CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2017

Transcription

1 CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 DECEMBER

2 CONTENTS Value created 1 About RMH 2 Our structure 3 Performance and outlook 4 External environment 4 Value created 4 Sources of income 5 Underlying intrinsic value 5 Interim dividend payment 6 Update on RMH s strategy 6 Outlook and future value creation 7 Interim dividend declaration 8 Board changes 8 Events subsequent to reporting period 8 Operational review 9 FirstRand 9 RMH Property 11 Financial review 12 Basis of presentation of results 17 Other required disclosures 18 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. 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. Refer to page 13. Ellen Marais CA(SA) prepared these financial results under the supervision of Herman Bosman LLM CFA. ARTWORK USED IN THIS ANNOUNCEMENT The First Meeting, a monotype print work by Sizwe Khoza, inspired by the three founders of RMH, GT Ferreira, Laurie Dippenaar and Paul Harris, who have instilled the strong values for which it has become known.

3 VALUE CREATED for the six months ended 31 December (comparatives at 31 December 2016) NET ASSET VALUE R42.7 billion +8% R39.5 billion 2016 R4.2 billion +3% R4.0 billion 2016 R127.5 billion +27% R100.5 billion 2016 NET INCOME INTRINSIC VALUE OF PORTFOLIO R111.8 billion +19% R93.7 billion 2016 HEADLINE EARNINGS R4.2 billion MARKET CAPITALISATION NORMALISED EARNINGS R4.2 billion +6% R4.0 billion +7% R3.9 billion DIVIDEND PER SHARE 168 cents +10% 153 cents

4 ABOUT RMH RMH IS A TOP 40 JSE-LISTED INVESTMENT HOLDING COMPANY WITH A 34% SHARE IN FIRSTRAND AND 100% OF RMH PROPERTY 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. Funding costs are expected to increase during the build phase of RMH Property. CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION Leading South African businessmen, GT Ferreira, Laurie Dippenaar and Paul Harris, founded RMH s forerunner 41 years ago. Since its listing in 1992, RMH has provided shareholders with a vehicle to co-invest with the founders of FirstRand. In 2011, the insurance interests were separately listed as Rand Merchant Investment Holdings Limited (RMI). In 2016, RMH 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 portfolios. INVESTMENT PORTFOLIO 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, with a market capitalisation of R377.2 billion at 31 December (2016: R298.3 billion). The extension of the investment strategy into property involved the acquisition of a 27.5% interest in Atterbury Property Holdings Proprietary Limited (Atterbury), a 34.1% interest in Propertuity Development Proprietary Limited (Propertuity), an urban renewal business and 40% of Genesis Properties Three Proprietary Limited (Genesis Properties), a mezzanine debt and equity funding business, to form RMH Property. A management ownership participation scheme with maximum participation of 10% in RMH Property has been put in place. INVESTMENT POLICY RMH invests in businesses that can deliver superior earnings, dividend growth and sustained long-term capital growth. We specifically target the wider financial services industry and industries complementary to our current portfolio. END OF AN ERA GT Ferreira has been RMH s chairman since inception and a driving force behind the group s value creation and relentless pursuit of high values. He has been involved in the financial services sector since graduating with commerce degrees from the University of Stellenbosch. In a stellar career, he was a driving force in building significant businesses and wealth. In April he will turn 70 and, with that, reach the point of compulsory retirement. Joining him are Pat Goss, Jan Dreyer and Khehla Shubane. These directors have a combined service of more than 130 years. RMH would like to thank these directors for their wisdom, innovation and commitment to RMH. Their leadership has created a legacy of leading financial services businesses such as FirstRand, Discovery, MMI Holdings and OUTsurance. The combined value of these businesses is R566 billion. RMH achieved shareholder returns of more than 25% per annum since Whilst GT will be sorely missed by his peers, his legacy shall remain. A set of unique values has been instilled in RMH with the most noticeable the ethos of an owner-manager culture. These values will ensure that the set strategy will be implemented with integrity and discipline to create further value for stakeholders. 2

5 OUR STRUCTURE Remgro Limited Royal Bafokeng Holdings Proprietary Limited Directors 28% 15% 10% 34.1% 100% FNB represents FirstRand s retail and commercial activities in South Africa and the broader African continent. RMB represents FirstRand s activities in the corporate and investment banking segments in South Africa, the broader African continent and India. WesBank represents FirstRand s activities in vehicle and asset finance in the retail, commercial and corporate segments in South Africa and the rest of Africa, and through MotoNovo in the UK. Through the DirectAxis brand, it also operates in the unsecured lending market. Ashburton Investments is the asset management business. 27.5% 34.1% 40% 3

