| Tue 25 Nov 2008, 17:01 | | REM - Remgro - Unaudited Report For The Six Months Ended 30 September 2008 |
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REM
REM
REM - Remgro - Unaudited Report For The Six Months Ended 30 September 2008
And Cash Dividend Declaration
Remgro Limited
Registration number 1968/006415/06
ISIN: ZAE000026480 & Share code REM
Interim report
Unaudited report for the six months ended 30 September 2008 and cash dividend
declaration
Salient features
Interim dividend per share: 80 cents
Headline earnings per share: -2.6%
Intrinsic value per share at 30 September: R227.16
Successful unbundling of BAT shares and Reinet depositary
receipts to shareholders subsequent to
30 September
Pro forma headline earnings per share: -13.5%
Abridged consolidated balance sheet
30 September 31 March
2008 2007 2008
R`m R`m R`m
Assets
Non-current assets
Property, plant and equipment 2 676 2 504 2 568
Biological agricultural assets 67 68 67
Investment properties 34 47 33
Goodwill and trade marks 399 402 408
Investments - Associated companies 44 815 34 931 43 175
- Joint ventures 154 23 64
- Other 4 640 6 644 8 551
Retirement benefits 10 10 10
Loans 2 2 2
Deferred taxation 126 125 4
52 923 44 756 54 882
Current assets 7 955 7 663 6 945
Cash and cash equivalents 4 157 4 533 3 934
Other current assets 3 798 3 130 3 011
Total assets 60 878 52 419 61 827
Equity and liabilities
Issued capital 45 45 45
Reserves 58 259 49 213 58 697
Treasury shares (2 093) (1 521) (1 515)
Shareholders` equity 56 211 47 737 57 227
Minority interest 667 520 648
Total equity 56 878 48 257 57 875
Non-current liabilities 1 398 1 691 1 872
Retirement benefits 208 212 229
Long-term loans 162 220 189
Deferred taxation 1 028 1 259 1 454
Current liabilities 2 602 2 471 2 080
Short-term loans 612 375 190
Other current liabilities 1 990 2 096 1 890
Total equity and liabilities 60 878 52 419 61 827
Net asset value per share (Rand)
- At book value R119.58 R101.04 R121.11
- At intrinsic value R227.16 R228.33 R253.67
Abridged consolidated income statement
Six months ended Year
ended
30 September 31 March
2008 2007 2008
R`m R`m R`m
Sales 5 398 4 878 9 447
Inventory expenses (3 675) (3 021) (5 415)
Personnel costs (810) (810) (1 621)
Depreciation (127) (129) (251)
Other net operating expenses (353) (337) (1 109)
Trading profit 433 581 1 051
Dividends received 315 188 274
Interest received 111 165 296
Finance costs (24) (9) (43)
Net impairment of investments, (81) 6 19
assets and goodwill
Profit on sale and restructuring of 2 115 96 1 665
investments
Consolidated profit before tax 2 869 1 027 3 262
Taxation (174) (194) (419)
Consolidated profit after tax 2 695 833 2 843
Share of after-tax profit of 3 612 3 681 7 210
associated companies and joint
ventures
Net profit 6 307 4 514 10 053
Attributable to:
Equity holders 6 277 4 467 9 893
Minority interests 30 47 160
6 307 4 514 10 053
Share of after-tax profit of
associated companies and joint
ventures
Profit before taking into account 5 017 5 079 10 023
impairments, non-recurring and
capital items
Net impairment of investments, (111) (18) (28)
assets and goodwill
Profit on the sale of investments 458 213 372
Restructuring costs (110) (66) (259)
Other non-recurring and capital (13) 8 32
items
Profit before tax and minority 5 241 5 216 10 140
interest
Taxation (1 415) (1 248) (2 390)
Minority interest (214) (287) (540)
3 612 3 681 7 210
Reconciliation of headline earnings
Six months ended Year
ended
30 September 31 March
2008 2007 2008
R`m R`m R`m
Net profit for the period 6 277 4 467 9 893
attributable to equity holders
Plus/(minus):
- Net impairment of investments, 81 (2) (15)
assets and goodwill
- Profit on sale and restructuring (2 115) (96) (1 665)
of investments
- Net (surplus)/loss on disposal of - (114) (114)
property, plant and equipment
- Non-headline earnings items (241) (135) (122)
included in equity accounted
earnings of associated companies and
joint ventures
- Taxation effect of adjustments 36 28 5
- Minority interest 8 3 9
Headline earnings 4 046 4 151 7 991
Earnings and dividends
Six months ended Year
ended
30 September 31 March
2008 2007 2008
Cents Cents Cents
Headline earnings per share
- Basic 856.7 879.6 1 692.8
- Diluted 840.3 852.0 1 649.0
Pro forma headline earnings per
share
