Total income for the year increased to R4.204 billion (2017: R3.843 billion), profit for the year attributable to owners of the parent rose to R566.5 million (2017: R486.9 million), while headline earnings per share grew to 43 cents per share (2017: 37.2 cents per share).
Given the company's increased confidence in business prospects and an improved economic outlook, the board decided to approve and declare a final gross dividend of 12.3 cents per share for the 2018 financial year (2017: 10.2 cents per share), representing a 21% increase from the previous financial year, from income reserves. This brings the full year increase in the total dividend to 18%, which for the first time in several years is more than our per share earnings growth for the full year. The group's dividend payout ratio nevertheless remains at the low end of the dividend payout policy range announced at the time of listing.
The recent political party leadership changes that led to a strengthening of the rand have improved the mood of South Africans, resulting in clients being more optimistic and confident about their future financial well-being.
The group's aim remains to service existing clients in an integrated manner that is seamless and market-leading, as well as to gain new clients. Several initiatives are in place to ensure this happens. The group's focus on products, platforms and client service excellence, through the quality of its advice process, works. As such, the prospects for continued growth are compelling.
The cash-generative nature of the business gives PSG Konsult several options of funding business growth initiatives which are, ultimately, aimed at enhancing our overall client experience.
The group will continue to prioritise organic growth in the domestic market, where we have relatively low but rapidly expanding market shares. The group's capital position adequately takes into account our current growth plans.
Revenue decreased to R8.5 billion (2017: R10.2 billion). Gross profit lowered to R1.5 billion (2017: R1.7 billion). Total income increased to R433 million (2017: R313 million). Profit attributable to owners turned around to R254 million (2017: loss of R796 million). Furthermore, headline earnings per share recovered to 24.8 cents per share (2017: headline loss of 47.5 cents per share).
The directors have resolved to declare a gross final dividend of 11.0 cents (2017: 11.0 cents) per share from income reserves in respect of the year ended 28 February 2018. The final dividend amount, net of South African dividend tax of 20%, is 8.8 cents per share for those shareholders who are not exempt from dividend tax.
Zeder remains actively involved with its underlying portfolio of companies and continuously seeks new investment opportunities. We believe that, despite inevitable cyclicality, investing in the agribusiness industry should offer attractive long-term returns and the strength of our companies and management teams, combined with a defensive portfolio mix, should contribute to the continued sustainability of results. We believe that the company and its shareholders will benefit from same.
Lending, investment and insurance income for the year increased to R17.3 billion (2017: R16.1 billion), net income jumped to R12.5 billion (2017: R10.7 billion), profit for the year climbed to R4.5 billion (2017: R3.8 billion), while headline earnings per share grew by 18% to 3 858 cents per share (2017: 3 281 cents per share).
The directors declared a final gross dividend of 945 cents per share on 26 March 2018, bringing the total dividends for the 2018 financial year to 1 470 cents per share.
Sustained focus on our fundamentals will keep us on course to become the best retail bank in the world.
Total income for the interim period lowered to R578.0 million (R592.7 million). Profit from operations decreased to R102.4 million (R112.9 million). Profit attributable to equity holders almost halved to R46.2 million (R84.7 million). In addition, headline earnings per share dipped to 157.95 cents per share (271.42 cents per share).
Interim preference share cash dividend
The Directors have declared a gross cash preference dividend number 27 of 427.42 cents per share (436.68 cents per share) ("preference dividend") for the period 1 July 2017 to 31 December 2017.
Interim ordinary share cash dividend
The Directors have declared an interim ordinary share cash dividend for the period ended 31 December 2017 of 46.894 cents (80.004 cents) per share.
Although the South African economy remains weak, the renewed confidence - particularly in the business and investor community - bodes well for the country and Sasfin. We expect trading conditions to remain challenging for the second half of the financial year but we are encouraged by the political situation and are hopeful that the credit environment will improve.
We believe that our strong balance sheet, good brand and diversified product offering, together with the investment we are making in human capital and technology, will position Sasfin well in the medium term. We expect that these efforts, together with our renewed focus on revenue growth, active management of our credit portfolio and cost management will result in long-term shareholder value creation.
During the past six months Sasfin has further implemented a number of key initiatives aimed at strengthening the business's human capital, enhancing infrastructure and to aid in achieving Sasfin's transformation objectives. Some of these initiatives include:
Women Investment Portfolio Holdings Ltd. (WIPHOLD) becoming a 25.1% shareholder which, together with other initiatives focused on sustainable and meaningful transformation, resulted in an improved BEE score for the Group;
Changes to our Board through the appointment of Gloria Serobe, Gugu Mtetwa, Gugu Dingaan, Shaun Rosenthal (as an Alternate Director) and Richard Buchholz as Non- Executive Directors;
Enhancing our executive leadership with a number of key appointments including the appointment of Michael Sassoon as Group Chief Executive Officer and Angela Pillay as Group Financial Director; and
Increased investment in innovation and digitisation with a view to improving the client experience.
