Reports to shareholders
Leon Crouse, Chief Financial Officer


Due to Remgro being an investment holding company, traditional measurements of performance, like sales or gross profit, are not meaningful criteria for evaluating the Group’s performance. However, management uses “headline earnings”, “intrinsic net asset value” and “cash at the centre” to evaluate the performance of the Group on a continuous basis and hence these concepts are used throughout the Integrated Annual Report to provide share­holders with a better understanding of our results.


During the previous financial year Mediclinic International Limited (Mediclinic) incurred material once-off charges relating to the comprehensive refinancing of its Swiss and South African debt. Remgro’s share of these once-off items included in its results for the year ended 30 June 2013 amounted to a loss of R1 312 million.

Due to the materiality of the amounts involved, headline earnings and headline earnings per share are also presented by excluding Remgro’s share of Mediclinic’s refinancing costs referred to above.


Headline earnings

Headline earnings for the year to 30 June 2014 amounted to R6 635 million compared to R4 196 million for the year to 30 June 2013, representing an increase of 58.1%, whereas headline earnings per share increased by 58.2% from 817.1 cents to 1 292.4 cents.

However, excluding the effect of the once-off items relating to Mediclinic’s refinancing transaction referred to earlier, headline earnings increased by 20.5% from R5 508 million to R6 635 million, whereas headline earnings per share also increased by 20.5% from 1 072.6 cents to 1 292.4 cents, as presented in the table below.

Comparable Headline Earnings Increased by 20.5%

Salient Features

Salient Features

Contribution to Headline Earnings by Reporting Platform

Contribution to Headline Earnings by Reporting Platform Refer to the composition of headline earnings for further information.

Commentary on reporting platforms’ performance

Food, liquor and home care

The contribution from food, liquor and homecare to Remgro’s headline earnings amounted to R795 million (2013: R1 123 million), representing a decrease of 29.2%. This decrease is mainly the result of lower contributions from RCL Foods and TSB. RCL Foods reported a headline loss of R303 million for the year under review (2013: R29 million profit), with Remgro’s share of this loss amounting to R239 million (2013: R21 million profit). During the year under review RCL Foods’ results were negatively affected by the following items:

  • Material foreign exchange losses resulting from the early redemption of Foodcorp’s euro-denominated debt
  • Once-off BEE costs relating to the restructuring of its BEE shareholding
  • Material transaction costs relating to the various corporate actions undertaken during the year
  • Continued high levels of cheap competitive chicken imports and high input costs

TSB’s contribution to headline earnings amounted to R192 million (2013: R316 million). It should be noted that TSB’s contribution only includes its results for the six months ended 31 December 2013 due to the fact that Remgro disposed of its 100% interest in TSB to RCL Foods during January 2014. TSB’s headline earnings for the full year amounted to R218 million (2013: R316 million). This decrease is mainly due to lower domestic sales volumes and margins realised due to the negative impact of increased sugar imports. Unilever’s contribution to headline earnings decreased by 18.5% to R347 million (2013: R426 million). This decrease is mainly the result of turnover growth being offset by increased supply chain costs, as well as brand and marketing investments and restructuring costs. Distell’s contribution to headline earnings, which includes the investment in Capevin Holdings, amounted to R495 million (2013: R360 million). During April 2013, Distell acquired Burn Stewart Distillers Limited and its results for the current year include a favourable remeasurement of R159 million to the contingent consideration payable on the acquisition. In the comparative year Distell’s results were negatively affected by new business acquisition costs and an interest provision on excise duty totalling R265 million. Excluding these once-off items, Distell’s contribution to Remgro’s headline earnings would have decreased by 1.6% to R442 million. Remgro’s effective interest in Distell decreased from 33.4% to 31.0%.


Grindrod’s contribution to Remgro’s headline earnings amounted to R108 million (2013: R144 million). This decrease is mainly due to a weaker operating performance from its commodity trading division. These operations are in the process of being wound down and sold according to plan. For the year under review the CIV group contributed R58 million to headline earnings (2013: R59 million). SEACOM reported a headline loss of R26 million for the year under review (2013: R3 million loss), with Remgro’s share of this amounting to R6 million (2013: a loss of less than R1 million).

Media and sport

Media and sport interests primarily consist of the interests in Sabido and Premier Team Holdings (PTH). Sabido’s contribution to Remgro’s headline earnings amounted to R131 million (2013: R148 million). This decrease is mainly due to significant new business development costs incurred during the period under review. PTH’s contribution to headline earnings amounted to a loss of R68 million (2013: R37 million loss).


The headline earnings contribution from the banking division amounted to R2 542 million (2013: R2 077 million), representing an increase of 22.4%. Both FirstRand and RMBH reported excellent headline earnings growth of 21.8% and 22.8% respectively, mainly due to growth in both interest income and non-interest income from FNB, RMB and WesBank, as well as a significant reduction in year-on-year credit impairment charges.


Mediclinic’s contribution to Remgro’s headline earnings amounted to a profit of R1 489 million (2013: R491 million loss). This increase in profit was mainly due to the effect of the once-off items relating to Mediclinic’s refinancing transaction in the comparative year referred to earlier. Excluding these once-off items, Mediclinic’s contribution to Remgro’s headline earnings would have increased by 81.4% from R821 million, mainly due to solid performances from all three operating platforms, as well as a once-off past service cost credit of R192 million relating to its retirement benefit obligations.


