| Mon 30 Nov 2009, 17:00 | | REM - Remgro Limited - Unaudited report for the six months ended 30 September |
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REM
REM
REM - Remgro Limited - Unaudited report for the six months ended 30 September
2009 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 2009 AND
CASH DIVIDEND DECLARATION
Salient features
Interim dividend per share: 84 cents
Headline earnings per share (including BAT): -67.9%
Headline earnings per share from continuing operations (excluding
BAT): -37.1%
Intrinsic value per share at 30 September: R110.54
Successful completion of the VenFin acquisition on 23 November 2009
Abridged consolidated statement of financial position
30 September 31 March
2009 2008 2009
R`m R`m R`m
Assets
Non-current assets
Property, plant and equipment 2 975 2 676 2 756
Biological agricultural assets 76 67 76
Investment properties 34 34 34
Intangible assets 391 399 394
Investments- Associated companies 24 263 44 815 23 795
- Joint ventures 95 154 84
- Other 5 519 4 640 4 742
Retirement benefits 114 103 100
Loans 44 2 100
Deferred taxation 10 126 10
33 521 53 016 32 091
Current assets 8 764 7 862 10 025
Inventories 1 626 1 552 911
Biological agricultural assets 464 436 430
Debtors and short-term loans 1 528 1 473 1 799
Investments in money market funds 1 918 - 1 578
Cash and cash equivalents 2 995 4 157 5 050
Other current assets 233 244 257
Total assets 42 285 60 878 42 116
Equity and liabilities
Issued capital 8 45 8
Reserves 38 161 58 259 38 324
Treasury shares (260) (2 093) (260)
Shareholders` equity 37 909 56 211 38 072
Non-controlling interest 710 667 715
Total equity 38 619 56 878 38 787
Non-current liabilities 1 306 1 398 1 172
Retirement benefits 163 208 156
Long-term loans 213 162 191
Deferred taxation 930 1 028 825
Current liabilities 2 360 2 602 2 157
Trade and other payables 2 205 1 891 1 999
Short-term loans 66 612 117
Other current liabilities 89 99 41
Total equity and liabilities 42 285 60 878 42 116
Net asset value per share (Rand)
- At book value R80.40 R119.58 R80.75
- At intrinsic value R110.54 R227.16 R99.15
Abridged consolidated income statement
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Continuing operations
Sales 5 499 5 398 11 455
Inventory expenses (3 321) (3 675) (7 245)
Personnel costs (922) (810) (1 744)
Depreciation (144) (127) (271)
Other net operating expenses (739) (353) (1 480)
Trading profit 373 433 715
Dividends received 80 315 355
Interest received 57 111 197
Finance costs (13) (24) (49)
Net impairment of investments, assets
and goodwill - (81) (442)
Profit on sale and restructuring of - - 24
investments
Consolidated profit before tax 497 754 800
Taxation (180) (174) (268)
Consolidated profit after tax 317 580 532
Share of after-tax profit of associated
companies and joint ventures
875 1 519 2 389
Net profit for the period from
continuing operations 1 192 2 099 2 921
Discontinued operations
Profit for the period from discontinued - 4 208 42 503
operations
Net profit 1 192 6 307 45 424
Net profit attributable to:
Equity holders 1 171 6 277 45 330
Continuing operations 1 171 2 069 2 827
Discontinued operations - 4 208 42 503
Non-controlling interest 21 30 94
1 192 6 307 45 424
Share of after-tax profit of associated
companies and joint ventures
(continuing operations)
Profit before taking into account 1 470 1 990 3 208
impairments, non-recurring and capital
items
Net impairment of investments, assets
and goodwill (96) (111) (253)
Profit on the sale of investments 11 238 360
Other non-recurring and capital items
(47) (13) (11)
Profit before tax and non-controlling
interest 1 338 2 104 3 304
Taxation (363) (533) (809)
Non-controlling interest (100) (52) (106)
875 1 519 2 389
Reconciliation of headline earnings
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Continuing operations
Net profit for the period attributable
to equity holders 1 171 2 069 2 827
Plus/(minus):
- Net impairment of investments, assets
and goodwill - 81 442
- Profit on sale and restructuring of
investments - - (24)
- Net (surplus)/loss on disposal of
property, plant and equipment (5) - 3
- Non-headline earnings items included 142 (131) (117)
in equity accounted earnings of
associated companies and joint ventures
