normalised Earnings to be a more appropriate basis against which to
measure performance.
Group capital position
The intrinsic value of the Group`s investment portfolio reflects the strong
equity markets experienced during the period under review.
The increase in value over the last year may be summarized as follows:
2006 2005 %
As at 31 December Rm Rm change
Market value of listed associates
??(FirstRand, Glenrand MIB) 37 683 31 042 21
Director`s valuation of unlisted
interests
??(OUTsurance, RMBSI) 2 292 1 857 23
Net cash resources/listed investments 259 593 (56)
Total Intrinsic Value 40 234 33 492 20
??Per RMBH share (cents) 3 387c 2 820c 20
At 31 December 2006 RMBH`s market capitalisation amounted to R39,67 billion or 3
340 cents per share, (2005: R33,14 billion) representing a 1,4% discount (2005:
1,1%) to the Group`s underlying intrinsic value.
Interim dividend payment
The Board has resolved to declare an interim dividend of 61,5 cents per share
(2005: 50,5 cents), representing a 22% increase. The interim dividend is covered
2,5 times by normalised earnings per share.
Corporate citizenship
RMBH and all of the companies in which it invests have embraced the
recommendations of the King II report on Corporate Governance. RMBH remains
committed to the highest standard of Corporate Governance and in this regard
strives to provide reports to shareholders that are timely, accurate, consistent
and informative.
RMBH supports broad-based and genuine empowerment and transformation in all of
the sectors in which we operate. All companies within the greater group are
proactively working towards achieving the targets envisaged in the Financial
Sector Charter.
Outlook for the Group
We expect the current favourable economic climate to continue in the second half
of the year. The impact of the interest rate increases since June 2006 has
resulted in a slow-down in consumer demand for credit and it is expected that
this will continue in the second half of the year. Bad debts are expected to
continue to increase from current levels.
At the FirstRand group:
- RMB, FNB and WesBank are well positioned to benefit from strengthening
corporate credit demand on the back of increased infrastructure spend,
corporate capacity building and BEE activity.
- Overall the banking group will continue to focus on maintaining strong top
line growth whilst managing increases in operating expenses and bad debts.
- Although Momentum`s investment in new initiatives has slowed earnings
growth during the current period, such initiatives are expected to
contribute positively to future earnings growth.
RMBH`s other interests (all engaged in short-term insurance) are each unique in
their own abilities and also stand poised to extract further value from their
identified niches.
Barring any unforeseen external shocks, we believe that the existing strategies
of the Group and diversified income streams generated from the underlying
business units will ensure that the Group is well positioned to achieve its
stated objective of 10% real growth.
For and on behalf of the Board
GT Ferreira P Cooper
Chairman Chief Operating Officer
Sandton
28 February 2007
INTERIM DIVIDEND DECLARATION
Notice is hereby given that an interim dividend of 61,5 cents per share was
declared on 28 February 2007 in respect of the six months ended 31 December
2006.
Shareholders` attention is drawn to the following important dates:
- Last day to trade in order to participate in Thursday, 15 March 2007
this dividend
- Shares commence trading
"ex dividend" on Friday,16 March 2007
- The record date for the dividend
payment will be Friday, 23 March 2007
- Dividend payment date Monday, 26 March 2007
No de-materialisation or re-materialisation of share certificates may be done
between Friday, 16 March 2007 and Friday, 23 March 2007 (both days inclusive).
By order of the Board
AH Arnott
Company Secretary
28 February 2007
FIRSTRAND GROUP
Summary of FirstRand Financial Results
Unaudited Unaudited
Six months ended Year ended
31 Dec 31 Dec % 30 June
Rm 2006 2005 change 2006
Normalised earnings
derived from:
?FirstRand Banking 4 752 3 680 29 7 410
Group
?Momentum Group 799 731 9 1 562
?Discovery Group 220 183 20 424
?FirstRand Limited (69) (73) 5 (164)
5 702 4 521 26 9 232
Non-cum non-redeem (163) (114) (274)
preference share
dividends
FirstRand Normalised 5 539 4 407 26 8 958
Earnings
Attributable to RMBH* 1 640 1 290 27 2 657
* After consolidation eliminations
The FirstRand Group produced excellent results for the six months, growing
normalised earnings by 26%.
