| Thu 25 Nov 2010, 17:00 | | REM - Remgro Limited - Unaudited results for the six months ended 30 |
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REM
REM
REM - Remgro Limited - Unaudited results for the six months ended 30
September 2010 and cash dividend declaration
Remgro Limited
(Incorporated in the Republic of South Africa)
Registration number 1968/006415/06
ISIN ZAE000026480
Share Code REM
INTERIM REPORT
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010 AND CASH
DIVIDEND DECLARATION
Salient features
- Interim dividend per share: +20.0%
- Headline earnings per share: +56.3%
- Intrinsic value per share at 30 September: R125.95
Abridged consolidated statement of financial position
30 September 31 March
2010 2009 2010
R`m R`m R`m
Assets
Non-current assets
Property, plant and equipment 3 105 2 975 3 050
Biological agricultural assets 177 76 157
Investment properties 40 34 34
Intangible assets 359 391 361
Investments - Associated 28 659 24 263 28 052
companies
- Joint ventures 198 95 55
- Other 5 835 5 519 6 644
Retirement benefits 119 114 121
Loans 106 44 108
Deferred taxation 4 10 6
38 602 33 521 38 588
Current assets 9 568 8 764 9 470
Inventories 1 867 1 626 1 048
Biological agricultural assets 423 464 423
Debtors and short-term loans 1 816 1 528 1 941
Investments in money market 1 739 1 918 1 812
funds
Cash and cash equivalents 3 392 2 995 3 827
Other current assets 331 233 419
Total assets 48 170 42 285 48 058
Equity and liabilities
Issued capital 3 605 8 3 722
Reserves 40 256 38 161 39 837
Treasury shares (248) (260) (255)
Shareholders` equity 43 613 37 909 43 304
Non-controlling interest 774 710 779
Total equity 44 387 38 619 44 083
Non-current liabilities 1 356 1 306 1 517
Retirement benefits 186 163 180
Long-term loans 188 213 175
Deferred taxation 982 930 1 162
Current liabilities 2 427 2 360 2 458
Trade and other payables 2 223 2 205 2 292
Short-term loans 101 66 146
Other current liabilities 103 89 20
Total equity and liabilities 48 170 42 285 48 058
Net asset value per share
(Rand)
- At book value R84.97 R80.40 R84.38
- At intrinsic value R125.95 R110.54 R121.64
Abridged consolidated income statement
Six months ended Year
ended
30 September 31
March
2010 2009 2010
R`m R`m R`m
Sales 6 118 5 499 11 849
Inventory expenses (3 642) (3 321) (7 099)
Personnel costs (1 061) (922) (1 939)
Depreciation (149) (144) (290)
Other net operating expenses (898) (739) (1 680)
Trading profit 368 373 841
Dividend income 94 80 116
Interest received 75 57 146
Finance costs (20) (13) (59)
Negative goodwill 112 - -
Net impairment of investments, (2) - (179)
assets and goodwill
Profit/(loss) on sale and 157 - (9)
unbundling of investments
Consolidated profit before tax 784 497 856
Taxation (234) (180) (309)
Consolidated profit after tax 550 317 547
Share of after-tax profit of 1 880 875 2 619
associated companies and joint
ventures
Net profit 2 430 1 192 3 166
Net profit attributable to:
Equity holders 2 405 1 171 3 060
Non-controlling interest 25 21 106
2 430 1 192 3 166
Share of after-tax profit of
associated companies and joint
ventures
Profit before taking into account 2 655 1 470 3 952
impairments, non-recurring and
capital items
Net impairment of investments,
assets and goodwill (69) (96) (118)
Profit on the sale of investments 52 11 41
Other non-recurring and capital 31 (47) (46)
items
Profit before tax and non- 2 669 1 338 3 829
controlling interest
Taxation (590) (363) (981)
Non-controlling interest (199) (100) (229)
1 880 875 2 619
Reconciliation of headline earnings
Six months ended Year
ended
30 September 31 March
2010 2009 2010
R`m R`m R`m
Net profit for the period 2 405 1 171 3 060
attributable to equity holders
Plus/(minus):
- Negative goodwill (112) - -
- Net impairment of investments - - 149
- Impairment of property, plant and - - 4
equipment
- Impairment of intangible assets - - 26
- (Profit)/loss on sale and (157) - 9
unbundling of investments
- Net surplus on disposal of - (5) (4)
property, plant and equipment
- Non-headline earnings items (13) 142 123
included in equity accounted
earnings of associated companies
and joint ventures
- Taxation effect of adjustments 83 (9) (10)
- Non-controlling interest 1 (1) (2)
Headline earnings 2 207 1 298 3 355
Earnings and dividends
Six months ended Year
ended
30 September 31 March
2010 2009 2010
Cents Cents Cents
Headline earnings per share
- Basic 430.2 275.3 690.1
- Diluted 413.5 270.7 676.4
Earnings per share
- Basic 468.8 248.4 629.4
- Diluted 451.8 244.6 616.3
Dividends per share
