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Summarised, audited results announcement and cash dividend declaration for the year ended 30 June 2012
RMB HOLDINGS
Summarised, audited RESULTS ANNOUNCEMENT and cash dividend declaration
for the year ended 30 June 2012
RMB HOLDINGS LIMITED (RMBH)
(Incorporated in the Republic of South Africa)
Registration number: 1987/005115/06
JSE Ordinary share code: RMH
ISIN code: ZAE000024501
Directors: GT Ferreira (Chairman), P Cooper (CEO), L Crouse, NDJ Carroll, LL Dippenaar, JW Dreyer, PM Goss, PK Harris, KC Shubane, (Ms) SEN Sebotsa and MH Visser (Deceased 26 April 2012).
Alternate directors: JJ Durand (Appointed 18 October 2011), TV Mokgatlha (Appointed 18 October 2011).
Secretary and registered office: (Ms) EJ Marais CA(SA) (Appointed 19 October 2011)
Physical address: 3rd Floor, 2 Merchant Place, Corner of Fredman Drive and Rivonia Road, Sandton, 2196
Postal address: PO Box 786273, Sandton, 2146
Telephone: +27 11 282 1824
Telefax: +27 11 282 4210
Web address: www.rmbh.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 (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
NORMALISED EARNINGS
(from continuing operations)
+23%
296.5 cents
DIVIDEND
+24%
125.5 cents
INTRINSIC VALUE
+34%
3 477 cents
RMBH RESTRUCTURING IN PRIOR YEAR
Shareholders are reminded that during the last quarter of the financial year ended 30 June 2011 RMBH completed a far-reaching restructuring, culminating in the distribution to shareholders of RMBHs
insurance interests, now held by separately listed Rand Merchant Insurance Holdings Limited (Rand Merchant Insurance or RMI).
After the restructuring, RMBHs sole interest is its 33.9% investment in FirstRand Limited (FirstRand), one of South Africas pre-eminent banking groups.
As a result of the restructuring:
- RMBHs results for the prior year ended 30 June 2011 represents an amalgam of its attributable share of FirstRands income (after recognising the change in interest during that year) and its
attributable share of the income of its insurance interest up to the unbundling thereof; while
- For the current year ended 30 June 2012, RMBHs results only reflect the outcome of its 33.9% interest in FirstRand.
This, together with accounting for the re-structuring itself, gives rise to a number of counter-intuitive outcomes in the reported prior year results.
To overcome the impact of these, the commentary below focuses on normalised earnings from continuing operations as its main measurement. A reconciliation of the adjustments made to derive
normalised earnings is presented in the accompanying schedules.
ECONOMIC ENVIRONMENT
The ongoing legacy of the 2008 financial crisis is one of significant macro-economic uncertainty. Such uncertainty in major developed economies combined with high levels of government
indebtedness, ongoing stress in the European banking system and households continuing to rebuild balance sheets weighed on economic activity. This weakness spilled over into the major emerging
economies and growth in countries such as China, India and Brazil which slowed markedly during the latter part of the financial year.
The South African economy was not immune to the global developments and, although growth picked up in the latter part of 2011, it moderated again at the start of 2012. Slowing export growth
and falling business confidence reflected muted global economic activity. Supply-side constraints, such as labour action in the mining sector and limited electricity supply, also weighed on
macroeconomic performance. This contributed to subdued private sector investment spending.
Consumer demand remained quite resilient throughout the financial year with household spending on durable goods particularly strong. This demand was underpinned by growth in real disposable
income and a gradual increase in the uptake of credit by households, particularly unsecured credit. Continued low interest rates provided further support.
OVERVIEW OF RESULTS
In the face of such a challenging background, RMBH continued to build on last years strong performance to produce excellent results for the financial year to 30 June 2012, achieving normalised
earnings from continuing operations of R4.2 billion, an increase of 35% on the previous year.
