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INTRODUCTION
Remgro’s intrinsic net asset value is the best indicator of the value added for our shareholders. Over the year under review the intrinsic net asset value per share has increased by 6.1% from R288.89 at 30 June 2015 to R306.44 at 30 June 2016. Over the same period the JSE all share index has increased by 0.8%, while Remgro’s share price decreased by 0.5%. Refer to the tables below where the relative performances are set out in more detail.
This report aims to provide shareholders with a better understanding of the methodology behind the calculation of the intrinsic net asset value, especially relating to the valuation of our unlisted investments. A summary of our investing activities during the year under review is also provided.
INTRINSIC net asset VALUE
The intrinsic net asset value of the Group includes valuations of all investments, incorporating subsidiary and associated companies and joint ventures, either at listed market value or, in the case of unlisted investments, at directors’ valuation. The net assets of other wholly owned subsidiary companies consist mainly of monetary items (included at book value) and property (included at fair value).
The following factors are taken into account in determining the directors’ valuation of unlisted investments:
- Market value and earnings yield of similar listed shares, taking into account that the marketability of unlisted investments is limited and, in some cases, also the tradeability
- Growth potential and risk
- Underlying net asset value
- Profit history
- Cash flow projections

It is Remgro’s policy not to apply a control premium to the valuation of investments where it holds a majority interest. Where Remgro holds a minority interest a 10% tradeability discount is applied.
Remgro’s unlisted investments were valued as follows:
Air Products
The discounted cash flow method was used to value this investment. No tradeability discount is applied to the valuation due to the 50% shareholding.
Business Partners
The net asset value was used.
CIV group
The discounted cash flow method was used.
Kagiso Tiso Holdings
The annual external valuation was used.
PGSI
The discounted cash flow method was used.
PRIF
The annual external valuation was used.
eMEDIA
A comparable market price was used.
Seacom
The discounted cash flow method was used.
Total
The discounted cash flow method was used.
Unilever
The discounted cash flow method was used.
Wispeco
The discounted cash flow method was used.
Refer to the table below for a detailed analysis of Remgro’s intrinsic net asset value.
RELATIVE PERFORMANCE OF INTRINSIC NET ASSET VALUE AND REMGRO INTERNAL RATE OF RETURN (IRR)
The tables below compare the relative performance of the Remgro intrinsic net asset value per share with certain selected JSE indices. Dividends paid by Remgro were not taken into account.
30 June 2016 |
30 June 2015 |
30 June 2014 |
30 June 2013 |
30 June 2012 |
30 June 2011 |
31 March 2010 |
|
---|---|---|---|---|---|---|---|
Intrinsic net asset value – Rand per share | 306.44 | 288.89 | 245.96 | 204.83 | 152.61 | 135.97 | 121.64 |
JSE – All share index | 52 218 | 51 807 | 50 945 | 39 578 | 33 708 | 31 865 | 28 748 |
– Fin & Ind 30 index | 73 134 | 71 344 | 63 467 | 48 801 | 35 943 | 30 834 | 26 592 |
– Financial 15 index | 14 715 | 16 498 | 14 501 | 11 176 | 9 618 | 8 128 | 8 061 |
– Resource 10 index | 30 302 | 39 130 | 56 968 | 42 428 | 47 234 | 53 933 | 51 854 |
Remgro share price (Rand) | 254.66 | 255.94 | 230.00 | 189.95 | 131.49 | 111.60 | 98.00 |
Relative performance |
Year 30 June 2016 (% year on year) |
Period from 28 October 2008 to 30 June 2016 (% compounded per annum) |
---|---|---|
Intrinsic net asset value | 6.1 | 18.3 |
JSE – All share index | 0.8 | 14.4 |
– Fin & Ind 30 index | 2.5 | 19.5 |
– Financial 15 index | (10.8) | 13.6 |
– Resource 10 index | (22.5) | (0.1) |
Remgro share price | (0.5) | 20.5 |
The following table compares Remgro’s IRR with that of certain selected JSE indices. For this purpose it has been assumed that dividends have been reinvested in either Remgro shares or in the particular index, depending on the specific calculation.
IRR from 28 October 2008 to 30 June 2016 (% compounded per annum) | |
---|---|
JSE – All share index | 17.8 |
– Fin & Ind 30 index | 22.9 |
– Financial 15 index | 18.3 |
– Resource 10 index | 2.8 |
Remgro share | 23.5 |
The following table compares the value at 30 June 2016 of R100 invested on 28 October 2008 in either the relevant index or a Remgro share. For this purpose it has been assumed that dividends have been reinvested in either Remgro shares or in the particular index, depending on the specific calculation.
R100 invested on 28 October 2008 until 30 June 2016 (Rand) | |
---|---|
JSE – All share index | 351 |
– Fin & Ind 30 index | 488 |
– Financial 15 index | 362 |
– Resource 20 index | 123 |
Remgro share | 507 |
INVESTment ACTIVITIES
During June 2015 Remgro acquired a 29.9% shareholding in Spire Healthcare Group plc (Spire) for a total purchase consideration of £431.7 million. The transaction was concluded early in July 2015 and Remgro financed the transaction through a combination of its own cash and external funding. Simultaneously, Remgro and Mediclinic International Limited (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 111.1 million 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 51.3 million 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.