- Basic 437.7 506.3 964.1
- Diluted 425.4 482.8 928.3
Earnings per share
- Basic 1 329.1 946.6 2 095.7
- Diluted 1 310.3 917.3 2 048.9
Dividends per share
Ordinary 80.00 180.00 510.00
- Interim 80.00 180.00 180.00
- Final 330.00
Abridged consolidated statement of changes in equity
Six months ended Year
ended
30 September 31 March
2008 2007 2008
R`m R`m R`m
Balance at 1 April 57 875 46 427 46 427
Total income accounted for 1 098 4 249 14 377
Exchange rate adjustments (1 831) (545) 2 362
Net fair value adjustments for the (3 378) 280 1 962
period
Net income directly accounted for in (5 209) (265) 4 324
equity
Net profit for the period 6 307 4 514 10 053
Dividends paid (1 595) (1 384) (2 252)
Increase of interest in subsidiary - (656) (660)
company
Capital invested by minorities 7 31 58
Transfer between reserves and other 8 3 53
movements
Change in reserves of associated 89 (436) (165)
companies and joint ventures
Purchase of shares by wholly owned (666) - -
subsidiary (treasury shares)
Net delivery/(purchase) of shares by 88 (24) (18)
The Remgro Share Trust
Long-term share incentive scheme (26) 10 18
reserve
Shares issued - 37 37
Total equity 56 878 48 257 57 875
Abridged consolidated cash flow statement
Six months ended Year
ended
30 September 31 March
2008 2007 2008
R`m R`m R`m
Cash generated from operations 1 666 481 1 485
Taxation paid (125) (195) (497)
Dividends received 752 1 861 3 548
Cash available from operating 2 293 2 147 4 536
activities
Dividends paid (1 595) (1 384) (2 252)
Net cash flow from operating 698 763 2 284
activities
Investing activities (923) (1 502) (3 438)
Financing activities 7 345 84
Net decrease in cash and cash (218) (394) (1 070)
equivalents
Cash and cash equivalents at the 3 831 4 901 4 901
beginning of the period
Cash and cash equivalents at the end 3 613 4 507 3 831
of the period
Cash and cash equivalents 4 157 4 533 3 934
Bank overdraft (544) (26) (103)
Additional information
30 September 31 March
2008 2007 2008
Number of shares in issue
- Ordinary shares of 1 cent 449 003 449 003 606 449 003 606
each 606
Issued at 1 April 449 003 448 802 207 448 802 207
606
Issued during the period - 201 399 201 399
- Unlisted B ordinary shares of 35 506 352 35 506 352 35 506 352
10 cents each
Total number of shares in issue 484 509 484 509 958 484 509 958
958
Number of shares held in (14 455 (12 042 320) (11 972 555)
treasury 989)
- Ordinary shares repurchased (12 054 (8 554 019) (8 554 019)
and held in treasury 019)
- Ordinary shares held by The (2 401 (3 488 301) (3 418 536)
Remgro Share Trust and 970)
accounted for as treasury
shares
470 053 472 467 638 472 537 403
969
Weighted number of shares 472 277 471 894 427 472 052 993
388
In determining earnings and headline earnings per share the weighted
number of shares was taken into account.
30 September 31 March
2008 2007 2008
R`m R`m R`m
Listed investments
Associated
- Book value 17 419 12 610 16 665
- Market value 22 242 26 251 22 147
Other
- Book value 4 557 6 556 8 483
- Market value 4 557 6 556 8 483
Unlisted investments
Associated
- Book value 27 396 22 321 26 510
- Directors` valuation 71 897 68 455 82 286
Joint ventures
- Book value 154 23 64
- Directors` valuation 154 23 64
Other
- Book value 83 88 68
- Directors` valuation 83 88 68
Additions to and replacement 231 180 464
of property, plant and
equipment
Capital commitments 779 730 888
(Including amounts authorised,
but not yet contracted for)
Guarantees and contingent 308 80 58
liabilities
Dividends received from 452 1 506 3 297
associated companies set off
against investments
Comments
1. Accounting policies
The interim report is prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards (IFRS),
including IAS 34: Interim Financial Reporting, and in accordance with the
requirements of the Companies Act (No. 61 of 1973), as amended, and the
Listings Requirements of the JSE Limited (JSE).
These financial statements incorporate accounting policies that are
consistent with those of the previous financial periods. During the period
under review various new accounting standards, interpretations and amendments
to IFRS became effective. The adoption of these new accounting standards,
interpretations and amendments to IFRS had no impact on the results of either
the current or prior periods.