On a per share basis, the following outcome from continuing operations was achieved:
Cents
per share % change
- Attributable earnings 318.7 (1)
- Headline earnings 304.9 32
- Normalised earnings 296.5 23
SOURCES OF INCOME
FNB: 52%
RMB: 28%
WesBank: 20%
RMBH CAPITAL POSITION AND BORROWINGS
At the end of June 2012, RMBHs net borrowings at holding company level amounted to some R1.3 billion (2011: R1.4 billion). This funding facility matures at end November 2012. Negotiations to
extend the facility for a further 5 years are well advanced and we anticipate that future funding costs will be maintained at current levels.
The intrinsic value of RMBHs investment portfolio reflects the effect of FirstRands strong share price performance during the year, with the values at year end as follows:
As at 30 June
R million 2012 2011 % change
Market value of interest in FirstRand 50 416 37 922 33
Net borrowings (1 327) (1 368)
Total intrinsic value 49 089 36 544 34
Per RMBH share (cents) 3 477 2 589
At 30 June 2012 RMBHs market capitalisation amounted to R49.2 billion or 3 488c per share (2011: 2 665c), representing a 0.3% premium (2011: 2.9%) to RMBHs underlying intrinsic value.
DIVIDEND PAYMENT
RMBH has traditionally followed the practice of returning net dividends (after providing for funding costs incurred at the centre) received by it in the ordinary course of business to shareholders.
For the year ended 30 June 2012, RMBHs normalised earnings from continuing operations amounted to 296.5 cents per share (2011: 241.3 cents).
The board is of the opinion that RMBH is adequately capitalised at this stage and that the Company will be able to meet its obligations in the foreseeable future after payment of the final dividend
declared below.
Having due regard to the final dividend receivable from FirstRand and applying the dividend practice outlined above, the board of RMBH has resolved to declare a final dividend of 73.5 cents per share.
Such final dividend, together with the interim dividend of 52 cents brings the total dividends for the year ended 30 June 2012 to 125.5 cents (2011: 101.0 cents). Such dividend is covered 2.4 times by
normalised earnings per share.
From 1 April 2012 Dividend Withholding Tax (DWT) at a rate of 15% is levied on dividends paid to shareholders who are not exempt from DWT. RMBH has accumulated prior year secondary tax
(STC) credits that have been used to reduce such DWT liability. The position of a non-exempt shareholder may be illustrated as follows:
Cents Cents
Gross dividend declared 73.5
DWT at 15% (11.0)
STC credit utilised 3.3
Net liability for DWT (7.7) (7.7)
Net dividend receivable 65.8
OUTLOOK FOR THE COMING YEAR
The macro environment will remain challenging during the 2013 financial year. The global economy is likely to register below average growth and will continue to face significant downside risk.
This will mean that economic activity in South Africa will remain under pressure. GDP growth is currently expected to be 2.5% for the 2013 financial year, and although interest rates are expected to
remain flat for the rest of the year, there is downside risk if economic growth slows further.
Growth in retail advances is likely to remain subdued, with mortgage lending expected to continue to lag nominal GDP growth. In addition, given the high levels of recent growth in unsecured and
short-term advances in the system, this is also likely to moderate. Corporate lending is expected to remain muted as business confidence has not fully recovered. If, however, the proposed government
and public sector infrastructure plans are implemented, this may provide some underpin to growth in advances.
Within the context of these challenges, FirstRand expects to continue to produce good organic growth. Achieving revenue growth remains a challenge, but the FirstRand franchises have compelling
strategies to grow top line revenues. Achieving a sustainable ROE and cost-to-income ratio will remain a balancing act between investment and cost management.
During April 2012, our fellow director MH Visser passed away after a tragic car accident. Our friendship and business relationship predated Thys joining the RMBH board in 2009. His wise counsel and
valued input on strategic matters will be sorely missed at board level.
