Wrap Text
Unaudited Results for
the Six Months Ended
31 December 2012
and Cash Dividend Declaration
REMGRO LIMITED
Registration number 1968/006415/06
ISIN ZAE000026480 Share code REM
INTERIM REPORT
UNAUDITED RESULTS FOR
THE SIX MONTHS ENDED
31 DECEMBER 2012
AND CASH DIVIDEND DECLARATION
SALIENT FEATURES
- Interim dividend per share: +15.1%
- Headline earnings per share: -35.1%
- Headline earnings per share, excluding Mediclinic
refinancing cost: +18.6%
- Intrinsic value per share at 31 December 2012, when
compared to 30 June 2012: +19.6%
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December 30 June
2012 2011 2012
R'm R'm R'm
ASSETS
Non-current assets
Property, plant and equipment 3 646 3 169 3 485
Biological agricultural assets 99 131 99
Investment properties 38 40 37
Intangible assets 363 327 356
Investments - Associated companies 42 490 37 112 38 321
- Joint ventures 153 267 130
- Other 1 996 5 886 1 587
Retirement benefits 171 154 164
Loans 199 112 115
Deferred taxation 6 7 6
49 161 47 205 44 300
Current assets 10 955 13 036 13 727
Inventories 2 147 1 984 2 002
Biological agricultural assets 497 431 476
Debtors and short-term loans 2 682 2 596 2 071
Investments in money market funds 2 448 2 335 2 344
Cash and cash equivalents 2 767 5 367 6 484
Other current assets 174 146 136
10 715 12 859 13 513
Assets held for sale 240 177 214
Total assets 60 116 60 241 58 027
EQUITY AND LIABILITIES
Stated and issued capital 3 605 3 605 3 605
Reserves 52 061 52 318 50 018
Treasury shares (485) (176) (169)
Shareholders' equity 55 181 55 747 53 454
Non-controlling interest 786 784 799
Total equity 55 967 56 531 54 253
Non-current liabilities 1 027 1 339 981
Retirement benefits 210 187 203
Long-term loans 137 155 105
Deferred taxation 680 997 673
Current liabilities 3 122 2 371 2 793
Trade and other payables 2 550 1 956 2 493
Short-term loans 505 211 279
Other current liabilities 67 204 21
Total equity and liabilities 60 116 60 241 58 027
Net asset value per share (Rand)
- At book value R107.62 R108.41 R103.93
- At intrinsic value R182.54 R142.99 R152.61
ABRIDGED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
31 December 31 December 30 June
2012 2011 2012
R'm R'm R'm
Sales 7 860 6 883 13 532
Inventory expenses (5 209) (4 221) (8 517)
Personnel costs (1 214) (1 126) (2 405)
Depreciation (187) (166) (354)
Other net operating expenses (890) (817) (1 484)
Trading profit 360 553 772
Dividend income 14 123 175
Interest received 105 99 243
Finance costs (15) (7) (21)
Negative goodwill 196 - -
Net impairment of investments, loans, assets and goodwill - (28) (295)
Profit on sale and unbundling of investments 12 1 247 4 421
Consolidated profit before tax 672 1 987 5 295
Taxation (138) (373) (462)
Consolidated profit after tax 534 1 614 4 833
Share of after-tax profit of associated companies and
joint ventures 1 373 2 385 4 532
Net profit for the period 1 907 3 999 9 365
Attributable to:
Equity holders 1 891 3 944 9 284
Non-controlling interest 16 55 81
1 907 3 999 9 365
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 2 304 3 012 6 094
Net impairment of investments, assets and goodwill (94) (9) (197)
Profit on the sale of investments 45 307 381
Other non-recurring and capital items (5) 1 38
Profit before tax and non-controlling interest 2 250 3 311 6 316
Taxation (768) (744) (1 405)
Non-controlling interest (109) (182) (379)
1 373 2 385 4 532
RECONCILIATION OF HEADLINE EARNINGS
Six months ended Year ended
31 December 31 December 30 June
2012 2011 2012
R'm R'm R'm
Net profit for the period attributable to equity holders 1 891 3 944 9 284
Plus/(minus):
- Negative goodwill (196) - -
- Net impairment of associates and joint ventures - 11 26
- Impairment of other investments - - 239
- Impairment of property, plant and equipment - - 3
- Recycling of foreign currency translation reserves - 59 94
- (Profit)/loss on sale of associates and joint ventures 1 (1 305) (1 056)
- Profit on sale of other investments (13) (1) (3 455)
- Net surplus on disposal of property, plant and equipment (8) (2) (79)
- Non-headline earnings items included in equity accounted earnings
of associated companies and joint ventures 49 (299) (241)
- Net surplus on disposal of property, plant and equipment (5) - (19)
- Profit on the sale of investments (45) (307) (381)
- Net impairment of investments, assets and goodwill 94 9 197
- Other non-recurring and capital items 5 (1) (38)
- Taxation effect of adjustments (5) 180 181
- Non-controlling interest - 62 117
Headline earnings 1 719 2 649 5 113
EARNINGS AND DIVIDENDS
Six months ended Year ended
31 December 31 December 30 June
2012 2011 2012
Cents Cents Cents
Headline earnings per share
Basic 334.4 515.5 994.6
Diluted 328.7 508.2 974.3
Earnings per share
Basic 367.8 767.5 1 805.9
Diluted 362.4 758.6 1 783.7
Dividends per share
Ordinary 145.00 126.00 314.00
Interim 145.00 126.00 126.00
Final 188.00
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
31 December 31 December 30 June
2012 2011 2012
R'm R'm R'm
Net profit for the period 1 907 3 999 9 365
Other comprehensive income, net of tax 1 177 1 318 (1 827)
Items that may be reclassified subsequently to the income
statement:
Exchange rate adjustments 233 762 792
Fair value adjustments for the period (162) (350) (866)
Deferred taxation on fair value adjustments (5) 47 199
Reclassification of reserves to the income statement (25) (6) (3 000)
Change in reserves of associated companies and
joint ventures 1 769 611 412
Items that will not be reclassified to the income statement:
Change in reserves of associated companies and
joint ventures (633) 254 636
Total comprehensive income for the period 3 084 5 317 7 538
Total comprehensive income attributable to:
Equity holders 3 068 5 262 7 457
Non-controlling interest 16 55 81
3 084 5 317 7 538
