Wrap Text
Unaudited results for the six months ended 31 December 2017 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 2017
AND
CASH DIVIDEND DECLARATION
SALIENT FEATURES
- Intrinsic net asset value per share +5.7%
- Interim dividend per share +5.2%
- Headline earnings per share, excluding option remeasurement +1.3%
- Headline earnings per share -10.4%
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December 30 June
R million 2017 2016 2017
ASSETS
Non-current assets
Property, plant and equipment 6 741 6 767 6 668
Investment properties 130 119 129
Intangible assets 4 873 4 936 4 927
Investments - Equity accounted 80 184 78 072 80 883
- Available-for-sale 2 937 3 152 3 345
Retirement benefits 204 152 201
Loans 573 616 562
Deferred taxation 22 40 23
95 664 93 854 96 738
Current assets 23 179 22 937 22 317
Inventories 3 645 3 621 3 055
Biological agricultural assets 619 709 791
Debtors and short-term loans 5 730 5 493 4 885
Investment in money market funds 5 849 3 569 5 888
Cash and cash equivalents 7 227 9 458 7 524
Other current assets 93 32 85
23 163 22 882 22 228
Assets held for sale 16 55 89
Total assets 118 843 116 791 119 055
EQUITY AND LIABILITIES
Stated capital 13 416 13 418 13 416
Reserves 78 933 76 171 79 235
Treasury shares (189) (231) (219)
Shareholders' equity 92 160 89 358 92 432
Non-controlling interest 3 009 2 812 2 870
Total equity 95 169 92 170 95 302
Non-current liabilities 18 161 18 935 18 493
Retirement benefits 183 182 173
Long-term loans 16 278 16 882 16 446
Deferred taxation 1 473 1 471 1 511
Derivative instruments 227 400 363
Current liabilities 5 513 5 686 5 260
Trade and other payables 4 625 4 671 4 710
Short-term loans 741 826 480
Other current liabilities 147 189 69
5 513 5 686 5 259
Liabilities held for sale - - 1
Total equity and liabilities 118 843 116 791 119 055
Net asset value per share (Rand)
- At book value R162.59 R157.73 R163.13
- At intrinsic value R265.84 R257.79 R251.48
SUMMARY CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
R million Restated*
Sales 14 046 14 511 27 600
Inventory expenses (6 804) (7 917) (16 138)
Staff costs (2 522) (2 456) (4 972)
Depreciation (362) (379) (752)
Other net operating expenses* (3 617) (3 351) (4 978)
Trading profit 741 408 760
Dividend income 48 19 61
Interest received 414 238 633
Fair value adjustment on exchangeable bonds' option* 134 667 687
Finance costs (614) (648) (1 255)
Net impairment of investments, loans, assets and goodwill 645 593 105
Profit on sale and dilution of investments 120 3 199
Consolidated profit before tax 1 488 1 280 1 190
Taxation (272) (118) (227)
Consolidated profit after tax 1 216 1 162 963
Share of after-tax profit of equity accounted investments 3 015 4 075 7 545
Net profit for the period 4 231 5 237 8 508
Attributable to:
Equity holders 4 131 5 219 8 431
Non-controlling interest 100 18 77
4 231 5 237 8 508
EQUITY ACCOUNTED INVESTMENTS
Share of after-tax profit of equity accounted investments
Profit before taking into account impairments, non-recurring and
capital items 5 380 5 466 10 066
Net impairment of investments, assets and goodwill (1 170) (308) (668)
Profit on the sale of investments 108 154 325
Other non-recurring and capital items 13 33 101
Profit before tax and non-controlling interest 4 331 5 345 9 824
Taxation (1 096) (1 079) (1 895)
Non-controlling interest (220) (191) (384)
3 015 4 075 7 545
* The fair value adjustment on the exchangeable bonds' option was included in "Other net operating expenses" in the
December 2016 income statement. As previously reported and in order to improve disclosure, this item is now presented
separately.
