Ecsponent changed their year end to June, therefore there are no comparable figures. Revenue for the year came in at R467 million, operating profit was R412.4 million, profit attributable to owners of the parent from owners of the parent was recorded at R102.2 million, while headline earnings per share was 6.99117 cents per share.
No ordinary dividends have been declared or proposed for the year.
The Company has issued and listed three additional classes of Preference Shares. Six classes are now in issue with the following dividend terms:
- Class A - 10% fixed rate monthly dividend;
- Class B - 0% monthly dividend, but redeeming at a rate equal to 170% of the Initial Issue Price;
- Class C - prime plus 4% floating rate monthly dividend.
- Class D - 12.5% fixed rate monthly dividend;
- Class E - 11.25% fixed rate monthly dividend
- Class G - 10% fixed rate monthly dividend
Preference Share dividends and interest of 241.1 million accrued to investors for the 15 months ended 30 June 2018. The dividends are classified as finance costs and included in the finance cost expense in the Consolidated Statement of Profit and Loss and Comprehensive Income.
Key elements of the Group's on-going growth strategy are:
- the continued focus on core businesses;
- the continued investment in the Group's credit operations;
- achieving a reduction in concentration risk;
- increased emphasis on high yield equity opportunities and sector diversification;
- increased focus on technology to facilitate trade;
- obtaining rand-based and foreign currency institutional funding; and
- aggressive cost rationalisation/reduction.
The abovementioned approach is aimed at the continued development of a robust and complementary financial services group which continues to provide sustainable returns.
Total income for the year increased to R1.219 billion (2017: R1.167 billion). Profit from operations lowered to R203.8 million (2017: R245.6 million). Profit attributable to equity holders of the Group decreased to R114.9 million (2017: R176.6 million). In addition, headline earnings per share dropped to 381.21 cents per share (2017: 611.76 cents per share).
Preference share cash dividend
The directors have declared a gross cash preference dividend number 28 of 414.03 cents per share (2017: 429.57 cents per share) ("preference dividend") for the period 1 January 2018 to 30 June 2018.
Ordinary share cash dividend
The directors have declared a final ordinary share cash dividend for the year ended 30 June 2018 of 104.37 cents (2017: 160.42 cents) per share.
Together with the interim ordinary dividend of 46.894 cents (2017: 80.004 cents) per share declared on 20 March 2018, the total ordinary dividends for the financial year ended 30 June 2018 amount to 151.26 cents (2017: 240.42 cents) per share.
2018 was a year of significant change for the Sasfin Group with the following material changes:
-The restructure into three focused, yet symbiotic Pillars to decentralise management and enhance performance;
-Women Investment Portfolio Holdings Limited (WIPHOLD) becoming a 25,1% shareholder;
-Changes to our board through the appointment of Gugu Mtetwa, Gloria Serobe, Gugu Dingaan, Shaun Rosenthal (as an Alternate Director) and Richard Buchholz as non-executive directors;
-Enhancing our executive leadership with most notably a new Financial Director and CEO, and several key appointments of experienced Bankers across the Group.
The executive leadership team went through a rigorous strategic process, the outcome of which was a five-year strategy approved by the board, and bought into by our management and staff, which established seven strategic focus areas that enable our purpose and unlock our vision.
Our purpose is to contribute to society by going beyond a bank to enable the growth in the businesses and global wealth of our clients.
The South African economy critically needs growing entrepreneurial businesses and, unfortunately, small to medium size businesses struggle to engage with banking and financial service providers in a way which works for their business. Sasfin, through its Banking and Capital pillars, is well positioned to deliver value to these entrepreneurial businesses through our excellent team, wide range of products and services and solution orientated mindset. This is increasingly being supported by enhancements in technology.
The economy also needs to grow a generation of investors and savers, at a time when South Africa's savings rates are amongst the lowest in the world. Sasfin has been successfully managing global wealth for generations and as the world becomes smaller, the need for global investment management is greater than ever. Over the last couple of years Sasfin has developed a wider range of solutions to service a broader spectrum of investors in a manner which is simple, agile and cost effective. This approach too, is being constantly enhanced through technology.
We have developed a clear vision of how we will unlock our purpose and, as highlighted below, we are making meaningful progress in each of our strategic focus areas which should result in growing stakeholder value into the future:
-High-performance culture built on the Sasfin values - significant changes to the executive leadership team including the finalisation of our long-term incentive scheme which is aligned to responsible stakeholder value creation;
-Sustainable and effective transformation - the introduction of WIPHOLD as a shareholder together with meaningful transformation initiatives, has resulted in an improved Level 4 BB-BEE Score on the revised codes;
-Effective organisational capacity - aligning our people, technology and processes to limit red tape so that our clients can engage with us in a seamless way, while ensuring regulatory compliance;
-Enhancing our products, user-experience and innovation - this is evident in our digital offerings including our novel B\\Yond banking platform and our acquired SWIP business;
-Building strong sales capability - we are driving growth in organic sales through strengthening our distribution and origination teams across the Pillars, remuneration structures and product sets;
-Growing our offshore revenue - we continue to grow foreign income within Sasfin Wealth which was strengthened by the investment in DMA (previously Saxo Capital Markets South Africa) and we are exploring opportunities in all three pillars;
-Improving our credit quality - we have strengthened our team and processes and have refined our risk appetite to ensure greater granularity in loans and advances while driving growth.