6 PERFORMANCE AND OUTLOOK VALUE CREATED RMH produced satisfactory results for the six months ended 31 December : Normalised earnings increased 7% to R4.2 billion (2016: R3.9 billion). CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION EXTERNAL ENVIRONMENT The South African economy has already experienced a positive impact as a result of the improved domestic political environment, most notably in the strengthening in the local currency and improved business confidence. That, together with the broad-based upturn in the global economy, has improved the prospects for GDP growth. However, a number of major hurdles still remain. Whilst the economy is expected to recover moderately in 2018 and 2019 on the back of higher prices for commodities, growth will remain constrained if structural imbalances in the economy are not addressed. This is further hampered by high profile corporate failures and critical water shortages in various parts of the country. FNB SA ECONOMIC FORECASTS F 2018F 2019F % Real GDP growth % Unemployment % CPI average Rand/Dollar average Despite the challenges associated with the political uncertainty and other pressures during the last half of, RMH, on the back of a resilient performance by FirstRand, produced satisfactory results, in keeping with its commitment to long-term value creation. NET ASSET VALUE 31 DECEMBER (R MILLION) Normalised earnings per share amounted to cents per share (2016: cents per share). RMH s core investment, FirstRand, produced a resilient performance despite the challenging economic climate, increasing normalised earnings by 7% (2016:7%) and delivering a return on equity (ROE) of 22.5% (2016:22.9%). FirstRand franchises, FNB and RMB, produced strong operating results as WesBank came under pressure. The results of RMH Property were negatively impacted as the property sector faced strong headwinds. Market capitalisation increased by 19% to R111.8 billion (2016: R93.7 billion). Dividends for the period distributed to shareholders increased by 10% to cents per share (2016: cents per share). INTRINSIC VALUE AT 31 DECEMBER (R MILLION)

7 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, predominantly sourced from South Africa, are made up as follows: For the six months ended 31 December 2016 % change For the year ended 30 June FNB RMB WesBank (1) Other* (48) 772 FIRSTRAND NORMALISED EARNINGS Attributable to RMH RMH Property (15) 7 >(100) 8 Centre costs (60) (84) (30) (176) RMH NORMALISED EARNINGS * Other is the total of FCC including group treasury and preference dividend paid on perpetual preference shares issued by FirstRand. It further includes capital endowment, the impact of accounting mismatches, interest rate management and foreign currency liquidity management. UNDERLYING INTRINSIC VALUE At 31 December, RMH s market capitalisation had increased by 19% year-on-year. At that date, it amounted to R111.8 billion (2016: R93.7 billion) or cents (2016: cents) per share. This represented a 14.1% discount (2016: 7.2% discount) to RMH s underlying intrinsic value. Net asset value per share increased 8% to cents (2016: cents) per share. For the six months ended 31 December 2016 % change For the year ended 30 June Market value of listed interest (FirstRand) Book value of RMH Property* (19) 899 Net funding* (1 876) (1 990) (6) (1 546) Total intrinsic value Intrinsic value per share (cents) Net asset value per share (cents) * Recalculated on a consistent basis. Stated after impairment of associates totalling R174 million. DISCOUNT TO UNDERLYING INTRINSIC VALUE Since the unbundling of RMI in 2011, RMH has traded at an average 1.1% discount compared to the underlying intrinsic value of its investments. Over the last three and five years respectively, RMH has traded at an average discount of 3.6% and 5.9%. It is widely accepted and empirically observed that holding companies typically trade at a discount due to frictional costs such as central head-office costs and tax. Notwithstanding the 70% increase in RMH s share price since 1 August (up to 5 March 2018), RMH has traded at an average 11.6% discount to its intrinsic value since 1 August, peaking at 17.4% on 15 February The board believes that the recent widening of the discount is not a structural deviation from historical performance and can be attributed to changes in liquidity and volatility patterns on the JSE. Shareholders are referred to the document entitled Reflections on RMH s recent trading in relation to underlying intrinsic value on the RMH website, for a more detailed assessment. 5

8 PERFORMANCE AND OUTLOOK continued INTERIM DIVIDEND PAYMENT The board of RMH has resolved to declare a gross interim dividend of cents per share (2016: cents). The dividend is covered 1.8 times (2016: 1.8 times) by normalised earnings per share and represents a year-on-year increase of 10% (2016: 8%). UPDATE ON RMH S STRATEGY RMH s aim is to be a value-adding active enabler of leadership and innovation in banking and property. Our objective is to create a portfolio of businesses which are market-leaders and can deliver sustainable earnings, an attractive dividend yield and capital growth. We pursue opportunities in the changing financial services landscape which meet our stringent criteria and strong values. RMH s strategy is based on three initiatives designed to create sustainable value. They are: CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION DIVERSIFICATION OPTIMISATION MODERNISATION We are constantly evaluating opportunities to expand the services of our existing investees or add new investments, thereby creating more value. We focus on continuously improving the value our investees provide in order to create better value for our shareholders. We are well aware of renewal in our industries and will acquire proven businesses or invest in start-ups with special opportunities and drivers, which can create new value. 6