- Within the Banking Group, RMB and FNB delivered excellent results, growing
normalised earnings by 75% and 26% respectively.
- Momentum Group increased normalised earnings by 9%.
- Discovery Group was buoyed by both its health and risk assurance business as
well a reduction in the operating losses incurred by Destiny Health in the
United States.
FirstRand Banking Group
In an economic environment that was generally favourable, the FirstRand Banking
Group:
- Increased net interest income by 32%, as a result of significant organic
growth in the advances and deposit base, a widening of interest margins (on the
back of higher interest rates) and an improved mix in advances with a bias
towards retail advances.
- Increased non-interest income by 32%, due to increased customer numbers and
higher transaction volumes. A continued buoyant market for mergers and
acquisitions as well as structured finance resulted in a 64% increase in
knowledge based income. Trading businesses benefited from volatility and
trending in most markets as well as increased client flows.
- Operating expenditure grew by 29%, driven largely by new initiatives launched
in both the local and international markets.
Consequently, the cost to income ratio (on normalised earnings) improved from
53,8% to 53,0%.
During the six months under review non-performing loans increased by R744
million to 1,5% of gross advances (June 2006: 1,4%) as the credit rating of
(largely retail) counterparties deteriorated due to the normalisation of credit
margins.
As a result of continuous capital investment in high growth retail lending
activities, the Banking Group`s core equity ratio of 8,1% is now at the lower
end of its target range. The Banking Group is not only actively seeking to
enhance its capital position through actions such as securitisations and first
loss risk transfers but is also re-assessing the manner in which capital is
deployed in new initiatives.
Rand Merchant Bank increased pre-tax earnings by 75% to R2 billion with all
business units delivering strong growth for the half year.
This excellent performance reflects how well positioned RMB is to benefit from
good economic conditions and can be attributed to the successful execution of a
number of strategic initiatives. These strategies have focused on providing
innovative products and maintaining a strong client franchise in local markets
whilst at the same time successfully applying its trading models and
intellectual capital in international markets on an opportunistic basis,
leveraging off its local infrastructure.
First National Bank produced another set of excellent results with profit before
taxation increasing by 24% from R2 521 million to R3 119 million.
FNB continued to focus on its segment strategy:
- In the consumer segment, FNB HomeLoans increased profit before taxation by
26%, driven by solid volume growth in profitable new business, combined with
increased margins due to rising interest rates.
- FNB Card successfully grew advances by 25%, customers` spend by 19% and
customer numbers by 17%, but profit was impacted by the anticipated increase in
bad debts and the start up costs associated with co-operation agreements.
- The Wealth, Commercial Corporate and International segments all performed
well.
FNB continued with its strategy to re-position its network to reflect
demographic shifts and alignment to retail and commercial development.
Representation points stayed static at 680 for the period and, whilst
traditional branches form the majority of the representation points, FNB
continued to increase its roll out of Community Banks and Sales Centres.
Overall, some 11 new branches were opened, 14 branches closed and 3 were
relocated in the period.
The National Credit Act ("NCA") provisions relating to fees and pricing become
effective on 1 June 2007 and FNB has estimated the annualised impact at a
revenue loss in the range of R300 million to R400 million (with the final impact
being subject to market forces) and that the total implementation costs of the
NCA will range between R140 million and R230 million (with the bulk thereof
incurred in the 2007 calendar year). FNB believes that the NCA will provide
significant opportunities for the established players to enter new markets.
WesBank`s local business showed good growth in a challenging environment
characterised by higher interest rates and pressure on customer affordability
levels. However, its overall profitability was impacted by its Australian and UK
operations, which are in start-up and turnaround phases.
Momentum Group
A good performance by the Insurance Operations on the back of continued strong
growth in new business volumes was muted by, inter alia, investment in new
initiatives and a disappointing performance from the local Asset Management
businesses.
The Insurance Operations increased operating profit by 18% to R495 million
resulting from continued growth in equity markets and new acquisitions which
were partly offset by a significant investment in new growth initiatives.
New retail recurring premium business increased by 22% despite increased
competitive pressure. The growth in the agency force production, together with
improved new business volumes from FNB collaboration activities, has resulted in
a more balanced distribution mix. Sales of Momentum`s lump sum products
benefited from the continued strong performance in equity markets.
