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Unaudited interim results and cash dividend finalisation announcement for the six months ended 31 December 2014
RMB Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1987/005115/06
JSE ordinary share code: RMH ISIN code: ZAE000024501
(RMH)
Condensed, unaudited interim results and cash dividend finalisation announcement for the six months ended 31 December 2014
FINANCIAL HIGHLIGHTS
Normalised earnings +15% to 237.7 cents
Dividend per share +22% to 122.0 cents
Intrinsic value +42% to 6 766 cents
RMH at a glance
RMH's sole interest is its 34% investment in separately listed FirstRand Limited (FirstRand), generally regarded as South Africa's pre-eminent financial services group.
FirstRand consists of a portfolio of leading financial services franchises:
- First National Bank (FNB), the retail and commercial bank;
- Rand Merchant Bank (RMB), the corporate and investment bank;
- WesBank, the instalment finance business; and
- Ashburton Investments, the group's recently established investment management business.
RMH was established in 1987 by the founding members GT Ferreira, LL Dippenaar and PK Harris. The company listed in 1993. RMH is well known for its entrepreneurship,
innovation and value creation. RMH entered the JSE Top 40 in June 2002 and has remained in the Top 40 ever since.
RMH is the founding and an influential shareholder of FirstRand and partners management in strategic dialogue. The group structure provides benefits to RMH and
FirstRand shareholders including BEE shareholding, portfolio optimisation and a long-term focus.
Basis of presentation
This report covers the unaudited financial results of RMH for the six months ended 31 December 2014. It is based on International Financial Reporting Standards
(IFRS).
The primary results and accompanying commentary are presented on a normalised basis. We believe this most accurately reflects underlying economic performance.
The normalised earnings have been derived from unaudited, IFRS financial results. A reconciliation of the adjustments made to derive normalised earnings is
presented in the accompanying schedules.
Ellen Marais, CA(SA), prepared these financial results under the supervision of Herman Bosman, LLM, CFA.
Operating environment
During the period under review the local economy remained subdued with weak global growth, structural constraints and sluggish domestic demand resulting in
low levels of economic activity.
Although the US continued to pick up momentum, other major developed and emerging economies struggled and this weakness was reflected in downward
pressure on commodity prices and slowing growth in the economies of South Africa's main export partners.
Local industries were unable to take full advantage of exchange rate weakness due to ongoing electricity shortages which have kept production capacity
constrained. Domestic demand remains negatively impacted by low levels of business and consumer confidence, weak real disposable income growth, sluggish
household credit extension and interest rate tightening.
Certain of the sub-Saharan region economies were also impacted by low global growth and falling commodity prices. The Indian economy however continued to
pick up momentum.
Overview of results
RMH produced good results for the six months ended 31 December 2014, achieving an increase of 15% in normalised earnings per share to 237.7 cents (R3.4
billion) over the previous period.
This outcome was driven by the good performance of FirstRand; all three main operating franchises continued to grow profits and produce return on equity (ROE)
significantly above internal targets.
The interim dividend of 122.0 cents per share increased by 22%. The increase in dividend is mainly due to FirstRand's stated belief that a dividend cover of between
1.8 and 2.0 is acceptable and RMH's policy of returning dividends to shareholders after provision has been made for funding and centre costs.
Sources of income
FirstRand's well-diversified income stream is drawn from the full spectrum of banking services and is predominantly sourced from Southern Africa.
for the six months ended
31 December
For the
year ended
Normalised earnings 30 June
R million 2014 2013 % change 2014
FNB 5 731 4 920 16 9 819
RMB 2 520 2 354 7 5 507
WesBank 1 623 1 497 8 3 013
Other 119 (80) >100 324
FIRSTRAND NORMALISED EARNINGS 9 993 8 691 15 18 663
Attributable to RMH 3 386 2 945 15 6 325
Centre costs (30) (39) (23) (88)
RMH NORMALISED EARNINGS 3 356 2 906 15 6 237
Underlying intrinsic value
RMH's intrinsic value reflected the strong growth experienced over the period in financial sector equity values:
As at 31 December
As at
30 June
R million 2014 2013 % change 2014
Market value of listed interest (FirstRand) 96 611 68 565 41 77 850
Net funding (1 070) (1 141) (6) (1 128)
TOTAL INTRINSIC VALUE 95 541 67 424 42 76 722
Intrinsic value per share (cents) 6 766 4 775 42 5 434
Interim dividend payment
RMH follows a stated practice of returning net dividends (after providing for funding and centre costs) received by it in the ordinary course of business to share-
holders. RMH's sole source of dividend income is its investment in FirstRand.