We are operating in uncertain times globally and challenging times in South Africa, and therefore businesses and investors need, more than ever, a partner to go beyond for them. The economy recently went into technical recession, and a significant improvement in the economy is not expected in the short term, which is concerning, but opportunities should continue to present themselves, for which, we are well-positioned to capitalise on.
Our strong balance sheet, good brand and diversified product offering together with the investment we are making in human capital and technology, positions Sasfin well in the medium term.
These efforts, together with a renewed focus on revenue growth, active management of our credit portfolio and cost management should result in long term shareholder value creation.
ARCInvest released their maiden final results, therefore there are no comparatives. Fair value movements on the investment in the ARC Fund at FVTPL came in at R794.7 million, profit for the period was recorded at R674.5 million, while headline earnings per ordinary share was 81 cents per share.
Earned premiums net of reinsurance for the year ended June 2018 increased by 1% to R14.173 billion (2017: R14.064 billion), profit before taxation jumped 12% to R5.403 billion (2017: R4.838 billion), profit for the year attributable to equity holders of RMIH climbed 17% to R3.897 billion (2017: R3.327 billion), while headline earnings per share from continuing operations grew 15% to 269.7 cents per share (2017: 234.2 cents per share).
The board of directors of RMIH has declared a final cash dividend of 65 cents per ordinary share for the year ended 30 June 2018. The number of capitalisation shares which RMIH shareholders may elect to receive under the scrip distribution alternative has been determined in the ratio of 1.71053 fully paid RMIH shares for every 100 RMIH shares held on the record date.
Outlook and future value creation
Discovery has built a strong portfolio of businesses at different maturity levels, all meeting stringent actuarial, market competitiveness and client service metrics. The established businesses are of significant scale and continue to grow, with Discovery Health leading in open scheme market share, Discovery Life leading in new business market share, Discovery Invest in the top ten retail asset takers and VitalityHealth and VitalityLife in the top five market leaders. In addition, these businesses entered adjacent industries over the year, manifesting in the launch of Discovery for Business in South Africa and the introduction of the long-term savings business, VitalityInvest in the UK, further building the Vitality UK composite model.
The emerging businesses of Discovery Insure, Vitality Group and Ping An Health, while taking longer than expected to grow, all turned profitable over the year and demonstrated their potential. Discovery Insure is the fastest-growing short-term insurer in South Africa, Vitality Group is building a leading global behavioural insurance platform and Ping An Health is the leading private health insurer in China. All three businesses continued to scale and innovate while maintaining positive actuarial dynamics, offering substantial value to the Global Vitality Platform.
Due to the scale and growth rate of the established businesses, the growth model is proving to be less linear as time progresses. This is driving the need to invest in large strategic initiatives with significant growth potential, which is the rationale behind launching Discovery Bank and VitalityInvest. Excluding the effect of the Bank, Discovery expects continued growth without recourse to additional capital. The Bank will flatten earnings for the 2019 year, as post-launch, the amortisation of the build cost will emerge. Thereafter, organic growth is expected.
A fast-moving and increasingly digital landscape plays to Hastings' strengths. Its capabilities in agile pricing, analytics and anti-fraud combined with its disciplined underwriting and strong capital position means it is well-placed to continue to identify and grow in profitable parts of the market. These core attributes have transformed the business from a small disruptor in 2011 into a household name in the UK short-term insurance market, a market with over 50 million car and home policies.
Looking forward, Hastings will continue to invest in technology. It is continuing with the phased roll-out of the next-generation Guidewire platform, with home policies now live on selected price comparison websites and car renewals migration underway. Guidewire will enable continued delivery of operational efficiencies. Hastings also developed new digital capabilities over the last few months and launched a new Hastings mobile app. Hastings is continuously developing its pricing and anti-fraud platforms and announced its participation in a mobility and vehicle technology research programme, alongside a range of other partners from the automotive and mobility sectors.
MMI's vision is to be the preferred lifetime financial wellness partner with a reputation for innovation and trustworthiness. The group strategy, which focuses on client-centricity, growth and excellence, remains intact. However, the specific strategic objectives will be set in more practical and meaningful terms, with an increased focus on execution and delivery. To this end, MMI has made good progress during the year. The reset in priorities was done to enable improved performance and future growth. Key activities include encouraging a more entrepreneurial culture, increased focus on successfully growing core businesses in South Africa and exiting marginal operations outside South Africa. MMI has simplified its operating model and empowered its businesses with end-to-end accountability from sales to service. Centralised functions need to demonstrate clear efficiency or standardisation benefits. MMI will also be increasingly vigilant in not attempting too many new initiatives at any given time.
The maturity of the South African insurance markets and modest short-term macroeconomic growth prospects continue to put pressure on MMI's revenue growth expectations. MMI will therefore also focus on financial discipline, cost-efficiencies and streamlining infrastructure. Building the foundation for longer-term prosperity will depend on a strong distribution and service culture and relevant digital enablement.
