Wrap Text
Summarised unaudited results announcement and cash dividend declaration for the six months ended 31 December 2015
RAND MERCHANT INVESTMENT HOLDINGS LIMITED
(RMI)
Registration number: 2010/005770/06
JSE ordinary share code: RMI
ISIN code: ZAE000210688
Summarised unaudited interim results announcement and cash dividend declaration for the six months ended 31 December 2015
Key highlights
Normalised earnings +4% to 109.2 cents
Ordinary dividend +2% to 53.0 cents
Overview of results
Introduction
Rand Merchant Investment Holdings Limited (RMI) (formerly Rand Merchant Insurance Holdings Limited) is an investment holding company with
an investment team of experienced, alternative thinking, financial services specialists who actively partner smart and industry-changing people
by being a shareholder of influence.
RMI's investments include Discovery Limited (Discovery), MMI Holdings Limited (MMI), OUTsurance Holdings Limited (OUTsurance), RMB-SI
Investments Proprietary Limited (RMB Structured Insurance), RMI Investment Managers Group Proprietary Limited (RMI Investment Managers)
and Merchant Capital Advisory Services Proprietary Limited (Merchant Capital).
Economic environment
The economic environment for the six months under review remained challenging and was characterised by:
- a 2% decrease in the local equity market;
- lower commodity prices due to slower growth in China;
- the first US interest rate hike in almost a decade, coupled with further easing measures in Europe and Japan. This resulted in a strong US dollar
and negative consequences for currencies of commodity exporters with large current account deficits like South Africa;
- the export benefit of a weaker Rand which was curbed by strained global trade activity and rising input costs;
- pressure on disposable income due to increased interest rates, rising inflation and moderating levels of income growth;
- the negative impact of the drought in South Africa on GDP growth; and
- reduced government spending to protect the country's sovereign credit rating from the elevated risk of a downgrade.
Real growth in South Africa is likely to continue underperforming in the foreseeable future. The economy also remains vulnerable to a more
aggressive rate hike approach from the central bank if capital inflows slow down further or reverse.
Summary of results
As indicated to the market during the group's year-end results in September 2015, the 2016 financial year was expected to be challenging. In
this difficult economic and business environment, as well as the impact of continued investment in strategic growth initiatives across the RMI
portfolio, the group delivered a 4% increase in normalised earnings for the six months ended 31 December 2015.
Discovery's strong growth in new business (up 27% to R8.4 billion) translated into 7% growth in normalised earnings due to a substantial
investment in new initiatives. These included banking, Ping An Health, Discovery Partner Markets (international markets) and the incorporation of
the Bankmed medical scheme. The costs associated with moving VitalityHealth in the UK onto its own platform were also higher than expected.
MMI recorded a 9% decrease in normalised earnings, mainly as a result of lower underwriting profits across the group and continued
investments into strategic initiatives in line with the growth strategy. New business annualised premium income increased by 11% to R3.5 billion.
The group remains well capitalised.
Normalised earnings from OUTsurance increased by a better than expected 25%. This strong result was driven by a significant improvement in
Youi Australia's profitability, coupled with a consistent improvement in the results of the Southern African operations. Both businesses benefited
from benign weather conditions and a further reduction in the cost to income ratio.
RMB Structured Insurance's normalised earnings decreased by 11%, mainly due to the increased capacity created in the credit insurance
division.
RMI Investment Managers made further progress in the build out of its affiliate asset management business, the creation of an asset
management operational platform to house its fixed income team, the recruitment of a distribution team and the appointment of a chief
executive for its broad-based black economic empowerment joint venture with Royal Bafokeng Holdings (RBH).The operational performance of
this business remains on track and the boutiques the business has invested in since December 2015 have all performed in line with expectations.
Merchant Capital, in which the group purchased a 25.1% shareholding in the period under review, continued its strong growth trajectory and
positive lending experience.
The total normalised earnings of RMI's investee companies for the period under review are listed in the table below:
Six months
ended
31 December Year ended
30 June
2015 2014 2015
R million Unaudited Unaudited % change Audited
Discovery 2 124 1 981 7 4 027
MMI 1 679 1 852 (9) 3 836
OUTsurance 923 739 25 1 388
RMB Structured Insurance 16 18 (11) 82
Other1 (13) - >(100) -
1 "Other" includes RMI Investment Managers and Merchant Capital.
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 further down in this announcement.
