Wrap Text
Unaudited results for the six months ended 31 December 2016 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 2016
AND
CASH DIVIDEND DECLARATION
SALIENT FEATURES
- Headline earnings per share +25.9%
- Headline earnings per share, excluding once-off costs
and option remeasurement +4.3%
- Interim dividend per share +4.9%
- Intrinsic net asset value per share at 31 December 2016 R257.79
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December 30 June
2016 2015 2016
R million Restated Restated
ASSETS
Non-current assets
Property, plant and equipment 6 767 6 375 6 500
Investment properties 119 56 107
Intangible assets 4 936 5 658 4 993
Investments - Equity accounted 78 072 67 014 78 565
- Other 3 152 3 499 3 408
Retirement benefits 152 225 163
Loans 616 1 240 880
Deferred taxation 40 35 42
93 854 84 102 94 658
Current assets 22 937 13 918 14 442
Inventories 3 621 3 210 3 274
Biological agricultural assets 709 732 968
Debtors and short-term loans 5 493 4 546 5 503
Investments in money market funds 3 569 1 119 1 050
Cash and cash equivalents 9 458 3 875 3 569
Other current assets 32 396 49
22 882 13 878 14 413
Assets held for sale 55 40 29
Total assets 116 791 98 020 109 100
EQUITY AND LIABILITIES
Stated capital 13 418 3 605 3 605
Reserves 76 171 77 258 75 456
Treasury shares (231) (248) (217)
Shareholders' equity 89 358 80 615 78 844
Non-controlling interest 2 812 2 945 2 813
Total equity 92 170 83 560 81 657
Non-current liabilities 18 935 5 583 20 821
Retirement benefits 182 231 202
Long-term loans 16 882 3 672 17 799
Deferred taxation 1 471 1 680 1 623
Derivative instruments 400 - 1 197
Current liabilities 5 686 8 877 6 622
Trade and other payables 4 671 4 369 4 833
Short-term loans 826 4 411 1 660
Other current liabilities 189 97 129
Total equity and liabilities 116 791 98 020 109 100
Net asset value per share (Rand)
- At book value R157.73 R156.64 R153.13
- At intrinsic value R257.79 R286.96 R306.44
The audited 30 June 2016 annual results and unaudited 31 December 2015 interim results were restated due to a change in
accounting policy, as well as the rights issue. Refer to "Restatement of comparative numbers" and notes 1 and 2 under
"Comments".
ABRIDGED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R million Restated Restated
Sales 14 511 14 255 27 697
Inventory expenses (7 917) (8 795) (16 959)
Staff costs (2 456) (2 225) (4 578)
Depreciation (379) (353) (727)
Other net operating expenses (2 684) (2 298) (5 651)
Trading profit/(loss) 1 075 584 (218)
Dividend income 19 30 77
Interest received 238 130 287
Finance costs (648) (297) (903)
Net impairment of investments, loans, assets and goodwill 593 (3) (2 556)
Profit on sale and dilution of investments 3 234 2 451
Consolidated profit/(loss) before tax 1 280 678 (862)
Taxation (118) (69) 21
Consolidated profit/(loss) after tax 1 162 609 (841)
Share of after-tax profit of equity accounted investments 4 075 2 864 6 250
Net profit for the period 5 237 3 473 5 409
Attributable to:
Equity holders 5 219 3 334 5 364
Non-controlling interest 18 139 45
5 237 3 473 5 409
EQUITY ACCOUNTED INVESTMENTS
Share of after-tax profit of equity accounted investments
Profit before taking into account impairments, non-recurring and
capital items 5 466 4 310 8 875
Net impairment of investments, assets and goodwill (308) (631) (809)
Profit on the sale of investments 154 96 216
Other non-recurring and capital items 33 (79) (67)
Profit before tax and non-controlling interest 5 345 3 696 8 215
Taxation (1 079) (778) (1 709)
Non-controlling interest (191) (54) (256)
4 075 2 864 6 250
HEADLINE EARNINGS RECONCILIATION
Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R million Restated Restated
Net profit for the period attributable to equity holders
(earnings) 5 219 3 334 5 364
Plus/(minus):
- Net impairment of equity accounted investments (738) (9) 1 862
- Impairment of property, plant and equipment 145 12 37
- Impairment of intangible assets - - 644
- Impairment of assets held for sale - - 7
- (Profit)/loss on sale and dilution of equity accounted investments 5 (82) (2 349)
- Profit on sale of other investments (8) (153) (153)
- Recycling of foreign currency translation reserves - - 51
- Net (surplus)/loss on disposal of property, plant and equipment (18) (18) 10
- Loss on disposal of biological agricultural assets - 9 9
- Non-headline earnings items included in equity accounted
earnings of equity accounted investments 128 524 633
- Net (surplus)/loss on disposal of property, plant and
equipment 7 (90) (27)
- Profit on the sale of investments (154) (96) (216)
- Net impairment of investments, assets and goodwill 308 631 809
- Other non-recurring and capital items (33) 79 67
- Taxation effect of adjustments (22) 1 (92)
- Non-controlling interest (21) (2) (149)
Headline earnings 4 690 3 616 5 874
Once-off costs - 128 788
Option remeasurement (667) - 730
Headline earnings, excluding once-off costs and option
remeasurement 4 023 3 744 7 392
EARNINGS AND DIVIDENDS
Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
Cents Restated Restated
Headline earnings per share
- Basic 867.7 689.4 1 119.6
- Diluted 863.9 684.6 1 115.0
Headline earnings per share, excluding once-off costs and
option remeasurement
- Basic 744.3 713.8 1 409.0
- Diluted 740.7 709.0 1 404.4
Earnings per share
- Basic 965.6 635.6 1 022.4
