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Summarised, audited results announcement and cash dividend declaration for the year ended 30 June 2013
RAND MERCHANT INSURANCE HOLDINGS LIMITED ("RMI")
Registration number: 2010/005770/06
JSE ordinary share code: RMI
ISIN code: ZAE000153102
Summarised, audited results announcement and cash dividend declaration for the year ended 30 June 2013
KEY HIGHLIGHTS
Normalised earnings +7% to 169.9 cents
Ordinary dividend +19% to 95 cents
Market value +45% to 2 520 cents
Economic environment
The macro-economic environment remained challenging over the financial year ended 30 June 2013 with global growth as a whole remaining uncertain and
below the long-term trend throughout the period.
However, during 2013 activity in the United States (US) started to improve to such a degree that its central bank authorities contemplated the possible unwinding
of current US monetary policy stimulus. This development negatively impacted emerging market flows, which had benefited from low US interest rates. Emerging
economies have gradually lost growth momentum, even though they are still outperforming the developed world.
For South Africa this resulted in some currency weakness. Amidst an atmosphere of diminished investor confidence arising from increasing social and labour
instability, South Africa's economic performance and prospects have also dimmed meaningfully over the past year.
Overview of results
For all our investments, operating conditions remained challenging and highly competitive. Local equity markets remained high while interest rate and currency
volatility continued. Overall consumer confidence remained fragile.
Particularly violent hailstorms in Gauteng during the last quarter of 2012 resulted in our short-term insurance businesses experiencing the most severe weather
related catastrophes in their history.
Notwithstanding such a challenging background, all of the businesses in which Rand Merchant Insurance Holdings Limited (RMI) is invested produced satisfying
results, with strong growth in normalised earnings being recorded by Discovery, driven largely by the performance of its United Kingdom operations:
Normalised earnings
For the year ended 30 June
2013 2012 %
R million Audited Audited change
Discovery 2 787 2 316 20
MMI 3 241 2 955 10
OUTsurance 1 161 1 157 -
RMBSI 89 96 (7)
As a result, the earnings derived by RMI from its investments in these companies were as follows:
For the year ended 30 June
2013 2012 %
R million Audited Audited change
Normalised earnings from:
- Discovery 699 579 21
- MMI 803 746 8
- OUTsurance 990 1 010 (2)
- RMBSI 70 74 (5)
2 562 2 409 6
Funding and holding company costs (37) (39) 5
Normalised earnings 2 525 2 370 7
Normalised earnings per share (cents) 169.9 159.5 7
RMI regards normalised earnings as the appropriate basis to evaluate business performance as it eliminates the impact of non-recurring items and accounting
anomalies.
A reconciliation of the adjustments made to derive normalised earnings is presented in the accompanying schedules.
Market value of investments
On the back of strong financial performance, Discovery and MMI, the group's two listed associates, benefited from a significant market re-rating during the
financial year. Discovery's market capitalisation on the JSE increased by 62% while that of MMI rose by 23%.
Over the course of the year, RMI's market capitalisation increased by 45%:
- as a result of the above-mentioned re-rating of our listed investments; as well as
- an implied market revaluation of our unlisted investments.
On a "look-through" basis, the market value attributed to RMI's interest in OUTsurance (83.4%) and RMBSI (76.4%) increased by 51% to R16.3 billion, reflecting
in part, market recognition of the progress made in building out OUTsurance's Australian initiative, Youi.
As at 30 June
%
R million 2013 2012 change
Market value of interest in:
- Discovery 12 445 7 699 62
- MMI 8 701 7 050 23
Market value of listed investments 21 146 14 749 43
Implied market value of unlisted investments 16 337 10 843 51
Gross market value of portfolio 37 483 25 592 46
Net (liabilities)/assets of holding company (44) 214 >(100)
RMI market capitalisation 37 439 25 806 45
RMI closing share price (cents) 2 520 1 737 45
Dividend payment
The board is of the opinion that RMI 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. The board is also of the view that at present the level of borrowings that the group carries at the center is
appropriate.
We have continued with our stated practice of paying out to shareholders dividends received from our underlying investments, after servicing any funding
commitments that RMI may have at the center.
Consequently, the board resolved to declare a final dividend of 55.0 cents per ordinary share.
