| Thu 24 Nov 2005, 17:01 | | Remgro - Interim report for the six months ended 3 |
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Remgro - Interim report for the six months ended 30 September 2005 (unaudited)
Remgro Limited
Registration number 1968/006415/06
ISIN ZAE000026480
Share Code REM
Interim report for the six months ended 30 September 2005 (unaudited)
* Increase in headline earnings per share +17.9%
* Increase in intrinsic value per share during the six months +13.7%
* Increase in interim dividend per share +14.7%
Abridged consolidated balance sheet
30 September 31 March
2005 2004 2005
R"m R"m R"m
Assets
Non-current assets
Property, plant and equipment 4 203 3 654 3 995
Biological agricultural assets 94 85 94
Investment properties 31 29 31
Goodwill and trade marks 386 54 386
Investments - Associated companies 26 077 25 111 28 243
- Other 2 622 1 884 1 948
Loans 151 50 157
Deferred taxation 142 95 154
33 706 30 962 35 008
Current assets 8 043 4 829 4 773
Cash and cash equivalents 5 231 2 469 2 372
Other current assets 2 812 2 360 2 401
Total assets 41 749 35 791 39 781
Equity and liabilities
Issued capital 8 8 8
Reserves 38 965 33 320 37 419
Treasury shares (3 112) (1 690) (2 552)
Shareholders" equity 35 861 31 638 34 875
Minority interest 2 161 1 813 2 011
Total shareholders" equity 38 022 33 451 36 886
Non-current liabilities 980 688 905
Retirement benefits 240 129 232
Long-term loans 185 216 200
Deferred taxation 555 343 473
Current liabilities 2 747 1 652 1 990
Short-term interest-bearing loans 331 159 175
Other current liabilities 2 416 1 493 1 815
Total equity and liabilities 41 749 35 791 39 781
Net asset value per share (Rand)
(attributable to equity holders)
- At book value R74.41 R63.75 R71.60
- At intrinsic value R136.36 R107.77 R119.97
Abridged consolidated cash flow statement
Six months ended Year
ended
30 September 31 March
2005 2004 2005
R"m R"m R"m
Cash generated from operations 700 458 1 764
Taxation paid (267) (336) (546)
Dividends received 1 536 1 412 2 453
Cash available from operating
activities 1 969 1 534 3 671
Dividends paid (3 975) (2 023) (2 642)
Net cash flow from operating
activities (2 006) (489) 1 029
Investing activities 4 724 (556) (2 184)
Financing activities (31) 14 9
Net increase/(decrease) in cash and
cash equivalents 2 687 (1 031) (1 146)
Cash and cash equivalents at the
beginning of the period 2 247 3 393 3 393
Cash and cash equivalents at the end
of the period 4 934 2 362 2 247
Cash and cash equivalents - per balance
sheet 5 231 2 469 2 372
Bank overdraft (297) (107) (125)
Abridged consolidated income statement
Six months ended Year
ended
30 September 31 March
2005 2004 2005
R"m R"m R"m
Revenue (Note 5) 6 956 6 589 12 823
Consolidated profit before taking into
account the following 1 139 839 1 702
Depreciation (148) (126) (262)
Finance costs (17) (23) (56)
Impairment of goodwill - (2) (3)
Net reversal of impairment of investments
and assets 4 8 25
Exceptional items (see Additional
information) 3 043 - 2 194
Consolidated profit before tax 4 021 696 3 600
Taxation (577) (192) (417)
Consolidated profit after tax 3 444 504 3 183
Share of after-tax profit of associated
companies 2 623 3 612 5 783
- Profit before taking into account
the following 2 303 2 173 4 525
- Impairment of goodwill - (15) (34)
- Net impairment of investments and
assets (52) - (31)
- Exceptional items (see Additional
information) 372 1 454 1 323
Net profit for the year 6 067 4 116 8 966
Attributable to:
Equity holders 5 835 3 936 8 559
Minority interests 232 180 407
6 067 4 116 8 966
Reconciliation of headline earnings:
Basic earnings - Attributable net profit 5 835 3 936 8 559
Plus/(minus) - portion attributable to
equity holders:
- Impairment of goodwill - 16 35
- Net impairment of investments and
assets 49 (9) 24
- Exceptional items (3 078) (1 470) (3 543)
- Net loss/(surplus), after
taxation, on disposal of property,