HEADLINE EARNINGS RECONCILIATION
Six months ended Year ended
31 December 31 December 30 June
R million 2017 2016 2017
Net profit for the period attributable to equity holders (earnings) 4 131 5 219 8 431
Plus/(minus):
- Net impairment of equity accounted investments (654) (738) (302)
- Impairment of available-for-sale investments - - 5
- Impairment of property, plant and equipment 8 145 181
- (Profit)/loss on sale and dilution of equity accounted investments (4) 5 (199)
- Profit on sale of available-for-sale investments (116) (8) -
- Net surplus on disposal of property, plant and equipment (45) (18) (110)
- Non-headline earnings items included in earnings of equity accounted
investments 1 048 128 223
- Net (surplus)/loss on disposal of property, plant and equipment (1) 7 (19)
- Profit on the sale of investments (108) (154) (325)
- Net impairment of investments, assets and goodwill 1 170 308 668
- Other non-recurring and capital items (13) (33) (101)
- Taxation effect of adjustments 32 (22) 5
- Non-controlling interest 6 (21) (13)
Headline earnings 4 406 4 690 8 221
Option remeasurement (134) (667) (687)
Headline earnings, excluding option remeasurement 4 272 4 023 7 534
EARNINGS AND DIVIDENDS
Six months ended Year ended
31 December 31 December June
Cents 2017 2016 2017
Headline earnings per share
- Basic 777.5 867.7 1 485.5
- Diluted 772.8 863.9 1 479.5
Headline earnings per share, excluding option remeasurement
- Basic 753.9 744.3 1 361.3
- Diluted 749.1 740.7 1 355.5
Earnings per share
- Basic 729.0 965.6 1 523.4
- Diluted 725.2 960.8 1 517.2
Dividends per share
Ordinary 204.00 194.00 495.00
- Interim 204.00 194.00 194.00
- Final - - 301.00
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
31 December 31 December 30 June
R million 2017 2016 2017
Net profit for the period 4 231 5 237 8 508
Other comprehensive income, net of tax (2 774) (2 976) (2 097)
Items that may be reclassified subsequently to the income statement:
Exchange rate adjustments (1 182) (4 570) (4 477)
Fair value adjustments for the period (2) (117) 69
Deferred taxation on fair value adjustments 12 53 21
Reclassification of other comprehensive income to the
income statement (98) (9) (20)
Other comprehensive income of equity accounted investments (1 694) 1 801 2 245
Items that will not be reclassified to the income statement:
Remeasurement of post-employment benefit obligations - - 68
Deferred taxation on remeasurement of post-employment benefit
obligations - - (19)
Change in reserves of equity accounted investments 190 (134) 16
Total comprehensive income for the period 1 457 2 261 6 411
Total comprehensive income attributable to:
Equity holders 1 356 2 244 6 338
Non-controlling interest 101 17 73
1 457 2 261 6 411
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
31 December 31 December 30 June
R million 2017 2016 2017
Balance at the beginning of the period 95 302 81 657 81 657
Total comprehensive income for the period 1 457 2 261 6 411
Dividends paid (1 747) (1 589) (2 708)
Transactions with non-controlling shareholders 63 5 18
Other movements 7 7 18
Long-term share incentive scheme reserve 87 48 127
Shares issued - 9 945 9 945
Share issue costs - (132) (134)
Purchase of treasury shares by wholly owned subsidiary - (32) (32)
Balance at the end of the period 95 169 92 170 95 302
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
31 December 31 December 30 June
R million 2017 2016 2017
Cash generated from operations 203 465 2 874
Taxation paid (204) (120) (363)
Dividends received¹ 2 205 2 509 4 163
Finance costs (570) (611) (1 179)
Cash available from operating activities 1 634 2 243 5 495
Dividends paid (1 747) (1 589) (2 708)
Net cash inflow/(outflow) from operating activities (113) 654 2 787
Investing activities1, 2 (128) (3 569) (6 572)
Financing activities3 (58) 8 997 8 553
Net increase/(decrease) in cash and cash equivalents (299) 6 082 4 768
Exchange rate loss on foreign cash (268) (231) (424)
Cash and cash equivalents at the beginning of the period 7 472 3 128 3 128
Cash and cash equivalents at the end of the period 6 905 8 979 7 472
Cash and cash equivalents - per statement of financial position 7 227 9 458 7 524
Bank overdraft (322) (479) (52)
1. The dividend received from RMI Holdings in respect of the reinvestment alternative (refer to the section dealing with
"Investment activities"), amounting to R292 million, is not included in "Dividends received" and "Investing activities"
for cash flow purposes.
