Wrap Text
Summarised audited results announcement and cash dividend declaration for the year ended 30 June 2015
RMB HOLDINGS LIMITED
(RMH)
(Incorporated in the Republic of South Africa)
Registration number: 1987/005115/06
JSE Ordinary share code: RMH ISIN code: ZAE000024501
Summarised audited results announcement and cash dividend declaration for the year ended 30 June 2015
Key highlights
Normalised earnings +15% to 507.0 cents
Dividend +21% to 276.0 cents
Intrinsic value +31% to 7 140.1 cents
RMH at a glance
RMH's sole interest is its 34% investment in separately listed FirstRand Limited (FirstRand), generally regarded as Southern Africa's pre-eminent
financial services group.
The FirstRand group comprises 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
ASHBURTON INVESTMENTS - the investment management business
The FCC franchise represents group-wide functions
RMH was established in 1987 by the founding members GT Ferreira, Laurie Dippenaar and Paul Harris. RMH represents the coming together of
Rand Consolidated Investment and Rand Merchant Bank, then run by Johann Rupert. We are proud to say that our founding members still play
an important role in the decision-making of RMH. Since its listing in 1993, it has provided shareholders with a vehicle to co-invest with the founders of
one of South Africa's most successful financial services groups. RMH remains a founding and influential shareholder of FirstRand and still partners
management in strategic dialogue. The group structure further provides benefits such as BEE shareholding, portfolio optimisation and long-term
focus.
The group 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.
Basis of preparation
The primary results and accompanying commentary are presented on a normalised basis as we believe this most accurately reflects
underlying economic performance. The normalised earnings have been derived from audited, IFRS financial results. A reconciliation of the
adjustments made to derive at normalised earnings is presented in the accompanying schedules.
For the detailed basis of preparation refer below.
Ellen Marais CA (SA) prepared these financial results under the supervision of Herman Bosman LLM CFA.
Operating environment
South African economic growth faced the following external and internal headwinds during the year:
- Commodity prices remained under pressure, mainly due to the strain in the Chinese economy.
- Emerging markets were negatively impacted by the gradual recovery of the US economy. Capital flows continued to slow down
and further currency weakness were being experienced.
- The Eurozone's lacklustre economic recovery provided little support for South African exports.
- Business confidence was negatively impacted by ongoing electricity shortages, weak foreign demand and low prices.
- Household consumption was impacted by higher debt service costs, rising unemployment and moderated levels of income growth; the
oil-led drop in inflation did provide some short-term relief.
The central bank implemented a gradual and moderate hiking cycle, but the economy remains vulnerable to a more aggressive hiking cycle.
In other sub-Saharan countries the experiences were similar, increased currency weakness, increased inflation, higher policy rates and lower
economic growth. Commodity prices are expected to remain low and therefore economic performance will be driven by structural reform.
Overview of results
RMH produced good results for the year ended 30 June 2015, reporting normalised earnings of R7.16 billion (2014: R6.24 billion), an increase of
15%. Normalised earnings per share amounted to 507.0 cents per share (2014: 441.7 cents). FirstRand's brands, FNB, RMB and WesBank all
performed well, demonstrating their leading market positions.
The final dividend of 154.0 cents per share (2014: 127.5 cents) resulted in dividends for the year increasing by 21%.
Sources of income
FirstRand's well-diversified income stream is drawn from the full spectrum of banking services and is predominantly sourced from South Africa.
RMH's interest in FirstRand's normalised earnings is as follows:
For the year ended
30 June
R million 2015 2014 % change
FNB 11 300 9 701 16
RMB 5 888 5 507 7
WesBank 3 309 3 013 10
Other 789 442 78
FIRSTRAND NORMALISED EARNINGS 21 286 18 663 14
Attributable to RMH 7 240 6 325 14
Central costs (82) (88) (7)
RMH NORMALISED EARNINGS 7 158 6 237 15
Underlying intrinsic value
Over the year to 30 June 2015, RMH's market capitalisation increased by 30% and at that date amounted to R93.8 billion or 6 645 cents per
share (June 2014: R72.4 billion). This represented a 7.4% discount (June 2014: 3.3% discount) to RMH's underlying intrinsic value.