- Taxation effect of adjustments (9) 40 34
- Non-controlling interest (1) 8 3
Headline earnings from continuing
operations 1 298 2 067 3 168
Discontinued operations
Net profit for the period attributable - 4 208 42 503
to equity holders
Plus/(minus):
Profit on the distribution of - (2 115) (40 805)
investments
- Non-headline earnings items included - (110) (223)
in equity accounted earnings of
associated companies
- Taxation effect of adjustments - (4) 17
Headline earnings from discontinued - 1 979 1 492
operations
Total headline earnings 1 298 4 046 4 660
Earnings and dividends
Six months ended Year ended
30 September 31 March
2009 2008 2009
Cents Cents Cents
Headline earnings per share
- Basic 275.3 856.7 987.7
Continuing operations 275.3 437.7 671.5
Discontinued operations - 419.0 316.2
- Diluted 270.7 840.3 954.8
Continuing operations 270.7 425.4 659.2
Discontinued operations - 414.9 295.6
Earnings per share
- Basic 248.4 1 329.1 9 607.9
Continuing operations 248.4 438.1 599.2
Discontinued operations - 891.0 9 008.7
- Diluted 244.6 1 310.3 9 570.4
Continuing operations 244.6 424.5 584.6
Discontinued operations - 885.8 8 985.8
Dividends per share
Ordinary 84.00 80.00 190.00
- Interim 84.00 80.00 80.00
- Final 110.00
Abridged consolidated statement of comprehensive income
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Net profit 1 192 6 307 45 424
Other comprehensive income, net of tax
(831) (5 120) (7 246)
Exchange rate adjustments (931) (1 831) (436)
Fair value adjustments for the period
438 (3 378) (3 563)
Realisation of reserves previously - - (2 716)
deferred in equity
Change in reserves of associated
companies and joint ventures (338) 89 (531)
Total comprehensive income for the
period 361 1 187 38 178
Total comprehensive income attributable
to:
Equity holders 340 1 157 38 084
Non-controlling interest 21 30 94
361 1 187 38 178
Abridged consolidated statement of changes in equity
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Balance at 1 April 38 787 57 875 57 875
Total comprehensive income 361 1 187 38 178
Dividends paid (553) (1 595) (1 990)
Dividend in specie - - (54 819)
Capital invested by minorities 6 7 14
Transfer between reserves and other
movements - 8 23
Purchase of shares by wholly owned
subsidiary (treasury shares)
- (666) (666)
Net disposal of shares by The Remgro 213
Share Trust - 88
Long-term share incentive scheme
reserve 18 (26) (37)
Cancellation of treasury shares - - (4)
Total equity 38 619 56 878 38 787
Abridged consolidated statement of cash flows
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Cash generated/(utilised) from/(by)
operations (141) (178) 1 129
Taxation paid (59) (125) (280)
Dividends received 712 752 1 494
Cash available from operating
activities 512 449 2 343
Dividends paid (553) (1 595) (2 120)
Net cash inflow/(outflow) from
operating activities (41) (1 146) 223
Investing activities (730) 1 192 2 631
Financing activities 8 7 10
Net increase/(decrease) in cash and
cash equivalents (763) 53 2 864
Investment in money market funds (340) - (1 578)
Exchange rate loss on foreign cash
(921) (271) (98)
Cash and cash equivalents at the
beginning of the period 5 019 3 831 3 831
Cash and cash equivalents at the end of
the period 2 995 3 613 5 019
Cash and cash equivalents - per
statement of financial position 2 995 4 157 5 050
Bank overdraft - (544) (31)
Additional information
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Discontinued operations
Equity accounted income from
discontinued operations - 2 093 2 417
Realisation of reserves previously
deferred in equity - - 2 695
Pre-tax profit on disposal of
discontinued operations - 2 115 38 068
Tax on the disposal of discontinued
operations - - (677)
Profit for the period from discontinued
operations - 4 208 42 503
On 7 October 2008 Remgro shareholders approved the unbundling of the
investment in British American Tobacco Plc (BAT) by way of an interim
dividend in specie, and on 3 November 2008 Remgro distributed 192.9 million
ordinary shares in BAT and 302.6 million Reinet Investments S.C.A. (Reinet)
depositary receipts (DRs) to Remgro shareholders in the ratio of 40.6054 BAT
ordinary shares and 63.6977 Reinet DRs for every 100 Remgro shares held.