Ordinary 101.00 84.00 209.00
- Interim 101.00 84.00 84.00
- Final 125.00
Abridged consolidated statement of comprehensive income
Six months Year
ended ended
30 September 31 March
2010 2009 2010
R`m R`m R`m
Net profit 2 430 1 192 3 166
Other comprehensive (1 (831) (640)
income, net of tax 362)
Exchange rate (151) (931) (1 216)
adjustments
Fair value adjustments (897) 520 1 421
for the period
Deferred taxation on
fair value
adjustments 161 (82) (219)
Realisation of reserves
previously
deferred in equity 28 - (6)
Change in reserves of
associated
companies and joint (503) (338) (620)
ventures
Total comprehensive 1 068 361 2 526
income for the period
Total comprehensive
income attributable to:
Equity holders 1 043 340 2 420
Non-controlling interest 25 21 106
1 068 361 2 526
Abridged consolidated statement of changes in equity
Six months Year
ended ended
30 September 31 March
2010 2009 2010
R`m R`m R`m
Balance at 1 April 44 083 38 38 787
787
Total comprehensive income 1 068 361 2 526
Dividends paid (680) (553) (1 006)
Capital invested by 4 6 10
minorities
Other movements 8 - 2
Long-term share incentive 21 18 50
scheme reserve
Unbundling of investment (117) - -
Shares issued - - 3 714
Total equity 44 387 38 44 083
619
Abridged consolidated statement of cash flows
Six months ended Year
ended
30 September 31
March
2010 2009 2010
R`m R`m R`m
Cash generated/(utilised) (460) (141) 1 004
from/(by) operations
Taxation paid (143) (59) (144)
Dividends received 795 712 1 444
Cash available from operating 192 512 2 304
activities
Dividends paid (680) (553) (1 006)
Net cash inflow/(outflow) from (488) (41) 1 298
operating activities
Investing activities 167 (730) (1 147)
Financing activities 38 8 (5)
Net increase/(decrease) in (283) (763) 146
cash and cash equivalents
(Increase)/decrease in money 73 (340) (234)
market funds
Exchange rate loss on foreign (159) (921) (1 190)
cash
Cash and cash equivalents at
the beginning of the period 3 741 5 019 5 019
Cash and cash equivalents at 3 372 2 995 3 741
the end of the period
Cash and cash equivalents - 3 392 2 995 3 827
per statement of financial
position
Bank overdraft (20) - (86)
Additional information
30 September 31 March
2010 2009 2010
Number of shares in issue
- Ordinary shares of 1 cent
each 481 106 439 479 481 106
370 751 370
Issued at 1 April 481 106 439 479 439 479
370 751 751
Issued during the period - - 41 626
619
- Unlisted B ordinary shares
of 10 cents each 35 506 35 506 35 506
352 352 352
Total number of shares in 516 612 474 986 516 612
issue 722 103 722
Number of shares held in
treasury
- Ordinary shares repurchased
and held in treasury (3 336 (3 498 (3 424
894) 824) 044)
513 275 471 487 513 188
828 279 678
Weighted number of shares 512 983 471 427 486 152
023 011 822
In determining earnings per share and headline earnings per
share the weighted number of shares was taken into account.
Additional information (continued)
30 September 31
March
2010 2009 2010
R`m R`m R`m
Listed investments
Associated
- Book value 17 235 16 809 17 235
- Market value 29 973 23 700 28 480
Other
- Book value 5 437 5 422 6 357
- Market value 5 437 5 422 6 357
Unlisted
investments
Associated
- Book value 11 424 7 454 10 817
- Directors` 18 896 12 800 17 720
valuation
Joint ventures
- Book value 198 95 55
- Directors` 216 95 55
valuation
Other
- Book value 398 97 287
- Directors` 398 97 287
valuation
Additions to and 206 200 424
replacement of
property, plant
and equipment
Capital 1 215 683 882
commitments
(Including amounts
authorised, but
not yet contracted
for)
Guarantees and 1 387 163 389
contingent
liabilities*
Dividends received 409 259 1 222
from associated
companies and
joint ventures set
off against
investments
* The increase in guarantees and contingent
liabilities since 31 March 2010 relates to two
tax assessments received from SARS during the
period under review. One of the assessments
amounting to R565 million relates to the
buyback and cancellation of treasury shares,
while the second assessment amounting to R434
million was issued in connection with the
disposal of investments. The assessments are
being disputed.
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.
These financial statements incorporate accounting policies that are
consistent with those of the previous financial periods, with the
exception of the implementation of the amendments to IAS 28: Investments
in Associates, resulting from the introduction of the revised IFRS 3:
Business Combinations. Refer to the section on changes in accounting
policy below for further detail.
