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 banking; healthcare; consumer products; insurance; industrial; infrastructure as well as media and sport.
|Year ended||30 June
| 30 June
|Headline earnings (R million)||8 573||8 221|
|– per share (cents)||1 512.6||1 485.5|
|– diluted (cents)||1 504.5||1 479.5|
|Headline earnings, excluding option remeasurement (R million)||8 312||7 534|
|– per share (cents)||1 466.5||1 361.3|
|– diluted (cents)||1 458.4||1 355.5|
|Earnings – net profit for the year (R million)||8 943||8 431|
|– per share (cents)||1 577.9||1 523.4|
|– diluted (cents)||1 567.5||1 517.2|
|Dividends (R million)||3 023||2 813|
|– ordinary – per share (cents)||532.00||495.00|
A final dividend of 328 cents (2017: 301 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.
The most important investment activities during the year under review were as follows:
Distell Group Holdings Limited (Distell)
On 30 June 2017 Remgro had an indirect economic interest of 31.8% in Distell Group Limited (previously listed Distell). This interest was held through its 50.0% shareholding in Remgro-Capevin Investments Proprietary Limited (RCI) and 19.0% shareholding in Capevin Holdings Limited (Capevin). Capevin held the other 50.0% shareholding in RCI and RCI had a 53.5% economic interest (or 52.8% voting interest) in the previously listed Distell.
On 11 May 2018 the competition authorities approved the restructuring of the previously listed Distell's multi-tiered ownership structure. In terms of the restructuring, Remgro exchanged its 50.0% shareholding in RCI for additional ordinary shares in Capevin (the RCI Exchange). The RCI Exchange increased Remgro's interest in Capevin from 19.0% to 59.5%. Following the RCI Exchange, Remgro exchanged its entire Capevin shareholding for ordinary shares in Distell, a new listed entity which is substantially similar to the previously listed Distell. Remgro also received unlisted B shares in Distell, which shares are linked to the Distell ordinary shares acquired by Remgro by virtue of the RCI Exchange, resulting in Remgro replicating RCI's 52.8% voting rights in the previously listed Distell. The unlisted B shares only carry voting rights in Distell and have no economic participation. The restructuring had no impact on Remgro's intrinsic net asset value and Remgro retained its 31.8% economic interest in Distell, but increased its voting rights in Distell to 56.0%.
Remgro's investments in RCI and Capevin were previously classified as a joint venture and an associate, respectively, and accounted for using the equity method. Since the restructuring, Remgro holds the majority of voting rights (56.0%) in Distell, thereby resulting in the investment in Distell now being consolidated at 31.8% with effect from 11 May 2018, while the investments in RCI and Capevin were derecognised at their fair values totalling R8 940 million, realising an accounting profit on the sale of investments of R5 150 million.
In terms of IFRS 3: Business Combinations the purchase consideration for Distell, consisting of the fair value of Remgro's previously held interests in RCI and Capevin, amounted to R8 940 million. The preliminary fair value of the underlying assets acquired and liabilities assumed at the effective date were: intangible assets of R10 169 million, property, plant and equipment of R6 608 million, and other net assets of R521 million. Non-controlling shareholders' proportionate interest in the fair value of Distell's net assets amounted to R11 893 million, while Remgro's economic interest therein amounted to R5 405 million. The balance of R3 535 million, being the difference between the purchase price and Remgro's portion of Distell's identifiable net assets, was allocated to goodwill.
The fair value adjustment to Distell's statement of financial position relates mainly to the recognition of brands (inter alia Hunters, Savanna, Amarula and Bernini). The amortisation of these additional assets will result in an annual after-tax expense of R145 million (Remgro's portion being R46 million) included in headline earnings. Since Remgro retained its economic interest of 31.8% in Distell's underlying business, the impact on attributable headline earnings for the year under review only relates to the additional after-tax amortisation expense of R8 million for the period to 30 June 2018.
RMI HOLDINGS LIMITED (RMI HOLDINGS)
On 19 September 2017 and 12 March 2018 RMI Holdings declared its final dividend for the year ended 30 June 2017 and interim dividend for the six months ended 31 December 2017 respectively. Both dividends 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 elected the reinvestment alternative for both declarations. Cash dividends amounting to R471 million were reinvested for 7 691 641 new RMI Holdings ordinary shares at R38.00 per share and 4 196 921 new RMI Holdings ordinary shares at R42.50 per share during October 2017 and April 2018 respectively. These investments increased Remgro's interest in RMI Holdings marginally to 30.3% (30 June 2017: 29.9%).