2. Prior year adjustments
Remgro has restated its reported results for the six months ended 30
September 2007 for the following changes:
Comparative figures in respect of associated companies
On 26 November 2007, Remgro published its interim results for the six months
ended 30 September 2007. Attention was drawn to the fact that at that stage
certain associated companies were not in a position to provide Remgro with
the necessary information in order to restate its headline earnings for the
comparative periods. This related to associated companies that implemented
the new accounting guideline on headline earnings, i.e. Circular 08/07 in
later financial periods, for example FirstRand Limited and RMB Holdings
Limited in respect of their interim reporting to 31 December 2007.
The companies mentioned above have subsequently announced their restated
results in terms of Circular 08/07, which have been included in the Remgro
restated results for the six months ended 30 September 2007.
Comparative figures in respect of Tsb Sugar Holdings (Pty) Limited (Tsb
Sugar)
Due to the seasonal nature of its industry, Tsb Sugar allocated certain
income and expenses evenly throughout the financial year instead of
recognising it in the period in which the transactions took place. This
practice has been suspended and the comparative figures for the six months
ended 30 September 2007 have been restated accordingly. This change in
accounting treatment only affects interim results and has no impact on annual
results.
Restatement of comparative figures as a result of the abovementioned
adjustments:
Six months ended
30 September 2007
R`m
Income statement
Increase in sales 254
Increase in inventory expenses 6
Increase in other net operating expenses 147
Decrease in minority interests (19)
Headline earnings
Headline earnings as previously reported 4 016
Restatement of comparative figures in 15
respect of associated companies
Restatement of comparative figures in 120
respect of Tsb Sugar
Restated headline earnings 4 151
Headline earnings per share as previously 851.0
reported (cents)
Restated headline earnings per share 879.6
(cents)
30 September 2007
R`m
Balance sheet 120
Increase in reserves
Decrease in minority interests (19)
Increase in current assets 55
Decrease in current liabilities (46)
3. Results
Headline earnings
For the period under review total headline earnings decreased by 2.5% from R4
151 million to R4 046 million, while headline earnings per share decreased by
2.6% from 879.6 cents to 856.7 cents.
Contribution to headline earnings
Six months ended Year ended
30 September 31 March
2008 2007 2008
R`m R`m R`m
Tobacco interests 2 052 1 839 3 579
Financial services 792 1 080 2 120
Industrial interests 847 970 1 895
Mining interests 296 176 264
Corporate finance and other 59 86 133
interests
4 046 4 151 7 991
The contribution of the tobacco interests, which represented 50.7% (2007:
44.3%) of headline earnings, increased by 11.6%. In sterling, R&R Holdings
SA, Luxembourg`s (R&R) contribution increased by 5.4%.
Currency movements continued to impact the tobacco interests` contribution to
the Group`s earnings materially. Due to the weaker rand, the positive
currency impact on translation of R&R`s contribution to headline earnings
(consisting mainly of equity accounted income from BAT) was R112 million
during the period under review, compared to R207 million in 2007, as set out
in the table below.
Six months ended Year ended
30 September 31 March
2008 2007 2008
Average exchange rate (R/GBP) 15.0166 14.1987 14.2882
Closing exchange rate (R/GBP) 14.7590 14.0020 16.0290
R&R`s contribution (GBP`m) 137 130 251
R&R`s contribution (R`m) 2 052 1 839 3 579
Favourable currency impact (R`m) 112 207 250
The combined contribution of FirstRand and RMBH to Remgro`s headline earnings
from financial services amounted to R792 million (2007: R1 080 million). The
decrease of 26.7% can be attributed mainly to an increase in bad debts in the
retail lending operations of the banking segment as well as to equity trading
losses.
The contribution of the industrial interests decreased by 12.7% to R847
million (2007: R970 million). Kagiso Trust Investment`s (KTI) contribution to
Remgro`s headline earnings amounted to a loss of R194 million (2007: R18
million profit). During the period under review KTI`s results were materially
impacted by unfavourable fair value adjustments relating to its holding of
Metropolitan Holdings Limited preference shares amounting to R369 million
(2007: R10 million favourable), as well as losses incurred on other
derivative instruments. Total South Africa produced strong results with a
contribution to headline earnings of R282 million (2007: R118 million), while
Distell continued its earnings growth with a contribution to headline
earnings of R114 million (2007: R102 million). Both Rainbow and Medi-Clinic
reported lower results with contributions to Remgro`s headline earnings
amounting to R93 million and R132 million respectively (2007: R142 million
and R153 million). Nampak`s contribution to Remgro`s headline earnings
amounted to R53 million (2007: R77 million).