The consolidated group normalised earnings for the six months ended 31 December 2015 amounted to R1.6 billion, an increase of 4% on the
comparative period. The table below provides a breakdown of this number:
Six months
ended Year ended
31 December
30 June
2015 2014 2015
R million Unaudited Unaudited % change Audited
Normalised earnings from:
Discovery 533 496 7 1 012
MMI 420 461 (9) 956
OUTsurance 773 620 25 1 166
RMB Structured Insurance 13 15 (13) 64
Other1 (13) - >(100) -
1 726 1 592 8 3 198
Funding and holding company costs (103) (26) >(100) (38)
NORMALISED EARNINGS 1 623 1 566 4 3 160
NORMALISED EARNINGS PER SHARE (CENTS) 109.2 105.4 4 212.7
1 "Other" includes RMI Investment Managers and Merchant Capital.
The funding and holding company costs include the funding and operational expenses carried at the RMI corporate centre. This includes the
investment in AlphaCode. Funding costs increased due to the additional R1.25 billion in cumulative, redeemable preference shares issued to
fund the additional shares taken up in Discovery as part of its rights issue offer in March 2015.
Value of investments
During the 2015 calendar year, RMI's share price decreased by 5%, compared to a 12% decrease in the JSE non-life insurance index and a 4%
increase in the JSE life insurance index. However, RMI has delivered total annual compounded return to shareholders of 31.4% since its listing in
March 2011.
The individual investment performances during the 2015 calendar year are outlined below:
- Discovery's share price increased by 19%. This, together with RMI's additional investment of R1.25 billion in Discovery shares as part of the rights
issue offer, resulted in a total increase of 31% in the market value of RMI's investment in Discovery;
- MMI's share price decreased by 27%, with a dividend yield of 6.8% (based on an assumed share price of R23). RMI acquired an additional 8.3
million MMI shares in the 2015 calendar year; and
- on a "look-through" basis, based on share prices as at 31 December 2015, the value attributed to RMI's unlisted investments decreased by 11%
to R28.6 billion. These unlisted investments include OUTsurance (83.4% held) and RMB Structured Insurance (75.5% held), as well as new
investments made during the period under review in RMI Investment Managers (100% held) and Merchant Capital (25.1% held).
The values of RMI's investments are summarised in the table below:
As at As at
31 December 30 June
2015 2014 2015
R million Unaudited Unaudited % change Unaudited
Market value of interest in:
- Discovery 21 531 16 493 31 20 481
- MMI 8 823 11 782 (25) 11 849
Market value of listed investments 30 354 28 275 7 32 330
Implied value of unlisted investments 28 616 32 305 (11) 31 875
Gross value of portfolio 58 970 60 580 (3) 64 205
Net (liabilities)/assets of the holding company (1 459) 125 >(100) (1 108)
RMI MARKET CAPITALISATION 57 511 60 705 (5) 63 097
RMI CLOSING SHARE PRICE (CENTS) 3 871 4 086 (5) 4 247
The movement in the net liabilities of the holding company was mainly due to the raising of the R1.25 billion additional debt, the acquisition of
additional MMI shares, the capitalisation of RMI Investment Managers and the acquisition of a 25.1% stake in Merchant Capital.
Interim dividend payment
The policy of paying out all dividends received from underlying investments after servicing any funding commitments at holding company level
and considering RMI's debt capacity and investment pipeline, remains in place.
The board is of the opinion that RMI is adequately capitalised and that the company will be able to meet its obligations in the foreseeable
future after payment of the interim dividend declared below.
The board resolved to declare an interim dividend of 53.0 cents (2014: 52.0 cents) per ordinary share. The dividend is covered 2.1 times (2014:
2.0 times) by the normalised earnings of 109.2 cents (105.4 cents) per share.
Shareholders are referred to the dividend declaration forming part of this announcement regarding the applicability of Dividend Withholding
Tax to the ordinary dividend.
Strategy and outlook
Existing portfolio
The South African economy is expected to continue to be impacted by muted GDP growth and disposable income, a rising inflation and
interest rate cycle and fluctuating capital markets. The increasingly complex regulatory environment and further pressure on the South African
consumer are expected to impact on local growth in new business volumes and profit at RMI's existing investments.
Similar to the South African market, the international markets in which RMI's portfolio companies operate will also face growth and stability
issues. However, given the low base of market shares in these global markets, growth will be more dependent on product traction than the
general economic conditions.
Against this demanding backdrop, RMI believes that its investee companies have appropriate strategies in place to produce resilient
operational performances.
Discovery's core operating performance and product and market diversification, in addition to the substantial investment in new initiatives,
position it positively for long-term growth.
As part of the implementation of its renewed client-centric model, MMI has identified a number of areas where further efficiencies can be
extracted, while focusing on restoring positive, quality topline growth. MMI is targeting a further reduction in annual expenses of R750 million by
the 2019 financial year.