- Diluted 960.8 630.9 1 018.5
Dividends per share
Ordinary 194.00 185.00 460.00
- Interim 194.00 185.00 185.00
- Final - - 275.00
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R million Restated Restated
Net profit for the period 5 237 3 473 5 409
Other comprehensive income, net of tax (2 976) 5 476 2 579
Items that may be reclassified subsequently to the income
statement:
Exchange rate adjustments (4 570) 2 175 1 745
Fair value adjustments for the period (117) 608 534
Deferred taxation on fair value adjustments 53 (57) (112)
Reclassification of other comprehensive income to the
income statement (9) (635) (951)
Other comprehensive income of equity accounted investments 1 801 3 579 1 652
Items that will not be reclassified to the income statement:
Remeasurement of post-employment benefit obligations - 7 19
Deferred taxation on remeasurement of post-employment benefit
obligations - (2) (6)
Change in reserves of equity accounted investments (134) (199) (302)
Total comprehensive income for the period 2 261 8 949 7 988
Total comprehensive income attributable to:
Equity holders 2 244 8 811 7 943
Non-controlling interest 17 138 45
2 261 8 949 7 988
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R million Restated Restated
Balance at the beginning of the period 81 657 75 917 75 917
Total comprehensive income for the period 2 261 8 949 7 988
Dividends paid (1 589) 1 377) (2 358)
Shares issued 9 813 - -
Capital invested by minorities 5 31 31
Purchase of treasury shares by wholly owned subsidiary (32) - -
Other movements 7 30 15
Long-term share incentive scheme reserve 48 10 64
Balance at the end of the period 92 170 83 560 81 657
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R million Restated Restated
Cash generated from operations 465 473 1 413
Taxation paid (120) (192) (328)
Dividends received 2 509 2 032 3 547
Finance costs (611) (325) (795)
Cash available from operating activities 2 243 1 988 3 837
Dividends paid (1 589) (1 377) (2 358)
Net cash inflow from operating activities 654 611 1 479
Investing activities* (3 569) (5 240) (18 767)
Financing activities** 8 997 3 572 16 365
Net increase/(decrease) in cash and cash equivalents 6 082 (1 057) (923)
Exchange rate profit/(loss) on foreign cash (231) 391 222
Cash and cash equivalents at the beginning of the period 3 128 3 829 3 829
Cash and cash equivalents at the end of the period 8 979 3 163 3 128
Cash and cash equivalents - per statement of
financial position 9 458 3 875 3 569
Bank overdraft (479) (712) (441)
* "Investment activities" primarily consists of an increase in money market funds of R2 519 million, while the
comparative period included an investment in Mediclinic of R4 621 million in terms of a Mediclinic rights issue.
** "Financing activities" primarily consists of the Remgro rights issue of R9 813 million, while the comparative period
included the bridge financing of R3 500 million, which was obtained to participate in the above-mentioned Mediclinic
rights issue.
ADDITIONAL INFORMATION
31 December 31 December 30 June
2016 2015 2016
Restated Restated
Number of shares in issue
- Ordinary shares of no par value 529 217 007 481 106 370 481 106 370
- Unlisted B ordinary shares of no par value 39 056 987 35 506 352 35 506 352
Total number of shares in issue 568 273 994 516 612 722 516 612 722
Number of shares held in treasury
- Ordinary shares repurchased and held in treasury (1 756 218) (1 973 153) (1 725 393)
566 517 776 514 639 569 514 887 329
Weighted number of shares 540 505 301 524 510 265 524 628 257
In determining earnings per share and headline earnings per share the weighted number of shares was taken into account.
31 December 31 December 30 June
2016 2015 2016
R million Restated Restated
Equity accounted investments
Associated companies 72 536 61 587 73 418
Joint ventures 5 536 5 427 5 147
78 072 67 014 78 565
Equity accounted investment reconciliation
Carrying value at the beginning of the period 78 565 57 831 57 831
Share of net attributable profit 4 075 2 864 6 250
Dividends received (2 109) (2 027) (3 900)
Investment in Mediclinic - 4 621 18 246
Dilutionary effects (6) (14) 1 886
Exchange rate differences (5 372) 200 (1 274)
Grindrod reversal of impairment/(impairment) 724 - (1 861)
Movements on reserves 1 667 3 380 1 350
Other movements 528 159 37
Carrying value at the end of the period 78 072 67 014 78 565
Long-term loans
20 000 Class A 7.7% cumulative redeemable preference shares 3 513 - 3 512
10 000 Class B 8.3% cumulative redeemable preference shares 4 383 - 4 382
Exchangeable bonds with an effective interest rate of 4.5% 5 530 - 6 380
Various other loans 3 597 3 679 3 672
17 023 3 679 17 946
Short-term portion of long-term loans (141) (7) (147)
16 882 3 672 17 799
Additions to and replacement of property, plant and
equipment 802 587 1 295
Capital and investment commitments 1 433 15 231 1 999
Al Noor acquisition - 13 656 -
Various other commitments 1 433 1 575 1 999
(Including amounts authorised, but not yet contracted for)
Guarantees and contingent liabilities 239 238 241
Dividends received from equity accounted investments set off
against investments 2 109 2 027 3 900
Dividends received from associate classified as asset held for
sale - 149 149
Refer to the section dealing with "Investment activities" for
more detail on related party transactions.