plant and equipment 3 (14) (69)
Headline earnings 2 809 2 459 5 006
Segmental analysis - Headline earnings
Tobacco interests 1 264 1 032 2 063
Financial services 903 789 1 691
Industrial interests 535 543 1 122
Mining interests 77 82 102
Corporate finance and other interests 30 13 28
2 809 2 459 5 006
Abridged consolidated statement of changes in equity
Six months ended Year
ended
30 September 31 March
2005 2004 2005
R"m R"m R"m
Balance at 1 April 36 886 30 968 30 968
Net fair value adjustments for the period 584 10 46
Net profit 6 067 4 116 8 966
Dividends paid (3 975) (2 025) (2 645)
Capital invested by minorities 5 11 21
Exchange rate adjustments (682) 84 250
Change in reserves of associated
companies and other movements (310) 672 528
Purchase of shares by wholly-owned
subsidiary (treasury shares) (563) (415) (1 235)
Net shares purchased by The Remgro
Share Trust* 2 18 (24)
Long-term share incentive scheme
reserve 8 12 11
Total shareholders" equity 38 022 33 451 36 886
* Also accounted for as treasury shares
Earnings and dividends per share
Six months ended Year
ended
30 September 31 March
2005 2004 2005
Cents Cents Cents
Headline earnings 579.4 491.4 1 006.7
- Diluted 566.9 475.3 978.6
Basic earnings 1 203.5 786.6 1 721.1
- Diluted 1 188.9 760.5 1 683.9
Dividends
Ordinary 133.00 116.00 314.00
- Interim 133.00 116.00 116.00
- Final 198.00
Special 600.00
Additional information
30 September 31 March
2005 2004 2005
Number of shares in issue
- Ordinary shares of 1 cent
each 486 493 650 486 493 650 486 493 650
- Unlisted B ordinary shares
Total number of shares in
issue 522 000 002 522 000 002 522 000 002
Ordinary shares repurchased
and held in treasury (35 709 404) (21 772 456) (30 521 841)
Ordinary shares held by The
Remgro Share Trust and
accounted for as treasury
shares (4 347 476) (3 978 774) (4 381 159)
481 943 122 496 248 772 487 097 002
Weighted number of shares 484 841 736 500 377 065 497 292 403
In determining the headline and basic earnings per share the weighted
number of shares was taken into account.
30 September 31 March
2005 2004 2005
R"m R"m R"m
Listed investments
Associated
- Book value 10 061 11 576 11 988
- Market value 17 653 17 795 19 893
Other
- Book value 2 529 1 808 1 866
- Market value 2 529 1 808 1 866
Unlisted investments
Associated
- Book value 16 016 13 535 16 255
- Directors" valuation 36 884 27 605 31 301
Other
- Book value 93 76 82
- Directors" valuation 93 76 82
Additions to and replacement
of property, plant and
equipment 346 229 472
Capital commitments 750 603 857
(Including amounts
authorised, but not yet
contracted for)
Dividends received
Dividends included in
consolidated profit 192 59 81
Dividends from associated
companies set off against
investments 1 215 1 393 2 501
Interest received
From unlisted investments and
deposits 149 157 273
(Included in consolidated
profit)
Exceptional items
Exceptional items of
subsidiary companies:
Capital gain on redemption of
debentures by R&R - - 2 100
Net capital gain on the sale
of investments and
businesses 3 043 - 45
Other - - 49
Total before taxation - per
income statement
3 043 - 2 194
Taxation (337) - (8)
Total after taxation 2 706 - 2 186
Share of exceptional items of
associated companies 372 1 454 1 323
Grand total 3 078 1 454 3 509
Attributable to minorities - - (20)
Attributable to equity
holders 3 078 1 454 3 489
Comments
1. Accounting policies
The interim report is prepared on the historical cost basis in accordance with
the recognition and measurement principles of International Financial Reporting
Standards (IFRS), IAS 34: Interim Financial Reporting, the requirements of the
South African Companies Ac, Act 61 of 1973, as amended, and the Listings
Requirements of the JSE Limited (JSE). It incorporates policies which are
consistent with those of previous financial periods, with the exception of the
implementation of IFRS 5: Non-current assets held for sale and discontinued
operations.