30 September 31 March
2009 2008 2009
Number of shares in issue
- Ordinary shares of 1 cent 439 479 751 449 003 606 439 479 751
each
Issued at 1 April 439 479 751 449 003 606 449 003 606
Cancelled during the period - - (9 523 855)
-Unlisted B ordinary shares of 10
cents each 35 506 352 35 506 352 35 506 352
Total number of shares in issue
474 986 103 484 509 958 474 986 103
Number of shares held in treasury
(3 498 824) (14 455 989) (3 500 000)
- Ordinary shares repurchased
and held in treasury (3 498 824) (12 054 019) (3 500 000)
- Ordinary shares held by The - (2 401 970) -
Remgro Share Trust and
accounted for as treasury shares
471 487 279 470 053 969 471 486 103
Weighted number of shares 471 427 011 472 277 388 471 798 001
In determining earnings per share and headline earnings per share the weighted
number of shares was taken into account.
30 September 31 March
2009 2008 2009
R`m R`m R`m
Listed investments
Associated
- Book value 16 809 17 419 16 838
- Market value 23 700 22 242 18 904
Other
- Book value 5 422 4 557 4 651
- Market value 5 422 4 557 4 651
Unlisted investments
Associated
- Book value 7 454 27 396 6 957
- Directors` valuation 12 800 71 897 11 407
Joint ventures
- Book value 95 154 84
- Directors` valuation 95 154 84
Other
- Book value 97 83 91
- Directors` valuation 97 83 91
Additions to and replacement of
property, plant and equipment 200 231 463
Capital commitments 683 779 751
(Including amounts authorised, but not
yet contracted for)
Guarantees and contingent liabilities
163 308 435
Dividends received from associated 259 452 1 528
companies and joint ventures set off
against investments
Comments
1. Acquisition of VenFin Limited (VenFin)
On 8 June 2009 Remgro and VenFin announced that they are engaged in
discussions regarding a possible merger of the two companies, and on 17 August
2009 Remgro and VenFin shareholders approved the proposed acquisition by
Remgro of the entire issued share capital of VenFin (the transaction).
On 4 November 2009 the Competition Tribunal approved the transaction and on 23
November 2009 VenFin shareholders received 1 Remgro share for every 6.25
VenFin shares held. In terms of the transaction Remgro issued 41 626 619
shares at a price of R89.25 per share.
As the transaction was completed subsequent to 30 September 2009, no income
from VenFin was accounted for during the period under review.
2. 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.
These financial statements incorporate accounting policies that are consistent
with those of the previous financial periods, with the exception of the
implementation of IFRS 8: Operating Segments and the amendments to IAS 1
(revised): Presentation of Financial Statements. The adoption of these new
accounting standards and amendments to IFRS had no impact on the results of
either the current or prior periods.
3. Comparison with prior periods
With effect from 3 November 2008 the investment in BAT was distributed to
Remgro shareholders as an interim dividend in specie. For the year ended 31
March 2009 the investment in BAT was accordingly only equity accounted for the
seven months to 31 October 2008.
In order to facilitate year-on-year comparison, headline earnings and headline
earnings per share are also presented for continuing operations, which
excludes the equity accounted income of BAT, as well as all non-recurring
costs relating to the unbundling.
4. Results
Headline earnings
For the period under review both headline earnings and headline earnings per
share decreased by 67.9% from R4 046 million to R1 298 million and from 856.7
cents to 275.3 cents respectively.
Contribution to headline earnings
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Tobacco interests - 2 052 2 295
Financial services 517 792 1 576
Industrial interests 744 847 1 318
Mining interests 56 296 164
Corporate finance and other (19) 59 (693)
interests
1 298 4 046 4 660
Refer to Annexures A and B for segmental information.