Total income came in higher at R82 million (R41.7 million) whilst profit for the period increased to R64.3 million (R28.9 million). Furthermore, headline earnings per share grew to 36cps (16cps).
The pipeline of opportunities across all of the Funds remains very strong. While there is improvement in the macroeconomic environment, it is important that the Funds continue to invest selectively in assets that have a robust and defensible business case. Across the various Funds, Ethos is in exclusive discussions on seven investments. Two have been signed and are subject only to regulatory approval. A further two investments are well progressed and have signed term sheets. While there can be no guarantee that all of these transactions will close, Ethos remains confident that it will be able to close on the majority of these investments. The amount of capital required by Ethos Capital into these transactions, should the Funds be successful in closing all of them, would be approximately R400 million.
The Company will host a webcast presentation at 12:00 pm on Monday 19 March 2018, covering the above results and outlook. Participants should please register for the webcast in advance by navigating to this website: http://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=5478956&linkSecurityString=1a49fad60 To access the call, dial one of the numbers supplied and then enter the passcode and PIN provided in the confirmation (which will be sent to you upon registration). If you experience any issues with the registration, or do not have web access, please contact Arlene Byrne at 011 328 7414 for assistance.
Operating loss was constant at R7 million (2016: loss of R7 million). Loss for the period lessened to R56 million (2016: loss of R58 million). Basic loss per share narrowed to 348 cents per share (2016: loos of 361 cents per share).
Declaration of cash dividend
Taking into account the value of the outstanding preference share debt balance, the board of directors has seen it prudent to utilise cash for repayment of financing activities and have concluded that no cash dividend be declared for the period ended 31 December 2017 (2016: Rnil).
Revenue for the interim period increased to R576.7 million (2016: R506.8 million ). Gross profit was higher at R274.2 million (2016: R240.2 million). Profit from operations turned around to R12.3 million (2016: loss of R22 million). Profit for the period attributable to ordinary shareholders lowered to R12.5 million (2016: R31.6 million). Furthermore, headline earnings per share grew to 3.2 cents per share (2016: 0.84 cents per share).
GPI paid its 2017 annual dividend of 11.5 cents per share on 27 December 2017. Total dividend paid, net of treasury shares amounted to R50.3 million (43.8 million GPI shares held in treasury).
GPI continues its journey to build a formidable food group. With the new management team in place, new and innovative ways are constantly being sought to drive efficiencies throughout the Group.
While GPI sees itself as an active investor, the Group is preparing to reshape its overall structure by repositioning itself into a fully fledged investment holding company. Management remains confident that within GPI there is value to be unlocked.
Total revenue for the year from continuing operations jumped to GBP10.4 billion (GBP6.2 billion). Profit attributable to equity holders shot up to GBP909 million (GBP570 million). In addition, headline earnings per share improved to GBP16.5p per share (GBP14.1p per share).
The directors of Old Mutual plc have declared a second interim dividend for the year ended 31 December 2017 of GBP3.57p per share, which will be paid on Monday, 30 April 2018.
The global economy is recovering which provides a positive backdrop for all of our businesses. In our key market of South Africa, we expect sentiment and confidence to improve following the appointment of the new South African president and we expect improved GDP growth in the coming year. In the UK, while there remains uncertainty over the outcome of the Brexit negotiations, the economy continues to grow. Global markets have performed strongly which combined with geopolitical developments, means that there are downside risks to our businesses.
Full outlooks for the three underlying businesses are given in their respective business review sections of the annual report and accounts. The following are extracts of current trading commentaries from each:
OML's outlook: The OML Group's continuing operations have started the year on a positive note. Results from operations are trading in line with expectations since the 2017 year end. Nedbank reported its annual results on Friday 2 March 2018, and further details are available on its website.
Quilter: Quilter has continued to trade in line with expectations since the year end. Overall, we continue to remain confident in Quilter's prospects and it is anticipated that the next trading update will be for the first quarter of 2018, which is expected to be published in April 2018.
The managed separation process has already delivered significant value through the reduction in plc debt and in central costs. We believe that further value will be delivered once the managed separation is completed through the following developments:
The removal of the conglomerate discount
GBP95 million of savings in central costs
Continued improvement in the performance of underlying businesses
Each business accessing its natural shareholder base and achieving appropriate valuations
Each business accountable to its shareholders for returns and cash generation from capital employed
And will have its local regulator as its lead regulator
Old Mutual plc's next update will be at our Annual General Meeting on 30 April 2018.