as at 30 June
R million 2015 2014 % change
Market value of listed interest (FirstRand) 101 864 77 850 31
Net funding (1 067) (1 128) 5
TOTAL INTRINSIC VALUE 100 797 76 722 31
Intrinsic value per share (cents) 7 140.1 5 434.7 31
At 30 June 2015 net borrowings at the centre amounted to R1.07 billion, of which the core element comprised R1.18 billion in fixed rate
preference shares due for redemption on 6 December 2017, paying dividends at 7.09% per annum, six monthly in arrears.
Final dividend payment
RMH follows a stated practice of returning net dividends (after providing for funding and operational costs incurred at the centre) received by
it in the ordinary course of business to shareholders. RMH's sole source of dividend income is its investment in FirstRand. FirstRand is of the opinion
that a range dividend cover of between 1.8 to 2.2 is appropriate taking into consideration the macroeconomic outlook and uncertainty
around potential regulatory and accounting changes.
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 final dividend.
Having due regard to the final dividend receivable from FirstRand and applying the dividend practice outlined above, the board of RMH has
resolved to declare a gross final dividend of 154.0 cents per share (2014: 127.5 cents). Such final dividend, together with the interim dividend of
122.0 cents, brings the total dividend for the year to 30 June 2015 to 276.0 cents per ordinary share (2014: 227.5 cents). The dividend is covered
1.8 times by normalised earnings per share and represents a year-on-year increase of 21%.
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 in 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 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 net effect of the transactions resulted in a net profit of R427 million in the current year earnings of RMH. This net profit is excluded for
headline and normalised earnings purposes.
Outlook
The year to June 2016 is expected to display more negative characteristics than the year under review:
- GDP will be lower due to both demand weakness and supply side constraints, particularly with regards to power.
- If the US recovery emerges as expected. The SA Reserve Bank may have to increase rates, which will place further pressure on the South
African consumer.
- Unemployment is trending upwards, with retrenchments already announced in the mining and construction sectors.
Economic headwinds continue to increase and growth in the system is expected to be subdued. High levels of indebtedness remain in certain
consumer segments. This means that advances growth will stay at current levels or decline and corporate activity is unlikely to pick up
significantly. Regulatory changes will negatively impact the profitability of certain retail lending and transactional business lines.
RMH is in agreement with FirstRand that its franchises have the appropriate strategies in place to produce resilient operational performances
against this difficult economic backdrop. The strength of FirstRand's balance sheet and the resilience of its diverse income streams should allow
FirstRand to continue to deliver sustainable and superior returns to shareholders.
For and on behalf of the board
GT Ferreira Herman Bosman
Chairman Chief executive officer
Sandton
11 September 2015
Final dividend declaration
Notice is hereby given that a gross final dividend of 154.0 cents per share, payable out of income reserves, was declared on 11 September
2015 in respect of the year ended 30 June 2015.
The dividend will be subject to Dividend Withholding Tax at a rate of 15%, which will result in a net dividend of 130.9 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
comprises 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, 2 October 2015
Shares commence trading "ex dividend" on Monday, 5 October 2015
The record date for the dividend payment will be Friday, 9 October 2015
Dividend payment date Monday, 12 October 2015
No de-materialisation or re-materialisation of share certificates may be done between Monday, 5 October 2015 and Friday, 9 October 2015
(both days inclusive).