RMI Holdings is the only investment being reported under insurance interests. RMI Holdings reported an increase of 28.4% in headline earnings, with all three operating platforms, Discovery, MMI Holdings and OUTsurance achieving excellent headline earnings growth of 45.6%, 28.5% and 19.2% respectively.


Total South Africa’s contribution to Remgro’s headline earnings amounted to R233 million (2013: R258 million). This decrease is despite more favourable stock re­valuations than in the comparative period, which was set off by an increase in its site rehabilitation cost provision. Remgro’s share of the results of KTH amounted to R71 million (2013: R36 million). Wispeco’s contribution to Remgro’s headline earnings amounted to R107 million (2013: R64 million). This increase in headline earnings is mainly due to improved sales volumes and selling prices, as well as improved production efficiencies. Air Products’ and PGSI’s contribution to headline earnings amounted to R217 million and R72 million respectively (2013: R180 million and R10 million respectively).

Other investments

The contribution from other investments to headline earnings amounted to R59 million (2013: R57 million), of which Business Partners’ contribution was R33 million (2013: R32 million).

Central treasury and other net corporate costs

The contribution from the central treasury division amounted to R83 million (2013: R3 million). This increase is mainly the result of foreign exchange losses of R98 million accounted for in the comparative period on the hedging of the repatriation of a portion of Remgro’s offshore cash. Other net corporate costs amounted to R134 million (2013: R102 million). This increase is mainly the result of the net after-tax underwriting fee of R46 million received on the Mediclinic rights offer in the comparative year.

Total earnings

Total earnings increased by 65.5% to R6 917 million (2013: R4 179 million), mainly as a result of the costs associated with the Mediclinic refinancing in the comparative year.

Dividend Cover


Dividend cover
*HEPS from continuing operations (post the unbundling of British American Tobacco Plc during November 2008)
**HEPS, excluding Mediclinic refinancing cost (restated)


On 30 June 2014 Remgro’s cash at the centre amounted to R3 264 million (2013: R2 733 million), of which 32% was invested offshore (2013: 46%). The cash is held in different currencies of which approximately 68% was held in SA rand and 30% in USA dollar.

Remgro’s offshore cash is managed through a strategy whereby the exposure to different currencies is limited to certain maximum levels. During the year under review it was decided to reinvest the offshore cash that was still invested in euro, Swiss franc and British pound in USA dollar.

This was done due to the fact that the majority of Remgro’s offshore capital commitments are denominated in USA dollar. As a result of the disinvestment from the euro, Swiss franc and British pound, a portion of the cumulative foreign exchange profits that was previously accounted for in equity became realised profits. These profits amounting to R70 million were reclassified to the income statement but were accounted for outside of headline earnings.

As at 30 June 2014 the majority of Remgro’s remaining offshore cash is already committed towards the expansion of existing offshore investments.


Cash Movement at the Holding Company (Cash at the Centre) (R Million)

Cash Movement at the Holding Company Closing and Average exchange rates


The final dividend per share was determined at 233 cents (2013: 201 cents). Total ordinary dividends per share in respect of the year to 30 June 2014 therefore amounted to 389 cents (2013: 346 cents).

The dividend is covered 3.3 times by headline earnings (excluding Mediclinic refinancing cost) against 3.2 times the previous year.


With effect from 1 April 2012, STC was replaced with a dividend tax. In terms of the new legislation, companies will be allowed to apply their available STC credits against future dividends declared for a period of three years from the effective date of dividend tax. As at 30 June 2014 Remgro’s available STC credits amounted to R1 824 million which can be offset against future dividend tax obligations of shareholders. R1 204 million of the STC credits will be utilised for the final dividend of 233 cents per share declared on 17 September 2014.

Shareholders are encouraged to read future shareholder notices carefully as the introduction of the dividend tax will require certain shareholder action to ensure that the correct dividend tax percentage is applied.

ZAR vs Foreign Currencies Remgro Holds


ZAR vs Foreign Currencies Remgro Holds


Remgro’s intrinsic net asset value per share at 30 June 2014 was R245.96 compared to R204.83 on 30 June 2013. Refer to the Chief Executive Officer’s Report for a detailed discussion regarding Remgro’s intrinsic net asset value and its relative performance with certain selected JSE indices.


The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The accounting policies have been consistently applied to both years presented, with the exception of the implementation of IFRS 10: Consolidated Financial Statements, IFRS 11: Joint Arrangements and the amendments to IAS 19: Employee Benefits. The adoption of IFRS 10, IFRS 11 and the revised IAS 19 required a restatement of the comparative results, as more fully set out in note 11 to the summary annual financial statements here.


The Company has implemented a comprehensive Risk Management Policy that is based on the principles of the international COSO (Committee of Sponsoring Organisations of the Treadway Commission) Enterprise Risk Management – Integrated Framework and complies with the recommendations of King III. A comprehensive risk management structure has also been implemented to ensure the effective and efficient management of risk within the Group.

Remgro’s risk management process is summarised in the Risk Management Report, as well as in note 31 to the complete annual financial statements.

CFO signature

Leon Crouse

Chief Financial Officer


17 September 2014


Composition of Headline Earnings