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Audited summarised results announcement and cash dividend declaration for the year ended 30 June 2016
RMB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1987/005115/06
JSE Ordinary share code: RMH
ISIN code: ZAE000024501
Audited summarised results announcement and cash dividend declaration for the year ended 30 June 2016
Key highlights
for the year ended June 2016
Normalised earnings +7% to 542.5 cents
DIVIDEND +7% to 295.0 cents
NET ASSET VALUE +9% to 2 709.1 cents
RMH at a glance
RMH's main 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:
- RMB: the retail and commercial bank
- FNB: the corporate and investment bank
- WesBank: the instalment finance business
- Ashburton Investments: the group's investment management business
In 2016 RMH announced the extension of its investment strategy to include a property investment business. RMH concluded its first acquisition, a 27.5%
interest in Atterbury Property Holdings Proprietary Limited (Atterbury) in July 2016 and is in the process of finalising the acquisition of a 34% interest in
Propertuity, an urban renewal business.
RMH has a three-tiered investment strategy which comprises:
1. Diversification - geographic, business and product diversification is evaluated and implemented in RMH and across the portfolio.
2. Optimisation - established relationships with the boards and management ensure that RMH participates in the strategic dialogue and activity across
our portfolio. The group and capital structure is designed in order to provide optimal returns to shareholders and to create a platform for potential
value-adding M&A or fund raising opportunities.
3. Modernisation - new businesses, technologies and industry trends are identified and assessed to complement RMH and its investee companies.
To execute on this strategy, RMH positions itself as an influential shareholder. It partners with management in formulating a long-term strategy and capital
allocation plan and provides the necessary stability in the shareholder base of investee companies. Management is empowered to execute on strategy.
The group has a track record of entrepreneurship, innovation and value creation.
Basis of preparation
This report covers the audited financial results of RMB Holdings Limited (RMH or the group) based on International Financial Reporting Standards (IFRS) for
the year ended 30 June 2016.
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 normalised earnings is presented in the accompanying schedules.
Ellen Marais CA(SA) prepared these financial results under the supervision of Herman Bosman LLM CFA.
Economic environment
The past year was headlined by Brexit and the economic and political instability in South Africa, which introduced short-term volatility and long-term
uncertainty in the local and global business environment. Inflation firstly hit the top end of the target band of the South African Reserve Bank, and
secondly Gross Domestic Product (GDP) growth was even lower than anticipated. The unemployment rate also increased to 26.6%, the Rand was weak
against most currencies and commodity prices remain weak.
The rest of Africa is still facing significant growth headwinds as commodity prices remained low.
Overview of results
RMH produced satisfactory results for the year ended 30 June 2016, reporting normalised earnings of R7.7 billion (2015: R7.2 billion), an increase of 7%.
Normalised earnings per share amounted to 542.5 cents per share (2015: 507.0 cents per share). The new property investment arm of RMH will only start
contributing to the results over the medium term.
RMH's core investment, FirstRand, performed well, with satisfactory results from all major brands, again demonstrating their leading market positions.
The final dividend of 153.0 cents per share (2015: 154.0 cents) resulted in dividends for the year increasing by 7%.
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 2016 2015 % change
FNB 12 282 11 385 8
RMB 6 287 5 758 9
WesBank 3 941 3 221 22
Other* 345 922 (63)
FirstRand normalised earnings 22 855 21 286 7
Attributable to RMH 7 783 7 240 8
RMH centre** (124) (82) 51
RMH normalised earnings 7 659 7 158 7
* Other is the total of FCC including group treasury and preference dividend paid on perpetual preference shares issued by
FirstRand. It includes negative year-on-year accounting mismatches primarily reflected in the nominal net interest income
growth of FirstRand.
** Includes funding cost and share-based payment cost directly linked to the RMH share price.
Underlying intrinsic value
During the year to 30 June 2016, RMH's market capitalisation decreased by 15%. At year-end it amounted to R79.4 billion (June 2015: R93.8 billion) or 5 625
cents per share (June 2015: 6 645 cents). This represented a 6.1% discount (June 2015: 6.9 % discount) to RMH's underlying intrinsic value.
as at
30 June
R million 2016 2015 % change
Market value of listed interest (FirstRand) 85 664 101 864 (16)
Net funding (1 072) (1 067) (1)
Total intrinsic value 84 592 100 797 (16)
Intrinsic value per share (cents) 5 992.2 7 140.1 (16)
At 30 June 2016 net borrowing at the RMH centre amounted to R1.07 billion of which the core element comprised R1.18 billion 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
At this stage, RMH's sole source of dividend income is its investment in FirstRand. FirstRand believes that, based on actual performance, forward-looking
macroeconomic conditions, demand for capital and potential regulatory and accounting changes, 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 consider this level on an annual basis.
