FINANCIAL report

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) Listings Requirements for summary financial statements, and the requirements of the Companies Act of South Africa. The Listings Requirements require 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 Reporting 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 prior year

Disposal of certain assets and liabilities of Distell

On 26 April 2023 Heineken International B.V. (Heineken) acquired the bulk of Distell’s business (consisting of its cider, other RTDs and spirits and wine business). The transaction entailed the following:

  • Distell sold its equity interests in Distell Namibia Limited, Distillers Corporation (Namibia) Limited and Namibia Wines and Spirits Limited to Namibia Breweries for a cash consideration of R1 564 million.
  • Heineken’s Southern African business, including an interest in Namibia Breweries, was combined with the bulk of the Distell business (consisting of its cider, other RTDs and spirits and wine business) in Heineken Beverages, a new unlisted entity, controlled by Heineken. Remgro exchanged 62 242 453 Distell shares for 62 242 453 Heineken Beverages shares (being a 15.5% stake in Heineken Beverages) and sold 7 607 803 of its Distell shares to Heineken Beverages for R1 255 million (being R165 per Distell share) in terms of a scale back of the issue of Heineken Beverages shares to Distell shareholders, electing to receive Heineken Beverages shares, to ensure a 65% shareholding by Heineken in Heineken Beverages.
  • Distell unbundled the unlisted shares in its subsidiary, Capevin, which holds Distell’s remaining assets, mainly its Scotch whisky business. Remgro is the controlling shareholder in Capevin, which shareholding mirrors the shareholding that was previously held in Distell (being an economic interest of 31.4% and a voting interest of 55.9%). Therefore, the Capevin investment continues to be classified as a subsidiary. It was previously held indirectly through Distell.

The investment in Distell was derecognised on 26 April 2023, while Remgro continued to consolidate the investment in Capevin at its underlying carrying values as previously accounted for. A profit on disposal of R4 374 million was recognised for the assets and liabilities transferred to Heineken Beverages and the related business activities was disclosed as a discontinued operation in the current financial year, with the prior year disclosure restated accordingly. No profit or loss was recognised from the unbundling of Capevin. The investment in Heineken Beverages was classified as an associate since Remgro has board representation.

 
R million At 
disposal 
date 
  Property, plant and equipment  8 257 
  Intangible assets  9 023 
  Inventories  8 461 
  Debtors and short-term loans  5 979 
  Cash and cash equivalents  2 318 
  Other assets  1 438 
  Deferred taxation  (3 300)
  Trade and other payables  (7 938)
  Bank overdraft  (1 550)
  Other liabilities  (1 744)
  Non-controlling interest  (12 239)
  Carrying value of net assets disposed  8 705 
  Consideration received  13 079 
    Cash consideration received from Namibia Breweries  1 564 
    Cash on shares disposed to Heineken, net of costs  1 245 
    Exchanged for investment in Heineken Beverages  10 270 
  Profit on disposal  4 374 
  Cash inflow on disposal  2 041 
    Cash and cash equivalents and bank overdrafts of business disposed  (768)
    Cash consideration received  2 809 

 

 


Transfer to non-current assets/(liabilities) held for sale of Vector Logistics

During the year under review RCL Foods announced its intention to dispose of Vector Logistics. On 29 March 2023, RCL Foods entered into a binding agreement with EMIF II Investment Proprietary Limited, a subsidiary of A.P. Möller Capital, to dispose of the Vector Logistics business.

The related assets and liabilities are presented as held for sale in the statement of financial position at 30 June 2023 and the results for the current and previous financial year are disclosed as a discontinued operation.

 
R million At 
30 June 
2023 
  Debtors and short-term loans  4 699 
  Other assets  1 773 
  Included in assets held for sale  6 472 
  Trade and other payables  (3 413)
  Other liabilities  (583)
  Included in liabilities held for sale  (3 996)

3.

