| Tue 24 Jun 2003, 17:21 | | Remgro Limited - Audited Consolidated Results For |
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Remgro Limited - Audited Consolidated Results For The Year Ended 31 March 2003
Release Date: 24/06/2003 17:12:01 Code(s): REM
Remgro Limited - Audited consolidated results for the year ended 31 March 2003
Remgro Limited
Registration number 1968/006415/06
ISIN ZAE000026480
Share code REM
Audited consolidated results for the year ended 31 March 2003
Increase in headline earnings per share: +16.1%
Increase in ordinary dividend per share: +20.4%
Five year compound growth rates (pro forma):
- Headline earnings per share 22% per annum
- Ordinary dividend per share 23% per annum
Abridged consolidated balance sheet
2003 2002
R million R million
Assets
Property, plant and equipment 3 255 2 063
Investment properties 22 20
Goodwill and trade marks 3 361 2 687
Investments - Associated companies 19 844 16 984
- Other 109 115
Loans 326 12
Deferred taxation 84 17
Cash resources 2 286 2 697
Other current assets 1 789 1 738
Total assets 31 076 26 333
Equity and liabilities
Interest of own members 27 809 24 062
Minority interest 1 583 929
Total shareholders" equity 29 392 24 991
Interest-bearing loans 213 151
Other non-current liabilities 218 203
Other current liabilities 1 253 988
Total equity and liabilities 31 076 26 333
Net asset value per share (Rand)
- At book value R54.49 R46.10
- At market value/directors" valuation ("intrinsic
value")
- at year-end R76.91 R89.50
- at 23 June 2003* R87.02 -
* This figure was not subject to audit
Abridged consolidated income statement
Revenue of the Company and its subsidiaries 11 212 8 441
Operating profit before depreciation 1 468 981
Depreciation (206) (189)
Finance costs (45) (58)
Profit from normal operations 1 217 734
Amortisation of goodwill (166) (138)
Impairment of assets (24) -
Exceptional items 1 245 (20)
Profit before tax 2 272 576
Taxation (302) (173)
Profit after tax of the Company and its subsidiaries
1 970 403
Share of after-tax profit of associated companies
7 262 3 255
- Profit from normal operations 4 421 3 881
- Amortisation of goodwill (308) (276)
- Impairment of assets (63) -
- Exceptional items 3 212 (350)
Group profit after tax 9 232 3 658
Minority interest (488) (151)
Net profit for the year 8 744 3 507
Reconciliation of headline earnings:
Basic earnings - Net profit for the year 8 744 3 507
Plus/(minus) - portion attributable to own members:
- Amortisation of goodwill 473 414
- Impairment of assets 72 -
- Exceptional items (4 354) 351
- Net surplus, after taxation, on disposal of
property, plant and equipment (21) (35)
- Other - 15
Headline earnings 4 914 4 252
Earnings and dividends per share
2003 2002
Cents Cents
Headline earnings 945.8 814.5
Basic earnings 1 682.9 671.8
Dividends
Ordinary 248.00 206.00
- Interim 88.00 73.00
- Final 160.00 133.00
Special - 100.00
Abridged consolidated statement of changes in equity
2003 2002
R million R million
Balance at 1 April - as previously reported 24 047 19 387
Prior year adjustments 15 (21)
Adjusted balance at 1 April 24 062 19 366
Net profit for the year 8 744 3 507
Dividends paid (1 674) (934)
Exchange rate adjustments (2 185) 2 131
Change in interests in subsidiary companies,
associated companies and joint ventures (23) 61
Change in reserves of associated companies
and other reserves (436) (94)
Purchase of shares by wholly-owned subsidiary
(treasury shares) (704) -
Long-term share incentive scheme reserve 25 25
Balance at 31 March 27 809 24 062
Abridged consolidated cash flow statement
2003 2002
R million R million
Cash flow from operating activities 1 377 795
Taxation paid (220) (111)
Dividends received 2 215 1 520
Cash available from operating activities 3 372 2 204
Dividends paid (1 773) (968)
Net cash inflow from operating activities 1 599 1 236
Investing activities (1 943) (201)
Financing activities (82) (158)
Net increase/(decrease) in cash and cash equivalents
(426) 877
Cash and cash equivalents at the beginning of the year
2 677 1 800
Cash and cash equivalents at the end of the year
2 251 2 677
Cash and cash equivalents - per balance sheet 2 286 2 697
Bank overdraft (35) (20)
Additional information
2003 2002
Number of shares in issue
- Ordinary shares of 1 cent each 486 493 650 486 493 650
- Unlisted B ordinary shares of 10 cents each 35 506 352 35 506 352
Total number of shares in issue 522 000 002 522 000 002
Shares repurchased and held in treasury
- Ordinary shares of 1 cent each (11 616 128) -
510 383 874 522 000 002
Weighted number of shares in issue 519 565 424 522 000 002
In determining the headline and basic earnings
per share the weighted number of shares in issue
was taken into account.