2. Changes in accounting policy
In the past all dilutionary and anti-dilutionary effects of equity
transactions by associated companies and joint ventures that Remgro was
not a party to, were accounted for in other comprehensive income. With
the introduction of the amendments to IAS 28: Investments in Associates,
resulting from the application of the revised IFRS 3: Business
Combinations, these effects are now accounted for in profit and loss.
In terms of the transitional provisions of the revised IFRS 3, this
standard is only applied prospectively for all financial periods
commencing on/after 1 July 2009 and accordingly the comparative results
have not been restated. The impact of the change in accounting policy
for the period under review was not material. In terms of Circular
3/2009: Headline Earnings, the effect of such transactions is not
included in headline earnings and accordingly the change in accounting
policy did not affect Remgro`s headline earnings.
3. Comparison with prior periods
The acquisition of VenFin Limited (VenFin) was completed on 23 November
2009 when VenFin shareholders received 1 Remgro share for every 6.25
VenFin shares held. For the six months ended 30 September 2009 no income
from the VenFin Group was accounted for in Remgro`s results, while the
inclusion of the VenFin Group during the period under review increased
headline earnings by R92 million. The acquisition did however have a
negative effect on headline earnings per share due to the dilutive
effect of the issue of 41.6 million Remgro shares as consideration for
the acquisition.
4. Results
Headline earnings
For the period under review headline earnings increased by 70.0% from
R1 298 million to R2 207 million, whereas headline earnings per share
increased by 56.3% from 275.3 cents to 430.2 cents.
Contribution to headline earnings
Six months ended Year ended
30 September 31 March
2010 % 2009 2010
R`m Change R`m R`m
Financial services 930 79.9 517 1 355
Industrial interests 1 110 49.2 744 1 982
Media interests 45 - 17
Mining interests 72 28.6 56 96
Technology interests 59 - 13
Other investments 12 138.7 (31) (64)
Central treasury 29 (14.7) 34 57
Other net corporate (50) (127.3) (22) (101)
costs
2 207 70.0 1 298 3 355
Refer to Annexures A and B for segmental information.
The combined contribution of FirstRand and RMBH to Remgro`s headline
earnings from financial services amounted to R930 million (2009:
R517 million). The increase of 79.9% can be attributed mainly to a
significant reduction in bad debts and improved profitability in both
RMB and Wesbank.
The contribution of the industrial interests to headline earnings
increased by 49.2% to R1 110 million (2009: R744 million). Kagiso Trust
Investment`s (KTI) contribution to headline earnings amounted to
R197 million (2009: R57 million), favourably impacted by fair value
adjustments relating to its shareholdings in Metropolitan Holdings
Limited and Adcock Ingram Holdings Limited. Total South Africa`s
contribution to headline earnings amounted to R97 million (2009: R15
million loss), which improved performance is mainly due to favourable
stock revaluations and savings in operating costs. Distell`s
contribution to Remgro`s headline earnings, which includes the
investments in Capevin Holdings and Capevin Investments, amounted to
R105 million (2009: R95 million). Rainbow reported slightly lower
results with its contribution to Remgro`s headline earnings amounting to
R119 million (2009: R125 million). Medi-Clinic and Unilever`s
contribution to headline earnings amounted to R170 million and R132
million respectively (2009: R152 million and R120 million). Tsb Sugar
again produced solid results with a contribution to headline earnings
amounting to R177 million (2009: R153 million).
Media interests consist primarily of the interests in Sabido, MARC
(previously SAIL) and Premier Team Holdings. Sabido`s contribution to
Remgro`s headline earnings amounted to R54 million, while MARC
contributed R3 million. Remgro`s share of Premier Team Holdings` loss
during the period under review was R15 million.
After the unbundling of the investment in Trans Hex to Remgro
shareholders during September 2010, Implats is the only remaining
investment being reported under mining interests. Dividends received
from Implats amounted to R72 million (2009: R53 million), while no
income from Trans Hex was accounted for during the period under review
(2009: R3 million).
Technology interests primarily represent the interest in the CIV group
of companies, as well as the investments in Tracker and SEACOM. For the
period under review the CIV group contributed R39 million to Remgro`s
headline earnings, while Tracker`s contribution to headline earnings
amounted to R34 million. SEACOM reported a headline loss of R81 million
for the period under review, with Remgro`s share of this loss amounting
to R20 million.
The contribution of other investments to headline earnings improved by
R43 million to R12 million (2009: R31 million loss). It should be noted
that a headline loss amounting to R38 million for Xiocom was included in
the results of the comparative period. This investment was sold in March
2010. Business Partners` contribution to headline earnings amounted to
R8 million (2009: R7 million).
Lower interest rates as well as lower average cash balances resulted in
a decrease in the contribution from the central treasury division to
R29 million (2009: R34 million). The increase in other net corporate
costs to R50 million (2009: R22 million) is mainly due to the first time
inclusion of VenFin`s corporate costs for the period under review, as
well as certain non-recurring items in the comparative period.