2. "Investing activities" for the comparative period primarily consisted of an increase in money market funds of
R2 519 million.
3. "Financing activities" for the comparative period included the Remgro rights issue of R9 813 million.
ADDITIONAL INFORMATION
31 December 31 December 30 June
2017 2016 2017
Number of shares in issue
- Ordinary shares of no par value 529 217 007 529 217 007 529 217 007
- Unlisted B ordinary shares of no par value 39 056 987 39 056 987 39 056 987
Total number of shares in issue 568 273 994 568 273 994 568 273 994
Number of shares held in treasury
- Ordinary shares repurchased and held in treasury (1 432 501) (1 756 218) (1 666 638)
566 841 493 566 517 776 566 607 356
Weighted number of shares 566 682 343 540 505 301 553 423 346
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
R million 2017 2016 2017
Equity accounted investments
Associates 74 451 72 536 75 392
Joint ventures 5 733 5 536 5 491
80 184 78 072 80 883
Equity accounted investment reconciliation
Carrying value at the beginning of the period 80 883 78 565 78 565
Share of net attributable profit 3 015 4 075 7 545
Dividends received (2 304) (2 109) (3 861)
Dilutionary effects 2 (6) 196
Exchange rate differences (940) (5 372) (4 947)
Grindrod impairment reversal 654 724 478
Movements on reserves (1 504) 1 667 2 256
Other movements 378 528 651
Carrying value at the end of the period 80 184 78 072 80 883
Long-term loans
20 000 Class A 7.7% cumulative redeemable preference shares 3 513 3 513 3 512
10 000 Class B 8.3% cumulative redeemable preference shares 4 383 4 383 4 382
Exchangeable bonds with an effective interest rate of 4.5% 5 533 5 530 5 650
Various other loans 3 084 3 597 3 127
16 513 17 023 16 671
Short-term portion of long-term loans (235) (141) (225)
16 278 16 882 16 446
Additions to and replacement of property, plant and equipment 336 802 1 228
Capital and investment commitments 1 330 1 433 1 247
(Including amounts authorised, but not yet contracted for)
Guarantees and contingent liabilities 25 239 26
Dividends received from equity accounted investments set off
against investments 2 304 2 109 3 861
Refer to the section dealing with "Investment activities" for
more detail on significant 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 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
31 December 2017
Assets
Available-for-sale 1 093 - 1 844 2 937
Derivative instruments - 8 - 8
Investment in money market funds 5 849 - - 5 849
6 942 8 1 844 8 794
Liabilities
Non-current derivative instruments - 227 - 227
Current derivative instruments - 14 49 63
- 241 49 290
31 December 2016
Assets
Available-for-sale 1 040 - 2 112 3 152
Derivative instruments - 2 - 2
Investment 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
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 from the beginning to the end of the
period:
31 December 31 December 30 June
R million 2017 2016 2017
Assets: Available-for-sale
Balances at the beginning of the period 2 167 2 148 2 148
Additions 56 26 119
Disposals (350) (57) (67)
Exchange rate adjustments (103) (109) (178)
Fair value adjustments through comprehensive income 74 104 145
Balances at the end of the period 1 844 2 112 2 167
Liabilities: Derivative instruments
Balances at the beginning of the period 49 54 54
Remeasurements - - (5)
Balances at the end of the period 49 54 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 492 million and R228 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' valuation methods
include discounted cash flow valuations, appropriate earnings and revenue multiples.
Milestone's fair value consists of listed investments (45%), cash and cash equivalents (6%) and unlisted investments (49%).
Unlisted investments included at recent transaction prices in Milestone's fair value amounted to R400 million, while its
remaining nine unlisted investments were valued at R328 million and is considered to be immaterial. PRIF's main assets are
the investments in ETG Group and Lumos Global. The fund values its investments 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 as the underlying assets of the funds in which Remgro made its investments are widely spread.
