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Remgro - Interim Report For The Six Months Ended 30 September 2002
REMGRO LIMITED
Registration number 1968/006415/06,
ISIN ZAE000026480
Share Code REM
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2002
Increase in headline earnings per share: + 31.7%
Increase in interim dividend per share : + 20.5%
ABRIDGED CONSOLIDATED BALANCE SHEET
Unaudited Audited
30 September 31 March
2002 2001 2002
R million R million R million
ASSETS
Non-current assets
Property, plant and equipment 2 976 2 032 2 056
Investment properties 20 21 20
Goodwill and trade marks 2 652 2 760 2 687
Investments - Associated companies 18 165 14 318 16 958
- Other 83 115 115
Loans 279 24 12
Deferred taxation 68 9 17
24 243 19 279 21 865
Current assets 4 943 4 089 4 435
Cash and cash equivalents 2 650 2 195 2 697
Other current assets 2 293 1 894 1 738
Total assets 29 186 23 368 26 300
EQUITY AND LIABILITIES
Capital and reserves
Interest of own members 25 518 21 116 24 047
Minority interest 2 039 833 945
Total shareholders` equity 27 557 21 949 24 992
Non-current liabilities 250 274 210
Retirement benefits 63 44 74
Long-term interest-bearing loans 97 159 41
Deferred taxation 90 71 95
Current liabilities 1 379 1 145 1 098
Short-term interest-bearing loans 32 113 110
Other current liabilities 1 347 1 032 988
Total equity and liabilities 29 186 23 368 26 300
Net asset value per share (Rand)
(attributable to own members)
- At book value R 49.03 R 40.45 R 46.07
- Allowing for market value/directors`
valuation of investments and listed
subsidiary companies R 92.17 R 76.66 R 89.50
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited Audited
Six months ended Year
ended
30 September 31 March
2002 2001 2002
R million R million R million
Revenue of the Company and its 5 819 4 262 8 441
subsidiaries
Operating profit before depreciation 683 347 975
Depreciation (100) (93) (184)
Finance costs (16) (27) (58)
Profit from normal operations 567 227 733
Amortisation of goodwill (70) (69) (138)
Impairment of assets (14) - -
Exceptional items 989 (6) (20)
1 472 152 575
Taxation (201) (56) (172)
Profit after tax of the Company and its 1 271 96 403
subsidiaries
Share of after-tax profit of associated 2 058 1 570 3 255
companies
- Profit from normal operations 2 306 1 781 3 881
- Amortisation of goodwill (163) (122) (276)
- Impairment of goodwill (50) - -
- Exceptional items (35) (89) (350)
Group profit after tax 3 329 1 666 3 658
Minority interest (305) (47) (151)
Net profit 3 024 1 619 3 507
Reconciliation of headline earnings:
Basic earnings - Net profit 3 024 1 619 3 507
Plus/(minus) - portion attributable to
own members:
- Amortisation of goodwill 226 191 414
- Impairment of goodwill and assets 58 - -
- Exceptional items (805) 94 351
- Net surplus, after taxation, on
disposal of property, plant and equipment (8) (8) (35)
- Other - - 15
Headline earnings 2 495 1 896 4 252
Segmental analysis - Headline earnings
Trade mark interests 1 375 966 2 167
Financial services 507 484 958
Industrial interests 316 203 570
Mining interests 153 137 306
Corporate finance and other interests 144 106 251
2 495 1 896 4 252
EARNINGS AND DIVIDENDS PER SHARE
30 September 31 March
2002 2001 2002
Cents Cents Cents
Headline earnings 478.2 363.2 814.5
Basic earnings 579.6 310.2 671.8
Dividends
Ordinary 88.00 73.00 206.00
- Interim 88.00 73.00 73.00
- Final 133.00
Special 100.00
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
Six months ended Year ended
30 September 31 March
2002 2001 2002
R million R million R million
Balance at 1 April - as previously
reported 24 047 19 536 19 536
Prior year adjustments - (149) (149)
Adjusted balance at 1 April 24 047 19 387 19 387
Net profit 3 024 1 619 3 507
Dividends paid (1 215) (553) (934)
Exchange rate adjustments 215 774 2 131
Change in reserves of associated
companies (448) (124) (70)
Purchase of shares by wholly-owned
subsidiary (treasury shares) (109) - -
Long-term incentive scheme reserve 7 12 25
Other (3) 1 1