Overall, the Asset Management operations generated an increase in headline
earnings of 16% to R149 million. In South Africa, the positive impact of
increased equity markets on fee revenue was offset by a reduction in performance
fees, the disinvestment of certain portfolios, and some non-recurring income
included in the comparative period.
The investment income earned on shareholders` assets decreased by 37% to R106
million, after adjusting for the special dividends of R1,2 billion paid to
FirstRand. The impact of the acquisition of Sage and ALH, together with the
repayment of loans relating to the original acquisition of Ashburton, and the
disposal of African Life resulted in a reduction in investment income.
The embedded value of Momentum increased by 7% to R15,4 billion, with positive
growth from equity markets being reduced by the special dividends. The
annualised return on embedded value totalled 30%, compared to 31% in the year to
30 June 2006.
Momentum`s short term insurance initiative is achieving growth ahead of its
business plan, with approximately 1 000 new policies being issued each month.
Its scientific rating process is resulting in a lower than expected net claims
ratio.
Discovery Group
Discovery Group`s underlying business delivered consistent and strong
performances.
Discovery Health increased operating profit by 29% to R342 million through a
combination of growth and improved operational efficiencies. Discovery Life
maintained its leadership position in the pure life assurance market with gross
inflows increasing by 35% to R1 107 million.
In the United Kingdom, PruHealth`s growth is exceeding expectations, while US
based Destiny Health has been stabalised with operating losses declining by 59%.
Discovery Group grew operating profit (before investment income, tax and the
impact of its BEE transaction) by 40% to R530 million, while diluted headline
earnings (before BEE transaction) grew by 29%.
DIRECTLY HELD INSURANCE INTERESTS
OUTsurance
The OUTsurance group is active in the short-term insurance market and continues
to grow and perform extremely well. It has become an established and trusted
brand in a relatively short space of time.
OUTsurance posted excellent results for the six months with:
- Net earned premium income increasing by 27% to R1,3 billion,
- Its underwriting result increasing by 20% to R227 million, and
- Headline earnings increasing by 18% to R216 million (2005: R183 million).
While such outcomes incorporate the impact of weather related claims during the
period, as well as ongoing investment in new initiatives, they are still
significantly above industry norms and benchmarks.
New business volumes from all sources continue to be encouraging. Given the
dramatic drop in the underwriting profits reported by most of OUTsurance`s
competitors, the expected hardening of premium rates is beginning to
materialise. As a result of Outsurance`s disciplined approach to underwriting,
it is well placed to benefit as this process plays out.
RMBH`s attributable share of OUTsurance`s normalised earnings for the six months
amounted to R123 million (2005: R108 million).
RMB Structured Insurance
RMBSI creates individual insurance and financial risk solutions for large
corporates by using innovative financial structures.
The group achieved real growth in premium income from its consumer protection
business, driven by booming retail sector activity, while income from other
activities remained flat. This, combined with significant investment in new
initiatives resulted in a relatively muted 7% growth in headline earnings from
R27 million in 2005 to R29 million in 2006.
RMBSI`s new initiatives are beginning to gain traction and the outcome for the
first two months of the current calendar year has been pleasing.
RMBH`s attributable share of RMBSI`s normalised earnings for the six months
amounted to R23 million (2005: R20 million).
OTHER FINANCIAL SERVICES INTERESTS
Glenrand M.I.B
The challenging market circumstances in which Glenrand M.I.B found itself have
continued in the six months under review.
An increase in attributable earnings from R9 million in 2005 to R57 million in
the six months to 31 December 2006 flows to a large extent from gains arising
from the disposal of non-core assets. After adjusting for such non-recurring
revenue items, Glenrand M.I.B reported headline earnings of R3,6 million (2005:
R9 million).
While the core Risk Advisory Services business showed an increase in revenues,
it suffered decreasing margins as the soft market manifested itself. This,
together with the continuing losses suffered by the Benefit Services business
resulted in the decline recorded in headline earnings.
RMBH`s share of normalised earnings from Glenrand M.I.B amounted to R0,5 million
(2005: R3 million).