FirstRand re-evaluates the appropriateness of the level of its dividend payout to its shareholders on an annual basis. Given the uncertainty around regulatory
changes, the challenging operating environment and expected demand for capital, FirstRand believes its current dividend strategy remains appropriate.As previously
stated it considers the level of payout within a range of 1.8 times to 2.2 times to be appropriate and will assess the appropriateness of this on an annual basis.
FirstRand has, therefore, decided to keep its interim dividend cover at 1.9 times for the six months to December 2014.
Having due regard to the interim dividend receivable from FirstRand and applying the dividend practice outlined above, the board of RMH has resolved to declare a
gross interim dividend of 122.0 cents per share (2013: 100.0 cents). Such dividend is covered 1.9 times by normalised earnings per share and represents a year-on-
year increase of 22%.
The board is of the opinion that RMH 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 interim dividend.
Dividend Withholding Tax ("DWT") at a rate of 15% is levied on dividends paid to shareholders who are not exempt from DWT. RMH has accumulated Secondary
Tax Credits (STC) which have been used to reduce the DWT liability arising from the dividend. A non-exempt shareholder would have needed to pay DWT
of 18.30000 cents per share. Due to a STC credit of 5.80623 cents per share being utilised to reduce the liability by the shareholder, the net DWT tax payable
amounts to 17.42906 cents per share.
The net dividend receivable by non-exempt shareholder is therefore 104.57094 cents per share. An exempt shareholder will receive 122.0 cents per share.
Shareholders are reminded that all accumulated STC credits not passed on will expire on 31 March 2015 and going forward there will not be any relief for non-exempt
shareholders.
Outlook
GDP growth in the medium term is expected to increase but will remain below the trend. This is due to demand weakness and supply constraints, particularly
where power is concerned. RMH as well as FirstRand are not expecting a rate hike in the second half of its financial year, economic headwinds are increasing and
growth remains subdued. High levels of indebtedness in certain consumer segments dictates that advances growth will remain at current levels and corporate
activity is not expected to increase significantly. The fall in the oil price could positively impact consumer inflation and the impact could be observed as CPI dropped
to 4.4% at the end of January 2015, the lowest level since April 2011.
RMH believes that the FirstRand franchises have appropriate strategies in place to produce resilient operational performances against a difficult economic backdrop.
The diverse income streams of FristRand in conjunction with RMH's strong balance sheet should continue to deliver sustainable and superior returns to
shareholders.
Maturity of FirstRand's BEE transaction
On 31 December 2014, the staff and director components of FirstRand's 2005 Black Economic Empowerment (BEE) transaction matured. This resulted in participants
receiving a benefit valued at R5.4 billion from the vesting of 107.5 million FirstRand ordinary shares and R560 million from the vesting of 17.8 million MMI
Holdings Limited (MMI) shares. The shares were held by the FirstRand Black Employee Trust, the FirstRand Black Non-executive Directors Trust and the Staff
Assistance Trust (the trusts) after purchasing the FirstRand shares in the market in 2005 and receiving the MMI shares pursuant to the unbundling of MMI in 2010.
To facilitate the wind-up of the trusts on maturity of the transaction, FirstRand bought back 63 million FirstRand shares from the trusts. FirstRand also obtained 11
million MMI shares held by the trusts (collectively, the share buy-back). The share buy-back enabled the trusts to return capital contributions and the vesting of the
net proceeds with the residual beneficiary.
To reinstate the normalised NAV, which was reduced by the share buy-back, FirstRand offered for issue 35 million ordinary shares on 20 January 2015.