The combined contribution of FirstRand and RMB Holdings to Remgro`s headline
earnings from financial services amounted to R517 million (2008: R792
million). The decrease of 34.7% can be attributed mainly to an increase in
bad debts in the retail lending business of the banking division as well as to
equity trading losses.
The contribution of the industrial interests decreased by 12.2% to R744
million (2008: R847 million). Total South Africa`s contribution to headline
earnings amounted to a loss of R15 million (2008: R282 million profit). The
decrease in earnings from Total South Africa is mainly due to the sharp
increase in fuel pump prices in the first half of 2008, resulting in material
favourable stock revaluations in the comparative period compared to negative
stock revaluations in the period under review. Kagiso Trust Investment`s
(KTI) contribution to headline earnings amounted to R57 million (2008: R194
million loss). KTI`s results were impacted by favourable fair value
adjustments amounting to R66 million (2008: R369 million unfavourable)
relating to its holding of Metropolitan Holdings Limited. Rainbow reported
improved results with its contribution to Remgro`s headline earnings amounting
to R125 million (2008: R93 million), while Medi-Clinic`s contribution to
headline earnings amounted to R152 million (2008: R132 million). Distell and
Unilever`s contribution to headline earnings amounted to R88 million and R120
million respectively (2008: R114 million and R127 million). Tsb Sugar again
produced solid results with a contribution to headline earnings amounting to
R153 million (2008: R173 million).
Mining interest`s contribution to headline earnings decreased by 81.1% to R56
million (2008: R296 million). Dividends received from Implats amounted to R53
million (2008: R314 million). Trans Hex`s contribution to Remgro`s headline
earnings amounted to R3 million (2008: R18 million loss).
The contribution of corporate finance and other interests decreased to a
headline loss of R19 million (2008: R59 million profit). The decrease can be
attributed mainly to lower interest rates than in the comparative period, with
the contribution of the central treasury division to headline earnings
amounting to R34 million (2008: R127 million). Also included in the
contribution of the central treasury division for the comparative period
referred to above, were foreign currency profits amounting to R48 million
relating to intergroup dividends.
Headline earnings from continuing operations
In order to facilitate year-on-year comparison, headline earnings and headline
earnings per share are also presented for continuing operations, which
excludes the equity accounted income of BAT, as well as all non-recurring
costs relating to the unbundling, as set out in the following table.
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Headline earnings as reported 1 298 4 046 4 660
Equity accounted income of BAT - (1 979) (2 211)
STC on the BAT unbundling - - 686
Other non-recurring costs - - 33
relating to the unbundling
Headline earnings from 1 298 2 067 3 168
continuing operations
Headline earnings per share as 275.3 856.7 987.7
reported (cents)
Headline earnings per share 275.3 437.7 671.5
from continuing operations
(cents)
Headline earnings from continuing operations decreased by 37.2% from R2 067
million to R1 298 million, while headline earnings per share from continuing
operations decreased by 37.1% from 437.7 cents to 275.3 cents.
Earnings
Total earnings decreased by 81.3% to R1 171 million (2008: R6 277 million),
mainly due to the fact that no income from BAT was accounted for during the
period under review.
5. Intrinsic value
Remgro`s intrinsic value per share increased by 11.5% from R99.15 at 31 March
2009 to R110.54 at 30 September 2009. Refer to Annexure B for full details.
6. Investments
The most important changes to Remgro`s investments during the period under
review were as follows:
Capevin Investments Limited (Capevin Investments) - previously KWV Investments
Limited
On 14 April 2009, Remgro acquired 4 028 136 Capevin Investments shares (9.6%
shareholding) for a total consideration of R258.5 million. As Remgro`s
interest in Distell Group Limited (Distell) is held through Remgro-Capevin
Investments Limited, in which both Remgro and Capevin Investments has a 50%
interest, this acquisition effectively increases Remgro`s indirect interest in
Distell by 2.8% to 32.0% (31 March 2009: 29.2%).
