Wrap Text
REM - Remgro Limited - Reviewed results for the twelve months ended 31 March
2011
Remgro Limited
(Incorporated in the Republic of South Africa)
Registration number 1968/006415/06
ISIN ZAE000026480
Share Code REM
INTERIM REPORT
REVIEWED RESULTS FOR THE TWELVE MONTHS ENDED 31 MARCH 2011
Salient features
- Headline earnings per share: +17.6%
- Intrinsic value per share at 31 March: R136.12
- Change in financial year-end from 31 March to 30 June
- Change in payment date of final dividend from August to November due to
change in financial year-end
Abridged consolidated statement of financial position
2011 2010
R`m R`m
Assets
Non-current assets
Property, plant and equipment 3 114 3 050
Biological agricultural assets 135 157
Investment properties 41 34
Intangible assets 327 361
Investments - Associated companies 34 697 28 052
- Joint ventures 249 55
- Other 6 300 6 644
Retirement benefits 158 121
Loans 107 108
Deferred taxation 7 6
45 135 38 588
Current assets 11 128 9 470
Inventories 1 168 1 048
Biological agricultural assets 416 423
Debtors and short-term loans 2 070 1 941
Investments in money market funds 1 711 1 812
Cash and cash equivalents 4 738 3 827
Other current assets 1 025 419
Total assets 56 263 48 058
Equity and liabilities
Issued capital 3 605 3 722
Reserves 48 155 39 837
Treasury shares (223) (255)
Shareholders` equity 51 537 43 304
Non-controlling interest 783 779
Total equity 52 320 44 083
Non-current liabilities 1 482 1 517
Retirement benefits 233 180
Long-term loans 154 175
Deferred taxation 1 095 1 162
Current liabilities 2 461 2 458
Trade and other payables 2 189 2 292
Short-term loans 34 146
Other current liabilities 238 20
Total equity and liabilities 56 263 48 058
Net asset value per share (Rand)
- At book value R100.34 R84.38
- At intrinsic value R136.12 R121.64
Abridged consolidated income statement
2011 2010
R`m R`m
Sales 12 222 11 849
Inventory expenses (7 413) (7 099)
Staff costs (2 258) (1 939)
Depreciation (307) (290)
Other net operating expenses (1 585) (1 680)
Trading profit 659 841
Dividend income 141 116
Interest received 149 146
Finance costs (31) (59)
Negative goodwill 112 -
Net impairment of investments, assets
and goodwill (67) (179)
Profit/(loss) on sale and unbundling
of investments 2 236 (9)
Consolidated profit before tax 3 199 856
Taxation (453) (309)
Consolidated profit after tax 2 746 547
Share of after-tax profit of associated
companies and joint ventures 7 071 2 619
Net profit for the period 9 817 3 166
Attributable to:
Equity holders 9 715 3 060
Non-controlling interest 102 106
9 817 3 166
Associated companies and joint ventures
Share of after-tax profit of associated
companies and joint ventures
Profit before taking into account
impairments,
non-recurring and capital items 5 526 3 952
Net impairment of investments, assets
and goodwill (83) (118)
Profit on the sale of investments 3 009 41
Other non-recurring and capital items 386 (46)
Profit before tax and non-controlling 8 838 3 829
interest
Taxation (1 399) (981)
Non-controlling interest (368) (229)
7 071 2 619
Reconciliation of headline earnings
2011 2010
R`m R`m
Net profit for the period attributable
to equity holders 9 715 3 060
Plus/(minus):
- Negative goodwill (112) -
- Net impairment of investments 7 149
- Impairment of property, plant and equipment - 4
- Impairment of intangible assets - 26
- (Profit)/loss on sale and unbundling
of investments (2 236) 9
- Net surplus on disposal of property,
plant and equipment - (4)
- Non-headline earnings items included in
equity accounted earnings of associated
companies and joint ventures (3 377) 123
- Taxation effect of adjustments 167 (10)
- Non-controlling interest - (2)
Headline earnings 4 164 3 355
Earnings and dividends
2011 2010
Cents Cents
Headline earnings per share
- Basic 811.6 690.1
- Diluted 785.1 676.4
Earnings per share
- Basic 1 893.5 629.4
- Diluted 1 860.5 616.3
Dividends per share
Ordinary 101.00 209.00
- Interim 101.00 84.00
- Final - 125.00
Abridged consolidated statement of comprehensive income
2011 2010
R`m R`m
Net profit for the period 9 817 3 166
Other comprehensive income, net of tax (258) (640)
Exchange rate adjustments (310) (1 216)
Fair value adjustments for the period (432) 1 421
Deferred taxation on fair value adjustments 100 (219)
Realisation of reserves previously deferred
in equity (14) (6)
Change in reserves of associated companies
and joint ventures 398 (620)
Total comprehensive income for the period 9 559 2 526
Total comprehensive income attributable to:
Equity holders 9 457 2 420
Non-controlling interest 102 106
9 559 2 526
Abridged consolidated statement of changes in equity
2011 2010
R`m R`m
Balance at 1 April 44 083 38 787
Total comprehensive income for the period 9 559 2 526
Dividends paid (1 220) (1 006)
Capital invested by minorities 13 10
Other movements (50) 2
Long-term share incentive scheme reserve 52 50
Unbundling of investment (117) -
Shares issued - 3 714
Balance at 31 March 52 320 44 083
Abridged consolidated statement of cash flows
2011 2010
R`m R`m
Cash generated from operations 806 1 004
Taxation paid (167) (144)
Dividends received 1 936 1 444
Cash available from operating activities 2 575 2 304
Dividends paid (1 220) (1 006)
Net cash inflow from operating activities 1 355 1 298
Investing activities (292) (1 147)
Financing activities 13 (5)
Net increase in cash and cash equivalents 1 076 146
(Increase)/decrease in money market funds 101 (234)
Exchange rate loss on foreign cash (207) (1 190)
Cash and cash equivalents at the beginning
of the period 3 741 5 019
Cash and cash equivalents at the end
of the period 4 711 3 741
Cash and cash equivalents - per statement of
financial position 4 738 3 827
Bank overdraft (27) (86)
Additional information
2011 2010