OUTsurance's strategic focus includes:
- Growing its market share and product range in Australia. Over the last two years, Youi's new business growth has slowed, resulting in a stagnating market share. The successful delivery of various operational improvements and product innovation can steer the business back to growth. Youi's entry into the bodily injury market has been successful and continues to grow its commercial insurance capability, which is an exciting long-term growth proposition;
- Enhancing digital capabilities and infrastructure. OUTsurance has materially increased its investment in the group's technological capability and digital skills as it aims to more rapidly digitise its client experience across all products;
- Establishing a leading tied-agent distribution capability. The commercial insurance strategy is the primary growth initiative of the South African operation and will continue to receive significant focus in 2019 and beyond. The agency-force is also expected to make a significant contribution to the distribution of personal lines products;
- Grow the product footprint of OUTsurance Life. OUTsurance has recently entered the South African funeral insurance market, which is large, competitive and profitable. The team is also working to refocus the underwritten life operation to ensure its competitiveness and strength of its client proposition;
- Earnings diversification. The disruptive threat of autonomous vehicles, ride-sharing and continuous improvements in vehicle safety is material to the size of the vehicle insurance profit pool. Although this threat is of a long-term nature, it is important that the group's future dependency on motor insurance is reduced. OUTsurance will continue to consider various opportunities to expand within the financial services sector; and
- Regulatory environment. Regulatory changes within the financial services landscape remain a constant. OUTsurance remains well-positioned to adopt new regulations and to contribute positively to the design thereof.
OUTsurance remains confident that Youi's growth will recover in the near term and that it will deliver on the exciting growth initiatives of the South African operation. Expansion in the South African economy is expected to remain challenging, which, coupled with historically low premium inflation, will contain the growth prospects of the OUTsurance personal lines operation in the near term. The group will continue to maintain strict adherence to its underwriting discipline and invest in its operational capability to drive world-class client service.
RMIH Investment Managers face a challenging South African market. However, the appetite to allocate assets to boutique managers remains in place, with a positive upward trend over the past two quarters. Many affiliates have been able to raise long-only mandates, with hedge funds remaining under pressure.
Affiliates across the portfolio remained focused on delivering good investment performance for their clients while continuing to strengthen their businesses with a well-diversified client base and adding to their investment and operational capabilities. RMIH Investment Managers has implemented a new shareholder value map which will enhance the team's focus on six functional areas including strategic support, asset raising, thought leadership, marketing, industry 4.0 and operations, risk and finance. These aim to add targeted value to affiliates in an innovative, focused and transparent manner.
The RMIH Investment Managers team is currently concentrating on the growth phase of the business, which includes the implementation of strategic growth initiatives at each affiliate. The portfolio is largely complete but the team will remain opportunistic and add potential affiliates to either solve additional or underexposure in certain asset classes or to further add value to the portfolio. RMIH Investment Managers will ensure that its reputation as a trusted, value-adding but non-interfering shareholder of choice for the independent asset management industry remains a core philosophy.
The team and its partners in MMI and RBH are excited and committed to work with all its affiliates and support their growth paths over time to create a more diversified and transformed business. Alida de Swardt has settled in well as the new CEO and the shareholders remain committed over the long-term to see the success of the affiliate business model.
In addition to optimising its existing portfolio, RMIH plans to diversify and modernise its investment portfolio through opportunities across a wide spectrum of scale and lifecycles of financial services businesses.
Traditional financial services
The investment team continues to investigate potential investment opportunities, both locally and globally, that conform to RMIH's investment philosophy and generate superior returns for shareholders.
Next-generation financial services
AlphaCode's vision is to pioneer the next frontier of financial services by identifying, partnering and growing extraordinary next-generation financial services entrepreneurs. During the year, AlphaCode has had success with both partnering these next-generation businesses with its underlying portfolio companies to drive innovation and modernisation and building an investment portfolio of superior entrepreneur-led, early-stage fintech-focused businesses that have achieved some market traction and are poised for rapid growth.
During the year under review, AlphaCode participated in a large capital raise in Prodigy Finance, an international fintech platform that offers loans to postgraduate students accepted into business, engineering and law at the world's top universities, alongside one of Europe's leading venture capital fintech investors, Balderton Capital. In August 2017, RMIH invested in Luno, a crypto-currency platform that enables clients to buy, sell and store Bitcoin and Ethereum. Luno is a global platform with operations in South Africa, Nigeria, Malaysia, Singapore and 35 countries across Europe. AlphaCode has a strong pipeline of investment opportunities and will continue to invest in this space.
AlphaCode remains committed to building the broader entrepreneurial sector in South Africa by supporting high-impact next-generation financial services entrepreneurs, with a strong emphasis on transforming financial services and partnering with young, black entrepreneurs. As part of this commitment, AlphaCode has launched three new programmes to identify, partner and grow entrepreneurs at all stages of their journey. AlphaCode Explore is a 12-month learnership programme which will develop and upskill 20 data scientists and enable them to build and proto-type fintech businesses. AlphaCode Incubate seeks to identify and reward early-stage, high-potential black-owned financial services businesses. Each year, eight businesses will be selected to complete a customised 12-month programme and benefit from an entrepreneurial package worth R2 million each. Lastly, AlphaCode Accelerate is a 24-month scale-up programme that provides mentorship, expert guidance and support services to financial services businesses in the growth phase, on the path to scale and job creation.
After year-end, Andile Maseko was appointed as the new AlphaCode eco-system manager.
There are several factors that could strain RMIH's earnings growth in the 2019 financial year:
- The group had an exceptionally low claims experience in the 2018 financial year, especially in the South African and Australasian operations of OUTsurance. This also contributes to lower premium inflation;
- Cyclical movements, regulatory reform and the impact of Brexit on the environment in which Hastings operates;
- MMI being in the process of repositioning its business, with a focus on getting the fundamentals in place for longer-term growth; and
- Investments into new initiatives like Discovery Bank are expected to result in significant additional expenses for Discovery in the following financial year.
