| Mon 24 Nov 2003, 11:13 | | Interim report for the six months ended 30 Septem |
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Remgro Limited - Interim report for the six months ended 30 September 2003
Remgro Limited
Registration number 1968/006415/06
ISIN ZAE000026480 Share Code REM
Interim report for the six months ended 30 September 2003
Negative currency impact of R338 million compared to R342 million gain in the
comparative period
Decrease in headline earnings per share: -0.6%
Increase in "intrinsic value" per share during the period: +5.6%
Increase in interim dividend per share: +14.8%
Abridged consolidated balance sheet
Unaudited Audited
30 September 31 March
2003 2002 2003
R million R million R million
Assets
Non-current assets
Property, plant and equipment 3 287 2 879 3 149
Biological agricultural assets 83 80 83
Investment properties 22 20 22
Goodwill and trade marks 3 323 2 652 3 361
Investments - Associated companies 18 558 18 191 19 844
- Other 2 061 83 109
Loans 226 279 326
Deferred taxation 72 68 84
27 632 24 252 26 978
Current assets 4 651 4 943 4 075
Cash and cash equivalents 1 296 2 650 2 286
Other current assets 3 355 2 293 1 789
Total assets 32 283 29 195 31 053
Equity and liabilities
Capital and reserves
Interest of own members 28 676 25 517 27 793
Minority interest 1 561 2 024 1 583
Total shareholders" equity 30 237 27 541 29 376
Non-current liabilities 574 275 351
Retirement benefits 108 63 103
Long-term interest-bearing loans 186 97 140
Deferred taxation 280 115 108
Current liabilities 1 472 1 379 1 326
Short-term interest-bearing loans 86 32 73
Other current liabilities 1 386 1 347 1 253
Total equity and liabilities 32 283 29 195 31 053
Net asset value per share (Rand)
(attributable to own members)
- At book value R56.72 R49.03 R54.46
- At market value/directors" valuation
("intrinsic value") R81.21 R92.17 R76.91
Abridged consolidated statement of changes in equity
Unaudited Audited
Six months ended Year ended
30 September 31 March
2003 2002 2003
R million R million R million
Balance at 1 April - as previously
reported 27 809 24 047 24 047
Prior year adjustments - as previously
reported - 15 15
Adjustments relating to AC 137 (16) (16) (16)
Adjusted balance at 1 April 27 793 24 046 24 046
Net after-tax cumulative opening
balance adjustment (AC 133) (88) - -
Net after-tax fair value adjustments
for the period (AC 133) 1 375 - -
Net profit 1 791 3 024 8 744
Dividends paid (817) (1 215) (1 674)
Exchange rate adjustments (718) 215 (2 185)
Change in interest in subsidiary
companies, associated companies and
joint ventures (9) - (23)
Change in reserves of associated
companies and other reserves (369) (451) (436)
Purchase of shares by wholly-owned
subsidiary (treasury shares) (295) (109) (704)
Long-term share incentive scheme reserve 13 7 25
Interest of own members 28 676 25 517 27 793
Abridged consolidated income statement
Unaudited Audited
Six months ended Year ended
30 September 31 March
2003 2002 2003
R million R million R million
Revenue of the Company and
its subsidiaries 6 330 5 819 11 212
Operating profit before depreciation 719 683 1 468
Depreciation (118) (100) (206)
Finance costs (14) (16) (45)
Profit from normal operations 587 567 1 217
Amortisation of goodwill (92) (70) (166)
Impairment of assets 1 (14) (24)
Exceptional items (1) 989 1 245
Profit before tax 495 1 472 2 272
Taxation (177) (201) (302)
Profit after tax of the Company and
its subsidiaries 318 1 271 1 970
Share of after-tax profit of
associated companies 1 623 2 058 7 262
- Profit from normal operations 2 185 2 306 4 421
- Amortisation of goodwill (129) (163) (308)
- Impairment of goodwill (26) (50) -
- Impairment of assets - - (63)
- Exceptional items (407) (35) 3 212
Group profit after tax 1 941 3 329 9 232
Minority interest (150) (305) (488)
Net profit 1 791 3 024 8 744
Reconciliation of headline earnings:
Basic earnings - Net profit 1 791 3 024 8 744
Plus/(minus) - portion attributable
to own members:
- Amortisation of goodwill 221 226 473
- Impairment of goodwill and assets 25 58 72
- Exceptional items 384 (805) (4 354)
- Net loss/(surplus), after taxation,
