Wrap Text
Condensed unaudited interim results announcement and cash dividend declaration for six months ended 31 December 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
Condensed unaudited interim results announcement and cash dividend declaration
for the six months ended 31 December 2015
Key highlights
Normalised earnings +9% to 258.8 cents
Dividend +16% to 142.0 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, including group treasury
RMH is an influential shareholder of FirstRand and partners management in strategic dialogue. The group provides benefits such as broad-
based black economic (BBBEE) 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
This report covers the unaudited interim financial results of RMH based on International Financial Reporting Standards (IFRS) for the six months
ended 31 December 2015.
The primary results and accompanying commentary are presented on a normalised basis as we believe this most accurately reflects the
group's underlying economic performance. The normalised earnings have been derived from the 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
Since the release of our year-end results in September 2015, the South African economy experienced additional headwinds and was
negatively impacted by a number of internal and external pressures. These included:
- global commodity prices falling on the back of slowing growth in China;
- the first interest rate increase by the US Federal Reserve in nine years, which resulted in a significant outflow of foreign capital from emerging
markets, including South Africa;
- the euro zone providing only limited support to South African exports;
- domestic household consumption continuing to be impacted by higher interest rates, rising inflation and moderating levels of income
growth; and
- reduced growth in government spending to stabilise public sector debt and protect the country's sovereign credit rating from the elevated
risk of a downgrade.
The South African Reserve Bank (SARB) continues to implement a gradual and moderate interest rate hiking cycle. The economy remains
vulnerable to a more aggressive approach, should capital inflow slow down or reverse. The currency remains weak after having devalued 25%
during the period.
Sub-Saharan economies were negatively affected by these global developments, with the Nigerian, Zambian and Ghanaian economies
weakening markedly. Economic growth also slowed in Namibia and Botswana.
Overview of results
Against this challenging economic backdrop, FirstRand produced resilient results, increasing normalised earnings by 9% and delivering a return
on equity (ROE) of 23.4%. RMH, tracking the results of FirstRand, increased normalised earnings by 9% and produced normalised earnings of R3.6
billion (2014: R3.3 billion). Normalised earnings per share amounted to 258.8 (2014: 237.7) cents per share. FirstRand franchises, FNB, RMB and
WesBank, all produced resilient operating results.
The RMH interim dividend of 142.0 (2014: 122.0) cents per share increased by 16%. The increase is mainly due to FirstRand's change in dividend
cover to 1.8 at 30 June 2015 compared to a dividend cover at 31 December 2014 of 1.9 together with RMH’s stated policy of returning
dividends to shareholders after provision for RMH's funding and administrative costs.
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 six months For the
ended year ended
31 December 30 June
R million 2015 2014 % change 2015
FNB 6 208 5 674 9 11 299
RMB 2 805 2 449 15 5 758
WesBank 1 856 1 619 15 3 307
Other* 46 251 (82) 922
FIRSTRAND NORMALISED EARNINGS 10 915 9 993 9 21 286
Attributable to RMH 3 717 3 386 10 7 240
RMH's funding and administrative costs (63) (30) >(100) (82)
RMH NORMALISED EARNINGS 3 654 3 356 9 7 158
* Other is the total of FCC including group treasury and the preference dividend paid on non-cumulative,
non-redeemable preference shares issued by FirstRand. Year-on-year negative accounting mismatches
primarily reflected in the nominal net interest income of FirstRand is included in this amount.
Underlying intrinsic value
RMH's intrinsic value reflected the decrease experienced due to the depressing macroeconomic outlook and the resulting rerating of FirstRand.
as at 31 December 30 June
R million 2015 2014 % change 2015
Market value of listed interest (FirstRand) 80 945 96 611 (16) 101 864
Net funding (1 068) (1 070) <1 (1 067)
TOTAL INTRINSIC VALUE 79 877 95 541 (16) 100 797
Intrinsic value per share (cents) 5 658 6 767 (16) 7 140
Interim dividend payment
RMH's sole source of dividend income is its investment in FirstRand. FirstRand believes that due to the regulatory uncertainty, the challenging
operating environment and expected demand for capital, its current dividend strategy remains appropriate. FirstRand considers a dividend
pay-out level of between 1.8 and 2.2 to be appropriate, but will reassess this level on an annual basis.
The board is of the opinion that RMH is adequately capitalised and that the company will be able to meet its obligations in the foreseeable
future, after payment of the interim dividend.
Having due regard for 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 142.0 (2014: 122.0) cents per share. This dividend is 1.8 times covered by normalised earnings
per share and represents a year-on-year increase of 16%.
Outlook
Based on the FirstRand outlook and current macroeconomic conditions, the second half of the year will continue to be characterised by low
GDP growth. As the SARB may have to increase rates again before the end of 2016, it will place further pressure on the South African consumer.