In terms of a private funding transaction, a small group of senior MMI executives in their individual capacities, acquired MMI shares and
European Call Options on MMI shares. This funding mechanism involves RMI providing five-year funding to enable these executives to acquire a
significant direct shareholding in and exposure to MMI shares. This strengthens the alignment of the interests of management and shareholders
and confirms the long-term commitment of the executives to the implementation of the MMI strategy. RMI has previously provided similar
financing structures to the management teams of its portfolio companies and will continue to follow this strategy as and when warranted.
OUTsurance estimates that the weaker Rand is expected to drive premium inflation in response to higher vehicle repair and property
replacement costs. These factors are expected to negatively impact growth in the core South African personal lines business. The Australasian
operation is expected to continue to deliver strong growth whilst constantly enhancing the client proposition and service. The operating
environment of Youi Australia is expected to be largely unchanged during the second half of the financial year. As Youi continues to find scale,
further efficiency and margin expansion should be realised.
RMB Structured Insurance continues to focus on a diversified business strategy. As management has communicated to the market before, the
complex regulatory environment requires a business of scale to absorb the investment in related resources.
RMI Investment Managers successfully concluded the acquisition of minority equity stakes in four affiliates during the six months under review.
These affiliates are Coreshares, a smart beta and passive ETF and index fund manager; Northstar, an active equity and multi-asset manager;
Perpetua, a value equity and multi-asset manager; and Tantalum, a multi-strategy hedge fund and absolute return focused active asset
manager. RMI Specialist Managers received FSB approval and the fixed income team intends to start managing funds in April 2016.
RMI Investment Managers also acquired a 30% equity stake in Sentio Capital in February 2016. Sentio Capital is an asset manager with R8 billion
of assets under management, a strong investment track record in active equities and absolute return funds, complementing the product range
of our existing affiliates. This brings the total number of affiliates to six, including RMI Specialist Managers. Collectively, RMI Investment Managers'
affiliates manage in excess of R25 billion.
To support the group's affiliates in their asset raising capabilities, RMI Investment Managers appointed Alida de Swardt, RMB's head of financial
institutions in their Global Markets division, as head of distribution and marketing, and a retail distribution team headed by Kevin Hinton from
MMI, where he was head of specialist investment distribution. This distribution team is actively seeking growth opportunities for affiliates. Andre
Rousseau from Deloitte Consulting was appointed as chief operating officer to build an asset management operating platform, RMI Specialist
Managers, and to support the operational capabilities of the affiliate managers.
RMI Investment Managers also reached agreement with RBH, RMI's broad-based black economic empowerment shareholder, to establish a
company that will invest in black asset management businesses and recruit black investment professionals. This business will aim to play a
significant role in the transformation of the South African asset management sector. RBH and management of the new entity will be the
majority shareholders, with RMI Investment Managers the minority shareholder. RMI Investment Managers and RBH are pleased to announce
the appointment of Kabelo Rikhotso as the chief executive of this business effective from March 2016. Kabelo comes from Investment Solutions
where he was head of portfolio management.
While Merchant Capital is expected to continue to grow rapidly, the focus remains on strengthening its foundations through continued
refinement of its credit underwriting skills, implementing relevant IT solutions and broadening its distribution. As the market opportunity within the
SME sector remains large and attractive, Merchant Capital will continue to explore opportunities to further enhance its value proposition to
customers and build on its reputation as a market leader in the SME financial services sector.
New investments
As previously outlined to the market, in addition to its active involvement in the existing portfolio, RMI plans to expand its investment portfolio
through opportunities across a wide spectrum of scale and life cycles of financial services businesses.
Traditional financial services
RMI is evaluating the potential of adding a significant "traditional" financial services business to the existing portfolio. The investment team has
evaluated a number of local and international opportunities. However, no imminent activity is expected.
Next-generation financial services
RMI recognises that the core business of its underlying portfolio companies is now, more than ever, being influenced by new, disruptive ventures
given the rise of shaping forces such as technology, social media and the millennial generation. As a result, RMI is actively seeking to fund and
scale new and disruptive business models.
To facilitate this, RMI launched its next-generation business platform, AlphaCode, in September 2015 to assist in identifying and enabling
investments that aim to change the landscape of the financial services industry. AlphaCode is a development hub, supported by a physical
workspace and virtual platform, which seeks to create a next-generation financial services ecosystem by bringing together entrepreneurs,
intrapreneurs, industry experts and thought leaders to connect, share knowledge and shape the industry.
AlphaCode currently has 45 businesses as members. These businesses operate across the financial services spectrum, with many exploiting
leading-edge technology to transform the delivery of financial services.
AlphaCode has facilitated numerous opportunities to support these businesses and assist them along their maturity curves to allow for potential
future investment. This has already resulted in a strong pipeline of potential investment opportunities in the next-generation financial services
arena.
For and on behalf of the board.