on disposal of property, plant and
equipment 1 (8) (21)
Headline earnings 2 422 2 495 4 914
Segmental analysis - Headline earnings
Trade mark interests 1 189 1 375 2 498
Financial services 676 507 1 121
Industrial interests 310 316 696
Mining interests 118 153 322
Corporate finance and other interests 129 144 277
2 422 2 495 4 914
Abridged consolidated cash flow statement
Unaudited Audited
Six months ended Year ended
30 September 31 March
2003 2002 2003
R million R million R million
Cash generated from operations 522 300 1 377
Taxation paid (297) (125) (220)
Dividends received * 147 1 470 2 215
Cash available from operating activities 372 1 645 3 372
Dividends paid (880) (1 239) (1 773)
Net cash inflow from operating activities (508) 406 1 599
Investing activities (528) 19 (1 943)
Financing activities 32 (471) (82)
Net increase/(decrease) in cash and
cash equivalents (1 004) (46) (426)
Cash and cash equivalents at the
beginning of the period 2 251 2 677 2 677
Cash and cash equivalents at the
end of the period 1 247 2 631 2 251
Cash and cash equivalents -
per balance sheet 1 296 2 650 2 286
Bank overdraft (49) (19) (35)
* The dividend from R&R Holdings amounting to R1 014 million (2002: R1 277
million) was received in October 2003 (2002: September 2002).
Earnings and dividends per share
30 September 31 March
2003 2002 2003
Cents Cents Cents
Headline earnings 475.3 478.2 945.8
Basic earnings 351.5 579.6 1 682.9
Dividends
Ordinary 101.00 88.00 248.00
- Interim 101.00 88.00 88.00
- Final 160.00
Additional information
30 September 31 March
2003 2002 2003
Number of 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 number of shares in issue 522 000 002 522 000 002 522 000 002
Shares repurchased and held
in treasury
- Ordinary shares of 1 cent each (16 442 602) (1 567 908) (11 616 128)
505 557 400 520 432 094 510 383 874
Weighted shares in issue 509 542 743 521 726 610 519 565 424
In determining the headline and
basic earnings per share the
weighted number of shares in
issue was taken into account.
30 September 31 March
2003 2002 2003
R million R million R million
Listed investments
Associated
- Book value 7 783 6 497 7 693
- Market value 11 057 10 188 10 911
Other
- Book value 1 995 18 44
- Market value 1 995 44 47
Unlisted investments
Associated
- Book value 10 775 11 694 12 151
- Directors" valuation 22 380 32 875 23 369
Other
- Book value 66 65 65
- Directors" valuation 66 74 74
Additions to and replacement of
property, plant and equipment 257 132 388
Capital commitments 454 363 579
(Including amounts authorised,
but not yet contracted for)
Dividends received
Dividends included in operating
profit 9 8 10
Dividends from associated
companies set off against
investments 1 627 1 462 2 095
Interest received
From unlisted investments and
deposits 194 183 372
(Included in operating profit)
Exceptional items
Exceptional items of
subsidiary companies:
Net capital surplus/(loss) on
the sale of investments and
businesses - 1 001 1 244
Retrenchment costs - (12) -
Other (1) - 1
Total before taxation -
per income statement (1) 989 1 245
Taxation (2) (36) (22)
Total after taxation (3) 953 1 223
Share of exceptional items of
associated companies:
Net capital surplus on BAT
preference shares - - 3 204
Restructuring costs (372) (23) (123)
Retrenchment costs - (47) -
Net capital surplus/(loss) on
sale of investments and
businesses (49) 12 86
Other (53) (1) 6
Taxation effect 64 22 37
Attributable to minorities of
associated companies 3 2 2
Total - per income statement (407) (35) 3 212
Grand total (410) 918 4 435
Attributable to minorities - (146) (142)
Attributable to own members (410) 772 4 293
Comments
1. Accounting policies
The interim report is prepared on the historical cost basis, in accordance with
South African Statements of Generally Accepted Accounting Practice, the
requirements of the South African Companies Act and the Listing Requirements of
the JSE Securities Exchange South Africa and incorporates policies which are
consistent with those of the previous financial periods, with the exception of
accounting for financial instruments and agricultural activities.