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
31 December 31 December 30 June
2012 2011 2012
R'm R'm R'm
Balance at the beginning of the period 54 253 52 330 52 330
Total comprehensive income for the period 3 084 5 317 7 538
Dividends paid (999) (1 139) (1 809)
Capital invested by minorities - 1 6
Other movements 2 (1) 1
Purchase of treasury shares by wholly owned subsidiary (405) - -
Long-term share incentive scheme reserve 32 23 84
Unbundling of investment - - (3 897)
Balance at the end of the period 55 967 56 531 54 253
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
31 December 31 December 30 June
2012 2011 2012
R'm R'm R'm
Cash generated/(utilised) from/(by) operations (89) (515) 949
Taxation paid (103) (213) (431)
Dividends received 1 526 1 719 3 150
Cash available from operating activities 1 334 991 3 668
Dividends paid (999) (1 139) (1 819)
Net cash inflow/(outflow) from operating activities 335 (148) 1 849
Investing activities (4 394) 1 032 124
Financing activities 47 16 139
Net increase/(decrease) in cash and cash equivalents (4 012) 900 2 112
Increase in money market funds (104) (610) (619)
Exchange rate profit on foreign cash 188 567 586
Cash and cash equivalents at the beginning of the
period 6 394 4 315 4 315
Cash and cash equivalents at the end of the period 2 466 5 172 6 394
Cash and cash equivalents per statement of
financial position 2 767 5 367 6 484
Bank overdraft (301) (195) (90)
ADDITIONAL INFORMATION
31 December 31 December 30 June
2012 2011 2012
Number of shares in issue
- Ordinary shares of no par value
(31 December 2011: 1 cent each) 481 106 370 481 106 370 481 106 370
- Unlisted B ordinary shares of no par value
(31 December 2011: 10 cents each) 35 506 352 35 506 352 35 506 352
Total number of shares in issue 516 612 722 516 612 722 516 612 722
Number of shares held in treasury
- Ordinary shares repurchased and held in treasury (3 862 662) (2 378 920) (2 279 155)
512 750 060 514 233 802 514 333 567
Weighted number of shares 514 106 204 513 901 431 514 090 014
In determining earnings per share and headline earnings per share the weighted number of shares was taken into account.
Statutory matters
During the period under review the Company adopted a new Memorandum of Incorporation. The new Memorandum of
Incorporation substituted the existing Memorandum and Articles of Association of the Company, in compliance with the
Companies Act (No. 71 of 2008), as amended.
Simultaneously, the Company's authorised and issued ordinary shares with a par value of R0.01 each were converted into
authorised and issued ordinary shares of no par value and the authorised and issued B ordinary shares with a par value of R0.10
each were converted into authorised and issued B ordinary shares of no par value. As a result the Company's share premium also
converted to stated capital.
31 December 31 December 30 June
2012 2011 2012
R'm R'm R'm
Listed investments
Associated
- Book value 28 573 24 474 25 713
- Market value 55 358 33 335 40 601
Other
- Book value 710 5 172 768
- Market value 710 5 172 768
Unlisted investments
Associated
- Book value 13 917 12 638 12 608
- Directors' valuation 26 516 21 116 23 464
Joint ventures
- Book value 153 267 130
- Directors' valuation 153 264 130
Other
- Book value 1 286 714 819
- Directors' valuation 1 286 714 819
Additions to and replacement of property, plant and
equipment 351 246 771
Capital and investment commitments 4 715 2 630 5 678
(Including amounts authorised, but not yet contracted for)
Guarantees and contingent liabilities* 2 232 2 313 2 420
Dividends received from associated companies and joint ventures
set off against investments 1 495 1 606 2 942
* The guarantees and contingent liabilities relate primarily to three unresolved tax disputes with SARS. Two of the disputes
(amounting together to R1 158 million) relate to the buy-back and cancellation of treasury shares, while the third dispute
(amounting to R755 million) is in connection with the disposal of investments. Both amounts include interest. Based on legal
opinion received, all the assessments are in dispute.
The appeal of the assessment to the Tax Court relating to the first treasury share dispute was successful with judgement in
Remgro's favour. SARS has appealed the Tax Court judgement in part only, thus decreasing the contingent liability in this
dispute by R211 million (including interest). The remaining issues will now be addressed before the Supreme Court of Appeal.
COMMENTS
1. 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. 71 of 2008), as amended, and the Listings Requirements of the JSE
Limited. The financial statements have been prepared under the supervision of the Chief Financial Officer, Leon
Crouse CA(SA).
These financial statements incorporate accounting policies that are consistent with those of the previous financial
periods, with the exception of the implementation of the amendments to IAS 1: Presentation of Financial
Statements. The adoption of the amended accounting standard only affected disclosure and had no impact on the
results of either the current or prior periods.
2. COMPARISON WITH PRIOR PERIOD
During October 2012 Mediclinic International Limited (Mediclinic) incurred material once-off charges relating to
the comprehensive refinancing of its Swiss and South African debt. These once-off items included the following:
- the derecognition of the mark-to-market liability relating to the Swiss interest rate swap of CHF418 million
(no tax relief has been recognised since the tax position has not been finalised);
- accelerated amortisation charges of Swiss capitalised financing expenses of CHF18 million;
- breakage charges of R55 million relating to existing South African debts; and
- a realised gain of R574 million on foreign exchange forward contracts.