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 153.0 cents per share (2015: 154.0 cents). Such final dividend, together with the interim dividend of 142.0 cents, brings the
total dividend for the year ending 30 June 2016 to 295.0 cents per ordinary share (2015: 276.0 cents). The dividend is covered 1.8 times by normalised
earnings per share and represents a year-on-year increase of 7%.
Expansion of investment strategy
On 3 May 2016, RMH announced the expansion of its investment strategy to include property. In keeping with the group's history and ethos, the focus will
be on entrepreneurial and owner-managed businesses. The strategy will involve investing in physical property portfolios as well as vertically integrated
property companies, specifically with internal management teams that offer asset management, development management and property management
skills.
The property strategy will create a diversified portfolio of superior and scalable entrepreneur-led businesses with proven track records in managing and
building out property portfolios. RMH will follow a phased approach to acquire its various property investments.
RMH will assist these players with capital, strategic input, networking opportunities, structural longevity and additional governance systems.
The RMH property investment case will be characterised by owner-managed businesses, access to a broader value chain in property, the unlisted nature
of the portfolio, a balance between net asset value growth and yield, as well as a limited concentration risk as RMH will acquire stakes across multiple
strategies, sub-sectors and geographies in time.
As previously mentioned as a first step in the execution of this strategy, RMH acquired a 27.5% interest in Atterbury in July 2016 and is in the process of
finalising the acquisition of a 34% interest in Propertuity.
Both acquisitions will be funded through the issue of preference shares, which will increase the funding cost at the RMH centre. At this stage, the net
contribution to earnings from these acquisitions will have an immaterial impact on the results of RMH and dividend pay-outs until the medium to long
term.
Outlook
Locally, growth rates will remain under pressure during 2017. Ongoing political and policy uncertainty, combined with a negative global economic growth
outlook, enhanced by Brexit, poses further downside risk. Inflation will remain above the top end of the target band. The Rand is expected to remain weak
against the Dollar and could weaken even further if the FED hikes rates aggressively and the sovereign downgrade is effected. Dollar strength poses a
challenge to countries with high levels of foreign debt.
GDP in the rest of Africa is expected to average between 2.5% to 4%. The slowing Chinese growth trend with the move away from resource-intensive
investment to consumption poses little relief to Africa.
FirstRand, together with RMH, remains committed to growing economic profit on a sustainable basis and will continue to only allocate capital to growth
initiatives that maximise shareholder returns. It remains confident that the quality of FirstRand's portfolio of businesses, the strength of its balance sheet,
discipline in resource allocation and the strategies it is currently investing in will ensure ongoing growth and superior returns to shareholders.
The board is of the opinion that the diversification of the income base of RMH together with FirstRand's stated intent to continue to deliver ongoing
growth and superior returns will contribute positively to returns to RMH shareholders over the medium to long term. RMH maintains a strong pipeline of
potential property opportunities spanning a wide variety of niche sub-segments that meet the mandate of RMH's specialist property portfolio. However,
given the challenging macroeconomic outlook, RMH remains cautious of deploying large amounts of capital into established property portfolios,
preferring to focus on partnering with entrepreneurs who have high levels of intellectual property and track records with less developed property
portfolios. With the exception of Propertuity, there are no imminent transactions as at the reporting date.
For and on behalf of the board
GT Ferreira Herman Bosman
Chairman Chief executive
Sandton
9 September 2016
Final dividend declaration
Notice is hereby given that a gross final dividend of 153.0 cents per share, payable out of income reserves, was declared on 9 September 2016 in respect
of the year ended 30 June 2016.
The dividend will be subject to Dividend Withholding Tax at a rate of 15%, which will result in a net dividend of 130.05 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 Tuesday, 4 October 2016
Shares commence trading ex-dividend on Wednesday, 5 October 2016
The record date for the dividend payment will be Friday, 7 October 2016
Dividend payment date Monday, 10 October 2016
No de-materialisation or re-materialisation of share certificates may be done between Wednesday, 5 October 2016 and Friday, 7 October 2016 (both
days inclusive).