9 RMH has consistently measured its performance in terms of normalised earnings, which adjusts headline earnings to take into account non-operational items and accounting anomalies. For the detailed calculation of normalised earnings in respect of the current and prior period, refer to page 13. The true value created is measured in terms of capital growth, which reflects the growth in the underlying value of our investments. For a detailed analysis of RMH s intrinsic and net asset value, refer to the underlying intrinsic value table on page 5. RMH measures the success of its active, value-adding portfolio management strategy to its stakeholders in the form of investments that can deliver superior earnings, dividend growth and sustained long-term capital growth. The above does not preclude RMH from considering opportunities to sell and achieve a premium for FirstRand or parts thereof or an unbundling, as the case may be, at the appropriate time. OUTLOOK AND FUTURE VALUE CREATION Management will focus on the following in the period ahead: DIVERSIFY OPTIMISE MODERNISE DIVERSIFICATION OF INCOME STREAM AND DISTRIBUTION OF ASSETS Management will focus on the newly-created property business in identifying opportunities for both the core portfolio and specialist portfolio. It will evaluate expanding RMH s geographic footprint further, either independently and/or through the existing portfolio. OPTIMISATION OF OUR ESTABLISHED INVESTMENTS Management will continue its strategic dialogue and activity across the portfolio. It will assist with creating leadership stability and succession planning. MODERNISATION RMH will continue to identify new businesses, technologies and industry trends to complement RMH and its investee companies. RMH was instrumental in FirstRand s acquisition of Aldermore plc (see page 10). This demonstrates the value of RMH as a strategic shareholder and delivers on the strategy of diversification, optimisation and modernisation. We remain confident that both our clear strategy, in conjunction with the solid investment portfolio and underpinned by unwavering values, will allow RMH to continue delivering on its primary objective of creating sustainable, long-term value for shareholders. For and on behalf of the board GT Ferreira JJ Durand HL Bosman Chairman Deputy chairman Chief executive Sandton 7 7 March 2018

10 INTERIM DIVIDEND DECLARATION Notice is hereby given that a gross interim dividend of cents per share, payable out of income reserves, was declared on 7 March 2018 in respect of the six months ended 31 December. The dividend will be subject to Dividend Withholding Tax at a rate of 20%, which will result in a net dividend of 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 ordinary shares and redeemable preference shares. Shareholders attention is drawn to the following important dates: Last day to trade in order to participate in this dividend Monday, 26 March 2018 Shares commence trading ex-dividend on Tuesday, 27 March 2018 The record date for the dividend payment will be Thursday, 29 March 2018 Dividend payment date Tuesday, 3 April 2018 No dematerialisation or rematerialisation of share certificates may be done between Tuesday, 27 March 2018 and Thursday, 29 March 2018 (both days inclusive). By order of the board (Ms) EJ Marais Company secretary 7 March 2018 CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION 8 BOARD CHANGES In addition to GT Ferreira (chairman), Jan Dreyer and Khehla Shubane also retire effective 31 March Pat Goss (lead independent) will retire on 10 April A new lead independent will be announced in due course. In their stead, RMH welcomes the following new independent non-executive directors and alternate on 31 March 2018: Mamongae Mahlare MBA (Harvard) BSc (Chemical Engineering), managing director of Illovo Sugar S.A, who was previously employed by Coca Cola Beverages South Africa, SABMiller and Bain & Company; Ralph Mupita MBA BSc (Engineering), chief financial officer of MTN and past chief executive officer of Old Mutual Emerging Markets; James Teeger BCom CA(SA), leads the investment activities of the Oppenheimer family. He was previously a director of De Beers and spent 12 years at RMB, first as the head of property finance and then as co-head of structured finance; and David Frankel BSc (Electrical Engineering) MBA (Harvard), alternate to James Teeger, managing partner and co-founder of Founder Collective. He was co-founder and chief executive officer of Internet Solutions on the board of Dimension Data plc. He has served on the board of RMB since Jannie Durand will become chairman of the board. He is a long-serving non-executive director on RMH s board and was previously appointed deputy chairman in anticipation of GT Ferreira s retirement. EVENTS SUBSEQUENT TO REPORTING PERIOD During January 2018, RMH Property acquired a further 43.8% interest in Atterbury Europe, in addition to its indirect interest through Atterbury. This transaction was concluded in a phased approach and completed by the middle of February The transaction was financed by the issue of a combination of cumulative, redeemable preference shares and notes under RMH s recently established debt programme.