In terms of International accounting standards Remgro cannot equity account
the additional 2.8% effective interest in Distell. The investment in Capevin
Investments is therefore classified as a financial instrument "available-for-
sale" and only dividend income will be accounted for in the income statement.
During the period under review dividend income amounting to R7.3 million was
received from Capevin Investments.
PG Group of Companies (PGSI)
PGSI is the foreign holding company of the Plate Glass group. On 31 March
2009, Remgro`s interest in PGSI, on a fully diluted basis, was 25.0%. During
March 2009 Remgro advanced a bridging loan amounting to R29.0 million to PGSI
in anticipation of a PGSI rights offer intending to raise up to R300 million
from shareholders.
During June 2009, in participation of the rights offer, Remgro invested a
further R171.1 million in PGSI, being represented by an equity investment
amounting to R41.5 million and an investment in convertible redeemable
preference shares amounting to R129.6 million. The term of the preference
shares is five years and it has an effective dividend yield of 7.5%. The
bridging loan amounting to R29.0 million was simultaneously repaid. On 30
September 2009 Remgro`s interest in PGSI, on a fully diluted basis, was 25.1%.
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
With effect from 3 August 2009 Tsb Sugar acquired the Pongola sugar mill from
Illovo Sugar Limited for R180.0 million. This acquisition adds approximately
140 000 tons of sugar production capacity to Tsb Sugar`s current base of 520
000 tons per annum, representing an increase of 26.9%.
For the period under review the Pongola sugar mill contributed R16.7 million
to turnover, while an operating loss of R4.9 million, before interest and tax,
was reported.
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. During the period under review
Remgro invested a further $5.0 million in Xiocom. Remgro has conditionally
committed funds amounting to $50.0 million to Xiocom and on 30 September 2009
$33.75 million had already been invested.
Kagiso Trust Investments (Pty) Limited 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. During the period under review Remgro invested a further R7.6
million in KIEF. By 30 September 2009, Remgro had invested R82.7 million of
the R350 million committed.
Business Partners Limited (Business Partners)
During the period under review Remgro acquired a further 25 000 Business
Partners shares for a total amount of R0.2 million. On a fully diluted basis,
Remgro`s interest in Business Partners remained unchanged at 20.8%.
Repurchase of Remgro shares
At 31 March 2009, 3 500 000 Remgro ordinary shares (0.8%) were held as
treasury shares by a wholly owned subsidiary company of Remgro. As previously
reported, 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 November 2008.
During the period under review no Remgro ordinary shares were repurchased,
while 1 176 Remgro ordinary shares were utilised to settle Remgro`s obligation
towards scheme participants who exercised share appreciation rights granted to
them.
At 30 September 2009, 3 498 824 Remgro ordinary shares (0.8%) were held as
treasury shares.
7. Information regarding unlisted investments
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
Tsb Sugar`s turnover for the six month period under review increased by 14.1%
from R1 564 million to R1 784 million.
Tsb Sugar`s headline earnings for the period was R153 million (2008: R173
million). The decrease in headline earnings is mainly due to the pressure of
increased input costs on gross profit and losses in the citrus-business.
Headline earnings attributable to sugar amounted to R196 million (2008: R185
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 646 270 tons (2008: 507 659 tons). This increase can be attributed to the
acquisition of the Pongola Mill and a marginal improvement in sucrose
percentage in cane. The world sugar price increased significantly over the
past months but the stronger rand negated most of the increase. The export
sugar price for the full year is however expected to be higher than the
previous year. Royal Swaziland Sugar Corporation`s contribution to Tsb Sugar`s
profit for the period is R62 million (2008: R56 million), 10.7% better than
the previous period due to improved sugar prices.
Wispeco Holdings Limited (Wispeco)
Headline earnings for the period under review amounted to R24 million (2008:
R26 million). Lower earnings resulted mainly from a further reduction of 21%
in sales volume compared to the corresponding period last year, linked to the
continuing slide in residential and commercial building activity. On the back
of lower commodity prices, turnover for the period reduced by 30% although
yielding a positive cash flow of R65 million.
With local extrusion capacity now exceeding demand, significant price
competition amongst local extruders is placing operating margins under
pressure. The threat of low cost imports, mainly from China, increased
following the reduction in the general import duty on aluminium extrusions
from 5% to 0% in June 2009.