 

Headline earnings reconciliation

 
R million 30 June 
 2023 
 
30 June 
2022 
Restated 
  Continuing operations     
  Net profit for the year attributable to equity holders (earnings) 5 836  12 445 
  – Impairment of equity accounted investments(1)  58  193 
  – Reversal of impairment of equity accounted investments(1)  (5) (361)
  – Impairment of property, plant and equipment  70  100 
  – Reversal of impairment of property, plant and equipment  (35) (253)
  – Impairment of intangible and other assets  462  162 
  – Profit on sale and dilution of equity accounted investments  (321) (395)
  – Loss on sale and dilution of equity accounted investments 
  – Profit on disposal of property, plant and equipment  (78) (27)
  – Loss on disposal of property, plant and equipment  62  14 
  – Recycling of foreign currency translation reserves  (10) – 
  – Non-headline earnings items included in equity accounted earnings of equity accounted investments  984  (6 181)
     – Profit on disposal of property, plant and equipment  (18) (59)
     – Profit on sale of investments(2)  (67) (6 298)
     – Loss on sale of investments  – 
     – Impairment of investments, assets and goodwill  1 069  190 
     – Other headline earnings adjustable items  –  (15)
  – Taxation effect of adjustments  (13) 126 
  – Non-controlling interest  (370) (8)
  Headline earnings from continuing operations  6 642  5 816 
  Discontinued operations     
  Net profit for the year attributable to equity holders (earnings) 3 788  694 
  – Impairment of property, plant and equipment  – 
  – Profit on disposal of property, plant and equipment  (9) (56)
  – Loss on disposal of property, plant and equipment  36 
  – Loss on disposal of intangible assets  –  (12)
  – Profit on disposal of subsidiary(3)  (4 374) – 
  – Recycling of foreign currency translation reserves  23  – 
  – Non-headline earnings items included in equity accounted earnings of equity accounted investments     
     – Profit on disposal of property, plant and equipment  –  (8)
  – Taxation effect of adjustments  607 
  – Non-controlling interest  343  36 
  Headline earnings from discontinued operations  414  678 
  Total headline earnings from continuing and discontinued operations  7 056  6 494 

 

 
  1. Refer to “Net impairments of equity accounted investments” here for further details.
  2. “Profit on sale of investments” from equity accounted investments for the year ended 30 June 2022 includes Remgro’s portion of the profit realised by OUTsurance Group on the unbundling of its investments in Discovery and Momentum Metropolitan (totalling R4 667 million) and the disposal of its investment in Hastings (R1 465 million).
  3. Refer to “Comparison with prior year” here for further details.

Headline earnings, adjusted for corporate actions, reconciliation

Corporate actions such as the unbundling, restructuring, acquisition and disposal of investments may result in non-recurring items or items that distort comparability, being recognised in the income statement that may not be excluded from the calculation of headline earnings as per the HEPS circular 1/2023. Headline earnings is then adjusted for these items (net of tax), being transaction and restructuring costs; acquisition and disposal-related gains or losses (inter alia foreign exchange gains or losses); income or losses that were not accounted for the full reporting period (inter alia consolidated or equity accounted income or losses until the date of unbundling, restructuring or disposal); and income or losses that were not accounted for on a consistent basis between reporting periods (inter alia to consolidate or to equity account as opposed to dividend income from investments recognised at fair value through other comprehensive income). In these instances, the Group discloses an alternative earnings measure excluding these items in order to promote comparability between reporting periods.

For the current and comparative years, these corporate actions and their impact on headline earnings include:
  • The restructuring of OUTsurance Group – during the comparative year, OUTsurance Group unbundled its investments in Discovery and Momentum Metropolitan (the OUTsurance Group unbundling), as well as disposed of its investment in Hastings. OUTsurance Group equity accounted these investments (being classified as discontinued operations) and Remgro’s portion thereof, included in headline earnings for the comparative year, amounted to R351 million. As a consequence of the OUTsurance Group unbundling, Remgro received Discovery and Momentum Metropolitan shares and classified both investments as financial instruments at fair value through other comprehensive income. As Remgro now accounts for dividend income from these investments, only R141 million of dividends were received and included in headline earnings from Momentum Metropolitan during the year under review;
  • The disposal of Grindrod Shipping (comparative year) – equity accounted income of R267 million was included in the prior year;
  • The unbundling of Grindrod (October 2022) – equity accounted income of only R61 million is included for the year under review (2022: R263 million);
  • The acquisition of an additional 5.4% indirect interest in Mediclinic (the Mediclinic acquisition) (June 2023) – transaction costs (R612 million) and foreign exchange gain (R522 million) are included for the year under review; and
  • The combination of the Heineken Southern African business, including an interest in Namibia Breweries with the bulk of the Distell business (consisting of its cider, other RTDs and spirits and wine business) in Heineken Beverages, as well as the unbundling by Distell of its subsidiary, Capevin, which holds Distell’s remaining assets, including its Scotch whisky business (the Distell/Heineken transaction) (April 2023) – transaction costs of R196 million is included for the year under review (2022: R16 million).