11 OPERATIONAL REVIEW FIRSTRAND The franchises performed as follows: CONTRIBUTION TO NORMALISED EARNINGS (%) FNB RMB WESBANK Net interest income (NII) increased by 6%, driven by good growth in deposits (up 9%) and solid advances growth (up 7%), offset by negative capital and deposit endowment following the 25 bps cut in the repo rate in July. Non-interest revenue (NIR) grew 10%, driven mainly by higher volumes across FNB s digital and electronic channels and growth in customer numbers and cross-selling. Fee, commission and insurance income represent 81% (2016: 83%) of FirstRand s NIR. Insurance revenues grew 7%, benefiting from strong volume growth in funeral policies (up 11%) and credit life policies (up 9%) in FNB. Total operating expenses increased by 8%. It continues to trend above inflation due to ongoing investment in the new insurance and asset management activities, platforms to extract further efficiencies and building the footprint in the rest of Africa. The cost-to-income ratio was 51.7% for the period (2016: 51.3%). Credit impairments increased by 8% (2016: 19%), with the credit impairment ratio increasing from 86 bps to 87 bps. Many of the group s lending books are trending in line with or better than expectations, particularly unsecured and corporate credit, mainly due to the early and proactive approach to origination and provisioning. Overall provisions at 98 bps remain conservative FNB increased pre-tax profits 11% and produced a ROE of 40.6%. FNB South Africa produced a strong performance, growing profits 12%, with a moderate turnaround in the rest of Africa, which delivered pre-tax profit growth of 3% compared to a 29% decline in The performance was impacted as set out below: FNB NII increased by 7%. This was driven by moderate growth in advances (up 5%) and good growth in deposits (up 11%). NIR grew by 11%. The result was achieved despite a conscious decision to rationalise the offering, simplifying both product and pricing options in the consumer segments. Overall fee and commission income benefited from strong transactional volume growth of 10% with excellent momentum across FNB s digital and electronic channels. Cost growth at 8% was acceptable on the back of continued investment in diversification strategies and rest of Africa expansion. Overall bad debts and non-performing loans (NPLs) increased period-on-period by 9%). The main driver of this increase was the rest of Africa portfolio, which continues to show strain (up 33%). Overall provisioning levels and overlays have increased. FNB Africa consists of a mix of mature (Namibia and Botswana) and start-up (Mozambique, Zambia, Tanzania and Ghana) businesses. Across the board, these businesses faced economic headwinds and emerging regulatory challenges. Whilst the portfolio has shown some recovery in the period under review, these businesses continue to face macro headwinds and regulatory challenges. 9

12 OPERATIONAL REVIEW continued RMB delivered a strong operational WesBank s pre-tax profit decreased by FirstRand has an organic strategy to grow performance. Pre-tax profits increased by 11%. The ROE of 22.9% demonstrates both the quality and diversification of the portfolio. The following impacted the results: 2% and it delivered an ROE of 18.6%. Whilst the local personal loans and corporate lending businesses showed strong operational performances, the local vehicle asset finance (VAF) business had a its wealth and investment management (WIM) activities. WIM activities have been moved to FNB, leaving AI as a pure asset management business. AI subsequently undertook a review of its operating CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION Investment banking and advisory delivered a strong performance, with pre-tax profits increasing by 18%. This was underpinned by good lending income aided by strong advances growth in prior periods, resilient fee income on the back of advisory and capital market mandates, lower credit impairments given historical proactive provisioning and strong operational leverage due to a continued focus on cost management. Corporate and transactional banking s focus on leveraging platforms, managing costs and expanding product offerings locally and in the rest of Africa, contributed to good profit growth, increasing pre-tax profits by 10%. Markets and structuring activities delivered a resilient performance, reflecting good client flow, robust structuring opportunities and an ability to successfully navigate volatile fixed income and foreign exchange markets, maintaining pre-tax profits. The investing activities showed a decrease in pre-tax profits of 5%. Annuity earnings have come under pressure. The quality and diversity of the Ventures and Corvest portfolios are, however, still reflected in the strong unrealised value of the portfolio of R3.4 billion. The business remains in an investment cycle and during the period several additional acquisitions were made. challenging six months. WesBank s results were influenced by the following: The SA VAF business was impacted by increased impairment levels, up from 1.42% in the prior year to 1.80% resulting in a 15% decrease in pre-tax profit. MotoNovo delivered GBP profit growth of 3%, reflecting ongoing conservatism from an origination and provisioning perspective, resulting in GBP new business production only up 0.3% (5.2% down in Rand terms). Actions taken include targeted risk cuts and termination of certain origination relationships which were resulting in higher risk new business. Personal loans performed well (up 18%), on the back of solid advances growth of 15% period-on-period. Margins have stabilised post the NCAA rate caps and targeted risk cuts. Corporate posted a strong operational performance (up 17%), albeit off a low base. Profitability was also impacted by cost growth of 9% due to increased profit share payable and further investments in platforms for both efficiency and regulatory requirements. platform, which resulted in some rationalisation of its cost base. It is now well positioned to deliver on its focused mandate. Ashburton Investments (AI) grew its assets under management by 15% to R101 billion. ALDERMORE PLC FirstRand s stated strategy is to achieve a more diversified revenue profile across products, segments and geographies. Currently 4% of total group earnings is generated by the group s UK business MotoNovo, one of the largest providers of motor finance for second-hand vehicles in the country. The success of this business, since it was acquired in 2006, can largely be attributed to the introduction of WesBank s operating model. On 6 November, FirstRand announced its formal offer for Aldermore plc, valuing Aldermore at approximately GBP1.1 billion (R20 billion) and representing a premium of 22% and a price to net tangible book value multiple of 1.80 times. FirstRand believes that MotoNovo is currently undiversified from a product and market perspective and the acquisition of Aldermore will accelerate the diversification process by using the strength of Aldermore s position in the SME, mortgage and savings markets. MotoNovo will be integrated within Aldermore to form a separate pillar under the leadership of Phillip Monks, Aldermore s chief executive. 10