Unemployment is trending upwards, with retrenchments increasing across a number of industry sectors.
RMH remains positive, that due to FirstRand's strong balance sheet and the resilience and diversity of its diverse income streams, FirstRand will
continue to deliver sustainable and superior returns to shareholders. This, in turn will allow RMH to deliver to its shareholders.
RMH continues to believe its investment in FirstRand provides it with a diversified and growing exposure to the South African banking and
general financial services industries.
The board continuously evaluates appropriate investment opportunities, which may include further exposure to FirstRand. However, the intention
remains not to activate the portfolio on a general basis.
For and on behalf of the board
GT Ferreira HL Bosman
Chairman Chief executive officer
Sandton
8 March 2016
Interim dividend declaration
Notice is hereby given that a gross interim dividend of 142.0 cents per share payable out of income reserves, was declared on 8 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 120.7 cents per share for those
shareholders who are not exempt. The company's tax reference number is 9950/098/71/6. 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 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 dematerialisation or rematerialisation of share certificates may be done between Thursday, 24 March 2016 and Friday, 1 April 2016 (both
days inclusive).
By order of the board
(Ms) EJ Marais
Company secretary
8 March 2016
Condensed unaudited interim results
Condensed consolidated income statement
For the six months For the
ended year ended
31 December 30 June
R million 2015 2014 % change 2015
Share of after-tax profit of associate company 3 569 3 418 4 7 388
Fee income - 12 -
Investment income (5) 3 434
Net fair value (loss)/gain on financial assets and liabilities (21) 74 83
Net income 3 543 3 507 1 7 905
Administration expenses (2) (32) 94 (41)
Income from operations 3 541 3 475 2 7 864
Finance costs (43) (42) 2 (86)
Profit before tax 3 498 3 433 2 7 778
Income tax expense - (9) 100 (9)
PROFIT FOR THE PERIOD 3 498 3 424 2 7 769
Attributable to:
Equity holders of the company 3 498 3 424 2 7 769
PROFIT FOR THE PERIOD 3 498 3 424 2 7 769
Condensed consolidated statement of comprehensive income
For the six months For the
ended year ended
31 December 30 June
R million 2015 2014 % change 2015
Profit for the period 3 498 3 424 2 7 769
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 792 (47) (144)
Items that may not subsequently be reclassified to profit or loss
Share of other comprehensive income of associate after tax
and non-controlling interests (22) 20 (48)
OTHER COMPREHENSIVE INCOME FOR THE PERIOD 770 (27) >100 (192)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 4 268 3 397 26 7 577
Total comprehensive income attributable to:
Equity holders of the company 4 268 3 397 26 7 577
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 4 268 3 397 26 7 577
Computation of headline and normalised earnings
For the six months For the
ended year ended
31 December 30 June
R million 2015 2014 % change 2015
Earnings attributable to equity holders 3 498 3 424 2 7 769
Adjustment for:
RMH's share of adjustments made by associate:
Loss on disposal of investment securities and other
investments of a capital nature (2) - -
Gain on disposal of available-for-sale assets 1 (78) (100)
Gain on disposal of investment in subsidiaries - (64) (75)
(Gain)/loss on the disposal of property and equipment (27) (4) 2
Fair value of investment properties - - (11)
Other - - 3
Tax effects of adjustments - - 6
Non-controlling interests adjustment - 8 10
RMH's own adjustments:
Net profit on maturing of the FirstRand BBBEE transaction - 113 (427)
Loss on deemed sale of associate due to change in
effective shareholding 6 - -
HEADLINE EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 3 476 3 399 2 7 177
RMH's share of adjustments made by associate:
IFRS 2 Share-based payment expenses - 26 26
Treasury shares - 17 9
Total Return Swap adjustment 194 (49) (12)
IAS 19 adjustment (18) (19) (36)
Private equity subsidiary realisations - 57 63
RMH's own adjustments:
RMH shares held by associate1 3 1 1
Group treasury shares2 (1) (40) (34)
Other3 - (36) (36)
NORMALISED EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 3 654 3 356 9 7 158
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 prior period the effect of the issue of an additional
35 420 014 issued on 21 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
in the prior period.