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 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 periods.
2. RESULTS
Headline earnings
For the period under review, headline earnings decreased by 6.1% from R4 690 million to R4 406 million, while
headline earnings per share (HEPS) decreased by 10.4% from 867.7 cents to 777.5 cents. The difference in the
decrease between headline earnings and HEPS is attributed to the impact of the rights issue during the comparative
period.
Included in headline earnings for the period under review is a positive fair value adjustment amounting to
R134 million (2016: R667 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
6.2% from R4 023 million to R4 272 million, while HEPS increased by 1.3% from 744.3 cents to 753.9 cents. The
increase in headline earnings, excluding option remeasurement, is mainly due to higher earnings from RCL Foods,
Total, RMI Holdings and higher finance income, offset by a lower contribution from Mediclinic.
Contribution to headline earnings by reporting platform
Year ended
31 Dec % 31 Dec 30 June
R million 2017 Change 2016 2017
Banking 1 678 6.2 1 580 3 163
Healthcare 487 (50.5) 983 1 875
Consumer products 1 140 20.6 945 1 354
Insurance 626 27.2 492 1 041
Industrial 551 29.3 426 750
Infrastructure 32 113.3 15 36
Media and sport (18) 28.0 (25) (58)
Other investments 29 (25.6) 39 70
Central treasury
- finance income 259 146.7 105 349
- finance costs (452) 2.2 (462) (903)
- option remeasurement 134 (79.9) 667 687
Other net corporate costs (60) 20.0 (75) (143)
Headline earnings 4 406 (6.1) 4 690 8 221
Option remeasurement (134) (667) (687)
Headline earnings, excluding option remeasurement 4 272 6.2 4 023 7 534
Refer to Annexures A and B for segmental information.
Commentary on reporting platforms' performance
Banking
The headline earnings contribution from the banking division amounted to R1 678 million (2016: R1 580 million),
representing an increase of 6.2%. FirstRand and RMH reported headline earnings growth of 6.0% and 6.2%
respectively. On a normalised basis, which excludes certain non-operational and accounting anomalies, FirstRand
and RMH reported earnings growth of 7.0% and 7.2% respectively. 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.
Healthcare
Mediclinic's contribution to Remgro's headline earnings amounted to R487 million (2016: R983 million),
representing a decrease of 50.5%. It should be noted that all the Al Noor facilities were rebranded to Mediclinic and
therefore Mediclinic's contribution for the period under review included an accelerated amortisation charge of
R171 million relating to the Al Noor trade name. Excluding the impact of the accelerated amortisation, Mediclinic's
contribution to Remgro's headline earnings would have decreased by 33.1% from R983 million to R658 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, decreased by 20.4% mainly due to a weaker performance by the Hirslanden and Middle
East operating divisions and a decrease in the equity accounted earnings from Spire. Hirslanden's comparative period
also included a positive past service cost adjustment of GBP10 million, while Spire's contribution to Mediclinic's results
included a provision of GBP7 million for the potential cost of a settlement relating to civil litigation against a consultant
who previously had practicing privileges at Spire.
Consumer products
The contribution from consumer products to Remgro's headline earnings amounted to R1 140 million
(2016: R945 million), representing an increase of 20.6%. RCL Foods' contribution to Remgro's headline earnings increased
by 56.6% to R498 million (2016: R318 million). The increase is mainly due to an improved result in the Chicken
business unit as a result of a revised business model, lower feed prices and improved realisations. On a normalised
basis, which excludes certain once-off items in the comparative period, relating to the settlement of the Zam Chick
and Zamhatch put options and costs incurred on the implementation of the revised Chicken business model, RCL
Foods reported headline earnings growth of 35.3%. Unilever's contribution to Remgro's headline earnings increased
by 9.5% to R288 million (2016: R263 million). This increase is mainly due to an improvement in gross margins as a
result of cost control. Distell's contribution to headline earnings, which includes the investment in Capevin
Holdings, amounted to R354 million (2016: R364 million). Distell's results for the period under review were
negatively impacted by once-off losses and write-offs amounting to R78 million in its associate, Tanzania
Distilleries Limited, following a sachet ban and excise duty dispute. The comparative period 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 and the aforementioned once-off items, of 3.2%, mainly
driven by a 9.3% increase in revenue achieved across all regions and categories.
