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Condensed unaudited interim financial results announcement and cash dividend declaration for the six months ended 31
RMB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1987/005115/06
JSE Ordinary share code: RMH
ISIN code: ZAE000024501
Condensed unaudited interim financial results announcement and cash dividend declaration
for the six months ended 31 December 2018
BASIS OF PREPARATION
This report covers the unaudited interim financial results of RMB Holdings Limited (RMH), based on International Financial Reporting Standards (IFRS), for the
six months ended 31 December 2018.
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 were derived from the unaudited, IFRS financial results. A reconciliation of the adjustments
made to derive normalised earnings is presented below.
Normalised earnings presented in these results constitute pro forma financial information. The pro forma financial information is the responsibility of RMH's
board of directors and is presented for illustrative purposes.
Ellen Marais, CA(SA) prepared these financial results under the supervision of Herman Bosman, LLM CFA.
ENDURING VALUE CREATED
INTRINSIC VALUE OF PORTFOLIO: R125.4 billion (June 2018: R121.8 billion) +3%
NET ASSET VALUE: R47.5 billion (June 2018: R44.4 billion) +7%
MARKET CAPITALISATION: R111.3 billion (June 2018: R107.0 billion) +4%
NET INCOME: R5.5 billion (December 2017: R4.2 billion) +31%
HEADLINE EARNINGS: R4.4 billion (December 2017: R4.2 billion) +6%
NORMALISED EARNINGS: R4.4 billion (December 2017: R4.2 billion) +7%
DIVIDEND PER SHARE: 178 cents (December 2017: 168 cents) +6%
ABOUT RMH
RMH positions itself as a value-adding,stable and aspirational shareholder.
RMH is an investment holding company with a proud track record of investing in disruptive and entrepreneurial financial services businesses. This
performance was achieved by partnering with exceptional management teams for the long term.
Since its listing in 1992, RMH has provided shareholders with a vehicle to co-invest with the founders of Rand Merchant Bank (RMB). From humble beginnings
at RMB, the group has produced outstanding businesses such as FirstRand Limited (FirstRand), Discovery and OUTsurance.
RMH prides itself on the role it played in the establishment and growth of these businesses. At the appropriate time, it also provided independence to these
businesses. RMH retained significant shareholdings as the strategic input is valued by the underlying businesses and their management teams. In 2011,
RMH's insurance interests (Discovery, MMI and OUTsurance) were separately listed as Rand Merchant Investment Holdings Limited (RMI).
RMH has since expanded its investment strategy to include a property investment business, comprising scalable entrepreneur-led businesses with proven
track records in managing and building out property partnerships.
Investment portfolio
FIRSTRAND
RMH is the founding and largest shareholder in FirstRand, South Africa's largest banking group, with a 34% stake.
FirstRand is generally regarded as one of Southern Africa's leading financial services groups. It is listed separately and has a market capitalisation of R367.8
billion at 31 December 2018 (2017: R377.2 billion).
RMH PROPERTY
RMH's property investments are housed in a wholly-owned subsidiary, RMH Property Holdings Proprietary Limited (RMH Property), managed by a dedicated
investment team led by Brian Roberts.
During the previous financial year, RMH Property expanded its core partnerships by acquiring a direct interest of 43.9% in Atterbury Europe, a logical
strategic alignment for the business, providing an opportunity for geographic diversification and access to a promising European market.
During the period under review, RMH Property obtained a direct interest of 50% in Atterbury Bucharest B.V. (Atterbury Bucharest) as part of the core
partnerships, solidifying the relationship with Atterbury Europe. It also acquired an 18% direct interest in the Divercity Urban Property Fund Proprietary
Limited (Divercity) and exercised an option to obtain shareholdings in Genesis Properties Proprietary Limited (9%), Genesis Properties One Proprietary
Limited (20%) and an additional 10% in Genesis Properties Three Proprietary Limited, collectively referred to as Genesis Properties. During the six-month
period ending December 2018, the net intrinsic value of RMH Property increased from R722 million (at 30 June 2018) to R971 million.
As communicated to the market in November 2018, the business is adequately capitalised, providing a foundation to enter into a period of consolidation
for future growth. No further investments are contemplated by RMH Property for the foreseeable future.
Investment policy
RMH invests in businesses that can deliver superior and enduring earnings, dividend growth and sustained long-term capital growth. We specifically target
businesses and industries complementary to our current portfolio.
Dividend policy
RMH has a stated policy of returning net dividends (after providing for funding and operational costs incurred at the centre) received in the ordinary
course of business to shareholders.