Number of shares in issue
- Ordinary shares of 1 cent each 481 106 370 481 106 370
Issued at 1 April 481 106 370 439 479 751
Issued during the year - 41 626 619
- Unlisted B ordinary shares of 10 cents each 35 506 352 35 506 352
Total number of shares in issue 516 612 722 516 612 722
Number of shares held in treasury
- Ordinary shares repurchased and held
in treasury (3 005 846) (3 424 044)
513 606 876 513 188 678
Weighted number of shares 513 071 546 486 152 822
In determining earnings per share and headline earnings per share the weighted
number of shares was taken into account
2011 2010
R`m R`m
Listed investments
Associated
- Book value 23 792 17 235
- Market value 31 752 28 480
Other
- Book value 5 844 6 357
- Market value 5 844 6 357
Unlisted investments
Associated
- Book value 10 905 10 817
- Directors` valuation 19 020 17 720
Joint ventures
- Book value 249 55
- Directors` valuation 256 55
Other
- Book value 456 287
- Directors` valuation 456 287
Additions to and replacement of property,
plant and equipment 498 424
Capital and investment commitments 1 293 882
(Including amounts authorised, but not yet
contracted for)
Guarantees and contingent liabilities* 2 210 389
Dividends received from associated companies
and joint ventures set off against
investments (the 2011 amount includes the
MMI and RMI Holdings unbundling dividends
amounting to R6 174 million) 8 027 1 222
* The increase in guarantees and contingent liabilities since 31 March 2010
relates mainly to two tax assessments received from SARS during the period
under review. One of the assessments amounting to R894 million relates to the
buyback and cancellation of treasury shares, while the second assessment
amounting to R690 million was issued in connection with the disposal of
investments (both amounts include interest). The assessments are being
disputed.
Comments
1. Change in financial year-end
During the period under review the financial year-end of the Company was
changed from 31 March to 30 June, with effect from the current financial year.
The rationale for the change was to comply with the revised International
Auditing Standard 600 (ISA 600), as fully set out in the announcement released
on SENS on 16 March 2011.
In terms of the JSE Listings Requirements (Listings Requirements), Remgro
therefore has to publish and distribute a second set of interim results to
shareholders for the twelve-month period ended 31 March 2011, with comparative
figures for the previous year. In terms of the Listings Requirements these
results have to be reviewed by the external auditors. Remgro will also publish
and distribute audited financial results for the fifteen months ending 30 June
2011, by no later than 30 September 2011.
As a result of the change in year-end, Remgro`s final and interim dividends
will now be paid during November and April of each year respectively, compared
to August and January previously. In respect of the fifteen-month period ending
30 June 2011, the final dividend will be based on earnings for the fifteen
months and will be paid in November 2011. For subsequent financial years, the
final dividend will again be based on earnings for the twelve months under
review.
2. Accounting policies
The interim report is prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards (IFRS),
including IAS 34: Interim Financial Reporting, and in accordance with the
requirements of the Companies Act (No. 61 of 1973), as amended, and the
Listings Requirements of the JSE Limited.
These financial statements incorporate accounting policies that are consistent
with those of the previous financial year, with the exception of the
implementation of the amendments to IAS 28: Investments in Associates, resulting
from the introduction of the revised IFRS 3: Business Combinations. Refer to the
section on changes in accounting policy below for further detail.
3. Changes in accounting policy
In the past all dilutionary and anti-dilutionary effects of equity transactions
by associated companies and joint ventures that Remgro was not a party to,
were accounted for in other comprehensive income. With the introduction of the
amendments to IAS 28: Investments in Associates, resulting from the application
of the revised IFRS 3: Business Combinations, these effects are now accounted
for in the income statement.
In terms of the transitional provisions of the revised IFRS 3, this standard
is only applied prospectively for all financial periods commencing on/after
1 July 2009 and accordingly the comparative results have not been restated.
The impact of the change in accounting policy for the period under review
resulted in an increase in earnings of R291 million. In terms of Circular
3/2009: Headline Earnings, the effect of such transactions is not included
in headline earnings and accordingly the change in accounting policy did not
affect Remgro`s headline earnings.
4. Comparison with prior year
The acquisition of VenFin Limited (VenFin) was completed on
23 November 2009 when VenFin shareholders received 1 Remgro share for every
6.25 VenFin shares held. For the year ended 31 March 2010 only VenFin`s
associates and joint ventures with March and September year-ends were equity
accounted for the three months from 1 January 2010 to 31 March 2010.
For the twelve months under review the VenFin Group was however accounted for
the full period. The acquisition did have a negative effect on headline earnings
per share due to the dilutive effect of the issue of 41.6 million Remgro shares
as consideration for the acquisition.
5. Results
Headline earnings
For the twelve months under review headline earnings increased by 24.1% from R3
355 million to R4 164 million, whereas headline earnings per share increased by
17.6% from 690.1 cents to 811.6 cents.