Fair value remeasurements
The following methods and assumptions are used to determine the fair value of each class of financial instruments:
- Financial instruments available-for-sale and investment in money market funds: Fair value is based on quoted market prices
or, in the case of unlisted instruments, appropriate valuation methodologies, being discounted cash flow, liquidation
valuation and actual net asset value of the investment.
- Derivative instruments: The fair value of derivative instruments is determined by using appropriate valuation methodologies
and mark-to-market valuations.
Financial instruments measured at fair value, are disclosed by level of the following fair value hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - Inputs (other than quoted prices included within level 1) that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices); and
Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following tables illustrate the fair values of financial assets and liabilities that are measured at fair value, by hierarchy
level:
R million Level 1 Level 2 Level 3 Total
31 December 2016
Assets
Available-for-sale 1 040 - 2 112 3 152
Derivative instruments - 2 - 2
Investments in money market funds 3 569 - - 3 569
4 609 2 2 112 6 723
Liabilities
Non-current derivative instruments - 400 - 400
Current derivative instruments - 39 54 93
- 439 54 493
31 December 2015
Assets
Available-for-sale 1 187 - 2 312 3 499
Derivative instruments - 395 - 395
Investments in money market funds 1 119 - - 1 119
2 306 395 2 312 5 013
Liabilities
Current derivative instruments - 14 - 14
30 June 2016
Assets
Available-for-sale 1 260 - 2 148 3 408
Derivative instruments - 8 - 8
Investments in money market funds 1 050 - - 1 050
2 310 8 2 148 4 466
Liabilities
Non-current derivative instruments - 1 197 - 1 197
Current derivative instruments - 63 54 117
- 1 260 54 1 314
The following tables illustrate the reconciliation of the carrying value of level 3 assets from the beginning to the end of the
period:
31 December 31 December 30 June
R million 2016 2015 2016
Assets: Available-for-sale
Balances at the beginning of the period 2 148 1 591 1 591
Additions 26 59 174
Disposals (57) (29) (53)
Exchange rate adjustments (109) 348 236
Fair value adjustments through comprehensive income 104 343 200
Balances at the end of the period 2 112 2 312 2 148
R million
Liabilities: Derivative instruments
Balances at the beginning of the period 54 - -
Additions - - 54
Balances at the end of the period 54 - 54
There were no transfers between the different levels.
Level 3 financial assets consist mainly of investments in the Milestone China entities (Milestone), the Kagiso Infrastructure
Empowerment Fund (KIEF) and the Pembani Remgro Infrastructure Fund (PRIF) amounting to R1 551 million, R283 million
and R193 million respectively. These investments are all valued based on the fair value of each investment's underlying
assets, which are valued using a variety of valuation methodologies. Listed entities are valued at the last quoted share price on
the reporting date, whereas unlisted entities' methods include discounted cash flow valuations and appropriate earnings and
revenue multiples.
Milestone's fair value consists of listed investments (38%), cash and cash equivalents (4%) and unlisted investments (58%).
68% of the unlisted investments were valued at cost (or the price at which additional investments were made) as Milestone's
management considers the transaction price to be the fair value of the investments, while the remaining 32% was valued at
approximately R279 million. KIEF's investments were valued using the discounted cash flow method. PRIF's main asset is
the investment in ETG Group and it was valued using appropriate revenue and earnings multiples based on peer group
companies to determine a price-to-book valuation.
Changes in the valuation assumptions of the above unlisted investments will not have a significant impact on Remgro's
financial statements.
RESTATEMENT OF COMPARATIVE NUMBERS
Refer to notes 1 and 2 under "Comments" for further detail
Restatement of comparative numbers for the six months ended 31 December 2015
For the
period ended For the
31 Dec 2015 period ended
as previously 31 Dec 2015
R million reported Adjustments Restated
Impact on income statement
Depreciation (325) (28) (353)
Other net operating expenses (2 304) 6 (2 298)
Taxation (75) 6 (69)
Net profit for the period 3 489 (16) 3 473
Attributable to:
Equity holders (earnings) 3 342 (8) 3 334
Non-controlling interest 147 (8) 139
(16)
Impact on headline earnings
Headline earnings 3 624 (8) 3 616
Headline earnings, excluding once-off costs and option remeasurement 3 752 (8) 3 744
Impact on earnings per share (cents)
Headline earnings 704.4 (15.0) 689.4
Headline earnings, excluding once-off costs and option remeasurement 729.2 (15.4) 713.8
Earnings 649.5 (13.9) 635.6
Impact on statement of comprehensive income
Net profit for the period 3 489 (16) 3 473
Total comprehensive income for the period 8 965 (16) 8 949
Total comprehensive attributable to:
Equity holders 8 819 (8) 8 811
Non-controlling interest 146 (8) 138
(16)
Impact on statement of cash flows
Cash flows from operating activities 599 12 611
Cash flows from investing activities (5 228) (12) (5 240)
As at
31 Dec 2015 As at
as previously 31 Dec 2015
R million reported Adjustments Restated
Impact on statement of financial position
ASSETS
Property, plant and equipment 6 131 244 6 375
Non-current assets - Biological agricultural assets 458 (458) -
Current assets - Biological agricultural assets 540 192 732
Total assets 98 042 (22) 98 020
LIABILITIES
Deferred taxation 1 686 (6) 1 680
Total liabilities 14 466 (6) 14 460
EQUITY
Distributable reserves 47 010 (8) 47 002
Non-controlling interest 2 953 (8) 2 945
Total equity 83 576 (16) 83 560
Restatement of comparative numbers for the 2016 financial year
For the
year ended For the
30 Jun 2016 year ended
as previously 30 Jun 2016
R million reported Adjustments Restated