PERFORMANCE AND OUTLOOK
External environment
The macroeconomic environment within which RMH's investee companies operate has experienced significant turbulence of late. This year is shaping up
to be another challenging year for the South African economy. Headwinds include a slowing global economy, Eskom (and other state-owned entities
(SOE)) challenges, adverse domestic weather conditions in the western maize-growing areas of the country, prolonged strike activity in the gold mining
sector and political uncertainty leading into the national election.
Continued weak Given disappointing fixed investment, a lack of policy visibility and a strained government fiscus, the 2019 real GDP growth
GDP growth forecast has been reduced to 1.4% from 1.5%. Growth is still expected to accelerate towards 1.6% during 2020. The improved
inflation prospects, weak domestic growth outlook and less pressure to follow the global interest rate cycle higher suggest
that the SA Reserve Bank may keep the repo rate unchanged in the foreseeable future.
Although the Rand has at times traded stronger-than-expected in 2019 to date, both global and domestic factors have the
potential to weigh on the currency.
Ongoing SOE In his recent State of the Nation Address, President Ramaphosa announced that Eskom will be divided into three separate
challenges SOEs dealing with generation, distribution and transmission under a state holding company in order to more easily access
financing. The state will provide financial support to the ailing parastatal in a manner which will not burden the fiscus with
"unmanageable debt".
President Ramaphosa also announced the establishment of an independent investigating directorate, to be housed within
the National Prosecuting Authority, which will focus on evidence that has emerged at the State Capture Commission.
Brexit In the UK, policymakers at the Bank of England voted to keep the benchmark policy interest rate unchanged at 0.75%. The
Monetary Policy Committee expressed its concern regarding the impact of Brexit and a slowdown in global growth on the
outlook for the UK economy. As such, the Committee lowered its growth forecast for the UK economy in 2019 from 1.7% to
1.2% – the weakest level since the recession of 2009 – and lowered its inflation forecast to just below the target of 2%.
USA-China trade Concerns about the negative impact of an escalation of the USA-China trade war on global growth have returned. In
war addition, investor sentiment was negatively impacted by the European Union and Bank of England making significant
downward adjustments to their real GDP growth forecasts.
FNB SA economic forecast
2015 2016 2017 2018F 2019F 2020F
% Real GDP growth 1.3 0.6 1.3 0.7 1.4 1.6
% Gross fixed capital formation growth 3.4 (4.1) 0.4 (0.2) 0.8 1.5
% CPI average 4.6 6.3 5.3 4.6 5.0 5.5
Rand/Dollar average 12.8 14.7 13.3 13.3 14.2 15.0
Enduring value created
Despite the macroeconomic challenges and other pressures during the second half of 2018, RMH, on the back of a resilient performance by FirstRand,
produced satisfactory results.
Normalised earnings increased 7% to R4.4 billion (2017: R4.2 billion). Normalised earnings per share amounted to 314.9 cents per share (2017: 295.2 cents
per share).
RMH's core investment, FirstRand, produced a solid performance despite the challenging economic climate, increasing normalised earnings by 7% (2017:
7%) and delivering a return on equity (ROE) of 22.3% (2017: 22.5%). FirstRand franchises, FNB, RMB and newly acquired Aldermore produced good
operating results, with WesBank adversely affected by the macroeconomic climate.
RMH Property increased its net intrinsic value from R722 million to R971 million. It delivered normalised profit of R15 million (2017: loss of R15 million).
Market capitalisation decreased slightly from R111.8 billion to R111.4 billion and dividend for the period distributed to shareholders increased by 6% to
178 cents (2017: 168 cents).
Sources of income
FirstRand's well-diversified income stream provides a universal set of transactional, lending, investment and insurance products and services. RMH's
normalised earnings are made up as follows:
For the six months ended
31 December For the
year ended
R million 2018 2017 % change 30 June 2018
FNB 8 665 7 668 13 15 865
RMB 3 321 3 154 5 7 353
WesBank 957 952 1 1 854
Aldermore 1 037 – 276
Other* (638) 687 (>100) 1 063
FIRSTRAND NORMALISED EARNINGS 13 342 12 461 7 26 411
Attributable to RMH 4 544 4 243 7 8 995
RMH Property 15 (15) >100 16
Centre costs (112) (60) (87) (196)
RMH NORMALISED EARNINGS 4 447 4 168 7 8 815
* Other is the total of FCC including Group Treasury, preference dividend paid on perpetual preference shares issued by FirstRand and the dividend on
the contingent convertible securities. It further includes capital endowment, the impact of accounting mismatches, interest rate management, foreign
currency liquidity management and MotoNovo.