Contribution to headline earnings
Twelve months ended
31 March
2011 % 2010
R`m Change R`m
Financial services 1 871 38.1 1 355
Industrial interests 2 051 3.5 1 982
Media interests 34 100.0 17
Mining interests 112 16.7 96
Technology interests 107 723.1 13
Other investments 25 139.1 (64)
Central treasury 65 14.0 57
Other net corporate costs (101) - (101)
4 164 24.1 3 355
Refer to Annexures A and B for segmental information.
The combined contribution of FirstRand and RMBH to Remgro`s headline earnings
from financial services amounted to R1 871 million (2010: R1 355 million). The
increase of 38.1% can be attributed mainly to a significant reduction in bad
debts and improved profitability in both RMB and WesBank.
The contribution of the industrial interests to headline earnings increased by
only 3.5% to R2 051 million (2010: R1 982 million). Medi-Clinic`s and Unilever`s
contribution to headline earnings amounted to
R474 million and R298 million respectively (2010: R460 million and
R279 million). Distell`s contribution to Remgro`s headline earnings, which
includes the investments in Capevin Holdings and Capevin Investments, amounted
to R315 million (2010: R281 million). Kagiso Trust Investment`s (KTI)
contribution to headline earnings amounted to R279 million (2010: R128 million),
favourably impacted by fair value adjustments relating to its shareholding in
MMI Holdings Limited and Adcock Ingram Holdings Limited during its first six
months. Rainbow reported firm results with a contribution to Remgro`s headline
earnings amounting to R273 million (2010: R259 million). Tsb Sugar`s
contribution to headline earnings declined to R114 million (2010: R227 million).
This decline is mainly due to a non-recurring cost of R43 million accounted for
during the period under review relating to the closure of a pension fund, as
well as profit of R34 million in the comparative period relating to a change in
the valuation methodology of its biological agricultural assets. Total South
Africa`s contribution to headline earnings amounted to R99 million (2010: R42
million), which improved performance is mainly due to favourable stock
revaluations and savings in operating costs.
Media interests consist of the interests in Sabido, MARC (previously SAIL),
One Digital Media (ODM) and Premier Team Holdings (PTH). Sabido`s contribution
to Remgro`s headline earnings amounted to R116 million (2010: R11 million),
while MARC contributed R2 million (2010: R5 million). ODM`s and PTH`s
contribution to headline earnings amounted to losses of R47 million (2010:
earnings of R1 million) and R37 million respectively. No income from PTH was
accounted for in the comparative period.
After the unbundling of the investment in Trans Hex to Remgro shareholders
during September 2010, Implats is the only remaining investment being reported
under mining interests. Dividends received from Implats amounted to R112 million
(2010: R85 million), while no income from Trans Hex was accounted for during the
period under review (2010: R11 million).
Technology interests primarily represent the interest in the CIV group of
companies, as well as the investments in Tracker and SEACOM. For the period
under review the CIV group contributed R87 million to Remgro`s headline
earnings (2010: R7 million), while Tracker`s contribution to headline earnings
amounted to R57 million. SEACOM reported a headline loss of R161 million for
the period under review, with Remgro`s share of this loss amounting to R40
million. SEACOM is cash flow positive and Remgro received dividends of USD6
million during the year. No income from Tracker and SEACOM was accounted for
in the comparative period. It should be noted that with effect from 31 December
2010 the investments in Tracker and Fundamo, also one of Remgro`s technology
interests, were reclassified as investments "held for sale".
The contribution of other investments to headline earnings improved by
R89 million to R25 million (2010: R64 million loss). It should be noted that
a headline loss amounting to R79 million for Xiocom was included in the results
of the comparative period. This investment was sold in March 2010. Business
Partners` contribution to headline earnings amounted to
R18 million (2010: R12 million).
Higher average cash balances resulted in an increase in the contribution from
the central treasury division to R65 million (2010: R57 million). Other net
corporate costs remained constant at R101 million (2010:
R101 million) mainly due to certain non-recurring items accounted for in both
periods.
Earnings
Total earnings increased by 217.5% to R9 715 million (2010:
R3 060 million), mainly as a result of the earnings growth of the underlying
investments, as well as the capital gains realised on the FirstRand/RMBH
restructuring transactions.
6. Intrinsic value
Remgro`s intrinsic value per share increased by 11.9% from R121.64 at
31 March 2010 to R136.12 at 31 March 2011. Refer to Annexure B for full
details.
7. Investment activities
The most important investment activities during the period under review were
as follows:
FirstRand Limited (FirstRand) and RMB Holdings Limited (RMBH)
On 12 November 2010 it was announced that all of the suspensive conditions of
the proposed merger of Metropolitan Holdings Limited and Momentum Group Limited,
as well as the subsequent unbundling by FirstRand of its entire shareholding
in the new merged entity (MMI Holdings Limited (MMI)) to its ordinary
shareholders, were fulfilled. On 13 December 2010 Remgro received 81.2
million MMI shares in terms of the above transaction.
During March 2010 RMBH also announced that it was exploring a number of
restructuring steps to realign its investment portfolio and to enhance
shareholder value. The restructuring commenced during December 2010 and included
the separation of RMBH`s insurance and banking interests (RMI Holdings Limited
(RMI Holdings) and RMBH respectively) and resulted in a separate listing of both
companies. In terms of the restructuring Remgro disposed of its entire holding
in MMI to RMI Holdings in exchange for shares in RMI Holdings, and now has the
following direct interests in the respective entities after the completion of
all related restructuring transactions:
RMI Holdings 34.9%
RMBH 31.5%
FirstRand 3.9%
As Remgro only acquired its interest in RMI Holdings during March 2011, no
income from that company was accounted for during the period under review.