With the aim of improving cost efficiency and maintaining balance between
capacity and throughput, Wispeco completed a restructuring process whereby
total employment was reduced by around 15%. During September 2009, Wispeco
concluded an agreement for the acquisition of Sheerline, a nationwide stockist
and distributor of aluminium extrusions, from AGI. This transaction is subject
to Competition Authorities approval, the outcome of which is expected in
January 2010.
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 mainly in South Africa.
Business Partners` contribution to Remgro`s headline earnings for the six
months ended 30 September 2009 amounted to R7 million (2008: R14 million),
representing a decrease of 50% compared to the corresponding period last year.
The decrease in headline earnings is primarily due to the decrease in net
interest revenue earned as a result of the decrease in interest rates. Non-
interest revenue, resulting from equity and quasi-equity investments, declined
as a result of the negative impact of the recession on the small and medium
enterprise sector.
Investments to the value of R376 million (2008: R475 million) were advanced
during the six month period, representing a decrease of 21% in investment
activity.
The cautious approach to investment activities will continue in the second
half of the financial year, duly considering the impact on Business Partners`
funding requirements, as well as developments in the South African economy. It
is anticipated however, that the level of new investments during 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 results for the six months to 30 June 2009 reflected a loss of R44
million, mainly due to the sharp drop of fuel pump prices which occurred
during January 2009. This resulted in a negative stock revaluation of R360
million. Oil prices were very volatile during the period, beginning the year
at $40 per barrel and trading at $71 during June 2009.
Retail sales of petroleum products in South Africa have been impacted by the
economic downturn which resulted in the stagnation of demand. Consequently,
Total`s sales volumes were at the same level as experienced during the first
half of 2008, thus maintaining market share. The decrease in marketing margins
is mainly due to negative stock revaluations experienced in January 2009 after
international oil prices dropped sharply at the end of 2008. However, the
industry obtained an increase in the regulated wholesale margin of 6.2 cents
per litre in October 2009 to partially compensate for inflation experienced in
the last few years. This should help to improve the profitability of the
company in the foreseeable future.
Natref (in which Total has an interest of 36%) experienced unscheduled
shutdowns which adversely affected production. Refining margins have also
dropped significantly compared to the prior period due to worldwide recession
and a substantial decrease in oil product consumption, particularly in the
transport sector.
Total`s capacity to finance development projects is reduced due to the
economic recession, which leads to more selectivity in investment choices,
whilst the company has also launched action plans to incur cost savings.
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 R120 million (2008: R127 million).
Turnover increased by 8.7% to R6 084 million (2008: R5 595 million), while
gross profit margins were higher at 33.9% (2008: 31.8%). Included in Remgro`s
share of Unilever`s earnings is restructuring costs amounting to R22 million
(2008: R7 million).
The growth in the retail business turnover of 9.3% for the six months ended 30
September 2009 (2008: 21.3%) was lower than that of the comparative period,
due to falling commodity prices which results in increased competitive pricing
in the market. The increased gross margins are enhanced by major cost saving
projects such as conversion of washing powder cartons into flexi bags and
switching major raw material suppliers.
Increased depreciation and finance costs due to capital expenditures incurred
during the previous year on additional warehousing, has offset the higher
gross profit, leading to the decrease in Unilever`s contribution to Remgro`s
headline earnings. Higher indirect costs compared to the previous period, as a
result of increased IT costs relating to the conversion into a global system
for customer service operations and reporting, has also partially contributed
to this decline in headline earnings.
Air Products South Africa (Pty) Limited (Air Products)
Air Products` contribution to Remgro`s headline earnings for the six months
ended 30 September 2009 increased by 4% to R53 million (2008: R51 million),
while the company`s profit before tax increased by 1% to R163 million (2008:
R161 million).
Sales volumes were generally lower across all segments of the business. Lower
demand for commodities and lower manufacturing volumes affected both the large
tonnage business and the demand for packaged gases. A new air separation plant
was commissioned in Newcastle, KwaZulu-Natal, to supply Mittal Steel`s
anticipated long-term demands in the region.