Over the longer term, RMIH remains confident that its clear strategy, in conjunction with its solid investment portfolio that is underpinned by unwavering values, will allow it to continue delivering on its primary objective of creating enduring value for shareholders.
Income from operations for the year increased by 9% to R84.724 billion (2017: R77.785 billion), profit for the year attributable to ordinary equity holders rose by 8% to R26.546 billion (2017: R24.572 billion), while headline earnings per share grew by 12% to 472.7 cents per share (2017: 423.7 cents per share).
The directors declared a gross cash dividend totalling 275 cents per ordinary share out of income reserves for the year ended 30 June 2018.
Interim (declared 5 March 2018) : 130.0 cents
Final (declared 5 September 2018) : 145.0 cents
Following the outcome of the ANC elective conference in December 2017 sentiment and markets staged a recovery and the outlook for South Africa remains more positive than it has been for some time. Given, however, the structural nature of many of South Africa's challenges the group believes that domestic fundamentals will not change quickly.
Global financial conditions will prevent the SARB from easing monetary policy despite the low growth outlook. This, combined with lower commodity prices and prospects of a slowdown in global growth next year, means that domestic economic activity will remain subdued in 2019. Against this backdrop, private sector activities such as corporate investment and household consumption will most likely remain under pressure.
In the medium to longer term, given the market leading positions of its businesses in South Africa and the growth strategies it is executing on, FirstRand considers itself strategically well positioned to benefit from renewed system growth. FNB's momentum is expected to continue on the back of customer and volume growth, and cross-sell and up-sell strategies will deliver higher insurance revenues and good deposit and advances growth. RMB's private equity realisations are expected to be lower in the current year compared to previous financial years.
With regard to the rest of Africa, there are signs that economic activity in most of the other sub-Saharan African countries that FirstRand operates in are picking up. The Nigerian economy is experiencing an oil price-induced lift and growth rates in Namibia and Botswana are also expected to improve. The group expects its portfolio to continue to show an improved performance.
In the UK, uncertainty over the outcome of Brexit continues to dominate the macroeconomic outlook and will continue to weigh on business and consumer confidence, which in turn will suppress investment spending to a certain degree. These ongoing headwinds were all anticipated when FirstRand acquired Aldermore and, as indicated previously, the group expects the growth trajectory to slow relative to the previous year, owing to competitive margin pressure and normalisation of credit costs.
The group expects to continue to deliver real growth in earnings and superior returns to shareholders.
Net income for the interim period decreased to R44.033 billion (2017: R47.289 billion), net operating result increased to R6.726 billion (2017: R6.547 billion), profit for the period attributable to shareholders' fund rose to R5.050 billion (2017: R4.867 billion), while headline earnings per share grew to 251 cents per share (2017: 227.7 cents per share).
No interim dividend declared in line with Group policy.
Economic growth prospects in our key markets are not expected to improve for the remainder of the year and will continue to impact on our ability to accelerate organic growth. Structural growth and new initiatives such as the Capitec Bank agreements should, however, support operational performance in the second half of the year. Particularly pleasing is the conclusion of investment-related mandates of R5 billion by Sanlam Corporate in July 2018, which will make a marked contribution to VNB and new business volumes. On the negative side, SI received notice of an R8 billion outflow of low margin index-tracking funds managed on an outsourced basis. We continue to attract flows into the Satrix index-tracking funds and the impact of the withdrawal on profitability should therefore be minimal. Focus also remains on addressing the few areas within the wider Group that failed to deliver to target in the first six months, so as to get them back on track for the financial year.
Shareholders need to be aware of the impact that the level of interest rates and financial market returns and volatility have on earnings and GEV. Relative movements in these elements may have a major impact on the growth in normalised headline earnings, VNB and GEV to be reported for the 2018 financial year.
We will continue to diligently execute on the strategic priorities identified in the Group's 2017 Integrated Report.
Net income rose to R75.3 billion (R54.7 billion) and results from operations came to R5.7 billion (2017: R5.7 billion). Earnings for the year attributable to owners of the parent lowered to R1.4 billion (2017: R1.5 billion). Furthermore, headline earnings per share dipped to 93 cents per share (2017: 118.3 cents per share).
Final dividend declaration
No interim or final dividend has been declared.
Dividends of R18.5 million (2017: R19.0 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.
It is not easy to turn around a comprehensive financial services company like MMI. The maturity of the South African insurance markets and modest short-term macro-economic growth prospects continues to put pressure on our revenue growth expectations. Given these factors, combined with increased losses expected in F2019 from our new initiatives, we expect only a modest increase in earnings for F2019. We will continue to focus on financial discipline, cost efficiencies and streamlining infrastructure to restore annual earnings to a level of R3.6 billion - R4.0 billion by F2021. Leading up to F2021, we will be working hard to build the foundation for longer-term prosperity, which will depend on a strong distribution and service culture, and relevant digital enablement.
Insurance premium revenue grew to R36.7 billion (R33.5 billion) whilst profit from operations went up 32% to R8.3 billion (R6.2 billion). Profit attributable to ordinary shareholders rose 28% to R5.7 billion (R4.4 billion). In addition, headline earnings per share increased 32% to 899.6 cents per share (683.1 cents per share).
Dividend and capital
Interim dividends paid in respect of the 2018 financial year
The following interim dividends were paid during the current financial year:
- B preference share dividend of 518.15068 cents (414.52054 cents net of dividend withholding tax), paid on 12 March 2018.