A reconciliation of the adjustments made to derive normalised earnings is presented below.
Underlying intrinsic value
At 31 December 2018, RMH's market capitalisation was R111.4 billion (2017 R111.8 billion) at 7 980 cents (2017: 7 917 cents) per share. This equates to an
11.2% discount (2017: 12.3% discount) to RMH's underlying intrinsic value. Net asset value per share increased 11% to 3 363.7 cents (2017: 3 022.4 cents) per
share.
As at
31 December
As at
R million 2018 2017 % change 30 June 2018
Market value of listed interest (FirstRand) 125 314 128 601 (3) 122 058
Net intrinsic value of RMH Property 971 (170) >100 722
Gross value 3 641 799 2 430
Attributable funding (2 670) (969) (1 708)
Other funding (897) (963) 7 (922)
TOTAL INTRINSIC VALUE 125 388 127 468 (2) 121 858
INTRINSIC VALUE PER SHARE (CENTS) 8 882.0 9 029.4 (2) 8 632.0
NET ASSET VALUE PER SHARE (CENTS) 3 363.7 3 022.4 11 3 281.4
Interim dividend payment
The board of RMH has resolved to declare a gross interim dividend of 178.0 cents per share (2017: 168.0 cents). The dividend is covered 1.8 times (2017: 1.8
times) by normalised earnings per share and represents a year-on-year increase of 6% (2017: 10%).
Update on RMH's strategy
Management will focus on the following during the balance of the financial year:
Diversify
DIVERSIFICATION OF INCOME STREAM AND On a selective basis, RMH may consider investments in businesses where partnerships with
DISTRIBUTION OF ASSETS entrepreneurial and industry-disruptive management teams can add value to RMH and its
shareholders.
Investments with the following attributes will be of particular interest:
- Banking and related industries;
- The ability to form a partnership between the investment, RMH and FirstRand;
- Unlisted;
- Digitally-oriented;
- The ability and possibility of RMH to add value; and
- Relevance in terms of the size of the enterprise and its shareholding.
Optimise
OPTIMISATION OF OUR ESTABLISHED INVESTMENTS We continuously focus on the strategic value we add to our investee companies in order to optimise
the enduring value we aim to create for our shareholders. For example, RMH facilitated discussions
between FirstRand and Discovery in relation to Discovery Bank.
As previously communicated, RMH Property will focus on the maximisation of the existing partnerships
with no further investments contemplated for the foreseeable future.
In addition, we will dynamically assess which investments are optimally housed in RMH. In the past,
similar assessments have led to the listing of Discovery, the merger of Momentum and Metropolitan, the
listing of MMI and the unbundling of RMI.
Modernise
MODERNISATION RMH will continue to support its investee companies in being or becoming future-ready.
We remain confident that our strategy, in conjunction with a solid investment portfolio, underpinned by unwavering values, will allow RMH to continue
delivering enduring value for shareholders.
For and on behalf of the board
JJ Durand HL Bosman
Chairman Chief executive
Sandton
14 March 2019
INTERIM DIVIDEND DECLARATION
Notice is hereby given that a gross interim dividend of 178 cents per share, payable out of income reserves, was declared on 14 March 2019 in respect of
the six months ended 31 December 2018.
The dividend will be subject to Dividend Withholding Tax at a rate of 20%, which will result in a net dividend of 142.4 cents per share for those shareholders
who are not exempt. The company's tax reference number is 9950/098/71/6.
RMH's 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, 2 April 2019
Shares commence trading ex-dividend on Wednesday, 3 April 2019
The record date for the dividend payment will be Friday, 5 April 2019
Dividend payment date Monday, 8 April 2019
No dematerialisation or rematerialisation of share certificates may be done between Wednesday, 3 April 2019 and Friday, 5 April 2019 (both days inclusive).
By order of the board
(Ms) EJ Marais
Company secretary
14 March 2019
FINANCIAL REVIEW
The dominant part of RMH's income is its share in the after-tax profits of FirstRand, amounting to R5 359 million (2017: R4 342 million).