On the same day, FirstRand offered 67 million FirstRand ordinary shares and R24 million MMI ordinary shares on behalf of the beneficiaries to settle tax obligations
and to deliver cash value to the beneficiaries who elected to sell their shares. While the group facilitated the sale, the election was made by the beneficiaries and
the full proceeds on the sale of these shares, were for the account of beneficiaries.
The offer was made by way of an accelerated bookbuild process to qualifying institutional investors only. The offer was successfully placed with qualifying institutional
investors, the ordinary shares delivered and the new shares listed on the JSE on 28 January 2015. RMH did not participate in the accelerated bookbuild.
The effect of the issue of 35 million ordinary shares is, however, not included in the IFRS financial results at 31 December 2014. If the new issue was effective at 31
December 2015, the effect on net asset value would be an increase of R377 million or 26.7 cents per share for RMH shareholders.
For and on behalf of the board
GT Ferreira HL Bosman
Chairman Chief executive officer
Sandton
11 March 2015
CASH DIVIDEND FINALISATION
Interim cash dividend finalisation
Notice is hereby given that a gross interim dividend of 122.0 cents per share payable out of income reserves was declared on 6 March 2015 in respect of the six
months ended 31 December 2014.
The company has utilised STC credits amounting to 5.80623 cents per 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 104.57094 cents per share for those shareholders who are not exempt. The company's tax reference number is
99950/098/71/6. Its issued share capital at the declaration date is 1 411 703 218 ordinary shares and 11 800 redeemable preference shares.
Shareholders' attention is drawn to the following important dates:
- Last day to trade in order to participate in this dividend Friday, 20 March 2015
- Shares commence trading "ex dividend" on Monday, 23 March 2015
- The record date for the dividend payment will be Friday, 27 March 2015
- Dividend payment date Monday, 30 March 2015
No de-materialisation or re-materialisation of share certificates may be done between Monday, 23 March 2015 and Friday, 27 March 2015 (both days inclusive).
By order of the board
(Ms) EJ Marais
Company secretary
6 March 2015
Condensed consolidated income statement
for the six months ended
31 December
For the
year ended
30 June
R million 2014 2013 % change 2014
Share of after-tax profit of associate company 3 418 3 079 11 6 426
Fee income 12 8 15
Investment income 3 4 4
Net fair value gain on financial assets and liabilities 74 8 18
Net income 3 507 3 099 13 6 463
Administration expenses (32) (16) 100 (40)
Income from operations 3 475 3 083 13 6 423
Finance costs (42) (43) (2) (85)
Profit before tax 3 433 3 040 13 6 338
Income tax expense (9) (1) >100 (1)
PROFIT FOR THE PERIOD 3 424 3 039 13 6 337
Attributable to:
Equityholders of the company 3 424 3 039 13 6 337
PROFIT FOR THE PERIOD 3 424 3 039 13 6 337
Condensed consolidated statement of comprehensive income
for the six months ended
31 December
For the
year ended
30 June
R million 2014 2013 % change 2014
3 424 3 039 13 6 337
PROFIT FOR THE PERIOD
Other comprehensive income, after tax:
Items that will not be reclassified to profit or loss
Share of other comprehensive income of associate after tax and non-controlling interests 20 (7) (29)
Items that may subsequently be reclassified to profit or loss
Share of other comprehensive income of associate after tax and non-controlling interests (47) 141 254
OTHER COMPREHENSIVE INCOME FOR THE PERIOD (27) 134 >100 225
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 3 397 3 173 7 6 562
Total comprehensive income attributable to:
Equityholders of the company 3 397 3 173 7 6 562
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 3 397 3 173 7 6 562