For and on behalf of the board
GT Ferreira
Chairman
P Cooper
Chief Executive Officer
Sandton
12 September 2012
FIRSTRAND GROUP
RMBHs sole interest is its 33.9% investment in FirstRand, one of South Africas pre-eminent banking groups.
FirstRands vision is to be the African financial services group of choice, creating long-term franchise value and delivering superior and sustainable economic returns to shareholders within acceptable
levels of volatility. It seeks to achieve this through two parallel growth strategies:
- becoming a predominant player in all of the financial services profit pools in South Africa, growing in existing markets and those where it is under-represented; and
- growing its franchise in the broader African continent, targeting those countries expected to show above average domestic growth and which are well positioned to benefit from the trade and
investment flows between Africa, China and India.
These strategies are executed through FirstRands operating franchises, within a strategic framework set by the Group. During the year First National Bank (FNB), the retail and commercial bank; Rand
Merchant Bank (RMB), the investment bank; and WesBank, the instalment finance business, continued to make good progress against this strategic intent.
Financial outcome
FirstRand continued to build on 2011s strong performance and produced excellent results for the financial year to 30 June 2012:
- achieving normalised earnings from continuing operations of R12.7 billion, an increase of 26% on the previous year; and
- producing a normalised return on equity (ROE) of 21% (2011: 19%).
FirstRands income was derived from the following sources:
For the year ended 30 June
R million 2012 2011 % change
Normalised earnings for ordinary shareholders derived from:
- FNB South Africa 6 157 4 787 29
- FNB Africa 516 540 (4)
- RMB and GTS 3 646 3 842 (5)
- WesBank 2 599 1 862 40
- FirstRand Corporate centre (including preference dividend) (188) (914) (79)
FirstRand normalised earnings 12 730 10 117 26
Attributable to RMBH* 4 314 3 201 35
* After consolidation eliminations and change in relative shareholding.
The most significant driver of earnings was the very strong operational performances from FNB and WesBank, both of which showed excellent topline growth. In the case of FNB this was the result of
specific strategies to acquire customers, grow loans and deposits, and drive transactional volumes across all of its platforms, particularly electronic. WesBank delivered excellent new business growth.
The RMB franchise performed well, particularly given the tough trading environment for corporate and investment banking and the high base created in recent years, due to significant private equity
realisations in the comparative period to June 2011.
Operational performance
FirstRands income statement benefited from an increase of 21% in net interest income before impairments (NII). This was driven by good growth in advances at FNB and WesBank. Asset margins
materially benefited from strong growth in unsecured lending products where loans are priced at better margins. Margins also continued to be positively impacted by ongoing re-pricing strategies in
the large retail lending books such as vehicle and asset finance, as well as residential mortgages.
A 5% increase in non-interest revenue (NIR) was underpinned by strong growth at FNB and WesBank. RMBs client activities, particularly advisory and structuring and currency and commodity
trading, also contributed. However, RMBs investment income was significantly down given the high base set in the previous year.
FirstRands core operating costs grew 10% for the year. Given a view that the benign credit cycle has bottomed, as well as needing to provide for under recoveries at FNBs merchant acquiring business,
the bad debt charge was increased. This, together with once-off items (accelerated depreciation on small value assets, higher costs associated with cooperation agreements, expansion costs and
incremental increases in share-based payment expenses directly linked to FirstRands increased share price) resulted in total expenses increasing by 14% to R27.2 billion.
FirstRand capital position
FirstRands capital management strategy is aligned to its overall objective to deliver sustainable returns to shareholders within appropriate levels of volatility. FirstRands current philosophy, given the
uncertain macro environment, is to operate at the higher end of its targeted capital levels (12% to 13.5%) to ensure balance sheet resilience. At year end its actual capital adequacy ratio was 14.7%
(against a regulatory minimum of 9.5%).
For an in-depth review of FirstRands performance, RMBH shareholders are referred to www.firstrand.co.za.