The immediate outlook for volumes remains uncertain, but recent modest
improvement in demand in certain areas provides reasonable prospects for
moderate growth.
PGSI Limited (PGSI)
PGSI`s turnover of R1 264 million for the six months to 30 June 2009, was
similar to that of the comparative period and its headline earnings declined
from R27 million to a loss of R54 million.
PGSI`s wholly owned subsidiary, PG Group (Pty) Limited`s results in South
Africa have been severely impacted by the global and domestic recession, which
has been particularly severe in the new vehicle manufacture and domestic
building sectors. New vehicle sales are 30% lower than the prior year. These
industries have not yet responded to the decline in interest rates over the
past year. The strengthening of the rand against major currencies during the
first six months of the year reduced export revenues and dampened domestic
volumes and prices. The group also had one of its major float manufacturing
plants down for repair and refurbishment during the period, which also
negatively impacted results.
Borrowing costs increased from the comparative period due to debt funding
required to finance PG Group`s capital expansion programme. Operating cash
flows benefited from a R84 million reduction in working capital over the last
twelve months. PGSI implemented a rights offer amounting to R300 million
through an issue of ordinary and preference shares during June 2009.
Whilst the economic climate is likely to remain challenging into 2010, the
group has benefited from the growth in infrastructure projects and
construction related to the 2010 Soccer World Cup. The automotive replacement
aftermarket has held up well with its consistent breakage demand.
The repair of the original float line at PG Group was completed in September
2009 following a five-month planned shutdown. This will bring to completion
the group`s capital expansion programme which will drive operational
efficiencies, increase opportunities for sales of a wider product range and
meet future anticipated growth.
Kagiso Trust Investments (Pty) Limited (KTI)
KTI`s contribution to Remgro`s headline earnings for the six months under
review amounted to R57 million (2008: R194 million loss). The increase in
contribution to headline earnings was due mainly to a favourable fair value
adjustment on the conversion rights attached to its holding of Metropolitan
Holdings Limited preference shares of R66 million (2008: R369 million
unfavourable) and the realisation of a profit of R56 million (2008: R126
million negative fair value adjustment) on the settlement of the platinum
hedging financial instrument for the Mototolo joint venture.
Xiocom Wireless, Inc. (Xiocom)
Xiocom`s contribution to Remgro`s headline earnings for the six months under
review amounted to a loss of R38 million (2008: R44 million loss). Xiocom
needs to expand its footprint and is in the process of raising capital for
this purpose.
Directorate
With effect from 4 November 2009, Messrs Peter Mageza, Jabu Moleketi, Gerrit
Thomas ("GT") Ferreira and Dr Mamphela Ramphele were appointed as independent,
non-executive directors to the Board of Remgro. In addition Mr Jannie Durand
has been appointed as an executive director. Mr G D de Jager retired as
independent non-executive director on 5 August 2009.
Management Board
The absorption of the VenFin management team into Remgro has resulted in a
change in the management structure of Remgro. The Executive Committee has been
replaced with a Management Board as a sub-committee of the Remgro Board. The
Management Board will mainly be responsible for determining policies, ensuring
compliance, monitoring and managing existing investments, identifying and
recommending new investment opportunities and executing the decisions and
strategy of the Board. The Management Board will comprise of Thys Visser
(Chairman and Chief Executive Officer), Jannie Durand (Chief Investment
Officer), Leon Crouse (Chief Financial Officer), Emil Buhrmann, Jan Dreyer,
Theo van Wyk, Jennifer Preller and Neville Williams.
Declaration of cash dividend
Declaration of dividend No 19
Notice is hereby given that an interim dividend of 84 cents (2008: 80 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 2009.
Dates of importance:
Last day to trade in order to participate in the Friday, 8 January 2010
interim dividend
Shares trade ex dividend Monday, 11 January 2010
Record date Friday, 15 January 2010
Payment date Monday, 18 January 2010
Share certificates may not be dematerialised or rematerialised between Monday,
11 January 2010 and Friday, 15 January 2010, both days inclusive.
Signed on behalf of the Board of Directors.