Such final dividend, together with the interim dividend of 40.0 cents per ordinary share, brings the total dividends for the year ended 30 June 2013 to 95.0 cents
per ordinary share (2012: 80.0 cents per ordinary share, excluding the special dividend of 55.0 cents per ordinary share), a year-on-year increase of 19%. Such
dividend is covered 1.8 times by the normalised earnings of 169.9 cents per share. The apparent divergence in the growth in dividends relative to the growth in
underlying earnings can be ascribed to OUTsurance (having accessed the cash earnings generated relative to its re-investment requirements) paying out a larger
than normal dividend.
Shareholders are referred to the cash dividend declaration forming part of this announcement regarding the applicability of Dividend Withholding Tax to the
ordinary dividend.
Outlook for the coming year
The difficult economic environment is expected to continue in the current financial year. Growth in insurance new business volumes will remain largely dependent
upon the economic environment, including a recovery in employment and stronger disposable income levels. All of the groups in which RMI is invested face both
opportunities and threats posed by the highly regulated environment in which they operate, including evolving capital regimes as well as social security reform
proposals.
Notwithstanding these challenges, RMI expects to produce good organic growth during the coming year. In particular:
- the progress made by Discovery over the past financial year positions it strongly for continued growth and profitability in the future; while
- MMI's strategic focus has shifted from integration to outward looking growth initiatives with innovative strategies to unlock value; and
- OUTsurance expects its life insurance offering to gain further traction in South Africa and it is excited about the growth prospects of Youi.
For and on behalf of the board
GT Ferreira P Cooper
Chairman Chief executive officer
Sandton
12 September 2013
Cash dividend declaration
Notice is hereby given that a gross final dividend of 55.0 cents per ordinary share payable out of income reserves was declared on 12 September 2013 in respect
of the financial year ended 30 June 2013.
RMI has utilised Secondary Tax on Companies credits amounting to 1.97593 cents per ordinary share. The balance of the dividend will be subject to Dividend
Withholding Tax at a rate of 15%, which will result in a net dividend of 47.04639 cents per ordinary share for those shareholders who are not exempt. The
company's tax reference number is 9469/826/16/9. Its issued share capital at the declaration date is 1 485 688 346 ordinary shares and 848 501 redeemable
preference shares.
Shareholders' attention is drawn to the following important dates:
Last day to trade in order to participate in these dividends Friday, 4 October 2013
Shares commence trading "ex dividend" on Monday, 7 October 2013
The record date for the dividend payment will be Friday, 11 October 2013
Dividend payment date Monday, 14 October 2013
No dematerialisation or rematerialisation of share certificates may be done between Monday, 7 October 2013 and Friday, 11 October 2013 (both days inclusive).
By order of the board
JS Human
Company secretary
12 September 2013
REVIEW OF INVESTMENT PERFORMANCE
For a comprehensive review of the investment performance of RMI's investee companies, shareholders are referred to www.rminsurance.co.za.
BASIS OF PREPARATION OF RESULTS
The accompanying summarised financial results for the year ended 30 June 2013 reflect:
- the consolidation of the operations of Rand Merchant Insurance Holdings Limited (RMI) and its subsidiaries, including OUTsurance Holdings Limited (OUTsurance)
and RMB-SI Investments Proprietary Limited (RMBSI); and
- RMI's proportionate interest in its associates, Discovery Limited (Discovery) and MMI Holdings Limited (MMI), which have been equity accounted.
The annual financial statements for the year ended 30 June 2013, to which this summarised results announcement relates, were prepared in accordance with:
- International Financial Reporting Standards (IFRS), 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.
Schalk Human CA(SA) prepared these consolidated financial results under the supervision of Peter Cooper CA(SA). The results were audited by
PricewaterhouseCoopers Inc. A copy of their unmodified audit opinion is available for inspection at RMI's registered office.
The accounting policies applied in the preparation of the annual financial statements for the year ended 30 June 2013 are consistent with those applied in the
previous financial year.