For the year ended 30 June
2012 2011 %
R million Audited Audited change
Continuing operations
Share of after tax results from associate company 4 618 4 255 9
Investment income 24 13 85
Net income 4 642 4 268 9
Administration expenses (37) (50) (26)
Results of operating activities 4 605 4 218 9
Net finance costs (102) (98) 4
Profit before taxation 4 503 4 120 9
Taxation (13) 1 (>100)
Profit form continuing operations 4 490 4 121 9
Discontinued operations (unbundled)
Profit attributable to discontinued operations (unbundled) - 1 206
Profit on unbundling of discontinued operations - 4 983
Negative goodwill on acquisition of associate - 1 370
Profit for the year 4 490 11 680 (62)
Attributable to:
Equity holders of RMBH 4 490 11 468 (61)
Non-controlling interests - 212
Profit for the year 4 490 11 680 (62)
For the year ended 30 June
2012 2011 %
R million Audited Audited change
Profit for the year 4 490 11 680 (62)
Other comprehensive income, net of tax
Net gains on available-for-sale financial assets - 13
Exchange differences on translation of foreign operations - 10
Share of other comprehensive loss of associates after tax and non-controlling interest 178 (127)
Other comprehensive income for the year 178 (104)
Total comprehensive income for the year 4 668 11 576
Total comprehensive income attributable to:
Equity holders of RMBH 4 668 11 355 (59)
Non-controlling interests - 221
Total comprehensive income for the year 4 668 11 576 (60)
Total comprehensive income attributable to equity holders arises from:
- Continuing operations 4 668 4 031 16
- Discontinued operations - 7 324
Total comprehensive income for the year attributable to equity holders 4 668 11 355 (59)
For the year ended 30 June
2012 2011 %
R million Note Audited Audited change
Earnings attributable to equity holders 4 490 11 468 (61)
Adjustment for:
Negative goodwill on acquisition of associate - (1 370)
Profit on unbundling of discontinued operations - (4 983)
Other - 12
Share of adjustment made by associates:
Profit on sale of shares in subsidiary and associate (258) (1 211)
Profit on sale of joint venture - (178)
Profit on sale of available-for-sale financial assets (54) (159)
Impairment of assets in terms of IAS 36 2 5
Loss on disposal of investment securities 7 18
Impairment of goodwill 40 29
Other 27 22
Total tax effect of adjustments 15 6
Total non-controlling interest 27 87
Headline earnings attributable to equity holders 4 296 3 746 15
RMBHs share of adjustments made by associates:
Treasury shares 1 88 162
Reversal of private equity realisation - 156
Net realised and fair value gains on shareholders funds - (26)
Basis changes and investment variances - 6
Amortisation of intangible assets relating to business combinations - 35
Recapture of reinsurance - 78
Other (84) 13
IFRS 2 share based expenses 27 (5)
Adjustment for:
RMBH shares held by policyholders and client trading activities 2 (1) 55
Group treasury shares 3 (140) (201)
Normalised earnings attributable to equity holders 4 186 4 019 4
Notes:
1. Deconsolidation of treasury shares and deemed treasury shares by FirstRand and Discovery, in comparative periods, to account for:
- the Discovery BEE transaction in comparative period;
- FirstRand shares acquired to hedge liabilities under staff share schemes; and
- FirstRand shares held as policyholders assets by group insurers.
2. Deconsolidation of deemed RMBH treasury shares held for policyholders by group insurers in the comparative period. RMBH shares held for client
trading activities by FirstRand in the current and comparative period.
3. Adjustment to reflect earnings impact based on actual RMBH shareholding in group companies, i.e. reflecting treasury shares as if they are
non-controlling interests.