Mining interests` contribution to headline earnings increased by 68.2% to
R296 million (2007: R176 million). Dividends received from Implats amounted
to R314 million (2007: R187 million). Trans Hex reported a headline loss of
R63 million for the period (2007: R32 million loss). Remgro`s share of this
loss amounted to R18 million (2007: R11 million).
The contribution of corporate finance and other interests decreased by 31.4%
to R59 million (2007: R86 million). The decrease can be attributed mainly to
losses amounting to R44 million which were equity accounted from the
investment in Xiocom (2007: Rnil). Lower average cash balances than in the
comparative period also resulted in a decrease in the contribution from the
central treasury division. Included in the corporate finance and other
interests` contribution to headline earnings referred to above, are foreign
currency profits amounting to R48 million relating to intergroup dividends.
Pro forma headline earnings
With effect from 3 November 2008 Remgro distributed its investment in British
American Tobacco Plc (BAT) to its shareholders as an interim dividend in
specie. Refer to the "Subsequent to 30 September 2008" section in note 6 for
further details.
As a result of the BAT unbundling, headline earnings are also presented on a
pro forma basis which, for the interim period only, excludes the equity
accounted income of BAT, as set out in the table below.
Six months ended Year ended
30 September 31 March
2008 2007 2008
R`m R`m R`m
Headline earnings as reported 4 046 4 151 7 991
Equity accounted income of BAT added (1 979) (1 762) (3 440)
back
Pro forma headline earnings 2 067 2 389 4 551
Headline earnings per share as 856.7 879.6 1 692.8
reported (cents)
Pro forma headline earnings per 437.7 506.3 964.1
share (cents)
On a pro forma basis both headline earnings and headline earnings per share
decreased by 13.5% from R2 389 million to R2 067 million and from 506.3 cents
to 437.7 cents respectively.
For the year ending 31 March 2009 the investment in BAT will only be equity
accounted for the seven months to 31 October 2008.
Earnings
Total earnings increased by 40.5% to R6 277 million (2007: R4 467 million),
mainly due to the surplus amounting to R2 115 million realised on the
redemption by R&R of debentures during the period under review (refer to the
BAT paragraph in note 5).
During the period under review Remgro made a provision for impairment
amounting to R81 million on two of its listed investments, i.e. Dorbyl and
Trans Hex, as their carrying values exceeded their estimated recoverable
amounts.
4. Intrinsic value
Remgro`s intrinsic value per share decreased by 10.5% from R253.67 at 31
March 2008 to R227.16 at 30 September 2008. Refer to Annexure A for full
details. The intrinsic value per share (ex BAT) on Tuesday, 18 November 2008
was R94.36.
5. British American Tobacco plc (BAT)
At 30 September 2008, Remgro`s interest in BAT was represented by its one-
third holding of the ordinary shares and all of the "2005" participation
securities issued by R&R. This gave Remgro an effective interest of 10.7% in
BAT at 30 September 2008 (2007: 10.6%). The balance of the ordinary share
capital of R&R was held by Compagnie Financi?re Richemont SA. In addition to
the above, Remgro also held one-third of the "2006" participation securities
issued by R&R.
As part of the steps to the unbundling of the investment in BAT, R&R redeemed
GBP142.5 million of debentures held by Remgro during the period under review
and cancelled the "2006" participation securities. The debentures redeemed
formed part of the consideration received from the Rothmans International
merger on 1 October 1995. As set out in the 1996 Rembrandt Group Limited
Annual Report, no book value was reflected in the group accounts in respect
of the original investment in R&R. As a result, the gross proceeds received
by Remgro upon the redemption of the debentures has been recorded as an
exceptional profit amounting to R2 115 million.
During the six months under review there was no change in the number of BAT
shares held by R&R. However, due to the positive effect of BAT`s continuing
share buy-back programme, R&R`s interest in BAT increased to 30.2% at 30
September 2008 (2007: 29.8%).
For the period under review Remgro`s share of R&R`s headline earnings
consisted of 35.46% of R&R`s share of the attributable profit of BAT and its
share of R&R`s non-BAT income (including income attributable to its
investment in the "2006" participation securities referred to above).