13 MANAGEMENT OF FINANCIAL RESOURCES The management of the group s financial resources, which it defines as capital, funding and liquidity, and risk capacity, are critical and supportive to the achievement of FirstRand s stated growth and return targets, and are driven by overall risk appetite. The management of financial resources is executed through Group Treasury and is independent of the operating franchises. This ensures that the required level of discipline is applied in the allocation of financial resources and pricing of these resources. This also ensures that Group Treasury s mandate is aligned with the portfolio s growth, return and volatility targets, to deliver shareholder value. CAPITAL FirstRand has maintained its very strong capital position. FirstRand s total capital requirement at 16.9%, exceeds the regulatory minimum requirement of 10.8% and its internal target of 14.0%. Capital planning is undertaken on a three-year forward-looking basis. The level and composition take into account organic growth, stress-testing and scenario outcomes. External factors such as regulatory and accounting changes, macroeconomic conditions and future outlook are also taken into consideration. LIQUIDITY POSITION FirstRand exceeds the 80% minimum liquidity coverage ratio (LCR) as set out by the Basel Committee, with an LCR for the group of 107% (2016: 95%). For a comprehensive, in-depth review of FirstRand s performance, RMH shareholders are referred to RMH PROPERTY As part of its diversification strategy, RMH identified the property industry as one where substantial value can be unlocked. It currently holds the following investments: CORE PORTFOLIO Atterbury SPECIALIST PORTFOLIO Office, retail and industrial property % held Date acquired 27.5 July 2016 % held Date acquired Propertuity Urban renewal business 34.1 November 2016 Genesis Properties Mezzanine debt and equity funding business 40 December 2016 Atterbury is RMH s key development partner in its core portfolio and targets the more traditional areas of South African property (principally office, retail and industrial property). The specialist portfolio houses best-of-breed specialist developers and managers focused on key niches in the property market. This portfolio is aimed at achieving higher yields and faster net asset value growth than the more traditional core portfolio. Propertuity was the first investment and Genesis Properties the second investment made in the specialist portfolio. RMH Property made a R15 million operating loss during the period. In line with the changed valuations of the wider property sector, the underlying asset value of RMH Property has decreased. RMH Property is actively involved, partnering with the various management teams to improve operating results. RMH Property will continue to evaluate further property transactions and remains active in pursuing its strategy to create a diversified portfolio of superior and scalable entrepreneur-led businesses with proven track records in managing and building out property portfolios. Given the challenging operating environment, RMH Property will maintain a measured approach in building out its property investment portfolio, with greater emphasis currently being placed on delivery of shareholder value within the recently-acquired property investments. 11

14 FINANCIAL REVIEW The dominant part of RMH s income is its share in the after-tax profits of FirstRand, amounting to R4 342 million (2016: R4 049 million). CONDENSED CONSOLIDATED INCOME STATEMENT For the six months ended 31 December 2016 % change For the year ended 30 June Revenue Share of after-tax profit of associates Fee income 3 3 Net fair value gain on financial assets and liabilities Net income Administration expenses (25) (35) (29) (40) Income from operations Finance costs (80) (73) 10 (152) Profit before tax Income tax expense (12) (8) 50 (5) CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION PROFIT FOR THE PERIOD Attributable to: Equity holders of the company PROFIT FOR THE PERIOD CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 31 December 2016 % change For the year ended 30 June Profit for the period 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 (332) (543) (742) Available-for-sale financial assets 23 (13) (14) Profit/(loss) arising during the period 29 (16) (18) Deferred income tax (6) 3 4 Items that may not subsequently be reclassified to profit or loss. Share of other comprehensive income of associates after tax and non-controlling interests (15) (28) 58 Other comprehensive income for the period (324) (584) (45) (698) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Total comprehensive income attributable to: Equity holders of the company TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