GT Ferreira HL Bosman
Chairman Chief executive
Sandton
7 March 2016
Cash dividend declaration
Interim cash dividend
Notice is hereby given that a gross interim dividend of 53.0 cents per ordinary share payable out of income reserves was declared on 7 March
2016 in respect of the six months ended 31 December 2015.
The dividend will be subject to Dividend Withholding Tax at a rate of 15%, which will result in a net dividend of 45.05 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, 648 001
cumulative, redeemable par value preference shares and 1 250 000 cumulative, redeemable no par value preference shares.
Shareholders' attention is drawn to the following important dates:
- Last day to trade in order to participate in the dividend Wednesday, 23 March 2016
- Shares commence trading "ex dividend" on Thursday, 24 March 2016
- The record date for the dividend payment will be Friday, 1 April 2016
- Dividend payment date Monday, 4 April 2016
No de-materialisation or re-materialisation of share certificates may be done between Thursday, 24 March 2016 and Friday, 1 April 2016 (both
days inclusive).
By order of the board.
JS Human
Company secretary
Sandton
7 March 2016
Review of investment performance
Discovery
Discovery services the healthcare funding and insurance markets in South Africa, the United Kingdom, China, Singapore, Australia and the
United States. It is a pre-eminent developer of integrated financial services products and operates under the Discovery Health, Discovery Life,
Discovery Insure, Discovery Invest, Discovery Vitality, VitalityHealth, VitalityLife and Ping An Health brand names.
In November 2014, Discovery acquired the remaining 25% shareholdings in Prudential Health Holdings and The Vitality Group LLC. Both of these
acquisitions were concluded based on put options granted to the sellers. Since 2011, Discovery carried the present value of the estimated
purchase price as a financial liability. The difference between the carrying value of this financial liability and the purchase price paid by
Discovery resulted in a fair value profit of R1 661 million included in its earnings and headline earnings attributable to ordinary shareholders for
the six months ended 31 December 2014, but it was excluded from normalised headline earnings. This resulted in Discovery's earnings and
headline earnings attributable to ordinary shareholders decreasing by 49% for the six months under review.
Discovery's financial highlights include:
- New business grew by 27% to R8.4 billion;
- Normalised headline earnings increased by 7% to R2.1 billion;
- Gross inflows under management increased by 20% to R21.9 billion;
- Embedded value grew by 24% to R56.5 billion; and
- The dividend for the six months ended 31 December 2015 remained unchanged at 85.5 cents per share.
RMI included R533 million of Discovery's earnings in its normalised earnings (2014: R496 million).
For an in-depth review of Discovery's performance, RMI's shareholders are referred to www.discovery.co.za.
MMI Holdings
MMI is a South African financial services group that provides life insurance, employee benefits, investment and savings, healthcare solutions and
short-term insurance to individual clients, small and medium businesses, large companies, organisations and public enterprises in South Africa,
the rest of Africa and selected international countries. It covers the lower, middle and upper income markets, principally under the Momentum
and Metropolitan brand names.
MMI's financial performance for the six months under review is summarised below:
- New business premiums increased by 14% to R27.3 billion;
- The value of new business decreased by 14% to R361 million, with the new business margin reducing to 1.3%. It should be noted that the value
of new business would have increased by 4% had the discount rate remained unchanged;
- The embedded value was maintained at R40 billion, reflecting an annualised return on embedded value of 7%;
- Earnings and headline earnings attributable to ordinary shareholders increased by 14% and 5% respectively;
- Diluted core headline earnings decreased by 9% to R1.7 billion, mainly as a result of lower underwriting profit across the group;
- Overall earnings growth was restricted by investments into new initiatives that are being pursued in line with the group's strategy of growth,
client-centricity and excellence; and
- The dividend for the six months increased by 3% to 65 cents per share.
MMI reported a strong capital buffer of R4 billion as at 31 December 2015, which allows for capital requirements, strategic growth initiatives and
the interim dividend. MMI is satisfied that its capital level is appropriate taking into account the many growth initiatives, the change to a new
capital regime (Solvency Assessment and Management (SAM)) and the difficult economic outlook.
RMI included R420 million of MMI's earnings in its normalised earnings (2014: R461 million).
For an in-depth review of MMI's performance, RMI's shareholders are referred to www.mmiholdings.co.za.
OUTsurance
OUTsurance provides short and long-term insurance products in South Africa, and short-term insurance products in Australia, New Zealand and
Namibia, with a client-centric ethos of providing value for money insurance solutions backed by awesome client service.
Youi New Zealand was launched in August 2014 as an extension of Youi's Australian operation. It provides personal lines insurance cover directly
to the New Zealand public.