Six months
to September
2008 2007
GBP`m GBP`m
Attributable profit of BAT before non-recurring 1 234 1 177
and capital items
R&R`s share of the attributable profit of BAT:
- 30.06% to 30.20% (2007: 29.62% to 29.84%) 372 350
R&R`s non-BAT income 9 8
R&R`s headline earnings for the six months to 30 381 358
September
Remgro`s share thereof:
- 35.46% of R&R`s share of the attributable profit 132 124
of BAT
- portion of R&R`s non-BAT income 5 6
137 130
R`m R`m
Translated at an average R/GBP rate of 15.0166 2 052 1 839
(2007: 14.1987)
BAT has a 31 December year-end and reports to its shareholders on a quarterly
basis. Additional information in respect of BAT, including copies of the
annual and quarterly reports, is available from the BAT website at
www.bat.com.
6. Other investments
The most important changes to Remgro`s other investments during the period
under review were as follows:
Xiocom Wireless, Inc. (Xiocom)
During the 2008 financial year Remgro acquired a 37.5% interest, on a fully
diluted basis, in Xiocom, a USA company that specialises in the deployment
and operation of wireless broadband networks. Remgro has conditionally
committed funds amounting to USD50.0 million to Xiocom and on 31 March 2008,
USD11.25 million was already invested. During the period under review Remgro
invested a further USD12.5 million in Xiocom.
PG Group of Companies (PGSI)
With effect from 31 July 2007 Remgro acquired a 24.5% interest, on a fully
diluted basis, in PGSI for R719.5 million, including transaction costs. PGSI
is the foreign holding company of the Plate Glass group. During the period
under review Remgro invested a further USD1.0 million (or R7.9 million) in
PGSI. On 30 September 2008, Remgro`s interest in PGSI, on a fully diluted
basis, was 25.0%.
Kagiso Trust Investments (Pty) Limited (KTI) and the Kagiso Infrastructure
Empowerment Fund (KIEF)
During the 2007 financial year, Remgro entered into agreements with KTI and
KIEF, in terms of which it committed funds amounting to R350 million to KIEF.
The fund has a target size of R650 million and aims to invest in
infrastructure projects, including roads, airports, power and
telecommunication installations, railway systems, ports, water and social
infrastructure. By 31 March 2008, Remgro invested R50.4 million of the R350
million committed. During the period under review Remgro invested a further
R16.1 million in KIEF.
Repurchase of Remgro shares
At 30 September 2008 12 054 019 Remgro ordinary shares (2.7%) were held as
treasury shares. The treasury shares comprised of the opening balance on 1
April 2008 of 8 554 019 Remgro ordinary shares and 3 500 000 Remgro ordinary
shares acquired during the period under review by a wholly owned subsidiary
company of Remgro at an average price of R189.71 for a total amount of R666.4
million. These shares were acquired for the purpose of hedging the new share
appreciation rights scheme that was implemented subsequent to the unbundling
of the investment in BAT.
During the period under review no Remgro ordinary shares were purchased by
The Remgro Share Trust, while 1 016 566 shares were delivered to participants
against payment of the subscription price.
Subsequent to 30 September 2008, as part of the preliminary steps to the
unbundling of the investment in BAT, the 8 554 019 Remgro ordinary shares
held as treasury shares and 969 836 of the Remgro ordinary shares held by The
Remgro Share Trust were cancelled after the unbundling of the investment in
BAT was approved by Remgro shareholders. The balance of the Remgro ordinary
shares held by The Remgro Share Trust were delivered to participants and a
wholly owned subsidiary company of Remgro provided a direct finance facility
to the participants to allow them to settle the outstanding purchase price.
Subsequent to 30 September 2008:
Group restructuring
On 7 October 2008 Remgro shareholders approved the unbundling of the
investment in BAT by way of an interim dividend in specie, and on 3 November
2008 Remgro distributed 192 870 000 ordinary shares in BAT and 302 555 410
Reinet Investments S.C.A. (Reinet) depositary receipts to Remgro shareholders
in the ratio of 40.6054 BAT ordinary shares and 63.6977 Reinet depositary
receipts for every 100 Remgro shares held.
The interim dividend in specie amounted to a total amount of R55.1 billion
and Secondary Taxation on Companies (STC) of R686.0 million is payable on
this dividend. In addition to the STC payable, Securities Transfer Tax
amounting to R144.1 million is also payable on the dividend in specie.
All cautionary and other announcements relating to the unbundling of the
investment in BAT are available on Remgro`s website at www.remgro.com.
7. Information regarding unlisted investments
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
Tsb Sugar`s revenue for the six month period under review increased by 3.8%
from R1 507 million to R1 564 million. Sugar accounted for R1 457 million
(2007: R1 410 million) of turnover. Exports for the period accounted for 17%
of turnover.
Tsb Sugar`s headline earnings for the period was R173 million (2007: R175
million). Headline earnings attributable to sugar amounted to R185 million
(2007: R177 million) of total headline earnings.