Due to the fact that Mediclinic has a March year-end, Remgro would normally only have accounted for Mediclinic's
results for the six months ended 30 September 2012 (without making any adjustments) when preparing its interim
results for the six months ended 31 December 2012. However, due to the materiality of the amounts involved, the
results of Mediclinic for the six months ended 30 September 2012 were adjusted with the items referred to above
before being accounted for in Remgro's interim results for the six months ended 31 December 2012.
Remgro's share of these adjustments amounted to a loss of R1 423 million.
3. RESULTS
Headline earnings
For the period under review headline earnings decreased by 35.1% from R2 649 million to R1 719 million, while
headline earnings per share also decreased by 35.1% from 515.5 cents to 334.4 cents.
However, excluding the effect of the once-off items relating to Mediclinic's refinancing transaction referred to in 2
above, headline earnings increased by 18.6% from R2 649 million to R3 142 million, while headline earnings per
share also increased by 18.6% from 515.5 cents to 611.2 cents, as presented in the table below.
Contribution to headline earnings
Six months ended Year ended
31 Dec 31 Dec 30 June
2012 % 2011 2012
R'm Change R'm R'm
Financial services 1 315 15.8 1 136 2 538
Industrial interests 216 (83.8) 1 334 2 236
Media interests 52 33.3 39 93
Mining interests - (100.0) 112 148
Technology interests 33 6.5 31 77
Other investments 17 30.8 13 22
Central treasury 120 100.0 60 140
Other net corporate costs (34) 55.3 (76) (141)
Headline earnings 1 719 (35.1) 2 649 5 113
Mediclinic refinancing cost 1 423 - - -
Headline earnings, excluding Mediclinic
refinancing cost 3 142 18.6 2 649 5 113
Refer to Annexures A and B for segmental information.
Financial services
The contribution from financial services to Remgro's headline earnings amounted to R1 315 million
(2011: R1 136 million), representing an increase of 15.8%. It should be noted that Remgro's effective interests in
RMBH and RMI changed materially since December 2011 due to Remgro selling a portion of its interest in these
entities to Royal Bafokeng Holdings (Pty) Limited. Both FirstRand and RMBH reported good results for the six
months ended 31 December 2012, mainly due to strong operational performances by FNB, WesBank and RMB.
RMI reported good results with an 18.0% growth in headline earnings, with good earnings growth by Discovery
(20.4%) and MMI Holdings (68.3%), being offset by 13.7% lower earnings in OUTsurance.
Industrial interests
The contribution of the industrial interests to headline earnings for the period under review decreased by 83.8% to
R216 million (2011: R1 334 million), mainly due to the effect of the once-off items relating to Mediclinic's
refinancing transaction referred to earlier. Excluding these once-off items, the contribution of the industrial
interests to headline earnings increased by 22.9% to R1 639 million. Unilever's contribution to Remgro's headline
earnings increased by 27.1% to R277 million (2011: R218 million). This increase is mainly due to an increase in
sales volumes, as well as improved margins. Distell's contribution to headline earnings, which includes the
investments in Capevin Holdings and Capevin Investments, amounted to R295 million (2011: R261 million). This
improved performance is mainly due to an increase in sales volumes. Rainbow's contribution to headline earnings
for the period under review amounted to R39 million (2011: R149 million). Rainbow is currently experiencing
difficult trading conditions, with its results being significantly impacted by record levels of cheap imports and high
input costs. Tsb Sugar's contribution to Remgro's headline earnings amounted to R258 million
(2011: R308 million). This decrease is mainly due to a lower cane throughput at Tsb Sugar's mills resulting from
the transport industrial action and adverse climatic conditions. Air Products produced lower earnings with a
contribution to headline earnings of R91 million (2011: R96 million). Grindrod contributed R57 million to
headline earnings for the period under review (2011: R13 million for the two months since acquisition). Remgro's
share of the results of KTH for the period under review amounted to R123 million (2011: R37 million loss). It
should be noted that in the comparative period, KTH's results were negatively impacted by unfavourable fair value
adjustments relating to certain investee companies. Total South Africa's contribution to Remgro's headline
earnings amounted to R146 million (2011: R117 million). As in the comparative period, Total South Africa's
results for the period under review were again impacted by substantial favourable stock revaluations.
Media interests
Media interests consist primarily of the interests in Sabido, MARC and Premier Team Holdings (PTH). Sabido's
contribution to Remgro's headline earnings amounted to R78 million (2011: R72 million). PTH's contribution to
headline earnings amounted to a loss of R20 million (2011: loss of R18 million). In the comparative period a loss
of R16 million was accounted from the investment in One Digital Media, which investment was sold during
April 2012.
Mining interests
Until the unbundling of Implats to Remgro shareholders during June 2012, Implats was the only remaining
investment being reported under mining interests. In the comparative period dividends received from Implats
amounted to R112 million.
Technology interests
Technology interests primarily represent the interests in the CIV group of companies and the investment in
SEACOM. For the period under review the CIV group contributed R34 million to Remgro's headline earnings
(2011: R37 million). SEACOM reported a headline loss of R30 million for the period under review
(2011: R75 million loss), with Remgro's share of this loss amounting to R7 million (2011: R19 million loss).
Other investments
The contribution of other investments to headline earnings amounted to R17 million (2011: R13 million), of which
Business Partners' contribution was R13 million (2011: R8 million).