Earned premiums net of reinsurance was 2% higher at R7.2 billion (2016: R7.0 billion). Income increased by 4% to R7.7 billion (2016: R7.4 billion). Profit for the period attributable to equity holders of RMIH rose by 27% to R2.1 billion (2016: R1.6 billion). Furthermore, headline earnings per share from continuing operations were 26% higher at 138.3 cents per share (2016: 109.4 cents per share).
Interim dividend payment
The board resolved to declare an interim dividend of 39.0 cents (2016: 53.0 cents) per ordinary share with an option to elect scrip in lieu of cash or to reinvest all or part of the cash dividend (net of any applicable taxes) in RMI ordinary shares. The interim dividend per ordinary share is covered 3.9 times (2016: 2.3 times) by the normalised earnings of 150.2 cents (2016: 121.5 cents) per share.
The number of capitalisation shares which RMI shareholders may elect to receive under the scrip distribution alternative has been determined in the ratio of 0.91765 fully paid RMI shares for every 100 RMI shares held on the record date.
A circular providing RMI shareholders with the full information on the cash dividend, the scrip distribution alternative and the reinvestment option, including a form of election to participate in either (i) the scrip distribution alternative or (ii) the reinvestment option, will be distributed to RMI shareholders on Wednesday, 14 March 2018.
The South African economy has already experienced a positive impact as a result of the improved domestic political environment, most notably in the strengthening of the Rand 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. Therefore, while 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 are not addressed appropriately. This is further complicated by recent high profile corporate failures and critical water shortages in parts of the country.
Changes to directorate
RMI welcomes the following new board members, effective from 31 March 2018, following the retirement of Messrs Ferreira, Dreyer, Goss (lead independent) and Shubane:
Jannie Durand will become chairman of the board. He is a long-serving non-executive director on RMI's board and was previously appointed deputy chairman in anticipation of GT Ferreira's retirement. A new lead independent will be announced in due course.
Net written premium for the interim period decreased to R159 million (2016: R163.7 million), operating profit turned around to R96.7 million (2016: loss of R45.8 million), profit attributable to equity holders of the parent came in at R56.4 million (2016: loss of R34.4 million), while headline earnings per share improved to 9.5 cents per share (2016: headline loss of 10.3 cents per share).
In line with the Group's strategy, the Board has not recommended any dividend payment to ordinary shareholders (2016: Nil).
Constantia is expected to achieve breakeven underwriting results in 2019 and has been suitably equipped for strong growth thereafter. Shareholders are however advised that underwriting is volatile by nature, especially in the context of the rapid business evolution underway at Constantia. The private investment portfolio has been expanded to include attractive opportunities with highly valued partners. The equity portfolio is, in management’s view, materially undervalued and contains several excellent companies with solid long-term prospects – however, it cannot be predicted when these valuations may materialise. Conduit is well-positioned to access the sustainable value creation mechanisms inherent in the portfolio of businesses it owns.
Total income for the year increased to R127.6 billion (2016: R121.2 billion), net income before capital items and equity accounted earnings rose to R42.8 billion (2016: R38.1 billion), profit for the year attributable to ordinary shareholders climbed to R26.2 billion (2016: R22.2 billion), while headline earnings per share grew to 1 640 cents per share (2016: 1 440.1 cents per share).
Declaration of dividends - Ordinary shares
Ordinary shareholders are advised that the board of directors has resolved to declare a final gross cash dividend number 97 of 510 cents (gross) per ordinary share (the cash dividend) to ordinary shareholders recorded in the register of the company at the close of business on Friday, 13 April 2018.
Preference share dividends
Preference shareholders are advised that the board has resolved to declare the following dividends:
- 6.5% first cumulative preference shares (first preference shares) dividend number 97 of 3.25 cents (gross) per first preference share, payable on Monday, 9 April 2018, to holders of first preference shares recorded in the books of the company at the close of business on the record date, Friday, 6 April 2018.
- Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend number 27 of 398.92 cents (gross) per second preference share, payable on Monday, 9 April 2018, to holders of second preference shares recorded in the books of the company at the close of business on the record date, Friday, 6 April 2018.
The global growth outlook remains positive and relatively synchronised, with recent momentum in advanced economies expected to continue. China's growth is expected to remain robust. Although upside inflationary pressures are emerging, particularly in the US, monetary policies in the advanced economies are expected to maintain a moderate pace of tightening, which should help sustain capital flows to emerging markets. From a 22-year low in 2016, growth in sub-Saharan Africa is expected to accelerate to 3.3% in 2018, supported by a world-wide economic upswing, and slightly rising commodity prices. In general, economic prospects across our network of countries are expected to improve, providing a favourable backdrop for our business.