The board of directors takes full responsibility for the preparation of this announcement and that the financial information has been correctly extracted from the
underlying audited annual financial statements. The independent auditors' report does not necessarily encompass all the information contained in this
announcement. Unless the financial information is specifically stated as audited, it should be assumed that it is unaudited. The complete annual financial
statements were audited by PricewaterhouseCoopers Inc. and their unmodified audit opinion is dated 12 September 2013. Shareholders are advised that for a full
understanding of the nature of the auditors' engagement they should obtain a copy of the auditors' unmodified report, together with the complete annual
financial statements from RMI's registered office, 3rd Floor, 2 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton.
RMI's effective interest in the group entities is different from the actual holdings as a result of the following consolidation adjustments:
- treasury shares held by the group entities;
- shares held by consolidated share incentive trusts;
- "deemed" treasury shares arising from BEE transactions entered into; and
- "deemed" treasury shares held by policyholders and mutual funds managed by them.
At 30 June 2013 the effective interest held by RMI can be compared to the actual interest in the statutory issued share capital of the companies as follows:
30 June 2013 30 June 2012
Effective Actual Effective Actual
Audited Audited Audited Audited
Discovery 26.7% 25.0% 26.7% 25.0%
MMI 25.2% 25.0% 25.1% 24.9%
OUTsurance 85.3% 83.4% 85.6% 83.4%
RMBSI 79.1% 76.4% 80.5% 76.4%
SUMMARISED CONSOLIDATED INCOME STATEMENT
For the year ended 30 June
2013 2012 %
R million Audited Audited change
Earned premiums net of reinsurance 7 869 6 661 18
Fee income 146 119 23
Investment income 631 569 11
Profit on sale of subsidiary 38 - -
Net fair value gains on financial assets 560 209 >100
Income 9 244 7 558 22
Net claims paid (3 873) (2 581) 50
Fair value adjustment to investment contracts and insurance contract provisions (1 027) (677) 52
Fair value adjustment to financial liabilities (201) (220) (9)
Acquisition, marketing and administration expenses (2 418) (1 971) 23
Profit before finance costs, share of after tax results of associates and taxation 1 725 2 109 (18)
Net finance costs (125) (138) (9)
Share of after tax results of associates 1 179 975 21
Profit before taxation 2 779 2 946 (6)
Taxation (371) (517) (28)
Profit for the year 2 408 2 429 (1)
Attributable to:
Equity holders of RMI 2 214 2 248 (2)
Non-controlling interests 194 181 7
Profit for the year 2 408 2 429 (1)
COMPUTATION OF HEADLINE EARNINGS
For the year ended 30 June
2013 2012 %
R million Audited Audited change
Earnings attributable to equity holders 2 214 2 248 (2)
Adjustment for:(1)
Profit on sale of subsidiary (24) (1)
Loss on dilution of shareholding 11 208
Goodwill and other impairments 1 17
Realised profit on sale of available-for-sale financial assets (1) (15)
Profit on step-up of associate - (54)
Impairment of available-for-sale reserve - 7
Headline earnings attributable to equity holders 2 201 2 410 (9)
(1) Adjustments are net of taxation and non-controlling interest and include RMI's share of adjustments made by associates.
SOURCES OF HEADLINE EARNINGS
For the year ended 30 June
2013 2012 %
R million Audited Audited change
Headline earnings from:
- Discovery 551 569 (3)
- MMI 628 550 14
- OUTsurance 990 1 261 (21)
- RMBSI 69 76 (9)
2 238 2 456 (9)
Funding and holding company costs (37) (46) 20
Headline earnings 2 201 2 410 (9)
COMPUTATION OF EARNINGS PER SHARE
For the year ended 30 June
2013 2012 %
R million Audited Audited change
Earnings attributable to equity holders 2 214 2 248 (2)
Headline earnings attributable to equity holders 2 201 2 410 (9)
Number of shares in issue (millions) 1 486 1 486 -
Weighted average number of shares in issue (millions) 1 483 1 481 -
Earnings per share (cents) 149.2 151.8 (2)
Diluted earnings per share (cents) 148.2 150.7 (2)
Headline earnings per share (cents) 148.4 162.8 (9)
Diluted headline earnings per share (cents) 147.4 161.8 (9)
Dividend per share (cents)
Interim dividend 40.0 30.0 33
Final dividend 55.0 50.0 10
Special dividend - 55.0 (100)
Total dividend 95.0 135.0 (30)
Less: Special dividend - (55.0) 100
Total normal dividend 95.0 80.0 19
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June
2013 2012
R million Audited Audited
Profit for the year 2 408 2 429 (1)
Other comprehensive income for the year
Items that may subsequently be reclassified to income, before and after taxation
Currency translation differences 62 77 (19)
Fair value movement on available-for-sale financial assets 19 7 >100