Nampak Limited (Nampak)
During August 2010 Remgro sold its 13.3% interest in Nampak through an
accelerated book build offering for a total consideration of
R1 358.9 million (or R17.40 per share). During the period under review the
results of Nampak were equity accounted for the four months to 31 July 2010
and its contribution to Remgro`s headline earnings amounted to R33 million
(2010: R73 million).
Trans Hex Group Limited (Trans Hex)
On 18 August 2010 Remgro shareholders approved the unbundling of the investment
in Trans Hex and on 13 September 2010 each Remgro shareholder received 5.85
Trans Hex shares for every 100 Remgro shares held. As the investment in Trans
Hex was reclassified as an investment "held for sale" in the previous financial
year, no income from Trans Hex was accounted for during the period under review
(2010: R11 million).
Medi-Clinic Corporation Limited (Medi-Clinic)
During August 2010 a further R591.9 million was invested in Medi-Clinic in
terms of a rights offer whereby Medi-Clinic shareholders could subscribe for
an additional 10 Medi-Clinic shares for every 100 shares held at a price of
R23.00 per share. On 31 March 2011 Remgro`s interest in Medi-Clinic was 45.2%
(31 March 2010: 45.7%).
Business Partners Limited (Business Partners)
During the period under review Remgro acquired a further 14 381 742 Business
Partners shares for a total consideration of R79.3 million. On a fully diluted
basis, Remgro`s interest in Business Partners increased to 28.8% (31 March
2010: 20.8%).
Kagiso Trust Investments (Pty) Limited (KTI) and the Kagiso Infrastructure
Empowerment Fund (KIEF)
During the 2007 financial year, Remgro entered into agreements with KTI and
KIEF, in terms of which it committed funds amounting to R350 million to KIEF.
The fund has a target size of R650 million and aims to invest in infrastructure
projects, including roads, airports, power and telecommunication installations,
railway systems, ports, water and social infrastructure. During the period
under review Remgro invested a further R132.1 million in KIEF. By 31 March
2011, Remgro had invested
R226.2 million of the R350 million committed.
Dark Fibre Africa (Pty) Limited (Dark Fibre)
In the past Remgro only had an indirect interest of 31.3% in Dark Fibre through
its interests in the CIV group of companies. During the period under review an
amount of R11.0 million was invested directly in Dark Fibre, while an additional
amount of R134.5 million was invested in the CIV group of companies. These
investments effectively increased Remgro`s interest in Dark Fibre to 37.0%.
At the same time Remgro agreed to provide a loan facility amounting to R85.0
million to Dark Fibre. The term of the facility is ten years and the full
amount has already been advanced.
Capevin Holdings Limited (Capevin Holdings)
During the period under review Remgro acquired a further 11 096 828 Capevin
Holdings shares for a total consideration of R38.5 million. These acquisitions
increased Remgro`s indirect interest in Distell to 33.5%
(31 March 2010: 33.3%).
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
During the period under review Tsb Sugar divested from its citrus operations
and sold its interests in Golden Frontiers Citrus (Pty) Limited and Komatie
Fruits (Pty) Limited with effect from 31 March 2011. An after-tax capital gain
of R22 million was realised on this transaction. The future impact of the
transaction on Tsb Sugar`s results is not expected to be material.
Other smaller investments were made during the period under review amounting
to R173.0 million in PGSI Limited, Fundamo (Pty) Limited, Premier Team Holdings
Limited (PTH), One Digital Media (Pty) Limited and Milestone China Funds.
Events after 31 March 2011:
Lashou Group Inc. (Lashou)
During April 2011 Remgro invested USD18.0 million for a 1.6% interest, on a
fully diluted basis, in Lashou, a Chinese company specialising in group buying
and location-based marketing campaigns.
KTI and Tiso Group (Pty) Limited (Tiso)
KTI and Tiso have entered into negotiations for the merger of the two groups
into a new merged entity, Kagiso Tiso Holdings (Pty) Limited. The transaction
is subject to the approval by the Competition Authorities and the proposed
effective date is 1 July 2011.
Tracker - Discussions have been entered into concerning the possible sale of
Tracker.
Fundamo - Remgro sold its interest in Fundamo to Visa Inc. for a total
consideration of R230 million.
PTH - Further equity investment of GBP2.6 million.
Dark Fibre - Further equity investment of R106.0 million, increasing Remgro`s
interest to 44.3%, as well as a further loan of R31.6 million.
8. Information regarding unlisted investments
Unilever South Africa Holdings (Pty) Limited (Unilever South Africa)
Unilever South Africa`s contribution to Remgro`s headline earnings for the
period under review amounted to R298 million (2010: R279 million). Included
in Remgro`s share of Unilever`s earnings are restructuring costs amounting to
R36 million (2010: R53 million).
Unilever South Africa`s turnover for the period increased by 4.5% to
R13 183 million (2010: R12 619 million) primarily driven by volume growth
(6.6%). The strong volume growth is mainly due to the Powders category where
the company is seeing the benefits of maintaining its competitive pricing
strategy. Volume growth is further driven by innovations in the Savoury
category. The decline in price growth (-3.3%) for the period under review is
mainly owing to decreasing commodity prices.
Turnover growth, slightly higher margins and decreased finance cost has
attributed to an increase in the company`s profit after tax for the period
under review to R1 151 million (2010: R1 070 million).
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
Tsb Sugar`s contribution to Remgro`s headline earnings for the period under
review amounted to R114 million (2010: R227 million), with the sugar business
contributing R112 million, and the citrus division R2 million.