Interest of own members 25 518 21 116 24 047
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
Six months ended Year ended
30 September 31 March
2002 2001 2002
R million R million R million
Cash generated from/(utilised in)
operations 300 (60) 688
Dividends received 1 470 1 161 1 627
Dividends paid (1 239) (564) (968)
Taxation paid (125) (59) (111)
Net cash inflow from operating
activities 406 478 1 236
Investing activities 19 (52) (201)
Financing activities (471) (138) (158)
Net increase/(decrease) in cash and
cash equivalents (46) 288 877
Cash and cash equivalents at the
beginning of the period 2 677 1 800 1 800
Cash and cash equivalents at the end
of the period 2 631 2 088 2 677
Cash and cash equivalents - per
balance sheet 2 650 2 195 2 697
Bank overdraft (19) (107) (20)
ADDITIONAL INFORMATION
30 September 31 March
2002 2001 2002
Shares in issue
- Ordinary shares of 1 cent
each 486 493 650 486 493 650 486 493 650
- Unlisted B ordinary shares of
10 cents each 35 506 352 35 506 352 35 506 352
Total shares in issue 522 000 002 522 000 002 522 000 002
Shares held in treasury
- Ordinary shares of 1 cent
each (1 567 908) - -
520 432 094 522 000 002 522 000 002
Weighted shares in issue 521 726 610 522 000 002 522 000 002
- In determining the headline and basic earnings per share the weighted
number of shares in issue was taken into account.
30 September 31 March
2002 2001 2002
R million R million R million
Listed investments
Associated
- Book value 6 471 6 282 6 766
- Market value 10 188 10 575 10 786
Other
- Book value 18 50 50
- Market value 44 145 136
Unlisted investments
Associated
- Book value 11 694 8 036 10 192
- Directors` valuation 32 875 23 118 30 895
Other
- Book value 65 65 65
- Directors` valuation 74 73 73
Additions to and replacement of
property, plant and equipment 132 95 185
Capital commitments 363 85 112
(Including amounts authorised, but not
yet contracted for)
Dividends received
Dividends included in operating profit 8 7 8
Dividends from associated companies set-
off against investments 1 462 1 003 1 469
Interest received
From unlisted investments and deposits 183 97 235
ADDITIONAL INFORMATION (CONTINUED)
30 September 31 March
2002 2001 2002
R million R million R million
Exceptional items
Exceptional items of subsidiary
companies consist of the following:
Net capital surplus/(loss) on the 1 001 (3) (18)
sale of investments and businesses
Retrenchment costs (12) - -
Other - (3) (2)
Total before taxation - per income
statement 989 (6) (20)
Taxation (36) - 18
Total after taxation 953 (6) (2)
Share of exceptional items of
associated companies (35) (89) (350)
- per income statement
Restructuring costs (23) (136) (148)
Retrenchment costs (47) - -
Net capital surplus/(loss) on sale 12 - (250)
of investments and businesses
Other (1) 4 (19)
Taxation effect 22 43 65
Attributable to minorities of
associated companies 2 - 2
918 (95) (352)
Attributable to minorities (146) 1 1
Attributable to own members 772 (94) (351)
(Included in operating profit)
COMMENTS
1. ACCOUNTING POLICIES
The interim report is prepared mainly on the historical cost basis, in
accordance with South African Statements of Generally Accepted Accounting
Practice and incorporates accounting policies which, with the exception of
accounting for investment properties, employee benefits and the Company`s long-
term share incentive scheme (the "scheme"), are consistent in all respects with
those of the previous financial periods.
2. PRIOR YEAR ADJUSTMENTS
Change in accounting policy - current period
The accounting policy in respect of the Company`s long-term share incentive
scheme has been changed.
In the past, the diluted headline and basic earnings per share were based on the
weighted number of shares in issue after adjustment for the dilutive effect of
shares which were to be issued to participants in the scheme. The trustees of
the Share Trust subsequently decided to rather acquire shares in the open market
and 3 950 000 shares were purchased in June 2002 for this purpose.