2. Change in accounting policies
With effect from 1 April 2003 Remgro adopted AC 133 (Financial Instruments:
Recognition and Measurement) and AC 137 (Agriculture).
AC 133
In accordance with the transitional provisions of AC 133, Remgro and its
subsidiaries recorded an after-tax cumulative adjustment loss of R88 million as
an opening balance adjustment to reserves to recognise the difference between
the carrying values and fair values of financial instruments at 1 April 2003.
Due to the fact that the comparative figures are not restated under the
transitional provisions of AC 133, certain items are not directly comparable on
a line-for-line basis with that of prior financial periods. The impact of AC 133
being applied by group companies was, excluding R&R Holdings SA (R&R), an
increase of R38 million in Remgro"s headline earnings (or 7.4 cents per share)
for the period under review. The combined effect of the call warrants issued by
R&R in January of this year and the application of AC 133 to R&R"s results,
further increased Remgro"s headline earnings by R60 million (or 11.7 cents per
share), partly due to the net warrant premium no longer being deferred.
The effect of AC 133 on the interim results is not an indication of what the
effect would be for the full year.
AC 137
The effect of this accounting standard on Remgro"s earnings for the six months
under review and the comparative periods was not material, therefore the
comparative income statements have not been restated.
AC 433
As indicated in the 2003 Annual Report, the Company implemented AC 433
(Consolidation and equity method - Potential voting rights and allocation of
ownership interests) during the 2003 financial year. The effect on earnings for
the six months ended 30 September 2002 was not material, therefore the
comparative income statement was not restated.
The balance sheets have been restated as follows:
30 September 2002 31 March 2003
R million R million
Decrease in minority interest (15) -
Decrease in reserves (1) (16)
Decrease in property, plant and equipment (97) (106)
Increase/(decrease) in deferred tax
liability 25 (7)
Increase in biological agricultural
assets 80 83
Increase in investments - Associated
companies 26 -
3. Results
Headline earnings
Total headline earnings decreased by 2.9% to R2 422 million. Headline earnings
per share however decreased by only 0.6% from 478.2c to 475.3c due to the
favourable impact of the share buy-back programme.
The major factor which influenced headline earnings was the negative impact of
the stronger rand on the translation of mainly British American Tobacco Plc"s
(BAT) profits from sterling to rands:
Six months to September 2003 2002
Average exchange rate (GBP/R) 12.2233 15.7012
Closing exchange rate (GBP/R) 11.5413 16.5292
R&R contribution (GBPm) 96 86
R&R contribution (Rm) 1 169 1 355
(Unfavourable)/favourable impact for the period (Rm) (338) 342
BAT"s attributable profit before goodwill and exceptional items increased by
1.7% in sterling before adjustment for the movement in present value of the BAT
preference shares and dividends. The percentage interest equity accounted by R&R
reduced from 31.5% to 28.8% due to the call warrants issued by R&R in January
2003 which are exercisable in June 2004. The preference shares are now treated
as a debt instrument. After the necessary adjustment at the R&R level for the
movement in present value of the BAT preference shares and dividends, and after
inclusion of the net warrant premium no longer deferred, R&R"s adjusted headline
earnings increased by 11% and consequently Remgro"s share thereof, from GBP86
million to GBP96 million. As indicated in the table above, R&R"s contribution to
Remgro"s total headline earnings declined by 14%.
The financial services interests produced solid results, with continued strong
profit growth from Absa and FirstRand.
The industrial interests" contribution declined by 2% mainly due to Dorbyl
(downsizing), Rainbow (now fully taxable) and Total South Africa (lower margins
due to the stronger rand). Transvaal Sugar and Unilever Bestfoods Robertsons
increased their contributions to Remgro"s headline earnings to R47 million
(2002: R32 million) and R66 million (2002: R14 million) respectively.
The contribution by mining interests declined by 23%, mainly due to the fact
that Remgro"s interest in Impala Platinum (Impala), unbundled by Gencor Limited
(Gencor) during June 2003, has not been equity accounted. Gencor, and therefore
Impala, was equity accounted during the comparative period.
Corporate and other interests, in aggregate, also produced lower results. While
Medi-Clinic"s contribution increased by 23% to R112 million, that of corporate
treasury decreased from R83 million to R44 million mainly due to cash funds
utilised to repurchase shares and lower interest rates.