We are also optimistic about the prospects in our home market of South Africa. We believe that the positive steps taken already by the ruling party subsequent to its leadership conference will improve business and consumer confidence. This positive sentiment, as well as pent-up demand, should begin to reflect in key economic indicators.
In the face of fast-growing competition from established banks and new competitors, we have a relentless focus on three immediate priorities - to transform into a client-centred, digitally enabled, and integrated universal financial services organisation.
We are in the final stages of our core banking journey and, by the end of the first quarter of 2018, 93% of our transactional accounts in South Africa will have been migrated onto our core banking platform. With this modernised platform in place, we will increasingly focus on front-end solutions and innovations, the benefit of which will be experienced directly by our customers.
We support faster, more inclusive and more sustainable economic growth and human development in South Africa and throughout the continent we are proud to call our home. At the same time, we are focused on improving the returns we deliver to our shareholders. Accordingly, we have lifted our medium-term ROE target range from 15% - 18% to 18% - 20%. We will continue to focus on the levers available to deliver on our targets, including positive jaws, efficient capital allocation and improving returns from PBB Africa Regions. We stand ready to serve our customers with consistent excellence, wherever they are and whatever financial services they require, online or in person.
Net income for the year increased to R114 billion (2016: R86.7 billion). Net operating result grew to R14.4 billion (2016: R12 billion). Profit for the year rose to R12 billion (2016: R10.6 billion). Furthermore, headline earnings per share were 486.3 cents per share (2016: 493 cents per share).
The Group only declares an annual dividend due to the costs involved in distributing an interim dividend to our large shareholder base. Sustainable growth in dividend payments is an important consideration for the Board in determining the dividend for the year. The board uses cash operating earnings as a guideline in setting the level of the normal dividend, subject to the Group's liquidity and solvency requirements. Dividend cover of cash operating earnings is managed broadly within a 1 to 1.1 times range to target consistent real growth of between 2% and 4% in the Group's normal dividend payment. The operational performance of the Group in the 2017 financial year enabled the Board to increase the normal dividend per share by 8% to 290 cents. This will maintain a cash operating earnings cover of approximately 1.1 times.
Revenue for the interim period grew to R11 million (R6 million) whilst income from operations was 3% higher at R4.2 billion (R4.1 billion). Profit attributable to equity holders rose 3% to R4.1 billion (R4.0 billion). In addition, headline earnings per share jumped 6% to 298.2 cents per share (280.7 cents per share).
Interim dividend payment
The board of RMH has resolved to declare a gross interim dividend of 168.0 cents per share (153.0 cents). The dividend is covered 1.8 times (1.8 times) by normalised earnings per share and represents a year-on-year increase of 10% (8%).
In addition to GT Ferreira (chairman), Jan Dreyer and Khehla Shubane also retire effective 31 March 2018. Pat Goss (lead independent) will retire on 10 April 2018. 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 Engineer) 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 2007.
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.
Company outlook and future value creation
Management will focus on the following in the period ahead:
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.
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. 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.
Net income for the period soared to R47 billion (2016: R20.7 billion), results of operations rose to R3.7 billion (2016: R3 billion), profit attributable to owners of the parent climbed to R1.2 billion (2016: R1 billion), while headline earnings per share grew to 82 cents per share (2016: 64.3 cents per share).
Interim dividend declaration
- No interim dividend has been declared.
- Dividends of R18.5 million (2016: R19.5 million) (132 cents per share p.a.) were declared on the unlisted A3 MMI Holdings Ltd. preference shares as determined by the company's Memorandum of Incorporation.
Capital, capital distribution and outlook
Our capital position remains solid on the current statutory basis and we had a buffer of R4.1 billion on 31 December 2017 on our internal basis. The CAR cover ratio was 2.8x as of 31 December 2017 versus 2.7x as of 31 December 2016. On a forward looking Solvency Assessment and Management (SAM) basis MMI is also well capitalised after taking into account all capital deployment initiatives and planned capital distributions.
Net interest income before impairment of advances for the period increased to R23.7 billion (2016: R22.2 billion), net income from operations rose 7% to R17.4 billion (2016: R16.3 billion), profit for the period attributable to ordinary equityholders climbed 7% to R12.7 billion (2016: R11.9 billion), while headline earnings per share grew by 6% to 224.2 cents per share (2016: 211.5 cents per share).
The directors declared a gross cash dividend totalling 130 cents per ordinary share out of income reserves for the six months ended 31 December 2017.
