Dear Shareholder
The Board has pleasure in reporting on the activities and financial results for the year under review.
Nature of activities
The Company is an investment holding company. Cash income is derived mainly from dividends and interest. The consolidated annual financial statements of the Company and its subsidiaries also incorporate the equity accounted attributable income of associated companies and joint ventures.
The Group’s interests consist mainly of investments in food, liquor and home care; banking; healthcare; insurance; industrial; infrastructure as well as media and sport.
Results
Year ended | 30 June 2016 |
30 June 2015 |
---|---|---|
Headline earnings (R million) | 5 887 | 7 996 |
– per share (cents) | 1 143.9 | 1 555.0 |
– diluted (cents) | 1 139.2 | 1 541.8 |
Headline earnings, excluding once-off costs and option remeasurement (R million) | 7 405 | 7 996 |
– per share (cents) | 1 438.9 | 1 555.0 |
– diluted (cents) | 1 434.1 | 1 541.8 |
Earnings – net profit for the year (R million) | 5 386 | 8 715 |
– per share (cents) | 1 046.6 | 1 694.9 |
– diluted (cents) | 1 042.5 | 1 680.9 |
Dividends (R million) | 2 376 | 2 211 |
– ordinary – per share (cents) | 460.00 | 428.00 |
A final dividend of 275 cents (2015: 259 cents) per share was declared after the year-end and was therefore not provided for in the annual financial statements. The final dividend is subject to dividend tax.
INVESTMENT ACTIVITIES
The most important investment activities during the year under review were as follows:
Mediclinic International Limited (Mediclinic)
FACILITATION OF MEDICLINIC’S ACQUISITION OF SPIRE
During June 2015 Remgro entered into an agreement with funds managed by Cinven to acquire 119 923 335 Spire Healthcare Group plc (Spire) shares (equivalent to a 29.9% shareholding in Spire) at a price of £3.60 per share for a total purchase consideration of £431.7 million (excluding transaction costs). The transaction was concluded early in July 2015 and Remgro financed the transaction through a combination of its own cash and external funding.
In conjunction with the above transaction, Remgro and Mediclinic concluded an agreement whereby Mediclinic would acquire Remgro’s interest in Spire, subject to Mediclinic raising the appropriate funds in order to conclude such a transaction. During August 2015 Mediclinic raised R10.0 billion through a rights issue in terms of which 111 111 111 new Mediclinic shares were issued at a price of R90.00 per share. Remgro, by following its rights and by underwriting the balance of the rights issue, subscribed for an additional 51 342 886 Mediclinic shares totalling R4.6 billion. Following the successful conclusion of the rights issue, Mediclinic acquired Remgro’s shareholding in Spire during August 2015 for an amount of R8.6 billion, equal to the purchase price, transaction and funding costs. Remgro thus effectively only facilitated the acquisition of Spire by Mediclinic.
In order to participate in the above-mentioned rights issue Remgro obtained bridge financing amounting to R3.5 billion. On 13 January 2016 Remgro (through its wholly owned subsidiary, Remgro Healthcare Holdings Proprietary Limited (Remgro Healthcare)) refinanced the bridge financing by issuing fixed rate cumulative redeemable preference shares. These preference shares have a tenure of four years and the dividend rate is fixed at 7.7%, payable semi-annually.
After the above transactions, Remgro’s effective interest in Mediclinic was 42.5% (30 June 2015: 42.0%).
COMBINATION OF MEDICLINIC AND AL NOOR HOSPITALS GROUP PLC (AL NOOR)
On 14 October 2015 Mediclinic and Al Noor agreed on the terms for the combination of their respective businesses (the “Combination”) pursuant to which Al Noor offered to acquire 100% of the issued share capital of Mediclinic. The transaction was concluded on 15 February 2016 and given the relative size of Mediclinic and Al Noor, the Combination was classified as a reverse takeover of Al Noor. The combined group was renamed Mediclinic International plc (Mediclinic plc) and it retained its premium listing on the Main Market of the London Stock Exchange (LSE). Mediclinic plc also obtained an inward secondary listing on the main board of the Johannesburg Stock Exchange (JSE) and it was admitted to the FTSE 100 index of the LSE. Mediclinic shareholders received 0.625 Al Noor shares for every Mediclinic share held by them, based on the five-day volume weighted average price up to and including 1 October 2015 of the Mediclinic shares on the JSE and of the Al Noor shares on the LSE (which was £5.20 and £8.32, respectively). As a result of the reverse takeover, Remgro realised a profit on the dilution of its interest in Mediclinic amounting to R2 262 million.
