RMI records 26% growth, mostly from Discovery

SPECIALIST financial services investment holding company Rand Merchant Investment Holding (RMI) said yesterday that it had benefited from Discovery’s strong performance, recording a 26 percent growth in normalised earnings to R2.3 billion during the six months to December.

Discovery’s normalised earnings rose 30 percent to R2.8bn.

RMI chief executive Herman Bosman said: “These results continue our growth trajectory and prove the resilience of our strategy of investing in businesses that can deliver superior earnings and dividend growth over the long term, as well as offer a balance between growth- and return-focused investments.

“Despite the macro-economic challenges experienced in all our markets, we managed to produce yet another set of solid results.”

RMI consists of listed investments which include Discovery, MMI and Hastings, and unlisted investments like OUTsurance, RMI Investment Managers and AlphaCode.

RMI reported a 24 percent increase in normalised headline earnings a share to 150.2 cents a share, from 121.5c. The board declared an interim dividend of 39c, down by 26 percent as compared with last year’s 53c an ordinary share.

Increase OUTsurance reported a 28 percent increase in normalised earnings, including its stake in Hastings increased to R1.5bn, excluding its share in Hastings, OUTsurance’s normalised earnings increased by 11 percent, mainly driven by Youi’s 60 percent growth in operating profit.

The group’s claims ratio was lower at 51.5 percent, because of lower natural peril claims in Australia and continued low claims frequencies and limited claims cost inflation in South Africa.

MMI recorded a 3 percent decrease in normalised earnings to R1.6bn. The group said growth in normalised earnings was strained by weaker persistency in Metropolitan Retail, weaker life insurance profitability at Momentum Retail and an increase in MMI’s share of losses, in line with business plans, on new initiatives such as the India joint venture.

Bosman said the group expected Discovery to continue its strong growth with its established businesses well positioned in their respective markets, its emerging businesses developing and four substantial businesses to be launched during 2018.

“Hastings’ solid business model will continue to drive its track record of sustainable growth. MMI continues to refine its actions and decisions to improve delivery on its strategy and OUTsurance is focused on delivering its growth objectives after maintaining targeted profitability against a period of slow top-line growth,” he said.

Last week, the company acquired 35 353 536 shares in OUTsurance from Willem Roos for R350 million.

Jordan Weir, an equities trader at BayHill Capital, said RMI’s results were in line with market expectations.

“There were also no red flags arising from the results release. Some of RMI’s more material performances came from Discovery and Outsurance through their Australian subsidiary, Youi Insurance, which had managed to deliver strong operating profit growth during the period. RMI still remains an attractive longer-term hold for investors at these levels,” Weir said.

RMI shares declined 3.97 percent on the JSE yesterday to close at R43.