By order of the board
Ellen Marais
Company secretary
9 September 2016
Audited summarised consolidated income statement
For the year ended
30 June
R million 2016 2015 % change
Share of after-tax profit of associate company 7 684 7 388 4
Investment income 7 434
Net fair value (loss)/gain on financial assets and liabilities (14) 83
Net income 7 677 7 905 (3)
Administration expenses (16) (41) (61)
Income from operations 7 661 7 864 (3)
Finance costs (87) (86) 1
Profit before tax 7 574 7 778 (3)
Income tax expense (15) (9) 67
PROFIT FOR THE YEAR 7 559 7 769 (3)
Attributable to:
Equity holders of the company 7 559 7 769 (3)
PROFIT FOR THE YEAR 7 559 7 769 (3)
Audited computation of headline and normalised earnings
For the year ended
30 June
R million 2016 2015 % change
Earnings attributable to equity holders 7 559 7 769 (3)
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 (2) (100)
Gain on disposal of investment in subsidiaries (28) (75)
Gain on the disposal of property and equipment (50) 2
Fair value of investment properties 7 (11)
Impairment of goodwill 3 -
Impairment of assets in terms of IAS 36 16 -
Other - 3
Tax effects of adjustments (7) 6
Non-controlling interests adjustment 3 10
RMH's own adjustments:
Net profit on maturing of the FirstRand BEE transaction - (427)
Loss on deemed sale of associate due to change in effective shareholding 4 -
HEADLINE EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 7 503 7 177 5
RMH's share of adjustments made by associate:
IFRS 2 Share-based payment expenses - 26
Treasury shares (2) 9
Total return swap adjustment 168 (12)
IAS 19 adjustment (35) (36)
Private equity subsidiary realisations 28 63
Adjustment for:
RMH shares held by associate(1) 1 1
Group treasury shares(2) (4) (34)
Other(3) - (36)
NORMALISED EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 7 659 7 158 7
(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 year the effect of the issue of an additional 35 420 014 shares 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 year.
Audited computation of per share information
For the year ended
30 June
R million 2016 2015 % change
Earnings attributable to equity holders 7 559 7 769 (3)
Headline earnings attributable to equity holders 7 503 7 177 5
Normalised earnings for the year 7 659 7 158 7
Net asset value 38 244 35 174 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) 535.7 550.5 (3)
Diluted earnings per share (cents) 535.7 550.5 (3)
Headline earnings per share (cents) 531.7 508.5 5
Diluted headline earnings per share (cents) 531.7 508.5 5
Normalised earnings per share (cents) 542.5 507.0 7
Diluted normalised earnings per share (cents) 542.5 507.0 7
Net asset value per share (cents) 2 709.1 2 491.1 9
Dividend per share (cents)
Interim 142.0 122.0 16
Final 153.0 154.0 (1)
TOTAL 295.0 276.0 7
Dividend cover (relative to headline earnings) 1.8 1.8
Dividend cover (relative to normalised earnings) 1.8 1.8
Audited summarised consolidated statement of comprehensive income
For the year ended
30 June
R million 2016 2015 % change
Profit for the year 7 559 7 769 (3)
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 82 (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 (47) (48)
Other comprehensive income for the year 35 (192)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 7 594 7 577
Total comprehensive income attributable to:
Equity holders of the company 7 594 7 577 <1
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 7 594 7 577 <1
Audited summarised consolidated statement of financial position
as at 30 June
R million 2016 2015
ASSETS
Cash and cash equivalents 18 16
Loans and receivables 3 1
Investment securities 223 229
Derivative financial instruments 12 36
Taxation receivable 1 -
Investment in associate 39 316 36 241
TOTAL ASSETS 39 573 36 523
EQUITY
Share capital and premium 8 825 8 815
Reserves 29 419 26 359
TOTAL EQUITY 38 244 35 174
LIABILITIES
Financial liabilities 1 218 1 221
Derivative financial instruments 29 46
Trade and other payables 62 60
Taxation payable - 1
Long-term liabilities 10 18
Provisions 1 3
Deferred tax liability 9 -
TOTAL LIABILITIES 1 329 1 349
TOTAL EQUITY AND LIABILITIES 39 573 36 523
Audited summarised consolidated statement of cash flows
For the year ended
30 June
R million 2016 2015
Net cash generated from operating activities 4 273 3 661
Dividends paid (4 178) (3 522)
Net cash outflow in financing activities (93) (137)
Net decrease in cash and cash equivalents 2 2
Cash and cash equivalents at the beginning of the year 16 14
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 18 16
Audited summarised consolidated statement of changes in equity
Share
capital and Total Total
R million premium reserves equity
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
Balance as at 1 July 2015 8 815 26 359 35 174
Total comprehensive income for the year - 7 594 7 594
Dividends paid - (4 178) (4 178)
Reserve movements relating to associate - (356) (356)
Movement in treasury shares 10 - 10
BALANCE AS AT 30 JUNE 2016 8 825 29 419 38 244
Basis of presentation of results
The accompanying audited summarised results for the year ended 30 June 2016 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 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 directors take full responsibility and confirm that this information has been correctly extracted from the annual financial statements from which the
summarised consolidated annual financial statements were derived.