2. Prior year adjustments
International Financial Reporting Standards
With effect from 1 April 2005, Remgro is required to prepare its consolidated
financial statements in accordance with IFRS. Consequently, the first published
IFRS results are the interim results for the six months ended 30 September 2005.
Remgro"s first complete set of financial statements under IFRS will be for the
year ending 31 March 2006. As comparative information is also reported, the date
for the transition to IFRS is effectively 1 April 2004. IFRS 1: First-time
adoption of IFRS has been applied and the results for the comparative periods
have been restated accordingly. The disclosures required by IFRS 1 reflecting
the reconciliation from South African Statements of Generally Accepted
Accounting Practice (SA GAAP) to IFRS are set out below. The detailed IFRS
Transition Report will be included in the interim report that will be mailed to
shareholders and will then be available on the website.
Certain associated companies were not yet in a position to provide Remgro with
the necessary IFRS information in order for Remgro to restate its financial
results for the comparative periods. This relates to associated companies with
later year-ends than Remgro, i.e. FirstRand Limited and RMB Holdings Limited
(both June year-ends) and Nampak Limited (September year-end). Due to the fact
that those companies have later year-ends than Remgro, it results in their later
implementation of IFRS.
The JSE has granted Remgro dispensation from complying with IFRS in respect of
listed associated companies that have not yet published their restated IFRS
results prior to Remgro releasing its interim results. The results of those
companies included in this interim report are based on their results prepared in
terms of South African Generally Accepted Accounting Practice.
As soon as those companies have released their restated IFRS results, Remgro
will assess the impact thereof and release an updated IFRS Transition Report as
well as restated interim results for the period to 30 September 2005 to its
shareholders.
Implementation of IFRS 5
With effect from 1 April 2005, Remgro adopted IFRS 5: Non-current assets held
for sale and discontinued operations. In terms of the provisions of this
accounting statement assets classified as "held for sale" or "discontinued
operations" are carried at the lower of fair value less cost to sell, or
carrying value. Any disposals are recognised in profit and loss.
As previously reported Remgro sold its entire interest in Absa Group Limited
(Absa) and Sage Group Limited (Sage) during the period under review.
Consequently these investments were reclassified as "Assets held for sale" with
effect from 1 April 2005 while previously they were reported under "Investments
- Associated companies". During the period under review only dividend income
from these companies were accounted for.
Refer to the Absa and Sage paragraphs under "Other investments" for full detail
regarding these transactions.
Due to the fact that the comparative figures are not restated under the
transitional provisions of IFRS 5, certain items are not directly comparable on
a line-for-line basis with those of prior periods.
Other adjustments
Restatement of comparative figures in respect of inventories
Transvaal Sugar Limited restated its comparative figures for the six months
ended 30 September 2004 in respect of inventories. This has the effect that
carry-over sugar inventory, which was previously recognised as revenue, is now
accounted for as inventory. The effect on Remgro"s 2004 interim results was an
increase in headline earnings of R4 million. The comparative balance sheet has
been restated accordingly.
Restatement of comparative figures in respect of associated companies
FirstRand and RMBH restated their results for the year ended 30 June 2004 in
order to comply with AC 501: Accounting for secondary taxation on companies
(STC). The effect of this restatement on both Remgro"s 2004 interim results as
well as its results for the year ended 31 March 2005 was an increase in headline
earnings of R5 million. The comparative balance sheets have been restated
accordingly.
Refer to the IFRS Transition Report where these adjustments are incorporated.
3. Results
Headline earnings
Headline earnings per share increased by 17.9% from 491.4 cents in 2004 to 579.4
cents. This increase was favourably impacted by the share repurchase programme,
as headline earnings in rands increased by 14.2% from R2 459 million to R2 809
million.
The contribution of the tobacco interests, which represented 45.0% (2004: 42.0%)
of headline earnings in the period under review, increased by 22.5%. This
increase is mainly the result of Remgro"s higher indirect interest in BAT
following the investment in 19 281 686 participation securities issued by R&R
Holdings S.A., Luxembourg (R&R) during February 2005, effectively increasing
Remgro"s interest in BAT from 9.4% (as at 30 September 2004) to 10.2% (as at 30
September 2005), as well as strong results reported by BAT.
