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 associates and joint ventures.
The Group’s interests consist mainly of investments in healthcare; banking; consumer products; insurance; industrial; infrastructure as well as media and sport.
Results
| Year ended | 30 June
2017 |
30 June
2016 Restated |
|---|---|---|
| Headline earnings (R million) | 8 221 | 5 874 |
| – per share (cents) | 1 485.5 | 1 119.6 |
| – diluted (cents) | 1 479.5 | 1 115.0 |
| Headline earnings, excluding once-off costs and option remeasurement (R million) | 7 534 | 7 392 |
| – per share (cents) | 1 361.3 | 1 409.0 |
| – diluted (cents) | 1 355.5 | 1 404.4 |
| Earnings – net profit for the year (R million) | 8 431 | 5 364 |
| – per share (cents) | 1 523.4 | 1 022.4 |
| – diluted (cents) | 1 517.2 | 1 018.5 |
| Dividends (R million) | 2 813 | 2 518 |
| – ordinary – per share (cents) | 495.00 | 460.00 |
A final dividend of 301 cents (2016: 275 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:
Community Investment Ventures Holdings Proprietary Limited (CIVH)
During September 2016 Remgro subscribed for an additional 12 353 shares in CIVH for a total amount of R329.3 million in terms of a CIVH rights issue. As a result of the share subscription, Remgro’s interest in CIVH increased marginally to 51.0% on 30 June 2017 (2016: 50.9%).
CAPEVIN HOLDINGS LIMITED (CAPEVIN)
During May 2017 Remgro acquired a further 30 667 156 Capevin shares for a total amount of R264.5 million. This transaction increased Remgro’s effective interest in Capevin to 19.0% (2016: 15.6%).
Invenfin Proprietary Limited (Invenfin)
During 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.
Pembani Remgro Infrastructure Fund (PRIF)
On 15 August 2016 PRIF had its final close, which resulted in Remgro receiving a capital distribution of R14.6 million, as well as an income distribution of R3.8 million. During the year under review Remgro also invested a further R58.0 million in PRIF, thereby increasing its cumulative investment to R255.2 million. As at 30 June 2017 the remaining commitment to PRIF amounted to R394.8 million.
Other
Other smaller investments amounted to R215 million.
Events after year-end
DISTELL GROUP LIMITED (DISTELL)During June 2017 it was announced that Distell will restructure its multi-tiered ownership structure (the Proposed Transaction) and in order to give effect to the Proposed Transaction, Remgro will, through a number of inter-conditional steps, exchange its existing 50% shareholding in Remgro-Capevin Investments Proprietary Limited (RCI) for additional ordinary shares in Capevin Holdings Limited (Capevin) (RCI Exchange). Remgro currently holds 19.0% of the ordinary shares in Capevin and after the RCI Exchange, Remgro will hold 59.5% in Capevin. Following the RCI Exchange, Remgro will exchange its entire Capevin shareholding for ordinary shares in a new listed entity (New Distell), which entity will be substantially similar to the current Distell. Remgro will, in addition, also receive unlisted B shares in New Distell, which shares will be linked to those New Distell ordinary shares acquired by Remgro in virtue of the RCI Exchange, resulting in Remgro replicating RCI’s current 52.8% voting rights in Distell. The unlisted B shares will only carry voting rights in New Distell and will have no economic participation. The Proposed Transaction will have no impact on Remgro’s intrinsic asset value and Remgro will retain its economic interest in Distell. Post implementation of the Proposed Transaction, Remgro will, in aggregate, have voting rights of 56.0% in New Distell. The Proposed Transaction is still subject to a number of conditions precedent, inter alia Distell and Capevin shareholders’ approvals, which is expected to be on 27 October 2017, as well as the approval of the relevant competition authorities.
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 has committed to reinvesting its cash dividend amounting to R292.3 million, by electing the reinvestment alternative, in order to receive 7 691 641 new RMI Holdings ordinary shares at R38.00 per share.
Other than the above-mentioned transactions, there were no other significant transactions subsequent to 30 June 2017.