15 COMPUTATION OF HEADLINE EARNINGS For the six months ended 31 December 2016 % change For the year ended 30 June Earnings attributable to equity holders Adjusted for: RMH s share of adjustments made by FirstRand: Gain on disposal of investment securities and other investments of capital nature (11) (1) Loss due to the fair value adjustment of a non-current asset held for sale 32 Gain on disposal of available-for-sale assets (7) (22) (18) Loss on disposal of investments in non-private equity associates 1 2 Impairment of non-private equity associates 1 (Gain)/loss on disposal of investments in subsidiaries (33) 2 (619) (Gain)/loss on disposal of property and equipment (9) 3 5 Fair value movement on investment properties (1) Impairment of goodwill 41 Impairment of assets in terms of IAS Other (10) Tax effects of adjustments Non-controlling interests adjustments RMH s own adjustments (Profit)/loss on deemed sale of associate due to change in effective shareholding (4) (18) 1 Impairment of assets in terms of IAS Impairment of associates 150 HEADLINE EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS 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 30 June 2016 change Headline earnings attributable to equity holders RMH's share of adjustments made by FirstRand: TRS and IFRS 2 liability remeasurement (47) (57) (21) Treasury shares 3 2 (4) IAS 19 adjustment (19) (18) (40) Private equity subsidiary realisations Adjusted for: Group treasury shares 1 (1) (3) NORMALISED EARNINGS FOR THE PERIOD Adjustment to reflect earnings impact based on actual RMH shareholding in FirstRand i.e. reflecting treasury shares as if they are non-controlling interests. 13

16 FINANCIAL REVIEW continued COMPUTATION OF PER SHARE INFORMATION CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION 14 For the six months ended 31 December 2016 % change For the year ended 30 June Earnings attributable to equity holders Headline earnings attributable to equity holders Normalised earnings attributable to equity holders Net asset value Number of shares in issue (millions) Weighted average number of shares in issue (millions) Diluted weighted average number of shares in issue (millions) Weighted average number of shares in issue (millions) for normalised earnings Earnings per share (cents) Diluted earnings per share (cents) Headline earnings per share (cents) Diluted headline earnings per share (cents) Normalised earnings per share (cents) Diluted normalised earnings per share (cents) Net asset value per share (cents) DIVIDEND PER SHARE cents For the six months ended 31 December 2016 % change For the year ended 30 June Dividend per share Interim Final TOTAL Dividend cover (relative to headline earnings) Dividend cover (relative to normalised earnings) NORMALISED EARNINGS PER SHARE (CENTS) Final Interim DIVIDEND PER SHARE (CENTS) Final Interim

17 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION The investment in associates increased with RMH s share of after-tax profits of R4 183 million (2016: R million) and RMH s share of associates other reserves of negative R22 million (2016: R5 million). This was offset by dividends received of R2 598 million (2016: R2 254 million). As at 31 December 2016 As at 30 June ASSETS Cash and cash equivalents Loans and receivables Investment securities Taxation receivable Derivative financial instruments Deferred tax asset 4 Investment in associates TOTAL ASSETS EQUITY Share capital and premium Reserves TOTAL EQUITY LIABILITIES Trade and other payables Provisions 13 Financial liabilities Derivative financial instruments Long-term liabilities Deferred tax liability TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES

18 FINANCIAL REVIEW continued CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 31 December 2016 For the year ended 30 June Net cash generated from operating activities Dividends paid (2 456) (2 160) (4 320) Net cash outflow in investment activities (11) (929) (840) Net cash (out)/inflow in financing activities (16) Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION Share capital and premium Total reserves Total equity holders' funds Noncontrolling interest Total equity Balance as at 1 July Total comprehensive income for the tear Dividends paid (2 160) (2 160) (2 160) Reserve movements relating to associates (5) (5) (5) BALANCE AS AT 31 DECEMBER Balance as at 1 July Total comprehensive income for the year Dividends paid (4 320) (4 320) (4 320) Reserve movements relating to associates (47) (47) (47) BALANCE AS AT 30 JUNE Balance as at 1 July Total comprehensive income for the period Dividends paid (2 456) (2 456) (2 456) Reserve movements relating to associates (22) (22) (22) BALANCE AS AT 31 DECEMBER