By order of the board
Ellen Marais
Company secretary
11 September 2015
Summarised consolidated income statement (audited)
For the year ended
30 June
R million 2015 2014 % change
Share of after-tax profit of associate company 7 388 6 426 15
Fee income - 15
Investment income 434 4
Net fair value gain on financial assets and liabilities 83 18
Net income 7 905 6 463 22
Administration expenses (41) (40) 3
Income from operations 7 864 6 423 22
Finance costs (86) (85) 1
Profit before tax 7 778 6 338 23
Income tax expense (9) (1) >100
PROFIT FOR THE YEAR 7 769 6 337 23
Attributable to:
Equity holders of the company 7 769 6 337 23
PROFIT FOR THE YEAR 7 769 6 337 23
Computation of headline and normalised earnings (audited)
For the year ended
30 June
R million 2015 2014 % change
Earnings attributable to equity holders 7 769 6 337 23
Adjustment for:
RMH's share of adjustment made by associate:
Loss on disposal of investment securities and other investments of a capital
nature - 9
Gain on disposal of available-for-sale assets (100) (24)
Gain on disposal of investments in associates - (21)
Gain on disposal of investment in subsidiaries (75) (6)
Loss on disposal of property and equipment 2 11
Fair value movement on investment properties (11) -
Impairment of goodwill - 45
Impairment of assets in terms of IAS 36 - 53
Other 3 -
Tax effects of adjustments 6 9
Non-controlling interests adjustment 10 5
RMH's own adjustments:
Maturing of FirstRand BEE transaction (427) -
HEADLINE EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 7 177 6 418 12
RMH's share of adjustments made by associates:
IFRS 2 Share-based payment expenses 26 63
Treasury shares 9 34
Total Return Swap adjustment (12) (69)
IAS 19 adjustment (36) (36)
Private equity subsidiary realisations 63 5
Adjustment for:
RMH shares held by associate1 1 (2)
Group treasury shares2 (34) (176)
Other3 (36) -
NORMALISED EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 7 158 6 237 15
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 20 January was taken into account on 1 January 2015 as the impact is immaterial on the
group results.
3 Adjustment reflects reversal of a once-off hedge break gain realised on the restructuring of the funding facility.
Computation of per share information (audited)
For the year ended
30 June
R million 2015 2014 % change
Earnings attributable to equity holders 7 769 6 337 23
Headline earnings attributable to equity holders 7 177 6 418 12
Normalised earnings for the year 7 158 6 237 15
Net asset value 35 174 32 220 9
Number of shares in issue (millions) 1 412 1 412 -
Weighted average number of shares in issue (millions) 1 411 1 411 -
Diluted weighted average number of shares in issue (millions) 1 411 1 411 -
Weighted average number of shares in issue (millions) for normalised earnings 1 412 1 412 -
Earnings per share (cents) 550.5 449.0 23
Diluted earnings per share (cents)1 550.5 444.2 24
Headline earnings per share (cents) 508.5 454.7 12
Diluted headline earnings per share (cents)1 508.5 449.9 13
Normalised earnings per share (cents) 507.0 441.7 15
Diluted normalised earnings per share (cents) 507.0 441.7 15
Net asset value per share (cents) 2 491.1 2 281.9 9
Dividend per share (cents)
Interim 122.0 100.0 22
Final 154.0 127.5 21
TOTAL 276.0 227.5 21
Dividend cover (relative to headline earnings) 1.8 2.0
Dividend cover (relative to normalised earnings) 1.8 1.9
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.