SUMMARISED GROUP INCOME STATEMENT
Six months ended Year ended
31 December
30 June
2006 2005 % 2006
Unaudited Unaudited change Audited
Rm Rm Rm
Share of after tax 1 653 1 213 36 2 757
results in associate
companies
Profit on sale of - - 6
interest in associates
Earned premiums net of 2 486 2 150 4 415
reinsurance
Commission income 15 4 -
Fee income 29 24 52
Investment income 464 554 919
Income 4 647 3 945 8 149
Net claims paid (1 289) (1 156) (2 426)
Investment contract
benefits and
insurance provisions (181) (192) (181)
Acquisition, marketing
and
administration expenses (1 003) (866) (1 746)
Operating profit 2 174 1 731 26 3 796
Net finance costs (83) (66) (232)
Profit before tax 2 091 1 665 26 3 564
Taxation (154) (166) (7) (270)
Net profit for the 1 937 1 499 29 3 294
period
Attributable to:
Equityholders of RMBH 1 856 1 425 30 3 145
Minority interest 81 74 9 149
1 937 1 499 29 3 294
Computation of headline earnings
Six months ended Year ended
31 December
30 June
2006 2005 % 2006
Unaudited Unaudited change Audited
Rm Rm Rm
Earnings attributable 1 856 1 425 30 3 145
to ordinary
shareholders
Adjustment for:
?Profit on sale of - - (6)
partial interest in
associates
?Other 5 7 13
Share of adjustments
made by associates:
?Reversal of private (101) (96) (71)
equity realisations
?Profit on sale of (165) (55) (117)
avaliable-for-sale
financial assets
?Profit on sale of - (27) (30)
associate
?
Impairment of goodwill - 33 -
?Other (8) 1 (26)
Headline earnings
attributable to
ordinary shareholders 1 587 1 288 23 2 908
SOURCES OF HEADLINE EARNINGS
Six months ended Year ended
31 December
30 June
2006 2005 % 2006
Unaudited Unaudited change Audited
Rm Rm Rm
Headline earnings from:
?FirstRand 1 379 1 066 29 2 521
?Glenrand M.I.B - 3 (100) (8)
?OUTsurance 131 115 14 234
?RMB Structured 21 20 5 56
Insurance
1 531 1 204 27 2 803
?RMBH and other 56 84 (33) 105
Headline earnings 1 587 1 288 23 2 908
COMPUTATION OF EARNINGS PER SHARE
Six months ended Year ended
31 December
30 June
2006 2005 % 2006
Unaudited Unaudited change Audited
Rm Rm Rm
Earnings attributable 1 856 1 425 30 3 145
to ordinary
shareholders
Headline earnings
attributable to
ordinary shareholders 1 587 1 288 23 2 908
Number of shares in 1 188 1 188 1 188
issue (millions)
Weighted average number
of shares
in issue (millions) 1 177 1 172 1 174
Earnings per share 157,7 121,6 30 267,8
(cents)
Diluted earnings per 153,5 117,7 30 260,5
share (cents)
Headline earnings per 134,8 109,9 23 247,6
share (cents)
Diluted headline 131,3 106,5 23 240,3
earnings per share
(cents)
Dividend per share
(cents)
??Interim 61,5 50,5 22 50,5
??Final - - - 63,0
??Total 61,5 50,5 22 113,5
Dividend cover 2,2 2,2 2,2
(relative to headline
earnings)
SUMMARISED GROUP BALANCE SHEET
31 Dec 31 Dec 30 June
2006 2005 2006
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Property and equipment 100 103 105
Goodwill and other intangible assets 10 15 13
Investment in associate companies 13 703 11 146 13 121
Financial assets 3 832 3 137 3 044
Receivables and prepayments 923 762 634
Reinsurers` share of insurance 28 48 24
provision
Cash and cash equivalents 2 002 2 466 2 236
Total assets 20 598 17 677 19 177
EQUITY
Share capital and premium 4 605 4 605 4 605
Reserves 10 075 7 747 9 511
Capital and reserves attributable to
equity
holders of the company 14 680 12 352 14 116
Minority interest 390 316 399
Total Equity 15 070 12 668 14 515