Earnings
Total earnings increased by 105.4% to R2 405 million (2009:
R1 171 million), mainly as a result of the earnings growth of the
underlying investments, as well as the capital gains realised on the
sale of Nampak and the unbundling of the investment in Trans Hex
amounting to R22 million and R52 million respectively.
5. Intrinsic value
Remgro`s intrinsic value per share increased by 3.5% from R121.64 at
31 March 2010 to R125.95 at 30 September 2010. Refer to Annexure B for
full details.
6. Investment activities
The most important investment activities during the period under review
were as follows:
Nampak Limited (Nampak)
During August 2010 Remgro sold its 13.3% interest in Nampak through an
accelerated book build offering for a total consideration of
R1 358.9 million (or R17.40 per share). During the period under review
the results of Nampak were equity accounted for the four months to 31
July 2010 and its contribution to Remgro`s headline earnings amounted to
R33 million (2009: R13 million).
Trans Hex Group Limited (Trans Hex)
On 18 August 2010 Remgro shareholders approved the unbundling of the
investment in Trans Hex and on 13 September 2010 each Remgro shareholder
received 5.85 Trans Hex shares for every 100 Remgro shares held. As the
investment in Trans Hex was reclassified as an investment "held for
sale" in the previous financial year, no income from Trans Hex was
accounted for during the period under review (2009: R3 million).
Medi-Clinic Corporation Limited (Medi-Clinic)
During August 2010 a further R591.9 million was invested in Medi-Clinic
in terms of a rights offer whereby Medi-Clinic shareholders could
subscribe for an additional 10 Medi-Clinic shares for every 100 shares
held at a price of R23.00 per share. On 30 September 2010 Remgro`s
interest in Medi-Clinic was 45.4% (31 March 2010: 45.7%).
Business Partners Limited (Business Partners)
During the period under review Remgro acquired a further 14 369 742
Business Partners shares for a total amount of R79.2 million. On a fully
diluted basis, Remgro`s interest in Business Partners increased to 28.8%
(31 March 2010: 20.8%).
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. During the period under review Remgro invested a
further R101.1 million in KIEF. By 30 September 2010, Remgro had
invested
R195.3 million of the R350 million committed.
Dark Fibre Africa (Pty) Limited (Dark Fibre)
In the past Remgro only had an indirect interest of 31.3% in Dark Fibre
through its interests in the CIV group of companies. During May 2010 an
amount of R9.7 million was invested directly into Dark Fibre in exchange
for a 0.7% equity interest in that company. This investment effectively
increased Remgro`s interest in Dark Fibre to 32.0%. At the same time
Remgro agreed to provide a loan facility amounting to R85.0 million to
Dark Fibre. The term of the facility is ten years and the full amount
has already been advanced.
Capevin Holdings Limited (Capevin Holdings)
During the period under review Remgro acquired a further 9 708 294
Capevin Holdings shares for a total amount of R33.1 million. These
acquisitions increased Remgro`s indirect interest in Distell to 33.4%
(31 March 2010: 33.3%).
Other smaller investments were made during the period under review
amounting to R53.9 million in PGSI Limited, Fundamo (Pty) Limited,
Premier Team Holdings Limited, One Digital Media (Pty) Limited and
Milestone China Funds.
Events after 30 September 2010:
FirstRand Limited (FirstRand) and RMB Holdings Limited (RMBH)
On 12 November 2010 it was announced that all of the suspensive
conditions of the proposed merger of Metropolitan Holdings Limited and
Momentum Group Limited, as well as the subsequent unbundling by
FirstRand of its entire holding of shares in the new merged entity (MMI
Holdings Limited) to its ordinary shareholders, have been fulfilled.
RMBH also announced that it is exploring a number of restructuring steps
to realign its investment portfolio and to enhance shareholder value.
These steps include the possible separation of RMBH`s insurance and
banking interests that could result in a separate listing of these
interests. Further announcements regarding the above will be made by
RMBH once more information becomes available.
Dark Fibre - Further equity investment of R44.4 million, increasing
Remgro`s interest to 34.5%.
KTI and KIEF - Further amount of R30.0 million invested, increasing the
amount already invested to R225.3 million of the R350 million committed.
7. Information regarding unlisted investments
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 R132 million (2009: R120
million). Included in Remgro`s share of Unilever`s earnings are
restructuring costs amounting to R14 million (2009: R22 million).
The turnover for the period increased by 1.7% to R6 190 million
(2009: R6 084 million). This increase was driven primarily by volume
growth (+10.2%), but offset by decreasing prices (-7.6%). The strong
volume growth is mainly in the washing powders category due to the
company`s competitive pricing strategy. The negative price growth is a
result of competition, as well as falling commodity pricing impacted by
the stronger Rand. Major cost saving projects led to increased profit
margins.