Condensed consolidated income statement
For the six months ended
31 December For the year
ended
R million 2018 2017 % change 30 June 2018
Revenue 18 11 26
Share of after-tax profit of associates 5 564 4 183 8 812
Fee income 1 3 18
Net fair value (loss)/gain on financial assets and liabilities (42) 17 (45)
Net income 5 541 4 214 31 8 811
Administration expenses (78) (25) >100 (56)
Income from operations 5 463 4 189 30 8 755
Finance costs (109) (80) 36 (173)
Profit before tax 5 354 4 109 30 8 582
Income tax expense 1 (12) >(100) (22)
PROFIT FOR THE PERIOD 5 355 4 097 31 8 560
Attributable to:
Equity holders of the company 5 355 4 097 31 8 560
PROFIT FOR THE PERIOD 5 355 4 097 31 8 560
Condensed consolidated statement of comprehensive income
For the six months ended
31 December For the year
ended
R million 2018 2017 % change 30 June 2018
Profit for the period 5 355 4 097 31 8 560
Other comprehensive income, after tax:
Items that may be reclassified to profit or loss
Share of other comprehensive income of associates after tax and
non-controlling interests 150 (332) 250
Available-for-sale financial assets: - 23 21
Profit/(loss) arising during the period - 29 27
Deferred income tax - (6) (6)
Cash flow hedges:
Profit arising during the period 90 - -
Exchange difference on translating foreign operations 40 - 94
Items that may not subsequently be reclassified to profit or loss
Share of other comprehensive income of associates after tax and
non-controlling interests (11) (15) 13
OTHER COMPREHENSIVE INCOME FOR THE PERIOD 269 (324) >(100) 378
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 5 624 3 773 49 8 938
Computation of headline earnings
For the six months ended
31 December For the year
ended
R million 2018 2017 % change 30 June 2018
Earnings attributable to equity holders 5 355 4 097 31 8 560
Adjusted for:
RMH's share of adjustments made by FirstRand:
Gain on disposal of investment securities and other investments of
capital nature (657) (11) (10)
(Gain)/loss on disposal of available-for-sale assets - (7) 31
Transfer to foreign currency translation reserve - - 37
Gain on disposal of investments in non-private equity associates (369) - -
Gain on disposal of investments in subsidiaries - (33) (33)
Gain on disposal of property and equipment (24) (9) (21)
Fair value movement on investment properties - (1) (10)
Impairment of goodwill - - 4
Impairment of assets in terms of IAS 36 - - 14
Gain from bargain purchase - - (14)
Other - (10) (10)
Tax effects of adjustments 236 4 -
Non-controlling interests adjustments - 7 -
RMH's share of adjustments made by RMH property associates:
Fair value movement on investment properties (146) - -
RMH's own adjustments:
Profit on deemed sale of associate due to change in effective
shareholding (1) (4) (5)
Impairment of assets in terms of IAS 36 7 24 61
Impairment of associates 47 150 247
HEADLINE EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 4 448 4 207 6 8 851
Computation of normalised earnings
RMH regards normalised earnings as the appropriate basis to evaluate business performance as it eliminates the impact of non-recurring items.
For the six months ended
31 December For the year
ended
R million 2018 2017 % change 30 June 2018
Headline earnings attributable to equity holders 4 448 4 207 6 8 851
RMH's share of adjustments made by FirstRand:
TRS and IFRS 2 liability remeasurement 22 (47) (18)
Treasury shares (5) 3 6
IAS 19 adjustment (18) (19) (37)
Private equity subsidiary realisations - 25 16
Adjusted for:
Group treasury shares - (1) (3)
NORMALISED EARNINGS FOR THE PERIOD 4 447 4 168 7 8 815
Computation of per share information
For the six months ended
31 December For the year
ended
R million 2018 2017 % change 30 June 2018
Earnings attributable to equity holders 5 355 4 097 31 8 560
Headline earnings attributable to equity holders 4 448 4 207 6 8 851
Normalised earnings attributable to equity holders 4 447 4 168 7 8 815
Net asset value 47 495 42 676 11 44 455
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 (millions) for normalised
earnings 1 412 1 412 - 1 412
Earnings per share (cents) 379.5 290.4 31 606.5
Diluted earnings per share (cents) 379.5 290.4 31 606.5
Headline earnings per share (cents) 315.2 298.2 6 627.1
Diluted headline earnings per share (cents) 315.2 298.2 6 627.1
Normalised earnings per share (cents) 314.9 295.2 7 624.4
Diluted normalised earnings per share (cents) 314.9 295.2 7 624.4
Net asset value per share (cents) 3 363.7 3 022.4 11 3 149.0
Dividend per share
For the six months ended
31 December For the year
ended
Cents 2018 2017 % change 30 June 2018
Dividend per share
Interim 178.0 168.0 6 168.0
Final 183.0
TOTAL 178.0 168.0 6 351.0
Dividend cover (relative to headline earnings) 1.8 1.8 - 1.8
Dividend cover (relative to normalised earnings) 1.8 1.8 - 1.8
Condensed consolidated statement of financial position
The investment in associates increased with RMH's share of after-tax comprehensive income of R5 703 million (2017: R4 446 million) and RMH's share of
associates' other reserves of (R1 million) (2017: R832 million). This was offset by dividends received of R2 770 million (2017: R2 598 million).