Summarised consolidated statement of comprehensive income (audited)
For the year ended
30 June
R million 2015 2014 % change
Profit for the year 7 769 6 337 23
Other comprehensive income after tax:
Items that may be reclassified to profit or loss
Share of other comprehensive income of associate after tax and non-
controlling interests (144) 254
Items that may not subsequently be reclassified to profit or loss
Share of other comprehensive income of associate after tax and non-
controlling interests (48) (29)
OTHER COMPREHENSIVE INCOME FOR THE YEAR (192) 225
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 7 577 6 562
Total comprehensive income attributable to:
Equity holders of the company 7 577 6 562 15
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 7 577 6 562 15
Summarised consolidated statement of financial position (audited)
As at
30 June
R million 2015 2014
ASSETS
Cash and cash equivalents 16 14
Loans and receivables 1 6
Investment securities 229 178
Derivative financial instruments 36 20
Investment in associate 36 241 33 348
TOTAL ASSETS 36 523 33 566
EQUITY
Share capital and premium 8 815 8 819
Reserves 26 359 23 401
TOTAL EQUITY 35 174 32 220
LIABILITIES
Financial liabilities 1 221 1 272
Derivative financial instruments 46 17
Trade and other payables 60 46
Receiver of revenue 1 -
Long-term liabilities 18 9
Provisions 3 2
TOTAL LIABILITIES 1 349 1 346
TOTAL EQUITY AND LIABILITIES 36 523 33 566
Summarised consolidated statement of cash flows (audited)
For the year ended
30 June
R million 2015 2014
Net cash generated from operating activities 3 661 3 007
Dividends paid (3 522) (2 887)
Net cash outflow in financing activities (137) (118)
Net increase in cash and cash equivalents 2 2
Cash and cash equivalents at the beginning of the year 14 12
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 16 14
Summarised consolidated statement of changes in equity (audited)
Share
capital and Total Total
R million premium reserves equity
Balance as at 1 July 2013 8 822 20 249 29 071
Total comprehensive income for the year - 6 562 6 562
Dividends paid - (2 887) (2 887)
Change in carrying value of associate due to elimination of treasury shares - (21) (21)
Reserve movements relating to associate - (502) (502)
Movement in treasury shares (3) - (3)
BALANCE AS AT 30 JUNE 2014 8 819 23 401 32 220
Balance as at 1 July 2014 8 819 23 401 32 220
Total comprehensive income for the year - 7 577 7 577
Dividends paid - (3 522) (3 522)
Share option expense - IFRS 2 - (1) (1)
Reserve movements relating to associate - (1 097) (1 097)
Movement in treasury shares (4) 1 (3)
BALANCE AS AT 30 JUNE 2015 8 815 26 359 35 174
Basis of preparation of results
The accompanying summarised audited final results for the year ended 30 June 2015 reflect:
- the operations of RMH and its proportionate interest in its associate, FirstRand which has been equity accounted. This does not qualify as a
group under the strict definition of IFRS but as an economic entity. In the announcement, where the term group is used, it actually refers to
the economic entity.
The announcement 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; and
- Financial Reporting Pronouncements as issued by Financial Reporting Standards Council;and
- JSE Listing Requirements.
This entire announcement is not audited but is extracted from audited group financial statements. The independent auditor's report does not necessarily
encompass all the information contained in this announcement. Unless the information is specifically stated as audited, it should be assumed that it is
unaudited. The auditor has issued a separate opinion on the announcement in terms of ISA 810.
The auditor expressed an unmodified opinion dated 11 September 2015 on the group financial statements from which this announcement was derived.
A copy of the auditor's report on the group financial statements and their ISA 810 report are available at RMH's registered office.
The directors take full responsibility for the preparation of this announcement and for correctly extracting the financial information for
inclusion in the announcement. The forward looking information provided above is not an earnings forecast and has not been reviewed and
reported on by the company’s external auditor.
Accounting policies
The group financial statements, from which this announcement was derived, are prepared in accordance with the going concern principle under the
historical cost basis as modified by the fair value accounting of certain assets and liabilities where required or permitted by IFRS.
These results incorporate accounting policies that are consistent with those used in preparing the financial results for the year ended 30 June
2015.
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 year:
- 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 Amendments
(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 adjustments made by its associate, FirstRand, which have a financial impact:
- Equity settled share-based payments and treasury shares; 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 the earnings impact based on the actual RMH shareholding in FirstRand.
4. The once-off hedge break gain realised on the restructuring of the preference share facility on 21 August 2014.
Directors:
GT Ferreira (Chairman), Herman Bosman (CEO), Johan Burger, Peter Cooper, Leon Crouse, Sonja De Bruyn-Sebotsa, Laurie Dippenaar,
Jan Dreyer, Pat Goss, Paul Harris, Albertina Kekana, Per Lagerström, Murphy Morobe and Khehla Shubane
Alternate directors: Jannie Durand and Obakeng Phetwe
Secretary and registered office:
Ellen 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 (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
Date: 11/09/2015 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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