The contribution of the financial services interests to headline earnings
increased by 14.4% from R789 million in 2004 to R903 million. With effect from 1
April 2005, Absa was reclassified as an "Asset held for sale" and consequently
no longer equity accounted. Dividends amounting to R123 million have been
included in income during the period under review while Absa"s contribution to
headline earnings in 2004 was R228 million. The combined contribution of
FirstRand and RMBH to Remgro"s headline earnings amounted to R780 million (2004:
R561 million), an increase of 39.0%.
The contribution of the industrial interests decreased by 1.5%, mainly due to a
headline loss reported by Dorbyl for the six months under review. The latter was
mainly the result of STC payable by Dorbyl on the special dividend paid during
the period. Rainbow reported solid earnings growth and its contribution to
headline earnings increased to R95 million (2004: R52 million). Distell and
Medi-Clinic also continued to report improved results and their contribution to
headline earnings was R57 million and R143 million respectively (2004: R42
million and R125 million).
The total contribution of the mining interests decreased by 6.1% to R77 million.
This was the result of lower income from Trans Hex that contributed R16 million
to headline earnings (2004: R28 million).
Basic earnings
Basic earnings per share increased by 53.0%, mainly as a result of the capital
gains arising on the realisation of investments (see 7 below).
4. Intrinsic value
Remgro"s intrinsic value per share increased by 13.7% from R119.97 at 31 March
2005 to R136.36 at 30 September 2005.
30 September 31 March
R million 2005 2005
Tobacco interests 30 919 26 276
Financial services 15 338 17 590
Industrial interests 13 852 11 979
Mining interests 2 938 2 286
Other interests (134) 355
Cash at the centre 4 099 1 094
67 012 59 580
Potential CGT liability (1 295) (1 141)
Intrinsic net asset value after tax 65 717 58 439
Issued shares after deduction of shares
repurchased and the shares in
The Remgro Share Trust (million) 481.9 487.1
Intrinsic value per share (R) 136.36 119.97
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
2005 2004 2005
R"m R"m R"m
Operating revenue 5 400 4 980 9 969
Dividends and interest 1 556 1 609 2 854
Total revenue 6 956 6 589 12 823
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 its one-third holding of the ordinary
shares and debentures, as well as all the participation securities, issued by
R&R. This gives Remgro an effective interest of 10.2% in BAT at 30 September
2005. The other two-thirds of the ordinary share capital and debentures of R&R
are held by Compagnie Financiere Richemont SA (Richemont).
R&R"s results for the period reflect its 28.3% interest of BAT"s results for the
period up to 30 June 2005. Subsequent share buy-backs by BAT resulted in R&R"s
percentage holding rising to 28.7% by the period end. This compares to R&R"s
29.6% share of BAT"s results for the two months to the beginning of June 2004,
and 27.9% for the four months to 30 September 2004.
Remgro"s share of R&R"s headline earnings consists of 35.46% (2004: 331/3%) of
R&R"s share of the adjusted attributable profit of BAT and 331/3% (2004: 331/3%)
of R&R"s non-BAT income, as follows.
Six months
to September
2005 2004
GBP"m GBP"m
Attributable profit as reported by BAT:
- for the nine months ended 30 September 1 381 2 526
- less: for the quarter ended 31 March (428) (344)
Adjustments:
- to eliminate non-recurring items 58 (1 339)
1 011 843
- movement in present value of BAT preference
shares and dividends - (8)
Adjusted attributable profit of BAT for the six
months ended 30 September 1 011 835
R&R"s share of the adjusted attributable profit
of BAT 290 238
Movement in present value of BAT preference
shares and dividends - 8
R&R"s other income 15 17
R&R"s adjusted headline earnings for the six
months ended 30 September 305 263
Remgro"s share thereof 108 88
R"m R"m
Translated at an average GBP/R rate of 11.7175
(2004: 11.7517) 1 264 1 032
BAT has a 31 December financial year-end. The following commentary is condensed
from the latest reported BAT results for the nine months to 30 September 2005.
