| Fri 26 Nov 2004, 17:28 | | Interim report for the six months ended 30 Septem |
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Remgro Limited - Interim report for the six months ended 30 September 2004
Remgro Limited
Registration number 1968/006415/06
ISIN ZAE000026480
JSE Share Code REM
Interim report for the six months ended 30 September 2004
Increase in headline earnings per share: +3.0%
Increase in intrinsic value per share during the six months: +6.5%
Increase in interim dividend per share: +14.9%
Abridged consolidated balance sheet
Unaudited Audited
30 September 31 March
2004 2003 2004
R`m R`m R`m
Assets
Non-current assets
Property, plant and equipment 3 529 3 287 3 408
Biological agricultural assets 85 83 85
Investment properties 22 22 22
Goodwill and trade marks 3 246 3 323 3 246
Investments - Associated companies 22 107 18 558 19 545
- Other 1 884 2 061 1 861
Loans 50 49 49
Deferred taxation 108 76 105
31 031 27 459 28 321
Current assets 4 987 4 655 5 208
Cash and cash equivalents 2 469 1 300 3 446
Other current assets 2 518 3 355 1 762
Total assets 36 018 32 114 33 529
Equity and liabilities
Capital and reserves
Interest of own members 31 791 28 427 29 766
Minority interest 1 848 1 516 1 700
Total shareholders` equity 33 639 29 943 31 466
Non-current liabilities 702 695 713
Retirement benefits 128 108 119
Long-term interest-bearing loans 177 186 172
Deferred taxation 397 401 422
Current liabilities 1 677 1 476 1 350
Short-term interest-bearing loans 139 86 105
Other current liabilities 1 538 1 390 1 245
Total equity and liabilities 36 018 32 114 33 529
Net asset value per share (Rand)
(attributable to own members)
- At book value R64.06 R56.72 R59.38
- At intrinsic value R107.77 R81.57 R101.23
Abridged consolidated income statement
Unaudited Audited
Six months ended Year ended
30 September 31 March
2004 2003 2004
R`m R`m R`m
Revenue (Note 5) 6 511 6 330 11 902
Consolidated profit before taking into
account the following 834 720 1 621
Depreciation (129) (118) (240)
Finance costs (23) (22) (39)
Impairment and amortisation of goodwill (2) (92) (186)
Net impairment of investments and assets 8 1 4
Exceptional items - (1) 50
Consolidated profit before tax 688 488 1 210
Taxation (188) (177) (415)
Consolidated profit after tax 500 311 795
Share of after-tax profit of associated
companies 3 301 1 623 3 177
- Profit from operations 2 180 2 185 4 164
- Impairment and amortisation of goodwill (201) (155) (383)
- Exceptional items (Note 3) 1 322 (407) (604)
Group profit after tax 3 801 1 934 3 972
Minority interest (179) (150) (335)
Net profit 3 622 1 784 3 637
Reconciliation of headline earnings:
Basic earnings - Net profit 3 622 1 784 3 637
Plus/(minus) - portion attributable to
own members:
- Impairment and amortisation of goodwill 202 247 568
- Impairment of investments and assets (8) (1) (1)
- Exceptional items (1 339) 384 523
- Net loss/(surplus), after taxation,
- on disposal of property, plant and
- equipment (15) 1 (8)
Headline earnings 2 462 2 415 4 719
Segmental analysis - Headline earnings *
Tobacco interests 1 040 1 169 2 100
Financial services 788 676 1 394
Industrial interests 538 438 1 027
Mining interests 81 122 172
Corporate finance and other interests 15 10 26
2 462 2 415 4 719
* Refer to the section `Other adjustments - Restatement of segmental
analysis`
Abridged consolidated cash flow statement
Unaudited Audited
Six months ended
30 September
Year ended
31 March
2004 2003 2004
R`m R`m R`m
Cash generated from operations 458 506 1 678
Taxation paid (336) (297) (363)
Dividends received * 1 412 147 1 718
Cash available from operating activities 1 534 356 3 033
Dividends paid (2 023) (873) (1 438)
Net cash flow from operating activities (489) (517) 1 595
Investing activities (556) (528) (528)
Financing activities 14 32 62
Net increase/(decrease) in cash and
cash equivalents (1 031) (1 013) 1 129
Cash and cash equivalents at the
beginning of the period 3 393 2 264 2 264
Cash and cash equivalents at the
end of the period 2 362 1 251 3 393
Cash and cash equivalents - per
balance sheet 2 469 1 300 3 446
Bank overdraft (107) (49) (53)
* The dividend from R&R Holdings amounting to R1 087 million (2003: R1 014
million) was received in September 2004 (2003: October 2003).