2003 2002
R million R million
Listed investments
Associated
- Book value 7 693 6 792
- Market value 10 911 10 786
Other
- Book value 44 50
- Market value 47 136
Unlisted investments
Associated
- Book value 12 151 10 192
- Directors" valuation 23 369 30 895
Other
- Book value 65 65
- Directors" valuation 74 73
Additions to and replacement of property,
plant and equipment 388 191
Capital commitments 579 112
(Including amounts authorised, but not yet
contracted for)
Dividends received
Dividends included in operating profit 10 8
Dividends from associated companies
set off against investments 2 095 1 469
Interest received
From unlisted investments and deposits 372 235
(Included in operating profit)
Exceptional items
Exceptional items of subsidiary companies:
Net capital surplus/(loss) on the sale of
investments and businesses
1 244 (18)
Other 1 (2)
Total before taxation - per income statement
1 245 (20)
Taxation (22) 18
Total after taxation 1 223 (2)
Share of exceptional items of associated
companies:
Net capital surplus on BAT preference shares 3 204 -
Restructuring costs (123) (148)
Net capital surplus/(loss) on sale of investments
and businesses 86 (250)
Other 6 (19)
Taxation effect 37 65
Attributable to minorities of associated 2 2
companies
Total - per income statement 3 212 (350)
Grand total 4 435 (352)
Attributable to minorities (142) 1
Attributable to own members 4 293 (351)
Comments
1. Accounting policies
The annual financial statements are prepared mainly on the historical cost
basis, in accordance with South African Statements of Generally Accepted
Accounting Practice and the requirements of the South African Companies Act and
incorporate accounting policies which are consistent with those of the previous
financial year, with the exception of accounting for the Company"s long-term
share incentive scheme and the implementation of the South African Statement of
Generally Accepted Accounting Practice, AC 433: Consolidation and equity method
- Potential voting rights and allocation of ownership interests.
2. Prior year adjustments
Change in accounting policy
The accounting policy in respect of the Company"s long-term share incentive
scheme (the "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 rather to acquire shares in the open market
and 3 950 000 shares were purchased for an amount of R277 million 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:
31 March
2002
Headline earnings
R million
Previously reported
4 277
Net scheme cost for the year
(25)
Restated headline earnings
4 252
Net scheme cost for the year to 31 March 2003
amounts to R16 million.
31 March
2002
Headline earnings per share
Cents
Previously reported
819.3
Net scheme cost for the year
(4.8)
Restated headline earnings per share
814.5
Net scheme cost per share for the year to 31
March 2003 amounts to 3.1 cents.
AC 433
During the year under review the Company implemented AC 433: Consolidation and
equity method - Potential voting rights and allocation of ownership interests.
The effect on earnings for the year ended 31 March 2002 was not material;
therefore the comparative income statement has not been restated.
3. Comparability
Certain balance sheet and income statement items are not directly comparable
with those of the prior financial year due to:
a) the consolidation of Medi-Clinic Corporation Limited (Medi-Clinic) as a
subsidiary company from 1 April 2002. Previously it was equity accounted as an
associated company, and
b) the equity accounting of the interest in Unilever Bestfoods Robertsons from 1
April 2002. Previously the interest in the former Bestfoods Robertsons joint
venture was proportionately consolidated.
4. Results
Headline earnings
Headline earnings for the year to 31 March 2003 grew by 15.6% from R4 252
million to R4 914 million.
Headline earnings per share, however, increased by 16.1% from 814.5c to 945.8c
reflecting the "uplift" resulting from the share repurchase programme.
During the year under review, a wholly owned subsidiary acquired 11.6 million
Remgro ordinary shares in the open market, representing 2.4% of the issued
ordinary share capital of the Company. The total purchase consideration amounted
to R704 million at an average of R60.64 per ordinary share. The shares have not
been cancelled and are held as treasury stock.
We have regularly in the past drawn attention to the fact that currency
movements could have a significant impact on earnings. In particular, British
American Tobacco Plc (BAT)"s Sterling profit contribution, translated into South
African rands, amounts to almost 50% of Remgro"s total headline earnings.
The favourable currency impact on translation of BAT"s contribution to headline
earnings as set out in the table below, has declined from R427 million during
2002 to R243 million for the year under review.