RIGHTS ISSUE
During October 2016 Remgro completed a rights issue whereby 48 110 637 new ordinary shares and 3 550 635 new B ordinary shares were issued at a subscription price of R192.50 per share for a total consideration of R9 944.8 million. The offer to the ordinary shareholders was made in the ratio of 10 rights issue shares for every 100 ordinary shares held on the record date of the rights issue, representing an aggregate amount of R9 261.3 million. In order to maintain the current level of voting rights of Rupert Beleggings Proprietary Limited (Rupert Beleggings) in Remgro, and to contribute to the new equity capital being raised, Remgro offered Rupert Beleggings the right to subscribe for 3 550 635 B ordinary shares, representing an aggregate amount of R683.5 million. In terms of IAS 33 paragraph 26, an adjustment to the weighted average number of shares in issue for the comparative period is required as the shares were issued at a discount to the Remgro share price on the day before the announcement (being R243.29 per share). Consequently, the comparable weighted number of shares in issue was adjusted by 9 994 195 shares to account for the deemed dilutive effect of the rights issue. Refer to note 15 for full detail on the restatement of comparative numbers.
cash resources at the centre
The Company’s cash resources at 30 June 2017 were as follows:
| 30 June 2017 | 30 June | |||
|---|---|---|---|---|
| R million | Local | Offshore | Total | 2016 |
| Per consolidated statement of financial position | 5 260 | 2 264 | 7 524 | 3 569 |
| Investment in money market funds | 3 815 | 2 073 | 5 888 | 1 050 |
| Less: Cash of operating subsidiaries | (1 170) | (19) | (1 189) | (841) |
| Cash at the centre | 7 905 | 4 318 | 12 223 | 3 778 |
On 30 June 2017, approximately 48% (R5 888 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 5.1 to the annual financial statements that is published on the Company’s website at www.remgro.com for further details.
group financial review
CHANGE IN ACCOUNTING POLICY
With effect from 1 July 2016 Remgro adopted the amendments to IAS 16: Property, Plant and Equipment and IAS 41: Agriculture. These amendments have to be applied retrospectively and accordingly the reported results of the comparative period were restated. The restatements pertain to the reclassification of bearer plants from biological assets to property, plant and equipment, the transfer of the remaining non-current biological assets (being the produce) to current biological assets and the measurement of the reclassified assets under the appropriate accounting treatment. Refer to the note 15 for full detail on the restatement of comparative numbers.
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 2017 | 30 June 2016 | |||
|---|---|---|---|---|
| R million | R per share | R million
Restated |
R per share
Restated |
|
| Equity employed | ||||
| Attributable to equity holders | 92 432 | 163.13 | 78 844 | 153.13 |
| Employment of equity | ||||
| Healthcare | 33 763 | 59.59 | 33 629 | 65.31 |
| Banking | 19 026 | 33.58 | 17 784 | 34.54 |
| Consumer products | 15 017 | 26.50 | 14 361 | 27.89 |
| Insurance | 7 277 | 12.84 | 7 157 | 13.90 |
| Industrial | 5 835 | 10.30 | 5 575 | 10.83 |
| Infrastructure | 4 998 | 8.82 | 5 052 | 9.81 |
| Media and sport | 1 512 | 2.67 | 1 444 | 2.80 |
| Other investments | 3 947 | 6.97 | 3 737 | 7.26 |
| Central treasury | ||||
| – Cash at the centre | 12 223 | 21.57 | 3 778 | 7.34 |
| – Debt at the centre | (13 907) | (24.54) | (16 452) | (31.95) |
| Other net corporate assets | 2 741 | 4.83 | 2 779 | 5.40 |
| 92 432 | 163.13 | 78 844 | 153.13 | |
INCOME STATEMENT
| 30 June 2017 | 30 June 2016 | |||
|---|---|---|---|---|
| R million | % | R million
Restated |
%
Restated |
|
| Source of headline earnings | ||||
| Healthcare | 1 875 | 23 | 1 566 | 27 |
| Banking | 3 163 | 38 | 2 989 | 51 |
| Consumer products | 1 354 | 17 | 1 605 | 27 |
| Insurance | 1 041 | 13 | 888 | 15 |
| Industrial | 750 | 9 | 517 | 9 |
| Infrastructure | 36 | 1 | 6 | – |
| Media and sport | (58) | (1) | (36) | (1) |
| Other investments | 70 | 1 | 67 | 1 |
| Central treasury | ||||
| – Finance income | 349 | 4 | 125 | 2 |
| – Finance costs | (216) | (3) | (1 602) | (27) |
| Other net corporate costs | (143) | (2) | (251) | (4) |
| 8 221 | 100 | 5 874 | 100 | |
| R million | 30 June 2017 |
30 June 2016 Restated |
|---|---|---|
| Composition of headline earnings | ||
| Subsidiaries | 429 | (994) |
| Profits | 1 230 | 807 |
| Losses | (801) | (1 801) |
| Associates and joint ventures | 7 792 | 6 868 |
| Profits | 7 950 | 7 252 |
| Losses | (158) | (384) |
| 8 221 | 5 874 | |
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 9 to the annual financial statements that is published on the Company’s website at www.remgro.com for further details on the SAR Scheme.
