Wrap Text
Audited summary financial results for the year ended 31 March 2022
RMB Holdings Limited (RMH)
(Incorporated in the Republic of South Africa)
Registration number: 1987/005115/06
JSE ordinary share code: RMH
ISIN code: ZAE000024501
Sector: Financials
ICB Sector: Diversified financial services
AUDITED SUMMARY FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2022
ABOUT RMH
RMH is a JSE Limited (JSE) listed investment holding company with a track record of investing in disruptive and entrepreneurial businesses,
complemented by innovative corporate actions.
We seek to instil the values and ethos that have defined the successes of RMH and Rand Merchant Investment Holdings Limited (RMI) to date.
True to the ethos of partnership, RMH played a significant role in the establishment and growth of some of South Africa's most iconic financial
services businesses, including FirstRand, Discovery and OUTsurance. In 2011, RMH's insurance interests (Discovery, Momentum Metropolitan and
OUTsurance) were separately listed as RMI. RMI recently unbundled its interests in Discovery and Momentum Metropolitan. This is in alignment
with the approach to liberate investments at the appropriate stage in their life cycle and to achieve the best value reflection.
In 2016, RMH expanded its investment strategy to include a property investment business (RMH Property). RMH Property partnered with
entrepreneurial management teams with proven track records in developing and managing unlisted property. RMH Property is RMH's most
significant remaining asset following the unbundling of RMH's investment in FirstRand in June 2020.
PERFORMANCE AND OUTLOOK
External environment
RMH's macroeconomic environment is characterised by the following:
Invasion of Ukraine and its effect on - Russia's invasion of Ukraine has resulted in extreme commodity price swings that will have a profound
the world economy impact on the global economy over the short term.
- Russia is a major oil and gas producer. The oil price continues to spike as buyers shunned Russian oil in
protest against the Ukraine invasion. Coal prices rose sharply due to concern over Russian coal supplies.
- Russia and Ukraine combined are responsible for more than 25% of global wheat exports. Amid concerns
over disruption of both harvesting and exports, global wheat prices have surged.
- Belarus, one of the world's largest producers of potash, a key input in fertiliser, was hit by severe sanctions
for supporting Russia's war efforts. Grain and fertiliser prices will push already record-high global food
prices even higher.
- The additional upward pressure on inflation will squeeze household purchasing power across the globe,
especially in the Euro Zone and the UK where gas forms an important part of the energy mix.
- Escalation and expansion of Russian aggression and the resultant economic sanctions can have a lasting
and dramatic effect on the world economy in the medium to long term.
South African economy - While coal exports generate significant export revenue for South Africa, this will not adequately counter
the inflationary impact of higher fuel and food prices.
- After the third and fourth COVID-19 waves, brought on by the Delta and Omicron variants, respectively,
and the riot-induced quarterly GDP decline in the third quarter of 2021, real GDP growth is estimated at
2.2% in 2022, with output and employment expected to remain well below pre-pandemic levels until 2023.
- Structural constraints and the slow pace of economic reforms are likely to continue to constrain medium-
term economic growth but the expectation is that partnerships across government, the private sector and
civil groups will facilitate a turnaround in the medium to long term.
COVID-19 - South Africa's vaccination programme got off to a slow start, but vaccines are now readily available.
Vaccine hesitancy remains a challenge to reaching government vaccination targets.
- It is expected that COVID-19 will be with us for some time yet, although vaccinations and the development
of effective treatment protocols are expected to, over time, ameliorate the effects.
Recovery in Europe - GDP in Serbia is expected to expand by 3.9% in 2022 and 3.9% in 2023, however, the war in Ukraine will
weigh on activity. Exports of goods and services will moderate due to sanctions placed on Russia, dragging
on the tourism and trade sectors, while higher commodity prices fuel inflation. This will hamper household
consumption, despite a tightening labour market and solid wage growth.
- GDP in Cyprus is expected to grow by 3.0% in 2022 and 3.2% in 2023. The all-important tourism sector will
be impacted by decreased arrivals from its key Russian market, while increasing inflation bodes ill for
domestic demand. More positively, a tighter labour market should soften the downturn in household
spending growth.