LIABILITIES
Financial liabilities 1 484 1 392 1 150
Insurance contract provisions 3 706 3 090 3 206
Payables and provisions 338 527 306
Total liabilities 5 528 5 009 4 662
Total equity and liabilities 20 598 17 677 19 177
SUMMARISED GROUP CASH FLOW STATEMENT
Six months ended Year
31 December
ended
30 June
2006 2005 2006
Unaudited Unaudited Audited
Rm Rm Rm
Cash available from operating 854 998 1 545
activities
Return of capital to shareholders - (1 188) (1 188)
Servicing of finance from (748) (694) (1 214)
shareholders
Investment activities (536) (938) (1 031)
Financing activities 196 (10) (165)
Net decrease in cash and cash (234) (1 832) (2 053)
equivalents
Unrealised foreign currency - - (9)
translation adjustments
Cash and cash equivalents at the 2 236 4 298 4 298
beginning of the period
Cash and cash equivalents at the end 2 002 2 466 2 236
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 STATEMENT OF CHANGES IN EQUITY
Share Equity Non- Treasury
Capital & Accounted Distributab Shares
le-
Premium Reserves Reserves Reserve
Rm Rm Rm Rm
Balance at 30 June 2006
(audited)
??as previously 4 605 6 879 489 (140)
reported
Net profit for the - - - -
period
Dividend paid - - - -
Income of associated - 1 164 - -
companies retained
Capital invested by - - - -
minorities
Share option expense - - 1 -
reserve
Reserve movements - - (11) -
relating to
subsidiaries
Change in carrying - 56 - -
value of associate due
to elimination of
treasury shares
Movement in treasury - - - (1)
shares
Reserve movements - (589) - -
relating to associates
Balance at 31 December 4 605 7 510 479 (141)
2006 (unaudited)
Balance at 31 December
2005 (unaudited)
??as previously 4 605 5 357 519 -
reported
IFRS adjustment at 1 - - - (202)
July 2005
Restatement due to de- - - 3 -
designation of asset
Restatement due to - - (41) -
reclassification of
asset
Restatement due to - - - 31
movement in treasury
shares
Restated balance at 31 4 605 5 357 481 (171)
December 2005
(unaudited)
Total
Retained Share- Minority Total
holders`
Earnings Funds Interest Equity
Rm Rm Rm Rm
Balance at 30 June 2006
(audited)
??as previously 2 283 14 116 399 14 515
reported
Net profit for the 1 856 1 856 81 1 937
period
Dividend paid (748) (748) (103) (851)
Income of associated (1 164) - - -
companies retained
Capital invested by - - 12 12
minorities
Share option expense - 1 - 1
reserve
Reserve movements - (11) 1 (10)
relating to
subsidiaries
Change in carrying - 56 - 56
value of associate due
to elimination of
treasury shares
Movement in treasury - (1) - (1)
shares
Reserve movements - (589) - (589)
relating to associates
Balance at 31 December 2 227 14 680 390 15 070
2006 (unaudited)
Balance at 31 December
2005 (unaudited)
??as previously 2 270 12 751 316 13 067
reported
IFRS adjustment at 1 (138) (340) - (340)
July 2005
Restatement due to de- (2) 1 - 1
designation of asset
Restatement due to 41 - - -
reclassification of
asset
Restatement due to (91) (60) - (60)
movement in treasury
shares
Restated balance at 31 2 080 12 352 316 12 668
December 2005
(unaudited)
COMPUTATION OF NORMALISED EARNINGS
Six months ended Year ended
31 December
30 June
2006 2005 % 2006
Unaudited Unaudited change Unaudited
Note Rm Rm Rm
Headline
earnings
attributable to
ordinary 1 587 1 288 23 2 908
shareholders
Adjustments by
FirstRand:
?Treasury shares 1 115 113 148
?
Private equity
realisations and
National
Treasury 2 101 105 81
settlement
?
