| Thu 15 Mar 2012, 17:00 | | REM - Remgro Limited - Unaudited interim results for the six months ended |
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REM
REM
REM - Remgro Limited - Unaudited interim results for the six months ended
31 December 2011 and cash dividend declaration
Remgro Limited
(Incorporated in the Republic of South Africa)
Registration number 1968/006415/06
ISIN ZAE000026480
Share Code REM
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011 AND CASH
DIVIDEND DECLARATION
Salient features
- Comparative growth in headline earnings is not meaningful due to change in
financial year-end from 31 March to 30 June
- Interim dividend per share: +24.8%
- Headline earnings per share: +19.8%
- Intrinsic value per share at 31 December: R142.99
Abridged consolidated statement of financial position
31 December 30 30 June
September
2011 2010 2011
R`m R`m R`m
Assets
Non-current assets
Property, plant and equipment 3 169 3 105 3 098
Biological agricultural assets 131 177 131
Investment properties 40 40 41
Intangible assets 327 359 327
Investments - Associated companies 37 112 28 659 34 920
- Joint ventures 267 198 252
- Other 5 886 5 835 6 059
Retirement benefits 154 119 149
Loans 112 106 139
Deferred taxation 7 4 7
47 205 38 602 45 123
Current assets 13 036 9 568 10 864
Inventories 1 984 1 867 1 476
Biological agricultural assets 431 423 445
Debtors and short-term loans 2 596 1 816 1 968
Investments in money market funds 2 335 1 739 1 725
Cash and cash equivalents 5 367 3 392 4 315
Other current assets 146 164 171
12 859 9 401 10 100
Assets held for sale 177 167 764
Total assets 60 241 48 170 55 987
Equity and liabilities
Issued capital 3 605 3 605 3 605
Reserves 52 318 40 256 48 170
Treasury shares (176) (248) (216)
Shareholders` equity 55 747 43 613 51 559
Non-controlling interest 784 774 771
Total equity 56 531 44 387 52 330
Non-current liabilities 1 339 1 356 1 481
Retirement benefits 187 186 238
Long-term loans 155 188 154
Deferred taxation 997 982 1 089
Current liabilities 2 371 2 427 2 176
Trade and other payables 1 956 2 223 2 160
Short-term loans 211 101 3
Other current liabilities 204 103 13
Total equity and liabilities 60 241 48 170 55 987
Net asset value per share (Rand)
- At book value R108.41 R84.97 R100.37
- At intrinsic value R142.99 R125.95 R135.97
Abridged consolidated income statement
Six months ended Fifteen
months
ended
31 December 30 September 30 June
2011 2010 2011
R`m R`m R`m
Sales 6 883 6 118 14 955
Inventory expenses (4 221) (3 642) (9 015)
Personnel costs (1 126) (1 061) (2 729)
Depreciation (166) (149) (387)
Other net operating expenses (817) (898) (2 160)
Trading profit 553 368 664
Dividend income 123 94 155
Interest received 99 75 205
Finance costs (7) (20) (35)
Negative goodwill - 112 112
Net impairment of investments, (28) (2) (68)
loans, assets and goodwill
Profit on sale of investments 1 247 157 2 283
Consolidated profit before tax 1 987 784 3 316
Taxation (373) (234) (480)
Consolidated profit after tax 1 614 550 2 836
Share of after-tax profit of 2 385 1 880 8 112
associated companies and joint
ventures
Net profit for the period 3 999 2 430 10 948
Attributable to:
Equity holders 3 944 2 405 10 841
Non-controlling interest 55 25 107
3 999 2 430 10 948
Associated companies and joint
ventures
Share of after-tax profit of
associated companies and joint
ventures
Profit before taking into account 3 012 2 655 7 624
impairments, non-recurring and
capital items
Net impairment of investments, (9) (69) (102)
assets and goodwill
Profit on the sale of investments 307 52 2 759
Other non-recurring and capital 1 31 389
items
Profit before tax and non- 3 311 2 669 10 670
controlling interest
Taxation (744) (590) (2 010)
Non-controlling interest (182) (199) (548)
2 385 1 880 8 112
Reconciliation of headline earnings
Six months ended Fifteen
months
ended
31 December 30 September 30 June
2011 2010 2011
R`m R`m R`m
Net profit for the period 3 944 2 405 10 841
attributable to equity holders
Plus/(minus):
- Negative goodwill - (112) (112)
- Net impairment of associates and 11 - (14)
joint ventures
- Impairment of property, plant and - - 40
equipment
- Recycling of foreign currency 59 - -
translation reserves
- Profit on sale of associates and (1 305) (161) (2 312)
joint ventures
- (Profit)/loss on sale of other (1) 4 54
investments
- Profit on sale of subsidiary - - (25)
company
- Net (surplus)/loss on disposal of (2) - 1
property, plant and equipment
- Non-headline earnings items (299) (13) (3 122)
included in equity accounted
earnings of associated companies
and joint ventures
Net (surplus)/loss on disposal of - 1 (76)
property, plant and equipment
Profit on the sale of investments (307) (52) (2 759)
Net impairment of investments, 9 69 102
assets and goodwill
