Notes to the summary financial statements

1.

Basis of preparation

The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited (JSE) for summary financial statements, and the requirements of the Companies Act applicable to summary financial statements. The JSE requires summary financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34: Interim Financial Reporting.

The accounting policies applied in the preparation of the consolidated financial statements from which the summary consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated Annual Financial Statements. During the year under review various other interpretations and amendments became effective, but their implementation had no impact on the results of either the current or prior years. The financial statements have been prepared under the supervision of the Chief Financial Officer, Neville Williams CA(SA).

The summary consolidated financial statements do not contain all the information and disclosures required in the consolidated financial statements. The summary consolidated financial statements have been extracted from the audited consolidated financial statements upon which PricewaterhouseCoopers Inc. has issued an unqualified report. The audited consolidated financial statements and the unqualified audit report are available for inspection at the registered office of the Company.

2.

Comparison with the prior year

RMB Holdings Limited (RMH) and FirstRand Limited (FirstRand)

During June 2020 Remgro unbundled its 28.2% interest in RMH (RMH Unbundling) and, consequently, the investment in RMH was treated as a discontinued operation for the year ended 30 June 2020. For the year under review, earnings and headline earnings measures are again presented for continuing operations and discontinued operations and, accordingly, discontinued operations for the prior year include the equity accounted income of RMH.

It should also be noted that with effect from 8 June 2020, Remgro ceased to have significant influence over FirstRand due to, among other factors, the RMH Unbundling and therefore the investment was reclassified from an equity accounted investment to an investment at fair value through other comprehensive income (FirstRand Reclassification). For the comparative year, the investment in FirstRand was equity accounted whereas, from the date of the FirstRand Reclassification, only dividend income is accounted for FirstRand in the income statement. Dividends of R191 million were received from FirstRand during the year under review (2020: cash dividends of R655 million). As a result of the Covid-19 pandemic, FirstRand only paid an interim dividend during the year under review.

Reporting platforms

Each significant investment is classified as an operating segment. Operating segments are presented in platforms. Platforms consist of investments with similar economic characteristics. As reported previously, the platforms under which the results of investee companies are being reported to the Chief Operating Decision-Maker were changed and certain investments reallocated in line with internal reporting to enhance stakeholder communication. The Media and sport and Other investments platforms that were reported under up to the 2020 financial year, were replaced by the following new platforms:

• Media (consisting mainly of eMedia Investments Proprietary Limited (eMedia Investments));
• Portfolio investments (non-strategic investments consisting mainly of FirstRand and British American Tobacco plc (BAT));
• Diversified investment vehicles (entities whose main business is to make investments consisting mainly of Kagiso Tiso Holdings Proprietary Limited (KTH), the Asian funds, Invenfin Proprietary Limited (Invenfin) and Pembani Remgro Infrastructure Fund (PRIF)); and
• Social impact investments (consisting mainly of the Blue Bulls rugby franchise and Stellenbosch Academy of Sport Proprietary Limited (SAS)).

Comparative figures have been re-presented accordingly.

3.

Headline earnings reconciliation

5.

Intangible assets

6.

Investments – equity accounted

Net impairments of equity accounted investments and loss allowances on loans

The listed market value of the investment in Mediclinic was R19 358 million on 30 June 2021 (2020: R18 769 million), which is significantly lower than the carrying value of R24 581 million (2020: R27 443 million) before impairment. Accordingly, management assessed for impairment by means of a value in use calculation. The value in use calculation is based on a discounted cash flow model. The calculation requires the use of estimates in respect of cash flows, growth and discount rates and it assumes a stable regulatory environment. These estimates are based on publicly available information such as analysts’ consensus forecast and guidance provided by Mediclinic in its annual results. Given that Mediclinic, in terms of London Stock Exchange listing requirements and its Disclosure Guidance and Transparency Rules, must monitor such publicly available information for reasonability against its internal budgets and forecast and publish guidance should there be a significant deviance, management has comfort that the estimates used in the discounted cash flow calculation are reasonable.

Cash flow projections for a five-year period were estimated and reflect management’s best view of future earnings. The discount and terminal growth rates used for the business segments are as follows:

Any increase in the discount rate or decreases in the short-term cash flow projections or terminal growth rate could give rise to further impairment charges in future. The value in use of the investment was R29 625 million on 30 June 2021 (2020: R28 776 million) and, as a result, no further impairment was recognised. 6. Investments – equity accounted (continued) Share of after-tax profit/(loss) of equity accounted investments

6.

Investments – equity accounted (continued) Share of after-tax profit/(loss) of equity accounted investments

12.