In addition to the Al Noor shares received by Remgro and as an indivisible component of the Combination, Remgro also subscribed for an additional 72 115 384 shares in Al Noor at a subscription price of £8.32 per share for an aggregate amount of £600.0 million during February 2016 (the “Remgro Subscription”). In order to fund the Remgro Subscription, Remgro obtained bridge financing of which £400.0 million was borrowed offshore, while £200.0 million (or R4.3 billion) was borrowed in South Africa.
On 16 March 2016 Remgro (through its wholly owned subsidiary, Remgro Healthcare) refinanced the local bridge financing with newly issued fixed rate cumulative redeemable preference shares amounting to R4.4 billion. The preference shares have a tenure of five years and a fixed dividend rate of 8.3%, payable semi-annually.
On 22 March 2016 Remgro (through its wholly owned subsidiary, Remgro Jersey GBP Limited) refinanced £350.0 million of the foreign bridge financing by issuing exchangeable bonds with a tenure of five years and a fixed coupon rate of 2.625%, payable semi-annually. The exchangeable bonds are exchangeable into approximately 30.9 million Mediclinic plc ordinary shares and the exchange price for the bonds is £11.3086 per Mediclinic plc share, representing a 30% premium above the weighted average price on the LSE between launch and pricing of the bond offering. Upon exchange or redemption of the bonds, Remgro will have the discretionary right to deliver an amount in cash or shares or a combination of cash and shares. The bonds were included for trading on the open market (Freiverkehr) segment of the Frankfurt Stock Exchange on 23 March 2016.
On 30 June 2016 Remgro’s effective interest in Mediclinic was 44.6%.
Britehouse Holdings Proprietary Limited (Britehouse)
During September 2015 Remgro disposed of its investment in Britehouse for a total consideration of R159.6 million. A profit of R93.7 million was realised on this transaction, which is excluded from headline earnings.
Milestone China Funds
During the year under review Remgro advanced the remaining committed loan amount of $6.9 million to Milestone Capital Strategic Holdings. Remgro also invested a further $6.7 million in Milestone China Opportunities Fund III (Milestone III), thereby increasing its cumulative investment in Milestone III to $93.2 million. As at 30 June 2016 the remaining commitment to Milestone III amounted to $6.8 million.
Pembani Remgro Infrastructure Fund (PRIF)
During the year under review Remgro committed a further R150.0 million to PRIF, bringing the total committed funds to R650.0 million. As a result of the additional commitment and PRIF’s successful second and third closes, Remgro invested a further net amount of R28.6 million in PRIF, thereby increasing its cumulative investment in PRIF to R211.9 million. As at 30 June 2016 the remaining commitment to PRIF amounted to R438.1 million.
Other
Other smaller investments amounted to R152 million.
Events after year-end
INVENFIN PROPRIETARY LIMITED (INVENFIN)
On 27 July 2016 Remgro (through its wholly owned subsidiary, Invenfin) acquired a 30% stake in Dynamic Commodities Proprietary Limited (Dynamic Commodities) for R80.0 million. Dynamic Commodities is an export-focused company that produces high-quality frozen desserts, snacks and value-added “fresh frozen” fruit. During August 2016, Invenfin also acquired a 30% stake in Joya Brands Proprietary Limited, a sweets manufacturer, for R50.2 million.