Operating profit was 43% lower at GBP1 091 million, mainly due to the impact in
the comparative period of a significant GBP1 392 million gain on the merger of
BAT"s North American operations with those of R.J. Reynolds in July 2004 to form
Reynolds American. However, profit from operations would have been 9% higher, or
6% higher at constant rates of exchange, if non-recurring items and the changes
resulting from the merger of BAT"s US businesses with R.J. Reynolds and the sale
of Etinera, together with the resulting beneficial changes in terms of trade in
Italy, were excluded. This `like for like" information provides a better
understanding of the subsidiaries" trading results.
On a reported basis, BAT"s volumes from subsidiaries were affected by the
transactions noted above, resulting in a 2% decrease to 505 billion sticks.
Excluding the impact of these transactions, there was good organic volume growth
from subsidiaries, with many markets contributing to the volume growth of 2% on
a like for like basis.
BAT"s share of the post tax results of associates increased by GBP180 million to
GBP277 million, reflecting the inclusion of GBP165 million following the
transaction which resulted in the formation of Reynolds American last year. On a
pro forma US GAAP basis, as if the combination with Brown & Williamson had been
completed as of 1 January 2004, Reynolds American reported that operating profit
for the nine months to September 2005 increased by 24% and net income rose 4%.
In the nine months to September 2005 BAT"s adjusted diluted earnings per share
grew 23% to 67.91p benefiting from the improved underlying operating
performance, reduced net finance costs, a lower effective tax rate and minority
interests, as well as the impact of the Reynolds American transaction and the
share buy-back programme. While these factors also benefited the basic earnings
per share, they were offset by the inclusion of the gain on the Reynolds
American transaction in the 2004 comparatives leading to a reduction in basic
earnings per share from 121.23p to 65.73p for the nine-month period.
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 during the period under review were as follows:
Absa Group Limited (Absa)
During July 2005 Remgro sold its entire interest in Absa to Barclays Plc for R5
064 million. An after-tax capital gain of R2 570 million was realised and
accounted for as an exceptional item.
FirstRand Limited (FirstRand)
In May this year, FirstRand announced that all conditions precedent regarding
its proposed black economic empowerment (BEE) transaction had been complied
with. The operative date of the scheme was 16 May 2005.
In terms of this transaction, FirstRand bought back approximately 416.2 million
ordinary shares on a pro rata basis from all shareholders in the ratio of 7.6
ordinary shares for each 100 ordinary shares held. The price per ordinary share
amounted to R12.28 and in terms of this transaction Remgro received R486.0
million on 16 May 2005. At the same time FirstRand issued 119 million ordinary
shares to the BEE consortium. An after-tax capital gain of R123 million was
realised and accounted for as an exceptional item.
After this transaction, Remgro"s total interest in FirstRand, including the
indirect interest held through its 23.1% interest in RMBH, is 16.7%.
Sage Group Limited (Sage)
During September 2005 Remgro sold its 17.9% interest in Sage to Momentum Group
Limited for R114 million, or R1.75 per Sage share, comprising an initial payment
of R1.42 per share and a potential subsequent payment of up to a maximum of
R0.33 per share. The initial payment received amounted to R92 million. An
after-tax capital gain of R10 million was realised and accounted for as an
exceptional item. The potential subsequent payment to a maximum of R0.33 per
share is still subject to certain potential tax liabilities being resolved.
Repurchase of Remgro shares
During the period under review, a wholly-owned subsidiary company of Remgro
acquired a further 5 187 563 ordinary Remgro shares (1.1% of the ordinary
shares) at an average price of R110.46 for a total amount of R573.0 million.
Together with those shares acquired in previous financial years, a total of 35
709 404 (7.3%) are held as treasury shares.
No further ordinary Remgro shares were purchased by The Remgro Share Trust
during the period under review whilst 33 683 shares were delivered to
participants against payment thereof.
Subsequent to 30 September 2005:
Kagiso Trust Investments (Proprietary) Limited (KTI)
As announced on 29 September 2005 Remgro intends acquiring 37% of the issued
ordinary shares of KTI for a consideration of R450 million. KTI is an
established empowered company, with a sound investment track record. KTI has an
investment portfolio and strategy that is complementary to that of Remgro. With
their combined industry expertise, the acquisition will crystallise the
opportunity for Remgro and KTI to jointly pursue investment opportunities.