The estimated cost of the scheme, after taking into account dividends received
on the relevant shares, is accounted for against income and headline earnings on
a straight-line basis over a four year period with a corresponding credit to
equity. The comparative figures have been restated in respect of the portion
attributable to the expired periods. The effect of the change in accounting
policy on headline earnings and headline earnings per share was as follows:
HEADLINE EARNINGS 30 September 31 March
2002 2001 2002
R million R million R million
Previously reported 1 908 4 277
Scheme cost attributable to the
period 7 12 25
Restated headline earnings 1 896 4 252
HEADLINE EARNINGS PER SHARE 30 September 31 March
2002 2001 2002
Cents Cents Cents
Previously reported 365.5 819.3
Scheme cost attributable to the
period 1.3 2.3 4.8
Restated headline earnings per share 363.2 814.5
Change in accounting policy - 2002 financial year
As indicated in Remgro`s 2002 Annual Report, the accounting policy in respect of
accounting for investment properties was changed during the 2002 financial year
to comply with the amended South African Statement of Generally Accepted
Accounting Practice (AC 135). During 2002 the Group also implemented AC 116
(revised) in respect of employee benefits.
The effect on earnings for the six months ended 30 September 2001 was not
material, therefore the comparative income statement has not been restated. The
balance sheet on 30 September 2001 has been restated as follows:
30 September
2001
R million
Balance sheet
Reduction in property, plant and equipment and
investment properties 5
Reduction in investments 18
Reduction in interest of own members 33
Reduction in minority interest 6
Increase in liabilities 16
3. RESULTS
Certain balance sheet and income statement items are not directly comparable on
a line-for-line basis with that of the prior financial periods due to:
(a) the consolidation of Medi-Clinic Corporation Limited (Medi-Clinic) as a
subsidiary company from 1 April 2002, while previously having being equity
accounted as an associated company, and
(b) the equity accounting of the interest in Unilever Bestfoods Robertsons
from 1 April 2002, while previously the interest in the former Bestfoods
Robertsons joint venture, was proportionately consolidated.
- Headline earnings per share
Headline earnings per share increased by 31.7% from 363.2 cents to 478.2 cents.
The contribution of the tobacco interests, which represented 54.3% (2001: 50.1%)
of total headline earnings for the period under review, increased by 42.8%. A
substantial portion of this increase can be attributed to the weakening of the
rand against the pound. It should be noted that income does not accrue evenly
throughout the year and after taking into account the recent strengthening of
the rand, the exchange rate impact will not necessarily be repeated to the same
extent during the second six months of the year to 31 March 2003.
The contribution of the financial services, which represented 20.3% (2001:
25.5%) of total headline earnings has increased by 4.8%. The combined
contribution of FirstRand Limited and RMB Holdings Limited to headline earnings
has increased by only 2.2%, due to an exchange rate benefit included in the
comparative period. ABSA Group Limited (ABSA) achieved earnings growth of
15.7%.
The total contribution of the industrial interests increased by 55.4%, mainly as
a result of the good performance by, amongst others, Rainbow Chicken Limited,
Dorbyl Limited and the packaging interests.
Due to a substantial increase in the headline earnings of Trans Hex Group
Limited, the mining interests` contribution increased by 12%.
Medi-Clinic continued its steady earnings growth with an increase of 25%.
- Basic earnings per share
Basic earnings, after exceptional items and amortisation of goodwill, increased
from 310.2 cents to 579.6 cents per share. This increase includes the capital
surplus realised on the Robertsons Unilever transaction as well as on the merger
between Malbak Limited and Nampak Limited (Nampak).
4. REVENUE
- of the Company and its 30 September 31 March
subsidiaries
2002 2001 2002
R million R million R million
Revenue is not directly comparable
with that of the previous periods as
is shown by the following analysis:
Operating revenue
- Medi-Clinic (Consolidated from 1
April 2002) 1 378 - -
- Bestfoods Robertsons joint venture
(Proportionately consolidated to
31 March 2002) - 944 1 866
- Other subsidiaries 2 788 2 203 4 863
Dividends and interest 1 653 1 115 1 712
Total revenue 5 819 4 262 8 441
Due to the nature and composition of the Group, segmental information in
respect of revenue is not meaningful.
