Wrap Text
1966/010753/06
Share code: FSR
ISIN code: ZAE 000014973
Results for the year ended 30 June 2001
Introduction
This report relates to the consolidated results of FirstRand Limited
("FirstRand") and its wholly-owned subsidiaries, FirstRand Bank Holdings
Limited and Momentum Group Limited. Comprehensive reports relating to these
subsidiaries are included in this circular and should be read in conjunction
with this report.
Financial highlights
* Headline earnings per share up 25,2%
* Dividend per share up 25,0%
* Total assets up 21,5%
* Return on equity 25,4%
Income statement for the year ended
30 June 30 June
2001 2000 %
R million (Audited) (Audited) change
Headline earnings
Banking operations 2 795 2 190 27,6
Insurance operations 943 790 19,4
3 738 2 980 25,4
Secondary Tax on Companies
("STC") (41) (26) (57,7)
3 697 2 954 25,2
Headline earnings reconciliation
Attributable earnings
Banking operations 2 787 2 190 27,3
Insurance operations 831 1 003 (17,1)
Goodwill amortised
intergroup 5
Sale of shares in insurance
subsidiary intergroup profit (104)
3 623 3 089 17,3
STC (41) (26)
Earnings attributable
to ordinary shareholders 3 582 3 063 16,9
Add: Goodwill amortised 37 6
Add: Effect of insurance
transitional tax on prior
years 31 35
Add: Exceptional items
insurance associated company 47
Less: Disposal of shares in
insurance subsidiary (150)
Headline earnings 3 697 2 954 25,2
Dividends (Rm) 1 293 1 035 25,0
Return on average equity (%) 25,4 24,2
Number of shares in
issue (million) 5 445 5 445
Earnings per share (cents) 65,8 56,3 16,9
Headline earnings per
share (cents) 67,9 54,2 25,2
Dividend per share (cents)
Interim 11,25 9,0 25,0
Final 12,50 10,0 25,0
Total dividend 23,75 19,0 25,0
Balance sheet at
30 June 30 June
2001 2000
R million (Audited) (Audited)
Assets
Banking operations 164 678 140 175
Cash and short-term funds 9 788 8 309
Short-term negotiable securities 6 105 14 470
Liquid assets and trading securities 26 399 9 773
Securities purchased under agreements
to resell 2 434
Advances 119 674 102 667
Other investments 2 712 2 522
Insurance operations 70 519 60 965
Funds on deposit 6 169 7 930
Government and public authority
stocks 8 739 4 800
Debentures and other loans 8 724 5 959
Policy loans 517 465
Equity investments 43 331 38 703
Property investments 3 039 3 108
Current assets 5 650 5 036
Loans 1 108 1 108
Investments in associated companies 945 690
Derivative assets 17 682 10 900
Deferred taxation 254 193
Intangible assets 561 84
Property and equipment 3 480 3 632
Total assets 264 877 222 783
Shareholders' equity and liabilities
Deposits and current accounts 136 627 117 559
Current liabilities 11 299 9 082
Taxation 376 128
Derivative liabilities 23 920 14 189
Securities sold under agreements
to repurchase 2 387
Deferred taxation 1 698 1 565
Debentures and long-term liabilities 5 090 4 140
Life insurance funds 67 943 58 723
Total liabilities 246 953 207 773
Outside shareholders' interest 950 641
Shareholders' equity 16 974 14 369
Share capital and share premium 9 595 9 595
Reserves 7 379 4 774
Total shareholders' equity
and liabilities 264 877 222 783
Summarised cash flow statement
for the year ended
30 June 30 June
2001 2000
R million (Audited) (Audited)
Cash flows from operating activities
Cash generated by operations 13 641 11 491
Working capital changes 4 610 3 558
Cash inflow from operations 18 251 15 049
Normal tax paid (955) (898)
Dividends paid (1 157) (926)
Net cash inflow from operating activities 16 139 13 225
Net cash outflow from investment
activities (16 623) (18 347)
Net cash inflow from financing activities 130 1 517
Net decrease in cash and cash equivalents (354) (3 605)
Cash and cash equivalents at beginning
of period 16 239 19 844
Cash and cash equivalents acquired 72
Cash and cash equivalents at end of period 15 957 16 239
Statement of changes in equity
Share
Non- capital Total
distri- Prefer- and share-
Retained butable Convertible ence share holders
R million earnings reserves debentures shares premium funds
Balance at 1 July 1999
As previously
stated 1 951 227 350 8 486 11 014
Reclassification
of convertible
debentures (350) (350)
Provision for
dividends 435 435
Provision for STC 34 34
Restated balance
at 1 July 1999 2 420 227 8 486 11 133
Preference
shares issued 1 109 1 109
Net loss not
recognised in the
income statement (10) (10)
Earnings attributable to
shareholders 3 063 3 063
Dividends paid (926) (926)
Transfer (to)/
from reserves (40) 40
Balance at 30
June 2000 4 517 257 1 109 8 486 14 369
Balance at 1
July 2000 4 517 257 1 109 8 486 14 369
Net gain not
recognised in the
income statement 180 180
Earnings attributable to
shareholders 3 582 3 582
Dividends paid (1 157) (1 157)
Balance at 30
June 2001 6 942 437 1 109 8 486 16 974
Assets under management
at
30 June 30 June
2001 2000
R million (Audited) (Audited)
Holding company 1 112 1 113
Banking Group 184 944 155 501
Insurance Group 180 842 145 236
On-balance sheet 78 821 66 169
Off-balance sheet assets
managed and administered
on behalf of clients 102 021 79 067
Total 366 898 301 850
Sources of profit for the year ended
30 June 30 June
2001 2000
% %
Retail bank 20 12
Merchant bank 14 17
WesBank 13 14
Corporate 9 10
Individual insurance
business 8 8
Asset management 6 7
African subsidiaries 6 4
HomeLoans 6 4
Bank head office & capital
centre 6 11
Investment income on insurance
shareholders' portfolio 5 6
Employee benefits 3 3
Health insurance 3 3
Other 2 1
eBucks.com (1)
Total headline earnings 100 100
NOTE: Banking figures assume that the average tax rate each year is common
across all divisions.