Since the outcome of the ANC elective conference in December 2017, sentiment and markets have staged a material recovery and the outlook for South Africa is more positive than it has been for some time.
FirstRand believes that the government should build on this renewed certainty, provide clear policy direction, appear willing to deal immediately with poor governance at some of the large and systemic SOEs, address corruption and state capture, and strengthen fiscal discipline.
In the medium to longer term, given the market leading positions of its businesses and the growth strategies it is executing on, FirstRand considers itself strategically well positioned to benefit from renewed growth.
Given the structural nature of many of South Africa's challenges, the group believes that the domestic fundamentals will not change quickly, therefore, it expects a similar macro picture for the remainder of its financial year to June 2018. The group remains committed to delivering real growth in earnings and superior returns to shareholders.
Operating income went up 6.6% to R48.4 billion (R45.4 billion) whilst profit from operations jumped 17.8% to R17.3 billion (R14.7 billion). Profit attributable to ordinary shareholders grew 14.7% to R11.6 billion (R10.1 billion). In addition, headline earnings per share were 2.2% higher at 2 452 cents per share (2 400 cents per share).
Final dividend declaration
Notice is hereby given that a final dividend of 675 cents per ordinary share has been declared, payable to shareholders for the six months ended 31 December 2017. The dividend has been declared out of income reserves.
Group economic and regulatory outlook
While structural challenges remain, 2018 has started with renewed optimism that these will be addressed and that improving business and consumer confidence should lead to a cyclical upturn off a low base. The SA economy is forecast to grow about 1,6% in 2018 as a resilient world economy and relatively firm international commodity prices are expected to provide further support to domestic production and exports. Business and consumer confidence should also improve from very weak levels in 2017, boosted by newly elected SA President Ramaphosa's promises to restore good governance, take immediate action against corruption and state capture, and make changes to many cabinet portfolios. Moderate growth in consumer spending and credit are forecast for 2018, while fixed investment, as well as government consumption and capital expenditure, is forecast to remain subdued.
The recovery in sub-Saharan Africa is expected to gather pace in 2018, underpinned by the ongoing global commodity price upswing as well as improved government finances and structural reforms in some African countries. The International Monetary Fund expects sub-Saharan Africa to grow faster at 3,4% this year.
Domestic inflation is forecast to recede moderately in the early part of 2018, before edging higher towards the end of the year, averaging about 5,1% over the year as a whole. Early in the year a stronger rand, coupled with easing food and fuel prices, should help contain inflation off the higher base that prevailed at the start of 2017. The rand remains the key risk to the inflation outlook. High expectations of political, policy and fiscal reforms have been built into the rand's recent rally. If the new ANC leadership fails to deliver, especially on the fiscal concerns, SA still runs the risk of being downgraded to universal subinvestment grade status, which could place the rand under pressure and alter the inflation outlook for the year. Given these uncertainties, the anticipated rise in US interest rates, the gradual tapering of quantitative easing programmes by other major central banks and the expected upturn in the domestic inflation cycle towards year-end, the SARB's Monetary Policy Committee is forecast to keep interest rates unchanged at current levels throughout 2018 and into 2019.
Fitch indicated that a failure to implement credible fiscal consolidation and any further economic deterioration could trigger another rating downgrade. S&P will act if both the economy and standards of public governance weaken further, while Moody's will downgrade the country if the measures to address the fiscal funding gap lack credibility or the chosen structural reforms fail to encourage investment and growth.
Overall economic conditions should improve off a low base and, despite the many challenges faced by the SA economy, the SA banking system remains sound, liquid and well capitalised.
Group prospects Our guidance on financial performance for the full year 2018 is currently as follows:
Average interest-earning banking assets to grow in line with nominal GDP.
NIM to be slightly above the 2017 level of 3,62%.
CLR to increase into the bottom half of our target range of 60 to 100 bps (under IFRS 9).
NIR to grow above mid-single digits.
Associate income to be positive (ETI associate income reported quarterly in arrear).
Expenses to increase by mid-single digits.
Given the loss in associate income from ETI in the 2017 base and continued delivery on the Nedbank strategy, our financial guidance is for growth in DHEPS for the full 2018 year to be in line with our medium-to-long-term target of greater than or equal to GDP + the consumer price index + 5%.
The outlook for our medium-to-long-term targets in 2018 is as follows, and we have now set ourselves specific 2020 targets of ROE (excluding goodwill) of greater than or equal to 18% and cost to income of lower than or equal to 53% as a pathway to ongoing and sustainable improvements in the key metrics that support shareholder value creation.