Share of other comprehensive income of associates 173 134 29
Items that may subsequently be reclassified to income, after taxation 173 120 44
Items that will not be reclassified to income, after taxation - 14 (100)
Other comprehensive income for the year 254 218 17
Total comprehensive income for the year 2 662 2 647 1
Total comprehensive income attributable to:
Equity holders of RMI 2 457 2 459 -
Non-controlling interests 205 188 9
Total comprehensive income for the year 2 662 2 647 1
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June
2013 2012
R million Audited Audited
Assets
Property and equipment 460 413
Goodwill and other intangible assets 43 50
Investments in associates 10 442 9 864
Financial assets 7 781 7 603
Loans and receivables including insurance receivables 1 668 998
Deferred acquisition cost 38 32
Reinsurance contracts 275 273
Deferred taxation 414 441
Disposal group held for sale - 211
Cash and cash equivalents 2 664 2 462
Total assets 23 785 22 347
Equity
Share capital and premium 13 632 13 614
Reserves (67) (430)
Capital and reserves attributable to equity holders of the company 13 565 13 184
Non-controlling interests 586 626
Total equity 14 151 13 810
Liabilities
Insurance contracts 4 855 3 710
Share-based payment liability 50 -
Financial liabilities 3 601 3 730
Payables and provisions 913 700
Deferred taxation 176 324
Taxation 39 14
Disposal group held for sale - 59
Total liabilities 9 634 8 537
Total equity and liabilities 23 785 22 347
STATEMENT OF CHANGES IN EQUITY
Audited
Trans-
Share actions
capital Equity with non- Non-
and accounted controlling Other Retained controlling Total
R million premium reserves interests reserves earnings interests equity
Balance as at 30 June 2011 13 571 (117) (2 352) 23 219 310 11 654
Total comprehensive income for the year - 134 - 77 2 248 188 2 647
Dividends paid - - - - (946) (86) (1 032)
Income of associates retained - 408 - - (408) - -
Movement in treasury shares 43 2 - - - - 45
Transactions with non-controlling interests - (8) - - - - (8)
Sale of shares in subsidiary - - 281 - - 210 491
Transfer from contingency reserve - - - (20) 20 - -
Share-based payment reserve - 1 - 8 - 1 10
Change in reserves due to a change in holding - - - - - 3 3
Balance as at 30 June 2012 13 614 420 (2 071) 88 1 133 626 13 810
Total comprehensive income for the year - 173 - 70 2 214 205 2 662
Dividends paid - - - - (2 154) (189) (2 343)
Income of associates retained - 271 - - (271) - -
Movement in treasury shares 18 21 - - - - 39
Transactions with non-controlling interests - 22 - - - - 22
Profit on preference share buy-back - 28 - - - - 28
Sale of subsidiary - - - (1) - (75) (76)
Share-based payment reserve - - - 1 - - 1
Change from equity-settled to cash-settled scheme - - - (9) (2) (2) (13)
Change in reserves due to a change in holding - - - 13 (13) 21 21
Balance as at 30 June 2013 13 632 935 (2 071) 162 907 586 14 151
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June
2013 2012
R million Audited Audited
Cash available from operating activities 3 076 1 957
Dividends paid (2 154) (946)
Investment activities 351 (936)
Financing activities (1 164) (205)
Net increase/(decrease) in cash and cash equivalents 109 (130)
Unrealised foreign currency translation adjustments 93 143
Cash and cash equivalents included under disposal group held for sale - (7)
Cash and cash equivalents at the beginning of the year 2 462 2 456
Cash and cash equivalents at the end of the year 2 664 2 462
COMPUTATION OF NORMALISED EARNINGS
For the year ended 30 June
2013 2012 %
R million Audited Audited change
Headline earnings attributable to equity holders 2 201 2 410 (9)
RMI's share of normalised adjustments made by associates: 341 230
Amortisation of intangible assets relating to business combinations 171 152
Basis and other changes and investment variances 92 76
Recapture of reinsurance 84 -
Finance costs raised on puttable non-controlling interest financial liability 41 38
Once-off costs 15 -
Net realised and fair value gains on shareholders' assets (85) (65)
STC - 37
Other 23 (8)
Group treasury shares (17) (53)
Recognition of deferred tax asset on assessed losses - (214)
Earnings of disposal group held for sale - (10)
STC - 7
Normalised earnings attributable to equity holders 2 525 2 370 7
COMPUTATION OF NORMALISED EARNINGS PER SHARE
For the year ended 30 June
2013 2012 %
Audited Audited change
Weighted average number of shares in issue (millions) 1 486 1 486 -
Normalised earnings per share (cents) 169.9 159.5 7
Diluted normalised earnings per share (cents) 168.6 157.8 7
Dividend cover (normal dividend relative to normalised earnings) 1.8 2.0
SEGMENT REPORT
The segmental analysis is based on the management accounts prepared for the group.