Turnover for the twelve months ended 31 March 2011 increased by 5.1% from
R4 149 million to R4 359 million. Sugar sales contributed R3 864 million
(2010: R2 948 million) to turnover of which 18.2% is represented by exports.
Tsb Sugar`s raw sugar production for the period under review decreased by 4.6%
to 600 045 tons (2010: 628 753 tons) while the South African Sugar industry`s
production for the same period decreased by 12.4%. The decrease in Tsb Sugar`s
production is mainly attributed to the lower cane crushed at the mills due to
wet conditions at the start and the end of the season and to lower cane quality
which negatively impacted on factory efficiencies. The world sugar price
remained strong over the past twelve months, but the stronger rand negated
most of the increase. During the period under review Tsb Sugar incurred a R43
million cost relating to the closure of the Booker Tate pension funds.
The contribution of Royal Swaziland Sugar Corporation to Tsb Sugar`s headline
earnings for the period amounted to R16 million (2010:
R38 million). The decrease was mainly due to the strength of the lilangeni
against the euro and lower sugar production.
Land claims affecting Komati and Malelane sugar mills have been settled and
the properties will not be restored to claimant communities. Negotiations to
reach settlement in respect of the remaining agricultural holdings and the
Pongola sugar mill are expected to be concluded in the next financial year.
Air Products South Africa (Pty) Limited (Air Products)
Air Products` contribution to Remgro`s headline earnings for the twelve
months ended 31 March 2011 increased by 20.9% to R139 million (2010:
R115 million).
Turnover for the twelve months ended 31 March 2011 increased by 13.4% to
R1 407 million (2010: R1 241 million), while the company`s operating profit
for the same period increased by 14.6% to R448 million (2010:
R391 million). Volumes in most business segments continued to improve slowly.
Further improvement in volumes is anticipated in forthcoming months, together
with increasing pressure on input costs.
Sabido Investments (Pty) Limited (Sabido)
Remgro has an effective interest of 31.5% in Sabido which has a range of
media interests, the most significant of which is South Africa`s only private
free-to-air television channel, e.tv, and its sister news service, the eNews
channel. Sabido`s contribution to Remgro`s headline earnings for the twelve
months ended 31 March 2011 amounted to R116 million. This amount includes a
charge of R11 million relating to the amortisation of intangible assets,
identified as part of the acquisition of VenFin.
The latest results from the All Media Products Survey indicate that e.tv`s
audience has grown by 400 000 to 15.2 million viewers. e.tv remains the largest
English-medium television channel in South Africa and the second most watched
channel overall. Despite significant gains by pay-television into e.tv`s core
target market, e.tv has managed to maintain audience growth with a strong local
programming line-up. The delay in launching digital terrestrial television,
which would provide a multi-channel free-to-air platform, continues to aggravate
the loss of audiences by free-to-air television channels to pay-television.
Programming costs have remained stable and although e.tv`s advertising revenue
was negatively affected by the 2010 FIFA World Cup, it managed to achieve its
annual target by the end of its financial year. e.tv Africa, the channel`s
pan-African syndicated service, launched on DStv`s pan-African service in
December and is now available in 49 countries across the continent.
The growth in pay-television subscribers on DStv has benefited the eNews
Channel which has retained its position as market leader among news channels
in South Africa. The channel is also now available to DStv subscribers in the
rest of Southern Africa. The launch of eNuus (a daily half-hour Afrikaans news
bulletin) on Kyknet has been well-received with eNuus appearing consistently
in Kyknet`s top five programmes and taking share from SABC2`s Afrikaans news
bulletin.
In early 2011, Sabido acquired a 47.4% stake in The Africa Channel, a pay-
television channel in the United Kingdom which is broadcast on the Sky retail
bouquet. The eNews Africa bulletins (which are currently broadcast on e.tv
Africa) are being broadcast on The Africa Channel from April 2011. Sabido has
also acquired 100% of Power, the United Kingdom`s eighth largest programme
distributor. This will consolidate Sabido`s capacity to distribute content
on a worldwide basis.
Kagiso Trust Investments (Pty) Limited (KTI)
KTI is a black controlled investment holding company. Its investments are
predominantly in the financial services, media and mining sectors. Its three
largest investments, by value, are its interests in MMI Holdings Limited (MMI),
Kagiso Media Limited and Adcock Ingram. KTI`s interest in MMI represents an
indirect interest in Metropolitan and Momentum as a result of corporate actions
during December 2010.
KTI`s financial year-end is 30 June. However, included in Remgro`s
headline earnings are KTI`s results for the twelve months ended 31 December
2010. KTI posted headline earnings of R657 million for the twelve months
ended 31 December 2010, compared to headline earnings of R301 million in
the prior twelve-month period. The significant increase in headline earnings
is mainly attributable to fair value gains on the investments in Adcock Ingram
(R238 million) as well as MMI (R296 million). KTI`s contribution to
Remgro`s headline earnings for the period under review amounted to R279
million (2010: R128 million).
The Mototolo Platinum Mine delivered strong equity accounted results during
the second half of the year. The rand`s strength, however, eroded some of the
gains in metal prices.
Total South Africa (Pty) Limited (Total)
Total`s contribution to Remgro`s headline earnings for the period under review
amounted to R99 million (2010: R42 million).
International oil prices increased significantly during the year driven by
worldwide economic growth and the recovery of demand as well as political
unrest in some oil producing countries. The strengthening of the rand against
the US dollar has limited the impact of stock revaluations which resulted in a
gain of R160 million before tax. Financing costs decreased mainly due to lower
interest rates, despite increased working capital requirements, driven by
higher prices in the international oil markets.