- Ordinary share dividend of 101 cents per share (80.8 cents net of dividend withholding tax), paid on 19 March 2018.
Final dividend declaration in respect of the 2018 financial year
B preference share cash dividend declaration:
On 23 August 2018, the directors declared a final gross cash dividend of 501.91781 cents (401.53425 cents net of dividend withholding tax) per B preference share for the period 1 January 2018 to 30 June 2018, payable from the income reserves of the company.
Ordinary share cash dividend declaration:
Notice is hereby given that the directors have declared a final gross cash dividend of 114 cents (91.2 cents net of dividend withholding tax) per ordinary share, out of income reserves for the year ended 30 June 2018.
Company prospects for growth
Discovery is well positioned for growth. Setting apart the effect of the Bank, Discovery expects continued growth without recourse to additional capital. The investment in Bank will impact earnings for the 2019 year, as post launch the amortisation of the build cost will emerge. Thereafter, the organic growth model is expected to revert to its long-term average.
The Group released their maiden interim results following its listing therefore there are no comparatives. Gross insurance premium revenue was R39.7 billion, net earned premiums were R36.4 billion and total revenue was recorded at R67.9 billion. Profit after tax for the financial period attributable to equity holders of the parent was recorded at R10.6 billion. In addition, headline earnings per share was 168.1 cents per share.
Old Mutual declared an interim dividend of 45 cents per share.
The Group also declared a special dividend of 100 cents per share.
In July, the SARB revised their 2018 GDP forecast for South Africa down to 1.2% from 1.7%, a reflection of a deteriorating outlook in SA. Recent announcements of foreign investments into SA as well as progress in improving the management of SOEs show potential for an economic turnaround, however this is likely to only take place in the medium to long term.
The International Monetary Fund (IMF) forecast 3.4% growth for sub-Saharan Africa, with a revised forecast for Zimbabwe at 2.4% (up from less than 1%), and more than 2% growth in the East and West African countries we operate in. This presents the opportunity for our operations in those regions to grow their consumer base and product lines.
Global growth is still expected to rise, assuming trade tensions and market risks do not result in a downturn that will affect global and local markets.
In spite of the deteriorating SA growth outlook, the above macroeconomic risks and strong competitive pressures, we remain confident in delivering solid 2018 results mostly aligned with our previously communicated medium term targets. AHE will continue to be influenced by investment returns in South Africa and Zimbabwe.
Gross written premium increased by 13% to R15.591 billion (2017: R13.795 billion), net insurance premium revenue rose by 5% to R11.121 billion (2017: R10.551 billion), profit attributable to equity holders of the company jumped 49% to 1 124 cents per share (2017: 753 cents per share), while headline earnings per share jumped to 1 018 cents per share (2017: 593 cents per share).
The board has declared a gross interim dividend of 363.00 cents per share (2017: 336.00 cents per share), 290.40 cents net of dividend withholding taxation, where applicable, per ordinary share for the six months ended 30 June 2018 to those members registered on the record date, being Friday, 21 September 2018.
Trading conditions remain very competitive in a low-growth South African economic environment, which translates into limited growth of insurable assets for the insurance industry. GDP contracted in the first quarter of 2018 and the South African Reserve Bank reduced its growth forecast for 2018 to 1.2%. It is expected that economic activity will in the near term be constrained by weak consumer spending linked to the recent increase in value added tax and by unemployment, which is at near record levels. Inflation (annual CPI) of 5.1% was reported at the end of July 2018.
The group's focus remains on growing profitably in South Africa and increasing its international diversification through the Santam Specialist Business and Santam re. International diversification is supported by close collaboration with the SEM general insurance businesses. In South Africa, continued focus is being placed on the development of Santam's full multichannel capability and refocused MiWay growth initiatives.
The focus will remain on appropriate underwriting actions to manage the risk associated with weak economic conditions, also taking the increased reinsurance rates into account. Santam continues to work with local municipalities to reduce risk and improve resilience.
The group remains focused on optimising efficiency by balancing management costs and underwriting profitability as well as the use of technology to improve underwriting results.
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 group continues to prioritise and focus on its transformation priorities. These include 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 30 June 2018, based on the Santam internal economic model, amounted to R6.4 billion (2017: R5.9 billion). This resulted in an economic capital coverage ratio of 158% (2017 normalised: 151%), somewhat above the midpoint of the target range of 130% to 170%. Santam has submitted its internal model application pack to the Prudential Authority in July 2018 for approval.
We remain committed to efficient capital management.
Net insurance premiums for the year increased 11% to R2.076 billion (2017: R1.873 billion), profit for the year attributable to equity holders of the Group rose 5% to R490.3 million (2017: R466.5 million), while headline earnings per share grew 5% to 147.22 cents per share (2017: 140.29 cents per share).
Notice was given that the directors have declared a final gross dividend of 125.00 cents (2017: 115.0 cents) per share on 16 August 2018 for the year ended 30 June 2018.
Management's primary focus is to improve the quality of new business written and to reduce withdrawals, thereby improving margins. Growth of the Agency and Broker channels are expected to create meaningful value for the group in future. The new initiatives, "Switch2", an innovative start-up providing niche credit life products to the South African consumer and the "Estate" product, which were launched in the second half of the financial year are in their infancy and management will monitor their progress closely. In an exciting development, Clientèle has signed an evergreen agreement with the Shembe Foundation under which it will provide Clientèle products to Shembe Church members. Policy sales will commence in the next few months. The Board is encouraged by the new initiatives and their prospects for growth and value creation in the Group's target market.