As at
31 December As at
1 July 30 June
R million 2018 2017 % change 2018 2018
ASSETS
Cash and cash equivalents 76 81 43 43
Loans and receivables 763 94 57 57
Investment securities 527 401 523 523
Taxation receivable - 1 4 4
Derivative financial instruments 138 42 55 55
Investment in associates 49 874 44 346 46 722 48 590
TOTAL ASSETS 51 378 44 965 14 47 404 49 272
EQUITY
Share capital and premium 8 825 8 825 8 825 8 825
Reserves 38 670 33 851 35 630 37 498
TOTAL EQUITY 47 495 42 676 11 44 455 46 323
LIABILITIES
Trade and other payables 99 103 232 232
Provisions 47 - - -
Taxation payable 1 - - -
Financial liabilities 3 716 2 138 2 692 2 692
Derivative financial instruments - 25 - -
Long-term liabilities - 1 - -
Deferred tax liability 20 22 25 25
TOTAL LIABILITIES 3 883 2 289 70 2 949 2 949
TOTAL EQUITY AND LIABILITIES 51 378 44 965 14 47 404 49 272
Condensed consolidated statement of cash flows
For the six months ended
31 December For the year
ended
R million 2018 2017 % change 30 June 2018
Cash flow from operating activities
Cash generated from operations 2 070 2 525 (18) 5 201
Income tax paid (1) - (8)
NET CASH GENERATED FROM OPERATING ACTIVITIES 2 069 2 525 (18) 5 193
Cash flow from investing activities
Investment in associates (374) - (397)
Additions to investments securities - - (157)
Additions to derivatives - (11) (11)
NET CASH OUTFLOW IN INVESTMENT ACTIVITIES (374) (11) >(100) (565)
Cash flow from financing activities
Preference shares issued 150 - 372
Borrowings withdrawn 870 56 5
Interest paid (7) (1) (5)
Dividends paid on preference shares in issue (92) (71) (168)
Dividends paid to equity holders (2 583) (2 456) (4 828)
NET CASH OUTFLOW IN FINANCING ACTIVITIES (1 662) (2 472) 33 (4 624)
Net decrease in cash and cash equivalents 33 42 4
Cash and cash equivalents at the beginning of the period 43 39 39
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 76 81 (6) 43
Condensed consolidated statement of changes in equity
Foreign
Share Equity Available- currency Cash flow
capital and accounted for-sale translation hedge Other Retained Total
R million premium reserves reserve reserve reserve reserves earnings equity
Balance as at 1 July 2017 8 825 29 359 (14) - - 333 2 878 41 381
Total comprehensive income - (347) 23 - - - 4 097 3 773
Dividends paid - - - - - - (2 456) (2 456)
Income of associates retained - 1 239 - - - - (1 239) -
Reserve movements of associates - (22) - - - - - (22)
BALANCE AS AT 31 DECEMBER 2017 8 825 30 229 9 - - 333 3 280 42 676
Balance as at 1 July 2017 8 825 29 359 (14) - - 333 2 878 41 381
Total comprehensive income - 263 21 94 - - 8 560 8 938
Dividends paid - - - - - - (4 828) (4 828)
Income of associates retained - 3 971 - - - - (3 971) -
Reserve movements of associates - 832 - - - - - 832
BALANCE AS AT 30 JUNE 2018 8 825 34 425 7 94 - 333 2 639 46 323
Balance as at 1 July 2018 8 825 34 425 7 94 - 333 2 639 46 323
Restatements (Refer page 23) - (1 868) (7) - - - 7 (1 868)
Restated balance as at 1 July 2018 8 825 32 557 - 94 - 333 2 646 44 455
Total comprehensive income - 139 - 40 90 - 5 355 5 624
Dividends paid - - - - - - (2 583) (2 583)
Income of associates retained - 2 936 - - - - (2 936) -
Reserve movements of associates - (1) - - - - - (1)
BALANCE AS AT 31 DECEMBER 2018 8 825 35 631 - 134 90 333 2 482 47 495
BASIS OF PRESENTATION OF RESULTS
The report is prepared in accordance with:
The framework concepts and the recognition and measurement requirements of International Reporting Standards (IFRS), including interpretations issued
- by the IFRS Interpretations Committee;
- Financial Reporting Pronouncements as issued by Financial Reporting Standards Council;
- SAICA Financial Reporting Guide as issued by the Accounting Practices Committee;
- As a minimum, the information required by IAS 34: Interim Financial Reporting; and
- The requirements of the South African Companies Act, 71 of 2008, applicable to summary financial statements.