Other non-recurring and capital (1) (31) (389)
items
- Taxation effect of adjustments 180 83 165
- Non-controlling interest 62 1 39
Headline earnings 2 649 2 207 5 555
Earnings and dividends
Six months ended Fifteen
months
ended
31 December 30 30 June
September
2011 2010 2011
Cents Cents Cents
Headline earnings per share
- Basic 515.5 430.2 1 082.4
- Diluted 508.2 413.5 1 050.4
Earnings per share
- Basic 767.5 468.8 2 112.4
- Diluted 758.6 451.8 2 072.3
Dividends per share
Ordinary 126.00 101.00 314.00
- Interim 126.00 101.00 101.00
- Final 213.00
Abridged consolidated statement of comprehensive
income
Six months ended Fifteen
months
ended
31 December 30 30 June
September
2011 2010 2011
R`m R`m R`m
Net profit for the period 3 999 2 430 10 948
Other comprehensive income, net of 1 318 (1 362) (1 361)
tax
Exchange rate adjustments 762 (151) (244)
Fair value adjustments for the (350) (897) (807)
period
Deferred taxation on fair value 47 161 145
adjustments
Realisation of reserves previously (6) 28 (14)
deferred in equity
Change in reserves of associated 865 (503) (441)
companies and joint ventures
Total comprehensive income for the 5 317 1 068 9 587
period
Total comprehensive income
attributable to:
Equity holders 5 262 1 043 9 480
Non-controlling interest 55 25 107
5 317 1 068 9 587
Abridged consolidated statement of changes in
equity
Six months ended Fifteen
months
ended
31 December 30 30 June
September
2011 2010 2011
R`m R`m R`m
Balance at the beginning of the 52 330 44 083 44 083
period
Total comprehensive income for the 5 317 1 068 9 587
period
Dividends paid (1 139) (680) (1 220)
Capital invested by minorities 1 4 14
Other movements (1) 8 (81)
Long-term share incentive scheme 23 21 64
reserve
Unbundling of investment - (117) (117)
Balance at the end of the period 56 531 44 387 52 330
Abridged consolidated statement of cash flows
Six months ended Fifteen
months
ended
31 December 30 30 June
September
2011 2010 2011
R`m R`m R`m
Cash generated/(utilised) from/(by) (515) (460) 381
operations
Taxation paid (213) (143) (407)
Dividends received 1 719 795 2 563
Cash available from operating 991 192 2 537
activities
Dividends paid (1 139) (680) (1 220)
Net cash inflow/(outflow) from
operating activities (148) (488) 1 317
Investing activities 1 032 167 (758)
Financing activities 16 38 87
Net increase/(decrease) in cash and 900 (283) 646
cash equivalents
(Increase)/decrease in money market (610) 73 87
funds
Exchange rate profit/(loss) on 567 (159) (159)
foreign cash
Cash and cash equivalents at the 4 315 3 741 3 741
beginning of the period
Cash and cash equivalents at the 5 172 3 372 4 315
end of the period
Cash and cash equivalents - per 5 367 3 392 4 315
statement of financial position
Bank overdraft (195) (20) -
Additional information
31 December 30 30 June
September
2011 2010 2011
Number of shares in issue
- Ordinary shares of 1 cent each 481 106 370 481 106 370 481 106 370
- Unlisted B ordinary shares of 10 35 506 352 35 506 352 35 506 352
cents each
Total number of shares in issue 516 612 722 516 612 722 516 612 722
Number of shares held in treasury
- Ordinary shares repurchased and (2 378 920) (3 336 894) (2 918 266)
held in treasury
514 233 802 513 275 828 513 694 456
Weighted number of shares 513 901 431 512 983 023 513 209 003
In determining earnings per share and headline
earnings per share the weighted number of shares
was taken into account.
31 December 30 30 June
September
2011 2010 2011
R`m R`m R`m
Listed investments
Associated
- Book value 24 474 17 235 23 380
- Market value 33 335 29 973 32 086
Other
- Book value 5 172 5 437 5 482
- Market value 5 172 5 437 5 482
Unlisted investments
Associated
- Book value 12 638 11 424 11 540
- Directors` valuation 21 116 18 896 19 695
Joint ventures
- Book value 267 198 252
- Directors` valuation 264 216 250
Other
- Book value 714 398 577
- Directors` valuation 714 398 577
Additions to and replacement of 246 206 612
property, plant and equipment
Capital and investment commitments 2 630 1 215 1 693
(Including amounts authorised, but
not yet contracted for)
Guarantees and contingent 2 313 1 387 2 472
liabilities*
Dividends received from associated 1 606 409 8 305
companies and joint ventures set
off against investments (the 30
June 2011
amount includes the MMI and RMI
Holdings unbundling dividends
amounting to R6 174 million)
* The guarantees and contingent liabilities primarily relate to three material
unresolved disputes with SARS. Two of the disputes amounting to R1 304 million
relate to the buyback and cancellation of treasury shares, while the third
dispute amounting to R718 million is in connection with the disposal of
investments (both amounts include interest). Based on legal opinion received,
the assessments are being disputed.