It is important to take note of the seasonality of the business of Tsb Sugar
and that the results for the six month periods to 30 September are not
necessarily a true reflection of the anticipated results for the year ending
31 March.
It is expected that Tsb Sugar`s sugar production for the season will increase
to 507 659 tons (2007: 478 643 tons). This increase can be attributed to
increased hectares under cane due to improved prevailing climatic conditions
and a marginal improvement in cane yields as a result of the increase in
overall water availability. The export sugar price for the full year is
expected to be higher than the previous year. This, combined with a weaker
rand, is expected to result in higher export income. Tsb Sugar did also
benefit from the increase in the local market sugar price. The Royal
Swaziland Sugar Corporation`s contribution to Tsb Sugar`s profit for the
period is R56 million (2007: R46 million), 21.7% better than the previous
period due to increased access to the European Union market.
Wispeco Holdings Limited (Wispeco)
Headline earnings for the period under review amounted to R26 million (2007:
R27 million). For the six months under review Wispeco`s headline earnings
were lower, mainly due to weaker local demand for aluminium extrusions as a
result of the slowdown in the residential building industry.
On the back of higher commodity prices, turnover increased by 4.1% to R507
million while operating profit margin reduced to 7.9% (2007: 9.8%). Low cost
imports from China continued to grow, thus exerting pressure on profit
margins. Sales volumes for the rest of the year will depend on the
sustainability of demand from the commercial building industry and large
infrastructure projects.
In the current economic climate, Wispeco is placing increased emphasis on
effective credit and inventory management, maximizing customer service and
continuously improving productivity in all operating divisions. As a result
of lower demand and continued productivity improvement, capacity expansion
plans on the new Vereeniging property have been placed on hold.
Wispeco continues to play an important role in skills development in the
aluminium fabrication industry. Earlier this year Wispeco awarded ten SpazAL
franchises to some of the learners who completed Wispeco`s aluminium
fabrication learnership. These young entrepreneurs are currently supported by
a one-year mentorship programme.
Business Partners Limited (Business Partners)
Business Partners is a specialist investment group which provides risk
finance, mentorship and property management services to small and medium
enterprises in South Africa.
Headline earnings for the six months ended 30 September 2008 amounted to R65
million (2007: R63 million) representing an increase of 3.2% compared to the
same period of the previous year. Headline earnings attributable to Remgro
for the period was R14 million (2007: R13 million). The slight increase in
headline earnings is due primarily to increases in operational income largely
as a result of an increase in the investment portfolio and higher interest
revenue. This was negated by a decrease in the surplus realised on the
disposal of investments and an increase in the impairment charges on the
investment portfolio.
Investments to the value of R475 million (2007: R300 million) were advanced
during the six month period, representing an increase of 58.3% in investment
activity. It is anticipated that despite the decline in the macro economic
environment, investment activities in the second half of the current
financial year will match those achieved in the first six months.
Total South Africa (Pty) Limited (Total)
Total`s contribution to Remgro`s headline earnings for the period under
review amounted to R282 million (2007: R118 million), a year-on-year increase
of 139%. However, due to the substantially increased investment in working
capital, Total did not pay a dividend during the period under review,
compared to a dividend of R168 million in the comparative period.
Retail sales of petroleum products in South Africa have been negatively
impacted on by the increasing international oil prices which resulted in a
stagnation of demand. Total`s sales volumes have remained at a similar level
as in September 2007, with market share largely unchanged.
The increase in marketing margin is due mainly to stock revaluations in the
first six months of the year and small increases granted by the government on
some of the price structure elements. However, increased transport costs,
resulting from high fuel prices and increased overheads due to high inflation
levels, have had a negative impact on margins and profit growth.
Natref (in which Total has a 36% interest) has experienced an unsatisfactory
reliability rate which only improved since August 2008. Despite production
interruptions, the refining margins have been high for the first six months
of the year due to the increasing international oil prices. In an effort to
increase energy efficiency, Natref saved 10% on its electricity consumption
during the period.
Unilever South Africa Holdings (Pty) Limited (Unilever South Africa)
Unilever South Africa`s contribution to Remgro`s headline earnings for the
six month period under review amounted to R127 million (2007: R121 million).
Revenue increased by 20.7% to R5 595 million (2007: R4 634 million), while
gross profit margins were lower at 31.8% (2007: 35.7%).