Insurance
RMI Holdings' contribution to headline earnings increased by 27.2% to R626 million (2016: R492 million). On a
normalised basis, RMI Holdings reported an increase of 25.8% in earnings mainly due to Discovery and
OUTsurance (excluding Hastings), which achieved earnings growth of 29.5% and 11.3% respectively. The strong
result by Discovery was driven by both established and emerging businesses, while OUTsurance's results were
driven by Youi's growth in operating profit as a result of lower natural peril claims in Australia. The contribution
from Hastings were partially offset by higher funding costs relating to its acquisition in the prior year.
Industrial
Total's contribution to Remgro's headline earnings amounted to R258 million (2016: R102 million). Included in the
contribution to headline earnings for the period under review are favourable stock revaluations amounting to
R135 million (2016: unfavourable stock revaluations of R28 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 5.4% from R130 million to R123 million mainly due to a lower refining margin, the impact of planned
and unplanned refinery shutdowns and a less favourable economic environment. Remgro's share of the results of
KTH amounted to R73 million (2016: R58 million), 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 R142 million and R62 million respectively (2016: R151 million and
R90 million), while PGSI contributed R16 million to Remgro's headline earnings (2016: R25 million).
Infrastructure
Grindrod's contribution to Remgro's headline earnings amounted to a loss of R52 million (2016: a loss of
R18 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 period under review the CIV group contributed R32 million to
headline earnings (2016: R44 million). This decrease is mainly due to higher finance costs and depreciation as a
result of the expanding network, as well as lower equity accounted income due to the disposal of the CIV group's
investment in Dartcom SA Proprietary Limited. Remgro's share of SEACOM's profit amounted to R32 million
(2016: loss of R18 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 R3 million (2016: R33 million). This decrease is mainly due to a
significant decline in license revenue resulting from a renegotiated DStv agreement.
Other investments
The contribution from other investments to headline earnings amounted to R29 million (2016: R39 million), of
which Business Partners' contribution was R29 million (2016: R23 million).
Central treasury and other net corporate costs
Finance income amounted to R259 million (2016: R105 million). This increase is mainly due to higher average cash
balances as a result of the Remgro rights issue in the comparative period. Finance costs amounted to R452 million
(2016: R462 million). The positive fair value adjustment of R134 million (2016: R667 million) relates to the
decrease in the value of the exchange option of the exchangeable bonds. Other net corporate costs amounted to
R60 million (2016: R75 million).
Earnings
Earnings decreased by 20.8% to R4 131 million (2016: R5 219 million). This decrease is mainly the result of the
lower positive fair value adjustment, relating to the decrease in value of the exchange option of the exchangeable
bonds of R134 million (2016: R667 million), as well as Remgro's portion of the impairment of Mediclinic's
investment in Spire amounting to R830 million.
3. INTRINSIC NET ASSET VALUE
Remgro's intrinsic net asset value per share increased by 5.7% from R251.48 at 30 June 2017 to R265.84 at
31 December 2017. The closing share price at 31 December 2017 was R236.00 (30 June 2017: R213.46)
representing a discount of 11.2% (30 June 2017: 15.1%) to the intrinsic net asset value. Refer to Annexure B for full
details.
4. INVESTMENT ACTIVITIES
The most important investment activities during the period under review were as follows:
RMI Holdings Limited (RMI Holdings)
On 19 September 2017 RMI Holdings declared its final dividend for the year ended 30 June 2017, 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 elected to reinvest its cash dividend amounting to R292.3 million,
and received 7 691 641 new RMI Holdings ordinary shares at R38.00 per share. Remgro's interest in RMI Holdings
increased marginally from 29.9% on 30 June 2017 to 30.1% on 31 December 2017.