The condensed consolidated interim results for the six months ended 31 December 2018 have not been audited or independently reviewed by the
external auditor.
This announcement does not include the information required pursuant to paragraph 16 A (j) of IAS 34. The full interim report is available on www.rmh.co.za
and at the registered office upon request.
Accounting policies
These condensed results incorporate accounting policies that are consistent with those used in preparing the financial results for the year ended 30 June
2018, except for the adoption of certain IFRS that became effective in the current year.
These results 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.
IFRS 9: Financial Instruments (IFRS 9) and IFRS 15: Revenue from Contracts with Clients (IFRS 15) became effective in the current year. IFRS 9, which replaces
IAS 39: Financial Instruments: Recognition and Measurement (IAS 39), had the most significant impact on the group. IFRS 9 introduced a principle-based
approach for classifying financial assets based on the entity's business model and changed the way impairments are calculated on financial assets at
amortised cost from the incurred loss model to the expected loss model.
IFRS 15, which contains a single model that is applied when accounting for contracts with clients, replaced revenue recognition guidance previously
included IAS 18: Revenue (IAS 18) and IFRIC 13: Customer Loyalty Programmes (IFRIC 13).
The adoption of IFRS 9 and IFRS 15 impacted the group's results on the date of initial adoption, being 1 July 2018. The most significant impact was the
flow-through of FirstRand's results on the equity accounting of FirstRand. FirstRand prepared an IFRS 9 Transitional Report, on which a reasonable assurance
audit report was provided by its external auditors.
No other new or amended IFRS become effective for the six months ended 31 December 2018 that impacted the group's reported earnings, financial
position or reserves, or the accounting policies.
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:
- 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;
- 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 4/2018, Headline Earnings per Share.
- RMH shares held for client trading activities by FirstRand's addition, 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, the 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.
- Adjustment to reflect earnings impact based on actual RMH shareholding in FirstRand based on actual number of shares issued by FirstRand.
The pro forma financial information, which is the responsibility of the directors, has been prepared for illustrative purposes to more accurately reflect
financial performance and because of its nature may not fairly present, in terms of IFRS, the group's financial position, changes in equity and results of
operations or cash flows.
IMPACT OF REVISED IFRS
RMH adopted IFRS 9 and IFRS 15 during the current period. The group, as permitted by these standards, elected not to restate any comparative
information. Accordingly, the impact of adopting the revised requirements has been applied retrospectively with an adjustment to RMH's 1 July 2018
opening reserves. Reported information in the prior interim period and the financial year 30 June 2018 were unaffected by the application of IFRS 9 and
IFRS 15.
As IFRS 9 IFRS 15 IFRS 9
reported at adjustments adjustment adjustments Restated
30 June 2018 Note 1 Note 2 Note 3 1 July 2018
ASSETS
Cash and cash equivalents 43 - - - 43
Loans and receivables 57 - - - 57
Investment securities 523 - - - 523
Taxation receivable 4 - - - 4
Derivative financial instruments 55 - - - 55
Investment in associates 48 590 (1 843) (25) - 46 722
TOTAL ASSETS 49 272 (1 843) (25) - 47 404
EQUITY
Share capital and premium 8 825 - - - 8 825
Reserves 37 498 (1 843) (25) - 35 630
Equity accounted reserves 34 425 (1 843) (25) - 32 557
Available-for-sale reserve 7 - - (7) -
Foreign currency translation reserve 94 - - - 94
Other reserves 333 - - - 333
Retained earnings 2 639 - - 7 2 646
TOTAL EQUITY 46 323 (1 843) (25) - 44 455
LIABILITIES
Trade and other payables 232 - - - 232
Financial liabilities 2 692 - - - 2 692
Deferred tax liability 25 - - - 25
TOTAL LIABILITIES 2 949 - - - 2 949
TOTAL EQUITY AND LIABILITIES 49 272 - - - 47 404
Note Requirement Description of change Impact
1 IFRS 9 impact on FirstRand
1.1 IFRS 9 introduced a principle-based approach for the This led to the reclassification This led to an increase of R305 million in
classification of financial assets based on the business model of and remeasurement of equity accounted reserves and
the entity. certain advances, deposits, investment in associates.
investment securities and net
interest in the post-retirement
employee liability.