Unilever South Africa is also reaping the benefits of implementing a
single distribution network. The consequential cost savings, as well as
decreased finance cost, increased the company`s profit after tax for the
period under review to R514 million (2009: R472 million).
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
Tsb Sugar`s contribution to Remgro`s headline earnings amounted to
R177 million (2009: R153 million), with sugar`s contribution R217
million, while a loss of R20 million was incurred by the citrus
division.
Revenue for the six months ended 30 September 2010 increased by 27.5%
from R1 784 million to R2 274 million of which 22.6% is represented by
exports. Sugar sales contributed R2 183 million (2009: R1 675 million)
to turnover of which 20.7% is represented by exports. It is important to
take note of the seasonality of Tsb Sugar`s business and that the bulk
of its profit is earned in the first six months of its financial year.
It is expected that Tsb Sugar`s sugar production for the season will
increase to 628 753 tons (2009: 550 016 tons). This increase is mainly
attributed to the inclusion of a full year`s production of the Pongola
Mill, which was acquired the previous year. 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 expected to be higher than that of the previous year.
The Royal Swaziland Sugar Corporation`s contribution to Tsb Sugar`s
headline earnings for the period was R38 million (2009: R62 million).
The 38.7% decrease was mainly due to the strength of the lilangeni
against the euro.
Air Products South Africa (Pty) Limited (Air Products)
Air Products` contribution to Remgro`s headline earnings for the six
months ended 30 September 2010 increased by 30.2% to R69 million (2009:
R53 million).
Turnover for the financial year ended 30 September 2010 increased by
18.8% to R1 357 million (2009: R1 142 million), while the company`s
operating profit increased by 15.5% to R424 million (2009: R367
million). Modest volume growth in all segments of the business was
experienced during the period.
Sabido Investments (Pty) Limited (Sabido)
Remgro has an effective interest of 32% in Sabido which has a range of
media interests, the most significant of which is South Africa`s only
private free-to-air television channel, e.tv, and its sister news
service, the eNews channel. Sabido`s contribution to Remgro`s headline
earnings for the six months ended 30 September 2010 amounted to R54
million. This amount includes a charge of R5 million relating to the
amortisation of intangible assets, identified as part of the acquisition
of VenFin.
The latest results from the All Media Products Survey (AMPS) indicate
that e.tv`s audience has grown to 14.8 million viewers. e.tv remains the
largest English-medium television channel in South Africa and the second
most watched channel overall. A renewed emphasis on local programming
has resulted in strong growth among middle income black audiences.
Nevertheless, significant growth in subscribers to low-cost pay-TV
packages has impacted on the market share of free-to-air terrestrial
channels over the past year. The delay in launching digital terrestrial
television, which would provide a multi-channel free-to-air platform,
has aggravated the loss of audiences by free-to-air television channels
to pay-TV. Programming costs have remained stable and while e.tv`s
advertising revenue was negatively affected by the FIFA World Cup and
its aftermath, it has recovered in the second half quarter of 2010. e.tv
Africa, the channel`s pan-African syndicated service, is available on a
free-to-air basis in key African countries including Kenya and Nigeria.
The growth in pay-TV subscribers on DStv has benefited the eNews Channel
which has retained its position as market leader among news channels in
South Africa. The channel is also now available to DStv subscribers in
the rest of Southern Africa and it continues to expand its pan-African
news-gathering capacity with a view to strengthen its position as
Africa`s premier television news broadcaster.
Sabido continues to pursue a multi-channel, multi-platform and multi-
territory strategy with a pan-African focus.
Kagiso Trust Investments (Pty) Limited (KTI)
Kagiso`s contribution to Remgro`s headline earnings for the six months
ended 30 September 2010 amounted to R197 million (2009: R57 million).
Turnover for the financial year ended 30 June 2010 increased from R288
million to R888 million mainly due to the consolidation of Kagiso Media
for the full year (versus one month in the prior year). The company`s
operating profit (including equity accounted income) decreased from R1
552 million to R1 152 million.
Kagiso`s headline earnings include net fair value adjustments on
investments amounting to R606 million (2009: R163 million). The most
notable of these fair value adjustments relate to its investments in
Adcock Ingram (R297 million) and Metropolitan (R320 million).
The Mototolo Platinum Mine delivered strong equity accounted results
during the second half of the year. The Rand`s strength, however, eroded
some of the gains in metal prices.
Kagiso made a limited number of investments during the year, focusing
instead on making quality investments. It took part, amongst others, in
the restructuring of the FirstRand BEE deal. The merger between
Metropolitan and Momentum groups presents new opportunities to KTI for
the future.
Total South Africa (Pty) Limited (Total)
Total`s contribution to Remgro`s headline earnings amounted to R97
million (2009: R15 million headline loss).