Adjustment of
listed property
subsidiary
and associate to 3 42 21 (9)
net asset value
?IFRS 2 Share 4 59 12 55
based payments
1 904 1 539 24 3 183
Adjustment for:
?RMBH shares 5 90 91 69
held by
policyholders
?Group treasury 6 (152) (125) (224)
shares
Normalised
earnings
attributable to
ordinary 1 842 1 505 22 3,028
shareholders
Weighted average
number of shares
in issue 1 188 1 188 1 188
(millions)
Normalised 155,1 126,7 22 254,9
earnings per
share (cents)
Diluted
normalised
earnings per
share (cents) 155,0 125,2 24 254,6
Dividend cover
(relative to
normalised 2,5 2,5 2,2
earnings)
SOURCES OF NORMALISED EARNINGS
Six months ended Year ended
31 December
30 June
2006 2005 % 2006
Unaudited Unaudited change Unaudited
Rm Rm Rm
Normalised earnings
from:
?FirstRand 1 640 1 290 27 2 657
?Glenrand M.I.B - 3 (100) (8)
?OUTsurance 123 108 14 219
?RMB Structured 23 20 15 55
Insurance
1 786 1 421 26 2 923
?RMBH and other 56 84 (33) 105
Normalised earnings 1 842 1 505 22 3 028
Notes:
1. Deconsolidation of treasury shares and "deemed" treasury shares 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. Adjustment to include recurring Private Equity realisations and insurance
settlement agreement with National Treasury in operational performance.
3. Adjustment of listed property subsidiary and associate from net asset value
to fair value in order to match the policyholders liability which is based on
the fair value of the units held.
4. Adjustment for IFRS 2 Share based payment charge.
5. Deconsolidation of "deemed" RMBH`s treasury shares held for policyholders by
group insurers.
6. Adjustment to reflect earnings impact based on actual RMBH shareholding in
group companies, i.e. reflecting treasury shares as if they were minority
shareholders.
BASIS OF PREPARATION OF RESULTS
The accompanying summarised results for the six months ended 31 December 2006
reflect:
- the consolidation of the operations of RMBH and its two subsidiaries,
OUTsurance and RMB Structured Insurance; and
-?RMBH`s proportionate interest in its associates, FirstRand and Glenrand M.I.B
which have been equity accounted.
This interim report is prepared in accordance with:
- International Financial Reporting Standards ("IFRS");
-?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").
These financial statements incorporate accounting policies that are consistent
with those used in preparing the financial results for the year ended 30 June
2006, with the exception of de-designating certain financial assets as at fair
value through profit or loss in accordance with IAS 39: Financial Instruments:
Recognition and Measurement (revised January 2006).
The results announcement for the six months ended 31 December 2005 was prepared
in accordance with IFRS and the interpretations available at that point. The
announcement stated that IFRS was continuing to evolve and that it was possible
that the financial impacts, reclassification and adjustments reflected in those
results might change. The following restatements have been made to the 31
December 2005 results:
-?The elimination of deemed RMBH treasury shares held for policyholders by group
insurers.
-?The re-designation of certain available-for-sale financial assets to at fair
value through profit or loss
-?The de-designating of certain financial assets as at fair value through profit
or loss in accordance with IAS 39: Financial Instruments: Recognition and
Measurement (revised January 2006).
The impact of such restatements is as follows:
As restated As
originally
stated
Balance Sheet Difference Reason
item
Total Assets 17 677 18 075 (398) Investment in
(Rm) Associate - The
elimination of deemed
treasury shares
(R400m)
Deferred Tax Asset -
De-designation of
certain financial
assets as at fair
value through profit
or loss (R2m)
Total 17 677 18 075 (398) Treasury Shares
Liabilities Reserve - The
(Rm) elimination of deemed
treasury shares
(R171m)
Non-distributable
Reserve - De-
designation of
certain financial
assets as at fair
value through profit
or loss (R3m)
Non-distributable
Reserve - Re-
designation of
certain available-for-
sale financial assets
to at fair value
through profit or
loss (R41m)
Retained Income - Net
effect of all
restatements (R190m)
Income
Statement
item
Net profit 1 499 1 552 (53)
for the
period (Rm)
(91) Treasury Shares - The
elimination of deemed
treasury shares
41 The re-designation of
certain available-for-
sale financial assets
to at fair value
through profit or
loss
(3) The de-designating of
certain financial
assets as at fair
value through profit
or loss in accordance
with IAS 39:
Financial Instruments
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
Physical address 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?
Web address www.rmbh.co.za?
Sponsor (in terms of JSE Listing Requirements)?Rand Merchant Bank (A division of
FirstRand Bank Ltd)?
Physical address 1 Merchant Place, corner of Fredman Drive and Rivonia Road,
Sandton 2196?
Transfer secretaries Computershare Investor Services 2004 (Pty) Limited
Physical address 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: 28/02/2007 10:27:01 Produced by the JSE SENS Department.
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