Driven by the economic recovery in South Africa, Total`s sales of main fuels
have increased by 2.5% from the previous year, while retail sales have increased
by 1.0%. Strong competition and low margins in the aviation business resulted in
a decrease of 13% in jet fuel sales, but the company has maintained its position
in the lubricants and bitumen market segments.
At the end of 2010, Total acquired the BEE company Tosaco Commercial Services
(Pty) Limited, and has merged the commercial activities within its marketing
activities. Marketing margins slightly recovered from the previous year,
helped by a small interim regulated wholesale margin increase granted by the
Department of Minerals and Energy to the industry at the end of 2009.
Natref, in which Total has an interest of 36%, experienced a relatively
satisfactory reliability rate in 2010. The refinery has commenced investing
in increasing its capacity, particularly in diesel grades in anticipation of
the increasing demand for distillates and the dieselisation of the market.
The second phase of the investment will take place during 2011. Driven by
increased demand of oil products, and following historical lows in 2009,
refining margins have recovered in 2010, but have not yet reached the level
seen before the economic downturn.
To face the economic downturn, the company had launched action plans during
2009 to reduce its costs and embarked on a restructuring process which was
completed during 2010. These action plans and lower inflation in South Africa
have led to a reduction of fixed costs. However, the company continues to
maintain the same level of investment regarding health, safety, environment
and quality projects.
SEACOM Capital Limited (SEACOM)
Remgro has an effective interest of 25.0% in SEACOM which launched the first
terabit undersea fibre-optic cable to connect Southern and Eastern Africa
with Europe and Asia in July 2009. The cable connects South Africa, Mozambique,
Tanzania, Kenya and Djibouti and onwards with the rest of the world via
landing points in France (and onwards to London) and India. Landlocked
countries (Uganda, Rwanda, Ethiopia, etc.) are connected by terrestrial
backhaul.
SEACOM has a December year-end and therefore its results for the twelve months
to 31 December 2010 have been included in Remgro`s results for the period
under review. SEACOM`s contribution to Remgro`s headline earnings for the
period under review amounted to a loss of R40 million. SEACOM provides
high-capacity international fibre-optic bandwidth to customers in the form
of IRUs (indefeasible right of use) where most of the revenue is accounted
for over 20 years. During the period under review SEACOM had unforeseen repair
and restoration costs due to a component failure on its undersea fibre-optic
cable. The company is on track to meet its targets, but incurred a loss for
the full financial year.
Internet supply increased substantially in the last year due to the delivery of
international bandwidth by SEACOM. SEACOM has experienced greater competition
this year with the launch of the TEAMS cable system in Kenya and EASSy in
Southern and Eastern Africa. The competition has resulted in downward pressure
on pricing, but the demand has shown great elasticity resulting in increased
international bandwidth usage in all countries in which it operates.
Tracker Investment Holdings (Pty) Limited (Tracker)
Tracker`s contribution to Remgro`s headline earnings for the period under
review amounted to R57 million. This amount includes a charge of R24 million
relating to the amortisation of intangible assets, arising on the acquisition
of VenFin.
For the twelve months ended 31 December 2010 Tracker`s turnover increased by
13.0% to R1 252 million (2009: R1 108 million) and operating profit improved by
16%. Over the same period the total subscriber base has increased by 10% to 649
810. The National Association of Automobile Manufacturers of South Africa
reported a 24.7% year-on-year growth in new vehicle sales for the 2010 calendar
year; however, this was off a very depressed 2009 base.
Community Investment Ventures Holdings (Pty) Limited (CIV)
Remgro has an effective interest of 41.2% in the CIV group which is active in
the power, telecommunications and information technology sectors. The main
subsidiaries are Dark Fibre Africa (DFA) which constructs and owns fibre-optic
networks, CIE Telecom which imports and distributes fibre and specialises in
network management and CIV Power which specialises in cabling of power stations.
The CIV group`s contribution to Remgro`s headline earnings for the twelve months
to 31 March 2011 amounted to R87 million.
It is anticipated that CIV group`s centre of growth will be DFA. DFA`s headline
earnings for the twelve months to 31 March 2011 increased by 129.2% to R165
million (thirteen months to 31 March 2010: R72 million), due to additional
sections of the company`s fibre-optic network having been completed and more
customers acquiring or leasing infrastructure.
DFA has fibre network rings in Johannesburg, Cape Town, Durban, Midrand,
Centurion and Pretoria. The Johannesburg ring is regarded as one of the
most important communication rings in Africa. To date, a total distance of
2 600 km has been completed in the major metropolitan areas. DFA is also
rolling out long-haul routes, the first one completed being from Durban
Metropolitan to the SEACOM landing station in Mtunzini. This route was extended
through Empangeni to Gauteng and was completed in April 2011. In 2010 DFA
commenced with the fibre-to-the-tower project linking mobile phone operators`
base stations to the core communication rings. Mobile backhaul is a major
growth driver for DFA.
DFA has signed commercial lease agreements with 33 telecommunications service
providers ranging from the largest incumbents to small niche operators, thereby
establishing an annuity income-generating business.
During the next financial year the company aims to extend its presence in
the South African telecommunications market by doubling its infrastructure
footprint, as well as expanding its sales and marketing activities. The
increase in the number of Electronic Communication Network Services licences
issued by the Independent Communications Authority of South Africa has
increased DFA`s potential market for its services and should lead to
sustainable growth in earnings.