1.2 IFRS 9 introduced the principle of an expected credit loss ratio This led to the reclassification This led to a decrease of R2 295 million
(ECL) which includes the incorporation of forward-looking of certain assets as well as in equity accounted reserves and
information for impairment of financial assets. the measurement of investment in associates.
underlying financial assets.
1.3 In terms of IAS 39, interest in suspense (ISP) was not capitalised This led to gross-up, of This led to an increase of R147 million in
to advances and interest suspended was tracked and advances but also the equity accounted reserves and
managed separately off-balance sheet. Under IFRS 9, interest remeasurement of ISP on, investment in associates.
revenue is calculated by applying the effective interest rate to certain advances reclassified
the amortised cost of financial assets classified in stage 3 (A to amortised cost.
financial asset is classified at stage 3, when it becomes credit
impaired since initial recognition with ECL measured on a
lifetime basis). The difference between the contractual interest
and the interest recognised in line with IFRS 9 is therefore
suspended. This suspended interest is capitalised to the
advance and immediately impaired.
2 IFRS 15 impact on FirstRand
IFRS 15 contains a single model that is applied when The transition to IFRS 15 This led to a decrease of R25 million in
accounting for contracts with clients. The model specifies that resulted in the deferral of equity accounted reserves and
revenue is recognised as and when control of goods or revenue relating to value investment in associates.
services is transferred to a client and that revenue is added products and services
recognised at the amount that an entity expects to receive. provided to clients by
Depending on certain criteria, revenue is recognised at a point WesBank.
in time or over time.
3 IFRS 9 impact on RMH Property
IFRS 9 introduced a principle-based approach for the Certain equity securities were This led to a decrease of R7 million in
classification of financial assets based on the business model of previously designated as the available-for-sale reserve and an
the entity. available-for-sale under IAS increase in retained earnings.
39. As the underlying nature
of the equity securities
changed, management
believes a reclassification as
fair value through profit and
loss to be more appropriate.
Contingencies and commitments
As at 31 December
As at
R million 2018 2017 30 June 2018
Guarantees 3 852 1 603 2 823
BALANCE AT THE END OF THE PERIOD 3 852 1 603 2 823
As at 31 December 2018, RMH had issued guarantees in respect of debt funding raised in terms of the debt programme to the value of R2 481 million
(2017: R958 million). R1 371 million of the total guarantees in issue (2017: R645 million) relates to funding facilities provided to RMH Property associates.
Events subsequent to reporting period
Events subsequent to reporting period
The directors are not aware of any material events that occurred between the date of the statement of financial position and the date of this report.
Segmental report
FCC and RMH
R million FNB RMB WesBank Aldermore other FirstRand Property Other RMH
Six months ended 31 December 2018
Revenue - - - - - - 13 5 18
Share of after-tax profit of associates 2 952 1 159 326 353 570 5 360 197 7 5 564
Fee income - - - - - - - 1 1
Net fair value (loss)/gain on financial assets
and liabilities - - - - - - (49) 7 (42)
Net income 2 952 1 159 326 353 570 5 360 161 20 5 541
Administration expenses - - - - - - (56) (22) (78)
Income/(loss) from operations 2 952 1 159 326 353 570 5 360 105 (2) 5 463
Finance costs - - - - - - (3) (106) (109)
Profit/(loss) before tax 2 952 1 159 326 353 570 5 360 102 (108) 5 354
Income tax expense - - - - - - 5 (4) 1
PROFIT/(LOSS) FOR THE PERIOD 2 952 1 159 326 353 570 5 360 107 (112) 5 355
