Profile

KTH is an established black economic controlled company with a focus on investment banking services, media and strategic investments. KTH has an investment portfolio and strategy that is complementary to that of Remgro. Its major investments include Kagiso Media Limited, MMI Holdings Limited and Exxaro Resources Limited.

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 year under review amounted to a loss of R108 million (2014: headline earnings of R71 million). The decrease in earnings was mainly driven by KTH’s net attributable share of negative fair value adjustments on equity investments in Exxaro Resources Limited (R393 million) and Aveng Limited (R137 million) partly offset by positive fair value adjustments on preference shares in MMI Holdings Limited (R69 million).

Income from equity accounted investments increased slightly to R612 million (2014: R604 million), with major contributions from its investments in MMI Holdings Limited, Emira Property Fund, Idwala Industrial Holdings Proprietary Limited and Fidelity Bank (Ghana) Limited. Net finance costs increased to R374 million (2014: R244 million) mainly as a result of the incurring of debt to partially finance the buyout of minorities of Kagiso Media midway through the comparative period.

Profile

Subsidiary of Total (France). Total South Africa’s business is the refining and marketing of petroleum and petroleum products in South Africa. It distributes to neighbouring countries. It has a 36% interest in National Petroleum Refiners of South Africa Proprietary Limited (Natref).

Total South Africa PROPRIETARY Limited (Total SOUTH AFRICA)

Total South Africa has a December year-end, but its results for the twelve months to 30 June 2015 have been included in Remgro’s results for the year under review. Total South Africa’s contribution to Remgro’s headline earnings for the year under review amounted to R133 million (2014: R233 million).

The results were negatively impacted by stock revaluation losses of R1 597 million (2014: gains of R94 million), as the international oil price decreased from US$114 per barrel, at 30 June 2014, to US$61 per barrel at 30 June 2015.

Total South Africa’s turnover for the twelve months ended 30 June 2015 increased by 14% to R51 168 million (2014: R44 818 million). The increase in turnover is mainly due to a marketing strategy to increase volumes to the mining sector and to distributors.

The Department of Energy announced an increase in the whole­sale margins, with effect from 1 December 2014, for petrol and diesel of 3.7 cents per litre and 4.7 cents per litre, respectively. The rollout of RAS (split of regulated margin between retail and wholesale) had no impact on Total South Africa’s operating profit, as expected, following dealers contract renegotiations.

The company is intensifying its investments regarding the health, safety, environment and quality constraints, at its depots as well as at its service stations.

Natref (in which Total South Africa has an interest of 36.4%) experienced an improvement in refining margins during the second half of the period under review, due to the combined impacts of a better economic environment for refiners, favour­able exchange rate movements and an improved refinery operational performance.

Profile

PGSI holds an interest of 90% in PG Group. The PG Group is South Africa’s leading integrated flat glass business that manufactures, distributes and installs high-performance automotive and building glass products.

PGSI Limited (PGSI)

PGSI has a December year-end, but its results for the twelve months ended 30 June 2015 have been included in Remgro’s results for the year under review. PGSI’s contribution to Remgro’s headline earnings for the year under review amounted to R30 million (2014: R72 million). It should be noted that the comparative headline earnings included a non-recurring positive fair value adjustment of R38 million on the conversion right attached to PGSI preference shares.

PGSI’s turnover for the period under review increased by 2.4% to R3 733 million (2014: R3 645 million). The group’s normalised operating profit, which excludes the impact of asset impairments, decreased from R250 million to R210 million, as market conditions in especially the automotive sector remained difficult.

During the period under review PGSI sold a 10% equity stake in PG Group, its main operating subsidiary in South Africa, to Saint Gobain of France, a leading global glass and building products supplier. This disposal resulted in a significant rationalisation of the balance sheet leading to several non-cash adjustments to asset valuations and goodwill. It is anticipated that the association with Saint Gobain will strengthen PG Group’s position and will enable positive operational improvements in the years ahead.

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 positive growth in volumes driven by increased domestic sales, in spite of competitive market conditions, and strong growth into Africa. The division has implemented rationalisation programmes which have substantially reduced overheads. The weaker rand has also had a positive impact, assisting the group’s competitive position in the local market and improving export profitability.

The market conditions in the automotive businesses remain difficult. Domestic new car sales have declined due to the weak economic climate, low consumer confidence, elevated household debt levels and expectations of future interest rate hikes. While there has been positive growth in export vehicle sales, the margins are compressed with the Original Equipment Manufacturers (“OE”) benchmarking prices with global competitors who have significantly higher economies of scale. The lower sales in the domestic automotive aftermarket sector during the period were further negatively affected by lower volumes of claims from the insurance sector, due to economic pressure on the consumer as well as market share loss to low-priced imported products. A new “Safevue” windscreen offering was launched in January 2015 to enable the group to meet aftermarket requirements for a low priced value proposition. This product offering will supplement the premium OE quality “Shatterprufe” offering. The manufacturing operations have shown improvements in yields, and cost reductions and improved efficiencies are being achieved through the auto­motive supply chain.

The results for the year were positively impacted by a reduction in finance costs of R30 million, which resulted mainly from the conversion of preference shares to ordinary shares during June 2014. The group also restructured its bank borrowings at more favourable rates, which generated further savings in finance charges.

While the economic climate is lacklustre, the group has established a sound strategic base for future growth. Initiatives to review the group’s structure to reduce costs and improve the service to its customers are under way. The strategic input and technical assistance provided by Saint Gobain provides further opportunities for sustainable growth.

Profile

Wispeco’s main business is the manufacturing and distribution of extruded aluminium profiles used mainly in the building, engineering and durable goods sectors.

Wispeco Holdings PROPRIETARY Limited (Wispeco)

Wispeco’s turnover for the year ending June 2015 increased by 11% to R1 649 million (2014: R1 486 million). The growth in turnover resulted mainly from higher selling prices following on increased raw material costs in rand terms, while sales volumes were only 1% higher. Headline earnings for the year under review decreased by 3% to R104 million (2014: R107 million). Sales margins were lower due to price competition against imports and local competitors, while the month long strike during July 2014 also had a negative impact on the results for the year.

Various exciting projects have been initiated which will reach fruition in the new financial year. These include the commissioning of the 9th extrusion press and the installation of the first vertical powder coating plant in the country. Expansion of the stockist (distributor) network remains a growth focus with some cross-border opportunities being investigated. A shareholding of 65% was acquired in Pressure Die Castings (Pty) Ltd during the year, with an effective date of 1 July 2015. The acquisition results in a diversification of Wispeco’s business into brass casting and synergies could arise with Wispeco’s drive to grow its aluminium accessories business.

Wispeco leads the way in developing products and software solutions for the architect and fabricator market. The Fenestration Performance Declaration is gaining traction as controls to ensure conformance to the building regulations intensifies. U-Solve is a user friendly software tool to calculate actual and certified thermal performance of Crealco aluminium windows and doors. Starfront 4 was rolled out at the end of the year offering various new features to its broad user base.