COMMENTS
1. Change in financial year-end and comparison with prior period
As previously reported, the financial year-end of the Company was changed from
31 March to 30 June with effect from 30 June 2011. As a result of the change
in year-end, the results for the six months to December 2011 being reported on
are not directly comparable to those of the six months to 30 September 2010
which were published as interim results during the previous financial year.
The main reason for this is that different accounting periods of certain
investee companies are accounted for in the comparative periods presented.
The most significant of the investee companies referred to above, are the
following:
- Rainbow, Tsb Sugar, Unilever and Wispeco - accounted for the six months
ended 31 December 2011 for the period under review, compared to the six months
ended 30 September 2010 in the comparative period
- Distell, FirstRand, Kagiso, PGSI, RMBH and Total - accounted for the six
months to 31 December 2011 for the period under review, compared to the six
months ended 30 June 2010 in the comparative period
In order to enable shareholders to make a meaningful comparison with the
results of the six months under review, we have prepared as additional
information an analysis of headline earnings for the comparative six months
ended 31 December 2010. A summary of these comparable results is presented in
the "Contribution to headline earnings" table below and in the segmental
information presented in Annexure A.
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. 71 of 2008), as amended, and the
Listings Requirements of the JSE Limited. The financial statements have been
prepared under the supervision of the Chief Financial Officer, Leon Crouse
CA(SA).
These financial statements incorporate accounting policies that are consistent
with those of the previous financial periods, with the exception of the
implementation of the revised IAS 24: Related Party Disclosures. The adoption
of the revised accounting standard only affected disclosure and had no impact
on the results of either the current or prior periods.
3 Results
Headline earnings
For the period under review headline earnings increased by 20.0% from R2 207
million to R2 649 million when compared to the six months ended 30 September
2010, whereas headline earnings per share increased by 19.8% from 430.2 cents
to 515.5 cents.
On a comparable basis, however, when compared to the six months ended 31
December 2010, headline earnings increased by 22.8% from R2 157 million to R2
649 million, whereas headline earnings per share increased by 22.6% from 420.4
cents to 515.5 cents.
Contribution to headline earnings
Six months ended
31 Dec 31 Dec 30 Sept
2011 % 2010 2010
R`m Change R`m R`m
Financial services 1 136 20.7 941 930
Industrial interests 1 334 24.9 1 068 1 110
Media interests 39 18.2 33 45
Mining interests 112 55.6 72 72
Technology interests 31 (32.6) 46 59
Other investments 13 8.3 12 12
Central treasury 60 66.7 36 29
Other net corporate costs (76) (49.0) (51) (50)
2 649 22.8 2 157 2 207
Refer to Annexures A and B for segmental information.
The following commentary is based on a comparison of the results of the period
under review with that of the six months ended 31 December 2010.
Financial services
The contribution from financial services to Remgro`s headline earnings
amounted to R1 136 million (2010: R941 million), representing an increase of
20.7%. It should be noted that Remgro`s effective interests in FirstRand and
RMBH changed materially since December 2010 due to various corporate actions
at these entities. Both FirstRand and RMBH reported good results for the six
months ended 31 December 2011, mainly due to strong growth in both net
interest income and fee and commission income, while margins also increased
due to repricing strategies in the retail lending books. RMI also reported
good results with strong growth in earnings being recorded by Discovery and
OUTsurance.
Industrial interests
The contribution of the industrial interests to headline earnings for the
period under review increased by 24.9% to R1 334 million (2010: R1 068
million). Total South Africa`s contribution to Remgro`s headline earnings
amounted to R117 million (2010: R2 million). The improved performance by Total
South Africa is mainly due to substantial favourable stock revaluations during
the period under review, compared to negative stock revaluations during the
six months ended 31 December 2010. Distell`s contribution to headline
earnings, which includes the investments in Capevin Holdings and Capevin
Investments, amounted to R261 million (2010: R210 million). Mediclinic`s and
Rainbow`s contribution to headline earnings amounted to R191 million and R149
million respectively (2010: R170 million and R131 million). Tsb Sugar produced
satisfactory results with a contribution to headline earnings amounting to
R308 million (2010: R172 million). This increase is mainly due to an improved
operational performance from Tsb Sugar`s milling activities, resulting from
higher sugar production. Unilever`s contribution to Remgro`s headline earnings
increased by 29.8% to R218 million (2010: R168 million). This increase is
mainly due to an increase in sales volumes, as well as improved margins.