GRINDROD LIMITED (GRINDROD)
On 19 June 2018 Grindrod distributed its shipping division to its shareholders as a dividend in specie. Grindrod shareholders received 1 Grindrod Shipping Holdings Limited (Grindrod Shipping) share for every 40 Grindrod shares held and, accordingly, Remgro received 4 329 580 Grindrod Shipping shares. Grindrod Shipping listed on the NASDAQ on 18 June 2018 with a secondary inward listing on the JSE on 19 June 2018. On 30 June 2018 Remgro's effective interests in Grindrod and Grindrod Shipping were 23.0% (2017: 23.1%) and 22.7% respectively.
KAGISO INFRASTRUCTURE EMPOWERMENT FUND (KIEF)
During the year under review, Remgro disposed of its investment in KIEF, realising a profit on disposal of R103 million on the transaction. Remgro initially committed funds amounting to R350 million to KIEF, which had a target size of R650 million and aimed to invest in infrastructure projects, including roads, airports, power and telecommunication installations, railway systems, ports, water and social infrastructure. In total, Remgro invested R285 million in KIEF and received income and capital distributions amounting to R381 million, which includes the proceeds on disposal of KIEF.
INVENFIN PROPRIETARY LIMITED (INVENFIN)
During the year under review Remgro (through its wholly owned subsidiary, Invenfin) invested a further R80 million in Bos Brands Proprietary Limited (Bos Brands), thereby increasing its cumulative investment in Bos Brands to R244 million. Bos Brands is an owner, producer, marketer and distributor of a range of ice teas and sports drinks, under the BOS brand.
PEMBANI REMGRO INFRASTRUCTURE FUND (PRIF)
During the year under review Remgro invested a further R43 million in PRIF, thereby increasing its cumulative investment to R298 million. As at 30 June 2018 the remaining commitment to PRIF amounted to R352 million.
Other smaller investments amounted to R114 million.
Events after year-end
UNILEVER SOUTH AFRICA HOLDINGS PROPRIETARY LIMITED (UNILEVER)
The competition authorities have approved Unilever's acquisition of Remgro's 25.75% shareholding in Unilever in exchange for Unilever's Spreads business in Southern Africa, as well as a cash consideration of R4 900 million, representing a total transaction value of R11 900 million. This transaction valued the Unilever Spreads business at R7 000 million. The effective date of the transaction was 2 July 2018.
On 2 July 2018 the Unilever Spreads business, valued at R7 000 million, was transferred to Silver 2017 Proprietary Limited (Silver), which became a wholly owned subsidiary of Remgro, and the investment in Unilever was disposed of for R11 900 million. In terms of IFRS 3: Business Combinations the purchase price of the Unilever Spreads business will be allocated to intangible assets (mainly brands like Rama, Stork and Flora), property, plant and equipment and other net assets, while the balance will be allocated to goodwill. At the date of publication of the audited consolidated results, the acquisition date fair values of acquired net assets have not yet been determined.
RMI HOLDINGS LIMITED (RMI HOLDINGS)
On 11 September 2018 RMI Holdings declared its final dividend for the year ended 30 June 2018, 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 R300 million, by electing the reinvestment alternative, in order to receive 7 894 998 new RMI Holdings ordinary shares at R38.00 per share.
COMMUNITY INVESTMENT VENTURES HOLDINGS PROPRIETARY LIMITED (CIVH)
On 29 August 2018 Remgro invested a further R324 million in CIVH as part of a CIVH rights offer.
MILESTONE CAPITAL STRATEGIC HOLDINGS LIMITED (MCSH)
During August 2018 Remgro disposed of its investment and loan in MCSH for a total purchase consideration of $70 million.