Kagiso Infrastructure Empowerment Fund (KIEF)
During the period under review, Remgro disposed of its investment in KIEF, realising a profit on disposal of
R102.8 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
R285.3 million in KIEF and received income and capital distributions amounting to R380.5 million, which includes
the proceeds on disposal of KIEF.
Other
Other smaller investments amounted to R122 million.
Events after 31 December 2017
Distell Group Limited (Distell)
During June 2017 it was announced that Distell will restructure its multi-tiered ownership structure. In terms of the
restructuring, Remgro will subscribe for listed ordinary shares and unlisted B shares in a new listed entity (New
Distell). The listed ordinary shares will give Remgro the same 31.8% economic interest, while the unlisted B shares,
though not having any economic rights, will increase Remgro's voting rights in New Distell to 56.0%. The
restructuring is still subject to the approval by the relevant competition authorities.
Unilever South Africa Holdings Proprietary Limited (Unilever)
On 22 September 2017 it was announced that Unilever will acquire Remgro's 25.75% shareholding in Unilever in
exchange for the Unilever Spreads business in Southern Africa, as well as a cash consideration of R4.9 billion,
representing a total transaction value of R11.9 billion. This transaction values the Unilever Spreads business at
R7.0 billion. The transaction is still subject to the approval by the relevant competition authorities.
RMI Holdings Limited (RMI Holdings)
On 12 March 2018 RMI Holdings declared its interim dividend for the six months ended 31 December 2017, 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 R178.4 million, by electing the reinvestment alternative, in order to receive 4 196 921 new RMI
Holdings ordinary shares at R42.50 per share.
Other than the above-mentioned transactions, there were no other significant transactions subsequent to
31 December 2017.
5. 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 2017 have been included in
Remgro's results for the period under review. Unilever's contribution to Remgro's headline earnings for the six
months under review increased by 9.5% to R288 million (2016: R263 million). The higher headline earnings
contribution was mainly due to improvements in trading results, gross margins and cost control, which resulted in
strong operating income in 2017.
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 2017 have been
included in Remgro's results for the period under review. Air Products' contribution to Remgro's headline earnings
for the period under review decreased by 6.0% to R142 million (2016: R151 million).
Turnover for Air Products' six months ended 30 September 2017 increased by 3.1% to R1 492 million
(2016: R1 447 million), while the company's operating profit for the same period remained unchanged at
R436 million (2016: R436 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, media, financial services, healthcare, property and information technology sectors.
KTH's contribution to Remgro's headline earnings for the period under review amounted to R73 million
(2016: R58 million). The increase in headline earnings was mainly due to the decrease in net finance cost to R117 million
(2016: R219 million) resulting from the repayment of debt at the centre following the disposal of the investment in
Exxaro Resources Limited (Exxaro). Exxaro's contribution to KTH's headline earnings for the period under review
amounted to R69 million (2016: R134 million), which included the profit on disposal thereof (included in headline
earnings).
KTH's loss attributable to ordinary shareholders amounted to R138 million (2016: R383 million profit). The loss is
mainly due to the impairment of the investment in Actom Proprietary Limited of R412 million, partly offset by the
reversal of impairment of XR Platinum Partnership (R146 million), while the comparative period included the profit
on disposal of Idwala Holdings Limited (R308 million).
Income from equity accounted investments decreased to R50 million (2016: R57 million) partly due to lower
contributions from other associates, joint ventures and partnerships as a result of the current difficult macro-
economic conditions. The major contributors to equity accounted earnings during the reporting period were the
investments in MMI Holdings Limited and Fidelity Bank (Ghana) Limited.
Total South Africa Proprietary Limited (Total)
Total has a December year-end and its results for the six months to 31 December 2017 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 2017 amounted to R258 million (2016: R102 million).
Total's turnover for the six months ended 31 December 2017 increased by 12.9% to R30 196 million
(2016: R26 747 million), mainly due to a price increase and increased sales volumes in the mining and reseller sector during
the period under review.
The results were positively impacted by stock revaluation gains of R753 million (2016: loss of R156 million) due to
the increase in the average basic fuel price and in crude prices during the period under review.
Total experienced lower refining margins during the period under review in comparison to 2016, due to the impact of
a major planned shutdown during October and November 2017, other unplanned shutdowns and a less favourable
economic environment.