Effective 1 July 2011 Kagiso Trust Investments (KTI) and the Tiso Group merged
into a new entity, Kagiso Tiso Holdings (KTH). Remgro`s share of the results
of KTH for the period under review amounted to a loss of R37 million (2010:
Remgro`s share of KTI`s results - R82 million profit). During the period under
review KTH`s results were negatively impacted by unfavourable fair value
adjustments relating to its interests in Exxaro Resources Limited and Aveng
Limited. Grindrod contributed R13 million to headline earnings for the two
months since acquisition.
Media interests
Media interests consist of the interests in Sabido, MARC, One Digital Media
(ODM) and Premier Team Holdings (PTH). Sabido`s contribution to Remgro`s
headline earnings amounted to R72 million (2010: R54 million), while MARC
contributed R1 million (2010: R2 million). PTH`s and ODM`s contribution to
headline earnings amounted to losses of R18 million and R16 million
respectively (2010: losses of R22 million and R1 million).
Mining interests
Implats is the only remaining investment being reported under mining interests
and dividends received amounted to R112 million (2010: R72 million).
Technology interests
Technology interests primarily represent the interests in the CIV group of
companies and the investment in SEACOM. For the period under review the CIV
group contributed R37 million to Remgro`s headline earnings (2010: R41
million). SEACOM reported a headline loss of R75 million for the period under
review (2010: R81 million loss), with Remgro`s share of this loss amounting to
R19 million (2010: R20 million loss). Before it was sold the investment in
Tracker was "held for sale" and therefore no income from Tracker was accounted
for during the period under review (2010: R23 million).
Other investments
The contribution of other investments to headline earnings amounted to R13
million (2010: R12 million), of which Business Partners` contribution was R8
million (2010: R8 million).
Central treasury and other net corporate costs
Higher average cash balances resulted in an increase in the contribution from
the central treasury division to R60 million (2010: R36 million). Other net
corporate costs amounted to R76 million (2010: R51 million).
Total earnings
Total earnings increased by 64.0% to R3 944 million (30 September 2010: R2 405
million), mainly as a result of the earnings growth of the underlying
investments, the capital gains amounting to R608 million realised on the
disposal of RMBH shares and RMI shares to Royal Bafokeng Holdings (Pty)
Limited and the disposal of Tracker, as well as an accounting profit amounting
to R491 million realised on the KTI and Tiso merger.
4. Intrinsic value
Remgro`s intrinsic value per share increased by 5.2% from R135.97 at 30 June
2011 to R142.99 at 31 December 2011. Refer to Annexure B for full details.
5. Investment activities
The most important investment activities during the period under review were
as follows:
RMB Holdings Limited (RMBH) and RMI Holdings Limited (RMI)
During December 2011 Remgro sold 50 088 654 RMBH shares and 68 866 361 RMI
shares to Royal Bafokeng Holdings (Pty) Limited for a total consideration of
R2 091.4 million. The transaction effectively reduced Remgro`s interests in
RMBH and RMI from 31.5% and 34.9%, to 27.9% and 30.3% respectively.
Grindrod Limited (Grindrod)
During the period under review Remgro acquired 127 662 895 Grindrod ordinary
shares for a total consideration of R1 932.8 million. These acquisitions
resulted in Remgro obtaining an effective 21.7% interest in Grindrod (21.3% on
a fully diluted basis). The results of Grindrod were equity accounted for two
months to 31 December 2011.
Tracker Investment Holdings (Pty) Limited (Tracker)
During October 2011 the investment in Tracker was sold for a total
consideration of R1 226.5 million.
Kagiso Trust Investments (Pty) Limited (KTI) and Tiso Group (Pty) Limited
(Tiso)
Effective 1 July 2011 KTI and Tiso merged into a new entity, Kagiso Tiso
Holdings (Pty) Limited, and Remgro`s effective interest in the new entity is
25.1%.
Other smaller investments, amounting to R149.6 million, were made during the
period under review in, inter alia, the Milestone China Funds, Premier Team
Holdings Limited, Kagiso Infrastructure Empowerment Fund and Business Partners
Limited.
Events after 31 December 2011:
Dark Fibre Africa (Pty) Limited (Dark Fibre)
Since 31 December 2011 Remgro invested a further R150.0 million directly in
Dark Fibre. This investment is part of an additional capital commitment
amounting to R248.0 million that will increase Remgro`s effective interest in
Dark Fibre to 49.6% (30 June 2011: 46.5%).
Dorbyl Limited (Dorbyl)
During February 2012 Remgro disposed of 11 839 510 shares in Dorbyl to RECM
and Calibre Limited for a nominal amount. The transaction reduced Remgro`s
interest in Dorbyl to 6.5% (30 June 2011: 41.4%).
6. Information regarding unlisted investments
Unilever South Africa Holdings (Pty) Limited (Unilever South Africa)
Unilever South Africa has a December year-end and therefore its results for
the six months ended 31 December 2011 have been included in Remgro`s results
for the period under review. Unilever South Africa`s contribution to Remgro`s
headline earnings for the period under review amounted to R218 million (2010:
R168 million). Included in Remgro`s share of Unilever`s earnings are
restructuring costs amounting to R21 million.