For the year ended 30 June
2012 2011 %
R million Audited Audited change
FNB 2 086 1 511 38
FNB Africa 175 169 4
RMB and GTS 1 236 1 218 1
WesBank 881 592 49
Other (64) (289) (78)
FirstRand contribution to RMBH 4 314 3 201 35
Funding and central costs (128) (110) 16
Normalised earnings from continuing operations 4 186 3 091 35
BASIS OF PREPARATION OF RESULTS
The accompanying summarised results for the year ended 30 June 2012 reflects:
- the operations of RMBH and its proportionate interest in its associate, FirstRand, which has been equity accounted;
- the prior year includes the results of its previously held subsidiaries OUTsurance and RMB Structured Insurance for the eight months ended 28 February 2011;
- as well as RMBHs proportionate interest in its previously held associates, Discovery and MMI Holdings for the eight months ended 28 February 2011.
The report is prepared in accordance with:
- International Financial Reporting Standards, including IAS 34: Interim Financial Reporting;
- The requirements of the South African Companies Act, Act 71 of 2008, as amended; and
- The Listings Requirements of the JSE Limited.
These summarised results incorporate accounting policies that are consistent with those used in preparing the financial results for the year ended 30 June 2011.
P Cooper, CA(SA), supervised the preparation of the consolidated results.
These financial results were audited by PricewaterhouseCoopers Inc. A copy of their unqualified audit opinion is available for inspection at RMBHs registered office.
RMBH believes normalised earnings more accurately reflect operational performance. Headline earnings are adjusted to take into account the following non-operational and accounting anomalies for
segmental reporting purposes:
1. Deconsolidation of treasury shares and deemed treasury shares by FirstRand and Discovery in comparative period to account for:
- the Discovery BEE transaction in the comparative period;
- FirstRand shares acquired to hedge liabilities under staff share schemes; and
- FirstRand shares held as policyholders assets by group insurers.
2. Deconsolidation of deemed RMBH treasury shares held for policyholders by group insurers in the comparative period. RMBH shares held for client trading activities by FirstRand in the current and
comparative period.
3. Adjustment to reflect earnings impact based on actual RMBH shareholding in group companies, i.e. reflecting treasury shares as if they are non-controlling interests.
As at 30 June
2012 2011
R million Audited Audited
ASSETS
Cash and cash equivalents 17 15
Investment securities 32 18
Loans and receivables 2 15
Deferred tax asset - 10
Property and equipment 1 2
Investment in associates 27 149 25 061
Total assets 27 201 25 121
EQUITY
Share capital and premium 8 771 8 750
Reserves 17 051 14 951
Total equity 25 822 23 701
LIABILITIES
Financial liabilities 1 305 1 360
Long-term liabilities 4 7
Provisions 7 5
Trade and other payables 63 48
Total liabilities 1 379 1 420
Total equity and liabilities 27 201 25 121
For the year ended 30 June
2012 2011
R million Audited Audited
Cash available from operating activities from continuing operations 3 059 1 457
Cash available from operating activities from discontinued operations (unbundled) - 593
Dividends paid (2 895) (1 447)
Investment activities from continuing operations - (47)
Investment activities from discontinued operations (unbundled) - (843)
Financing activities from continuing operations (162) 2 495
Financing activities from discontinued operations (unbundled) - 79
Net increase in cash and cash equivalents from continuing and discontinued
operations (unbundled) 2 2 287
Unrealised foreign currency translation adjustments - 26
Transfer to non-current assets held for sale - (5 047)
Cash and cash equivalents at the beginning of the year 15 2 749
Cash and cash equivalents at the end of the year 17 15
For the year ended 30 June
2012 2011 %
R million Audited Audited change
FROm CONTINUING AND DISCONTINUED OPERATIONS (UNBUNDLED)
Earnings attributable to equity holders 4 490 11 468 (61)
Headline earnings attributable to equity holders 4 296 3 746 15