Financial year: 2003 2002
Average exchange rate (GBP/R) 15.0678 13.5592
Closing exchange rate at year-end (GBP/R) 12.4915 16.2056
BAT contribution (GBPm) 161 154
BAT contribution (Rm) 2 423 2 088
Favourable currency impact (Rm) 243 427
It should be noted that BAT"s profit contribution is translated at an average
exchange rate. If the average for the year to 31 March 2004 was to be equal to
the current GBP/R spot rate, which is lower (ie stronger rand) compared to the
average rate for the past year, it will result in an unfavourable currency
impact during the new financial year.
Basic earnings
Basic earnings per share increased by a substantial 151% to 1 682.9 cents. Basic
earnings reflect earnings after goodwill amortisation and inclusion of non-
recurring exceptional items. During the current year, attributable after-tax
exceptional items amounted to R4 293 million. These included large exceptional
gains such as:
* R310 million in respect of the disposal of the interest in Malbak Limited in
exchange for shares in Nampak Limited.
* R408 million relating to the restructuring of the Bestfoods Robertsons joint
venture resulting in a revised holding in the enlarged Unilever Bestfoods
Robertsons venture.
* R270 million on the disposal of the Robertsons Homecare interests.
* R3 204 million in respect of the revaluation gain arising on R&R Holdings"
ownership of BAT preference shares following the issue of call warrants on such
preference shares.
5. Revenue
31 March 31 March
2003 2002
R million R million
Revenue is not comparable with that of the previous
year as is shown by the following analysis:
Operating revenue
- Medi-Clinic (Consolidated from 1 April 2002) 2 924 -
- Bestfoods Robertsons joint venture
(Proportionately consolidated to 31 March 2002) - 1 866
- Other subsidiaries 5 811 4 863
Dividends and interest 2 477 1 712
Revenue of the Company and its subsidiaries 11 212 8 441
6. Source of headline earnings
2003 2002
R million % R million %
Trade mark interests 2 498 51 2 167 51
Financial services 1 121 23 958 23
Industrial interests 696 14 570 13
Mining interests 322 7 306 7
Corporate finance and other 277 5 251 6
interests
4 914 100 4 252 100
7. Tobacco
Remgro"s tobacco interests are represented by a one-third shareholding in R&R
Holdings SA Luxembourg (R&R). The other two-thirds are held by Compagnie
Financiere Richemont SA (Richemont).
In January 2003, R&R issued secured call warrants exercisable into ordinary
shares of BAT in 2004. This transaction effectively locked in the value of the
120.9 million convertible redeemable preference shares which R&R has in BAT and
which it was obliged to either sell or tender for redemption in June 2004 at the
redemption price of 675 pence per share. Together with the gross warrant premium
of 34.29 pence per share received in January 2003, the value locked in amounted
to 709.29 pence per share, before costs. R&R also holds 604.3 million BAT
ordinary shares.
As a consequence of the warrant issue, the preference shares are now treated as
a debt instrument in the consolidated accounts of R&R and are no longer equity
accounted. For the nine months ended 31 December 2002, R&R"s effective interest
in BAT, reflecting the holding of both ordinary and preference shares, was
31.5%. For the three-month period ended 31 March 2003, R&R has accounted for its
27.9% effective interest in BAT ordinary shares under the equity method and, in
respect of the preference shares, has recorded the movement in the present value
of the shares as investment income. Similarly, this movement in net present
value effectively became an investment expense for BAT in accounting terms and
therefore, for purposes of equity accounting the interest in the ordinary
shares, R&R reduced BAT"s attributable profit for the quarter ended 31 March
2003 accordingly.
Whilst R&R has applied IAS 39 (Financial Instruments: Recognition and
Measurement) in accordance with International Financial Reporting Standards, the
South African equivalent, AC 133, was not yet applicable to Remgro in the year
under review. This required Remgro to make the necessary adjustments to the
reported results of R&R for the difference in accounting policies. Had R&R not
applied IAS 39, the conversion rights embedded in the preference shares would
not have been valued, and consequently these conversion rights, represented by
the warrant premium, would have been accounted for as income either
proportionately over the remaining term of the preference shares, or in one
amount upon their redemption in June 2004. Accordingly, the net warrant premium,
amounting to GBP30 million has been deferred in accounting for Remgro"s share of
the results of R&R for the year to 31 March 2003. With AC 133 subsequently
becoming applicable to Remgro, the deferred income will be included in equity
accounted income in the ensuing financial year.
Linked to the realisation of the value of the preference shares and their
reclassification, R&R recorded an exceptional gain during the year under review,
Remgro"s share of which amounted to R3 204.4 million.