Other than the above-mentioned transactions, there were no other significant transactions subsequent to 30 June 2016.
cash resources at the centre
The Company’s cash resources at 30 June 2016 were as follows:
R million | 30 June 2016 | 30 June 2015 |
||
---|---|---|---|---|
Local | Offshore | Total | ||
Per consolidated statement of financial position | 2 001 | 1 568 | 3 569 | 4 050 |
Investment in money market funds | 500 | 550 | 1 050 | 986 |
Less: Cash of operating subsidiaries | (795) | (46) | (841) | (1 017) |
Cash at the centre | 1 706 | 2 072 | 3 778 | 4 019 |
On 30 June 2016, approximately 28% (R1 050 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. Refer to note 14 to the annual financial statements that is published on the Company’s website at www.remgro.com for further details.
group financial review
Statement of financial position
The analysis of ”Equity employed” and of ”Source of headline earnings” below reflects the sectors into which the Group’s investments have been classified. No adjustment has been made where investments are active mainly in one sector but also have interests in other sectors.
30 June 2016 | 30 June 2015 | |||
---|---|---|---|---|
R million | R per share |
R million | R per share |
|
Equity employed | ||||
Attributable to equity holders | 78 866 | 153.17 | 73 114 | 142.12 |
Employment of equity | ||||
Food, liquor and home care | 14 383 | 27.93 | 13 887 | 26.99 |
Banking | 17 784 | 34.54 | 16 567 | 32.20 |
Healthcare | 33 629 | 65.31 | 13 227 | 25.71 |
Insurance | 7 157 | 13.90 | 6 717 | 13.06 |
Industrial | 5 575 | 10.83 | 5 461 | 10.62 |
Infrastructure | 5 052 | 9.81 | 6 857 | 13.33 |
Media and sport | 1 444 | 2.80 | 1 500 | 2.92 |
Other investments | 3 737 | 7.26 | 3 047 | 5.92 |
Central treasury | ||||
– Cash at the centre | 3 778 | 7.34 | 4 019 | 7.81 |
– Debt at the centre | (16 452) | (31.95) | – | – |
Other net corporate assets | 2 779 | 5.40 | 1 832 | 3.56 |
78 866 | 153.17 | 73 114 | 142.12 |
INCOME STATEMENT
30 June 2016 | 30 June 2015 | |||
---|---|---|---|---|
R million | % | R million | % | |
Source of headline earnings | ||||
Food, liquor and home care | 1 618 | 27 | 1 531 | 19 |
Banking | 2 989 | 51 | 2 845 | 36 |
Healthcare | 1 566 | 26 | 1 734 | 22 |
Insurance | 888 | 15 | 986 | 12 |
Industrial | 517 | 9 | 381 | 5 |
Infrastructure | 6 | – | 392 | 5 |
Media and sport | (36) | – | (16) | – |
Other investments | 67 | 1 | 84 | 1 |
Central treasury | ||||
– Finance income | 125 | 2 | 111 | 1 |
– Finance costs | (1 602) | (27) | – | – |
Other net corporate costs | (251) | (4) | (52) | (1) |
5 887 | 100 | 7 996 | 100 |
R million | 30 June 2016 | 30 June 2015 |
---|---|---|
Composition of headline earnings | ||
Subsidiary companies | (981) | 996 |
Profits | 820 | 1 107 |
Losses | (1 801) | (111) |
Associated companies and joint ventures | 6 868 | 7 000 |
Profits | 7 252 | 7 183 |
Losses | (384) | (183) |
5 887 | 7 996 |
Share incentive scheme
Remgro currently has one long-term incentive plan, i.e. the Remgro Equity Settled Share Appreciation Right Scheme (the SAR Scheme). In terms of the SAR Scheme, participants are offered Remgro ordinary shares to the value of the appreciation of their rights to a specified number of Remgro ordinary shares that can be exercised at different intervals but before the expiry of seven years from date of grant.
The earliest intervals at which the share appreciation rights are exercisable are as follows:
- One-third after the third anniversary of the grant date
- An additional third after the fourth anniversary of the grant date
- The remainder after the fifth anniversary of the grant date
Refer to note 25 to the annual financial statements that is published on the Company’s website at www.remgro.com for full details on the SAR Scheme.
TREASURY SHARES
At 30 June 2015, 2 169 558 Remgro ordinary shares (0.5%) were held as treasury shares by a wholly owned subsidiary company of Remgro. As previously reported, these shares were acquired for the purpose of hedging Remgro’s share incentive scheme.