Unilever South Africa`s turnover for the period under review increased by
15.1% to R7 680 million (2010: R6 672 million) primarily driven by growth in
volumes due to the Powders category launch of Omo Liquids and Comfort fabric
conditioners, the re-launch of Sunlight Powders and Skip Liquids. The
increased focus on complex cooking aids in Savoury & Dressings, launch of
Germiguard and the Dove Men`s Care range coupled with the Ice-Cream cabinet
footprint expansion also contributed to this increase in volumes. The price
growth of 9%, results from price increases across most categories due to
increasing commodity costs. The acquisition of Sara Lee brands also had a
positive contribution of R81 million to the increase in turnover.
The company`s profit after tax for the period under review increased by 72.0%
to R1 108 million (2010: R644 million). This increase was mainly as a result
of an after-tax profit on the sale of brands amounting to R267 million, as
well as turnover growth and higher margins.
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
Tsb Sugar`s contribution to Remgro`s headline earnings for the period under
review amounted to R308 million (2010: R172 million). This increase was mainly
due to a better operational performance from Tsb Sugar`s milling activities,
resulting from higher sugar production as well as a higher contribution from
Royal Swaziland Sugar Corporation.
Turnover for the six months ended 31 December 2011 decreased by 5.6% from R2
586 million to R2 441 million. 14.4% of turnover is represented by exports.
The positive impact of high world sugar prices and a weaker rand was negated
by lower volumes. Turnover for the six months to 31 December 2010 included
revenue from the disposed citrus operations amounting to R160 million.
Tsb Sugar`s raw sugar production for the period under review increased by 5.7%
to 424 863 tons (2010: 402 060 tons) while the South African Sugar industry`s
production for the milling season decreased by 4.9%. The increase in Tsb
Sugar`s production is mainly attributed to favourable climatic conditions
which enabled the mills to crush more cane and an improvement in cane quality
which positively impacted factory efficiencies. The world sugar price remained
strong and the weakening of the rand contributed to higher sugar export
prices.
The Royal Swaziland Sugar Corporation`s contribution to Tsb Sugar`s headline
earnings for the period was R85 million (2010: R30 million). The increase was
mainly due to increased production and better sugar and ethanol prices.
5 662 hectares of Tsb Sugar`s cane land in the Malelane area is in the process
of being transferred to the Matsamo Communal Property Association and the
process is expected to be completed during March 2012. This is in line with
the land claims settlement agreement which was subsequently made an order of
court. This transaction will substantially complete the land claims in the
Nkomazi area in relation to Tsb Sugar`s land. Tsb Sugar is confident that the
post settlement arrangements entered into will ensure continued cane supply.
Air Products South Africa (Pty) Limited (Air Products)
Air Products has a September year-end and therefore its results for the six
months ended 30 September 2011 have been included in Remgro`s results for the
period under review. Air Products` contribution to Remgro`s headline earnings
for the period under review increased by 39.1% to R96 million (2010: R69
million).
Turnover for Air Products` six months ended 30 September 2011 increased by
6.8% to R787 million (2010: R737 million), while the company`s operating
profit for the same period increased by 29.0% to R289 million (2010: R224
million). Operating profit during the period was positively impacted by mark-
to-market profits of R30 million on forward exchange contracts. Volumes in
most business segments continued to improve slowly. Further improvement in
volumes is anticipated in forthcoming months, together with increasing
pressure on input costs.
Sabido Investments (Pty) Limited (Sabido)
Remgro has an effective interest of 31.5% 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 has a March year-end and therefore its results for the six months ended
30 September 2011 have been included in Remgro`s results for the period under
review. Sabido`s contribution to Remgro`s headline earnings for the period
under review amounted to R72 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 available All Media Products Survey (AMPS) results indicate that
e.tv`s audience has grown by a further 2% to 15.5 million viewers. e.tv
remains the largest English-medium television channel in South Africa and the
second most watched channel overall. However, the aggressive growth in the
middle income pay-television market has started to affect e.tv audience share.
Continued delays in the rollout of digital terrestrial television mean that
e.tv and other terrestrial broadcasters will continue to lose market share to
multi-channel pay-television.
Net advertising sales were ahead of target for the period under review, while
programming and operating costs have remained stable. An increased investment
in local content is likely to enable e.tv to retain its competitiveness.
The sustained growth in pay-television subscribers on DStv continues to
benefit the eNews Channel. The Channel remains the top news channel watched by
South Africans. Live eNews Africa bulletins are now available to 10 million
Sky-subscribers in the United Kingdom on The Africa Channel (in which Sabido
owns a 47.4% stake).
Kagiso Tiso Holdings (Pty) Limited (KTH)
KTH was formed through the merger of Kagiso Trust Investments (Pty) Limited
(KTI) and Tiso Group (Pty) Limited into a new entity. The merger resulted in
the creation of a leading black owned investment company with in excess of R14
billion in assets and a net asset value of R9.3 billion. KTH has a strong and
diversified asset portfolio covering the resources, industrial, media,
financial services, healthcare, property and information technology sectors.