Central treasury and other net corporate costs
The contribution from the central treasury division amounted to R120 million (2011: R60 million). This increase
mainly resulted from unrealised foreign exchange profits of R59 million on the hedging of the repatriation of a
portion of Remgro's offshore cash balances in anticipation of the planned Rainbow rights offer early in
March 2013. Other net corporate costs amounted to R34 million (2011: R76 million). This decrease is mainly the
result of the net after-tax underwriting fee of R46 million received on the Mediclinic rights offer.
Total earnings
Total earnings decreased by 52.1% to R1 891 million (2011: R3 944 million), mainly as a result of the losses relating
to Mediclinic's refinancing transaction amounting to R1 423 million accounted for during the period under review,
as well as capital gains amounting to R1 099 million accounted for in the comparative period on the disposal of
RMBH shares and RMI shares to Royal Bafokeng Holdings (Pty) Limited, the disposal of Tracker and the KTI and
Tiso merger.
4. INTRINSIC VALUE
Remgro's intrinsic value per share increased by 19.6% from R152.61 at 30 June 2012 to R182.54 at
31 December 2012. Refer to Annexure B for full details.
5. INVESTMENT ACTIVITIES
The most important investment activities during the period under review were as follows:
Mediclinic International Limited (Mediclinic)
During October 2012, Mediclinic completed a comprehensive refinancing of its Swiss and South African debt. As
part of the transaction Mediclinic raised new equity amounting to R5.0 billion through a rights offer which Remgro
agreed to underwrite.
In terms of the rights offer, Remgro acquired a further 75 788 206 Mediclinic shares for a total consideration of
R2 169.8 million. As the rights offer was oversubscribed, Remgro did not acquire any additional shares in
Mediclinic in terms of the underwriting agreement. On 31 December 2012 Remgro's effective interest in Mediclinic
was 44.5% (30 June 2012: 45.0%).
Rainbow Chicken Limited (Rainbow)
On 14 November 2012, Rainbow announced its acquisition of an effective 64.2% interest in New Foodcorp Holdings
(Pty) Limited (Foodcorp) for a total consideration of R1 037 million. The transaction is subject to Competition
Commission approval which is anticipated in March 2013. Foodcorp brings a strong portfolio of brands into the
Rainbow stable and will help to diversify Rainbow's earnings stream into different products and markets.
On 4 February 2013, it was also announced that Rainbow concluded an agreement for the purchase of a 49%
shareholding in Zam Chick Limited (Zam Chick) for $14.25 million. Zam Chick is the broiler operation of Zambeef
plc of Zambia, itself a fully integrated agribusiness listed on the Lusaka and London stock exchanges. This intended
transaction is aligned to Rainbow's strategy to expand into sub-Saharan Africa and is subject to regulatory approval
in both Zambia and South Africa.
Rainbow will fund the purchase consideration of both acquisitions referred to above out of a portion of the proceeds
of the R3.9 billion rights offer that was completed early in March 2013. Together with the shares acquired as
underwriter of the rights offer, Remgro acquired a further 219.6 million Rainbow shares for a total consideration of
R3 118.6 million, thereby increasing its effective interest in Rainbow to 76.2% (30 June 2012: 73.4%).
Pembani Remgro Infrastructure Fund (PRIF)
PRIF has been established as a joint initiative between Remgro and Phuthuma Nhleko and focuses on investments in
infrastructure companies and projects (and related industries) within Africa. During November 2012, Remgro
invested R500 million in PRIF which was used to partly fund its $75 million investment in the Export Trading Group
(ETG). ETG owns and manages a vertically integrated agriculture infrastructure supply chain in sub-Saharan Africa
with operations in procurement, processing, warehousing, logistics, distribution and merchandising.
Kagiso Tiso Holdings (Pty) Limited (KTH)
During August 2012, Remgro increased its shareholding in KTH by acquiring a further 7.2% interest for a total
amount of R486.1 million, thereby increasing its interest from 25.1% to 32.3%.
Grindrod Limited (Grindrod)
During the period under review Remgro acquired a further 9 178 903 Grindrod shares for a total amount of
R135.8 million. These acquisitions increased Remgro's effective interest in Grindrod to 25.0% (24.6% on a fully
diluted basis), compared to 23.5% on 30 June 2012.
Business Partners Limited (Business Partners)
During the period under review Remgro acquired a further 21 768 223 Business Partners shares for a total amount
of R120.3 million. On a fully diluted basis, Remgro's interest in Business Partners increased to 41.1%
(30 June 2012: 29.0%).
Capevin Holdings Limited (Capevin Holdings)
During August 2012, Capevin Holdings acquired all the shares in Capevin Investments Limited (Capevin
Investments) not already held by it through the issue of 21 Capevin Holdings shares for every 1 Capevin Investments
share acquired.
The transaction did not affect Remgro's indirect interest in Distell Group Limited, which remained unchanged at
33.5%.
MARC Group Limited (MARC)
During November 2012, it was announced that the intended transaction between Kagiso Media Limited (Kagiso
Media) and Remgro in terms of which Kagiso Media would have acquired 100% of the shares in Trinergy Brand
Connectors (Pty) Limited, Experiential Marketing (Pty) Limited and EXP Momentum Limited, as well as the 50%
indirect interest in Blue Bulls Company (Pty) Limited held by MARC, was unsuccessful.
Other smaller investments, amounting to R362 million, were made during the period under review in, inter alia,
the Milestone China Funds and Premier Team Holdings Limited.
6. 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 six months to 31 December 2012
increased by 27.1% to R277 million (2011: R218 million), mainly due to turnover growth and higher margins.
Included in Remgro's share of Unilever's earnings are restructuring costs amounting to R31 million
(2011: R15 million), increasing mainly as a result of dual running and transition costs incurred on the
commissioning of a new Savoury factory.