The increased contribution to headline earnings can be attributed mainly to
turnover growth, as well as focusing on the control of overhead spending,
while still ensuring increased investment in brands. The growth in the retail
business turnover was 21.3% for the six months ended 30 September 2008, 17%
of which was derived from price increases. Homecare products, especially
laundry powders Omo and Sunlight, were the largest contributors to this
growth. Strong growth was also evident in Spreads due to high price increases
during the period and in Savoury and Dressings, where growth was balanced
between increases in volume and price. The impact of increased turnover and
controlled overhead spending was offset partially by raw material cost
inflation and distribution cost increases.
Air Products South Africa (Pty) Limited (Air Products)
Air Products` contribution to Remgro`s headline earnings for the six months
ended 30 September 2008 increased by 18.6% to R51 million (2007: R43
million), while profit before tax increased by 35.0% to R81 million (2007:
R60 million). Earnings growth was negatively impacted by the increased
effective tax rate for the period of 36% (2007: 28%) caused by increased
Secondary Taxation on Companies payable on significantly higher dividends
paid in the current year.
Sales volumes were generally good across all segments of the business. In the
large tonnage gas business, a large air separation plant was commissioned for
Konkola Copper Mines. Significant construction progress was made during the
period on a new air separation plant in Newcastle, KwaZulu-Natal, to increase
supplies to Mittal Steel operations in the area. Demand for cylinder gases
and other packaged gas products remained strong throughout the year.
The immediate outlook for Air Products remains positive although the rate of
growth in demand is expected to slowdown as some industries experience a fall-
out from lower commodity price levels and a decrease in local economic
activity and export opportunities.
PGSI Limited (PGSI)
For the six months under review PGSI`s turnover declined by 2% over the
comparative period to R1 272 million and its headline earnings declined by
56.5% from R62 million to R27 million. PGSI`s contribution to Remgro`s
headline earnings for the period under review amounted to R3 million.
The National Credit Act as well as the increase in interest rates over the
last two years have resulted in lower consumer disposable income. These
factors have been the main reason for the significant decline in domestic new
car sales and residential building activity, which negatively impacted on the
demand for glass. The local Original Equipment Car Manufacturers have
resisted price increases due to low cost products available from the East,
whilst Shatterprufe`s auto glass manufacturing costs have increased markedly.
Export car sales and commercial building projects have continued to offer
good demand for glass. A weaker rand has supported the profitability of value-
added autoglass exports.
Borrowing costs increased over the comparative period due to debt funding
required to finance the second float glass plant, commissioned in April 2007.
The benefits of this additional capacity will only come through after the
routine repair of the first float line, scheduled from May to August 2009.
Kagiso Trust Investments (Pty) Limited (KTI)
KTI`s contribution to Remgro`s headline earnings for the six months under
review amounted to a headline loss of R194 million (2007: R18 million
profit). The reduction in contribution to headline earnings was due mainly to
an unfavourable fair value adjustment on the conversion rights attached to
its holding of Metropolitan Holdings Limited preference shares of R369
million and a negative fair value adjustment of R126 million in the platinum
hedging financial instrument for the Mototolo joint venture.
Xiocom Wireless, Inc. (Xiocom)
Remgro acquired a 37.5% interest in this technology start-up company during
the 2008 financial year. Remgro has conditionally committed funds amounting
to USD50.0 million to Xiocom and at 30 September 2008, USD23.75 million was
invested. For the period under review Remgro has equity accounted for losses
of USD6 million (2007: USDnil).
During the reporting period Xiocom made progress to position itself as a
preferred supplier of broadband systems and networks to developing markets.
In this regard the roll-out of networks in the Dominican Republic has
commenced. A network for Altech was successfully commissioned in Kigali,
Rwanda.
Both the hardware and software platforms were improved and the new versions
successfully implemented.
Revenue at this stage is immaterial and the loss is a result of expenditure
incurred in establishing the company.
Directorate
On 22 August 2008, Mr Daniel Prins retired as an independent non-executive
director and Mr Herman Wessels was appointed as an independent non-executive
director.
The Board wishes to thank Mr Prins for his valuable contribution over the
years.
Dividends
Subsequent to the distribution of ordinary shares in BAT and Reinet
depository receipts at the beginning of November 2008, shareholders will in
future be receiving dividends from Remgro, BAT and Reinet.
Shareholders will, in respect of the BAT shares distributed to them, be
receiving the BAT final dividend directly, in respect of its financial year
to December 2008. It is anticipated that the BAT final dividend will be paid
during May 2009. Remgro`s final dividend for the year ending 31 March 2009,
will be paid during August 2009.
Taking the above into consideration, the Remgro interim dividend was
determined at 80 cents (2007: 180 cents) per share.
Declaration of cash dividend
Declaration of Dividend No 17
Notice is hereby given that an interim dividend of 80 cents (2007: 180 cents)
per share has been declared in respect of both the ordinary shares of one
cent each and the unlisted B ordinary shares of ten cents each, for the half
year to 30 September 2008.