Remgro`s 42.3% interest in KTI changed to a fully diluted interest of 25.1% in
KTH, as at 1 July 2011, the effective date of the transaction. As KTH is a
newly formed company, there are no comparative results.
KTH has a June year-end and therefore its results for the six months ended 31
December 2011 have been included in Remgro`s results for the period under
review. KTH`s contribution to Remgro`s headline earnings for the period under
review amounted to a loss of R37 million, mainly due to negative fair value
adjustments on investments in Exxaro Resources Limited and Aveng Limited.
Income from equity accounted investments amounted to R166 million. A profit of
R455 million has been realised on the disposal of joint venture, LexisNexis,
by subsidiary Kagiso Media Limited, but this profit is accounted for outside
of headline earnings.
KTH has a well-defined investment and business strategy, a sound asset and
capital base and an experienced and diverse management team which positions
the group as a leading black owned and managed investment company.
Total South Africa (Pty) Limited (Total)
Total has a December year-end and therefore its results for the six months
ended 31 December 2011 have been included in Remgro`s results for the period
under review. Total`s contribution to Remgro`s headline earnings for the
period amounted to R117 million (2010: R2 million).
Turnover for the period under review increased from R11 087 million in 2010 to
R15 378 million, while operating profit increased to R630 million (2010: R314
million). The good performance is mainly due to the stock revaluation gains of
R300 million (2010: revaluation losses of R2 million) resulting from an
increase in the international oil price, the impact of a weaker rand and
improved marketing margins. Positive adjustments on deferred taxation and
decreased financing costs also contributed to the increase in Total`s net
profit for the period under review to R473 million (2010: R7 million).
Retail sales of petroleum products achieved lower levels than 2010, having
decreased by 1% for the six months ended 31 December 2011. The demand for
petroleum products in the retail business has decreased due to petrol pump
prices above the R10 per litre level and consumer reaction thereto. Market
share of Total`s main fuels is deemed to have slightly decreased between 2010
and 2011.
Natref (in which Total has an interest of 36%) experienced a relatively
disappointing reliability in 2011. Refining margins have reached similar low
levels than in 2010, but have slightly exceeded the breakeven point for the
activity.
SEACOM Capital Limited (SEACOM)
Remgro has an effective interest of 25% in SEACOM which launched the first
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 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 has a December year-end and therefore its results for the six months
ended 31 December 2011 have been included in Remgro`s results for the period
under review. SEACOM`s contribution to Remgro`s headline earnings for the
period under review amounted to a loss of R19 million (2010: R20 million
loss).
SEACOM provides high-capacity international fibre-optic bandwidth to customers
in the form of IRUs (indefeasible right of use) where most of the revenue is
accounted for over 20 years. SEACOM reported a loss of USD10 million for the
period under review. Delays with the implementation of the cable through Egypt
resulted in additional unforeseen operational costs for SEACOM. SEACOM expects
to enhance profitability by implementing various initiatives to cut back on
costs and through expected cost savings on capacity purchases due to the cable
completion this year.
Whilst increased bandwidth supply is expected by SEACOM`s competitors with the
likes of EASSy`s upgrades and the imminent arrival of WACS, the company
expects stable and profitable pricing, albeit at a heavily discounted rate.
Demand is also playing its part positively, driven by on-going reductions in
terrestrial costs (mobile operator deals and other operators such as Dark
Fibre Africa) as well as a surge in demand for reliable protected routes
around Africa. SEACOM`s ability to change with the rapidly evolving market and
respond to demand faster than others is augmenting these positive market
conditions.
Community Investment Ventures Holdings (Pty) Limited (CIV)
Remgro has an effective interest of 43.8% 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 has a March year-end and therefore its results for the six
months ended 30 September 2011 have been included in Remgro`s results for the
period under review. The CIV group`s contribution to Remgro`s headline
earnings for the period under review amounted to R37 million (2010: R41
million).
It is anticipated that CIV group`s centre of growth will be DFA. DFA`s
headline earnings for the six months to 30 September 2011 decreased by 46.8%
to R33 million (2010: R62 million), despite additional sections of the
company`s fibre-optic network having been completed. The decrease in headline
earnings was caused by delays in obtaining way leave approvals from
municipalities and road authorities which prevents DFA from completing fibre
rings on time which in turn delays revenue income generation to offset
increasing depreciation and finance charges incurred on network rollout costs.
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 3 804 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 was extended through
Empangeni to Gauteng and was completed in April 2011. DFA also completed the
build of a long-route to link Cape Town to the WACS (West African Cable
System) undersea cable landing station in Yzerfontein. In 2010 DFA commenced
with the fibre-to-tower project linking mobile phone operators` base stations
to the core communication rings, and the project will continue to 2013 and
beyond as demand for mobile backhaul increase due to the smart phone
applications. Mobile backhaul is a major growth driver for DFA.