Turnover increased to R181.5 billion (2017: R172.4 billion). Earnings before interest and tax (EBIT) declined to R17.7 billion (2017: R31.7 billion). Profit for the year attributable to owners of Sasol Ltd. lowered to R8.7 billion (2017: R20.4 billion). Furthermore, headline earnings per share was 2 744 cents per share (2017: 3 515 cents per share).
Declaration of cash dividend number 78
A final gross cash dividend of South African 790 cents per share (30 June 2017 - 780 cents per ordinary share) has been declared for the year ended 30 June 2018. The cash dividend is payable on the ordinary shares and the Sasol BEE ordinary shares. The board is satisfied that the liquidity and solvency of the company, as well as capital adequacy remaining after payment of the dividend is sufficient to support the current operations for the ensuing year. The dividend has been declared out of retained earnings (income reserves).
Business performance outlook
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 2019, with:
SSO volumes of between 7.6 to 7.7 million tons impacted by a planned full shutdown in 2019;
Liquid fuels sales of approximately 57 to 58 million barrels due to a planned full shutdown at SSO;
Base Chemicals sales volumes, excluding US produced products, to be 2%-3% higher than the prior year, with US dollar product pricing expected to follow Brent crude oil prices. Our US HDPE plant will contribute for the full year, while LCCP is expected to start contributing during the second half of the year.
Performance Chemicals sales volumes to be 2%-4% higher, excluding the LCCP;
Gas production volumes from the Petroleum Production Agreement in Mozambique to be between 114 bscf to 118 bscf;
We expect to achieve an average utilisation rate of 95% at ORYX GTL in Qatar;
Normalised cash fixed costs to remain in line within our inflation assumption of 6%;
Capital expenditure, including capital accruals, of R38 billion for 2019 and R30 billion for 2020 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 to range between 40%-44%;
Rand/US dollar exchange rate to range between R12.50 and R13.50; and
Average Brent crude oil prices to remain between USD65/bbl and USD75/bbl.
Total income for the interim period rose to R62.5 billion (R61.2 billion). Profit for the period attributable to ordinary shareholders jumped to R12.7 billion (R12.3 billion). In addition, headline earnings per share shot up to 793.9 cents per share (755.5 cents per share).
Declaration of dividends
Shareholders of Standard Bank Group (the company) are advised of the following dividend declarations out of income reserves in respect of ordinary shares and preference shares.
Ordinary shareholders are advised that the board has resolved to declare an interim gross cash dividend No. 98 of 430 cents per ordinary share (the cash dividend) to ordinary shareholders recorded in the register of the company at the close of business on Friday, 14 September 2018.
Preference shareholders are advised that the board has resolved to declare the following interim dividends:
6.5% first cumulative preference shares (first preference shares) dividend No. 98 of 3.25 cents (gross) per first preference share, payable on Monday, 10 September 2018, to holders of first preference shares recorded in the books of the company at the close of business on the record date, Friday, 7 September 2018.
Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend No. 28 of 386.43 cents (gross) per second preference share, payable on Monday, 10 September 2018, to holders of second preference shares recorded in the books of the company at the close of business on the record date, Friday, 7 September 2018.
Whilst the global growth outlook for 2018 and 2019 is unchanged at 3.9%, the underlying growth is expected to be less even. Relative to expectations earlier in the year, the International Monetary Fund is expecting the US to grow slightly faster and UK, Europe and EM slightly slower. The broadly supportive EM capital inflows seen in recent periods could reverse if US monetary tightening is faster than expected. This would negatively impact EM currencies and capital markets.
Sub-Saharan Africa's recovery is expected to continue on the back of higher commodity prices. Growth is estimated to increase from 2.8% in 2017 to 3.4% in 2018 and rise further to 3.8% in 2019. Within our portfolio, we expect the macros in the West region to continue to improve, supported by higher average oil prices and the East region to continue to deliver GDP growth of 5 to 6%. More specifically, Kenya's credit growth could experience a recovery if the regulatory caps and floors, imposed in 2016, are amended or lifted. The South & Central region performance will be impacted by SA growth in 2H18.
In South Africa, while consumer confidence has improved, delays in resolving key policy issues remain an obstacle to business confidence, fixed investment and growth. Inflation is expected to remain inside the 3% to 6% target range, supporting a flat interest rate outlook for the rest of the year. The group has appetite to grow lending judiciously in South Africa. There is no doubt competitive pressures will continue to increase, however, we will fiercely protect our existing customer franchise and grow by partnering with third parties to build new, innovative offerings and revenue streams.
Our strategy is unchanged and actions being taken are positioning us to deliver contextually-relevant offerings to our customers, to compete effectively against both incumbents and new entrants and to grow our franchise in partnership with our clients, employees and business partners, in a sustainable way.
With revenue pressures expected to continue, operating expenses will be a focus area for 2H18 to ensure better full year jaws. More broadly, we will continue to balance growth, resilience and returns to deliver on our medium-term objectives of sustainable growth in earnings and delivering an ROE in our 18% to 20% target range.
The following results are the company's maiden interim results and are therefore incomparable. Total revenue for the period was GBP857 million whilst profit for the period attributable to equity holders was GBP342 million. In addition, headline earnings per share were GBP2.8 pence per share.
Special interim dividend
In line with statements given at the time of the company's listing, there is no routine interim dividend in relation to the first half of 2018. However, the board has declared a special interim dividend of GBP12.0 pence per share from the surplus proceeds from the sale of the Single Strategy business. The special interim dividend will be paid on 21 September 2018 to shareholders on the UK and South African share registers on 24 August 2018.