Further details will be announced once the acquisition has become unconditional,
which includes obtaining the necessary approval from the Competition
Authorities.
Nampak Limited (Nampak)
On 29 September 2005 Nampak"s shareholders approved its BEE transaction. The
operative date of the scheme was 31 October 2005.
In terms of the transaction, Remgro sold 10 Nampak shares for every 100 held.
The price per ordinary share was R15.13 and Remgro received R131.3 million on 31
October 2005. After this transaction Remgro"s interest in Nampak will dilute to
approximately 13.5%.
Rand Merchant Bank Holdings Limited (RMBH)
With the release of their results for the year ended 30 June 2005, RMBH
announced that it would be making a capital reduction of R1.00 per ordinary
share. Remgro received R274 million on 7 November 2005.
Distell Group Limited (Distell)
On 21 September 2005 Distell announced the introduction of a BEE partner. In
terms of this transaction Distell will dispose of 15% in its operating company
for a consideration of approximately R869.4 million.
Medi-Clinic Corporation Limited (Medi-Clinic)
On 4 October 2005 Medi-Clinic announced its black ownership initiative and
capital restructuring. The operative date of the scheme is 19 December 2005.
In terms of this transaction, Medi-Clinic"s strategic black partners will buy
approximately 14.9 million ordinary shares on a pro rata basis from all
shareholders to the ratio of 4.25 ordinary shares for each 100 ordinary shares
held. The proposed price per ordinary share will be R18.40 and consequently
Remgro will receive R139.5 million. At the same time Medi-Clinic will issue 44.3
million ordinary shares to a BEE consortium and a trust set up for the benefit
of participating employees. This will result in the dilution of Remgro"s
interest in Medi-Clinic from 51.0% as at 30 September 2005 to approximately
43.4%. As a result Medi-Clinic will no longer be consolidated but accounted for
as an associated company.
Dividend declaration
Notice is hereby given that an interim dividend of 133 cents
(2004: 116 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 2005.
Dates of importance:
Last day to trade in order to participate in
the interim dividend Friday, 6 January 2006
Trading on or after this date will be ex the
interim dividend Monday, 9 January 2006
Record date Friday, 13 January 2006
Payment date Monday, 16 January 2006
Shareholders may not dematerialise or rematerialise their holdings of ordinary
shares between Monday, 9 January 2006, and Friday, 13 January 2006, both days
inclusive.
Signed on behalf of the Board of Directors.
Johann Rupert
Chairman
Thys Visser
Chief Executive Officer
Stellenbosch
24 November 2005
Transition Report - Transition to International Financial Reporting Standards
(IFRS)
Note: This must be read in conjunction with paragraph 2 of the interim report.
To explain how Remgro"s reported performance and financial position are impacted
by IFRS, information previously published under SA GAAP has been restated and
reconciled to the equivalent basis under IFRS. This restatement follows the
guidelines set out in IFRS 1: First-time Adoption of IFRS.
It is important to note that this financial information, subject to the note
above, has been prepared in accordance with IFRS statements expected to be
effective at 31 March 2006. The IFRS statements are subject to ongoing review
and possible amendment through interpretive guidance from the International
Accounting Standards Board. It should further be noted that the presentation of
the transition to IFRS at year-end as well as income statement and balance sheet
captions could also change.
The basis of the adjustments, net of the taxation impact, as shown in the
reconciliation of equity and the income statement below, are as follows:
Post-retirement benefits
Previously Remgro has elected to use the corridor method for the recognition of
actuarial gains and losses.
Under IFRS 1 Remgro has elected to recognise all accumulated actuarial gains and
losses in equity at the date of transition. Future actuarial gains and losses
will continue to be recognised using the corridor method.
Property, plant and equipment
Previously property, plant and equipment were depreciated on a straight-line
basis to their estimated residual values. These residual values were fixed at
the date of acquisition and not reassessed annually.
Under IFRS significant components of property, plant and equipment are
identified separately and the residual values of these components are now re-
determined on each balance sheet date. Depreciation ceases when the carrying
value of an asset equals its residual value.