PGSI Limited (PGSI)
PGSI's contribution to Remgro's headline earnings for the six months to 31 December 2017 amounted to
R16 million (2016: R25 million). PGSI's turnover for the period under review increased from R2 105 million to
R2 171 million. The group's normalised operating profit, which excludes the impact of asset impairments, decreased
from R159 million to R114 million.
The group's main operating subsidiary in South Africa, PG Group, manufactures and supplies glass for the building
and automotive industries. The building glass businesses reported a decline in profits due to weak domestic demand
and growing pressure on selling prices in a competitive and oversupplied market.
The automotive businesses were negatively impacted by economic pressures on consumers, lower claims from the
insurance sector and weaker demand in export markets. The strong rand negatively impacted automotive export
profitability. Supplies to local automotive assembly operations have been challenged by very competitive pricing,
especially out of China. Original Equipment Manufacturers benchmarking prices with global competitors, who have
the advantage of better economies of scale, also compressed margins.
The Rest of Africa businesses, which have shown robust growth over the past few years, reported a decline in
profitability with many regions impacted by weaker economic activity, as well as political instability in some
regions.
The group made good progress in reducing costs and improving manufacturing quality and efficiencies. This has
established a sound strategic base for future growth.
Wispeco Holdings Proprietary Limited (Wispeco)
Wispeco's turnover for the six months ended 31 December 2017 decreased by 7.4% to R1 076 million
(2016: R1 162 million). This decrease resulted from sales volumes being lower in a market where price competition is
intense and margins are under pressure. Headline earnings for the period under review decreased to R62 million
(2016: R90 million). Import duties on aluminium extrusions were increased from 5% to 15% at the end of 2017,
going some way in levelling the playing field going forward for local manufacturers against subsidised imports. The
recent strengthening of the rand poses its own challenges for local manufacturing, emphasising the importance of
Wispeco's drive to world-class productivity and lowest cost of production.
Wispeco continues to lead the way with product innovation and aluminium solutions. New fit-for-purpose
aluminium products are being developed to meet the needs of specific market segments. Its new design and
estimating software package for fabricators of aluminium windows and doors (Starlite) will soon be launched to
support sales and legal compliance in the fastest growing segment of the market. Technical manufacturing
capabilities are elevated continuously to produce more challenging products for industrial (non-architectural)
markets. Opportunities to expand the company's distribution footprint are exploited on an ongoing basis.
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 2017 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 R32 million (2016: R44 million). This decrease is mainly due to
higher finance costs and depreciation as a result of the expanding network, as well as lower equity accounted income
due to the disposal of the CIV group's investment in Dartcom SA Proprietary Limited.
DFA's revenue for the six months ended 30 September 2017 increased by 23.0% to R903 million
(2016: R734 million) mainly as a result of solid growth of 28.3% in annuity revenue. DFA's EBITDA for the period under
review increased by 10.1% to R545 million. The current book value of the fibre-optic network is in excess of
R6.8 billion (30 June 2017: R6.6 billion). DFA has thus far secured a healthy annuity income of R113 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, as well as a
number of smaller metropolitan areas, including East London, Polokwane, Tlokwe, Emalahleni, George and
Pietermaritzburg. At 30 September 2017, a total distance of 10 138 km (September 2016: 9 503 km) of fibre network
had been completed in the major metropolitan areas, small towns and on long-haul routes. The network uptime for
the period under review was 99.99%.
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 R12.2 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 2017 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 R32 million (2016: headline loss of R18 million). The increase in headline earnings is due
to an improved SEACOM Business result in South Africa and Kenya and the once-off realisation of deferred
revenue associated with the early termination of long term indefeasible right of use (IRU) contracts.
SEACOM's core sales and revenue streams are generated from its established base of Service Provider (wholesale)
customers that also provide the basis for network scale, cost reductions and service innovation. The Service Provider
segment is seeing strong demand for international capacity from large Over The Top providers and from the growth
of Internet Protocol Transit traffic from local internet service providers. The SEACOM international and terrestrial
networks are continuously being upgraded to keep pace with this demand.