Turnover, for the six months ended 30 June 2010, increased from R8 981
million in 2009 to R10 474 million, while operating profit increased to
R444 million (2009: R42 million operating loss). The better results were
mainly due to the improved economic environment in South Africa, stock
revaluation gains of R163 million and cost savings achieved. Financing
costs decreased by R13 million to R60 million due to its improved cash
situation and lower interest rates.
Retail sales of petroleum products achieved similar levels as in 2009,
however, profitability and margins increased, partly due to the
additional interim margin granted by the government to the industry at
the end of 2009, although this increase is below the rate of inflation.
Despite inflationary cost and wages pressures, running expenses have
also been maintained at the same level as the previous year, following
the implementation of cost saving measures as part of a restructuring
process.
Following the economic recession in 2009, Total was increasingly
selective in its capital expenditure projects. The company has, however,
maintained the same levels of capital expenditure for health, safety and
environment projects, especially at its depots.
Natref (in which Total has an interest of 36%) experienced better
reliability than in 2009. The only significant event that affected
production was a planned plant shutdown, which took longer than
expected. After a drastic decline in refining margins in 2009 due to
worldwide recession and decrease in oil product consumption, margins
recovered in 2010, reaching levels above the breakeven point for
refining.
SEACOM Capital Limited (SEACOM)
Remgro has an effective interest of 25% in SEACOM which launched the
first terabit undersea fibre-optic cable to connect Southern and Eastern
Africa with Europe and Asia in July 2009. The cable connects South
Africa, Mozambique, Tanzania, Kenya and Djibouti and onwards with the
rest of the world via landing points in France (and onwards to London)
and India. Landlocked countries (Uganda, Rwanda, Ethiopia, etc.) are
connected by terrestrial backhaul.
SEACOM`s contribution to Remgro`s headline earnings for the period under
review amounted to a loss of R20 million. SEACOM provides high-capacity
international fibre-optic bandwidth to customers in the form of IRU`s
(indefeasible right of use) where most of the revenue is accounted for
over 20 years. During the period under review SEACOM had unforeseen
repair and restoration costs due to a component failure on its undersea
fibre-optic cable. The company is on track to meet its targets, but will
be loss making for the full financial year.
Internet supply increased substantially in the last year due to the
delivery of international bandwidth by SEACOM. In doing so, SEACOM has
utilised less than 10% of its 1.28 terabits per second system designed
capacity. SEACOM has experienced greater competition this year with the
advent of the TEAMS cable system in Kenya and EASSy in Southern and
Eastern Africa. The competition has resulted in downward pressure on
pricing, but the demand has shown great elasticity resulting in
increased international bandwidth usage in all countries in which it
operates.
Tracker Investment Holdings (Pty) Limited (Tracker)
Tracker`s contribution to Remgro`s headline earnings for the period
under review amounted to R34 million. This amount includes a charge of
R12 million relating to the amortisation of intangible assets,
identified as part of the acquisition of VenFin.
For the six months ended 30 June 2010 Tracker`s turnover increased by
14% to R606 million (2009: R534 million) and operating profit improved
by 18%. Over the same period the total subscriber base has increased by
4.5% to 615 995. The National Association of Automobile Manufacturers of
South Africa reported a 20.7% year-on-year growth in new vehicle sales
in
June 2010, however this was off a very depressed 2009 base.
The period under review was very successful for Tracker in terms of new
business, profitability and the various new initiatives that were
started. The cost of vehicle theft as a component of total risk of
insurance is declining, while the cost of replacement parts due to
accidents is increasing. Insurance companies therefore increasingly
require information on driver behaviour. Tracker is well positioned to
assist insurance companies with driver related data through its Skytrax
range of products. Tracker now also provides live traffic data which it
collects from its base of installed Skytrax units for the latest Tom Tom
satellite navigation device.
Community Investment Ventures Holdings (Pty) Limited (CIV)
Remgro has an effective interest of 35.6% in the CIV group which is
active in the power, telecommunications and information technology
sectors. The main subsidiaries are Dark Fibre Africa (DFA) which
constructs and owns fibre optic networks, CIE Telecom which imports and
distributes fibre and specialises in network management and CIV Power
which specialises in cabling of power stations.
The CIV group`s contribution to Remgro`s headline earnings for the six
months to 30 September 2010 amounted to R39 million.
It is anticipated that CIV group`s centre of growth will be DFA. DFA`s
headline earnings for the period under review increased by 41% to
R62 million (7 months to 30 September 2009: R44 million), due to
additional sections of the company`s fibre optic network having been
completed and more customers acquiring or leasing infrastructure.
DFA has fibre network rings in Johannesburg, Cape Town, Durban, Midrand,
Centurion and Pretoria. The Johannesburg ring is regarded as one of the
most important communication rings in Africa. To date, a total distance
of 2 200 km has been completed in the major metropolitan areas. DFA is
also rolling out long-haul routes, the first one completed being from
Durban Metropolitan to the SEACOM landing station in Mtunzini. This
route is currently being extended to Gauteng. In 2010 DFA commenced with
the fibre-to-the-tower project linking mobile phone operators` base
stations to the core communication rings. Mobile backhaul is a major
growth driver for DFA.