5. TOBACCO
Remgro`s tobacco interests are represented by a one-third shareholding in R&R
Holdings, Luxembourg, (R&R). The other two-thirds are held by Compagnie
Financi
re Richemont AG (Richemont).
In the period under review, R&R has equity accounted its effective 31.50% (2001:
31.53%) interest in British American Tobacco Plc (BAT) for the full six months
period. In line with the practice adopted in the prior year, R&R`s share of
BAT`s earnings for the six months to 30 September 2002 is based on BAT`s results
for the nine months period to 30 September 2002, less the results for the
quarter to 31 March 2002.
After adjustment for exceptional items and goodwill amortisation, R&R`s
contribution to Remgro`s headline earnings is as follows:
Six months to
September
2002 2001
GBP GBP
million million
R&R`s share of the adjusted attributable profit
of BAT for the
six months to 30 September 256 241
R&R`s other income 3 2
R&R`s headline earnings for the six months to 259 243
30 September
Remgro`s 33.33% share thereof 86 81
R million R million
Converted at the average GBP/R rate of 15.7012
(2001: 11.7415) 1 355 949
BAT performed well in its recently reported nine months period to the end of
September with adjusted diluted earnings per share increasing by 8% from 45.80
pence to 49.47 pence. Sales volumes for the period totalled 579.3 billion
(2001: 602.0 billion) cigarettes. However, BAT`s four global brands Lucky
Strike, Kent, Dunhill and Pall Mall achieved sales growth of 9%.
Profit for the America-Pacific region for the nine-month period showed an
increase of 4% to GBP769 million. BAT`s operations in the United States
increased market share and profit, while strong volume increases in South Korea
more than offset the lower volumes in Canada. Total regional volume was 2%
ahead at 80 billion cigarettes.
In Europe a profit increase of 6% to GBP412 million was achieved, as a result of
solid performances in Germany, Russia, Ukraine, France and Switzerland, with
volumes in line with last year.
In the Asia-Pacific region profit was 5% lower, mainly as a result of markedly
reduced duty-free sales volumes, while in the Africa and Middle East region the
severe devaluation of the South African Rand, the costs incurred in setting up
the new operation in Turkey and lower duty-free sales contributed to a decrease
in profit of 18% to GBP45 million.
BAT`s businesses in Latin America performed well in exceptionally difficult
economic circumstances, recording a profit decline of 4% despite the currency
devaluations in many countries and a fall in volume of 6%.
6. INVESTMENTS
The most important changes subsequent to 1 April 2002 were as follows:
Purchase of Remgro shares
During the period under review, Remgro`s wholly-owned subsidiary company, Remgro
Investments (Proprietary) Limited, acquired 1 567 908 ordinary Remgro shares
(0.32% of the issued ordinary shares of 1 cent each) for a total amount of
R109.1 million and these shares are held as treasury shares. This did not have a
material effect on earnings or earnings per share.
Medi-Clinic Corporation Limited (Medi-Clinic)
The interest in Medi-Clinic at 30 September 2002 was 52.2%. The interest in
excess of 50% was previously considered to be temporary due to personnel options
that could be exercised which would have diluted the interest to below 50%. Due
to the buy-back of shares by Medi-Clinic, this expected dilution to below 50%
will probably not occur and accordingly Medi-Clinic has been consolidated as a
subsidiary company from 1 April 2002.
Standard Bank Investment Corporation Limited (Stanbic)
The 3.1 million Stanbic shares received during April 2000 by way of a dividend
in specie from the Gencor Limited unbundling was sold for R110.6 million during
May 2002.
FirstRand Limited (FirstRand)
During May 2002 a further investment of R111 million was made in FirstRand. On
30 September 2002 Remgro`s direct interest in FirstRand was 9.6%.
Malbak Limited (Malbak)
The scheme of arrangement between Malbak and its shareholders was sanctioned by
the High Court of South Africa on 14 August 2002. In terms of this transaction
Remgro received 74 374 104 Nampak shares and R167.7 million in cash in exchange
for its Malbak shares. Since then Remgro made a further investment of R159.0
million in Nampak. On 30 September 2002 Remgro`s interest in Nampak was 13.6%.
