Remgro's intrinsic net asset value is the most appropriate indicator of the value added for our shareholders. For the year under review the intrinsic net asset value per share has increased by 2.2% from R251.48 at 30 June 2017 to R256.97 at 30 June 2018. Over the same period the JSE all share index has increased by 11.6%, while Remgro's share price decreased by 4.3%. Refer to the tables here where the relative performances are set out in more detail.
Whilst, for various reasons, the index comparison is not always applicable over single accounting periods, the long-term trends are used as part of Remgro's risk and opportunity process to retain focus on our commitment to stakeholders as stated in our investment philosophy.
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.
The intrinsic net asset value is also presented as part of the Group's segmental information in the audited annual financial statements.
INTRINSIC net asset VALUE
The intrinsic net asset value of the Group includes valuations of all investments, incorporating subsidiaries and associates 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 subsidiaries 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:
- Cash flow projections
- Growth potential and risk
- 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
- Profit history
- Underlying net asset value
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 tradeability discount is applied.
Remgro's unlisted investments were valued as follows:
Refer to the table here for a detailed analysis of Remgro's intrinsic net asset value.
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.
|Intrinsic net asset value – Rand per share||256.97||251.48||306.44||288.89||245.96|
|JSE|| All share index||57 611||51 611||52 218||51 807||50 945|
| Fin & Ind 30 index||78 391||73 184||73 134||71 344||63 467|
| Financial 15 index||16 139||14 470||14 715||16 498||14 501|
| Healthcare||6 800||7 538||10 025||9 765||8 307|
|Remgro share price (Rand)||204.29||213.46||254.66||255.94||230.00|
30 June 2018
(% year on year)
28 October 2008 to
30 June 2018
(% compounded per annum)
|Intrinsic net asset value||2.2||12.2|
|JSE|| All share index||11.6||12.4|
| Fin & Ind 30 index||7.1||16.0|
| Financial 15 index||11.5||11.7|
|Remgro share price||(4.3)||13.3|
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 2018 (% compounded per annum)
|JSE|| All share index||15.7|
| Fin & Ind 30 index||19.3|
| Financial 15 index||16.4|
The following table compares the value at 30 June 2018 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 2018 (Rand)
|JSE|| All share index||410|
| Fin & Ind 30 index||552|
| Financial 15 index||435|
On 11 May 2018 the competition authorities approved the restructuring of Distell Group Limited's (previously listed Distell) multi-tiered ownership structure. In terms of the restructuring, Remgro exchanged its 50.0% shareholding in Remgro-Capevin Investments Proprietary Limited (RCI) for additional ordinary shares in Capevin Holdings Limited (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 Group Holdings Limited (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%.
The competition authorities approved Unilever South Africa Holdings Proprietary Limited's (Unilever) 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 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 and reinvested cash dividends amounting to R471 million for 11 888 562 new
RMI Holdings ordinary shares.
On 19 June 2018 Grindrod Limited (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.
The following table represents the cash effects of Remgro's investing activities for the year to 30 June 2018. These activities exclude the investing activities of Remgro's operating subsidiaries, i.e. RCL Foods Limited, Distell Group Holdings Limited and Wispeco Holdings Proprietary Limited.
|Investments made and loans granted||R million|
|Existing investee companies|
|Premier Team Holdings||30|
|Investments sold and loans repaid||R million|
|Kagiso Infrastructure Empowerment Fund||277|
|Milestone Capital Funds (offshore)||61|
The table below summarises the investment commitments of Remgro as at 30 June 2018.
|Investment commitments||R million|
|Milestone Capital Funds (offshore)||65|
Chief Executive Officer
19 September 2018
|30 June 2018||30 June 2017|
|RMH||15 385||30 123||14 016||23 350|
|FirstRand||5 486||14 045||5 010||10 365|
|Mediclinic||29 373||31 329||33 763||41 568|
|Unilever||3 588||11 900||3 737||10 702|
|Distell(1)||9 110||9 674||3 727||9 556|
|RCL Foods||8 128||11 534||7 553||10 173|
|RMI Holdings||8 479||17 285||7 277||17 532|
|Air Products||1 026||4 158||1 047||4 298|
|KTH||1 964||2 218||1 684||2 466|
|Total||2 007||2 382||1 640||2 167|
|Grindrod||1 624||1 624||1 915||1 915|
|CIV group||2 301||4 940||2 242||4 829|
|Other infrastructure interests||256||256||520||520|
|Media and sport|
|eMedia Investments||866||866||1 147||1 424|
|Other media and sport interests||223||268||365||319|
|Other investments||4 060||4 196||3 947||3 932|
|Cash at the centre(2)||13 704||13 704||12 223||12 223|
|Debt at the centre||(14 097)||(14 097)||(13 907)||(13 907)|
|Other net corporate assets||2 073||2 536||2 741||3 164|
|Intrinsic net asset value (INAV)||98 098||152 110||92 432||149 503|
|Potential CGT liability(3)||(6 438)||(7 010)|
|INAV after tax||98 098||145 672||92 432||142 493|
|Issued shares after deduction of shares repurchased (million)||566.9||566.9||566.6||566.6|
|INAV after tax per share (Rand)||173.04||256.97||163.13||251.48|
|Remgro share price (Rand)||204.29||213.46|
|Percentage discount to INAV||20.5||15.1|
|(1)||The prior year 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, Distell 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. 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.|