DFA has signed commercial lease agreements with 37 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 extending its infrastructure
footprint to secondary cities including Polokwane, East London, Rustenburg,
Potchefstroom, George, Witbank and Middelburg, as well as expanding its sales
and marketing activities. The increase in the number of Electronic
Communication Network Services licences issued by the Independent
Communications Authority of South Africa has increased DFA`s potential market
for its service and combined with the high demand for Broadband Services
should lead to sustainable growth in earnings.
PGSI Limited (PGSI)
PGSI has a December year-end and therefore its results for the six months
ended 31 December 2011 have been included in Remgro`s results for the period
under review. PGSI`s contribution to Remgro`s headline earnings for the period
under review amounted to R3 million (2010: R9 million), which includes a
negative adjustment of R5 million (2010: positive adjustment of R5 million) on
the conversion right attached to PGSI preference shares.
PGSI`s turnover for the period under review increased by 2.1% to R1 617
million (2010: R1 584 million), while its operating profit amounted to R43
million (2010: R84 million). The reduction in operating result was primarily
due to a much weaker domestic market compared to the prior year. Furthermore
the second half of the year was impacted by industry strikes and a slowdown of
manufacturing facilities due to weaker demand, partially due to lower
automotive Original Equipment production as a result of the Thailand floods.
Decreased financing costs have however resulted in PGSI reporting a net profit
of R6 million (2010: R9 million loss) for the period under review.
The main operating subsidiary in South Africa, PG Group, has been affected by
the global and local recession of the past few years, particularly in the
domestic building sector. While the automotive and low cost housing sectors
have emerged from the recession, commercial buildings are lagging and continue
to experience slow glass demand. Excess manufacturing capacity has resulted in
increased competition. The lower domestic demand also led to increased exports
which resulted in an adverse sales mix, mainly due to currency factors.
The difficult market conditions for manufacturing in South Africa have been
further exacerbated by a very strong rand which persisted through to September
2011. The PG Group has embarked on a number of initiatives to improve
profitability in this difficult trading environment, including the
reorganisation of management structures to focus on opportunities as well as
efficiency, cost reduction and increasing yields at all manufacturing
facilities.
The Group is well invested with two state of the art float lines and capital
expenditure over the next 5 years will be minimal.
The outlook for 2012 has improved with better margins expected in export
markets, due to an improvement in the market and an expected more competitive
currency, as the Group is a major exporter of high quality float glass and
automotive components.
Wispeco Holdings Limited (Wispeco)
Turnover for the six months ended 31 December 2011 increased by 14.6% from
R458 million to R525 million due to higher worldwide aluminium prices and
continued growth in Wispeco`s sales volumes compared to the previous year.
Consequently, headline earnings increased by 26.3% to R24 million (2010: R19
million), despite sustained downward pressure on margins caused by increasing
input costs and severe price competition (both local and imported).
Wispeco obtained Competition Commission approval for the acquisition of an 80%
shareholding in Xline Aluminium Solutions (Pty) Ltd at the end of 2011. The
Xline and Sheerline aluminium stockist operations will be consolidated into
one business and future prospects are promising.
Although Wispeco continues to import much of its raw material, it also
produces a significant amount of in-house billet from recycled aluminium. Re-
melting of recycled aluminium requires only 5% of the energy used to produce
virgin aluminium. As a result of these recycling activities, Wispeco has been
accredited with an Ecospecifier listing - a green rating on its aluminium
profiles.
Wispeco continues to actively drive the development of energy efficient window
and door systems for the building industry. Its new Crealco range of novel,
sophisticated and energy efficient products, which is being launched during
2012, allows for unrivalled creativity in architect design while meeting the
latest requirements of the new national building regulations.
Wispeco has successfully mentored and coached more than 20 young previously
disadvantaged entrepreneurs running their own aluminium fabrication
businesses, through its SpazAL programme. These businesses continue to grow,
thereby creating further employment opportunities in local communities.
Through its fabrication learnership programme for black disabled school
leavers, Wispeco has developed 19 deaf students into employable skilled
workers.
MARC Group Limited (MARC)
MARC is a Pan-African investment company which focuses on marketing,
communication and rights commercialization in the sport and entertainment
industry. This includes various strategic subsidiary and equity investments in
activations marketing, sponsorships management, events management, ticketing
and rugby. The group operates in 16 different African countries of which South
Africa, Nigeria and Kenya are the biggest markets.
MARC has a December year-end and therefore its results for the six months to
31 December 2011 are included in Remgro`s results for the period under review.
MARC`s contribution to Remgro`s headline earnings for the period amounted to
R1 million, which includes a negative fair value adjustment of R1 million on
the conversion option of the preference shares.
MARC`s headline earnings for the six months to December 2011 amounted to R3
million (2010: R17 million). The lower earnings can be attributed to once-off
FIFA World Cup related earnings during 2010, as well as decreased sponsorship
spend by one of MARC`s major customers during the current period.
7. Treasury shares
At 30 June 2011, 2 918 266 Remgro ordinary shares (0.6%) 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 Remgro`s share incentive
schemes.