The OUTsurance group delivered a pleasing operational and financial performance for the six months under review:
- Group normalised earnings increased by 25% to R923 million, driven mainly by a significant improvement in Youi's profitability, coupled with a
consistent improvement in the South African results;
- Gross premium revenue grew by 18% to R7.2 billion, of which the Australasian operations contributed 49%;
- The OUTsurance group recorded growth in annualised new business volumes of 9% to R2.1 billion;
- The claims ratio decreased from 54.4% to 52.9% as a result of the improved performance of Youi Australia;
- The cost to income ratio decreased from 28.1% to 26.9% in line with efficiency gains across most operations, most notably Youi Australia; and
- The total dividend for the six months increased by 14% to 16.5 cents per share.
OUTsurance's South African short-term insurance operations recorded a claims ratio of 51.5%, which is in line with the comparative period. The
claims ratio benefited from the relatively lower weather-related claims frequencies as a result of the local drought conditions and continues to
track below the long-term target. The cost to income ratio improved from 19.4% to 18.4% as a result of reduced marketing expenditure and a
growth rate in operational expenditure which was below premium growth.
OUTsurance Life generated normalised earnings of R24 million for the six months under review, compared to R11 million in the comparative
period. Premium income increased by 27%. The embedded value increased by 22% since 30 June 2015 to R668 million.
Youi Australia generated normalised earnings of R201 million for the six months under review, compared to R66 million in the comparative
period. Youi's profitability benefited from reduced weather-related claims and a reduction in the cost to income ratio. Gross written premiums
increased by 26% to R3.4 billion
The performance of Youi New Zealand to date is satisfactory and in line with expectations. The loss for the six months to 31 December 2015
amounted to R70 million, with gross written premiums of R140 million.
Based on the current calibration and interpretation of the standard formula, the introduction of the new SAM regulatory regime with effect
from 1 January 2017 is expected to improve the capital adequacy ratios of OUTsurance and OUTsurance Life.
RMI included R773 million of OUTsurance's earnings in its normalised earnings (2014: R620million).
For an in-depth review of OUTsurance's performance, RMI's shareholders are referred to www.outsurance.co.za.
RMB Structured Insurance
RMB Structured Insurance holds both short-term and life insurance licenses. It creates bespoke insurance and financial risk solutions for South
Africa's large corporations by using sophisticated risk techniques and innovative financial structures. In addition, it partly owns a portfolio of
underwriting management agencies.
Normalised earnings for the six months to 31 December 2015 amounted to R16 million (2014: R18 million). RMI included R13 million of RMB -
Structured Insurance's earnings in its normalised earnings (2014: R15 million).
Summarised results
Basis of preparation of results
These summarised unaudited financial results for the six months ended 31 December 2015 have been prepared in accordance with:
- International Financial Reporting Standards (IFRS), including IAS 34: Interim financial reporting;
- the requirements of the Companies Act, 71 of 2008, as amended;
- the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee; and
- the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council.
The accounting policies applied are consistent with those applied in the previous financial period, except for changes required by the
mandatory adoption of new and revised IFRS. None of the new accounting standards becoming effective in the current financial period had a
significant impact on the group's results.
Schalk Human (MCom(Acc), CA(SA)) prepared these consolidated financial results under the supervision of Herman Bosman (LLM, CFA). The
board of directors takes full responsibility for the preparation of this announcement and for correctly extracting the financial information for
inclusion in the announcement.
The entire announcement is not audited. The forward-looking information in this announcement is not an earnings forecast and has not been
reviewed and reported on by the company's external auditor.
Effective interest
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 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.
