RMBH interim results December 2018

Net income was higher at R5.5 billion (R4.2 billion). Income from operations rose to R5.5 billion (R4.2 billion), while profit attributable to equity holders increased to R5.4 billion (R4.1 billion). In addition, headline earnings per share jumped 6% to 315.2 cents per share (298.2 cents per share).

Interim dividend payment
The board of RMH has resolved to declare a gross interim dividend of 178.0 cents per share (2017: 168.0 cents). The dividend is covered 1.8 times (2017: 1.8 times) by normalised earnings per share and represents a year-on-year increase of 6% (2017: 10%).

Performance and outlook
External environment
The macroeconomic environment within which RMH's investee companies operate has experienced significant turbulence of late. This year is shaping up to be another challenging year for the South African economy. Headwinds include a slowing global economy, Eskom (and other state-owned entities (SOE)) challenges, adverse domestic weather conditions in the western maize-growing areas of the country, prolonged strike activity in the gold mining sector and political uncertainty leading into the national election.

Continued weak GDP growth
Given disappointing fixed investment, a lack of policy visibility and a strained government fiscus, the 2019 real GDP growth forecast has been reduced to 1.4% from 1.5%. Growth is still expected to accelerate towards 1.6% during 2020. The improved inflation prospects, weak domestic growth outlook and less pressure to follow the global interest rate cycle higher suggest that the SA Reserve Bank may keep the repo rate unchanged in the foreseeable future. Although the Rand has at times traded stronger-than-expected in 2019 to date, both global and domestic factors have the potential to weigh on the currency.

Ongoing SOE challenges
In his recent State of the Nation Address, President Ramaphosa announced that Eskom will be divided into three separate SOEs dealing with generation, distribution and transmission under a state holding company in order to more easily access financing. The state will provide financial support to the ailing parastatal in a manner which will not burden the fiscus with "unmanageable debt". President Ramaphosa also announced the establishment of an independent investigating directorate, to be housed within the National Prosecuting Authority, which will focus on evidence that has emerged at the State Capture Commission.

In the UK, policymakers at the Bank of England voted to keep the benchmark policy interest rate unchanged at 0.75%. The Monetary Policy Committee expressed its concern regarding the impact of Brexit and a slowdown in global growth on the outlook for the UK economy. As such, the Committee lowered its growth forecast for the UK economy in 2019 from 1.7% to 1.2% - the weakest level since the recession of 2009 - and lowered its inflation forecast to just below the target of 2%.

USA-China trade war
Concerns about the negative impact of an escalation of the USA-China trade war on global growth have returned. In addition, investor sentiment was negatively impacted by the European Union and Bank of England making significant downward adjustments to their real GDP growth forecasts.

2019-03-14 09:13:05