Abridged consolidated statement of changes in equity
Unaudited Audited
Six months ended
30 September
Year ended
31 March
2004 2003 2004
R`m R`m R`m
Balance at 1 April 29 766 27 809 27 809
Prior year adjustments - (366) (366)
Adjusted balance at 1 April 29 766 27 443 27 443
Net cumulative opening balance
adjustment (AC 133) - 36 36
Net fair value adjustments for the
period (AC 133) 10 1 375 1 204
Net profit 3 622 1 784 3 637
Dividends paid (1 934) (810) (1 316)
Exchange rate adjustments 90 (718) (694)
Change in interest in subsidiary
companies, associated companies
and joint ventures (10) (9) (10)
Change in reserves of associated
companies and other reserves 638 (367) (236)
Purchase of shares by wholly-owned
subsidiary (treasury shares) (415) (295) (295)
Net shares purchased by The Remgro
Share Trust 18 (25) (17)
Long-term share incentive scheme reserve 6 13 14
Interest of own members 31 791 28 427 29 766
Earnings and dividends per share
30 September 31 March
2004 2003 2004
Cents Cents Cents
Headline earnings 492.0 477.8 937.6
- Diluted 490.6 476.9 935.6
Basic earnings 723.9 353.0 722.7
- Diluted 721.8 352.3 721.1
Dividends
Ordinary 116.00 101.00 285.00
- Interim 116.00 101.00 101.00
- Final 184.00
Special 200.00
Additional information
30 September 31 March
2004 2003 2004
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
Ordinary shares repurchased and
held in treasury (21 772 456) (16 442 602) (16 442 602)
Ordinary shares held by The
Remgro Share Trust and accounted
for as treasury shares (3 978 774) (4 348 000) (4 236 087)
496 248 772 501 209 400 501 321 313
Weighted number of shares 500 377 065 505 406 357 503 280 054
In determining the headline and
basic earnings per share the
weighted number of shares was
taken into account.
30 September 31 March
2004 2003 2004
R`m R`m R`m
Listed investments
Associated
- Book value 8 680 7 783 8 104
- Market value 17 795 11 057 14 413
Other
- Book value 1 808 1 995 1 795
- Market value 1 808 1 995 1 795
Unlisted investments
Associated
- Book value 13 427 10 775 11 441
- Directors` valuation 27 605 22 380 27 903
Other
- Book value 76 66 66
- Directors` valuation 76 66 66
Additions to and replacement of
property, plant and equipment 229 257 470
Capital commitments 603 454 490
(Including amounts authorised,
but not yet contracted for)
Dividends received
Dividends included in
consolidated profit 59 9 28
Dividends from associated
companies set off against
investments 1 393 1 627 2 156
Interest received
From unlisted investments and
deposits 157 194 334
(Included in consolidated
profit)
Exceptional items
Exceptional items of subsidiary
companies:
Net capital surplus on the
sale of investments and
businesses - - 50
Other - (1) -
Total before taxation - per
income statement - (1) 50
Taxation - (2) (3)
Total after taxation - (3) 47
Share of exceptional items of
associated companies 1 322 (407) (604)
Grand total - Attributable to
own members (Note 3) 1 322 (410) (557)
Notes
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 1973 as amended and the Listings
Requirements of the JSE Securities Exchange South Africa (JSE), and incorporates
policies which are consistent with those of the previous financial periods, with
the exception of the implementation of the South African Statement of Generally
Accepted Accounting Practice, AC 140 (IFRS 3): Business Combinations.