Impact on income statement
Depreciation (670) (57) (727)
Other net operating expenses (5 647) (4) (5 651)
Taxation 4 17 21
Net profit for the period 5 453 (44) 5 409
Attributable to:
Equity holders (earnings) 5 386 (22) 5 364
Non-controlling interest 67 (22) 45
(44)
Impact on headline earnings
Headline earnings 5 887 (13) 5 874
Headline earnings, excluding once-off costs and option remeasurement 7 405 (13) 7 392
Impact on earnings per share (cents)
Headline earnings 1 143.9 (24.3) 1 119.6
Headline earnings, excluding once-off costs and option remeasurement 1 438.9 (29.9) 1 409.0
Earnings 1 046.6 (24.2) 1 022.4
Impact on statement of comprehensive income
Net profit for the period 5 453 (44) 5 409
Total comprehensive income for the period 8 032 (44) 7 988
Total comprehensive attributable to:
Equity holders 7 965 (22) 7 943
Non-controlling interest 67 (22) 45
(44)
Impact on statement of cash flows
Cash flows from operating activities 1 457 22 1 479
Cash flows from investing activities (18 745) (22) (18 767)
As at
30 Jun 2016 As at
as previously 30 Jun 2016
R million reported Adjustments Restated
Impact on statement of financial position
ASSETS
Property, plant and equipment 6 292 208 6 500
Non-current assets - Biological agricultural assets 625 (625) -
Current assets - Biological agricultural assets 612 356 968
Total assets 109 161 (61) 109 100
LIABILITIES
Deferred taxation 1 640 (17) 1 623
Total liabilities 27 460 (17) 27 443
EQUITY
Distributable reserves 44 324 (22) 44 302
Non-controlling interest 2 835 (22) 2 813
Total equity 81 701 (44) 81 657
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 the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council, 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, Neville Williams CA(SA). The interim report has not been
audited or reviewed.
These financial statements incorporate accounting policies that are consistent with those of the previous financial
periods, with the exception of the adoption of the amendments to IAS 16: Property, Plant and Equipment and
IAS 41: Agriculture. These amendments have to be applied retrospectively and accordingly the reported results of
both comparative periods were restated. The restatements pertain to the reclassification of bearer plants from
biological assets to property, plant and equipment, the transfer of the remaining non-current biological assets (being
the produce) to current biological assets and the measurement of the reclassified assets under the appropriate
accounting treatment. Refer to the section "Restatement of comparative numbers" for further detail.
During the period under review various other new and revised accounting standards became effective, but their
implementation had no impact on the results of either the current or prior periods.
2. RIGHTS ISSUE
During October 2016 Remgro completed a rights issue whereby 48 110 637 new Remgro ordinary shares and
3 550 635 B ordinary shares were issued at a subscription price of R192.50 per share for a total consideration of
R9 944.8 million. In terms of IAS 33 paragraph 26, an adjustment to the weighted average number of shares in issue
for the comparative periods is required as the shares were issued at a discount to the Remgro share price on the day
before the announcement (being R243.29 per share). Consequently, the comparable weighted number of shares in
issue was adjusted by 9 994 195 shares to account for the deemed dilutive effect of the rights issue. Refer to the
section "Restatement of comparative numbers" for further detail.
3. RESULTS
Headline earnings
For the period under review headline earnings increased by 29.7% from R3 616 million to R4 690 million, while
headline earnings per share (HEPS) increased by 25.9% from 689.4 cents to 867.7 cents. The difference in the
increase between headline earnings and HEPS is attributed to the impact of the rights issue during the period under
review.
Included in headline earnings for the comparative period are once-off transaction costs incurred with the Mediclinic
rights issue and Al Noor Hospitals Group plc (Al Noor) transaction amounting to R128 million ("once-off costs").
The period under review includes a positive fair value adjustment of R667 million, relating to the decrease in value
of the bondholders' exchange option (accounted for as a derivative liability) of the bonds ("option remeasurement")
that were issued during March 2016 to partially refinance the foreign bridge funding that was raised for the Al Noor
transaction. The bonds are exchangeable into Mediclinic plc shares and/or cash and fair value adjustments on the
option (reflecting inter alia the movement in the underlying Mediclinic plc share price) are expected to cause
volatility in headline earnings during its five-year term. Excluding these items, headline earnings increased by 7.5%
from R3 744 million to R4 023 million, whereas HEPS increased by 4.3% from 713.8 cents to 744.3 cents. The
increase in headline earnings, excluding once-off costs and option remeasurement, is mainly due to higher
contributions from the healthcare and banking platforms and KTH, partly offset by lower earnings from RCL Foods
and higher finance costs.
Contribution to headline earnings by reporting platform
Six months ended
Year ended
31 Dec % 31 Dec 30 June
2016 Change 2015 2016
R million Restated Restated
Food, liquor and home care 945 (23.9) 1 242 1 605
Banking 1 580 14.0 1 386 2 989
Healthcare 983 24.9 787 1 952
Insurance 492 8.1 455 888
Industrial 426 8 420.0 5 517
Infrastructure 15 (79.7) 74 6
Media and sport (25) 10.7 (28) (36)
Other investments 39 25.8 31 67
Central treasury
- finance income 105 36.4 77 125
- finance costs (462) (407.7) (91) (470)
Other net corporate costs (75) 61.3 (194) (251)
Headline earnings, excluding once-off costs and
option remeasurement 4 023 7.5 3 744 7 392
Once-off costs - 100.0 (128) (788)
Option remeasurement 667 - - (730)
Headline earnings 4 690 29.7 3 616 5 874
Refer to Annexures A and B for segmental information.
Commentary on reporting platforms' performance
Food, liquor and home care
The contribution from food, liquor and homecare to Remgro's headline earnings amounted to R945 million
(2015: R1 242 million), representing a decrease of 23.9%. RCL Foods' contribution to Remgro's headline earnings
decreased by 44.6% to R318 million (2015: R574 million). During the comparative period RCL Foods' results were
positively impacted by the release of a R163 million provision raised for uncertain tax disputes as part of the
Foodcorp acquisition. Excluding the above, RCL Foods' contribution to Remgro's headline earnings would have
decreased by 29.0% from R448 million. This decrease is mainly due to a lower contribution from the Chicken
business, partly offset by a strong Sugar business performance. The Chicken business was impacted by a massive
oversupply in the local market caused by local production and dumping of imported chicken, while the Sugar
business benefitted from price increases which helped offset reduced volumes. Unilever's contribution to Remgro's
headline earnings decreased by 14.3% to R263 million (2015: R307 million). This decrease is mainly the result of
lower tax allowances following the completion of manufacturing investments, as well as a weakening trade
environment. Distell's contribution to headline earnings, which includes the investment in Capevin Holdings,
amounted to R364 million (2015: R361 million). Distell's results were negatively impacted by a stronger rand,
particularly against the British pound, as well as intense competition and pressure on consumers.
Banking
The headline earnings contribution from the banking division amounted to R1 580 million (2015: R1 386 million),
representing an increase of 14.0%. Both FirstRand and RMBH reported headline earnings growth of 14.0%. On a
normalised basis, which excludes certain non-operational and accounting anomalies, mainly adjustments relating to
the share based payment obligation, FirstRand and RMBH reported earnings growth of 6.7% and 6.4% respectively.
These increases are mainly due to growth in both net interest income and non-interest revenue from FNB, RMB and
WesBank, partly offset by an increase in credit impairment charges.
Healthcare
Mediclinic's contribution to Remgro's headline earnings amounted to R983 million (2015: R787 million). This
increase is mainly due to Remgro's increased interest in Mediclinic (42.1% to 44.6%), the inclusion of the results of
Al Noor and Spire Healthcare Group plc (Spire) and a strong performance in Switzerland, as well as good organic
growth in Southern Africa. The increase is partly offset by the underperforming Middle East business, which was
impacted by a number of operational and regulatory factors, including the new insurance co-payment requirements,
doctor vacancies and delayed facility openings.
Insurance
RMI Holdings' contribution to headline earnings increased by 8.1% to R492 million. On a normalised basis, RMI
Holdings reported an increase of 11.2% in earnings, with OUTsurance and Discovery achieving earnings growth of
24.1% and 2.4% respectively, offset by lower earnings from MMI Holdings (lower by 3.8%). The strong result by
OUTsurance was driven by a significant improvement in the cost-to-income ratio, particularly at Youi due to scale
benefits and cost efficiencies.
Industrial
Total's contribution to Remgro's headline earnings amounted to R102 million (2015: R51 million). Included in the
contribution to headline earnings for the period under review is unfavourable stock revaluations amounting to
R28 million (2015: unfavourable stock revaluations of R144 million). These revaluations are the result of the
volatility in the Brent Crude price and the rand exchange rate. Excluding these revaluations, the contribution
decreased by 33.3% from R195 million to R130 million mainly due to a lower refining margin and lower volumes.
Remgro's share of the results of KTH amounted to a profit of R58 million (2015: loss of R260 million). In the
comparative period, KTH's results were negatively impacted by unfavourable fair value adjustments relating to its
investments in Exxaro Resources Limited and MMI Holdings Limited preference shares. Air Products' and
Wispeco's contribution to headline earnings amounted to R151 million and R90 million respectively
(2015: R142 million and R54 million), while PGSI contributed R25 million to Remgro's headline earnings
(2015: R18 million).
Infrastructure
Grindrod's contribution to Remgro's headline earnings amounted to a loss of R18 million (2015: a profit of
R43 million). This loss is mainly the result of the continuation of weak commodity markets and low dry-bulk
shipping rates during the period. For the period under review the CIV group contributed R44 million to headline
earnings (2015: R35 million). Remgro's share of SEACOM's loss amounted to R18 million (2015: loss of
R28 million).
Media and sport
Media and sport primarily consist of the interests in eMedia and various sport interests, including interests in rugby
franchises, as well as the Stellenbosch Academy of Sport. eMedia's contribution to Remgro's headline earnings
amounted to R33 million (2015: R11 million), mainly due to higher advertising revenue as a result of an
improvement in market share. The increase is partly offset by higher business development costs, as well as
continued investment into the multi-channel business. Other media and sport interests' contribution to headline
earnings amounted to a loss of R58 million (2015: loss of R39 million).
Other investments
The contribution from other investments to headline earnings amounted to R39 million (2015: R31 million), of
which Business Partners' contribution was R23 million (2015: R21 million).
Central treasury and other net corporate costs
Finance income amounted to R105 million (2015: R77 million). This increase is mainly due to higher average cash
balances as a result of the Remgro rights issue. Finance costs mainly consist of funding costs amounting to
R458 million (2015: R91 million) and once-off transaction costs in the comparative period amounting to
R128 million, which relate to the Mediclinic rights issue and Al Noor transaction, as well as a positive fair value
adjustment for the period under review of R667 million, relating to the decrease in the value of the exchange option
of the exchangeable bonds. Other net corporate costs amounted to R75 million (2015: R194 million). The
comparative period includes transaction and funding costs amounting to R115 million relating to Remgro's
acquisition of Spire. These costs were recouped from Mediclinic as part of the Spire disposal consideration, outside
headline earnings.
Earnings
Earnings increased by 56.5% to R5 219 million (2015: R3 334 million). This increase is mainly the result of the
positive fair value adjustment relating to the decrease in value of the exchange option of the exchangeable bonds
amounting to R667 million, as well as a reversal of impairment of the investment in Grindrod amounting to
R724 million.
4. INTRINSIC NET ASSET VALUE
Remgro's intrinsic net asset value per share decreased by 15.9% from R306.44 at 30 June 2016 to R257.79 at
31 December 2016 mainly due to a 38.7% drop in the market value of the Mediclinic investment, as well as the
dilutive effect of the rights issue. The closing share price at 31 December 2016 was R223.05
(30 June 2016: R254.66) representing a discount of 13.5% (30 June 2016: 16.9%) to the intrinsic net asset value. Refer to Annexure
B for full details.
5. INVESTMENT ACTIVITIES
The most important investment activities during the period under review were as follows:
Community Investment Ventures Holdings Proprietary Limited (CIVH)
During September 2016 Remgro subscribed for an additional 12 353 shares in CIVH for a total amount of
R329.3 million in terms of a CIVH rights issue. As a result of the share subscription, Remgro's interest in CIVH
increased marginally from 50.9% on 30 June 2016 to 51.0% on 31 December 2016.
Invenfin Proprietary Limited (Invenfin)
On 27 July 2016 Remgro (through its wholly owned subsidiary, Invenfin) acquired a 30% stake in Dynamic
Commodities Proprietary Limited (Dynamic Commodities) for R80.0 million. Dynamic Commodities is an export-
focused company that produces high quality frozen desserts, snacks and value-added "fresh frozen" fruit.
During August 2016, Invenfin also acquired a 30% stake in Joya Brands Proprietary Limited, a sweets manufacturer,
for R50.2 million.
Pembani Remgro Infrastructure Fund (PRIF)
On 15 August 2016 PRIF had its final close, which resulted in Remgro receiving a capital distribution of
R14.6 million, as well as an income distribution of R3.8 million. During the period under review Remgro also
invested a further R5.6 million in PRIF, thereby increasing its cumulative investment to R202.9 million. As at
31 December 2016 the remaining commitment to PRIF amounted to R447.1 million.
Other
Other smaller investments amounted to R152 million.
Events after 31 December 2016
There were no significant transactions subsequent to 31 December 2016.
6. INFORMATION REGARDING UNLISTED INVESTMENTS
Unilever South Africa Holdings Proprietary Limited (Unilever)
Unilever has a 31 December year-end and its results for the six months to 31 December 2016 have been equity
accounted in Remgro's results for the period under review. Unilever's contribution to Remgro's headline earnings
for the six months under review decreased by 14.3% to R263 million (2015: R307 million). The lower headline
earnings contribution was mainly due to a higher effective tax rate resulting from lower tax allowances following the
completion of manufacturing investments, as well as a tough competitive environment experienced in this consumer
market.
Air Products South Africa Proprietary Limited (Air Products)
Air Products has a September year-end and its results for the six months ended 30 September 2016 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 increased by 6.3% to R151 million (2015: R142 million).
Turnover for Air Products' six months ended 30 September 2016 increased by 6.2% to R1 447 million
(2015: R1 363 million), while the company's operating profit for the same period increased by 2.3% to R436 million
(2015: R426 million).
The period under review saw difficult trading conditions with depressed demand for the company's products in most
sectors of the business.
Kagiso Tiso Holdings Proprietary Limited (KTH)
KTH is a leading black-owned investment company with a strong and diversified asset portfolio covering the
resources, industrial, services, media, financial services and healthcare sectors.
KTH's contribution to Remgro's headline earnings for the period under review amounted to R58 million
(2015: headline loss of R260 million). The increase in earnings was mainly due to KTH's net attributable share of positive
fair value adjustments on its equity investment in Exxaro Resources Limited (R320 million), AECI Limited
(R64 million) and Aveng Limited (R43 million).
Income from equity accounted investments decreased to R57 million (2015: R245 million) partly due to the disposal
of Idwala Holdings Limited, as well as significantly lower contributions from other associates due to the difficult
macro-economic conditions.
Net finance costs amounted to R219 million (2015: R209 million).
Total South Africa Proprietary Limited (Total)
Total has a December year-end and its results for the six months to 31 December 2016 have been included in
Remgro's results for the period under review. Total's contribution to Remgro's headline earnings for the six months
to 31 December 2016 amounted to R102 million (2015: R51 million).
Total's turnover for the six months ended 31 December 2016 increased by 2.1% to R26 747 million
(2015: R26 195 million), mainly due sales to other oil companies that were affected by the transporter strike during the
period under review. There was no increase in the wholesale margin during the period.
The results were positively impacted by lower stock revaluation losses of R156 million (2015: loss of R802 million)
due to a decrease in the average basic fuel price during the period under review.
NATREF (in which Total has an interest of 36.4%) experienced lower refining margins during the period under
review as compared to 2015, due to the impact of a less favourable economic environment and a major planned
shutdown during October and November 2016.
PGSI Limited (PGSI)
PGSI's contribution to Remgro's headline earnings for the six months to 31 December 2016 amounted to
R25 million (2015: R18 million). PGSI's turnover for the period under review increased from R1 975 million to
R2 105 million. The group's normalised operating profit, which excludes the impact of asset impairments, increased
from R135 million to R159 million.
The group's main operating subsidiary in South Africa, PG Group, manufactures and supplies glass for the building
and automotive industries. In spite of the difficult economic climate, the Group has reported reasonable growth in
both industries.
The group has shown positive growth in the building division's results in 2016, driven by market share gains in the
domestic market coupled with profitable growth in the "Rest of Africa" markets.
The Group's automotive division has reported significant improvements in 2016 over the prior periods results. This
sector has been negatively impacted by the economic climate, with pressure on consumers, lower volumes of claims
from the Insurance sector, weak demand in export markets and competition from low priced imported products. The
Group responded with a low priced product offering for the local aftermarket called Safevue. New local vehicle sales
have been declining for the past ten months, so whilst the company expect to secure some new supply contracts with
the Original Equipment Manufacturing assembly operations, PGSI does not foresee significant growth in this area.
Wispeco Holdings Proprietary Limited (Wispeco)
Wispeco's turnover for the six months to 31 December 2016 increased by 9.2% to R1 162 million
(2015: R1 064 million). This increase came on the back of slightly higher selling prices as well as higher sales volumes for
the period. Headline earnings for the period under review increased to R90 million (2015: R54 million). Sales
margins were higher than expected due to volatility in raw material costs, although this situation was recently
reversed as world-wide primary aluminium prices rose.
Wispeco continues to drive productivity and cost efficiency improvements through capital investment into leading
edge technologies to support the company's future sustainability and growth. Its PDC subsidiary benefitted from
growing exports.
Wispeco actively supports the local downstream aluminium fabrication industry through continuous product
innovation, best-in-industry lead times and ongoing investment in the development of design software widely used
by fabricators and architects. Technical capabilities are nourished to produce ever more challenging products for
industrial (non-architectural) markets.
Community Investment Ventures Holdings Proprietary Limited (CIV group)
Remgro has an effective interest of 51.0% in the CIV group, which is active in the telecommunications and
information technology (ICT) sector. The key operating company of the group is Dark Fibre Africa Proprietary
Limited (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 2016 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 R44 million (2015: R35 million) driven by increased revenue and
operating performance from DFA.
DFA's revenue for the six months ended 30 September 2016 increased by 38.8% to R734 million
(2015:R529 million) mainly as a result of solid growth of 29.0% in annuity revenue. DFA's earnings before interest, tax,
depreciation and amortisation for the period under review increased by 42.7% to R495 million. The current book
value of the fibre-optic network is in excess of R7.4 billion. DFA has thus far secured a healthy annuity income of
R101 million per month, with the majority thereof being on long-term contracts with customers.
DFA owns fibre network rings in Johannesburg, Cape Town, Durban, Midrand, Centurion and Pretoria. The network
has been expanded to a further 21 smaller metros, including East London, Polokwane, Tlokwe, Emalahleni, George
and Pietermaritzburg, to name a few. At 30 September 2016, a total distance of 9 503km (September 2015: 8 839km)
of fibre network had been completed in the major metropolitan areas and on long-haul routes. The network uptime
for the period under review was 99.9921%.
The DFA revenue model is flexible to adapt to customers' needs, and DFA either sells an indefeasible right of use
agreement, which is a lump sum in advance, or on an annuity basis with multi-year contracts of mostly up to
15 years. The future value of the current annuity contract base is in excess of R18 billion.
SEACOM Capital Limited (SEACOM)
Remgro has an effective interest of 30% in SEACOM, which operates Africa's largest international data network
connecting Southern and Eastern Africa with Europe and Asia.
SEACOM has a December year-end and its results for the six months to 31 December 2016 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 R18 million (2015: loss of R28 million). The decreased loss is mainly due to a
change in the estimated useful life of the network assets in 2015 and the resulting normalisation of the depreciation
charge in 2016. The change did not have any impact on operating cash flow. In 2016, SEACOM continued its
growth strategy in the corporate market under "SEACOM Business".
SEACOM provides high-capacity low-latency international data connectivity services to customers in the form of
private data transmission and public IP-based services. These services are generally sold under 12- to 36-month lease
contracts and as long-term indefeasible right of use (IRU) contracts, which include upfront cash payment and then
annual maintenance charges over the term. Upfront revenue from IRUs is accounted for over the full term of 15 or
20 years.
SEACOM's core sales and revenue streams continue to come from its established base of Service Provider
(wholesale) customers that also provide the basis for network scale, cost reductions and service innovation.
SEACOM Business provides the platform for future growth and improved profitability as the number and size of
corporate customers increases. SEACOM Business added over 1 000 corporate customers in 2016, and has a healthy
pipeline to continue to grow sales and revenue in 2017. Simultaneously, SEACOM is working with partners to
ensure that connectivity to corporates is done over fibre-optic solutions, allowing for future upgrades as data demand
continues to accelerate and cloud-based IT solutions become the norm.
7. TREASURY SHARES
At 30 June 2016, 1 725 393 Remgro ordinary shares (0.4%) 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 scheme.
During the period under review 134 962 Remgro ordinary shares were utilised to settle Remgro's obligation towards
scheme participants who exercised the rights granted to them. Remgro also followed its rights with respect to
treasury shares it held when it completed the rights issue during October 2016 and subscribed for 165 787 Remgro
ordinary shares for a total amount of R32 million.
At 31 December 2016, 1 756 218 (0.3%) Remgro ordinary shares were held as treasury shares.
DIRECTORATE AND COMPANY SECRETARY
Mrs Mariza Lubbe has been appointed by the Board as executive director on 20 September 2016 and her appointment has
been ratified by the Board on 1 December 2016. Following Mrs Lubbe's appointment as a director, she resigned as Remgro's
company secretary. Ms Danielle Heynes has been appointed as company secretary in her place with effect from the close of
business on 20 September 2016.
Mr Herman Wessels retired as an independent non-executive director on 1 December 2016.
DECLARATION OF CASH DIVIDEND
Declaration of Dividend No. 33
Notice is hereby given that an interim gross dividend of 194 cents (2015: 185 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 ended 31 December 2016.
A dividend withholding tax of 20% or 38.8 cents per share will be applicable, resulting in a net dividend of 155.2 cents per
share, unless the shareholder concerned is exempt from paying dividend withholding tax or is entitled to a reduced rate in
terms of an applicable double-tax agreement.
The issued share capital at the declaration date is 529 217 007 ordinary shares and 39 056 987 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 dividend Tuesday, 18 April 2017
Shares trade ex dividend Wednesday, 19 April 2017
Record date Friday, 21 April 2017
Payment date Monday, 24 April 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 19 April 2017, and Friday, 21 April 2017,
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 are no longer issued. In the instance where shareholders do not provide the
Transfer Secretaries with their banking details, the dividend will not be forfeited, but will be marked as "unclaimed" in the
share register until the shareholder provides the Transfer Secretaries with the relevant banking details for payout.
Signed on behalf of the Board of Directors.
Johann Rupert Jannie Durand
Chairman Chief Executive Officer
Stellenbosch
16 March 2017
DIRECTORATE
Non-executive directors
Johann Rupert (Chairman), E de la H Hertzog (Deputy Chairman),
J Malherbe (Deputy Chairman), S E N De Bruyn Sebotsa*, G T Ferreira*,
P K Harris*, N P Mageza*, P J Moleketi*, M Morobe*,
F Robertson*
(*Independent)
Executive directors
J J Durand (Chief Executive Officer),
W E Bührmann, M Lubbe, N J Williams
CORPORATE INFORMATION
Secretary
D I Heynes
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 Proprietary Limited,
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196
(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
2016 2015
R million Restated
Food, liquor and home care
Unilever 263 307
Distell(1) 364 361
RCL Foods 318 574
Banking
RMBH 1 115 979
FirstRand 465 407
Healthcare
Mediclinic 983 787
Insurance
RMI Holdings 492 455
Industrial
Air Products 151 142
KTH 58 (260)
Total 102 51
PGSI 25 18
Wispeco 90 54
Infrastructure
Grindrod (18) 43
CIV group 44 35
SEACOM (18) (28)
Other infrastructure interests 7 24
Media and sport
eMedia 33 11
Other media and sport interests (58) (39)
Other investments 39 31
Central treasury
Finance income 105 77
Finance costs(2) 205 (219)
Other net corporate costs (75) (194)
Headline earnings 4 690 3 616
Weighted number of shares (million) 540.5 524.5
Headline earnings per share (cents) 867.7 689.4
Notes
1. Includes the investment in Capevin Holdings Limited.
2. Finance costs include the positive option remeasurement (R667 million) for the period under review and the once-off costs
(R128 million) in the comparative period.
ANNEXURE B
COMPOSITION OF INTRINSIC NET ASSET VALUE
31 December 2016 30 June 2016
Book value Intrinsic value Book value Intrinsic value
R million Restated
Food, liquor and home care
Unilever 3 542 10 232 3 589 10 650
Distell(1) 3 484 9 782 3 500 10 723
RCL Foods 7 446 8 477 7 272 9 278
Banking
RMBH 13 481 26 391 13 132 22 356
FirstRand 4 796 11 688 4 652 9 857
Healthcare
Mediclinic 31 869 42 690 33 629 69 691
Insurance
RMI Holdings 7 050 17 897 7 157 18 526
Industrial
Air Products 959 4 445 933 4 241
KTH 1 754 2 576 1 631 2 723
Total 1 598 1 956 1 575 1 879
PGSI 732 681 734 734
Wispeco 792 1 138 702 1 055
Infrastructure
Grindrod 2 329 2 329 1 986 1 986
CIV group 2 250 3 895 1 871 3 166
SEACOM 406 1 050 655 1 043
Other infrastructure interests 483 483 540 540
Media and sport
eMedia 1 142 1 573 1 116 1 342
Other media and sport interests 341 341 328 328
Other investments 3 886 3 869 3 737 3 717
Central treasury
Cash at the centre(2) 12 293 12 293 3 778 3 778
Debt at the centre (13 826) (13 826) (16 452) (16 452)
Other net corporate assets 2 551 2 909 2 779 3 149
Net asset value (NAV) 89 358 152 869 78 844 164 310
Potential CGT liability(3) (6 828) (6 526)
NAV after tax 89 358 146 041 78 844 157 784
Issued shares after deduction of shares
repurchased (million) 566.5 566.5 514.9 514.9
NAV after tax per share (Rand) 157.73 257.79 153.13 306.44
Remgro share price (Rand) 223.05 254.66
Percentage discount to NAV 13.5 16.9
Notes
1. Includes the investment in Capevin Holdings Limited.
2. Cash at the centre excludes cash held by subsidiaries that are separately valued above (mainly RCL Foods and Wispeco).
3. 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.
4. For purposes of determining the intrinsic net asset value, the unlisted investments are shown at directors' valuation and the listed
investments are shown at stock exchange prices.
Date: 16/03/2017 05:03:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