TREASURY SHARES
At 30 June 2016, 1 725 393 Remgro ordinary shares (0.4%) 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 year under review 224 542 Remgro ordinary shares were utilised to settle Remgro’s obligation towards share scheme participants who exercised the rights granted to them. Remgro also followed its rights with respect to treasury shares it held when it completed the rights issue during October 2016 and subscribed for 165 787 Remgro ordinary shares, at R192.50 per share, for a total amount of R32 million.
At 30 June 2017, 1 666 638 Remgro ordinary shares (0.3%) were held as treasury shares.
Principal shareholder
Rupert Beleggings Proprietary Limited (Rupert Beleggings) holds all the issued unlisted B ordinary shares of the Company and is entitled to 42.54% (2016: 42.55%) of the total votes.
An analysis of the shareholders appears here.
Subsidiary companies and investments
Particulars of subsidiaries and equity accounted investments are disclosed in note 14 of the annual financial statements. that is published on the Company’s website at www.remgro.com.
Directors
The names of the directors appear here.
Mrs M Lubbe has been appointed as an executive director of Remgro on 20 September 2016 and the Board has ratified her appointment on 1 December 2016. Mrs M Lubbe’s 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 Mrs M Lubbe as a director to the Company.
Mr H Wessels has retired as an independent non-executive director from the Board of Remgro from 1 December 2016.
The Board wishes to thank him for his valuable contribution over many years.
In terms of the provision of the Memorandum of Incorporation, Messrs W E Bührmann, G T Ferreira, N P Mageza, P J Moleketi and F Robertson retire from the Board by rotation. These directors are eligible and offer themselves for re-election.
Directors’ interests
At 30 June 2017 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 2.57% (2016: 2.55%).
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 R5.2 million (2016: R4.8 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 in the Integrated Annual Report.
AUTHORITY TO PLACE ORDINARY SHARES UNDER THE CONTROL OF THE DIRECTORS
It is recommended that a general authority be granted to the Board to allot and issue ordinary shares, subject to the provisions of the Companies Act (No. 71 of 2008), as amended, and the Listings Requirements of the JSE Limited, provided that the aggregate number of ordinary shares to be allotted and issued is limited to 5% of the number of the unissued ordinary shares in the authorised share capital of the Company (being 23 539 150 ordinary shares). This authority cannot be used to issue shares for cash.
An ordinary resolution to grant this general authority to the Board is incorporated in the notice of the Annual General Meeting that appears here in the Integrated Annual Report.
declaration of cash Dividend
Declaration of CASH Dividend No. 34
Notice is hereby given that a final gross dividend of 301 cents (2016: 275 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 2017.
A dividend withholding tax of 20% or 60.2 cents per share will be applicable, resulting in a net dividend of 240.8 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 2017 therefore amounts to 495 cents, compared to 460 cents for the year ended 30 June 2016.
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.
Payment
The final dividend is payable on Monday, 20 November 2017, to shareholders of the Company registered at the close of business on Friday, 17 November 2017.
Share certificates may not be dematerialised or rematerialised between Wednesday, 15 November 2017, and Friday, 17 November 2017, 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.
 |
 |
|
| Johann Rupert | Jannie Durand | |
| Chairman | Chief Executive Officer |
Stellenbosch
20 September 2017