As highlighted at our Capital Markets Showcase event earlier this year, our near-term agenda is focussed on three key priorities:
First, we need to successfully implement our new platform and execute a smooth migration for existing customers.
Second, we will continue to invest in growth by recruiting and building our Adviser and Investment Manager base.
Third, we need to ensure that we optimise our business so that we deliver increased operating leverage, and I look forward to updating the market on our plans with our full year results in March 2019.
These are all on track and we remain confident in our strategic path and the growth prospects that we set out in our prospectus ahead of listing. We are very much where we expected to be at this stage on the Quilter journey. While short-term market fluctuations and Brexit induced uncertainty may exacerbate market volatility or temper momentum in near-term flows, we operate in a large and fragmented market that has plenty of growth potential. We are a young company with a 250 year heritage and we're just getting started.
Net interest income went up 3.4% to R14.0 billion (R13.5 billion) whilst profit from operations was 3.8% higher at R9.1 billion (R8.8 billion). Profit attributable to ordinary shareholders jumped 27.0% to R6.7 billion (R5.2 billion). In addition, headline earnings per share jumped 26.3% to 1 387 cents per share (1 098 cents per share).
Interim dividend declaration
Notice is hereby given that an interim dividend of 695 cents per ordinary share has been declared, payable to shareholders for the six months ended 30 June 2018. The dividend has been declared out of income reserves.
Economic and regulatory outlook
The International Monetary Fund expects global economic growth to accelerate to 3.9% in 2018 from 3.7% in 2017, with advanced countries forecast to grow by 2.5% and emerging and developing economies by 4.9%. Growth in sub-Saharan Africa is expected to accelerate to 3.3% in 2018 from 2.9% in 2017.
Given SA's poor economic performance in early 2018, Nedbank Group's current forecast for GDP growth in 2018 is 1.0%, down from 1.3% in 2017. GDP growth thereafter is forecast to increase to 1.8% and 2.2% in 2019 and 2020 respectively. Although inflation is forecast to remain within SARB's inflation target range, it is likely to drift higher during the rest of the year and into 2019. The upward pressure on inflation is expected to emanate from higher food, fuel and electricity prices, as well as a moderately weaker rand. The rand is forecast to be volatile as global risk appetite softens on growing concerns over world growth prospects in light of rising protectionism and the normalisation of monetary policy in most developed countries. As a result, domestic interest rates are forecast to remain unchanged for the remainder of the year, but the risk to the interest rate outlook has shifted to the upside.
Consumer spending is likely to remain firm, supporting moderate growth in household credit demand. Faster growth appears unlikely given that household finances are likely to be hurt by slower wage growth and higher living costs. Corporate credit demand will remain subdued, but should improve modestly off a low base. Continued global growth and rising commodity prices could eventually translate into cyclical recoveries in SA's major export-orientated industries. Some revival is also expected in renewable-energy projects, but persistent policy uncertainty, particularly around property expropriation without compensation, the Mining Charter and the challenging domestic operating environment, will probably delay a more broad-based recovery in fixed investment.
Government spending should be kept in check by the need to reduce the budget deficit and contain the rise in government debt to avoid a further sovereign-ratings downgrade. Progress with tackling strategic, structural and financial problems at many state-owned enterprises – and Eskom in particular – is essential to lift economic growth.
Overall economic conditions in SA should improve off a low base over the next three years. Despite the many challenges faced by the SA economy, the SA banking system remains sound, liquid and well capitalised.
On the back of the group's strong performance in H1 2018 and developments in the environment, we have updated our guidance on financial performance currently expected for the full year 2018 as follows:
Average interest-earning banking assets to grow below nominal GDP (previously: in line with nominal GDP).
NIM to be slightly above the 2017 level of 3.62% (unchanged).
CLR to increase, but remain below the bottom of our target range of 60 to 100 bps (under IFRS 9) (previously: increase into the bottom half of our target range).
NIR to grow above mid-single digits (unchanged).
Associate income to be positive (ETI associate income reported quarterly in arrear) (unchanged).
Expenses to increase below mid-single digits (previously: increase by mid-single digits).
Given the strong financial performance in the first half of 2018, together with expectations of a slowly improving economic outlook and ongoing delivery on our strategy, our guidance for growth in DHEPS for 2018 remains unchanged, being in line with our medium-to-long-term target of greater than or equal to GDP plus CPI plus 5%.
The outlook for our medium-to-long-term targets in 2018 is as follows, and we remind investors that we have 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 interest income for the interim period grew to R21.4 billion (R20.8 billion) whilst operating income before operating expenditure increased to R34.2 billion (R32.6 billion). Profit attributable to ordinary equity holders lowered to R7.3 billion (R7.4 billion). Furthermore, headline earnings per share decreased to 880.3 cents per share (917.5 cents per share ).
Declaration of interim dividend number 64
Shareholders are advised that an interim ordinary dividend of 490 cents per ordinary share was declared on 6 August 2018, for the period ended 30 June 2018. The interim ordinary dividend is payable to shareholders recorded in the register of members of the company at the close of business on 14 September 2018. The directors of Absa Group Ltd. have applied the solvency and liquidity test and reasonably concluded that the Group will satisfy the solvency and liquidity test immediately after completion of the dividend distribution.