19 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 have not been audited or independently reviewed by the external auditor. 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. 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. Amendments to IAS 7 Statement of Cash Flows (IAS 7) and IAS 12 Income Taxes (IAS 12) became effective in the current year. These amendments have not had an impact on the group s reported earnings, financial position or reserves, or a material impact on the accounting policies. The amendments to IAS 7 introduce additional disclosures in the statement of cash flows that will enable the users of the financial statements to evaluate changes in liabilities arising from financing activities. This amendment has been applied retrospectively and comparative information has been presented in line with the amended disclosure requirements. The amendment to IAS 12 relates to the recognition of a deferred tax asset for unrealised losses on debt instruments that are measured at fair value for accounting purposes but considered at cost for tax purposes. The group is accounting for deferred tax on these assets in line with the amendments. The adoption of these amendments has no impact on the group. No other new or amended IFRS became effective for the six months ended 31 December 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: 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 broadbased black economic empowerment 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 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 equityaccounted method. 3. Adjustment to reflect earnings impact based on actual RMH shareholding in FirstRand based on actual number of shares issued by FirstRand. 17

20 OTHER REQUIRED DISCLOSURES CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION FAIR VALUE MEASUREMENTS VALUATION METHODOLOGY Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date i.e. an exit price. Fair value is therefore a market-based measurement and, when measuring fair value, RMH uses the assumptions that market participants would use when pricing an asset or liability under current market conditions, including assumptions about risk. When determining fair value it is presumed that the entity is a going concern and the fair value is therefore not an amount that represents a forced transaction, involuntary liquidation or a distressed sale. The fair value of publicly-traded derivatives is based on quoted bid prices for assets held or liabilities to be issued and current offer prices for assets to be acquired and liabilities held. The fair value of non-traded derivatives is based on discounted cash flow models and option pricing models as appropriate. The group recognises derivatives as assets when the fair value is positive and as liabilities when the fair value is negative. The best evidence of the fair value of a financial instrument at initial recognition is the transaction price (i.e. the fair value of the consideration given or received) unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. When such evidence exists, the group recognises profits or losses on day one. Where fair value is determined using valuation techniques whose variables include non-observable market data, the difference between the fair value and the transaction price (the day one profit or loss) is not recognised in the statement of financial position. These differences are however monitored for disclosure purposes. If observable market factors that market participants would consider in setting a price subsequently become available, the balance of the deferred day one profit or loss is released to profit or loss. Fair value measurements are determined on both a recurring and non-recurring basis. Recurring fair value measurements Recurring fair value measurements are those for assets and liabilities that IFRS requires or permit to be recognised at fair value and are recognised in the statement of financial position at reporting date. This includes financial assets, financial liabilities and non-financial assets. FINANCIAL INSTRUMENTS When determining the fair value of a financial instrument RMH uses the most representative price. Non-financial assets When determining the fair value of a non-financial asset, a market participant s ability to generate economic benefits by using the assets in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use, is taken into account. This includes the use of the asset that is physically possible, legally permissible and financially feasible. In determining the fair value of the group s investment properties and commodities, the highest and best use of the assets was their current use. Non-recurring fair value measurements Non-recurring fair value measurements are those triggered by particular circumstances and include the classification of assets and liabilities as non-current assets or disposal groups held for sale under IFRS 5 where fair value less costs to sell is the recoverable amount, IFRS 3 business combinations where assets and liabilities are measured at fair value at acquisition date, and IAS 36 impairments of assets where fair value less costs to sell is the recoverable amount. These fair value measurements are determined on a case-by-case basis as they occur within each reporting period. OTHER FAIR VALUE MEASUREMENTS Other fair value measurements include assets and liabilities not measured at fair value but for which fair value disclosures are required under another IFRS e.g. financial instruments at amortised cost. The fair value for these items is determined by using observable quoted market prices where these are available, or in accordance with generally acceptable pricing models such as a discounted cash flow analysis. FAIR VALUE HIERARCHY AND MEASUREMENTS Valuations based on observable inputs include: Level 1 fair value is based on quoted market prices (unadjusted) in active markets for identical instruments as measured on reporting date. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. Level 2 fair value is determined through valuation techniques based on observable market inputs. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. Valuations based on unobservable inputs include: Level 3 fair value is determined through valuation techniques which use significant unobservable inputs. 18

21 The table below sets out the valuation techniques applied by RMH for fair value measurements of financial assets and liabilities categorised as Level 2 assets and liabilities in the fair value hierarchy. Instrument Fair value hierarchy level Valuation technique Description of valuation technique and main assumptions Observable inputs Derivative financial instruments Equity derivative Level 2 Industry standard model The models calculate fair value based on input parameters such as stock prices and interest rates. Market interest rates and prices Financial assets and liabilities not measured at fair value but for which fair values are disclosed Level 2 Discounted cash flows The future cash flows are discounted using a market-related interest rate and curves adjusted for credit inputs. Market interest rates and curves Level 1 Level 2 Level 3 Total As at 31 December Recurring fair value measurements Financial assets Equity instruments at fair value through profit or loss Derivative financial instruments Investment in FirstRand FINANCIAL ASSETS RECOGNISED AT FAIR VALUE Recurring fair value measurements Financial liabilities Financial liabilities Derivative financial instruments FINANCIAL LIABILITIES RECOGNISED AT FAIR VALUE Level 1 Level 2 Level 3 Total As at 31 December 2016 Recurring fair value measurements Financial assets Equity instruments at fair value through profit or loss Derivative financial instruments Investment in FirstRand FINANCIAL ASSETS RECOGNISED AT FAIR VALUE Recurring fair value measurements Financial liabilities Financial liabilities Derivative financial instruments FINANCIAL LIABILITIES RECOGNISED AT FAIR VALUE