During the year under review no Remgro ordinary shares were repurchased, while 444 165 Remgro ordinary shares were utilised to settle Remgro’s obligation towards share scheme participants who exercised the rights granted to them.
At 30 June 2016, 1 725 393 Remgro ordinary shares (0.4%) were held as treasury shares.
SHARE CAPITAL
The general meeting of shareholders on 16 August 2016 approved the increase of the authorised ordinary shares of no par value by 487 506 350 to 1 000 000 000 ordinary shares of no par value and the authorised B ordinary shares of no par value by 59 493 648 to 100 000 000 B ordinary shares of no par value. It was also resolved to place 100 000 000 ordinary shares of no par value and 10 000 000 B ordinary shares of no par value under the control of the Remgro Board to raise additional equity capital by way of a rights issue, which authority will be in place until the next Annual General Meeting, unless renewed at the said meeting.
Principal shareholder
Rupert Beleggings Proprietary Limited (Rupert Beleggings) (previously Rembrandt Trust Proprietary Limited) holds all the issued unlisted B ordinary shares of the Company and is entitled to 42.55% (2015: 42.57%) of the total votes.
An analysis of the shareholders appears here.
Subsidiary companies and investments
Particulars of subsidiary companies, equity accounted investments and other investments are disclosed in Annexures A and B.
Directors
The names of the directors appear here.
Mr N J Williams has been appointed as Chief Financial Officer of Remgro with effect from 1 April 2016, which directors’ appointment will in terms of the Company’s Memorandum of Incorporation have to be confirmed by the shareholders at the next Annual General Meeting.
The Board wishes to welcome Mr N J Williams as Chief Financial Officer to the Company.
In terms of the provision of the Memorandum of Incorporation, Messrs J J Durand, P K Harris, Dr E de la H Hertzog, J Malherbe and M Morobe retire from the Board by rotation. These directors are eligible and offer themselves for re-election.
Directors’ interests
At 30 June 2016 the aggregate of the direct and indirect interests of the directors and their associates in the issued ordinary share capital of the Company amounted to 2.55% (2015: 2.57%).
Mr J P Rupert is a director of Rupert Beleggings which owns all the issued unlisted B ordinary shares.
An analysis of directors’ interests in the issued capital of the Company appears here.
directors’ emoluments
The total directors’ fees for services rendered as directors during the past financial year amounted to R4.8 million (2015: R3.7 million).
Acquisition of shares of the Company
It is recommended that a general authority be granted to the Board to acquire, should circumstances warrant it, the Company’s own shares and to approve the acquisition of shares in the Company by any of its subsidiaries, subject to the provisions of the Companies Act (No. 71 of 2008), as amended, and the Listings Requirements of the JSE Limited.
A special resolution to grant this general authority to the Board is incorporated in the notice of the Annual General Meeting that appears here.
declaration of cash Dividend
Declaration of CASH Dividend No. 32
Notice is hereby given that a final gross dividend of 275 cents (2015: 259 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 2016.
A dividend withholding tax of 15% or 41.25 cents per share will be applicable, resulting in a net dividend of 233.75 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 2016 therefore amounts to 460 cents, compared to 428 cents for the year ended 30 June 2015.
The issued share capital at the declaration date is 481 106 370 ordinary shares and 35 506 352 B ordinary shares. The income tax number of the Company is 9500-124-71-5.
Payment
The final dividend is payable on Monday, 21 November 2016, to shareholders of the Company registered at the close of business on Friday, 18 November 2016.
Share certificates may not be dematerialised or rematerialised between Wednesday, 16 November 2016, and Friday, 18 November 2016, 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 pay out.
Secretary
The name and address of the Company Secretary appears here.
Approval
The comprehensive annual financial statements published on the Company’s website at www.remgro.com, as well as the summary annual financial statements set out here have been approved by the Board.
Signed on behalf of the Board of Directors.
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Johann Rupert | Jannie Durand | |
Chairman | Chief Executive Officer |
Stellenbosch
20 September 2016