DFA has signed commercial lease agreements with 29 telecommunications
service providers ranging from the largest incumbents to small niche
operators, thereby establishing an annuity-income-generating business.
During the next financial year the company aims to extend its presence
in the South African telecommunications market by doubling its
infrastructure footprint, as well as expanding its sales and marketing
activities. The increase in the number of Electronic Communication
Network Services (ECNS) licences issued by ICASA has increased DFA`s
potential market for its services and should lead to sustainable growth
in earnings.
PGSI Limited (PGSI)
Remgro`s portion of PGSI`s headline loss for the six months ended 30
June 2010 amounted to R4 million (2009: R18 million). This amount
includes the contribution relating to the PGSI convertible preference
shares as well as the fair value adjustment on the conversion right
amounting to R6 million (2009: R3 million).
PGSI`s turnover for the period increased by 4% to R1 320 million (2009:
R1 264 million), while its operating profit amounted to R11 million
(2009: R5 million operating loss). The improvement in the results was
largely driven by an improved economic climate in South Africa.
The growth was, however, subdued and off a low base. The building
construction industry continued to be lacklustre and it is expected that
growth will remain weak for the remainder of 2010. Automotive glass
sales were boosted by the number of locally made cars that were
exported, as well as an increase in local new car sales (albeit that 70%
of new cars sold in South Africa are imported). The automotive
replacement glass market showed strong growth, while building glass
sales benefited from the growth in low cost housing and the household
improvement markets. Commercial building activity was high in the lead
up to the Soccer World Cup.
This improvement in sales activity was negated by the strengthening of
the rand by 18% against major currencies over the comparable period,
which significantly reduced export revenues and made imports more
competitive, resulting in pressure on margins.
The PG Group has embarked on a number of initiatives to improve
profitability in this difficult trading environment, including: the
reorganisation of the building products division to improve service
levels, a focus on growing markets in Africa, the reduction in labour
costs at the automotive manufacturing plants and increased yields at all
manufacturing facilities.
The capital expenditure programme of the past four years is now complete
and the focus has shifted to cash generation to service the borrowings
that financed the expansion programme. Over the interim period working
capital was reduced by R165 million and R100 million was raised through
a rights issue.
Wispeco Holdings Limited (Wispeco)
Revenue for the period under review increased by 29.6% from R355 million
to R460 million due to higher aluminium prices worldwide and the
acquisition of Sheerline (a nationwide stockist of aluminium profiles)
from AGI. Despite this increase in revenue, headline earnings decreased
to R20 million (2009: R24 million). The lower earnings were mainly
caused by a reduction in margin (prices came under increasing pressure
due to competition from cheap imports) and local extruders operating
below capacity.
The closure of BHP Billiton`s cast house at the end of 2009 prompted
Wispeco to maintain higher levels of raw material inventory to make
provision for unexpected delays in the arrival of import billet
shipments. As a result, Wispeco`s ability to deliver to its customers
was unaffected by the Transnet strike.
While the building industry battles to recover from the recession,
demand for aluminium profiles in the local market remains low. The first
signs of improved demand in the residential building sector were noted
during middle 2010.
Wispeco was privileged to play a major role in the supply of aluminium
profiles to a number of prominent infrastructure projects, including the
Moses Mabhida Stadium in Durban, the Mbombela Stadium in Nelspruit and
the King Shaka International Airport in Durban. Aluminium windows fitted
to the Gautrain coaches are also being manufactured from Wispeco
aluminium.
MARC Group Limited (MARC)
MARC`s contribution to Remgro`s headline earnings for the period under
review is R3 million. MARC is an investment company in the sport and
entertainment industry in Africa, focusing on marketing and rights
commercialisation as well as certain joint ventures and investments in
sports brands. The Group operates in 13 different African countries of
which South Africa, Nigeria and Kenya are the biggest markets.
MARC`s turnover for the six months ended 30 June 2010 increased by 2% to
R255 million (2009: R249 million), whilst its operating profit increased
from R3 million to R17 million. The increased profitability is due to
higher margins on World Cup activities and cost containments throughout
the group.
MARC`s headline earnings for the six months amounted to R13 million from
a loss of R2 million in the prior period. Marc`s operations are seasonal
and most of the Groups operating profits are earned in the second half
of the year.
8. Treasury shares
At 31 March 2010, 3 424 044 Remgro ordinary shares (0.7%) 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 87 150 Remgro ordinary shares were utilised to settle
Remgro`s obligation towards scheme participants who exercised share
appreciation rights granted to them.
At 30 September 2010, 3 336 894 Remgro ordinary shares (0.7%) were held
as treasury shares.
