Separately listed RMB Holdings (RMBH) (R35,8bn market capitalisation at end December 2007) has interests in:-
* banking and insurance FirstRand (33%);
* health insurer Discovery (27%);
* personal lines insurer OUTsurance (62%);
* specialist insurer RMB Structured Insurance (81%); and
·*short-term insurance broker Glenrand M.I.B (16%).
FINANCIAL HIGHLIGHTS
RMBH’s key income statement outcomes for the six months ended 31 December 2007 are:-
* Headline earnings + 26% to R2,12bn (2006 : R1,69bn)
* Headline earnings per share + 25% to 179,2c (2006 : 143,4c)
Accounting anomalies and non-operational factors have a distorting impact on the calculation of Headline Earnings. RMBH prefers to focus on “Normalised earnings” – where such anomalies have been eliminated - as the basis against which to measure operational performance.
* Normalised earnings + 13% to R2,08bn (2006 : R1,84bn)
* Normalised earnings per share + 12% to 174,4c (2006 : 155,1c)
* Interim dividend per share + 12% to 69,0c (2006 : 61,5c)
RMBH Chairman GT Ferreira commented that: “Both the international and the South African financial services environment were particularly challenging in the six months to December 2007. This is underscored by the fact that, in the period under review, we were not able to achieve our medium term target of 10% real growth in earnings per share. In this context, the outcome achieved is acceptable.”
The make-up of RMBH’s normalised earnings for the six months was as follows:
(Click on image to enlarge)
FirstRand grew pro forma normalised earnings (ie. excluding Discovery) by 12%, after robust performances by FNB (+ 25% ) and Momentum (+19%) were diluted by significant increases in credit defaults at WesBank’s vehicle finance business and trading losses at RMB’s equity trading division.
OUTsurance produced an excellent 33% increase in normalised earnings with new business volumes exceeding expectation.
RMBH itself benefited from continued growth in its international emerging markets investment portfolio.
RMBH increased its interim dividend by 12%, in line with the increase in normalised earnings per share.
OUTLOOKFerreira anticipates that, given the continuing volatility in global and local capital markets, combined with rising inflation and high interest rates, the second half of the financial year will continue to represent a challenging operating environment.
Against this background, he is cautious regarding earnings prospects for the year to June 2008 and believes it is unlikely that RMBH will meet its targeted growth in earnings of 10% above inflation, in the current financial year. He anticipates that, given the quality of RMBH’s franchises and the diversified nature of its portfolio, over the medium term earnings will trend back to this stated target.