Malbak`s results were equity accounted for the four months to 31 July 2002 and
that of the enlarged Nampak for the two months to 30 September 2002.
Universa (Proprietary) Limited (Universa)
On 20 August 2002 the Mine Employees Pension Fund and Sentinel Mining Industry
Retirement Fund (collectively, the MPFs), Sage Group Limited (Sage) and
Financial Securities Limited (FSL), a wholly-owned subsidiary of Remgro
(collectively, the Universa shareholders) and Sanlam Limited (Sanlam) announced
that they had restructured the agreements between them in respect of their
interests in ABSA.
It is the intention of the Universa shareholders to unbundle the entire
shareholding of Universa in ABSA, resulting in them holding ABSA shares
directly, and the Universa shareholders have entered into an agreement to
facilitate this unbundling. In addition, FSL, the MPFs and Sanlam have entered
into a new ABSA shareholders` agreement. Sage elected to withdraw from the
previous ABSA shareholders` agreement and do not participate in the new ABSA
shareholding pool.
Since 30 September 2002:
Hunt Leuchars & Hepburn Holdings Limited (HL&H)
The schemes of arrangement in terms of which Industrial Partnership Investments
Limited (IPI) would have obtained all the ordinary and preference shares in HL&H
not yet held by it, were sanctioned by the High Court of South Africa on
22 October 2002.
The listing of HL&H shares on the JSE Securities Exchange South Africa was
terminated on 28 October 2002, and in terms of the schemes of arrangement IPI
acquired 60.0 million HL&H ordinary shares and 37.9 million HL&H preference
shares on 4 November 2002 for a total consideration of R952.1 million. HL&H is
now a wholly-owned subsidiary of Remgro.
DIRECTORATE
On 28 August 2002, Mr P J Erasmus retired as a non-executive director.
DIVIDENDS
Notice is hereby given that an interim dividend of 88 cents (2001: 73 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 2002.
Dates of importance:
Last day to trade in order to participate in the Friday, 10 January
interim dividend 2003
Trading on or after this date will be ex the interim Monday, 13 January
dividend 2003
Record date Friday, 17 January
2003
Payment date Monday, 20 January
2003
On payment date, if so mandated, dividends due to holders of certificated
securities will either be transferred electronically to such shareholders` bank
accounts or, alternatively, cheques will be posted to their registered
addresses.
Dividends in respect of dematerialised shareholdings will be credited to
shareholders` accounts with their Central Securities Depository Participant
(CSDP) or broker.
Shareholders may not dematerialise or rematerialise their holdings of ordinary
shares between Monday, 13 January 2003 and Friday, 17 January 2003, both days
inclusive.
Signed on behalf of the Board of Directors.
Johann Rupert Chairman
Thys Visser Chief Executive Officer / Deputy Chairman
Stellenbosch
21 November 2002
DIRECTORATE AND ADMINISTRATION
Directors
Johann Rupert* (Chairman),
M H Visser (Deputy Chairman/Chief Executive Officer),
P E Beyers*,W E Bhrmann, G D de Jager*,
J W Dreyer*, D M Falck, P K Harris*, E de la H Hertzog*,
E Molobi*, J F Mouton*, J A Preller (Mrs),
F Robertson*, P G Steyn*, T van Wyk
(*Non-executive)
Secretary
M Lubbe (Mrs)
Listing
JSE Securities Exchange South Africa
Sector: Financial - Investment Companies
American depositary receipt (ADR) program
Cusip number 75956M107 ADR to ordinary share 1 : 1
Depositary
The Bank of New York, 620 Avenue of the Americas, New York NY 10011
Business address and registered office
Carpe Diem Office Park, Quantum Street,
Techno Park, Stellenbosch 7600
(P O Box 456, Stellenbosch 7599)
Transfer Secretaries
Computershare Investor Services Limited, 70 Marshall Street,
Johannesburg 2001 (P O Box 61051, Marshalltown 2107)
Auditors
PricewaterhouseCoopers Inc.,
Stellenbosch
Sponsor
Rand Merchant Bank Corporate Finance
Website
www.remgro.com
Date: 21/11/2002 05:00:00 PM Produced by the JSE SENS Department