Condensed consolidated statement of financial position
as at 31 December
As at
30 June
R million 2014 2013 2014
Assets
Cash and cash equivalents 15 29 14
Loans and receivables 6 6 6
Investment securities 221 57 178
Derivative financial instruments 34 17 20
Investment in associate 33 968 31 328 33 348
Receiver of Revenue - 1 -
TOTAL ASSETS 34 244 31 438 33 566
Equity
Share capital and premium 8 818 8 819 8 819
Reserves 24 080 21 369 23 401
TOTAL EQUITY 32 898 30 188 32 220
Liabilities
Financial liabilities 1 229 1 180 1 272
Derivative financial instruments 45 11 17
Long-term liabilities 21 6 9
Provisions 4 8 2
Trade and other payables 47 45 46
TOTAL LIABILITIES 1 346 1 250 1 346
TOTAL EQUITY AND LIABILITIES 34 244 31 438 33 566
Condensed consolidated statement of cash flows
for the six months ended
31 December
For the
year ended
30 June
R million 2014 2013 2014
Net cash generated from operating activities 1 874 1 588 3 007
Dividends paid (1 800) (1 475) (2 887)
Net cash outflow in financing activities (73) (96) (118)
Net increase in cash and cash equivalents 1 17 2
Cash and cash equivalents at the beginning of the period 14 12 12
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 15 29 14
Condensed statement of changes in equity
Total
Share equity- Non-
capital and Total holders' controlling Total
R million premium reserves funds interest equity
Balance at 1 July 2012 8 822 20 249 29 071 - 29 071
Total comprehensive income for the period - 3 173 3 173 - 3 173
Dividend paid - (1 475) (1 475) - (1 475)
Change in carrying value of associate due to elimination of treasury shares - (14) (14) - (14)
Reserve movements relating to associate - (564) (564) - (564)
Movement in treasury shares (3) - (3) - (3)
BALANCE AT 31 DECEMBER 2013 8 819 21 369 30 188 - 30 188
Balance at 1 July 2014 8 819 23 401 32 220 - 32 220
Total comprehensive income for the period - 3 397 3 397 - 3 397
Dividend paid - (1 800) (1 800) - (1 800)
Share option expense - IFRS 2 - (1) (1) - (1)
Reserve movements relating to associate - (918) (918) - (918)
Movement in treasury shares (1) 1 - - -
BALANCE AT 31 DECEMBER 2014 8 818 24 080 32 898 - 32 898
Computation of headline and normalised earnings
for the six months ended
31 December
For the
year ended
30 June
R million 2014 2013 % change 2014
Earnings attributable to equityholders 3 424 3 039 13 6 337
Adjustment for:
RMH's share of adjustment made by associate:
Loss on disposal of investment securities and other investments of a capital nature - 3 9
Gain on disposal of available-for-sale assets (78) (23) (24)
Gain on disposal of investments in associates or joint ventures - (3) (21)
Gain on disposal of investment in subsidiaries (64) (4) (6)
(Gain)/loss on the disposal of property and equipment (4) 4 11
Impairment of goodwill - - 45
Impairment of assets in terms of IAS 36 - 4 53
Tax effects of adjustments - 7 9
Non-controlling interests adjustment 8 1 5
RMH's own adjustments
Loss on share-buy back by FirstRand 113 - -
HEADLINE EARNINGS ATTRIBUTABLE TO EQUITYHOLDERS 3 399 3 028 12 6 418
RMH's share of adjustments made by associates:
IFRS 2 Share-based payment expenses 26 4 63
Treasury shares 17 22 34
Total Return Swap adjustment (49) (51) (69)
IAS 19 adjustment (19) (18) (36)
Private equity subsidiary realisations 57 3 5
Adjustment for:
RMH shares held by associate1 1 (1) (2)
Group treasury shares2 (40) (81) (176)
Other3 (36) - -
NORMALISED EARNINGS ATTRIBUTABLE TO EQUITYHOLDERS 3 356 2 906 15 6 237
1 RMH shares held for client trading activities by FirstRand.
2 Adjustment to reflect earnings impact based on actual RMH shareholding in FirstRand i.e. reflecting treasury shares as if they are non-controlling
interests. For the current year the effect of the issue of an additional 35 420 014 issued on 21 January was taken into account on 31 December
2014 to provide shareholders with a comparable performance on a normalised basis.