Net insurance premiums for the year decreased to R38 billion (2016: R39.4 billion), total earnings attributable to shareholders rose to R3.1 billion (2016: R2.2 billion), while headline earnings per share grew to 1 202.9 cents per share (2016: 811.7 cents per share).
In line with the group's dividend policy, the board has approved and declared a gross final dividend of 415 cents per share.
Lib-Hold's business is built on our deep relationships with our customers and advisers which is core to creating value for all stakeholders. We are taking decisive actions to improve profitability and place our business on a sound strategic footing. In 2018, management will focus on restoring the financial performance of the SA Retail insurance business, improving the investment performance of STANLIB, simplifying the group's overall operations and expanding our relationship with the Standard Bank Group.
We are confident that the group will emerge from this period of change with significantly greater potential to serve the needs of all stakeholders.
Net interest income for the year increased to R42.6 billion (2016: R42 billion), operating income before operating expenditure rose to R66.3 billion (2016: R63.6 billion), profit attributable to ordinary equity holders lowered to R13.8 billion (2016: R14.7 billion), while headline earnings per ordinary shares fell to 1 716.7 cents per share (2016: 1 796.6 cents per share).
Declaration of final ordinary dividend number 63
Shareholders are advised that an ordinary dividend of 595 cents per ordinary share was declared on 1 March 2018, for the period ended 31 December 2017.
In South Africa we expect a modest improvement in real GDP growth to 1.4% in 2018, with upside potential from fixed investment, a rebound in confidence and strong global growth, although fiscal consolidation remains a concern and there is downside risk for credit ratings. We believe the South African Reserve Bank will keep interest rates on hold for some time.
Our latest forecast indicates slightly better GDP growth of 5.8% in our markets in the rest of Africa, with further monetary policy easing in a number of countries. At current exchange rates the rand could weigh on our rest of Africa reported growth again in 2018.
Given these assumptions, and excluding major political, macroeconomic or regulatory developments, we expect our loan and deposit growth to improve in 2018. We again see stronger loan growth from the rest of Africa in constant currency and CIB than Retail South Africa. Our net interest margin is likely to decline slightly this year, due to rate cuts in the rest of Africa, regulatory costs and mix effects. Costs will remain well controlled and our operating Jaws should improve from last year’s. While IFRS 9 could increase volatility, we expect a stable credit loss ratio. Our CET1 ratio is likely to remain above Board targets, which will allow us to maintain our current dividend cover. Lastly, our normalised RoE should improve slightly in 2018.
Normalised financial results as a consequence of Barclays PLC separation On 1 March 2016, Barclays PLC announced its intention to sell down its 62,3% interest in the Group. A comprehensive separation programme was initiated by Barclays PLC and the Group to determine possible interactions between the companies to ensure that the Group can operate as an independent and sustainable group without the involvement of Barclays PLC.
Barclays PLC currently holds 14.9% in the Group.
As part of its divestment Barclays PLC contributed GBP765 million to the Group, primarily in recognition of the investments required for the Group to separate from Barclays PLC. Investments will be made primarily in rebranding, technology and separation-related projects and it is expected that it will neutralise the capital and cash flow impact of separation investments on the Group over time. The separation process will have an impact on the Group’s financial results for the next few years, most notably by increasing the capital base in the near-term and generating endowment revenue thereon, with increased costs over time as the separation investments are concluded. International Financial Reporting Standards (IFRS) require that the Barclays PLC contribution be recognised directly in equity, while the subsequent investment expenditure (including the depreciation or amortisation of capitalised assets), will be recognised in profit or loss. The aforementioned will result in a disconnect between underlying business performance and the IFRS financial results during the separation period.
The following presents the items which have been excluded from the normalised financial results:
Barclays PLC contribution (including the endowment benefit)
Hedging linked to separation activities
Technology and brand separation projects
Depreciation and amortisation on the aforementioned projects
Transitional service payments to Barclays PLC
Employee cost and benefits linked to separation activities
Net income for the period rose 14% to R25.2 billion (R22.0 billion) whilst results of operating activities jumped 28% to R2.6 billion (R2.0 billion). Profit attributable to equity holders shot up 38% to R1.7 billion (R1.2 billion). In addition, headline earnings per share increased by 31% to 1 425 cents per share (1 086 cents per share).
Dividend (Number 128)
Notice is hereby given that the board has declared a gross final dividend of 616.00 cents per share (2016: 570 cents per share), 492.80 cents net of dividend withholding taxation, where applicable, per ordinary share for the year ended 31 December 2017 to those members registered on the record date, being Friday, 23 March 2018.