OPERATING ENVIRONMENT
The environment in which the Group companies operated during the year to 30
June 2001 has been challenging.
While a relatively stable interest rate environment, which tended lower, had
the potential to encourage borrowings, the demand for credit remained
subdued. The impact on bad debts provisioning was favourable, but changes to
the repo rate have put pressure on interest margins. The market was not
conducive to the realisation of private equity investments. Comments by the
Department of Finance regarding the level of tax paid by the banking
industry, and subsequent discussions with the South African Revenue
Services, have created a sense of uncertainty surrounding structured finance
deals involving long-term capital investment, in which our merchant banking
operations have traditionally played a major role.
The Insurance Group had to contend with the implications of changes to the
Medical Schemes Act, actions by the South African Reserve Bank to limit the
outflow of funds to offshore portfolios and the proposed legislation
necessary to protect the purchasers of insurance products. The JSE All Share
Index gained 19% compared to 7% in the prior year. Most of these gains
occurred in the last quarter of the year.
FINANCIAL OVERVIEW
FirstRand Limited
The consolidated headline earnings for the year ended 30 June 2001 totalled
R3 697 million (67,9 cents per share) representing an excellent increase of
25% on the R2 954 million (54,2 cents per share) of the previous year. The
rate of growth in earnings in the second half of the year is consistent with
that announced at the interim stage.
Attributable earnings, which include goodwill amortisation and exceptional
items, increased by 17% to R3 582 million.
Banking operations contributed 75% of headline earnings and insurance and
asset management 25%. International operations, including African banking
subsidiaries, represented 22% of headline earnings.
Headline earnings of the Banking Group totalled R2 795 million representing,
an exceptional increase of 27,6%. The Insurance Group headline earnings
increased by a solid 19,4% to R943 million. Good growth was achieved in all
the major operating divisions.
A final dividend of 12,5 cents per share (2000: 10,0 cents per share) has
been declared bringing the total dividend for the year to 23,75 cents per
share (2000: 19,0 cents per share). This represents an increase of 25%. The
dividend cover has been maintained at 2,9 times.
The Group's assets under management and administration now total R367
billion, representing a pleasing 22% increase on last year.
FirstRand's return on average equity increased to 25,4%
(2000: 24,2%).
At 30 June 2001 the shareholders' surplus of the Insurance Group covered the
statutory capital adequacy requirements 2,4 times (2000: 2,1 times). In the
Banking Group the consolidated capital adequacy ratio was 11,4%, compared
with the statutory requirement of 8%. Since the year-end the Registrar of
Banks has announced that the statutory minimum ratio is to be increased to
10% from 1 October 2001.
OPERATIONAL highlights
Operational activities have been dealt with in the detailed reports of the
Insurance and Banking Groups. The highlights are:
Banking Group
* FNB Retail Bank doubles earnings following successful restructuring
* FNB Corporate Bank increases earnings 25% through advances growth and
sound credit management
* FNB HomeLoans increases market share from 8,8% to 10,1% and doubles
earnings
* WesBank increases earnings by 19% and maintains dominant market share
* African Subsidiaries increase earnings by 64% through market share gains
and lower bad debts.
Insurance Group
* Individual Life single premiums up 31% to R3,9 billion
* Discovery Health new business production up 57% to R2,1 billion
* RMB Investment Services unit trusts in top quartile performance
* Assets under management and administration up 24% to R181 billion
* Reduction of 2% in life company management expenses.