As at 31 December 2015, the effective interest held by RMI can be compared to the actual interest in the statutory issued share capital of the
companies as follows:
31 December 31 December
2015 2014
Unaudited Effective Actual Effective Actual
Discovery 25.1% 25.0% 25.8% 25.0%
MMI 25.8% 25.5% 25.2% 25.0%
OUTsurance 84.2% 83.4% 84.2% 83.4%
RMB Structured Insurance 78.1% 75.5% 78.3% 76.4%
RMI Investment Managers 100.0% 100.0% - -
Merchant Capital 25.1% 25.1% - -
Summarised consolidated income statement
Six months
ended
31 December Year ended
30 June
2015 2014 2015
R million Unaudited Unaudited % change Audited
Earned premiums net of reinsurance 6 892 5 721 20 11 738
Fee and commission income 171 121 41 312
Investment income 320 272 18 563
Net fair value gains on financial assets 27 43 (37) 128
Income 7 410 6 157 20 12 741
Net claims paid (3 468) (2 899) 20 (6 109)
Fair value adjustment to investment contracts and insurance contract
provisions (278) (201) 38 (438)
Fair value adjustment to financial liabilities (100) (89) 12 (201)
Acquisition, marketing and administration expenses (2 202) (1 857) 19 (3 840)
Profit before finance costs, share of after tax results of associates and taxation 1 362 1 111 23 2 153
Net finance costs (102) (39) >100 (162)
Share of after tax results of associates 887 1 213 (27) 2 146
Profit before taxation 2 147 2 285 (6) 4 137
Taxation (439) (346) 27 (624)
PROFIT FOR THE PERIOD 1 708 1 939 (12) 3 513
Attributable to:
Equity holders of RMI 1 550 1 819 (15) 3 292
Non-controlling interests 158 120 32 221
PROFIT FOR THE PERIOD 1 708 1 939 (12) 3 513
Computation of headline earnings
Six months
ended
31 December Year ended
30 June
2015 2014 2015
R million Unaudited Unaudited % change Audited
Earnings attributable to equity holders 1 550 1 819 (15) 3 292
Adjustment for:
Profit on sale of subsidiary (29) - -
(Profit)/loss on dilution of shareholding (17) 3 (22)
Realised (profit)/loss on sale of available-for-sale financial assets (1) 2 (40)
Profit on sale of property and equipment (1) - -
Profit on sale of associate - (11) (11)
Intangible asset impairments - 1 4
Impairment of available-for-sale financial assets - - 35
HEADLINE EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 1 502 1 814 (17) 3 258
Computation of normalised earnings
Six months
ended
31 December Year ended
30 June
2015 2014 2015
R million Unaudited Unaudited % change Audited
Headline earnings attributable to equity holders 1 502 1 814 (17) 3 258
RMI's share of normalised adjustments made by associates: 146 (255) (87)
Amortisation of intangible assets relating to business combinations 116 103 218
Net realised and fair value (gains)/losses on shareholders' assets (67) 18 2
Rebranding and business acquisition expenses 50 - 105
Basis and other changes and investment variances 17 6 37
Non-recurring items 15 29 35
Additional 54.99% share of DiscoveryCard profits 15 - -
Fair value adjustment to puttable non-controlling interest financial liability - (416) (415)
Finance costs raised on puttable non-controlling interest financial liability - 16 16
Non-controlling interest allocation if no put options - (11) (11)
Deferred tax raised on assessed losses - - (74)
Group treasury shares (25) 7 (11)
NORMALISED EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 1 623 1 566 4 3 160
Computation of earnings per share
Six months
ended
31 December Year ended
30 June
2015 2014 2015
R million Unaudited Unaudited % change Audited
Earnings attributable to equity holders 1 550 1 819 (15) 3 292
Headline earnings attributable to equity holders 1 502 1 814 (17) 3 258
Normalised earnings attributable to equity holders 1 623 1 566 4 3 160
Number of shares in issue (millions) 1 486 1 486 - 1 486
Weighted average number of shares in issue (millions) 1 482 1 482 - 1 483
Earnings per share (cents) 104.6 122.7 (15) 222.0
Diluted earnings per share (cents) 104.1 121.5 (14) 220.0
Headline earnings per share (cents) 101.4 122.4 (17) 219.8
Diluted headline earnings per share (cents) 101.0 121.2 (17) 217.8
Normalised earnings per share (cents) 109.2 105.4 4 212.7
Diluted normalised earnings per share (cents) 108.9 104.8 4 211.1
Dividend per share (cents)
Interim dividend 53.0 52.0 2 52.0
Final dividend - - - 64.0
TOTAL DIVIDEND 53.0 52.0 2 116.0
Summarised consolidated statement of comprehensive income
Six months
ended
31 December Year ended
30 June
2015 2014 2015
R million Unaudited Unaudited % change Audited
Profit for the period 1 708 1 939 (12) 3 513
Other comprehensive income for the period
Items that may subsequently be reclassified to income
Currency translation differences 428 (97) >100 (142)
Fair value movement on available-for-sale financial assets (27) (54) (50) 17
Deferred taxation relating to fair value movement on available-for-sale
financial assets 5 10 (50) (3)
Share of other comprehensive income of associates 592 53 >100 152