- The economy in Romania is forecast to grow by 3.3% in 2022 and 4.2% in 2023. Economic growth this year
is projected to decelerate from last year's rally due to a fading base effect and the fallout from the war,
though renewed government spending and EU-backed investments should support activity. Persistently
higher energy and food prices, new COVID-19 variants and a potentially slower-than expected absorption
of EU funds cloud the outlook for 2022.
Climate change - Climate-related weather events and cyberattacks continue to be key risks.
- Severe weather events are expected to become more frequent and increase in severity in the coming
decade. Momentum of climate change action and ESG disclosures are growing.
Financial performance
The post-COVID-19 macroeconomic recovery has been slow. Further uncertainty has been introduced by Russia's invasion of Ukraine.
RMH's net asset value increased by 12% from R3 493 million (excluding cash retained for the special dividend) at 31 March 2021 to R3 910 million
at 31 March 2022. The biggest contributor was the recovery of property valuations as a result of the COVID-19 cap rate penalty being removed by
external valuators in Eastern Europe. This led to an increase in valuations of investment properties of R543 million (2021: loss of R22 million).
The net increase was offset by the strengthening of the Rand/Euro exchange rate over the period, contributing a loss of R204 million (2021: loss of
R243 million). The operating performance of the underlying RMH Property investees remained buoyant in the context of the current operating
environment, showing some improvement due to COVID-19 concessions granted to tenants in the prior year not being repeated. The gross value
of RMH Property increased by 15% to R2 980 million (2021: R2 584 million).
Income after tax for the year improved by more than 100% to R611 million (2021: loss of R72 million for the nine months). The biggest contributor
to this performance was the increase in value of underlying investment properties as mentioned above, which resulted in the share of after-tax
profits from associates and joint ventures increasing from R18 million to R613 million.
The cash resources earmarked for ongoing RMH operating expenses and liabilities as at 31 March 2022 amounted to R464 million (2021: R418
million) despite the low interest rate environment. Cash for the disposal of Atterbury Mauritius was received in April 2021 and the loan extended to
Integer 3 decreased.
Shareholders are reminded that in the comparative period RMH changed its year-end from June to March. The results reflected above are for the
year ended 31 March 2022 while the comparatives are for the nine months ended 31 March 2021
Proposed monetisation of RMH's interest in Atterbury Europe
Shareholders are advised that RMH and RMH Property have entered into an agreement with Brightbridge to dispose of all the shareholder loan
claims and the A ordinary shares held by RMH Property in Atterbury Europe (representing 37.5% of the total issued A ordinary shares in Atterbury
Europe) for a total consideration of R1 750 million.
As RMH shareholders are aware, following the unbundling of RMH's interest in FirstRand Limited in June 2020, RMH's strategic intent has been to
actively seek various monetisation alternatives to extract maximum value for its shareholders. This includes the orderly monetisation of RMH
Property's individual portfolio companies over time.
The RMH board is of the view that Brightbridge, as an Atterbury group affiliated entity, is the most suitable acquirer of RMH Property's interest in
Atterbury Europe as part of this monetisation strategy, particularly in view of their deep knowledge of the businesses and contractual
arrangements between the Atterbury group companies. Accordingly, having considered all relevant quantitative and qualitative factors, the RMH
board has concluded that the disposal is aligned with RMH's monetisation strategy to realise value for shareholders.
This transaction constitutes 58% of the net asset value of RMH as at 31 March 2022. At a 12% discount to net asset value (including tax
considerations), RMH believes that shareholders will be supportive with the outcome. Shareholders are referred to the firm intention
announcement made today, 24 June 2022, to RMH shareholders for further detail.
Outlook
The year under review has been a challenging one. The South African economy was impacted by the following:
- In July 2021, South Africa experienced civil unrest causing billions of Rand in damage;
- Continued uncertainty as a result of COVID-19 with the State of Emergency only being lifted in April 2022;
- Changing weather patterns led to unusual rainfall and, in April 2022, floods hit the province of KwaZulu-Natal, resulting in an estimated 400 lives
lost and R10 billion in damage to infrastructure;
- The struggling electricity grid led to 1 150 hours of load shedding in 2021 with the outlook for 2022 not improving. Eskom implemented
loadshedding for 31 days for the period 1 January 2022 to 10 May 2022, compared to 26 days for the same period last year;
- Rising interest rates - South Africa experienced three increases of 25 basis points each in the repo rate in November, January and March with a
50 basis points increase in May; and
- Rising fuel, wheat, corn and sunflower oil prices as a result of the invasion of Ukraine by Russia.