Attention is drawn to the fact that the accounting policies of associated
companies do not in all circumstances correspond with that of the Company. This
is the result of different accounting standards being applied in other
countries, e.g. in the United Kingdom (relating to British American Tobacco Plc)
and year-ends of local companies that differ, resulting in the later
implementation of new accounting standards. No adjustments are made for such
differences in accounting policies where it is not practicable.
2. Prior year adjustments
Change in accounting policy
AC 140 (IFRS 3)
With effect from 1 April 2004 Remgro adopted AC 140: Business Combinations. In
terms of the provisions of this accounting statement goodwill arising from a
business combination for which the agreement date is on or after 31 March 2004,
will not be amortised, but be carried at cost less accumulated impairment
losses.
As from 1 April 2004 all goodwill that already existed on this date will also be
treated in accordance with AC 140.
Due to the fact that the comparative figures are not restated under the
transitional provisions of AC 140, certain items are not directly comparable on
a line-for-line basis with that of prior periods.
Other adjustments
Restatement of comparative figures in respect of deferred taxation
As previously reported, Rainbow Chicken Limited (Rainbow) restated its results
for the year ended 31 March 2003, in order to comply with the accounting
statement dealing with deferred taxation. Rainbow`s results for the six months
ended 30 September 2003 were restated accordingly. This had no effect on
Remgro`s results for the comparative period. The comparative balance sheet on 30
September 2003 has been restated as set out below.
Restatement of comparative figures in respect of agricultural activities
Transvaal Sugar Limited restated its comparative figures for the six months
ended 30 September 2003, in order to comply with the accounting statement
dealing with agricultural activities. This had no effect on Remgro`s results for
the comparative period. The comparative balance sheet on 30 September 2003 has
been restated as set out below.
Consolidation of The Remgro Share Trust (the `trust`)
In terms of the rules of the JSE, Remgro consolidated the trust on 31 March
2004. Comparative figures for the six months ended 30 September 2003 have been
restated accordingly and the 3 978 774 (30 September 2003: 4 348 000) ordinary
shares held in the trust for participants are accounted for as if they were
treasury shares and are also deducted from the issued number of shares in
determining the weighted average number of shares. The cost price of the shares
has been deducted from equity.
Restatement of comparative figures as a result of above-
mentioned prior year adjustments: Six months ended
30 September
2003
R`m
Income statement
Headline earnings as previously reported 2 422
Consolidation of The Remgro Share Trust (7)
Restated headline earnings 2 415
Weighted number of shares in issue as previously
reported 509 542 743
Restated weighted number of shares in issue 505 406 357
Headline earnings per share as previously reported
(cents) 475.3
Restated headline earnings per share (cents) 477.8
R`m
Balance sheet
Increase in reserves 53
Increase in treasury shares 302
Decrease in minority liabilities (45)
Decrease in loans (177)
Increase in deferred tax assets 4
Increase in current assets 4
Increase in deferred tax liability 121
Increase in current liabilities 4
Restatement of segmental analysis
Remgro changed its segmental analysis. Since 1 April 2004 Distell Group Limited
(Distell) and Medi-Clinic Corporation Limited (Medi-Clinic) are classified as
`Industrial interests`, while previously they were accounted for as `Trade mark
interests` and `Corporate finance and other interests` respectively. Since this
date Caxton and CTP Publishers and Printers Limited, which was previously
accounted for under `Corporate finance and other interests`, is also included in
`Industrial interests`.
After the restatement, R&R Holdings SA, Luxembourg (R&R), which represents
Remgro`s tobacco interests is the only remaining interest under `Trade mark
interests`. Therefore, the description `Trade mark interests` has thus being
changed to `Tobacco interests`. The comparative figures have been changed
accordingly.
3. Results
- Headline earnings
While total headline earnings increased by 1.9% from R2 415 million to R2 462
million, headline earnings per share increased by 3.0% to 492.0 cents, due to
the favourable impact of the share repurchase programme.
The contribution of the tobacco interests, which represented 42.2% (2003: 48.4%)
of headline earnings in the period under review, declined by 11.0% due mainly to
the non-recurring call warrant premium accounted for in the comparative period.