PGSI Limited (PGSI)
Remgro`s portion of PGSI`s headline loss for the twelve months ended
31 December 2010 amounted to R12 million (2009: R1 million headline earnings).
This amount excludes the earnings contribution relating to the PGSI convertible
preference shares of R11 million (2009: R8 million) as well as the fair value
adjustment on the conversion right amounting to
R10 million (2009: R74 million).
PGSI`s turnover for its year under review increased by 7.0% to
R2 905 million (2009: R2 716 million), while its operating profit amounted to
R93 million (2009: R72 million). The improvement in the operating results was
largely driven by a slowly improving economic climate in South Africa, but
increased net finance costs have resulted in a net loss, compared to the
previous year.
The main operating subsidiary in South Africa, PG Group, has been affected by
the global and local recession of the past few years, particularly in the
Original Equipment Manufacturers (OEM) automotive and domestic building sectors.
While the automotive and small building sectors are beginning to emerge from
the recession, commercial buildings are lagging and will continue to impact
in terms of slow glass demand during 2011.
The difficult market conditions for manufacturing in South Africa have been
further exacerbated by a very strong rand which strengthened considerably since
the first quarter of 2010, in addition to similar strengthening in 2009. The PG
Group has embarked on a number of initiatives to improve profitability in this
difficult trading environment, including the reorganisation of the building
products division to improve service levels, a focus on growing markets in
Africa, the reduction in labour costs at the automotive manufacturing plants
and increased yields at all manufacturing facilities.
The PG Group completed a comprehensive 5-year capital expenditure programme
and now owns two state of the art float lines, with the next repair scheduled
for 2022. The expansion was funded through term debt with local banks. The
Group is well invested and capital expenditure over the next 5 years will be
minimal.
During 2010, R100 million was raised through a rights issue to further support
the financial structure of the expansion at PG Group.
The scenario for 2011 has improved with demand coming through in automotive
sales and the domestic home improvement sector. The continued volatile Rand
however continues to dampen export contributions, as the Group is a major
exporter of high quality float glass and automotive products.
Wispeco Holdings Limited (Wispeco)
Revenue for the period under review increased by 21.4% from R747 million to
R907 million due to higher aluminium prices worldwide as well as growth in
sales volumes partly resulting from the demise of AGI and the acquisition of
Sheerline. Despite this increase in revenue, headline earnings declined to
R38 million (2010: R63 million). This decline was caused largely by the
continued suppression of profit margins owing to continued growth in low cost
imports and local price competition in a market where supply exceeds demand.
The recovery and turnaround of the Sheerline business remains tenuous also
contributing to the weaker overall performance.
In the absence of a local supplier of extrusion billet (raw material) Wispeco
has been managing its billet inventories at higher levels than in previous
years. As a result Wispeco remained unaffected by billet supply disruptions
thereby maintaining high levels of customer service throughout the year.
The building industry remains key to the revival of demand growth in the local
market. Commercial building activity is expected to remain at present low levels
over the short term, while activity in the residential building sector is
expected to lead a gradual recovery in demand for architectural aluminium
products.
Wispeco continues to play the leading role in the development of skills in the
aluminium industry through wide ranging training initiatives. Wispeco also leads
the way with the development and supply of innovative energy efficient aluminium
window/door systems aimed at supporting the drive towards energy efficient
buildings.
MARC Group Limited (MARC)
MARC has a December year-end and its results for the 12 months to
31 December 2010 are included in Remgro`s results for the period under review.
MARC`s headline earnings for the year ending 31 December 2010 amounted to R30
million (2009: R39 million). Included in headline earnings is once-off FIFA
World Cup related earnings of R10 million (2009:
R22 million). The remaining sustainable earnings grew by 15.0% from
R20 million to R23 million. After allowing for the negative fair value
adjustment on the conversion right relating to the MARC convertible preference
shares its contribution to Remgro`s headline earnings for the period amounted to
R2 million.
MARC is an investment company in the sport and entertainment industry in Africa,
focusing on activations marketing and rights commercialisation as well as
certain joint ventures and investments in sports brands. The group operates in
13 different African countries of which South Africa, Nigeria and Kenya are the
biggest markets.
9. Treasury shares
At 31 March 2010, 3 424 044 Remgro ordinary shares (0.7%) were held as treasury
shares by a wholly owned subsidiary company of Remgro. As previously reported,
these shares were acquired for the purpose of hedging Remgro`s share schemes.
During the period under review no Remgro ordinary shares were repurchased, while
418 198 Remgro ordinary shares were utilised to settle Remgro`s obligation
towards scheme participants who exercised the rights granted to them.
At 31 March 2011, 3 005 846 Remgro ordinary shares (0.6%) were held as treasury
shares.
10. Cash resources at the centre
The Company`s cash resources at 31 March 2011 were as follows:
Local Offshore Total 2010
R`m R`m R`m R`m
Per consolidated statement of
financial position 2 412 2 326 4 738 3 827
Investment in money market funds - 1 711 1 711 1 812
Less: Cash of operating
subsidiaries (820) (19) (839) (977)
Cash at the centre 1 592 4 018 5 610 4 662
On 31 March 2011, approximately 43% (R1 711 million) of the available offshore
cash at the centre was invested in money market funds which are not classified
as cash and cash equivalents on the statement of financial position.
Directorate
Mr G T Ferreira, an independent non-executive director of Remgro, has been
appointed as lead independent director of the Company.
Mr Theo van Wyk has retired as an executive director from the Board of Remgro
with effect from 31 January 2011. Mr van Wyk also served on the Management
Board. The Board wishes to thank him for his valuable contribution over many
years.