All these factors had a negative impact on economic recovery in South Africa and did not leave the property sector unscathed. In the first quarter
of 2022, office vacancy rates reached a new all-time high at 16.7%. Petrol prices rose above R21 per litre for the first time. As a result, inflation has
been testing the 6% upper limit of the South African Reserve Bank's monetary policy target range each month for the first quarter of 2022.
Eastern Europe's proximity to Ukraine and Russia negatively impacted the post-pandemic economic recovery. It further led to an influx of refugees
and an increase in prices of oil, gas, metal, food and fertiliser. As a result, currencies and inflation have come under pressure. Eastern European
banks responded by increasing interest rates. In light of the above, both local and international economic recovery will be slow. The need for
liquidity and the pressure to reduce loan-to-value (LTV) ratios place further pressure on property investors. We are, however, buoyed by the recent
activity, including indications of improved trading density across the Atterbury and Atterbury Europe portfolios.
The board remains committed to the monetisation strategy of the balance of the RMH Property business, taking into account prevailing trading
conditions, which may have an impact on the timing of the execution of the strategy.
Sonja De Bruyn Herman Bosman
Chairman CEO
Rosebank
24 June 2022
Audited computation of per share information
For the
For year nine months
ended ended
31 March 31 March
R million 2022 2021 % change
Revenue 629 38 >100
Earnings/(loss) attributable to equity holders 611 (72) >100
Headline earnings/(loss) attributable to equity holders 56 (30) >100
Net asset value including the special dividend 3 910 4 622 (15)
Net asset value excluding the special dividend 3 910 3 493 12
For year For the
ended nine months
31 March ended
Cents per share 2022 31 March 2021 % change
Earnings/(loss) 43.9 (5.1) >100
Headline earnings/(loss) 4.0 (2.1) >100
Net asset value including the special dividend 277.0 327.4 (15)
Net asset value excluding the special dividend 277.0 247.4 12
ADMINISTRATION
Directors
(Ms) SEN De Bruyn (chairman), HL Bosman (CEO and FD), P Lagerstrom, UH Lucht, (Ms) MM Mahlare, MM Morobe, and JA Teeger
Secretary and registered office
(Ms) EJ Marais
Physical address: 12th floor, The Bank Corner Cradock and Tyrwhitt Avenues, Rosebank, Johannesburg, 2196
Postal address: Private bag X1000, Saxonwold, 2132
Telephone: +27 10 753 2420
Website: http://www.rmh.co.za
Sponsor
(in terms of JSE Limited Listings Requirements)
Rand Merchant Bank
(a division of FirstRand Bank Limited)
Physical address: 1 Merchant Place, Corner of Fredman Drive and Rivonia Road, Sandton, 2196
Transfer secretaries
Computershare Investor Services Proprietary Limited
Physical address: Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Postal address: Private Bag X9000, Saxonwold, 2132
Telephone: +27 11 370 5000
Telefax: +27 11 688 5221
Short-form announcement
This short-form announcement is the responsibility of the directors and is only a summary of the information in the full announcement and does
not contain full or complete details. The full announcement was released on the JSE's Stock Exchange News Service (SENS) on 24 June 2022 and
can be found on the company's website at https://rmh.co.za/downloads/2022/RMH_Year_end_results_announcement_2022.pdf or at
https://senspdf.jse.co.za/documents/2022/jse/isse/RMH/RMH22final.pdf The full announcement is available for inspection at the company's
registered office and copies may also be requested from the company.secretary@rmbh.co.za and at the offices of the sponsor, at no charge, during
office hours. Any investment decision should be based on the full announcement published on SENS and on the company's website. The auditor
expressed an unmodified audit opinion on the annual financial statements which includes the key audit matters, a copy of the annual financial
statements including the audit opinion can be found at https://rmh.co.za/downloads/2022/RMH_Annual_financial_statements_2022.pdf.
The short-form announcement has not been audited or reviewed by the auditor.
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Sandton
24 June 2022
Date: 24-06-2022 09:00:00
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