Unilever South Africa's turnover for the six months to 31 December 2012 increased by 11.5% to R8 563 million
(2011: R7 680 million), primarily driven by increased volumes in the Home Care, Beauty, Ice Cream and
Savoury & Dressings categories coupled with the recovery of price increases in commodities and new
innovations. The acquisition of Sara Lee and Oral Care brands also had a positive contribution to the increase in
turnover.
The company's profit after tax for the six-month period under review decreased by 3.9% to R1 063 million
(2011: R1 106 million) mainly due to an after-tax profit of R267 million on the sale of the Sanex and Status
brands included in the prior period's earnings.
Tsb Sugar Holdings (Pty) Limited (Tsb Sugar)
Tsb Sugar's contribution to Remgro's headline earnings for the period under review amounted to R258 million
(2011: R308 million). This decrease was mainly due to a lower cane throughput at Tsb Sugar's mills, due to the
transport industrial action and adverse climatic conditions.
Turnover increased by 13.1% for the period under review from R2 441 million to R 2 761 million. 15.4% of turnover
is represented by exports. The increase is mainly attributable to increased sugar prices and an increase in export
volumes.
Tsb Sugar's raw sugar production for the period under review decreased by 20% to 339 975 tons (2011: 424 863
tons) while the South African Sugar industry's production for the same period decreased by 8.4%. The decrease in
Tsb Sugar's production is mainly attributed to the countrywide transport strike and unfavourable climatic conditions
which led to the under-utilisation of milling capacity. The planned extension in the length of the new season should
significantly reduce the current cane backlog.
The Royal Swaziland Sugar Corporation's contribution to Tsb Sugar's headline earnings for the period was
R107 million (2011: R85 million). The increase was mainly due to increased production and better sugar and ethanol
prices.
Air Products South Africa (Pty) Limited (Air Products)
Air Products has a September year-end and therefore its results for the six months ended 30 September 2012 have
been included in Remgro's results for the period under review. Air Products' contribution to Remgro's headline
earnings for the period under review decreased by 5.2% to R91 million (2011: R96 million).
Turnover for Air Products' six months ended 30 September 2012 increased by 11.2% to R875 million
(2011: R787 million), while the company's operating profit for the same period decreased by 4.2% to R277 million
(2011: R289 million). Operating profit for the prior period was positively impacted by mark-to-market profits of
R30 million on forward exchange contracts to cover imports of capital equipment.
Air Products is the largest manufacturer of industrial gases in Southern Africa. Air Products also imports and
distributes a variety of specialty gases and chemical products that are supplied to a wide range of industries,
including steel, chemicals, oil refining, resource minerals, glass, pulp and paper, food packaging as well as general
manufacturing, fabrication and welding.
Demand for large tonnage industrial gases has shown little sign of recovery as steel output and resources demand
remain muted. The outlook for volumes in these sectors remains uncertain, but bulk liquid and packaged gases
volume remains steady and has shown year-on-year growth.
Sabido Investments (Pty) Limited (Sabido)
Remgro has an effective interest of 31.6% in Sabido which has a range of media interests, which includes South
Africa's only private free-to-air television channel, e.tv, its sister news service, eNews Channel Africa (eNCA),
Gauteng-based radio station, Yfm and various studio and facilities businesses.
Sabido has a March year-end and therefore its results for the six months ended 30 September 2012 have been
included in Remgro's results for the period under review. Sabido's contribution to Remgro's headline earnings for
the period under review amounted to R78 million (2011: R72 million). This amount includes a charge of R5 million
(2011: R5 million) relating to the amortisation of intangible assets, identified as part of the acquisition of VenFin
Limited during November 2009.
Despite aggressive growth in pay television, which is impacting on audience share for free-to-air services, e.tv has
managed to hold its own against the increasing competition. All Media Products Survey (AMPS) figures for
June 2012 showed a 2.6% growth for e.tv, ahead of the industry's 1.2% growth, taking its reach to 16.5 million
viewers. However, audience and advertising share are increasingly under pressure from pay-TV as the continued
delays in the launch of digital terrestrial television prevent free-to-air services from providing multi-channel
offerings. The future of free-to-air television in South Africa, including e.tv, is critically dependent on the
availability of a free-to-air platform which can compete effectively with the dominant pay-TV player.
e.sat tv's primary operating business, eNCA, benefited from subscriber growth in the DStv Compact platform and
retained its position as the premier news service on DStv. eNCA launched on the Sky digital platform in the United
Kingdom during August 2012, making it available to 10 million UK households and the service is now available
internationally on online platform Livestation. eNCA continues to provide syndicated services to e.tv, e.tv Africa,
The Africa Channel (UK) and KykNET (via its eNuus brand).
Advertising sales on e.tv, eNCA and Yfm were under pressure during the period under review but programming
and operating costs remained stable. The studios and facilities businesses performed as expected with the exception
of post-production business, The Refinery, which is experiencing difficult market conditions.
The focus of the group for the forthcoming months is the ongoing development of a multi-channel strategy to
enhance its competitiveness across a multiplicity of platforms and provide opportunities for new revenue streams.
This includes the launch of e.tv Online and eNCA Online in the first half of 2013.
Kagiso Tiso Holdings (Pty) Limited (KTH)
KTH is a leading black-owned investment company with in excess of R15 billion in assets and a net asset value of
R9 billion. KTH has a strong and diversified asset portfolio covering the resources, industrial, media, financial
services, healthcare, property and information technology sectors.
KTH has a June year-end and therefore its results for the six months ended 31 December 2012 have been included
in Remgro's results for the period under review. KTH's contribution to Remgro's headline earnings for the period
under review amounted to R123 million (2011: loss of R37 million). It should be noted that in the comparative
period, KTH's results were negatively impacted by unfavourable fair value adjustments relating to investments in
Exxaro Resources Limited and Aveng Limited. Results for the period under review were impacted by positive fair
value adjustments on investments in MMI Holdings Limited (R463 million) and Emira Property Fund
(R72 million), partially offset by negative fair value adjustments on investments in Exxaro Resources Limited
(R353 million) and Adcock Ingram Holdings Limited (R97 million).