STRATEGIC INITIATIVES
The vision of an integrated financial services group remains the cornerstone
of FirstRand's strategic thinking. During the year FirstRand created three
important clusters to align strategic thinking across the Group with
appropriate target market segments. These are a Wealth Cluster, targeting
the upper end of the market, a Corporate Cluster targeting the business
sector and a Retail Cluster focused on consumers. The executive committees
of these clusters, which comprise both banking and insurance executives,
will ensure that the full range of intellectual skills existing in the Group
is brought to bear on strategic thinking.
eBucks.com, FirstRand's e-commerce initiative and customer appreciation
programme, designed to reward new and existing customers for loyalty to and
support of the Group's range of products, has made good progress. The
announcement in January 2001 that eBucks.com had entered into an agreement
with MTN and Johnnic to merge their respective customer appreciation
programmes, and the decision to transfer all of the Group's internet banking
operations to this entity, will mean that by December 2001 eBucks.com will
have 350 000 customers.
In September 2000 Discovery Life was launched. This company, specialising in
risk products, made an immediate impact on the market and was able to report
promising results at the year-end.
During the year FirstRand Asset Management increased its stake in the Jersey
General Group to 55%. Since the year-end the remaining minority stake has
been acquired. This acquisition is in line with its strategy of enhancing
asset management capabilities for clients wishing to invest offshore. All
international asset management activities will trade under the FirstRand
International Asset Management banner.
The Momentum Group increased its direct shareholding in African Life to
31,7%, thereby increasing its access to a segment of the insurance market
where it is currently not well represented.
The South African operations of Momentum Wealth and those of Momentum Life
have been merged to ensure that the investment products of the Insurance
Group are appropriately aligned.
The Banking Group's FNB retail branches operating in the metropolitan areas
have been successfully converted into sales and service outlets. This,
together with extensive training in sales and Group product knowledge, will
enable FNB to use these important outlets to service customers more
effectively. Steps have been taken to improve service offerings to people
living in the more remote areas of South Africa.
STRATE
The scheduled date for the transfer of FirstRand to the electronic
settlement environment of STRATE is 29 October 2001. Trading for electronic
settlement will begin on 19 November 2001. FirstRand has entered into an
agreement with Computershare Custodial Services to establish and sponsor an
"Issuer Sponsored Nominee (ISN)" facility for the benefit of shareholders. A
separate letter will be sent to shareholders explaining the options
available to them.
ACCOUNTING POLICIES
The accounting policies of the Group comply in all material respects with
South African statements of Generally Accepted Accounting Practice and the
Companies Act, 1973. These accounting policies are consistent with those
applied during the year to 30 June 2000, except for the following:
* the debt and equity components of the Momentum convertible debentures
should be reflected separately in terms of AC 125. In prior years these
convertible debentures were disclosed in full under equity, whereas the
present value of the future debt obligation is now disclosed under long-term
liabilities. This
change had no effect on the Group income statement.
* in accordance with the provisions contained in AC 107 and AC 130,
dividends paid and STC are now accounted for upon declaration of the
dividend. Previously, dividends paid and the corresponding STC were accrued
at the end of the accounting period, prior to the dividend declaration. The
effect of this change on the results to 30 June 2000 is an increase of R7
million in attributable earnings.
PROSPECTS
The international economy, especially in the United States, remains a cause
for concern. The potential impact of this on domestic investment markets,
interest rates and credit demand introduces a large element of uncertainty
and risk into the business environment.
FirstRand operates in a frequently changing regulatory framework. These
changes have become a major issue of contention in our forward planning.
Competition in the South African financial services industry is expected to
increase.
Against this background, maintaining profit growth at the high level
achieved in the past year, will be difficult and challenging. However,
FirstRand is well positioned to maintain its performance relative to its
peers. At the end of its third year of operations, FirstRand has established
an integrated financial services group with a solid foundation. The Group
has reached a position where it can build on this foundation, by growing
revenue through a greater external focus.
DIVIDEND DECLARATION
Notice is hereby given that a final dividend of 12,5 cents per share has
been declared on 6 September 2001 in respect of the year ended 30 June 2001,
payable to ordinary shareholders registered in the books of the company at
the close of business on 12 October 2001. Dividends will, where applicable,
be transferred electronically on 31 October 2001 to bank accounts of
shareholders. Dividend cheques will, in the absence of appropriate mandates,
be posted to shareholders on this date.
On behalf of the directors
G T Ferreira L L Dippenaar
Chairman Chief Executive
Transfer secretaries
Computershare Services Limited
2nd Floor, Edura House
41 Fox Street
Johannesburg, 2001
Registered office
17th Floor, 1 Merchant Place
Cnr Fredman Drive and Rivonia Road
Sandton, 2149
Postal address
PO Box 786273, Sandton, 2146
Secretary
P F de Beer (FCIS)
FIRSTRAND
Banking Group
Results for the year ended 30 June 2001
Introduction
This announcement reflects the operating results and financial position of
the banking interests of the FirstRand Limited Group of companies and should
be read in conjunction with the report on FirstRand Limited. The FirstRand
Banking Group ("the Banking Group") is 100% held by FirstRand Limited. The
consolidated figures in this report include the o
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