During the period under review no Remgro ordinary shares were repurchased,
while 539 346 Remgro ordinary shares were utilised to settle Remgro`s
obligation towards scheme participants who exercised the rights granted to
them.
At 31 December 2011, 2 378 920 Remgro ordinary shares (0.5%) were held as
treasury shares.
Declaration of cash dividend
Declaration of Dividend No 23
Notice is hereby given that an interim dividend of 126 cents (30 September
2010: 101 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 31 December 2011.
Dates of importance:
Last day to trade in order to participate in the Friday, 13 April 2012
interim dividend
Shares trade exdividend Monday, 16 April 2012
Record date Friday, 20 April 2012
Payment date Monday, 23 April 2012
Share certificates may not be dematerialised or rematerialised between Monday,
16 April 2012, and Friday, 20 April 2012, both days inclusive.
Secondary tax on companies (STC) and dividend tax
With effect from 1 April 2012, STC will be replaced with a dividend tax.
Although the dividend for the period under review is payable after 1 April
2012 it does not fall into the dividend tax regime due to the fact that it was
declared prior to this date. Existing STC credits will thus be applied to the
potential STC liability.
In terms of the new legislation, companies will be allowed to apply their
available STC credits against future dividends declared for a period of three
years from the effective date of dividends tax, as announced by the Minister
of Finance in the 2012 Budget Speech.
Signed on behalf of the Board of Directors.
Johann Rupert Thys Visser
Chairman Chief Executive Officer
Stellenbosch
15 March 2012
Annexure A
Composition of headline earnings
Six months ended
31 December 31 December 30 September
2011 2010 2010
R`m R`m R`m
Financial services
RMBH 594 484 475
RMI Holdings 315 - -
FirstRand 227 457 455
Industrial interests
Mediclinic 191 170 170
Unilever SA Holdings 218 168 132
Distell Group 1 261 210 105
Rainbow Chicken 149 131 119
Tsb Sugar 308 172 177
Air Products South Africa 96 69 69
Grindrod 13 - -
Nampak - 33 33
KTH/KTI (37) 82 197
Total South Africa 117 2 97
PGSI 3 9 (4)
Wispeco 24 19 20
Other industrial interests (9) 3 (5)
Media interests
Sabido 72 54 54
MARC 1 2 3
Other media interests (34) (23) (12)
Mining interests
Implats 112 72 72
Technology interests
CIV group 2 37 41 39
Tracker - 23 34
SEACOM (19) (20) (20)
Other technology interests 13 2 6
Other investments 13 12 12
Central treasury 60 36 29
Other net corporate costs (76) (51) (50)
Headline earnings 2 649 2 157 2 207
Weighted number of shares 513.9 513.1 513.0
(million)
Headline earnings per share 515.5 420.4 430.2
(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
31 December 2011 30 June 2011
Book value Intrinsic Book value Intrinsic
value value
R`m R`m R`m R`m
Financial services
RMBH 8 940 10 768 9 968 11 846
RMI Holdings 5 082 6 025 5 623 6 404
FirstRand 3 056 4 559 3 027 4 363
Industrial interests
Mediclinic 4 764 9 512 4 216 8 776
Unilever SA Holdings 3 121 6 034 2 990 5 313
Distell Group 1 2 287 4 908 2 100 4 725
Rainbow Chicken 2 143 3 345 2 108 3 455
Tsb Sugar 1 801 3 005 1 546 2 804
Air Products South Africa 557 2 392 521 2 257
Grindrod 2 022 1 787 - -
KTH/KTI 1 961 1 667 1 441 1 667
Total South Africa 1 073 1 414 972 1 374
PGSI 576 561 578 582
Wispeco 407 305 383 343
Other industrial interests 423 424 458 457
Media interests
Sabido 946 1 841 898 1 405
MARC 171 168 169 168
Other media interests - - 16 16
Mining interests
Implats 4 466 4 466 4 862 4 862
Technology interests
CIV group 2 1 068 1 167 1 027 1 236
Tracker - - 587 1 196
SEACOM 629 1 067 577 1 057
Other technology interests 221 261 255 278
Other investments 1 098 753 944 634
Central treasury - cash at 8 242 8 242 5 852 5 852
the centre 3
Other net corporate assets 693 955 441 744
Net asset value (NAV) 55 747 75 626 51 559 71 814
Potential CGT liability 4, (2 095) (1 965)
5
NAV after tax 55 747 73 531 51 559 69 849
Issued shares after 514.2 514.2 513.7 513.7
deduction of shares
repurchased (million)
NAV after tax per share 108.41 142.99 100.37 135.97
(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. It was announced in the 2012 Budget Speech that the inclusion rate at which
capital gains is taxed, will be increased from 50% to 66.6%, effective from 1
March 2012. This expected amendment will increase the potential capital gains
tax payable and effectively decrease the net intrinsic value after CGT by R687
million, or R1.33 per share.
6. 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
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: 15/03/2012 17:00:01 Produced by the JSE SENS Department.
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