Income from equity accounted investments amounted to R184 million (2011: R166 million), with major
contributions from its investments in XK Platinum Partnership and Actom Investment Holdings (Pty) Limited. A
special dividend of R55 million has also been received from MMI Holdings Limited during the period under
review.
KTH has a well-defined investment and business strategy, a sound asset and capital base and an experienced and
diverse management team which positions the group as a leading black-owned and managed investment company.
Total South Africa (Pty) Limited (Total)
Total has a December year-end and therefore its results for the six months ended 31 December 2012 have been
included in Remgro's results for the period under review. Total's contribution to Remgro's headline earnings for
the period under review amounted to R146 million (2011: R117 million).
Total's turnover for the six months to 31 December 2012 increased by 12.9% from R15 378 million to
R17 365 million, while operating profit increased to R780 million (2011: R630 million). The improved
performance results mainly from stock revaluation gains of R463 million (2011: gains of R300 million), as the
international oil price increased from US$94 per barrel, at 30 June 2012, to US$112 per barrel at
31 December 2012.
Retail sales of petroleum products achieved lower levels than during 2011. The demand for petroleum products in
the retail business has decreased due to petrol pump prices above the R11 per litre level and consumer reaction
thereto. Market share of Total's main fuels is deemed to have slightly decreased between 2011 and 2012, also due
to focus on higher margin sales in the general trade business.
The company is intensifying its investments regarding the health, safety, environment and quality constraints, at its
depots as well as at its service stations. In particular, Total has launched a project to make sure all its service
stations are fully compliant with Total Group norms, which are more onerous than those of South Africa.
Natref (in which Total has an interest of 36.4%) experienced a planned global shutdown of the refinery during
October 2012, which negatively impacted production during the period. Refining margins have continued to
recover, due to favourable market prices for gasoline and jet fuel, and have reached higher levels during 2012.
SEACOM Capital Limited (SEACOM)
Remgro has an effective interest of 25.0% in SEACOM which launched the first 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 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 six months ended 31 December 2012 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 R7 million (2011: loss of R19 million). SEACOM is however
cash flow positive and Remgro has received dividends of R59 million from SEACOM during the period under
review, bringing the cumulative dividends received since the acquisition of VenFin Limited to R239 million.
SEACOM provides high-capacity international fibre-optic bandwidth to customers in the form of indefeasible right
of use (IRUs), leases and maintenance charges, where most of the revenue is accounted for over 20 years. Delays
with the implementation of the cable through Egypt, have resulted in additional unforeseen operational costs which
are not expected to recur in future. SEACOM maintains a proactive approach to ensuring profitability, by
implementing various initiatives to cut back on costs.
With the arrival of WACS (the West African Cable System), a competitor to SEACOM in sub-Saharan Africa, and
recent upgrades to the EASSy system, its East coast competitor, increased supply continues to drive regular price
declines into the market.
Fortunately with affordability improving, demand elasticity is playing its part positively ensuring that demand grows
above expectations. Furthermore, ongoing reductions in terrestrial costs (mobile operator deals and other operators
such as Dark Fibre Africa and FibreCo) and increased need for reliable protected routes around Africa are also
leading to increased demand. SEACOM's ability to change with the rapidly evolving market and respond to demand
faster than others is critical to maintain its ongoing competitive positioning.
Community Investment Ventures Holdings (Pty) Limited (CIV)
Remgro has an effective interest of 43.8% in the CIV group which is active in the telecommunications and
information technology sectors. The group has decided to focus on the Telecommunications Infrastructure market
and as a consequence the company is in the process of disposing of companies that are not directly aligned with this
market. All of the power industry investments (CIV Power) have already been sold. The balance of the non-core
operating assets in the Telecommunications (CIE Telecommunications) portfolio is at various stages in the disposal
process. The key operating company is Dark Fibre Africa (DFA) which constructs and owns fibre-optic networks.
The CIV group has a March year-end and therefore its results for the six months ended 30 September 2012 have
been included in Remgro's results for the period under review. The CIV group's contribution to Remgro's headline
earnings for the period under review amounted to R34 million (2011: R37 million), of which the major contributors
were CIE Telecommunications (R18 million) and DFA (R10 million).
It is anticipated that CIV group's future growth will be DFA and other potential aligned investment opportunities.
DFA's revenue for the period under review increased by 41.1% to R302 million (2011: R214 million) underpinned
by solid growth in annuity revenue. One of the main operating challenges that DFA faces is the slower than
anticipated customer site build that affects DFA's ability to link the sites to the fibre network. Another challenge is
the delay in way leave approvals from municipalities and road authorities which prevent DFA from completing
fibre rings on time. Both these challenges delay revenue income generation to offset increasing depreciation and
finance charges incurred on network rollout costs, resulting in lower earnings for the period under review.
DFA has embarked on an aggressive roll out of the network. Once a section of network is completed, the asset is
recognised and then depreciation on the full infrastructure cost and finance charges incurred. The current value of
the fibre-optic network is in excess of R3 billion.