After elimination of exceptional items and goodwill amortisation and the
necessary adjustments referred to above, R&R"s contribution to Remgro"s headline
earnings is made up as follows:
2003 2002
GBP million GBP million
Adjusted attributable profit of BAT for the
twelve months ended 31 March 1 528 1 456
R&R"s 31.5% share of the adjusted attributable
profit of BAT for the twelve months to 31 March
2002 - 459
R&R"s 31.5% share of the adjusted attributable
profit of BAT for the period 1 April 2002 to 31
December 2002 380 -
R&R"s 27.9% share of the adjusted attributable
profit of BAT for the period 1 January 2003 to 31
March 2003 89 -
Movement in present value of BAT preference
shares and dividends 10 -
R&R"s other income 3 3
R&R"s headline earnings for the year ended 31 482 462
March
Remgro"s 331/3% share thereof 161 154
R million R million
Translated at an average GBP/R rate of 15.0678
(2002: 13.5592) 2 423 2 088
BAT had shipments of 777 billion cigarettes in the year to 31 December 2002
representing a global market share of 14.6%. It has a robust position in all
regions worldwide which, together with the broad based portfolio of
international, regional and local brands, provides the platform for achieving
global leadership of the tobacco business. Growth in profit is achieved by a
continuous focus on increasing its share in the key growth consumer segments of
international and premium priced brands.
For BAT the most encouraging aspect of the results for the year was the
impressive growth in their global drive brands. Dunhill, Kent, Lucky Strike and
Pall Mall grew by 8% between them. Dunhill in particular performed well with
sales exceeding 30 billion cigarettes for the first time. Although Lucky Strike
declined in 2002 as a result of the planned reduction in duty-free sales, the
brand should return to growth in 2003 whilst Dunhill, Kent and Pall Mall should
maintain their progress.
Within BAT"s regions, America-Pacific"s operating profit was in line with the
prior year, reflecting the net effect of a good performance from all its
regional markets offset by the adverse exchange rate movements. Asia-Pacific,
along with the Africa and Middle East regions, suffered from the planned
reduction in duty-free sales with profits down GBP46 million and GBP50 million
respectively. Latin America performed well given the exceptionally difficult
economic circumstances and political uncertainty in many countries during the
year with profits down GBP35 million, reflecting lower volumes and a significant
weakening of the region"s major currencies against Sterling. Europe"s operating
profit was GBP42 million higher as a result of solid market performances in
Russia, Ukraine, Poland, Hungary, France and Switzerland. This was despite a
significant loss of profit from the dissolution of the UK partnership, a price
war in Romania and excise tax increases in Germany.
In the year to 31 December 2002, BAT"s adjusted earnings per share, arguably the
best measure of the company"s underlying performance grew by 8% as a result of
lower net interest expense, an improved tax position and lower minority charges.
These results were achieved despite a 3% decline in operating profit caused by
the impact of weak currencies and the planned decline in duty-free sales, but at
comparable rates of exchange operating profits were up by 3%.
8. Other investments
The most important changes during the year under review were as follows:
Purchase of Remgro shares
During the year under review, Remgro"s wholly owned subsidiary company, Remgro
Investments (Proprietary) Limited, acquired 11 616 128 ordinary shares for a
total amount of R704.4 million or R60.64 per share. This represents 2.4% of the
issued ordinary shares and is held as treasury shares.
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"s unbundling were sold for R110.6 million
during May 2002. The transaction realised an after-tax capital surplus of R77.1
million which was accounted for as an exceptional item.
FirstRand Limited (FirstRand)
During May 2002 a further investment of R111 million was made in FirstRand.
Since then Remgro"s direct interest in FirstRand amounts to 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 arrangement,
Remgro received 74 374 104 Nampak Limited (Nampak) shares and R167.7 million in
cash in exchange for its Malbak shares. The transaction realised an after-tax
capital surplus of R310.4 million which was accounted for as an exceptional
item. During August 2002 Remgro made a further investment of R159.0 million in
Nampak. Since then Remgro"s interest in Nampak amounts to 13.5%.
Malbak"s results were equity accounted for the four months to 31 July 2002 and
that of the enlarged Nampak for the eight months to 31 March 2003.
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 Group Limited (Absa). 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 no longer participates in the
new Absa shareholding pool.
The unbundling of Universa"s shareholding in Absa was finalised on 8 November
2002. An application for the voluntary liquidation of Universa was submitted on
22 January 2003. Remgro has a direct interest in Absa of 9.4%.
Hunt Leuchars & Hepburn Holdings Limited (HL&H)
The schemes of arrangement in terms of which Industrial Partnership Investments
Limited (IPI), a wholly owned subsidiary of Remgro, acquired all the ordinary
and preference shares in HL&H not 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 (JSE) was
terminated on 28 October 2002. 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 R985.6 million. HL&H has
since been a wholly owned subsidiary of Remgro.