Johann Rupert Thys Visser
Chairman Chief Executive Officer
Stellenbosch
30 November 2009
Directorate
Non-executive directors
Johann Rupert (Chairman), E de la H Hertzog (Deputy Chairman),
P E Beyers, G T Ferreira*, P K Harris*, N P Mageza*,
J Malherbe, P J Moleketi*, M M Morobe*, M A Ramphele*,
F Robertson*, H Wessels*
(*Independent)
Executive directors
M H Visser (Chief Executive Officer),
W E Buhrmann, L Crouse, J W Dreyer, J J Durand,
J A Preller, T van Wyk
Corporate information
Secretary
M Lubbe
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
Composition of headline earnings
Six months ended Year ended
30 September 31 March
2009 2008 2009
R`m R`m R`m
Tobacco interests
R&R Holdings - 2 052 2 295
Financial services
RMB Holdings 296 399 761
FirstRand 221 393 815
Industrial interests
Medi-Clinic Corporation 152 132 288
Unilever SA Holdings 120 127 231
Distell Group 88 114 304
Capevin Investments 7 - -
Rainbow Chicken 125 93 235
Tsb Sugar 153 173 188
Air Products South Africa 53 51 102
Nampak 13 53 105
Total South Africa (15) 282 (25)
Kagiso Trust Investments 57 (194) (139)
PGSI (18) 3 40
Wispeco 24 26 30
Caxton - - 4
Dorbyl (15) (13) (45)
Mining interests
Implats 53 314 346
Trans Hex Group 3 (18) (182)
Corporate finance and other (19)
interests 59 (693)
Headline earnings 1 298 4 046 4 660
Adjusted for discontinued -
operations (1 979) (1 492)
Headline earnings from
continuing operations 1 298 2 067 3 168
Weighted number of shares 471.4
(million) 472.3 471.8
Headline earnings per share
(cents) 275.3 856.7 987.7
Continuing operations 275.3
(cents) 437.7 671.5
Discontinued operations -
(cents) 419.0 316.2
Annexure B
Composition of net asset value
30 September 2009 31 March 2009
Book Intrinsic Book Intrinsic
value value value value
R`m R`m R`m R`m
Financial services
RMB Holdings 6 218 8 258 6 027 6 227
FirstRand 5 825 7 944 5 728 5 803
Industrial interests
Medi-Clinic Corporation 3 251 5 739 3 533 5 533
Unilever SA Holdings 3 068 4 346 2 950 4 110
Distell Group 1 318 3 693 1 320 3 052
Capevin Investments 298 298 - -
Rainbow Chicken 1 876 3 429 1 836 3 315
Tsb Sugar 1 364 2 631 1 211 2 631
Air Products South 473 1 653 453 1 563
Africa
Nampak 1 179 1 328 1 263 984
Total South Africa 547 1 187 566 1 136
Kagiso Trust 1 154 1 167 940 955
Investments
PGSI 523 498 368 368
Wispeco 335 376 312 345
Caxton 94 94 94 94
Dorbyl 38 63 49 49
Mining interests
Implats 4 670 4 670 4 223 4 223
Trans Hex Group 57 103 44 44
Other
Sundry investments and 511 399 496 358
loans
Deferred taxation (473) (490) (394) (422)
liability
Other net assets 852 1 151 1 086 1 301
Cash and liquid assets
at the centre
Local 550 550 874 874
Offshore 4 181 4 181 5 093 5 093
Net asset value (NAV) 37 909 53 268 38 072 47 636
Potential CGT liability (1 150) (887)
NAV after tax 37 909 52 118 38 072 46 749
Issued shares after 471.5 471.5 471.5 471.5
deduction of shares
repurchased (million)
NAV after tax per share 80.40 110.54 80.75 99.15
(Rand)
Notes :
1. Cash at the centre excludes cash held by subsidiaries that are
separately valued above.
2. 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, Capevin Investments and Caxton) is
included in deferred taxation liability above.
3. For purposes of determining the intrinsic value, the unlisted
investments are shown at directors` valuation and the listed
investments are shown at stock exchange prices.
Date: 30/11/2009 17:00:03 Produced by the JSE SENS Department.
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