Items that may subsequently be reclassified to income, after taxation 583 39 >100 136
Items that will not be reclassified to income, after taxation 9 14 (36) 16
OTHER COMPREHENSIVE INCOME FOR THE PERIOD 998 (88) >100 24
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 2 706 1 851 46 3 537
Total comprehensive income attributable to:
Equity holders of RMI 2 483 1 753 42 3 336
Non-controlling interests 223 98 >100 201
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 2 706 1 851 46 3 537
Summarised consolidated statement of financial position
As at 31 December As at
30 June
2015 2014 2015
R million Unaudited Unaudited Audited
ASSETS
Property and equipment 726 524 546
Goodwill and other intangible assets 42 81 68
Investments in associates 15 287 12 155 14 063
Financial assets 8 101 7 211 8 288
Loans and receivables including insurance receivables 3 051 2 746 2 318
Deferred acquisition cost 422 381 362
Reinsurance contracts 614 542 832
Taxation 5 3 3
Deferred taxation 135 177 216
Cash and cash equivalents 6 962 5 112 5 633
TOTAL ASSETS 35 345 28 932 32 329
EQUITY
Share capital and premium 13 539 13 538 13 526
Reserves 5 108 2 776 3 579
Capital and reserves attributable to equity holders of the company 18 647 16 314 17 105
Non-controlling interests 1 119 942 978
TOTAL EQUITY 19 766 17 256 18 083
LIABILITIES
Insurance contracts 8 436 6 469 7 469
Share-based payment liability 170 131 182
Financial liabilities 5 250 3 719 5 140
Payables and provisions 1 597 1 114 1 329
Deferred taxation 71 203 80
Taxation 55 40 46
TOTAL LIABILITIES 15 579 11 676 14 246
TOTAL EQUITY AND LIABILITIES 35 345 28 932 32 329
Statement of changes in equity
Share Transactions
Unaudited capital Equity with non- Non-
and accounted controlling Other Retained controlling Total
R million premium reserves interests reserves earnings interests equity
Balance as at 1 July 2014 13 592 2 094 (2 076) 343 1 525 899 16 377
Total comprehensive income for the period - 53 - (119) 1 819 98 1 851
Dividends paid - - - - (921) (96) (1 017)
Income of associates retained - 560 - - (560) - -
Puttable non-controlling interests - (5) - - - - (5)
Movement in treasury shares (54) 6 - - - - (48)
Transactions with non-controlling interests - - 65 (55) 45 41 96
Share-based payment reserve - - - 2 - - 2
BALANCE AS AT 31 DECEMBER 2014 13 538 2 708 (2 011) 171 1 908 942 17 256
Balance as at 1 July 2015 13 526 3 368 (2 017) 182 2 046 978 18 083
Total comprehensive income for the period - 592 - 341 1 550 223 2 706
Dividends paid - - - - (951) (99) (1 050)
Income of associates retained - 367 - - (367) - -
Movement in treasury shares 13 5 - - - - 18
Transactions with non-controlling interests - (19) 7 - - 4 (8)
Issue of share capital to non-controlling interests by subsidiaries - - - - - 12 12
Share-based payment reserve - - - 6 (2) 1 5
BALANCE AS AT 31 DECEMBER 2015 13 539 4 313 (2 010) 529 2 276 1 119 19 766
Summarised consolidated statement of cash flows
Six months
ended
31 December Year ended
30 June
2015 2014 2015
R million Unaudited Unaudited Audited
Cash available from operating activities 2 174 1 399 4 505
Dividends paid (951) (921) (1 694)
Investment activities (285) (13) (2 703)
Financing activities (196) 63 981
Net increase in cash and cash equivalents 742 528 1 089
Unrealised foreign currency translation adjustments 587 (141) (181)
Cash and cash equivalents at the beginning of the period 5 633 4 725 4 725
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 6 962 5 112 5 633
Segmental report
The segmental analysis is based on the management accounts prepared for the group.
RMB
Unaudited Structured RMI
R million Discovery MMI OUTsurance Insurance Other1 group
Six months ended 31 December 2015
Operating profit/(loss) - - 1 352 54 (44) 1 362
Finance costs - - - (35) (67) (102)
Share of after tax results of associates 476 397 6 8 - 887
Profit/(loss) before taxation 476 397 1 358 27 (111) 2 147
Taxation - - (425) (11) (3) (439)
PROFIT/(LOSS) FOR THE PERIOD 476 397 933 16 (114) 1 708
NORMALISED EARNINGS 533 420 923 16 (269) 1 623
Assets - - 13 834 5 576 606 20 016
Associates 8 701 6 423 30 57 76 15 287
Intangible assets - - 39 1 2 42
TOTAL ASSETS 8 701 6 423 13 903 5 634 684 35 345
TOTAL LIABILITIES - - 8 404 5 136 2 039 15 579
Six months ended 31 December 2014
Operating profit - - 1 057 40 14 1 111
Finance costs - - - (7) (32) (39)
Share of after tax results of associates 901 341 9 (1) (37) 1 213
Profit/(loss) before taxation 901 341 1 066 32 (55) 2 285
Taxation - - (327) (14) (5) (346)
PROFIT/(LOSS) FOR THE PERIOD 901 341 739 18 (60) 1 939
NORMALISED EARNINGS 496 461 739 18 (148) 1 566
Assets - - 10 603 5 234 859 16 696
Associates 6 113 5 961 26 55 - 12 155
Intangible assets - - 78 1 2 81
TOTAL ASSETS 6 113 5 961 10 707 5 290 861 28 932
TOTAL LIABILITIES - - 6 098 4 837 741 11 676
1 "Other" includes RMI Holdings Limited, RMI Investment Managers, Merchant Capital and consolidation entries.