Discovery MMI OUTsurance RMBSI Other(1) Group
R million Audited Audited Audited Audited Audited Audited
Year ended 30 June 2013
Operating profit/(loss) - - 1 746 (36) 15 1 725
Finance costs - - (1) (20) (104) (125)
Share of after tax results of associates 542 628 10 (1) - 1 179
Profit/(loss) before taxation 542 628 1 755 (57) (89) 2 779
Taxation - - (515) 146 (2) (371)
Profit/(loss) for the year 542 628 1 240 89 (91) 2 408
Normalised earnings 699 803 1 161 89 (227) 2 525
Assets - - 7 554 5 111 635 13 300
Associates 4 456 5 935 23 28 - 10 442
Intangible assets - - 39 1 3 43
Total assets 4 456 5 935 7 616 5 140 638 23 785
Total liabilities - - 4 023 4 722 889 9 634
Year ended 30 June 2012
Operating profit - - 1 845 263 1 2 109
Finance costs - - (1) (44) (93) (138)
Share of after tax results of associates 571 397 8 (1) - 975
Profit/(loss) before taxation 571 397 1 852 218 (92) 2 946
Taxation - - (383) (122) (12) (517)
Profit/(loss) for the year 571 397 1 469 96 (104) 2 429
Normalised earnings 579 746 1 157 96 (208) 2 370
Assets - - 7 170 4 369 894 12 433
Associates 3 927 5 914 18 5 - 9 864
Intangible assets - - 47 1 2 50
Total assets 3 927 5 914 7 235 4 375 896 22 347
Total liabilities - - 3 078 3 974 1 485 8 537
(1) "Other" includes RMI Holdings Limited, Firness International Proprietary Limited, consolidation of treasury shares and other consolidation entries.
GEOGRAPHICAL SEGMENTS
South
Africa Australia Total
R million Audited Audited Audited
Year ended 30 June 2013
Profit/(loss) before taxation 2 870 (91) 2 779
Taxation (429) 58 (371)
Profit/(loss) for the year 2 441 (33) 2 408
Total assets 20 946 2 839 23 785
Total liabilities 7 624 2 010 9 634
Year ended 30 June 2012
Profit/(loss) before taxation 3 067 (121) 2 946
Taxation (789) 272 (517)
Profit for the year 2 278 151 2 429
Total assets 20 288 2 059 22 347
Total liabilities 7 382 1 155 8 537
ADMINISTRATION
RAND MERCHANT INSURANCE HOLDINGS LIMITED ("RMI")
Registration number: 2010/005770/06
JSE ordinary share code: RMI
ISIN code: ZAE000153102
Directors
GT Ferreira (Chairman), P Cooper (CEO), L Crouse (appointed 17 September 2012), LL Dippenaar, JW Dreyer, JJ Durand, PM Goss, PK Harris, TV Mokgatlha,
O Phetwe (appointed 6 February 2013), (Ms) SEN Sebotsa and KC Shubane.
Alternates
NDJ Carroll (resigned 31 October 2012) and (Ms) A Kekana (appointed 6 February 2013).
Secretary and registered office
JS Human
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 8166
Telefax: +27 11 282 4210
Web address: www.rminsurance.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 2004 Proprietary 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: 12/09/2013 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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