Robertsons Holdings (Proprietary) Limited (Robertsons)
During September 2001 it was announced that Robertsons and Unilever Plc
(Unilever) had agreed in principle to restructure their interests in the
existing joint venture between Robertsons and Bestfoods Europe. This proposal
was a direct result of Unilever"s acquisition of Bestfoods" global interests.
The new Unilever Bestfoods Robertsons (UBR) venture, in which Robertsons holds
41%, was established with effect from 1 April 2002. From that date the interest
in UBR has been equity accounted for. In the past the interest in the former
Bestfoods Robertsons joint venture was consolidated proportionately.
Medi-Clinic Corporation Limited (Medi-Clinic)
The interest in Medi-Clinic on 31 March 2003 was 52.4%. Previously the interest
in excess of 50% was considered to be temporary due to personnel options not yet
exercised which could dilute the interest to below 50%. Because of the purchase
of shares by Medi-Clinic this expected dilution will probably not take place and
therefore, from 1 April 2002, Medi-Clinic has been consolidated as a subsidiary
company.
Subsequent to the year-end:
Total South Africa (Proprietary) Limited
An empowerment transaction was announced recently. On 30 April 2003 the
shareholders of Total South Africa, namely Total France, Remgro and Old Mutual,
restructured their shareholding and Total South Africa issued 25% of its voting
capital to Tosaco (Proprietary) Limited (Tosaco) in exchange for cash. Total
France now has 50.1%, Remgro 24.9% and Tosaco 25.0% of Total South Africa.
Gencor Limited (Gencor)
The unbundling of Gencor"s interest in Impala Platinum Holdings Limited (Impala)
by way of a dividend in specie was approved by Gencor"s shareholders on 25 April
2003.
Gencor shareholders received their Impala shares on 18 June 2003. In terms of
the listing requirements of the JSE, Gencor"s listing will be suspended six
months after the proposed unbundling. Remgro"s interest in Impala will be
approximately 5.0% and it will no longer be equity accounted.
Sage Group Limited (Sage)
On 9 April 2003 Sage announced that the company plans to raise additional
capital to the amount of R350 million.
This will be accomplished by an issue of shares to a consortium of investors,
represented by, and including, AVASA Holdings Limited, as well as a rights issue
to all shareholders of Sage.
Remgro"s maximum exposure in terms of the underwriting agreement amounts to
R92.5 million.
Directorate
On 28 August 2002, Mr P J Erasmus retired as a non-executive director.
Audit report
The annual financial statements have been audited by PricewaterhouseCoopers Inc.
and their unqualified audit report is available for inspection at the registered
office of the Company.
Dividends
Declaration of Dividend No 6
Notice is hereby given that a final dividend of 160 cents (2002: 133 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 financial year
ended 31 March 2003.
Together with the interim dividend of 88 cents per share paid during January
2003, total dividends for the financial year amounted to 248 cents per share.
Dates of importance:
Last day to trade in order to participate in the Friday, 8 August 2003
final dividend
Trading on or after this date will be ex the final Monday, 11 August 2003
dividend
Record date Friday, 15 August 2003
Payment date Monday, 18 August 2003
On payment date, if so mandated, dividends due to holders of certificated
securities will either be transferred electronically to bank accounts, or
alternatively, cheques will be posted to their registered addresses.
Dividends in respect of dematerialised shareholdings will be paid through the
STRATE system.
Shareholders may not dematerialise or rematerialise their holdings of ordinary
shares between Monday, 11 August 2003, and Friday, 15 August 2003, both days
inclusive.
The Annual Report will be posted to members during July 2003.
Signed on behalf of the Board of Directors.
Johann Rupert
Chairman
Thys Visser
Chief Executive Officer/Deputy Chairman
Stellenbosch
24 June 2003
DIRECTORATE AND ADMINISTRATION
Directors
Johann Rupert* (Chairman)
M H Visser (Chief Executive Officer/Deputy Chairman)
P E Beyers*, W E Buhrmann, 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
(PO Box 456, Stellenbosch 7599)
Transfer secretaries
Computershare Investor Services Limited, 70 Marshall Street,
Johannesburg 2001 (PO Box 61051, Marshalltown 2107)
Auditors
PricewaterhouseCoopers Inc., Stellenbosch
Sponsor
Rand Merchant Bank Corporate Finance
Website
www.remgro.com