Headline earnings/(loss) 2 952 1 131 326 353 (217) 4 545 15 (112) 4 448
Normalised earnings/(loss) 2 951 1 131 326 353 (217) 4 544 15 (112) 4 447
As at 31 December 2017
Assets - - - - - - 1 188 316 1 504
Investment in associates - - - - - 47 421 2 453 - 49 874
TOTAL ASSETS - - - - - 47 421 3 641 316 51 378
TOTAL LIABILITIES - - - - - - 1 315 2 568 3 883
Six months ended 31 December 2017
Revenue - - - - - - 5 6 11
Share of after-tax profit of associates 2 612 1 074 324 - 332 4 342 (164) 5 4 183
Fee income - - - - - - - 3 3
Net fair value (loss)/gain on financial assets
and liabilities - - - - - - (24) 41 17
Net income/(loss) 2 612 1 074 324 - 332 4 342 (183) 55 4 214
Administration expenses - - - - - - (3) (22) (25)
Income/(loss) from operations 2 612 1 074 324 - 332 4 342 (186) 33 4 189
Finance costs - - - - - - (3) (77) (80)
Profit/(loss) before tax 2 612 1 074 324 - 332 4 342 (189) (44) 4 109
Income tax expense - - - - - - - (12) (12)
PROFIT/(LOSS) FOR THE YEAR 2 612 1 074 324 - 332 4 342 (189) (56) 4 097
Headline earnings/(loss) 2 612 1 074 324 - 272 4 282 (15) (60) 4 207
Normalised earnings/(loss) 2 612 1 074 324 - 233 4 243 (15) (60) 4 168
As at 31 December 2017
Assets - - - - - - 262 357 619
Investment in associates - - - - - 43 809 537 - 44 346
TOTAL ASSETS - - - - - 43 809 799 357 44 965
TOTAL LIABILITIES - - - - - - 56 2 233 2 289
Year ended 30 June 2018
Revenue - - - - - - 18 8 26
Share of after-tax profit of associates 5 404 2 505 632 94 408 9 043 (236) 5 8 812
Fee income - - - - - - - 18 18
Net fair value (loss)/gain on financial assets
and liabilities - - - - - - (53) 8 (45)
Net income/(loss) 5 404 2 505 632 94 408 9 043 (271) 39 8 811
Administration expenses - - - - - - (10) (46) (56)
Income/(loss) from operations 5 404 2 505 632 94 408 9 043 (281) (7) 8 755
Finance costs - - - - - - (5) (168) (173)
Profit/(loss) before tax 5 404 2 505 632 94 408 9 043 (286) (175) 8 582
Income tax expense - - - - - - (6) (16) (22)
PROFIT/(LOSS) FOR THE YEAR 5 404 2 505 632 94 408 9 043 (292) (191) 8 560
Headline earnings/(loss) 5 404 2 505 632 94 395 9 030 16 (195) 8 851
Normalised earnings/(loss) 5 403 2 504 631 94 363 8 995 16 (196) 8 815
As at 30 June 2018
Assets - - - - - - 397 285 682
Investment in associates - - - - - 46 557 2 033 - 48 590
TOTAL ASSETS - - - - - 46 557 2 430 285 49 272
TOTAL LIABILITIES - - - - - - 363 2 586 2 949
Geographical segments
United
R million South Africa Kingdom Europe RMH
Six months ended 31 December 2018
Share of after-tax profit of associates 5 047 353 164 5 564
Profit for the year 4 838 353 164 5 355
As at 31 December 2018
Investment in associates 43 239 5 022 1 613 49 874
Six months ended 31 December 2017
Share of after-tax profit of associates 4 183 - - 4 183
Profit for the year 4 097 - - 4 097
As at 31 December 2017
Investment in associates 44 346 - - 44 346
Year ended 30 June 2018
Share of after-tax profit of associates 8 674 94 44 8 812
Profit for the year 8 422 94 44 8 560
As at 30 June 2018
Investment in associates 47 182 - 1 408 48 590
ADMINISTRATION
DIRECTORS
JJ Durand (Chairman), HL Bosman (CE), JP Burger, P Cooper, (Ms) SEN De Bruyn, LL Dippenaar, PK Harris, (Ms) A Kekana, P Lagerström, MM Mahlare,
MM Morobe, R Mupita and JA Teeger
Alternate directors: DA Frankel, F Knoetze and O Phetwe
SECRETARY AND REGISTERED OFFICE
(Ms) EJ Marais
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 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: First floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Postal address: PO Box 61051, Marshalltown, 2107
Telephone: +27 11 370 5000
Telefax: +27 11 688 5221
INVESTOR CALL
Please register at http://www.diamondpass.net/5691366
The call is scheduled for 9:00 on Friday, 15 March 2019
Sandton
Thursday, 14 March 2019
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 14/03/2019 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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