Normalised earnings for the year 4 186 4 019 4
Number of shares in issue (millions) 1 412 1 412 -
Weighted average number of shares in issue (millions) 1 409 1 272 11
Earnings per share (cents) 318.7 901.3 (65)
Diluted earnings per share (cents)* 312.1 895.4 (65)
Headline earnings per share (cents) 304.9 294.4 4
Diluted headline earnings per share (cents)* 298.6 290.2 3
Normalised earnings per share (cents) 296.5 313.8 (6)
Diluted normalised earnings per share (cents)* 296.5 313.8 (6)
Dividend per share (cents)
Interim 52.0 42.7 22
Final 73.5 58.3 26
Total 125.5 101.0 24
Dividend cover (relative to headline earnings) 2.4 2.9
Dividend cover (relative to normalised earnings) 2.4 3.1
FROm CONTINUING OPERATIONS
Earnings attributable to equity holders 4 490 4 121 9
Headline earnings attributable to equity holders 4 296 2 966 45
Normalised earnings for the year 4 186 3 091 35
Number of shares in issue (millions) 1 412 1 412 -
Weighted average number of shares in issue (millions) 1 409 1 280 10
Weighted average number of shares in issue (millions) for normalised earnings 1 412 1 281 10
Earnings per share (cents) 318.7 321.9 (1)
Diluted earnings per share (cents)* 312.1 316.1 (1)
Headline earnings per share (cents) 304.9 231.7 32
Diluted headline earnings per share (cents)* 298.6 227.5 31
Normalised earnings per share (cents) 296.5 241.3 23
Diluted normalised earnings per share (cents) 296.5 241.3 23
* The diluted calculations give cognisance to the impact of the similar calculation of FirstRand. This has no impact on RMBHs weighted average
number of shares.
Share Total Non-
capital equity control-
and Total holders ling Total
R million premium reserves funds interest equity
Balance at 30 June 2010
As previously reported 5 126 17 721 22 847 1 036 23 883
Issue of shares 6 735 - 6 735 - 6 735
Total comprehensive income for the year - 11 355 11 355 221 11 576
Dividend paid - (1 449) (1 449) (99) (1 548)
Dividend in specie: Unbundling of RMI Holdings (3 238) (13 654) (16 892) (1 307) (18 199)
Movement in treasury shares 127 122 249 - 249
Capital invested by minorities - - - 130 130
Reserve movements relating
to subsidiaries - 5 5 19 24
Change in carrying value of
associate due to elimination of treasury shares - (601) (601) - (601)
Reserve movements relating to associates - 1 452 1 452 - 1 452
Balance at 30 June 2011 8 750 14 951 23 701 - 23 701
Total comprehensive income for the year - 4 668 4 668 - 4 668
Dividend paid - (2 897) (2 897) - (2 897)
Share based payment - (5) (5) - (5)
Change in carrying value of associate due to elimination of treasury shares - 117 117 - 117
Movement in treasury shares 21 (12) 9 - 9
Reserve movements relating to associates - 229 229 - 229
Balance at 30 June 2012 8 771 17 051 25 822 - 25 822
CASH DIVIDEND DECLARATION
Notice is hereby given that on 12 September 2012 the board declared a final gross dividend of 73.5 cents per share in respect of the financial year ended 30 June 2012. The dividend is paid out of
income reserves.
The Company has utilised secondary tax on companies credits amounting to 21.85969 cents per share. The balance of the dividend will be subject to a dividend withholding tax at a rate of 15%,
which will result in a net dividend of 65.75395 cents per share to those shareholders who are not exempt. RMBHs tax reference number is 9950/098/71/6.
The issued share capital at the declaration date is 1 411 703 218 ordinary shares and 11 800 preference shares.
Shareholders attention is drawn to the following important dates:
- Last day to trade in order to participate in this dividend Friday, 5 October 2012
- Shares commence trading ex dividend on Monday, 8 October 2012
- The record date for the dividend payment will be Friday,12 October 2012
- Dividend payment date Monday,15 October 2012
No dematerialisation or rematerialisation of share certificates may be done between Monday, 8 October 2012 and Friday, 12 October 2012 (both days inclusive).
By order of the board
(ms) EJ marais
Company Secretary
12 September 2012
Date: 12/09/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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