Basic earnings
Basic earnings per share, after exceptional items and amortisation of goodwill,
decreased by 39% mainly as a result of the non-recurrence of the capital surplus
realised on the Robertsons Unilever transaction and the merger of Malbak and
Nampak in the comparative period. Remgro"s share of the exceptional items of
associated companies (mainly BAT) also reduced basic earnings during the period
under review.
4. Intrinsic value
Remgro"s intrinsic value per share has increased by 5.6% from R76.91 at 31 March
2003 to R81.21 at 30 September 2003.
30 September 31 March
R million 2003 2003
Listed investments 15 539 12 757
Unlisted investments 23 548 24 487
Sundry investments 249 229
Other net assets 93 143
Cash at the centre 1 630 1 639
41 059 39 255
Issued shares less repurchased (million) 505.6 510.4
Intrinsic value per share (R) 81.21 76.91
Full details are available on the website and will be included in the interim
report that will be mailed to shareholders.
5. Revenue
- of the Company and its subsidiaries 30 September 31 March
2003 2002 2003
R million R million R million
Revenue, excluding dividends and
interest 4 500 4 166 8 735
Dividends and interest 1 830 1 653 2 477
Total revenue 6 330 5 819 11 212
Due to the nature and composition of the Group, segmental analysis in respect of
revenue is not meaningful.
6. British American Tobacco Plc (BAT)
Remgro"s interest in BAT is 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 the period under review, R&R equity accounted its effective 28.8% (2002:
31.5%) interest in BAT for the full six-month period. As explained in the 2003
Annual Report, the BAT preference shares held by R&R are being treated as a debt
instrument as from January 2003 and no longer equity accounted. This is a
consequence of the call warrants issued by R&R which are exercisable in June
2004. The movement in the present value of the preference shares is accounted
accordingly. It was also mentioned previously that the deferred net warrant
premium would be included in equity accounted income during the period under
review. R&R"s interest in the ordinary shares of BAT has increased from 27.9% at
31 March 2003 to the present level of 28.8% due to the impact of the BAT share
buy-back programme.
R&R"s share of BAT"s earnings for the six months to 30 September 2003 is based
on BAT"s results for the nine-month period to 30 September 2003, less the
results for the quarter to 31 March 2003.
R&R"s contribution to Remgro"s headline earnings is as follows:
Six months to
September
2003 2002
GBP GBP
million million
Attributable profit of BAT before
goodwill and exceptional items 828 814
Movement in present value of BAT preference shares
and dividends (20) -
Adjusted attributable profit of BAT for the six
months ended 30 September 808 814
R&R"s 28.8% (2002: 31.5%) share of the adjusted
attributable profit of BAT for the six months to
30 September 233 256
Movement in present value of BAT preference shares
and dividends 20 -
R&R"s other income 4 3
R&R"s headline earnings for the six months ended
30 September 257 259
Net warrant premium no longer deferred 30 -
R&R"s adjusted headline earnings for the six
months ended 30 September 287 259
Remgro"s 33.33% share thereof 96 86
R million R million
Translated at the average GBP/R rate of 12.2233
(2002: 15.7012) 1 169 1 355
BAT"s operating profit for its most recently reported nine-month period to 30
September, excluding goodwill amortisation and exceptional items, increased by
3% to GBP2 115 million as volumes grew by 1% to 584 billion cigarettes with the
four global drive brands, Kent, Dunhill, Lucky Strike and Pall Mall showing
growth of 13%.
All BAT"s regions contributed to the growth in operating profit except for the
American Pacific region. This region"s profit of GBP728 million was down GBP30
million from the comparative period as the impact of very difficult trading
conditions continuing in the US cigarette business and exchange rate movements
were only partly offset by strong profit increases from Canada, Japan and South
Korea. In the US market, industry profitability was severely affected by
continued competitive pricing and promotional activities, as well as industry
volumes down 7% due to excise tax increases and lower wholesale inventory
levels.
In Asia-Pacific, regional profit rose by GBP9 million to GBP358 million, with
outstanding performances in Australia, Malaysia, Vietnam and India, partially
offset by reduced profit from Cambodia, Indonesia and duty free.
In Latin America, profit of GBP335 million was GBP19 million higher with
increased contributions from many markets in the region and a first time
contribution from the acquisition in Peru. The excellent regional result was
achieved despite the difficult economic conditions in many of the countries and
the impact of currency devaluations.