Share-based payments
Remgro and its subsidiaries operate various equity settled share-based
compensation plans. In the past Remgro hedged itself by buying the same number
of shares in the open market than that offered to participants. This has the
effect that no new shares will have to be issued by Remgro when shares are
delivered to participants. The only actual cost to Remgro was the difference (if
any) between the purchase price of these shares and the subscription price paid
by participants when the shares are delivered to them. In the past this cost was
accounted for against net income and headline earnings on a straight-line basis
over a four-year period with a corresponding credit to equity.
Under IFRS the fair value of share offers is determined on the grant date and is
accounted for as an employee services expense over the vesting period of the
share offers, with a corresponding increase in equity, based on Remgro"s
estimate of shares that will eventually vest.
Goodwill
A significant aspect affecting Remgro under IFRS is the removal of goodwill
amortisation from the income statement. As mentioned in Remgro"s 2005 annual
financial statements, Remgro adopted IFRS 3 (AC 140): Business Combinations with
effect from 1 April 2004. As from this date goodwill is no longer being
amortised, but carried at cost less accumulated impairment losses.
The exception to this was goodwill that was still being amortised by certain
associated companies and such amortisation was accounted for in Remgro"s 2005
annual financial statements. This was mainly due to year-ends of companies that
differ, resulting in the later implementation of new accounting standards. The
implementation of IFRS did however result in all associated companies now also
adopting IFRS 3, resulting in the removal of Remgro"s share of their goodwill
amortisation from the income statement.
This adjustment is included in the line "Associated companies".
Leases
IAS 17 requires operating lease costs and income to be accounted for on a
straight-line basis. Future lease increases in terms of the lease contract are
determined and the average lease expense is then recognised in equal amounts
over the lease period. In general, this leads to earlier recognition of lease
income and lease expense compared with the pattern of recognition in terms of
previous industry practice in South Africa where income and expenses were
recognised at a constant real rate of return on the net cash investment in the
lease.
Adjustments relating to IAS 17 are included in the "Other" and "Associated
companies" lines.
Reconciliation of equity from previous SA GAAP to IFRS
31 March 30 Sept 1 April
2005 2004 2004
R"m R"m R"m
Equity
As previously reported under
SA GAAP 36 971 33 639 31 411
Prior year adjustments 21 (69) 15
Restated under SA GAAP 36 992 33 570 31 426
IFRS adjustments (106) (119) (458)
Post-retirement benefits (1) - 2
Property, plant and equipment 99 100 93
Associated companies (193) (208) (542)
Other (11) (11) (11)
As reported under IFRS 36 886 33 451 30 968
Reconciliation of income statements from previous SA GAAP to IFRS
Profit attributable to
equity holders of the
company Headline earnings
Year Six months Year Six months
ended ended ended ended
31 March 30 Sept 31 March 30 Sept
2005 2004 2005 2004
R"m R"m R"m R"m
As previously reported
under SA GAAP 8 807 3 622 4 982 2 462
Prior year adjustments 5 9 5 9
Restated under SA GAAP 8 812 3 631 4 987 2 471
IFRS adjustments (253) 305 19 (12)
Post-retirement
benefits (2) (1) (2) (1)
Property, plant and
equipment 4 4 4 4
Associated companies
- Exceptional items (272) 317 - -
- Other 25 (11) 25 (11)
Share-based payments (8) (4) (8) (4)
As reported under IFRS 8 559 3 936 5 006 2 459
The detailed IFRS Transition Report will be included in the interim report that
will be mailed to shareholders and will then be available on the website.
Directorate
Non-executive directors
Johann Rupert (Chairman), E de la H Hertzog (Deputy Chairman), PE Beyers,
GD de Jager*, JW Dreyer, PK Harris*, E Molobi*, JF Mouton*, D Prins*,
F Robertson* (*Independent)
Executive directors
MH Visser (Chief Executive Officer), WE Buhrmann, DM Falck, JA Preller (Mrs), T
van Wyk
Corporate information
Secretary
M Lubbe (Mrs)
Listing
JSE Limited
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 (Proprietary) 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)
www.remgro.com
Date: 24/11/2005 05:02:28 PM Produced by the JSE SENS Department