Fair value remeasurements

The following methods and assumptions are used to determine the fair value of each class of financial instruments:

• Financial instruments at fair value and investment in money market funds: Fair value is based on quoted market prices or, in the case of unlisted instruments, appropriate valuation methodologies, being discounted cash flow, liquidation valuation or actual net asset value of the investment.
• Derivative instruments: The fair values of derivative instruments, which are included in financial instruments at FVPL, are determined by using appropriate valuation methodologies and mark-to-market valuations.

Financial instruments measured at fair value are disclosed by level of the following fair value hierarchy:

The following table illustrates the fair values of financial assets and liabilities that are measured at fair value, by hierarchy level:

The following table illustrates the reconciliation of the carrying value of level 3 assets at the beginning and end of the year:

Level 3 financial assets consist mainly of investments in the Milestone China entities (Milestone) and PRIF amounting to R1 273 million (2020: R1 299 million) and R368 million (2020: R341 million), respectively. These investments are all valued based on the fair value of each investment’s underlying assets, which are valued using a variety of valuation methodologies. Listed entities are valued at the last quoted share price on the reporting date, whereas unlisted entities’ valuation methods include discounted cash flow valuations, appropriate earnings and revenue multiples.

Milestone’s fair value consists of listed investments (33%), cash and cash equivalents (5%) and unlisted investments (62%) (2020: 13%, 2% and 85%, respectively). Unlisted investments included at transaction prices in Milestone’s fair value amounted to R649 million (2020: R988 million), while its remaining three unlisted investments were valued at R140 million (2020: R117 million). PRIF’s main assets are the investments in ETG Group, Lumos Global, Solar Saver, Icolo, Zimborders and GridX. ETG Group was valued using a market-based approach, specifically the comparable company method (Enterprise value/EBITDA), while the other investments were valued using the discounted cash flow method. The investments in LifeQ and Bolt were valued at R186 million and R336 million, respectively, at 30 June 2021.

Changes in the valuation assumptions of the above unlisted investments will not have a significant impact on Remgro’s financial statements as the underlying assets of the funds in which Remgro made its investments are widely spread.

13.

Segment revenue

Disaggregated revenue information

14.

Related party transactions

Community Investment Ventures Holdings Proprietary Limited (CIVH)

During January 2021, Remgro subscribed for 54 738 shares in CIVH for a total amount of R1 636 million in terms of a rights issue. This share subscription increased Remgro’s interest in CIVH marginally from 54.7% at 30 June 2020 to 55.2% at 30 June 2021.

Subsequent to 30 June 2021, Remgro subscribed for a further 67 364 shares in CIVH for a total amount of R2 124 million in terms of a further rights issue, increasing Remgro’s interest in CIVH to 55.5%. The proceeds of both rights issues were used to reduce the CIVH group’s debt, as well as to unlock capital expenditure facilities for further growth.

RCL Foods Limited (RCL Foods)

During November and December 2020 Remgro acquired a further 28 940 412 RCL Foods shares for a total amount of R234 million. At 30 June 2021 Remgro’s effective interest in RCL Foods was 80.4% (2020: 77.1%).

KTH

During November 2020 Tiso Blackstar Group Proprietary Limited exited its 20.0% investment in KTH through multiple inter-connected steps, which increased Remgro’s interest in KTH. At 30 June 2021 Remgro’s effective interest in KTH was 43.5% (2020: 36.3%).

Other

For other related party transactions refer to note 6 and 11.

15.

Comparison with the prior year

Rand Merchant Investment Holdings Limited (RMI)

On 20 September 2021 RMI announced its decision to restructure its investment portfolio by the distribution of all the shares held by it in its two life insurance-focused assets, Discovery Limited and Momentum Metropolitan Holdings Limited, as well as an equity capital raise of up to R6.5 billion by way of a pro rata rights issue to optimise its capital structure (the RMI Restructure). Remgro gave its in-principle support for the RMI Restructure. Following the RMI Restructure, RMI’s remaining assets will consist mainly of its 89.1% investment in OUTsurance Holdings Limited and its 30.0% investment in Hastings Group Holdings plc.

Civil unrest in South Africa

Distell Group Holdings Limited (Distell) and RCL Foods

Civil unrest occurred in South Africa’s KwaZulu-Natal and Gauteng provinces from 9 to 17 July 2021, which resulted in violence and the destruction and looting of property and businesses. One of the Distell distribution centres in KwaZulu-Natal was damaged and its operations disrupted. Initial assessments placed the damage between R80 million and R100 million. Various of RCL Foods’ KwaZulu-Natal-based sites in the Chicken and Vector Logistics business units were also impacted by the civil unrest and resultant looting and vandalism of property. RCL Foods estimated the impact of the civil unrest at approximately R46 million.

The impact of the civil unrest is regarded as a non-adjusting event in terms of IAS 10: Events after the Reporting Period. No adjustments were therefore made to the amounts recognised in the financial statements of 30 June 2021.

Other than the above-mentioned events, there were no other significant events subsequent to 30 June 2021.