BAT`s attributable profit, excluding goodwill amortisation and exceptional
items, increased by 2.4% in sterling before adjustments for movements in the
present value of preference shares and dividends. In May this year, option
holders exercised the call warrants issued by R&R in January 2003 in respect of
the BAT preference shares. These preference shares were converted into ordinary
BAT shares and R&R`s share of the ordinary share capital of BAT decreased
accordingly. This led to a decline in the weighted percentage interest equity
accounted by R&R from 28.8% to 28.5% despite BAT`s share buy-back programme.
Due to a stronger but more stable rand, the unfavourable currency impact on
translation of R&R`s contribution to headline earnings declined from R338
million in 2003 to R42 million as set out in the table below.
Six months to September 2004 2003
Average exchange rate (GBP/R) 11.7460 12.2233
Closing exchange rate (GBP/R) 11.7170 11.5413
R&R`s contribution (GBP`m) 89 96
R&R`s contribution (R`m) 1 040 1 169
Unfavourable currency impact for the period (R`m) (42) (338)
FirstRand and RMBH`s combined contribution to Remgro`s headline earnings
amounted to R556.8 million (2003: R478.4 million), while Absa Group Limited also
reported solid earnings growth. Absa`s contribution to headline earnings was
R231.3 million (2003: R199.2 million).
The contribution of the industrial interests increased by 22.8%, mainly as a
result of improved performances by Rainbow, Distell and Total South Africa. This
was offset by lower results from Transvaal Sugar and Unilever Bestfoods
Robertsons which contributed only R12.4 million (2003: R46.7 million) and R69.8
million (2003: R93.7 million) respectively. Medi-Clinic again reported solid
results and its contribution to headline earnings increased by 11.9% to R125.2
million (2003: R111.9 million).
The total contribution of the mining interests decreased by 33.8% to R80.8
million. This was the result of lower income from Trans Hex as well as the fact
that Remgro`s interest in Impala, unbundled during June 2003 by Gencor Limited
(Gencor), has not been equity accounted during the period under review, while
Gencor, and therefore Impala, was equity accounted until 30 June 2003. Dividends
from the latter, amounting to R53.4 million have been included in income during
the period under review (2003: RNil).
Analysis of comparable headline earnings (cents per share)
- Excluding contribution by R&R
Six months to September 2004 2003
Headline earnings as reported 492.0 477.8
Elimination of R&R`s contribution (207.8) (231.2)
Comparable headline earnings after elimination of the
above (+15.2%) 284.2 246.6
- Basic earnings
Basic earnings per share, after exceptional items and goodwill amortisation,
increased by 105.1%, mainly due to Remgro`s share in the favourable exceptional
items of associated companies. The latter mainly comprises the profit realised
by BAT following the merger of Brown & Williamson`s US businesses with R.J.
Reynolds to form a new holding company, Reynolds American Inc, and from the sale
of Lane Limited to Reynolds American.
4. Intrinsic value
Remgro`s intrinsic value per share has increased by 6.5% from R101.23 at 31
March 2004 to R107.77 at 30 September 2004.
30 September 31 March
R million 2004 2004
Tobacco interests 22 656 23 517
Financial services 15 580 12 185
Industrial interests 11 212 10 181
Mining interests 2 408 2 548
Other interests 218 170
Cash at the centre 1 407 2 150
53 481 50 751
Issued shares after deduction of treasury shares
(million) 496.2 501.3
Intrinsic value per share (R) 107.77 101.23
- before taking into account any possible capital
gains tax
Further 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
2004 2003 2004
R`m R`m R`m
Revenue, excluding dividends and interest 4 902 4 500 9 384
Dividends and interest 1 609 1 830 2 518
Total revenue 6 511 6 330 11 902
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).
The results for the period reflect R&R`s 29.6% interest of BAT`s results for the
period up to the conversion of the BAT preference shares into ordinary shares at
the beginning of June 2004 at which time its interest was diluted to 27.9%.
Subsequent share buy-backs by BAT resulted in R&R`s percentage holding rising to
28.1 by the period end. This compares to R&R`s 28.8% share of BAT`s results for
the six months to 30 September 2003.
