| Fri 26 Nov 2010, 7:05 | | 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: +20.2%
- 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 companies 28 659 24 263 28 052
- 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 funds 1 739 1 918 1 812
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, assets and (2) - (179)
goodwill
Profit/(loss) on sale and unbundling of 157 - (9)
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 associated 1 880 875 2 619
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 items 31 (47) (46)
Profit before tax and non-controlling 2 669 1 338 3 829
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 attributable to 2 405 1 171 3 060
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 unbundling of (157) - 9
investments
- Net surplus on disposal of property, - (5) (4)
plant and equipment
- Non-headline earnings items included in (13) 142 123
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 ended Year ended
30 September 31 March
2010 2009 2010
R`m R`m R`m
Net profit 2 430 1 192 3 166
Other comprehensive income, net of tax (1 362) (831) (640)
Exchange rate adjustments (151) (931) (1 216)
Fair value adjustments for the period (897) 520 1 421
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 ventures (503) (338) (620)
Total comprehensive income for the period 1 068 361 2 526
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 ended Year ended
30 September 31 March
2010 2009 2010
R`m R`m R`m
Balance at 1 April 44 083 38 787 38 787
Total comprehensive income 1 068 361 2 526
Dividends paid (680) (553) (1 006)
Capital invested by minorities 4 6 10
Other movements 8 - 2
Long-term share incentive scheme reserve 21 18 50
Unbundling of investment (117) - -
Shares issued - - 3 714
Total equity 44 387 38 619 44 083
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) from/(by) (460) (141) 1 004
operations
Taxation paid (143) (59) (144)
Dividends received 795 712 1 444
Cash available from operating activities 192 512 2 304
Dividends paid (680) (553) (1
006)
Net cash inflow/(outflow) from operating (488) (41) 1 298
activities
Investing activities 167 (730) (1
147)
Financing activities 38 8 (5)
Net increase/(decrease) in cash and cash (283) (763) 146
equivalents
(Increase)/decrease in money market funds 73 (340) (234)
Exchange rate loss on foreign cash (159) (921) (1
190)
Cash and cash equivalents at the beginning of
the period 3 741 5 019 5 019
Cash and cash equivalents at the end of the 3 372 2 995 3 741
period
Cash and cash equivalents - per statement of 3 392 2 995 3 827
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 481 106 370 439 479 751 481 106 370
Issued at 1 April 481 106 370 439 479 751 439 479 751
Issued during the period - - 41 626 619
- Unlisted B ordinary shares
of 10 cents each 35 506 352 35 506 352 35 506 352
Total number of shares in issue 516 612 722 474 986 103 516 612 722
Number of shares held in treasury
- Ordinary shares repurchased
and held in treasury (3 336 894) (3 498 824) (3 424 044)
513 275 828 471 487 279 513 188 678
Weighted number of shares 512 983 023 471 427 011 486 152 822
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` valuation 18 896 12 800 17 720
Joint ventures
- Book value 198 95 55
- Directors` valuation 216 95 55
Other
- Book value 398 97 287
- Directors` valuation 398 97 287
Additions to and replacement of property, 206 200 424
plant and equipment
Capital commitments 1 215 683 882
(Including amounts authorised, but not yet
contracted for)
Guarantees and contingent liabilities* 1 387 163 389
Dividends received from associated 409 259 1 222
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 costs (50) (127.3) (22) (101)
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 participate Friday, 7 January 2011
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 Africa 69 53 115
Nampak 33 13 73
Total South Africa 97 (15) 42
Kagiso Trust Investments 197 57 128
PGSI (4) (18) 83
Wispeco 20 24 63
Other industrial interests (5) (15) (28)
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 interests 6 - 6
Other investments 12 (31) (64)
Central treasury 29 34 57
Other net corporate costs (50) (22) (101)
Headline earnings 2 207 1 298 3 355
Weighted number of shares (million) 513.0 471.4 486.2
Headline earnings per share (cents) 430.2 275.3 690.1
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 value Intrinsic Book value Intrinsic
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 Africa 525 1 948 536 1 752
Nampak - - 1 205 1 398
Total South Africa 727 1 280 631 1 080
Kagiso Trust Investments 1 328 1 350 1 213 1 269
PGSI 538 569 533 528
Wispeco 377 379 358 381
Other industrial interests 404 452 328 351
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 interests 375 378 385 479
Other investments 787 495 573 399
Central treasury - cash at 5 082 5 082 4 662 4 662
the centre (3)
Other net corporate assets 433 613 581 796
Net asset value (NAV) 43 613 66 590 43 304 64 125
Potential CGT liability (4) (1 938) (1 703)
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: 26/11/2010 07:05:17 Produced by the JSE SENS Department.
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