Review report
The interim financial results have been reviewed by PricewaterhouseCoopers Inc.
and their unqualified review report on the summarised financial statements is
available for inspection at the registered office of the Company.
Dividends
As a result of the change in year-end, no dividend is proposed for the twelve
months ended 31 March 2011. The final dividend for the fifteen months ending 30
June 2011 will be declared in September 2011, payable in November 2011.
Signed on behalf of the Board of Directors.
Johann Rupert Thys Visser
Chairman Chief Executive Officer
Stellenbosch
21 June 2011
Annexure A
Composition of headline earnings
Twelve months Twelve months
ended ended
31 March 31 March
2011 2010
R`m R`m
Financial services
RMBH 959 720
FirstRand 912 635
Industrial interests
Medi-Clinic Corporation 474 460
Unilever SA Holdings 298 279
Distell Group 1 315 281
Rainbow Chicken 273 259
Tsb Sugar 114 227
Air Products South Africa 139 115
Nampak 33 73
Total South Africa 99 42
Kagiso Trust Investments 279 128
PGSI 9 83
Wispeco 38 63
Other industrial interests (20) (28)
Media interests
Sabido 116 11
MARC 2 5
Other media interests (84) 1
Mining interests
Implats 112 85
Trans Hex Group - 11
Technology interests
CIV group 2 87 7
SEACOM (40) -
Tracker 57 -
Other technology interests 3 6
Other investments 25 (64)
Central treasury 65 57
Other net corporate costs (101) (101)
Headline earnings 4 164 3 355
Weighted number of shares (million) 513.1 486.2
Headline earnings per share (cents) 811.6 690.1
1. Includes the investments in Capevin Investments Limited and Capevin Holdings
Limited.
2. Includes the investments in CIV Fibre Network Solutions (Pty) Limited, CIE
Telecommunications Limited, CIV Power Limited, Central Lake Trading No. 77 (Pty)
Limited and Dark Fibre Africa (Pty) Limited.
Annexure B
Composition of intrinsic net asset value
31 March 2011 31 March 2010
Book value Intrinsic Book value Intrinsic
value value
R`m R`m R`m R`m
Financial services
RMBH 9 829 12 447 6 400 9 785
RMI Holdings 6 394 6 041 - -
FirstRand 2 698 4 418 6 026 9 719
Industrial interests
Medi-Clinic Corporation 4 358 8 209 3 111 6 948
Unilever SA Holdings 2 994 5 001 3 109 4 346
Distell Group 1 1 967 4 738 1 798 4 430
Rainbow Chicken 2 076 3 906 1 956 3 412
Tsb Sugar 1 472 2 798 1 376 2 506
Air Products South Africa 571 2 180 536 1 752
Nampak - - 1 205 1 398
Total South Africa 743 1 556 631 1 080
Kagiso Trust Investments 1 478 1 504 1 213 1 269
PGSI 543 614 533 528
Wispeco 375 321 358 381
Other industrial interests 446 478 328 351
Media interests
Sabido 898 1 428 837 1 215
MARC 185 192 187 211
Other media interests 1 - 50 71
Mining interests
Implats 5 224 5 224 5 711 5 711
Trans Hex Group - - 65 106
Technology interests
CIV group 2 701 922 378 539
SEACOM 575 1 003 721 1 120
Tracker 587 1 196 574 911
Other technology interests 389 417 385 479
Other investments 825 514 573 399
Central treasury - cash at 5 610 5 610 4 662 4 662
the centre 3
Other net corporate assets 598 778 581 796
Net asset value (NAV) 51 537 71 495 43 304 64 125
Potential CGT liability 4 (1 582) (1 703)
NAV after tax 51 537 69 913 43 304 62 422
Issued shares after 513.6 513.6 513.2 513.2
deduction of shares
repurchased (million)
NAV after tax per share 100.34 136.12 84.38 121.64
(Rand)
Notes
1. Includes the investments in Capevin Investments Limited and Capevin
Holdings Limited.
2. Includes the investments in CIV Fibre Network Solutions (Pty) Limited, CIE
Telecommunications Limited, CIV Power Limited, Central Lake Trading No. 77
(Pty) Limited and Dark Fibre Africa (Pty) Limited.
3. Cash at the centre excludes cash held by subsidiaries that are separately
valued above (mainly Rainbow Chicken, Tsb Sugar and Wispeco).
4. The potential capital gains tax (CGT) liability, which is unaudited, is
calculated on the specific identification method using the most favourable
calculation for investments acquired before 1 October 2001 and also taking
into account the corporate relief provisions. Deferred CGT on investments
available-for-sale (mainly Implats and Caxton) is included in "other net
corporate assets" above.
5. For purposes of determining the intrinsic value, the unlisted investments
are shown at directors` valuation and the listed investments are shown at
stock exchange prices.
Directorate
Non-executive directors
Johann Rupert (Chairman), E de la H Hertzog (Deputy Chairman),
P E Beyers, G T Ferreira*, P K Harris*, N P Mageza*,
J Malherbe, P J Moleketi*, M M Morobe*, M A Ramphele*,
F Robertson*, H Wessels*
(*Independent)
Executive directors
M H Visser (Chief Executive Officer),
W E Buhrmann, L Crouse, J W Dreyer, J J Durand, J A Preller
Corporate information
Secretary
M Lubbe
Listing
JSE Limited
Sector: Industrials - Diversified Industrials
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 (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)
Website
www.remgro.com
Date: 21/06/2011 17:00:02 Supplied by www.sharenet.co.za
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