Dates of importance:
Last day to trade in order to participate Friday, 9 January 2009
in the interim dividend
Shares trade ex dividend Monday, 12 January 2009
Record date Friday, 16 January 2009
Payment date Monday, 19 January 2009
Share certificates may not be dematerialised or rematerialised between
Monday, 12 January 2009, and Friday, 16 January 2009, both days inclusive.
Signed on behalf of the Board of Directors.
Johann Rupert Thys Visser
Chairman Chief Executive Officer
Stellenbosch
25 November 2008
Directorate
Non-executive directors
Johann Rupert (Chairman),
E de la H Hertzog (Deputy Chairman), P E Beyers, G D de Jager*, J W Dreyer, P
K Harris*, J Malherbe, M M Morobe*, M Ramos (Miss)*,
F Robertson*, H Wessels*
(*Independent)
Executive directors
M H Visser (Chief Executive Officer),
W E B?hrmann, L Crouse, J A Preller (Mrs), T van Wyk
Corporate information
Secretary
M Lubbe (Mrs)
Listing
JSE Limited
Sector: Industrials - Diversified Industrials
American depositary receipt (ADR) program
Cusip number 75956M107 ADR to ordinary share 1 : 1
Depositary
The Bank of New York, 101 Barclay Street, New York NY 10286
Business address and registered office
Carpe Diem Office Park, Quantum Street, Techno Park, Stellenbosch 7600
(PO Box 456, Stellenbosch 7599)
Transfer Secretaries
Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Auditors
PricewaterhouseCoopers Inc.,
Cape Town
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Website
www.remgro.com
Annexure A
Intrinsic net asset value
Shares Stock Exchange 30 31 March
held exchange September 2008
closing 2008
Notes million price GBP`m rate R`m R`m
Tobacco
interests
R&R 4 084.0 14.7590 60 276 69 018
Holdings
- BAT- 1 214.3 1 835 3 932.4
ordinary
shares
- Cash and 151.7
cash
equivalent
s
- Other (0.1)
net
assets/
(liabiliti
es)
Financial
services
FirstRand 481.1 1 671 8 040 7 698
RMB 302.3 2 600 7 859 7 406
Holdings
Industrial
interests
Medi- 257.3 1 813 4 666 5 070
Clinic
Corporatio
n
Distell 58.7 4 350 2 552 2 992
Group
Unilever 4 110 3 663
SA
Holdings
Rainbow 214.6 1 390 2 983 3 133
Chicken
Total 1 445 2 620
South
Africa
Tsb Sugar 2 127 2 097
Nampak 78.1 1 402 1 095 1 281
Kagiso 1 136 1 432
Trust
Investment
s
Air 1 591 1 538
Products
South
Africa
PG Group 530 773
Wispeco 413 447
Dorbyl 14.1 810 114 112
Caxton 7.8 1 170 91 113
Mining
interests
Implats 26.7 16 600 4 430 8 353
Trans Hex 30.2 680 205 317
Group
Other
Sundry 426 344
investment
s and
loans
Deferred (475) (1 027)
taxation
asset/
(liability
)
Other net 488 441
assets/
(liabiliti
es)
Cash at
the centre
Local 2 408 619
Offshore 3 335 2 654
- Sterling 2 14.7590 3 329 2 641
- Rand 6 13
Intrinsic 107 845 121 094
net asset
value
Potential 3 (1 058) (1 233)
CGT
liability
Intrinsic net 106 787 119 861
asset value after
tax
Issued shares after deduction of shares repurchased 470.1 472.5
and the shares in The Remgro Share Trust (million)
Intrinsic value per share R227.16 R253.67
Notes
1. This represents Remgro`s effective interest of 10.7% in BAT Plc.
2. Cash at the centre excludes cash held by subsidiaries and associated
companies that are separately valued above.
3. The potential capital gains tax (CGT) liability, which is unaudited, is
calculated on the specific identification method using the most favourable
calculation for investments acquired before 1 October 2001 and also taking
into account the corporate relief provisions. Deferred CGT on investments
available-for-sale (Implats and Caxton) is included in "Other" above.
4. Unlisted investments are shown at directors` valuation. Listed investments
are shown at stock exchange prices.
5. The intrinsic value per share on Tuesday, 18 November 2008 was R94.36.
This is after the unbundling of British American Tobacco Plc on 3 November
2008 to Remgro shareholders and taking into account the related transaction
costs.
Date: 25/11/2008 17:01:01 Produced by the JSE SENS Department.
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