22 OTHER REQUIRED DISCLOSURES continued Level 1 Level 2 Level 3 Total As at 30 June Recurring fair value measurements Financial assets Equity instruments Derivative financial instruments 8 8 Investment in FirstRand FINANCIAL ASSETS RECOGNISED AT FAIR VALUE Recurring fair value measurements Financial liabilities Financial liabilities Derivative financial instruments 6 6 FINANCIAL LIABILITIES RECOGNISED AT FAIR VALUE CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION Reconciliation of Level 3 assets For the six months ended 31 December 2016 For the year ended 30 June Reconciliation of Level 3 assets Balance at the beginning of the period 123 Additions in the current period Fair value movement 43 (14) (18) BALANCE AT THE END OF THE PERIOD

23 Effect of changes in significant unobservable assumption of Level 3 instruments: Significant unobservable inputs Unobservable inputs of which reasonable possible changes are applied Reasonably possible changes applied Assets Equity instruments The underlying value of the unlisted equity was valued using a discounted cash flow model. Future cash flows are discounted using a market-related interest rate adjusted for credit inputs. Credit rates. Reduced and increased by 10% Derivate instruments Volatilities Volatilities Reduced and increased by 10% Fair value Using more positive assumptions Using more negative assumptions As at 31 December Equity instruments Derivate instruments As at 31 December 2016 Equity instruments As at 30 June Equity instruments CONTINGENCIES AND COMMITMENTS For the six months ended 31 December 2016 For the year ended 30 June Contingencies and commitments Guarantees BALANCE AT THE END OF THE PERIOD

24 SEGMENTAL REPORT CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION FNB RMB WesBank FCC and other FirstRand RMH Property Other RMH For the six months ended 31 December Revenue Share of after-tax profit of associates (164) Fee income 3 3 Net fair value gain on financial assets (24) Net income (183) Administration expenses (3) (22) (25) Income from operations (186) Finance costs (3) (77) (80) Profit before tax (189) (44) Income tax expense (12) (12) PROFIT FOR THE PERIOD (189) (56) Headline earnings (15) (60) Normalised earnings (15) (60) Assets Investment in associates TOTAL ASSETS TOTAL LIABILITIES FNB RMB WesBank FCC and other FirstRand RMH Property Other RMH For the six months ended 31 December 2016 Revenue Share of after-tax profit of associates Net fair value gain on financial assets/liabilities Net income Administration expenses (35) (35) Income from operations Finance costs (1) (72) (73) Profit before tax (59) Income tax expense (8) (8) PROFIT FOR THE PERIOD (67) Headline earnings (86) Normalised earnings (86) Assets Investment in associates TOTAL ASSETS TOTAL LIABILITIES

25 FNB RMB WesBank FCC and other FirstRand RMH Property Other RMH For the year ended 30 June Revenue Share of after-tax profit of associates (1) Fee income 3 3 Net fair value gain on financial assets 6 6 Net income Administration expenses (40) (40) Income from operations (22) Finance costs (2) (150) (152) Profit before tax (172) Income tax expense (5) (5) PROFIT FOR THE YEAR (177) Headline earnings (176) Normalised earnings (176) Assets Investment in associates TOTAL ASSETS TOTAL LIABILITIES GEOGRAPHICAL SEGMENTS RMH does not have any geographic segments as both FirstRand and RMH Property are viewed as South African entities. This is expected to change in the forthcoming financial year. 23

26 ADMINISTRATION RMB HOLDINGS LIMITED (Incorporated in the Republic of South Africa) Registration number: 1987/005115/06 JSE Ordinary share code: RMH ISIN code: ZAE DIRECTORS GT Ferreira (chairman), JJ Durand (deputy chairman) HL Bosman (chief executive), JP Burger, P Cooper, (Ms) SEN De Bruyn, LL Dippenaar, JW Dreyer, PM Goss, PK Harris, (Ms) A Kekana, O Phetwe, P Lagerström, MM Morobe and KC Shubane Alternate directors: F Knoetze and DR Wilson 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 , Sandton, 2146 Telephone: Telefax: Web address: 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: Telefax: