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Audited summary consolidated results for the year ended 30 June 2018 and cash dividend declaration
REMGRO LIMITED
Registration number 1968/006415/06
ISIN ZAE000026480 Share code REM
AUDITED SUMMARY CONSOLIDATED RESULTS
FOR THE YEAR ENDED 30 JUNE 2018
AND CASH DIVIDEND DECLARATION
SALIENT FEATURES
- Headline earnings per share, excluding option remeasurement +7.7%
- Headline earnings per share +1.8%
- Ordinary dividend per share +7.5%
- Intrinsic net asset value per share R256.97
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June
R million 2018* 2017
ASSETS
Non-current assets
Property, plant and equipment 13 626 6 668
Investment properties 119 129
Intangible assets 18 427 4 927
Investments - Equity accounted 73 722 80 883
- Available-for-sale 3 067 3 345
Retirement benefits 737 201
Loans 697 562
Deferred taxation 158 23
110 553 96 738
Current assets 40 375 22 317
Inventories 10 967 3 055
Biological agricultural assets 807 791
Debtors and short-term loans 8 599 4 885
Investment in money market funds 3 996 5 888
Cash and cash equivalents 12 169 7 524
Other current assets 93 85
36 631 22 228
Assets held for sale 3 744 89
Total assets 150 928 119 055
EQUITY AND LIABILITIES
Stated capital 13 416 13 416
Reserves 84 865 79 235
Treasury shares (183) (219)
Shareholders' equity 98 098 92 432
Non-controlling interest 15 348 2 870
Total equity 113 446 95 302
Non-current liabilities 25 891 18 493
Retirement benefits 195 173
Long-term loans 20 316 16 446
Deferred taxation 5 268 1 511
Derivative instruments 112 363
Current liabilities 11 591 5 260
Trade and other payables 9 904 4 710
Short-term loans 1 557 480
Other current liabilities 130 69
11 591 5 259
Liabilities held for sale - 1
Total equity and liabilities 150 928 119 055
Net asset value per share (Rand)
- At book value R173.04 R163.13
- At intrinsic value R256.97 R251.48
* Since 11 May 2018, Remgro consolidates its investment in Distell and therefore, certain line items are not directly
comparable with the prior year. Refer to "Comparison with the prior year" under "Comments" for further detail.
SUMMARY CONSOLIDATED INCOME STATEMENT
Year ended 30 June
R million 2018 2017
CONTINUING OPERATIONS
Sales 31 115 27 600
Inventory expenses (17 814) (16 138)
Staff costs (5 641) (4 972)
Depreciation (810) (752)
Other net operating expenses (5 590) (4 978)
Trading profit 1 260 760
Dividend income 112 61
Interest received 886 633
Fair value adjustment on exchangeable bonds' option 261 687
Finance costs (1 266) (1 255)
Net impairment of investments, loans, assets and goodwill (202) 105
Profit on sale and dilution of investments 5 188 199
Consolidated profit before tax 6 239 1 190
Taxation (423) (227)
Consolidated profit after tax 5 816 963
Share of after-tax profit of equity accounted investments 2 893 7 099
Net profit for the year from continuing operations 8 709 8 062
DISCONTINUED OPERATIONS*
Profit for the year from discontinued operations 490 446
Net profit for the year 9 199 8 508
Attributable to:
Equity holders 8 943 8 431
Continuing operations 8 453 7 985
Discontinued operations 490 446
Non-controlling interest 256 77
9 199 8 508
EQUITY ACCOUNTED INVESTMENTS
Share of after-tax profit of equity accounted investments
Profit before taking into account impairments and non-recurring items 10 035 10 066
Net impairment of investments, assets and goodwill (5 935) (668)
Profit on the sale of investments 505 325
Recycling of foreign currency translation reserves 647 83
Other headline earnings adjustable items 13 18
Profit before tax and non-controlling interest 5 265 9 824
Taxation (1 499) (1 895)
Non-controlling interest (383) (384)
3 383 7 545
Continuing operations 2 893 7 099
Discontinued operations 490 446
* On 30 June 2018 the investment in Unilever was transferred from "investments - equity accounted" to "assets held for
sale" (refer to the section dealing with "Investment activities"). Profit from discontinued operations consists of the equity
accounted earnings of Unilever. Comparative information has been represented accordingly.
HEADLINE EARNINGS RECONCILIATION
Year ended 30 June
R million 2018 2017
CONTINUING OPERATIONS
Net profit for the year attributable to equity holders (earnings) 8 453 7 985
- Impairment of equity accounted investments 580 177
- Reversal of impairment of equity accounted investments (529) (479)
- Impairment of available-for-sale investments 44 5
- Impairment of property, plant and equipment 71 181
- Profit on sale and dilution of equity accounted investments (1) (5 156) (208)
- Loss on sale and dilution of equity accounted investments 52 9
- Profit on sale of available-for-sale investments (116) (15)
- Loss on sale of available-for-sale investments - 15
- Profit on disposal of property, plant and equipment (114) (110)
- Recycling of foreign currency translation reserves (10) -
- Impairment of intangible assets 34 -
- Loss on sale of subsidiary 42 -
- Non-headline earnings items included in equity accounted earnings of equity
accounted investments 4 726 220
- Profit on disposal of property, plant and equipment (44) (22)
- Profit on the sale of investments (583) (351)
- Loss on the sale of investments 78 26
- Impairment of investments, assets and goodwill (2) 5 935 668
- Recycling of foreign currency translation reserves (647) (83)
- Other headline earnings adjustable items (13) (18)
- Taxation effect of adjustments 32 5
- Non-controlling interest (35) (13)
Headline earnings from continuing operations 8 074 7 772
DISCONTINUED OPERATIONS
Net profit for the year attributable to equity holders (earnings) 490 446
- Non-headline earnings items included in equity accounted earnings of equity
accounted investments
- Loss on disposal of property, plant and equipment 12 3
- Taxation effect of adjustments (3) -
Headline earnings from discontinued operations 499 449
Total headline earnings from continuing and discontinued operations 8 573 8 221
Option remeasurement (261) (687)
Headline earnings, excluding option remeasurement 8 312 7 534
1. "Profit on sale and dilution of equity accounted investments" includes the profit realised on the Distell restructuring
transaction of R5 150 million.
2. "Impairment of investments, assets and goodwill" from equity accounted investments includes Remgro's portion of the
impairments of Mediclinic's investments in Hirslanden and Spire of R5 257 million.
EARNINGS AND DIVIDENDS
Year ended 30 June
Cents 2018 2017
Headline earnings per share
– Basic 1 512.6 1 485.5
Continuing operations 1 424.6 1 404.4
Discontinued operations 88.0 81.1
– Diluted 1 504.5 1 479.5
Continuing operations 1 416.5 1 398.5
Discontinued operations 88.0 81.0
Headline earnings per share, excluding option remeasurement
– Basic 1 466.5 1 361.3
Continuing operations 1 378.5 1 280.2
Discontinued operations 88.0 81.1
– Diluted 1 458.4 1 355.5
Continuing operations 1 370.4 1 274.5
Discontinued operations 88.0 81.0
Earnings per share
– Basic 1 577.9 1 523.4
Continuing operations 1 491.4 1 442.8
Discontinued operations 86.5 80.6
– Diluted 1 567.5 1 517.2
Continuing operations 1 481.1 1 436.8
Discontinued operations 86.4 80.4
Dividends per share
Ordinary 532.00 495.00
– Interim 204.00 194.00
– Final 328.00 301.00
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 30 June
R million 2018 2017
Net profit for the year 9 199 8 508
Other comprehensive income, net of tax (311) (2 097)
Items that may be reclassified subsequently to the income statement:
Exchange rate adjustments 2 012 (4 477)
Fair value adjustments for the year (149) 69
Deferred taxation on fair value adjustments 55 21
Reclassification of other comprehensive income to the income statement (206) (20)
Other comprehensive income of equity accounted investments (2 127) 2 245
Items that will not be reclassified to the income statement:
Remeasurement of post-employment benefit obligations 189 68
Deferred taxation on remeasurement of post-employment benefit obligations (53) (19)
Change in reserves of equity accounted investments (32) 16
Total comprehensive income for the year 8 888 6 411
Total comprehensive income attributable to:
Equity holders 8 374 6 338
Non-controlling interest 514 73
8 888 6 411
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 30 June
R million 2018 2017
Balance at the beginning of the year 95 302 81 657
Total comprehensive income for the year 8 888 6 411
Dividends paid (2 934) (2 708)
Transactions with non-controlling shareholders 40 18
Other movements 18 18
Long-term share incentive scheme reserve 182 127
Non-controlling shareholders' interest in acquisition of subsidiary 11 953 -
Non-controlling shareholders' interest in disposal of subsidiary (3) -
Shares issued - 9 945
Share issue costs - (134)
Purchase of treasury shares by wholly owned subsidiary - (32)
Balance at the end of the year 113 446 95 302
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 30 June
R million 2018 2017
Cash generated from operations 2 096 2 241
Interest received 879 633
Taxation paid (657) (363)
Dividends received (1) 3 789 4 163
Finance costs (1 159) (1 179)
Cash available from operating activities 4 948 5 495
Dividends paid (2 934) (2 708)
Net cash inflow from operating activities 2 014 2 787
Investing activities (1), (2) 2 208 (6 572)
Financing activities (3) 78 8 553
Net increase in cash and cash equivalents 4 300 4 768
Exchange rate profit/(loss) on foreign cash 213 (424)
Cash and cash equivalents at the beginning of the year 7 472 3 128
Cash and cash equivalents at the end of the year 11 985 7 472
Cash and cash equivalents – per statement of financial position 12 169 7 524
Bank overdraft (184) (52)
1. The dividend received from RMI Holdings in respect of the reinvestment alternative (refer to the section dealing with
"Investment activities"), amounting to R471 million, is not included in "Dividends received" and "Investing activities"
for cash flow purposes.
2. "Investing activities" includes the net cash and cash equivalents of Distell at the acquisition date amounting to
R1 306 million, as well as a decrease in money market funds of R1 892 million (2017: an increase of R4 838 million).
3. "Financing activities" for the comparative year included the Remgro rights issue of R9 811 million.
ADDITIONAL INFORMATION
30 June
2018 2017
Number of shares in issue
- Ordinary shares of no par value 529 217 007 529 217 007
- Unlisted B ordinary shares of no par value 39 056 987 39 056 987
Total number of shares in issue 568 273 994 568 273 994
Number of shares held in treasury
- Ordinary shares repurchased and held in treasury (1 389 033) (1 666 638)
566 884 961 566 607 356
Weighted number of shares 566 773 693 553 423 346
In determining earnings per share and headline earnings per share the weighted number of shares was taken into account.
30 June
R million 2018 2017
Equity accounted investments
Associates 70 735 75 392
Joint ventures 2 987 5 491
73 722 80 883
Equity accounted investment reconciliation
Carrying value at the beginning of the year 80 883 78 565
Share of net attributable profit 3 383 7 545
Dividends received (4 259) (3 861)
Exchange rate differences 1 779 (4 947)
Investments made 675 771
Derecognition of equity accounted investments in Distell and Capevin (3 885) -
Transfer of Unilever to non-current assets held for sale (3 588) -
Businesses acquired 968 -
Grindrod impairment reversal 487 478
Equity accounted movements on reserves (2 145) 2 256
Other movements (576) 76
Carrying value at the end of the year 73 722 80 883
Long-term loans
20 000 Class A 7.7% cumulative redeemable preference shares 3 512 3 512
10 000 Class B 8.3% cumulative redeemable preference shares 4 382 4 382
Exchangeable bonds with an effective interest rate of 4.5% 6 090 5 650
Various other loans 7 533 3 127
21 517 16 671
Short-term portion of long-term loans (1 201) (225)
20 316 16 446
Additions to and replacement of property, plant and equipment 1 153 1 228
Capital and investment commitments* 4 366 1 247
(Including amounts authorised, but not yet contracted for)
Guarantees and contingent liabilities 9 26
Dividends received from equity accounted investments set off
against investments 4 259 3 861
Refer to the section dealing with "Investment activities" for
more detail on related party transactions.
* Capital and investment commitments at 30 June 2018 include an amount of R2 459 million from Distell.
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 table illustrates 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
30 June 2018
Assets
Available-for-sale 934 41 2 092 3 067
Derivative instruments - 12 - 12
Investment in money market funds 3 996 - - 3 996
4 930 53 2 092 7 075
Liabilities
Non-current derivative instruments - 112 - 112
Current derivative instruments - 34 43 77
- 146 43 189
30 June 2017
Assets
Available-for-sale 1 178 - 2 167 3 345
Derivative instruments - 1 - 1
Investment in money market funds 5 888 - - 5 888
7 066 1 2 167 9 234
Liabilities
Non-current derivative instruments - 363 - 363
Current derivative instruments - 13 49 62
- 376 49 425
The following table illustrates the reconciliation of the carrying value of level 3 assets at the beginning and end of the year:
30 June
R million 2018 2017
Assets: Available-for-sale
Balances at the beginning of the year 2 167 2 148
Additions 103 119
Disposals (356) (67)
Exchange rate adjustments 81 (178)
Fair value adjustments through comprehensive income 97 145
Balances at the end of the year 2 092 2 167
Liabilities: Derivative instruments
Balances at the beginning of the year 49 54
Put option exercised (6) (5)
Balances at the end of the year 43 49
There were no transfers between the different levels.
Level 3 financial assets consist mainly of investments in the Milestone China entities (Milestone) and the Pembani Remgro
Infrastructure Fund (PRIF) amounting to R1 737 million and R234 million respectively, while the investment in the Kagiso
Infrastructure Empowerment Fund was disposed of during the year under review. 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' valuation methods include
discounted cash flow valuations, appropriate earnings and revenue multiples.
Milestone's fair value consists of listed investments (43%), cash and cash equivalents (6%), unlisted investments (60%) and
other net liabilities (9%). Unlisted investments included at transaction prices in Milestone's fair value amounted to
R573 million, while its remaining eight unlisted investments were valued at R469 million. PRIF's main assets are the
investments in ETG Group, Nova Lumos and GPR Leasing. ETG Group was valued at its last traded price used for the
acquisition of an interest by a third party. GPR Leasing and Nova Lumos were valued using the discounted cash flow method.
Changes in the valuation assumptions of the above unlisted investments will not have a significant impact on Remgro's
financial statements as the underlying assets of the funds in which Remgro made its investments are widely spread.
COMMENTS
1. ACCOUNTING POLICIES
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
(JSE) Listing Requirements for provisional reports, and the requirements of the Companies Act applicable to
summary financial statements. The JSE Listing Requirements for provisional reports require summary financial
statements to be prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS) 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 to also, as a minimum, contain the information required by IAS 34: Interim Financial
Reporting.
The accounting policies applied in the preparation of the consolidated financial statements from which the summary
consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies
applied in the preparation of the previous consolidated annual financial statements, with the exception of the
adoption of the amendments to IAS 7: Cash flow statements, IAS 12: Income taxes and IFRS 12: Disclosure of
interest in other entities. The implementation of these interpretations and amendments had no impact on the results
of either the current or prior years.
The financial statements have been prepared under the supervision of the Chief Financial Officer, Neville Williams
CA(SA).
2. COMPARISON WITH THE PRIOR YEAR
Since 11 May 2018 Remgro holds the majority of voting rights (56.0%) in Distell, thereby resulting in the
investment in Distell now being consolidated at 31.8%. Therefore, certain line items in the statement of financial
position and income statement are not directly comparable with the prior year. Based on the preliminary accounting
for the business combination, the fair value of the major classes of assets and liabilities acquired are as follows:
R million
Property, plant and equipment 6 608
Intangible assets 10 169
Inventories 7 765
Debtors and short-term loans 2 149
Cash and cash equivalents less bank overdraft 1 306
Other net assets 1 229
Long-term loans (4 378)
Deferred taxation (assets and liabilities) (3 693)
Trade and other payables (3 857)
Non-controlling interest (11 893)
Fair value of net assets acquired 5 405
Goodwill 3 535
Total purchase consideration 8 940
Distell's revenue contribution for the year under review is R4 219 million. Refer to "Investment activities" for
further detail.
3. RESULTS
Headline earnings
For the year to 30 June 2018 headline earnings increased by 4.3% from R8 221 million to R8 573 million, while
headline earnings per share (HEPS) increased by 1.8% from 1 485.5 cents to 1 512.6 cents. The difference in the
increase between headline earnings and HEPS is attributed to the impact of the rights issue during the comparative
year.
Included in headline earnings for the year under review is a positive fair value adjustment amounting to
R261 million (2017: R687 million), relating to the decrease in value of the bondholders' exchange option of the
exchangeable bonds (option remeasurement). Excluding the option remeasurement, headline earnings increased by
10.3% from R7 534 million to R8 312 million, while HEPS increased by 7.7% from 1 361.3 cents to 1 466.5 cents.
The increase in headline earnings, excluding option remeasurement, is mainly due to higher earnings from the
banking and insurance platforms, RCL Foods, Total and higher finance income, offset by a lower contribution from
Mediclinic as well as transaction costs incurred on the Distell ownership restructuring and the Unilever Spreads
business acquisition.
Contribution to headline earnings by reporting platform
Year ended Year ended
30 June % 30 June
R million 2018 Change 2017
Banking 3 525 11.4 3 163
Healthcare 1 556 (17.0) 1 875
Consumer products 1 605 18.5 1 354
Insurance 1 228 18.0 1 041
Industrial 971 29.5 750
Infrastructure 57 58.3 36
Media and sport (47) 19.0 (58)
Other investments 66 (5.7) 70
Central treasury
- finance income 524 50.1 349
- finance costs (891) 1.3 (903)
- option remeasurement 261 (62.0) 687
Other net corporate costs (282) (97.2) (143)
Headline earnings 8 573 4.3 8 221
Option remeasurement (261) (687)
Headline earnings, excluding option remeasurement 8 312 10.3 7 534
Refer to Annexures A and B for the audited segmental information.
Commentary on reporting platforms' performance (unaudited)
Banking
The headline earnings contribution from the banking division amounted to R3 525 million (2017: R3 163 million),
representing an increase of 11.4%. FirstRand and RMH reported headline earnings growth of 11.6% and 11.4%
respectively. On a normalised basis, which excludes certain non-operational and accounting anomalies, and is a
better reflection of underlying performance, both FirstRand and RMH reported earnings growth of 7.9%. These
increases are mainly due to growth in both net interest income, underpinned by good growth in advances and
deposits, and non-interest revenue due to strong growth in fee and commission income. This growth in earnings was
partly offset by an increase in non-performing loans due to the constrained macro-economic environment resulting in
an increase in credit impairment charges.
Healthcare
Mediclinic's contribution to Remgro's headline earnings amounted to R1 556 million (2017: R1 875 million),
representing a decrease of 17.0%. It should be noted that all the Al Noor facilities were rebranded to Mediclinic and
therefore Mediclinic's contribution for the year under review included an accelerated amortisation charge of
R171 million relating to the Al Noor trade name. Mediclinic's contribution also included a derecognition charge of
R114 million in respect of unamortised finance expenses relating to the refinancing of Hirslanden's debt. Excluding
the impact of the accelerated amortisation and derecognition of unamortised finance expenses, Mediclinic's
contribution to Remgro's headline earnings would have decreased by 1.8% from R1 875 million to R1 841 million.
The strengthening of the rand against the Swiss franc, British pound and United Arab Emirates dirham also had a
negative impact on Mediclinic's contribution. In British pound terms Mediclinic's contribution, excluding the
accelerated amortisation and derecognition of unamortised finance expenses, increased by 4.9% mainly due to a
stronger performance by the Southern Africa and Middle East operating divisions, offset by a lower contribution
from Hirslanden and a decrease in the equity accounted earnings from Spire. Hirslanden's results were impacted by a
subdued market, the continued change in insurance mix and the evolving changes in the regulatory environment,
while Spire's contribution to Mediclinic's results included a provision of £9 million for the potential cost of a
settlement relating to civil litigation against a consultant who previously had practicing privileges at Spire and a
charge relating to a decision to cease the provision of radiotherapy services at the Spire Specialist Cancer Care
Centre in Baddow (Essex).
Consumer products
The contribution from consumer products to Remgro's headline earnings amounted to R1 605 million (2017:
R1 354 million), representing an increase of 18.5%.
RCL Foods' contribution to Remgro's headline earnings increased by 52.6% to R647 million (2017: R424 million).
This increase is mainly due to the recovery in the Chicken business unit, strong volume performances in the
Dressings, Pet Food and Pies categories, lower interest costs and a tax credit of R64 million relating to an energy
efficiency allowance in the Sugar business unit. The improvement from the Chicken business unit resulted from a
revised business model, lower feed prices and improved realisations. The increase was dampened by the impact of
listeriosis within the business unit, amounting to an estimated negative impact of R158 million. The Sugar operations
experienced challenging market conditions due to low international prices, a relatively strong currency and a
significant volume of dumped imports.
Unilever's contribution to Remgro's headline earnings increased by 11.1% to R499 million (2017: R449 million).
This increase is mainly due to an improvement in gross margins as a result of tighter spend management.
Distell's contribution to headline earnings, which includes the investment in Capevin Holdings, amounted to
R459 million (2017: R481 million). Distell's results for the year under review were negatively impacted by once-off
losses and write-offs amounting to R78 million (2017: R22 million) in its associate, Tanzania Distilleries Limited,
following a sachet ban and excise duty dispute. The comparative year included a reversal of a provision for interest
payable in respect of an extended excise duty dispute of R42 million. Distell reported headline earnings growth,
adjusted for foreign exchange movements, retrenchment and group restructuring costs, as well as the aforementioned
once-off items, of 5.2%, mainly driven by a 10.4% increase in revenue achieved across all regions and categories.
Insurance
RMI Holdings' contribution to headline earnings increased by 18.0% to R1 228 million (2017: R1 041 million). On a
normalised basis, RMI Holdings reported an increase of 14.8% in earnings mainly due to the contributions from
Discovery (up 16.2%), OUTsurance (up 11.5%) and the newly acquired Hastings, partly offset by higher funding
costs relating to the Hastings acquisition and a lower contribution by MMI (down 12.4%). The strong result by
Discovery was driven by both established and emerging businesses, while OUTsurance's results were impacted by
favourable claims conditions throughout all major operations. MMI's results were negatively impacted by the
continued challenging macro-economic environment, as well as operational shortcomings in the Momentum and
Metropolitan retail divisions.
Industrial
Total's contribution to Remgro's headline earnings amounted to R501 million (2017: R224 million). Included in the
contribution to headline earnings for the year under review are favourable stock revaluations amounting to
R216 million (2017: unfavourable stock revaluations of R82 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 6.9% from R306 million to R285 million.
Remgro's share of the results of KTH amounted to R55 million (2017: R34 million). This increase is mainly due to
lower finance costs as a result of the repayment of debt following the disposal of the investment in Exxaro Resources
Limited.
Air Products' and Wispeco's contribution to headline earnings amounted to R289 million and R122 million
respectively (2017: R298 million and R169 million), while PGSI contributed R4 million to Remgro's headline
earnings (2017: R25 million).
Infrastructure
Grindrod's contribution to Remgro's headline earnings amounted to a loss of R46 million (2017: a loss of
R48 million), impacted by stock impairments in the rail assembly business due to the closure of this business unit.
This decrease was partly offset by improved results across core businesses mainly due to increased commodity
demand and stronger drybulk shipping rates.
For the year under review the CIV group contributed R48 million to headline earnings (2017: R110 million). This
decrease is mainly due to higher finance costs and depreciation due to increased infrastructure spend. Despite the
decrease in earnings, the CIV group's monthly annuity income increased to R138 million (2017: R115 million).
Remgro's share of SEACOM's profit amounted to R15 million (2017: loss of R33 million). This increase is mainly
due to improved results in South Africa and Kenya, as well as a once-off realisation of deferred revenue relating to
the early termination of long-term contracts.
Media and sport
Media and sport primarily consist of the interests in eMedia Investments and various sport interests, including
interests in rugby franchises, as well as the Stellenbosch Academy of Sport.
eMedia Investments' contribution to Remgro's headline earnings decreased to R1 million (2017: R49 million). This
decrease is mainly due to a significant decline in license revenue resulting from a renegotiated DStv agreement, and
the continued investment in the Openview platform.
Other investments
The contribution from other investments to headline earnings amounted to R66 million (2017: R70 million), of
which Business Partners' contribution was R65 million (2017: R54 million).
Central treasury and other net corporate costs
Finance income amounted to R524 million (2017: R349 million). This increase is mainly due to higher average cash
balances as a result of the Remgro rights issue in the comparative year. Finance costs amounted to R891 million
(2017: R903 million). The positive fair value adjustment of R261 million (2017: R687 million) relates to the
decrease in the value of the exchange option of the exchangeable bonds. Other net corporate costs amounted to
R282 million (2017: R143 million). The increase in other net corporate costs is mainly due to transaction costs
amounting to R109 million, incurred on the Distell ownership restructuring and the Unilever Spreads business
acquisition.
Earnings
Earnings increased by 6.1% to R8 943 million (2017: R8 431 million). This increase is mainly due to the profit
realised on the Distell restructuring transaction of R5 150 million, as well as the increase in headline earnings as
explained above. This increase is partly offset by Remgro's portion of the impairments of Mediclinic's investments
in Hirslanden and Spire of R5 257 million, as well as the lower positive fair value adjustment, relating to the
decrease in value of the exchange option of the exchangeable bonds of R261 million (2017: R687 million).
4. INTRINSIC NET ASSET VALUE
Remgro's intrinsic net asset value per share increased by 2.2% from R251.48 at 30 June 2017 to R256.97 at
30 June 2018. The closing share price at 30 June 2018 was R204.29 (2017: R213.46) representing a discount of
20.5% (2017: 15.1%) to the intrinsic net asset value. Refer to Annexure B for full details.
5. INVESTMENT ACTIVITIES
The most important investment activities during the year under review were as follows:
Distell Group Holdings Limited (Distell)
On 30 June 2017 Remgro had an indirect economic interest of 31.8% in Distell Group Limited (previously listed
Distell). This interest was held through its 50.0% shareholding in Remgro-Capevin Investments Proprietary Limited
(RCI) and 19.0% shareholding in Capevin Holdings Limited (Capevin). Capevin held the other 50.0% shareholding
in RCI and RCI had a 53.5% economic interest (or 52.8% voting interest) in the previously listed Distell.
On 11 May 2018 the competition authorities approved the restructuring of the previously listed Distell's multi-tiered
ownership structure. In terms of the restructuring, Remgro exchanged its 50.0% shareholding in RCI for additional
ordinary shares in Capevin (the RCI Exchange). The RCI Exchange increased Remgro's interest in Capevin from
19.0% to 59.5%. Following the RCI Exchange, Remgro exchanged its entire Capevin shareholding for ordinary
shares in Distell, a new listed entity which is substantially similar to the previously listed Distell. Remgro also
received unlisted B shares in Distell, which shares are linked to the Distell ordinary shares acquired by Remgro by
virtue of the RCI Exchange, resulting in Remgro replicating RCI's 52.8% voting rights in the previously listed
Distell. The unlisted B shares only carry voting rights in Distell and have no economic participation. The
restructuring had no impact on Remgro's intrinsic net asset value and Remgro retained its 31.8% economic interest
in Distell, but increased its voting rights in Distell to 56.0%.
Remgro's investments in RCI and Capevin were previously classified as a joint venture and an associate,
respectively, and accounted for using the equity method. Since the restructuring, Remgro holds the majority of
voting rights (56.0%) in Distell, thereby resulting in the investment in Distell now being consolidated at 31.8% with
effect from 11 May 2018, while the investments in RCI and Capevin were derecognised at their fair values totalling
R8 940 million, realising an accounting profit on the sale of investments of R5 150 million.
In terms of IFRS 3: Business Combinations the purchase consideration for Distell, consisting of the fair value of
Remgro's previously held interests in RCI and Capevin, amounted to R8 940 million. The preliminary fair value of
the underlying assets acquired and liabilities assumed at the effective date were: intangible assets of R10 169 million,
property, plant and equipment of R6 608 million, and other net assets of R521 million. Non-controlling shareholders'
proportionate interest in the fair value of Distell's net assets amounted to R11 893 million, while Remgro's economic
interest therein amounted to R5 405 million. The balance of R3 535 million, being the difference between the
purchase price and Remgro's portion of Distell's identifiable net assets, was allocated to goodwill.
The fair value adjustment to Distell's statement of financial position relates mainly to the recognition of brands (inter
alia Hunters, Savanna, Amarula and Bernini). The amortisation of these additional assets will result in an annual
after-tax expense of R145 million (Remgro's portion being R46 million) included in headline earnings. Since
Remgro retained its economic interest of 31.8% in Distell's underlying business, the impact on attributable headline
earnings for the year under review only relates to the additional after-tax amortisation expense of R8 million for the
period to 30 June 2018.
RMI Holdings Limited (RMI Holdings)
On 19 September 2017 and 12 March 2018 RMI Holdings declared its final dividend for the year ended
30 June 2017 and interim dividend for the six months ended 31 December 2017 respectively. Both dividends
included an alternative to the cash dividend of either receiving a scrip distribution or reinvesting the cash dividend by
subscribing for new RMI Holdings ordinary shares. Remgro elected the reinvestment alternative for both
declarations. Cash dividends amounting to R471 million were reinvested for 7 691 641 new RMI Holdings ordinary
shares at R38.00 per share and 4 196 921 new RMI Holdings ordinary shares at R42.50 per share during
October 2017 and April 2018 respectively. These investments increased Remgro's interest in RMI Holdings
marginally to 30.3% (30 June 2017: 29.9%).
Grindrod Limited (Grindrod)
On 19 June 2018 Grindrod distributed its shipping division to its shareholders as a dividend in specie. Grindrod
shareholders received 1 Grindrod Shipping Holdings Limited (Grindrod Shipping) share for every 40 Grindrod
shares held and, accordingly, Remgro received 4 329 580 Grindrod Shipping shares. Grindrod Shipping listed on the
NASDAQ on 18 June 2018 with a secondary inward listing on the JSE on 19 June 2018. On 30 June 2018 Remgro's
effective interests in Grindrod and Grindrod Shipping were 23.0% (2017: 23.1%) and 22.7% respectively.
Kagiso Infrastructure Empowerment Fund (KIEF)
During the year under review, Remgro disposed of its investment in KIEF, realising a profit on disposal of
R103 million on the transaction. Remgro initially committed funds amounting to R350 million to KIEF, which had a
target size of R650 million and aimed to invest in infrastructure projects, including roads, airports, power and
telecommunication installations, railway systems, ports, water and social infrastructure. In total, Remgro invested
R285 million in KIEF and received income and capital distributions amounting to R381 million, which includes the
proceeds on disposal of KIEF.
Invenfin Proprietary Limited (Invenfin)
During the year under review Remgro (through its wholly owned subsidiary, Invenfin) invested a further R80 million
in Bos Brands Proprietary Limited (Bos Brands), thereby increasing its cumulative investment in Bos Brands to
R244 million. Bos Brands is an owner, producer, marketer and distributor of a range of ice teas and sports drinks,
under the BOS brand.
Pembani Remgro Infrastructure Fund (PRIF)
During the year under review Remgro invested a further R43 million in PRIF, thereby increasing its cumulative
investment to R298 million. As at 30 June 2018 the remaining commitment to PRIF amounted to R352 million.
Other
Other smaller investments amounted to R114 million.
Events after year-end
Unilever South Africa Holdings Proprietary Limited (Unilever)
The competition authorities have approved Unilever's acquisition of Remgro's 25.75% shareholding in Unilever in
exchange for Unilever's Spreads business in Southern Africa, as well as a cash consideration of R4 900 million,
representing a total transaction value of R11 900 million. This transaction valued the Unilever Spreads business at
R7 000 million. The effective date of the transaction was 2 July 2018.
On 2 July 2018 the Unilever Spreads business, valued at R7 000 million, was transferred to Silver 2017 Proprietary
Limited (Silver), which became a wholly owned subsidiary of Remgro, and the investment in Unilever was disposed
of for R11 900 million. In terms of IFRS 3: Business Combinations the purchase price of the Unilever Spreads
business will be allocated to intangible assets (mainly brands like Rama, Stork and Flora), property, plant and
equipment and other net assets, while the balance will be allocated to goodwill. At the date of publication of the
audited consolidated results, the acquisition date fair values of acquired net assets have not yet been determined.
RMI Holdings
On 11 September 2018 RMI Holdings declared its final dividend for the year ended 30 June 2018, which included an
alternative to the cash dividend of either receiving a scrip distribution or reinvesting the cash dividend by subscribing
for new RMI Holdings ordinary shares. Remgro has committed to reinvesting its cash dividend amounting to
R300 million, by electing the reinvestment alternative, in order to receive 7 894 998 new RMI Holdings ordinary
shares at R38.00 per share.
Community Investment Ventures Holdings Proprietary Limited (CIVH)
On 29 August 2018 Remgro invested a further R324 million in CIVH as part of a CIVH rights offer.
Milestone Capital Strategic Holdings Limited (MCSH)
During August 2018 Remgro disposed of its investment and loan in MCSH for a total purchase consideration of
$70 million.
Other than the above-mentioned transactions, there were no other significant transactions subsequent to
30 June 2018.
6. TREASURY SHARES
At 30 June 2017, 1 666 638 Remgro ordinary shares (0.3%) were held as treasury shares by a wholly owned
subsidiary of Remgro. As previously reported, these shares were acquired for the purpose of hedging Remgro's share
incentive scheme.
During the year under review 277 605 Remgro ordinary shares were utilised to settle Remgro's obligation towards
scheme participants who exercised the rights granted to them.
At 30 June 2018, 1 389 033 (0.3%) Remgro ordinary shares were held as treasury shares.
7. CASH RESOURCES AT THE CENTRE
The Company's cash resources at 30 June 2018 were as follows:
30 June 2018 30 June 2017
R million Local Offshore Total
Per consolidated statement of financial position 6 921 5 248 12 169 7 524
Investment in money market funds 3 915 81 3 996 5 888
Less: Cash of operating subsidiaries (1 701) (760) (2 461) (1 189)
Cash at the centre 9 135 4 569 13 704 12 223
On 30 June 2018, approximately 29% (R3 996 million) of the available cash at the centre was invested in money
market funds which are not classified as cash and cash equivalents on the statement of financial position.
DIRECTORATE
Mr W E Bührmann has retired as an executive director from the Board of Remgro on 30 April 2018. He has reached his
normal retirement age of 63 for executive directors.
The Board wishes to thank him for his valuable contribution over many years.
REPORTS OF THE INDEPENDENT AUDITOR
The Company's directors are responsible for the preparation of a summary of the audited consolidated financial statements.
These summary consolidated financial statements for the year ended 30 June 2018 have been audited by
PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The auditor also expressed an unmodified
opinion on the annual financial statements from which these summary consolidated financial statements were derived.
A copy of the auditor's report on the summary consolidated financial statements and of the auditor's report on the annual
consolidated financial statements are available for inspection at the Company's registered office, together with the financial
statements identified in the respective auditor's reports.
The auditor's report does not necessarily report on all of the information contained in this announcement/financial results.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they
should obtain a copy of the auditor's report together with the accompanying financial information from the registered office
of the Company.
DECLARATION OF CASH DIVIDEND
Declaration of Dividend No. 36
Notice is hereby given that a final gross dividend of 328 cents (2017: 301 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
year ended 30 June 2018.
A dividend withholding tax of 20% or 65.6 cents per share will be applicable, resulting in a net dividend of 262.4 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 total gross dividend per share for the year ended 30 June 2018 therefore amounts to 532 cents, compared to 495 cents
for the year ended 30 June 2017.
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, 13 November 2018
Shares trade ex dividend Wednesday, 14 November 2018
Record date Friday, 16 November 2018
Payment date Monday, 19 November 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 14 November 2018, and Friday,
16 November 2018, 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
19 September 2018
DIRECTORATE
Non-executive directors
Johann Rupert (Chairman), E de la H Hertzog (Deputy Chairman),
J Malherbe (Deputy Chairman), S E N De Bruyn*, 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),
M Lubbe, N J Williams
CORPORATE INFORMATION
Secretary
D I Heynes
Listing
JSE Limited
Sector: Industrial – Diversified Industrial
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 (audited)
Year ended 30 June
R million 2018 2017
Banking
RMH 2 486 2 232
FirstRand 1 039 931
Healthcare
Mediclinic 1 556 1 875
Consumer products
Unilever 499 449
Distell (1) 459 481
RCL Foods 647 424
Insurance
RMI Holdings 1 228 1 041
Industrial
Air Products 289 298
KTH 55 34
Total 501 224
PGSI 4 25
Wispeco 122 169
Infrastructure
Grindrod (46) (48)
CIV group 48 110
SEACOM 15 (33)
Other infrastructure interests 40 7
Media and sport
eMedia Investments 1 49
Other media and sport interests (48) (107)
Other investments 66 70
Central treasury
Finance income 524 349
Finance costs (891) (903)
Option remeasurement 261 687
Other net corporate costs (282) (143)
Headline earnings 8 573 8 221
Weighted number of shares (million) 566.8 553.4
Headline earnings per share (cents) 1 512.6 1 485.5
Note
1. Includes the investment in Capevin Holdings Limited.
ANNEXURE B
COMPOSITION OF INTRINSIC NET ASSET VALUE (audited)
30 June 2018 30 June 2017
R million Book value Intrinsic value Book value Intrinsic value
Banking
RMH 15 385 30 123 14 016 23 350
FirstRand 5 486 14 045 5 010 10 365
Healthcare
Mediclinic 29 373 31 329 33 763 41 568
Consumer products
Unilever 3 588 11 900 3 737 10 702
Distell (1) 9 110 9 674 3 727 9 556
RCL Foods 8 128 11 534 7 553 10 173
Insurance
RMI Holdings 8 479 17 285 7 277 17 532
Industrial
Air Products 1 026 4 158 1 047 4 298
KTH 1 964 2 218 1 684 2 466
Total 2 007 2 382 1 640 2 167
PGSI 692 692 643 643
Wispeco 874 984 821 1 368
Infrastructure
Grindrod 1 624 1 624 1 915 1 915
Grindrod Shipping 623 623 - -
CIV group 2 301 4 940 2 242 4 829
SEACOM 353 870 321 896
Other infrastructure interests 256 256 520 520
Media and sport
eMedia Investments 866 866 1 147 1 424
Other media and sport interests 223 268 365 319
Other investments 4 060 4 196 3 947 3 932
Central treasury
Cash at the centre (2) 13 704 13 704 12 223 12 223
Debt at the centre (14 097) (14 097) (13 907) (13 907)
Other net corporate assets 2 073 2 536 2 741 3 164
Intrinsic net asset value (INAV) 98 098 152 110 92 432 149 503
Potential CGT liability (3) (6 438) (7 010)
INAV after tax 98 098 145 672 92 432 142 493
Issued shares after deduction of shares
repurchased (million) 566.9 566.9 566.6 566.6
INAV after tax per share (Rand) 173.04 256.97 163.13 251.48
Remgro share price (Rand) 204.29 213.46
Percentage discount to INAV 20.5 15.1
Notes
1. The prior year 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, Distell 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: 19/09/2018 05:00:00 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
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