3 Adjustment reflects the reversal of a once-off hedge break gain realised on the restructuring of the funding facility.
Computation of earnings per share
for the Six months ended
31 December
For the
year ended
30 June
R million 2014 2013 % change 2014
Earnings attributable to equityholders 3 424 3 039 13 6 337
Headline earnings attributable to equityholders 3 399 3 028 12 6 418
Normalised earnings for the period 3 356 2 906 15 6 237
Net asset value 32 898 30 188 9 32 220
Number of shares in issue (millions) 1 412 1 412 1 412
Weighted average number of shares in issue (millions) 1 411 1 412 1 411
Diluted weighted average number of shares in issue (millions) 1 411 1 412 1 411
Weighted average number of shares in issue (millions) for normalised earnings 1 412 1 412 1 412
Earnings per share (cents) 242.6 215.2 13 449.0
Diluted earnings per share (cents)1 242.6 213.2 14 444.2
Headline earnings per share (cents) 240.8 214.4 12 454.7
Diluted headline earnings per share (cents)1 240.8 212.5 13 449.9
Normalised earnings per share (cents) 237.7 205.8 15 441.7
Diluted normalised earnings per share (cents) 237.7 205.8 15 441.7
Net asset value per share (cents) 2 329.9 2 138.0 9 2 281.9
Dividend per share (cents)
Interim 122.0 100.0 22 100.0
Final - - - 127.5
TOTAL 122.0 100.0 22 227.5
Dividend cover (relative to headline earnings) 2.0 2.1 2.0
1.9 2.1 1.9
Dividend cover (relative to normalised earnings)
1 The diluted calculations give cognisance to the impact of the similar calculation within FirstRand. This has no impact on RMH's weighted average
number of shares.
Basis of preparation of results
The accompanying condensed unaudited results for the period ended 31 December 2014 reflects:
- the operations of RMH and its proportionate interest in its associate, FirstRand, which has been equity accounted.
The report is 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;
- SAICA Financial Reporting Guide as issued by the Accounting Practices Committee;
- Financial Reporting Pronouncements as issued by Financial Reporting Standards Council; and
- The Listings Requirements of the JSE Limited.
The board takes full responsibility for the preparation of this announcement.
Accounting policies
These condensed unaudited results incorporate accounting policies that are consistent with those used in preparing the financial results for the year ended 30 June
2014.
The following standards and interpretations, which did not have any effect on RMH's accounting policies, earnings or financial position, were effective for the
current financial period:
- IAS 19 Employee Benefits Defined Benefit Plans - Employee Contributions (IAS 19);
- IAS 32 Financial Instruments: Presentation - Amendment to Offsetting Financial Assets and Financial Liabilities (IAS 32);
- IAS 39 Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting Amendment (IAS 39);
- IFRS 10 Consolidated Financial Statements - Investment Entities amendment (IFRS 10); and
- IFRIC 21 Levies (IFRIC 21).
Normalised results
RMH believes normalised earnings more accurately reflect operational performance. Headline earnings are adjusted to take into account the following
non-operational and accounting anomalies:
1. RMH's portion of normalised adjustment made by its associate FirstRand Limited which have a financial impact:
- Equity-settled share-based payments and treasury share: consolidation of staff share trust;
- FirstRand shares held for client trading activities;
- the Total Return Swap which is an economic hedge against the share-based payment obligation;
- the consolidation of private equity subsidiaries which is excluded from the Rule 1 exemption of Circular 2/2013, Headline Earnings per Share; and
- IAS 19 measurement of plan asset.
2. RMH shares held for client trading activities by FirstRand.
3. Adjustment to reflect earnings impact based on actual RMH shareholding in FirstRand.
4. The once-off hedge break gain realised on the restructuring of the funding facility on 21 August 2014.
ADMINISTRATION
Directors
GT Ferreira (Chairman), HL Bosman (CEO), JP Burger, P Cooper, L Crouse, LL Dippenaar, JW Dreyer, PM Goss, PK Harris, (Ms) A Kekana, P Lagerström, MM Morobe,
KC Shubane, and (Ms) SEN De Bruyn-Sebotsa.
Alternate Directors: JJ Durand and O Phetwe
Secretary and registered office
(Ms) EJ Marais, BCom (Hons), CA(SA)
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 8000
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 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: 11/03/2015 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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