DFA has fibre network rings in Johannesburg, Cape Town, Durban (expanding to Pietermaritzburg), Midrand,
Centurion and Pretoria. During the past year, the network has been expanded to a further 15 smaller towns. The
Johannesburg ring is regarded as one of the most important communication rings in Africa. At 31 December 2012, a
total distance of 6 915 km has been completed in the major metropolitan areas and on long-haul routes. Long-haul
routes include Durban to the SEACOM landing station in Mtunzini, which route was extended through Empangeni
to Gauteng. DFA also completed building a long-haul route to link Cape Town to the WACS (West African Cable
System) undersea cable landing station in Yzerfontein. WACS has the largest capacity of all the undersea cables to
South Africa. In 2010 DFA commenced with the fibre-to-tower project linking mobile phone operators' base stations
to the core communication rings, and the project will continue through 2013 and beyond as demand for mobile
backhaul increases due to, amongst others, a strong growth in data demand by smart phones. Mobile backhaul is a
major growth driver for DFA due to the increased demand for mobile broadband. DFA has 4 069 base transceiver
station sites on the network that cover three of the four mobile operators.
DFA has signed commercial lease agreements with 41 customers that have Electronic Communication Network
Licences ranging from the largest incumbents to small niche operators. The revenue model is flexible to adapt to the
customers' needs and is to either sell an IRU which is a lump sum in advance or on an annuity basis with multi-year
contracts. Presently approximately 63% of revenue is annuity which ensures good visibility for the foreseeable
future.
PGSI Limited (PGSI)
PGSI's contribution to Remgro's headline earnings for the six months to 31 December 2012 amounted to
R10 million (2011: R3 million), which includes a negative fair value adjustment of R5 million (2011: R5 million)
on the conversion right attached to PGSI preference shares.
PGSI's turnover for the period under review increased by 4.2% from R1 607 million to R1 675 million, while its
operating profit before depreciation and amortisation (EBITDA) amounted to R194 million (2011: R133 million).
The increase in EBITDA was driven by an improvement in the economic climate both domestically and
internationally, and a weakening in the rand-currency. While the economic climate is showing some improvements
it still appears fragile and uncertain. The fall-out of some domestic players and the closure of float lines in Europe
and USA, have, however, resulted in reduced overall supply.
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 domestic building sector. While the low-cost housing sectors have shown
some positive growth, commercial buildings and the middle and upper-class home sectors are lagging and continue
to experience slow glass demand. Excess global and local manufacturing capacity has resulted in reduced margins
on a number of product lines. The lower domestic demand also led to increased capacity which was exported and
resulted in an adverse domestic/export sales mix. Growth in new car sales was positive which assisted sales from
the Shatterprufe division. However, the export vehicle build was lower than in the prior period due to the weaker
export demand for local Original Equipment Manufacturers.
The difficult market conditions for manufacturing in South Africa over the past few years have been further
exacerbated by a very volatile rand, but the current levels of the rand will have a positive impact on the business, as
the group will benefit from increased export earnings and reduced import volumes. The PG Group has embarked on
a number of initiatives to improve profitability in this difficult trading environment, including the reorganisation of
management structures to focus on opportunities as well as efficiency, cost reduction and increasing yields at all
manufacturing facilities, which are all starting to show positive impacts on earnings.
Wispeco Holdings Limited (Wispeco)
Turnover for the six months ended 31 December 2012 increased by 11.2% to R598 million (2011: R538 million).
This growth in turnover was primarily driven by increased sales volumes, while prices only started to increase
towards the end of the period. Headline earnings for the period under review increased by 20.8% to R29 million
(2011: R24 million), mainly due to the higher turnover, containment of costs and protection of gross margins in a
period of continued intense competition amongst local extruders and importers.
The increasing importance of the processing of recycled aluminium supports Wispeco's initiatives to reduce its
carbon footprint. Wispeco is continuously focusing on productivity and efficiency improvements in its main
manufacturing divisions to enhance competitiveness against local and foreign competitors.
Wispeco's range of architectural products under the Crealco brand is increasing and more products and software
support programmes directed towards the development of energy-efficient buildings are being introduced.
The emerging renewable energy market, in particular demand from the proposed solar power generation plants
(both photovoltaic and concentrated solar power), started slower than expected, but the first orders for locally
manufactured aluminium extrusions have now been received and should create a steady stream for the next few
years.
MARC Group Limited (MARC)
MARC is a pan-African investment company that focuses on marketing, communication and rights
commercialisation in the sport and entertainment industry. This includes various strategic subsidiary and equity
investments in activations marketing, sponsorships management, events management, ticketing and rugby. The
group operates in 16 different African countries of which South Africa, Nigeria and Kenya are the biggest markets.
The investment in MARC has been classified as a non-current asset held for sale with effect from 30 June 2012 and
therefore its results have not been included in Remgro's results for the period under review.
MARC's net profit of R10 million (2011: R2 million) for the six months to 31 December 2012 was positively
impacted by the solid growth in its operations in Nigeria, Kenya and South Africa.
MARC has disposed of its investments in Griffons Rugby (Pty) Limited and House of the Brave (Pty) Limited
during the period under review. MARC also unbundled its BEE shareholding vehicle which now results in Remgro
owning 78.3% of MARC.
7. TREASURY SHARES
At 30 June 2012, 2 279 155 Remgro ordinary shares (0.5%) 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 incentive schemes.
During the period under review Remgro repurchased a further 2 710 000 Remgro ordinary shares at an average price
of R149.56 per share for a total amount of R405.3 million, while 1 126 493 Remgro ordinary shares were utilised to
settle Remgro's obligation towards scheme participants who exercised the rights granted to them.
At 31 December 2012, 3 862 662 Remgro ordinary shares (0.8%) were held as treasury shares.
DIRECTORATE
Mr P E Beyers has retired as a non-executive director from the Board of Remgro with effect from 31 January 2013.
Mrs M A Ramphele has resigned as an independent non-executive director from the Board of Remgro with effect from
31 January 2013. The Board of Remgro also approved the retirement of Mrs J A Preller as an executive director from the
Board with effect from 31 March 2013.