Trading conditions remain very competitive in a low-growth economic environment, which translates into limited growth of insurable assets for the insurance industry. Real annual GDP of 0.8%, by the end of quarter 3 of 2017, and inflation (average CPI) of 4.7% was reported in 2017. We are, however, hopeful that new political leadership in South Africa will create an environment in which economic stagnation is arrested and, in time, turned around. A rebound in the economy will not only enhance growth prospects, but also potentially reduce levels of crime, arson, and fraud - all of which have put pressure on claims costs in recent years.
The group's focus remains on growing profitably in South Africa and to increase its international diversification through the Santam Specialist Business and Santam re. International diversification is supported by close collaboration with the SEM general insurance businesses, which utilises the extensive emerging markets footprint to source new business opportunities. Santam continues to focus strategically on supporting the development of the SEM general insurance businesses by allocating appropriate technical resources. In South Africa, continued focus is placed on the development of Santam's full multichannel capability.
Following the significant catastrophe events experienced during 2017, reinsurance rates have increased in 2018. Underwriting actions will continue to focus on the commercial and corporate property class of business, taking the increased reinsurance rates into account. We will continue to work with local municipalities to reduce risk and improve resilience.
The group remains focused on balancing profitable growth with efficiency to improve the management expense ratio over the medium term, and to optimise the claims and procurement value chains.
The investment market is likely to remain uncertain. The increased exposure to non-rand-denominated business further increases foreign exchange volatility for the group.
The calls for transformation and economic inclusivity demand a deeper and fresher way of thinking to build an inclusive and cohesive society. The group's transformation priorities are focused on the promotion of a diverse workforce, intermediary and supplier base; access to insurance products by non-traditional markets; and further impactful investment in communities.
The group economic capital requirement at 31 December 2017, based on the Santam internal economic model, amounted to R6 billion (2016: R5.8 billion). This resulted in an economic capital coverage ratio of 158% (2016: 155%), slightly above the midpoint of the target range of 130% to 170%.
We remain committed to efficient capital management.
Turnover increased to R88.2 billion (2016: R84.9 billion), operating profit lowered to R11.8 billion (2016: R13.7 billion) and profit attributable to owners of Sasol decreased to R6.9 billion (2016: R8.7 billion). In addition, headline earnings per share rose to 1 767 cents per share (2016: 1 512 cents per share).
Declaration of cash dividend number 77
An interim gross cash dividend of South African 500 cents per ordinary share (31 December 2016 – 480 cents per ordinary share) has been declared for the six months ended 31 December 2017. The cash dividend is payable on the ordinary shares and the Sasol BEE ordinary shares.
Business performance outlook* – strong production performance and cost reductions to continue
The current economic climate continues to remain highly volatile and uncertain. While oil price and foreign exchange movements are outside our control and may impact our results, our focus remains firmly on managing factors within our control, including volume growth, cost optimisation, effective capital allocation, focused financial risk management and maintaining an investment grade credit rating.
We expect an overall strong operational performance for the year ending 30 June 2018, with:
SSO volumes of 7.7 million tons due to an unplanned electricity supply interruption to our operations in January 2018;
Liquid fuels sales of approximately 59 million barrels due to lower production at Natref and slower South African economic growth;
Base Chemicals sales volumes, excluding merchant ethylene, to be between 1% to 3% higher than the prior year, with US dollar product pricing expected to follow oil prices. Normalised operating profit for the full financial year is estimated to be between R3 billion to R5 billion;
Performance Chemicals sales volumes, excluding merchant ethylene, to be between 2% to 3% higher, with average margins for the business remaining resilient;
Gas production volumes from the Petroleum Production Agreement in Mozambique to be between 114 bscf to 118 bscf;
Average utilisation rate at ORYX GTL in Qatar to exceed 92%, taking into account two planned plant shutdowns in the second half of the financial year;
Normalised cash fixed costs to remain in line within our inflation assumption of 6%;
Capital expenditure, including capital accruals, of R54 billion for 2018 and R38 billion for 2019 as we progress with the execution of our growth plan and strategy. Capital estimates may change as a result of exchange rate volatility and other factors;
Our balance sheet gearing up to 44%;
Rand/US dollar exchange rate to range between R12.50 and R14.00; and
Average Brent crude oil prices to remain between USD55/bbl and USD65/bbl.
The financial information contained in this business performance outlook is the responsibility of the directors and in accordance with standard practice, it is noted that this information has not been reviewed and reported on by the company's auditors.
Revenue for the year lowered to R2.2 billion (2016: R2.3 billion). Profit from operating activities decreased to R884.3 million (2016: R975.1 million). Profit for the year lowered to R835.5 million (2016: R919.7 million). In addition, headline earnings per share dropped to 996.6 cents per share (2016: 1 063.2 cents per share).