Geographical segments
Unaudited South New
R million Africa Australia Zealand UK Total
Six months ended 31 December 2015
Profit/(loss) before taxation 1 038 292 (70) - 1 260
Share of after tax results of associates 870 - - 17 887
Profit/(loss) before taxation 1 908 292 (70) 17 2 147
Taxation (348) (91) - - (439)
PROFIT/(LOSS) FOR THE PERIOD 1 560 201 (70) 17 1 708
TOTAL ASSETS 26 540 8 038 767 - 35 345
TOTAL LIABILITIES 9 099 6 119 361 - 15 579
Six months ended 31 December 2014
Profit/(loss) before taxation 1 039 94 (61) - 1 072
Share of after tax results of associates 1 132 - - 81 1 213
Profit/(loss) before taxation 2 171 94 (61) 81 2 285
Taxation (318) (28) - - (346)
PROFIT/(LOSS) FOR THE PERIOD 1 853 66 (61) 81 1 939
TOTAL ASSETS 22 998 5 365 569 - 28 932
TOTAL LIABILITIES 7 546 4 062 68 - 11 676
Financial instruments measured at fair value
The group's activities expose it to a variety of financial risks. The interim results announcement does not include all financial risk management
information and disclosures required in the annual financial statements and should be read in conjunction with the group's annual integrated
report for the year ended 30 June 2015.
The table below analyses financial instruments carried at fair value by level in the fair value hierarchy. The different levels are based on the
extent that quoted prices are used in the calculation of the fair value of the financial instruments. These levels are defined as follows:
Level 1 - fair value is based on quoted market prices (unadjusted) in active markets for identical instruments as measured on the reporting date.
Level 2 - fair value is determined from inputs other than quoted prices that are observable for the asset or liability, either directly (for example
prices) or indirectly (for example derived from prices).
Level 3 - fair value is determined from inputs for the asset or liability that are not based on observable market data.
Unaudited Total
carrying
R million Level 1 Level 2 Level 3 amount
31 December 2015
Financial assets
Equity securities
- available-for-sale 723 - - 723
- at fair value through profit or loss 2 072 26 - 2 098
Debt securities
- available-for-sale - 651 - 651
- at fair value through profit or loss 943 3 100 369 4 412
Derivative asset - 24 - 24
TOTAL FINANCIAL ASSETS RECOGNISED AT FAIR VALUE 3 738 3 801 369 7 908
Financial liabilities
Convertible debentures - 15 - 15
Financial liabilities at fair value through profit or loss - 29 100 129
Derivative liability - 14 - 14
Investment contracts - 1 490 - 1 490
TOTAL FINANCIAL LIABILITIES RECOGNISED AT FAIR VALUE - 1 548 100 1 648
Unaudited Six months
ended
31 December
R million 2015 2014
Reconciliation of movement in level 3 assets
Balance at the beginning of the period 386 415
Investment income accrued 16 17
Dividends received from the OUTsurance Investment Trust (33) (32)
BALANCE AT THE END OF THE PERIOD 369 400
Reconciliation of movement in level 3 liabilities
Balance at the beginning of the period 107 105
Preference dividend accrued 100 89
Preference dividend paid (107) (105)
BALANCE AT THE END OF THE PERIOD 100 89
Unaudited Total
carrying
R million Level 1 Level 2 Level 3 amount
31 December 2014
Financial assets
Equity securities
- available-for-sale 684 - - 684
- at fair value through profit or loss 2 069 24 - 2 093
Debt securities
- available-for-sale - 544 - 544
- at fair value through profit or loss 276 3 090 400 3 766
Derivative asset - 45 - 45
TOTAL FINANCIAL ASSETS RECOGNISED AT FAIR VALUE 3 029 3 703 400 7 132
Financial liabilities
Convertible debentures - 15 - 15
Financial liabilities at fair value through profit or loss - - 89 89
Derivative liability - 34 - 34
Investment contracts 876 504 - 1 380
TOTAL FINANCIAL LIABILITIES RECOGNISED AT FAIR VALUE 876 553 89 1 518
Administration
Directors
GT Ferreira (Chairman), HL Bosman (CEO & FD), JP Burger, P Cooper, (Ms) SEN De Bruyn Sebotsa, LL Dippenaar, JW Dreyer, JJ Durand, PM Goss, PK
Harris, P Lagerstrom, MM Morobe, O Phetwe and KC Shubane.
Alternates: L Crouse and (Ms) A Kekana
Mr L Crouse resigned as alternate director to Mr JJ Durand effective 31 March 2016 and Mr F Knoetze was appointed as alternate director to
Mr JJ Durand effective 1 April 2016.
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.rmih.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: 07/03/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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