Declaration of cash dividend
Declaration of Dividend No 21
Notice is hereby given that an interim dividend of 101 cents (2009:
84 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 2010.
Dates of importance:
Last day to trade in order to Friday, 7 January 2011
participate in the interim
dividend
Shares trade ex dividend Monday, 10 January 2011
Record date Friday, 14 January 2011
Payment date Monday, 17 January 2011
Share certificates may not be dematerialised or rematerialised between
Monday, 10 January 2011 and Friday, 14 January 2011, both days
inclusive.
Signed on behalf of the Board of Directors.
Johann Rupert Thys Visser
Chairman Chief Executive Officer
Stellenbosch
25 November 2010
Annexure A
Composition of headline earnings
Six months ended Year ended
30 September 31 March
2010 2009 2010
R`m R`m R`m
Financial services
RMBH 475 296 720
FirstRand 455 221 635
Industrial interests
Medi-Clinic Corporation 170 152 460
Unilever SA Holdings 132 120 279
Distell Group (1) 105 95 281
Rainbow Chicken 119 125 259
Tsb Sugar 177 153 227
Air Products South 69 53 115
Africa
Nampak 33 13 73
Total South Africa 97 (15) 42
Kagiso Trust 197 57 128
Investments
PGSI (4) (18) 83
Wispeco 20 24 63
Other industrial (5) (15) (28)
interests
Media interests
Sabido 54 - 11
MARC 3 - 5
Other media interests (12) - 1
Mining interests
Implats 72 53 85
Trans Hex Group - 3 11
Technology interests
CIV group (2) 39 - 7
SEACOM (20) - -
Tracker 34 - -
Other technology 6 - 6
interests
Other investments 12 (31) (64)
Central treasury 29 34 57
Other net corporate (50) (22) (101)
costs
Headline earnings 2 207 1 298 3 355
Weighted number of 513.0 471.4 486.2
shares (million)
Headline earnings per 430.2 275.3 690.1
share (cents)
Notes
1. Includes the investments in Capevin Investments Limited and Capevin
Holdings Limited.
2. Includes the investments in CIV Fibre Network Solutions (Pty)
Limited, CIE Telecommunications Limited, CIV Power Limited, Central Lake
Trading No. 77 (Pty) Limited and Dark Fibre Africa (Pty) Limited.
Annexure B
Composition of intrinsic net asset value
30 September 2010 31 March 2010
Book Intrinsic Book Intrinsic
value value value value
R`m R`m R`m R`m
Financial services
RMBH 6 769 11 472 6 400 9 785
FirstRand 6 346 10 325 6 026 9 719
Industrial interests
Medi-Clinic Corporation 3 593 7 513 3 111 6 948
Unilever SA Holdings 3 164 4 711 3 109 4 346
Distell Group (1) 1 842 4 552 1 798 4 430
Rainbow Chicken 1 979 3 433 1 956 3 412
Tsb Sugar 1 557 2 677 1 376 2 506
Air Products South 525 1 948 536 1 752
Africa
Nampak - - 1 205 1 398
Total South Africa 727 1 280 631 1 080
Kagiso Trust 1 328 1 350 1 213 1 269
Investments
PGSI 538 569 533 528
Wispeco 377 379 358 381
Other industrial 404 452 328 351
interests
Media interests
Sabido 889 1 489 837 1 215
MARC 188 206 187 211
Other media interests 57 32 50 71
Mining interests
Implats 4 804 4 804 5 711 5 711
Trans Hex Group - - 65 106
Technology interests
CIV group (2) 513 770 378 539
SEACOM 726 1 068 721 1 120
Tracker 610 992 574 911
Other technology 375 378 385 479
interests
Other investments 787 495 573 399
Central treasury - cash 5 082 5 082 4 662 4 662
at the centre (3)
Other net corporate 433 613 581 796
assets
Net asset value (NAV) 43 613 66 590 43 304 64 125
Potential CGT liability (1 938) (1 703)
(4)
NAV after tax 43 613 64 652 43 304 62 422
Issued shares after 513.3 513.3 513.2 513.2
deduction of shares
repurchased (million)
NAV after tax per share 84.97 125.95 84.38 121.64
(Rand)
Notes
1. Includes the investments in Capevin Investments Limited and Capevin
Holdings Limited.
2. Includes the investments in CIV Fibre Network Solutions (Pty)
Limited, CIE Telecommunications Limited, CIV Power Limited, Central Lake
Trading No. 77 (Pty) Limited and Dark Fibre Africa (Pty) Limited.
3. Cash at the centre excludes cash held by subsidiaries that are
separately valued above.
4. 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 (mainly Implats and Caxton) is
included in "other net corporate assets" above.
5. 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.
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
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.,
Stellenbosch
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Website
www.remgro.com
Date: 25/11/2010 17:00:01 Produced by the JSE SENS Department.
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