The Board wishes to thank these directors for their valuable contribution over many years.
DECLARATION OF CASH DIVIDEND
Secondary tax on companies (STC) and dividend tax
With effect from 1 April 2012, STC was replaced with a dividend tax. In terms of the new legislation, companies will be
allowed to apply their available STC credits against future dividends declared for a period of three years from the effective
date of dividend tax.
Declaration of Dividend No. 25
Notice is hereby given that an interim gross dividend of 145 cents (2011: 126 cents) per share has been declared out of
income reserves in respect of both the ordinary shares of no par value and the unlisted B ordinary shares of no par value, for
the half-year to 31 December 2012.
The Company will be utilising STC credits amounting to 145 cents per ordinary share and 145 cents per unlisted B ordinary
share. As a result there will be no dividend tax deducted from the interim gross dividend for any Remgro shareholder.
The issued share capital at the declaration date is 481 106 370 ordinary shares and 35 506 352 B ordinary shares. The income
tax number of the Company is 9500-124-71-5.
Dates of importance:
Last day to trade in order to participate in the final dividend Friday, 12 April 2013
Shares trade ex dividend Monday, 15 April 2013
Record date Friday, 19 April 2013
Payment date Monday, 22 April 2013
Share certificates may not be dematerialised or rematerialised between Monday, 15 April 2013, and Friday, 19 April 2013,
both days inclusive.
In terms of the Company's Memorandum of Incorporation dividends will only be transferred electronically to the bank
accounts of shareholders, while dividend cheques will no longer be mailed. If you have in the past received dividend
cheques, please contact the Transfer Secretaries to provide them with confirmation of your banking details.
Signed on behalf of the Board of Directors.
Johann Rupert Jannie Durand
Chairman Chief Executive Officer
Stellenbosch
19 March 2013
DIRECTORATE
Non-executive directors
Johann Rupert (Chairman), E de la H Hertzog (Deputy Chairman),
G T Ferreira*, P K Harris*, N P Mageza*,
J Malherbe, P J Moleketi*, M M Morobe*,
F Robertson*, H Wessels*
(*Independent)
Executive directors
J J Durand (Chief Executive Officer),
W E Bührmann, L Crouse, J W Dreyer, J A Preller
CORPORATE INFORMATION
Secretary
M Lubbe
Listing
JSE Limited
Sector: Industrials Diversified Industrials
Business address and registered office
Millennia Park, 16 Stellentia Avenue, Stellenbosch 7600
(PO Box 456, Stellenbosch 7599)
Transfer Secretaries
Computershare Investor Services (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)
Website
www.remgro.com
ANNEXURE A
COMPOSITION OF HEADLINE EARNINGS
Six months ended
31 December 31 December
2012 2011
R'm R'm
Financial services
RMBH 686 594
FirstRand 289 227
RMI Holdings 340 315
Industrial interests
Mediclinic (1 109) 191
Unilever SA Holdings 277 218
Distell Group(1) 295 261
Rainbow Chicken 39 149
Tsb Sugar 258 308
Air Products South Africa 91 96
Grindrod 57 13
KTH 123 (37)
Total South Africa 146 117
PGSI 10 3
Wispeco 29 24
Other industrial interests - (9)
Media interests
Sabido 78 72
MARC - 1
Other media interests (26) (34)
Mining interests
Implats - 112
Technology interests
CIV group(2) 34 37
SEACOM (7) (19)
Other technology interests 6 13
Other investments 17 13
Central treasury 120 60
Other net corporate costs (34) (76)
Headline earnings 1 719 2 649
Weighted number of shares (million) 514.1 513.9
Headline earnings per share (cents) 334.4 515.5
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 (Pty) Limited, CIV Power
(Pty) Limited, Central Lake Trading No. 77 (Pty) Limited and Dark Fibre Africa (Pty) Limited.
ANNEXURE B
COMPOSITION OF INTRINSIC NET ASSET VALUE
31 December 2012 30 June 2012
Book value Intrinsic value Book value Intrinsic value
R'm R'm R'm R'm
Financial services
RMBH 9 808 16 053 9 438 13 758
FirstRand 3 408 6 814 3 258 5 801
RMI Holdings 5 451 9 254 5 530 7 810
Industrial interests
Mediclinic 6 572 19 684 4 622 10 601
Unilever SA Holdings 3 145 8 187 3 051 7 026
Distell Group(1) 2 473 7 086 2 258 5 935
Rainbow Chicken 2 114 3 183 2 139 3 140
Tsb Sugar 1 979 3 820 1 910 3 372
Air Products South Africa 669 2 829 642 2 774
Grindrod 2 482 2 342 2 315 1 871
KTH 2 432 2 328 1 765 1 667
Total South Africa 1 085 1 192 941 1 217
PGSI 567 577 581 585
Wispeco 438 353 409 350
Other industrial interests 942 942 425 424
Media interests
Sabido 900 1 987 845 1 768
MARC 234 222 168 168
Other media interests 125 141 56 56
Technology interests
CIV group(2) 1 465 1 629 1 428 1 550
SEACOM 551 946 586 926
Other technology interests 145 154 228 226
Other investments 1 562 1 021 1 200 839
Central treasury cash at the centre(3) 5 212 5 212 8 327 8 327
Other net corporate assets 1 422 1 665 1 332 1 622
Net asset value (NAV) 55 181 97 621 53 454 81 813
Potential CGT liability(4) (4 023) (3 319)
NAV after tax 55 181 93 598 53 454 78 494
Issued shares after deduction of shares
repurchased (million) 512.8 512.8 514.3 514.3
NAV after tax per share (Rand) 107.62 182.54 103.93 152.61
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 (Pty) Limited, CIV Power (Pty)
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 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" 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.
Date: 19/03/2013 05:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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