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 2016.
The consolidated annual financial statements, from which these summarised consolidated annual financial statements are extracted 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.
No new or amended IFRS standards became effective for the year ended 30 June 2016.
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:
- the total return swap which is an economic hedge against the cash-settled share-based payment;
- IFRS 2 share-based payment expense in terms of the BEE 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. In terms of IAS 28 Investments in Associates, upstream and downstream profits are eliminated
when equity accounting is applied, and, in terms of IAS 32, profits or losses cannot be recognised on an entity's own equity instruments. For the income
statement, RMH's portion of the fair value change in RMH shares by FirstRand is, therefore, deducted from equity-accounted earnings and the
investment recognised using the equity-accounted method.
3. An adjustment to reflect earnings impact based on actual RMH shareholding in FirstRand based on actual number of shares issued by FirstRand.
4. The once-off hedge break gain realised on the restructuring of the preference share facility on 21 August 2014 in the prior year.
Auditor's report
The summarised consolidated annual financial statements for the year ended 30 June 2016 contained in this announcement have been audited by
PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon.
The auditor also expressed an unmodified opinion on the annual financial statements from which the summarised consolidated annual financial
statements were derived. Unless the financial information is specifically stated as audited, it should be assumed it is unaudited.
A copy of the auditor's reports on the announcement and annual consolidated financial statements are available for inspection at RMH's registered
office, 2 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, together with the annual financial statements identified in the respective
auditors' reports.
The auditor's report does not necessarily report on all of the information contained in these summarised consolidated financial statements. Shareholders
are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should review the auditor's report
together with the accompanying financial information from the issuer's registered office.
The forward-looking information has not been commented or reported on by the group's external auditor. RMH's board of directors take full responsibility
for the preparation of this announcement.
Audited segment report
FCC and
R million FNB RMB WesBank other FirstRand Other RMH
Year ended 30 June 2016
Share of after-tax profit of associate 4 185 2 142 1 343 18 7 688 (4) 7 684
Investment income - - - - - 7 7
Net fair value loss on financial assets - - - - - (14) (14)
Net income 4 185 2 142 1 343 18 7 688 (11) 7 677
Administration expenses - - - - - (16) (16)
Income from operations 4 185 2 142 1 343 18 7 688 (27) 7 661
Finance costs - - - - - (87) (87)
Profit before tax 4 185 2 142 1 343 18 7 688 (114) 7 574
Income tax expense - - - - - (15) (15)
PROFIT FOR THE YEAR 4 185 2 142 1 343 18 7 688 (129) 7 559
Headline earnings 4 185 2 142 1 343 (42) 7 628 (125) 7 503
Normalised earnings 4 183 2 141 1 342 117 7 783 (124) 7 659
Assets - - - - - 257 257
Associate - - - - 39 316 - 39 316
TOTAL ASSETS - - - - 39 316 257 39 573
TOTAL LIABILITIES - - - - - 1 329 1 329
FCC and
R million FNB RMB WesBank other FirstRand Other RMH
Year ended 30 June 2015
Share of after-tax profit of associate 3 891 1 967 1 101 431 7 390 (2) 7 388
Investment income - - - - - 434 434
Net fair value gain on financial assets - - - - - 83 83
Net income 3 891 1 967 1 101 431 7 390 515 7 905
Administration expenses - - - - - (41) (41)
Income from operations 3 891 1 967 1 101 431 7 390 474 7 864
Finance costs - (86) (86)
Profit before tax 3 891 1 967 1 101 431 7 390 388 7 778
Income tax expense - - - - - (9) (9)
PROFIT FOR THE YEAR 3 891 1 967 1 101 431 7 390 379 7 769
Headline earnings 3 891 1 967 1 101 265 7 224 (47) 7 177
Normalised earnings 3 872 1 959 1 096 313 7 240 (82) 7 158
Assets - - - - - 282 282
Associate - - - - 36 241 - 36 241
TOTAL ASSETS - - - - 36 241 282 36 523
TOTAL LIABILITIES - - - - - 1 349 1 349
Geographical segments
RMH does not have multiple geographic segments as FirstRand is viewed as a South African entity.
Administration
RMB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1987/005115/06
JSE Ordinary share code: RMH ISIN code: ZAE000024501
Directors:
GT Ferreira (Chairman), Herman Bosman (CEO), Johan Burger, Peter Cooper, Leon Crouse (resigned 31 March 2016), Sonja De Bruyn-Sebotsa, Laurie
Dippenaar, Jan Dreyer, Pat Goss, Paul Harris, Albertinah Kekana, Faffa Knoetze (appointed 1 April 2016), Per Lagerstrom, 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.rmh.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: 09/09/2016 09:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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