As explained in the 2003 Annual Report, those BAT preference shares were treated
as debt instruments since January 2003 and were no longer equity accounted. This
also resulted in those debt instruments being revalued to fair value. The
movement in the present value of the preference shares was therefore recognised
and accounted for accordingly. The deferred net warrant premium was included in
equity accounted income during the six-month period to 30 September 2003.
R&R`s share of BAT`s earnings for the six months to 30 September 2004 is based
on BAT`s results for the nine-month period to 30 September 2004, less the
results for the quarter to 31 March 2004.
R&R`s contribution to Remgro`s headline earnings is as follows:
Six months to
September
2004 2003
GBP`m GBP`m
Attributable profit of BAT before goodwill and exceptional
items 848 828
Movement in present value of BAT preference shares and
dividends (8) (20)
Adjusted attributable profit of BAT for the six months
ended 30 September 840 808
R&R`s share of the adjusted attributable profit of BAT:
- 29.6% for 1 April 2004 to 31 May 2004 76 -
- 28.1% for 1 June 2004 to 30 September 2004 164 -
- 28.8% for 1 April 2003 to 30 September 2003 - 233
Movement in present value of BAT preference shares and
dividends 8 20
R&R`s other income 18 4
266 257
Net warrant premium - 30
R&R`s adjusted headline earnings for the six months ended
30 September 266 287
Remgro`s 33.33% share thereof 89 96
R`m R`m
Translated at an average GBP/R rate of 11.7460 (2003:
12.2233) 1 040 1 169
BAT has a 31 December financial year-end. The following commentary is based on
the latest reported BAT results for the nine months to 30 September 2004.
Operating profit for the nine months before charging goodwill amortisation and
exceptional items was 1% higher at GBP2 138 million, with results being
adversely affected by the negative impact of exchange rates. At comparable rates
of exchange, operating profit would have risen 7%, benefiting from the
acquisition of Ente Tabacchi Italiani S.p.A. and good performances in all
regions except America-Pacific.
BAT`s group sales volumes grew by 6% to 618 billion, driven largely by
acquisitions and the impact of the Reynolds American transaction completed on 30
July 2004. The four global drive brands Kent, Dunhill, Lucky Strike and Pall
Mall improved in the third quarter, up 3%, and for the nine months grew
slightly, after being somewhat lower than last year in the first six months.
Further information will be included in the interim report that will be mailed
to shareholders and will then be available on the website.
7. Other investments
The most important changes since 1 April 2004 were as follows:
Repurchase of Remgro shares
During the period under review, a wholly-owned subsidiary company of Remgro
acquired a further 5 329 854 ordinary Remgro shares (1.1% of the ordinary
shares) at an average price of R77.89 for a total amount of R415.1 million.
Together with those shares acquired in previous financial years, a total of 21
772 456 (4.5%) are held as treasury shares.
During the period under review The Remgro Share Trust bought 8 000 (2003: 398
000) ordinary Remgro shares at an average price of R82.65 (2003: R63.66) for a
total amount of R0.6 million (2003: R25.3 million). During the period under
review 265 313 shares were delivered to participants against payment thereof.
Since 30 September 2004:
Henkel South Africa (Proprietary) Limited (Henkel)
During October 2004 Remgro sold its 50% interest in Henkel for R80 million. The
capital surplus will be accounted for as an exceptional item.
DIVIDENDS
Notice is hereby given that an interim dividend of 116 cents (2003: 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
30 September 2004.
Dates of importance:
Last day to trade in order to participate in the
interim dividend Friday, 7 January 2005
Trading on or after this date will be ex the
interim dividend Monday, 10 January 2005
Record date Friday, 14 January 2005
Payment date Monday, 17 January 2005
Shareholders may not dematerialise or rematerialise their holdings of ordinary
shares between Monday, 10 January 2005, and Friday, 14 January 2005, 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
26 November 2004
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*, D Prins*, F Robertson*
(*Independent)
Executive directors
M H Visser (Chief Executive Officer/Deputy Chairman),
W E Buhrmann, D M Falck, J A Preller (Mrs), T van Wyk
Retirement
Mr P G Steyn retired as director on 25 August 2004.
CORPORATE INFORMATION
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, 101 Barclay Street, New York NY 10286
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 2004 (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)
Corporate Finance
Website
www.remgro.com