Other than the above-mentioned transactions, there were no other significant transactions subsequent to 30 June 2018.
cash resources at the centre
The Company's cash resources at 30 June 2018 were as follows:
|30 June 2018||30 June|
|Per consolidated statement of financial position||6 921||5 248||12 169||7 524|
|Investment in money market funds||3 915||81||3 996||5 888|
|Less: Cash of operating subsidiaries||(1 701)||(760)||(2 461)||(1 189)|
|Cash at the centre||9 135||4 569||13 704||12 223|
On 30 June 2018, approximately 29% (R3 996 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 to the annual financial statements for further details.
group financial review
Statement of financial position
The analysis of ”Equity employed” and ”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 2018||30 June 2017|
|R million||R per share||R million||R per share|
|Attributable to equity holders||98 098||173.04||92 432||163.13|
|Employment of equity|
|Banking||20 871||36.82||19 026||33.58|
|Healthcare||29 373||51.81||33 763||59.59|
|Consumer products||20 826||36.74||15 017||26.50|
|Insurance||8 479||14.96||7 277||12.84|
|Industrial||6 563||11.58||5 835||10.30|
|Infrastructure||5 157||9.10||4 998||8.82|
|Media and sport||1 089||1.92||1 512||2.67|
|Other investments||4 060||7.16||3 947||6.97|
|– Cash at the centre||13 704||24.17||12 223||21.57|
|– Debt at the centre||(14 097)||(24.87)||(13 907)||(24.54)|
|Other net corporate assets||2 073||3.65||2 741||4.83|
|98 098||173.04||92 432||163.13|
|30 June 2018||30 June 2017|
|R million||%||R million||%|
|Source of headline earnings|
|Banking||3 525||41||3 163||38|
|Healthcare||1 556||18||1 875||23|
|Consumer products||1 605||19||1 354||17|
|Insurance||1 228||14||1 041||13|
|Media and sport||(47)||(1)||(58)||(1)|
|– Finance income||524||6||349||4|
|– Finance costs||(630)||(7)||(216)||(3)|
|Other net corporate costs||(282)||(3)||(143)||(2)|
|8 573||100||8 221||100|
|R million||30 June
|Composition of headline earnings|
|Profits||1 302||1 230|
|Associates and joint ventures||8 119||7 792|
|Profits||8 269||7 950|
|8 573||8 221|
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 8 to the annual financial statements for further details on the SAR Scheme.
At 30 June 2017, 1 666 638 Remgro ordinary shares (0.3%) 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 277 605 Remgro ordinary shares were utilised to settle Remgro's obligation towards share scheme participants who exercised the rights granted to them.
At 30 June 2018, 1 389 033 Remgro ordinary shares (0.3%) were held as treasury shares.
Rupert Beleggings Proprietary Limited (Rupert Beleggings) holds all the issued unlisted B ordinary shares of the Company and is entitled to 42.53% (2017: 42.54%) of the total votes.
An analysis of the shareholders appears here.
Subsidiaries and investments
Particulars of subsidiaries and equity accounted investments are disclosed in note 14 of the annual financial statements.
The names of the directors appear here.
Mr W E Bührmann has retired as an executive director from the Board of Remgro on 30 April 2018. He has reached his normal retirement age of 63 for executive directors.
The Board wishes to thank him for his valuable contribution over many years.
In terms of the provision of the Memorandum of Incorporation, Ms S E N De Bruyn and Messrs P K Harris, M Morobe, J P Rupert and N J Williams retire from the Board by rotation. These directors are eligible and offer themselves for re-election.
At 30 June 2018 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 2.51% (2017: 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.
The total directors' fees for services rendered as directors during the past financial year amounted to R5.5 million (2017: R5.2 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.
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, the Memorandum of Incorporation and the Listings Requirements of the exchange operated by 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.
declaration of cash Dividend
Declaration of CASH Dividend No. 36
Notice is hereby given that a final gross dividend of 328 cents (2017: 301 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 2018.
A dividend withholding tax of 20% or 65.6 cents per share will be applicable, resulting in a net dividend of 262.4 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 2018 therefore amounts to 532 cents, compared to 495 cents for the year ended 30 June 2017.
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.
The final dividend is payable on Monday, 19 November 2018, to shareholders of the Company registered at the close of business on Friday, 16 November 2018.
Share certificates may not be dematerialised or rematerialised between Wednesday, 14 November 2018, and Friday, 16 November 2018, 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 payout.
The name and address of the Company Secretary appears here.
Signed on behalf of the Board of Directors.
|Johann Rupert||Jannie Durand|
|Chairman||Chief Executive Officer|
19 September 2018