Excluding restructuring costs in the UK, operating profit in Europe was up GBP29
million to GBP444 million, as lower marketing costs in the UK and significantly
higher profits in Russia, Hungary and Netherlands, as well as the strengthening
of the euro, more than offset lower profit from France.
In the Africa and Middle East region, profit at GBP250 million was up by GBP43
million, despite the costs of continuing investments in building the business in
Turkey, reflecting generally good performances and the impact of the strong
South African rand.
BAT"s adjusted diluted earnings per share grew 5% in the nine months to
September 2003 to 51.47p as higher operating profits and the benefits from the
share buy-back programmes more than offset the increases in net interest paid
and the minority interest charge.
During the period under review, BAT has announced proposals to restructure
certain of its businesses. These included the consolidation of manufacturing
operations in the UK and a major restructuring of the business in Canada. BAT"s
results for the nine-month period to 30 September 2003 included an exceptional
charge of GBP302 million in respect of the costs associated with these
restructuring activities. In addition, the company incurred a loss on disposal
of a US subsidiary totalling GBP62 million.
BAT has also been active in terms of acquiring businesses, having acquired a
controlling interest in Peru"s leading tobacco company Tabacalera Nacional
S.A.A., having made a successful bid (subject to European Commission approval)
for the Italian state tobacco company Ente Tabacchi Italiani S.p.A. and having
bought a 67.8% holding in the Serbian tobacco company Duvanska Industrija
Vranje.
In addition, in October 2003, BAT announced an agreement to combine its US
subsidiary Brown & Williamson"s domestic business with RJ Reynolds (RJR) to form
Reynolds American, a new holding company to be 58% owned by RJR shareholders and
42% owned by BAT. BAT also announced that it would sell its US smoking tobacco
and cigar business to Reynolds American for US$400 million in cash. Reynolds
American will have a combined share of some one third of the US domestic market.
7. Other investments
The most important changes since 1 April 2003 were as follows:
Repurchase of Remgro shares
During the period under review, Remgro"s wholly-owned subsidiary company, Remgro
Investments (Proprietary) Limited, acquired a further 4 826 474 ordinary Remgro
shares (1.0% of the ordinary shares) at an average price of R61.22 for a total
amount of R295.5 million. Together with those acquired in the previous financial
year, a total of 16 442 602 (3.4%) shares are held in treasury.
Total South Africa (Proprietary) Limited
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. On 30
September 2003 Remgro"s interest in Impala was 5.0%.
Sage Group Limited (Sage)
In 2003 Sage raised additional capital in the amount of R350 million by way of
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.
In terms of the rights issue and underwriting agreement, Remgro subscribed for
54 177 337 Sage shares for a total consideration of R89.4 million. On 30
September 2003 Remgro"s effective interest in Sage was 21.6%.
Rainbow Chicken Limited (Rainbow)
During August 2003 Remgro acquired a further 10.0% in Rainbow at a cost of
R119.3 million. Remgro"s interest in Rainbow is now 64.5%.
Dividends
Notice is hereby given that an interim dividend of 101 cents (2002: 88 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 2003.
Dates of importance
Last day to trade in order to participate in
the interim dividend Friday, 9 January 2004
Trading on or after this date will be ex the
interim dividend Monday, 12 January 2004
Record date Friday, 16 January 2004
Payment date Monday, 19 January 2004
Shareholders may not dematerialise or rematerialise their holdings of ordinary
shares between Monday, 12 January 2004, and Friday, 16 January 2004, both days
inclusive.
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.
Signed on behalf of the Board of Directors.
Johann Rupert Thys Visser
Chairman Chief Executive Officer/Deputy Chairman
Stellenbosch
24 November 2003
Directorate
Non-executive directors
Johann Rupert (Chairman), P E Beyers, G D de Jager, J W Dreyer, P K Harris, E de
la H Hertzog, E Molobi, J F Mouton, F Robertson, P G Steyn
Executive directors
M H Visser (Chief Executive Officer/ Deputy Chairman), W E Buhrmann, D M Falck,
J A Preller (Mrs), T van Wyk
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 office
Computershare 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)
Corporate Finance
Website
www.remgro.com
Date: 24/11/2003 10:58:15 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