Declaration of ordinary dividend
The board has decided to declare an ordinary dividend for the year ended 31 December 2017 at 605 cents per ordinary share (2016: 560 cents).
We are clear about our 2018 priorities and hence the issues that we need to tackle to improve our operational resilience and to achieve our strategy and to grow this business sustainably.
The JSE is a largely fixed-cost business. Therefore we will maintain our focus on costs, while making the necessary capital investments in areas that will enhance the Group's sustainability and diversify revenue.
Our revenues are variable and largely driven by activity on the various markets that we operate. For this reason, the board makes no projections regarding the Group's financial performance in 2018.
Notice of annual general meeting
Notice is hereby given that the thirteenth AGM of shareholders of the JSE will be held at the JSE on Thursday, 17 May 2018, at 16:00, to transact the business as stated in the AGM notice forming part of the annual financial statements. The AGM notice includes the proxy form.
Changes to the board
During 2017 the company announced the following changes to the board:
Leanne Parsons resigned from the board as an alternate director with effect from 31 December 2017 and will be leaving the JSE in 2018 after more than 30 years of service.
Nolitha Fakude joined the board on 15 November 2017 as an independent non-executive director.
In compliance with JSE Listings Requirements shareholders are advised that the following directors will retire from the board, in terms of the board's tenure policy for non-executive directors, at the upcoming annual general meeting (AGM) to be held on 17 May 2018 and will not be available for re-election:
Nomavuso Mnxasana, an independent non-executive director, has indicated that although eligible for a further term, she will be retiring at the AGM in May 2018 and will not be available to stand for re-election to the board.
The board will make an announcement in due course regarding further appointments, in order to ensure that the board retains an appropriate mix of skills and experience.
Net insurance premium revenue increased by 6% to R15.631 billion (2016: R14.703 billion), profit from operations rose 19% to R3.859 billion (2016: R3.249 billion), profit attributable to ordinary shareholders jumped 31% to R2.656 billion (2016: R2.028 billion), while headline earnings per share grew by 36% to 426.1 cents per share (2016: 314 cents per share).
Interim dividend declaration
B preference share cash dividend declaration:
On 15 February 2018, the directors declared an interim gross cash dividend of 518.15068 cents (414.52054 cents net of dividend withholding tax) per B preference share for the period 1 July 2017 to 31 December 2017, payable from the income reserves of the Company. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.
Ordinary share cash dividend declaration:
Notice was given that the directors have declared an interim gross cash dividend of 101 cents (80.8 cents net of dividend withholding tax) per ordinary share, out of income.
Prospects for continued growth are compelling. Discovery's established businesses are all well positioned in their respective markets, its emerging businesses are insurgent, and four substantial businesses will be launched during 2018. This gives the Group confidence of ongoing growth and performance into the future reserves for the six month period ended 31 December 2017.
Insurance premium revenue increased by 11% to R1.096 billion (2016: R989.5 million), profit attributable to equity holders of the group climbed 18% to R262.2 million (2016: R222.3 million), while headline earnings per share grew 17% to 78.44 cents per share (2016: 66.94 cents per share).
Management's primary focus is currently directed at improving the quality of new business written whilst maintaining production levels and reducing the level of withdrawals and debit order disputes.
New initiatives include the acquisition of "Switch2", an innovative start-up providing niche credit life products as well as the introduction of the "Estate Preservation" product which will be launched within a month.
The roll out of new distribution channels, particularly the Agency and Broker channels, are expected to create meaningful value for the Group into the future.
Clientèle remains committed to providing products that are relevant and meet policyholders' needs whilst delivering these to the market conveniently and efficiently.
The Board is encouraged by the new initiatives and their prospects for growth and value creation in the Group's target market.
Operating income for the year was higher at GBP387 000 (GBP318 000) whilst operating profit grew to GBP114 000 (GBP90 000). Profit attributable to shareholders shot up to GBP563 000 (GBP69 000). In addition, headline earnings per share turned around to GBP0.3p per share (loss of GBP0.9p per share).
The board recommends an interim gross dividend of GBP0.55p per share (ZAR9.36442 cents) (GBP0.55p) which will be paid on Friday 6th April 2018 to those members registered at the close of business on Friday 16th March 2018 (SA and UK). Shareholders on the South African register will receive their dividend in SA Rand converted from sterling at the closing rate of exchange on Thursday 1st February 2018 being GBP 1 = SA Rand 17.02622.
Although markets have shown resilience and strength over the course of the last year, they are close to an all-time high. The board remains cautious about the potential impact of major geo-political risks. Accordingly, the board expects to see continued volatility in the equity and currency markets. These may have a material impact on the value of our investments.
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