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 2017, and over
US$22 million in new order total contract value. The unit has a healthy pipeline to continue to grow sales and
revenue in 2018. In addition to organic growth, SEACOM Business has made acquisitions of internet service
providers focused largely on the enterprise market. SEACOM Business continues to focus its investments on
in-building fibre reticulation and terrestrial fibre to unlock previously unserviced areas.
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 period under review 234 137 Remgro ordinary shares were utilised to settle Remgro's obligation towards
scheme participants who exercised the rights granted to them.
At 31 December 2017, 1 432 501 (0.3%) Remgro ordinary shares were held as treasury shares.
DECLARATION OF CASH DIVIDEND
Declaration of Dividend No. 35
Notice is hereby given that an interim gross dividend of 204 cents (2016: 194 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 2017.
A dividend withholding tax of 20% or 40.8 cents per share will be applicable, resulting in a net dividend of 163.2 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, 17 April 2018
Shares trade ex dividend Wednesday, 18 April 2018
Record date Friday, 20 April 2018
Payment date Monday, 23 April 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 18 April 2018, and Friday, 20 April 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, as 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
15 March 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),
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
R million 31 December 2017 31 December 2016
Banking
RMH 1 185 1 115
FirstRand 493 465
Healthcare
Mediclinic 487 983
Consumer products
Unilever 288 263
Distell¹ 354 364
RCL Foods 498 318
Insurance
RMI Holdings 626 492
Industrial
Air Products 142 151
KTH 73 58
Total 258 102
PGSI 16 25
Wispeco 62 90
Infrastructure
Grindrod (52) (18)
CIV group 32 44
SEACOM 32 (18)
Other infrastructure interests 20 7
Media and sport
eMedia Investments 3 33
Other media and sport interests (21) (58)
Other investments 29 39
Central treasury
Finance income 259 105
Finance costs (452) (462)
Option remeasurement 134 667
Other net corporate costs (60) (75)
Headline earnings 4 406 4 690
Weighted number of shares (million) 566.7 540.5
Headline earnings per share (cents) 777.5 867.7
Note
1. Includes the investment in Capevin Holdings Limited.
ANNEXURE B
COMPOSITION OF INTRINSIC NET ASSET VALUE
31 December 2017 30 June 2017
R million Book value Intrinsic value Book value Intrinsic value
Banking
RMH 14 380 31 466 14 016 23 350
FirstRand 5 170 14 783 5 010 10 365
Healthcare
Mediclinic 31 111 35 038 33 763 41 568
Consumer products
Unilever 3 575 10 512 3 737 10 702
Distell¹ 3 927 9 839 3 727 9 556
RCL Foods 7 991 10 146 7 553 10 173
Insurance
RMI Holdings 7 860 20 993 7 277 17 532
Industrial
Air Products 1 019 3 830 1 047 4 298
KTH 1 632 2 157 1 684 2 466
Total 1 831 2 282 1 640 2 167
PGSI 657 658 643 643
Wispeco 883 1 037 821 1 368
Infrastructure
Grindrod 2 364 2 364 1 915 1 915
CIV group 2 280 4 881 2 242 4 829
SEACOM 332 836 321 896
Other infrastructure interests 247 247 520 520
Media and sport
eMedia Investments 1 150 1 114 1 147 1 424
Other media and sport interests 341 338 365 319
Other investments 3 931 3 937 3 947 3 932
Central treasury
Cash at the centre2 12 543 12 543 12 223 12 223
Debt at the centre (13 656) (13 656) (13 907) (13 907)
Other net corporate assets 2 592 3 014 2 741 3 164
Intrinsic net asset value (INAV) 92 160 158 359 92 432 149 503
Potential CGT liability3 (7 668) (7 010)
INAV after tax 92 160 150 691 92 432 142 493
Issued shares after deduction of shares
repurchased (million) 566.8 566.8 566.6 566.6
INAV after tax per share (Rand) 162.59 265.84 163.13 251.48
Remgro share price (Rand) 236.00 213.46
Percentage discount to INAV 11.2 15.1
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: 15/03/2018 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
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 