On 15 February 2016 Mediclinic and Al Noor Hospitals Group plc (Al Noor) combined their respective businesses pursuant to which Al Noor acquired 100% of the issued share capital of Mediclinic. However, 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 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). 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). In addition to the Al Noor shares received by Remgro and as an indivisible component of the combination, Remgro also subscribed for an additional 72.1 million shares in Al Noor at a subscription price of £8.32 per share for an aggregate amount of £600.0 million.
During the year under review Remgro committed a further R150.0 million to Pembani Remgro Infrastructure Fund (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.
On the international front, Remgro also invested a further $14 million in the Milestone Capital Funds, increasing Remgro’s total investment in China to $202 million. Despite the current problems in the Chinese economy, Remgro believes that its partnership with the Milestone Funds will produce value over the long term.
The following table represents the cash effects of Remgro’s investing activities for the year to 30 June 2016. These activities exclude the investing activities of Remgro’s operating subsidiaries, i.e. RCL Foods Limited and Wispeco Holdings Limited.
Investments made and loans granted | R million |
---|---|
Existing investee companies | |
Mediclinic (Al Noor) | 12 891 |
Mediclinic (rights issue) | 4 621 |
Milestone Capital Funds (offshore) | 194 |
Invenfin | 99 |
PRIF | 56 |
Premier Team Holdings | 47 |
Other | 6 |
17 914 |
Investments sold and loans repaid | R million |
---|---|
Britehouse | 84 |
Kagiso Infrastructure Empowerment Fund | 31 |
PRIF | 27 |
Other | 15 |
157 |
The acquisition and disposal of Spire to Mediclinic are excluded from the above tables as it was cash neutral.
INVESTment commitments
The table below summarises the investment commitments of Remgro as at 30 June 2016.
Investment commitments | R million |
---|---|
PRIF | 438 |
CIV group | 428 |
Milestone Capital Funds (offshore) | 133 |
Invenfin | 130 |
Other | 11 |
1 140 |

Jannie Durand
Chief Executive Officer
Stellenbosch
20 September 2016
INTRINSIC net asset VALUE
30 June 2016 | 30 June 2015 | |||
---|---|---|---|---|
R million | Book value | Intrinsic value | Book value | Intrinsic value |
Food, liquor and home care | ||||
Unilever | 3 589 | 10 650 | 3 384 | 8 688 |
Distell(1) | 3 500 | 10 723 | 3 157 | 11 098 |
RCL Foods | 7 294 | 9 278 | 7 346 | 11 514 |
Banking | ||||
RMBH | 13 132 | 22 356 | 12 267 | 26 409 |
FirstRand | 4 652 | 9 857 | 4 300 | 11 720 |
Healthcare | ||||
Mediclinic | 33 629 | 69 691 | 13 227 | 36 727 |
Insurance | ||||
RMI Holdings | 7 157 | 18 526 | 6 717 | 19 096 |
Industrial | ||||
Air Products | 933 | 4 241 | 882 | 4 164 |
KTH | 1 631 | 2 723 | 1 876 | 2 696 |
Total | 1 575 | 1 879 | 1 428 | 1 785 |
PGSI | 734 | 734 | 672 | 672 |
Wispeco | 702 | 1 055 | 603 | 920 |
Infrastructure | ||||
Grindrod | 1 986 | 1 986 | 4 016 | 2 329 |
CIV group | 1 871 | 3 166 | 1 795 | 2 797 |
SEACOM | 655 | 1 043 | 566 | 1 001 |
Other infrastructure interests | 540 | 540 | 480 | 480 |
Media and sport | ||||
eMedia | 1 116 | 1 342 | 1 126 | 2 094 |
Other media and sport interests | 328 | 328 | 374 | 382 |
Other investments | 3 737 | 3 717 | 3 047 | 3 266 |
Central treasury | ||||
Cash at the centre(2) | 3 778 | 3 778 | 4 019 | 4 019 |
Debt at the centre | (16 452) | (16 452) | ||
Other net corporate assets | 2 779 | 3 149 | 1 832 | 2 224 |
Net asset value (NAV) | 78 866 | 164 310 | 73 114 | 154 081 |
Potential CGT liability(3) | (6 526) | (5 466) | ||
NAV after tax | 78 866 | 157 784 | 73 114 | 148 615 |
Issued shares after deduction of shares repurchased (million) | 514.9 | 514.9 | 514.4 | 514.4 |
NAV after tax per share (Rand) | 153.17 | 306.44 | 142.12 | 288.89 |
Remgro share price (Rand) | 254.66 | 255.94 | ||
Percentage discount to NAV | 16.9 | 11.4 |
(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. The increase in the potential CGT liability is mainly the result of the increased CGT inclusion rate. 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. |
(5) | Intrinsic net asset values have not been audited. |