Computation of earnings per share
For the six months For the
ended year ended
31 December 30 June
R million 2015 2014 % change 2015
Earnings attributable to equity holders 3 498 3 424 2 7 769
Headline earnings attributable to equity holders 3 476 3 399 2 7 177
Normalised earnings for the period 3 654 3 356 9 7 158
Net asset value 36 902 32 898 12 35 174
Number of shares in issue (millions) 1 412 1 412 - 1 412
Weighted average number of shares in issue (millions) 1 411 1 411 - 1 411
Diluted weighted average number of shares in issue (millions) 1 411 1 411 - 1 411
Weighted average number of shares in issue for normalised
earnings (millions) 1 412 1 412 - 1 412
Earnings per share (cents) 247.9 242.6 2 550.5
Diluted earnings per share (cents) 247.9 242.6 2 550.5
Headline earnings per share (cents) 246.4 240.8 2 508.5
Diluted headline earnings per share (cents) 246.4 240.8 2 508.5
Normalised earnings per share (cents) 258.8 237.7 9 507.0
Diluted normalised earnings per share (cents) 258.8 237.7 9 507.0
Net asset value per share (cents) 2 613.5 2 329.9 12 2 491.1
Dividend per share
For the six months For the
ended year ended
31 December 30 June
R million 2015 2014 % change 2015
Dividend per share (cents)
Interim 142.0 122.0 16 122.0
Final - - - 154.0
TOTAL 142.0 122.0 16 276.0
Dividend cover (relative to headline earnings) 1.7 2.0 1.8
Dividend cover (relative to normalised earnings) 1.8 1.9 1.8
Condensed consolidated statement of financial position
as at as at
31 December 30 June
R million 2015 2014 2015
ASSETS
Cash and cash equivalents 16 15 16
Loans and receivables 2 6 1
Investment securities 209 221 229
Derivative financial instruments 14 34 36
Investment in associate 37 970 33 968 36 241
TOTAL ASSETS 38 211 34 244 36 523
EQUITY
Share capital and premium 8 813 8 818 8 815
Reserves 28 089 24 080 26 359
TOTAL EQUITY 36 902 32 898 35 174
LIABILITIES
Financial liabilities 1 217 1 229 1 221
Derivative financial instruments 24 45 46
Trade and other payables 54 47 60
Taxation payable - - 1
Long-term liabilities 12 21 18
Provisions 2 4 3
TOTAL LIABILITIES 1 309 1 346 1 349
TOTAL EQUITY AND LIABILITIES 38 211 34 244 36 523
Condensed consolidated statement of cash flows
For the six months For the
ended year ended
31 December 30 June
R million 2015 2014 2015
Net cash generated from operating activities 2 179 1 874 3 661
Dividends paid (2 174) (1 800) (3 522)
Net cash outflow in financing activities (5) (73) (137)
Net increase in cash and cash equivalents - 1 2
Cash and cash equivalents at the beginning of the period 16 14 14
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 16 15 16
Condensed statement of changes in equity
Share Total
capital equity Non-
and Total holders' controlling Total
R million premium reserves funds interest equity
Balance as 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)
Settlement of share-based payment - (1) (1) - (1)
Reserve movements relating to associate - (918) (918) - (918)
Movement in treasury shares (1) 1 - - -
BALANCE AS AT 31 DECEMBER 2014 8 818 24 080 32 898 - 32 898
Balance as at 1 July 2015 8 815 26 359 35 174 - 35 174
Total comprehensive income for the period - 4 268 4 268 - 4 268
Dividend paid - (2 174) (2 174) - (2 174)
Reserve movements relating to associate - (367) (367) - (367)
Movement in treasury shares (2) 3 1 - 1
BALANCE AS AT 31 DECEMBER 2015 8 813 28 089 36 902 - 36 902
Basis of preparation of results
The accompanying condensed results for the six months ended 31 December 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 this announcement, where the term group is used, it actually refers to the
economic entity.
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, 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 results are prepared in accordance with the going concern principle under historical cost basis, as modified by the fair value accounting
of certain assets and liabilities, where required or permitted by IFRS. This announcement is the responsibility of the directors. The information
contained in this announcement including any forward looking statements do not constitute an earnings forecast and has not been reviewed and reported
on by the company’s external auditors.
Accounting policies
These summarised results incorporate accounting policies that are consistent with those used in preparing the financial results for the year
ended 30 June 2015.
There were no new standards and interpretations which became effective for the first time in the current financial period.
Normalised results
RMH believes that normalised earnings more accurately reflect its 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:
- the Total Return Swap, which is an economic hedge against the share-based payment obligation;
- IFRS 2 share-based payment expense in terms of the BBBEE transaction
- FirstRand shares held for client trading activities;
- IAS 19 measurement of plan asset; and
- the consolidation of private equity subsidiaries which is excluded from the Rule 1 exemption of Circular 2/2015, Headline Earnings per Share.
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 preference share facility on 21 August 2014 in the prior period.
Administration
Directors:
GT Ferreira (Chairman), HL Bosman (CEO), JP Burger, P Cooper, L Crouse,(MS) SEN De Bruyn-Sebotsa, LL Dippenaar, JW Dreyer, PM Goss, PK Harris,
(Ms) A Kekana, P Lagerstrom, MM Morobe and KC Shubane
Alternate directors: JJ Durand and O Phetwe
Changes to the board:
Mr L Crouse resigned as non-executive director effective 31 March 2016 and Mr F Knoetze has been appointed as non-executive director
effective 1 April 2016.
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: 08/03/2016 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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