In South Africa growth prospects remain challenging given subdued business confidence and headwinds to household spending. We forecast real GDP growth of 1.2% this year and 2.0% next year. Fiscal policy remains a challenge as recent tax increases might not be enough to deliver the much needed consolidation. We expect the Reserve Bank to leave interest rates unchanged for some time.
We forecast real GDP growth of 6% in our Rest of Africa portfolio, although monetary policy easing may have bottomed. At current levels, the rand would dampen our earnings less in the second half than it did in the first half.
Based on these assumptions, and excluding any unforeseen major political, macroeconomic or regulatory developments, our guidance for 2018 is largely unchanged. We expect our loan and deposit growth to improve in 2018, with stronger loan growth in Rest of Africa, CIB and Retail South Africa. Our net interest margin is likely to decline slightly this year. Costs will remain well controlled and our operating JAWS should improve from last year's but is unlikely to be positive. We expect our credit loss ratio to improve in 2018. Our CET1 ratio is expected to remain above board targets, which will allow us to maintain our current dividend cover. Lastly, our normalised RoE should improve slightly in 2018.
Revenue for the year rose to R1.2 billion (R1.1 billion) whilst profit from operating activities jumped to R581.9 million (R452.9 million). Profit for the period shot up to R560.7 million (R419.4 million). Furthermore, headline earnings per share strengthened to 654.6cps (488.9cps).
We are clear about our 2018 priorities and hence what we need to do to deliver a better service to our clients 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 service offering and sustainability.
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.
Net insurance premiums for the interim period came in at R17.367 billion (2017: R18.469 billion), total income was lower at R27.425 billion (2017: R35.786 billion), total earnings attributable to shareholders' equity decreased to R1.522 billion (2017: R1.541 billion), while headline earnings per share was 563.5 cents per share (2017: 568.5 cents per share).
Dividends - 2018 interim dividend
In line with the group's interim dividend policy of paying 40% of the prior full year dividend, the board has approved and declared a gross interim dividend of 276 cents per share.
The planned enhancements to Liberty's organisational design will ensure focus on our customers and advisers.
Management's focus in the medium term will remain 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 expect that the economic and operating environment will remain subdued for the remainder of the year, suggesting that pressure on sales volumes could continue in the short term.
We however remain confident that the group is on track to emerge from this period of change with significantly greater potential to create value for all stakeholders.
Due to the change in the financial year-end, the second current interim period comprises the twelve months ended 31 March 2018, while the comparative previous period is for the fifteen months ended 31 March 2017. For this reason there are no comparatives. Revenue was R379.5 million, gross profit was recorded at R315.8 million and operating profit came to R240.2 million. Total comprehensive income attributable to ordinary shareholders was R17.9 million. In addition, headline earnings per share was 0.12623 cents per share.
No ordinary dividends have been declared or proposed for the year.
Key elements of the Group's on-going growth strategy are:
- the continued focus on core businesses;
- the continued investment in the Group's credit operations;
- increased emphasis on high yield equity opportunities and sector diversification
- obtaining rand-based and foreign currency institutional funding; and
- aggressive cost rationalisation/reduction.
The abovementioned approach is aimed at the continued development of a robust and complementary financial services Group which continues to provide sustainable returns.
Revenue for the year fell to NAD800.9 million (2017: NAD1.248 billion), gross profit decreased to NAD526.7 million (2017: NAD1.038 billion), profit attributable to owners of the company dropped to NAD178.8 million (2017: NAD530 million), while headline earnings per share weakened to NAD27.19 cps (2017: NAD70.75 cps).
During the year under review, the board recommended that no dividend be declared for the financial period ended 31 March 2018.
Changes to the board
Mr J Mahlangu, an independent non-executive director, resigned on 22 April 2018. On 26 April 2018, Prof LJ Weldon and Ms KN van Niekerk were appointed as independent non-executive directors.
Income from operations grew to R110.3 million (R103.1 million) whilst profit for the period took a knock to R20.6 million (R59.0 million). In addition, headline earnings per share from continued operations slumped to 1.4cps (4.8cps).
No ordinary or preference dividends were declared in the current period (2017: Rnil).
Company strategic outlook
As a publicly listed investment holding company, Phoenix’s primary aim is to create and sustain long- term value as measured by consistent growth in net asset value, before distributions to shareholders.
Accordingly, the Board has chosen to position Phoenix as an investment holding company, managed primarily by black South Africans who have a proven track record of deploying capital in a manner that generates long term economic value.
It is the company’s intention to reach its long-term goal by owning meaningful equity interests in a range of diverse businesses that have either a proven track record or a proven business concept. These businesses should demonstrably generate or be able to generate cash and should earn acceptable returns in relation to the initial capital invested.
While Phoenix is a listed company, it is able to benefit from the advantages of operating as a private equity investor without the limitations of a typical private equity structure, which usually demands an exit from investee companies within a defined period. Investments are selected with a long-term view in mind and the intention is that they will be maintained for as long as they continue to meet the company’s investment criteria. Conversely, investments will be disposed of should they fall short of these criteria.
The performance of deployed capital is actively assessed against the investment criteria on an ongoing basis to make sure that Phoenix meets its long-term objective of growing the company’s net asset value by more than the cost of capital at portfolio level. Phoenix will continue to use its strong balance sheet to take advantage of appropriate investment opportunities and to build shareholder value.
At subsidiary level, Stangen will continue to strengthen its distribution network and to actively seek out synergies that will enable it to secure its long-term sustainability.
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