Headline earnings adjusted for the above-mentioned corporate actions is as follows:

 
Year ended 30 June
R million 2023  2022 
  Total headline earnings from continuing and discontinued operations  7 056  6 494 
  Discontinued operations of OUTsurance Group  –  (351)
  Momentum Metropolitan dividends  (141) – 
  Grindrod Shipping equity accounted income  –  (267)
  Grindrod equity accounted income  (61) (263)
  Foreign exchange gain and transaction costs relating to the Mediclinic acquisition  90  – 
  Transaction costs relating to the Distell/Heineken transaction  196  16 
  Headline earnings adjusted for the corporate actions  7 140  5 629 

4.

 

Earnings and dividends

 
Cents 30 June 
2023 
 
30 June 
2022 
Restated 
  Headline earnings per share     
  – Basic  1 254  1 151 
    Continuing operations  1 180  1 031 
    Discontinued operations  74  120 
  – Diluted  1 244  1 141 
    Continuing operations  1 171  1 022 
    Discontinued operations  73  119 
  Earnings per share     
  – Basic  1 710  2 328 
    Continuing operations  1 037  2 205 
    Discontinued operations  673  123 
  – Diluted  1 696  2 313 
    Continuing operations  1 027  2 191 
    Discontinued operations  669  122 
  Dividends per share     
  Ordinary  240  150 
  – Interim  80  50 
  – Final  160  100 

5.

 

Investments – Equity accounted

 
R million 30 June 
 2023 
30 June 
 2022 
  Associates  27 973  43 317 
  Joint ventures  48 472  7 454 
  Investments – Equity accounted  76 445  50 771 
  Loans to equity accounted investments – current  35  15 
    76 480  50 786 
  Equity accounted investments reconciliation     
  Carrying value at the beginning of the year  50 786  50 301 
  Share of net attributable profit  3 472  10 980 
  Dividends received  (1 459) (1 687)
  Grindrod unbundled(1)  (1 649) – 
  Investments made(2)  18 034  2 163 
  Business disposed  (806) – 
  Discovery dividend in specie(3)  –  (8 561)
  Momentum Metropolitan dividend in specie(3)  –  (2 056)
  Exchange rate differences  7 087  (244)
  Grindrod Shipping transferred to non-current assets held for sale/disposed of(4)  –  (1 055)
  Net impairments  (50) 168 
  Net allowances on loans  – 
  Equity accounted movements on reserves  1 388  729 
  Other movements  (323) 47 
  Carrying value at the end of the year  76 480  50 786 

 
  1. Refer to “Investment activities” here for further details.
  2. Refer to “Investment activities” for the investments in Heineken Beverages and Mediclinic during the year under review. The prior year included an investment in CIVH amounting to R2 124 million.
  3. During April 2022 OUTsurance Group unbundled its investments in Discovery and Momentum Metropolitan. Remgro received a 7.7% interest in Discovery and an 8.6% interest in Momentum Metropolitan and both the investments were classified as financial instruments at fair value through other comprehensive income.
  4. During January 2022 Remgro sold its investment in Grindrod Shipping.

Net impairments of equity accounted investments and loss allowances on loans

Reversal of impairments/(impairments) were recognised for the following investments:

 
R million 30 June 
 2023 
30 June 
 2022 
  Business Partners(1)  –  (193)
  Grindrod(2)  –  361 
  Other impairments and loss allowances  (50)
  Other impairments and loss allowances  (50) 169 

 

 
  1. Business Partners’ fair value declined mainly due to an increase in the tradability discount applied to the valuation thereof.
  2. At 30 June 2022 Grindrod’s listed share price recovered significantly (85% increase year-on-year) following much improved trading results mainly due to the recovery in the logistics and port and terminals sectors in which it operates.

At 30 June 2023, the fair value of the investment in Mediclinic was R47 268 million (2022: listed market value R29 568 million), which exceeded the carrying value of R41 050 million (2022: R26 681 million). Included in the carrying value of the investment is an impairment of R3 898 million which arose following regulatory changes in the investments’ Switzerland business that affected its profitability since the 2019 financial year. Subsequently, the business was also severely impacted by the Covid-19 pandemic. While the Switzerland business is adapting to the new business environment and is recovering after the pandemic, its profitability has not yet improved sufficiently to warrant a reversal of the impairment.

Share of after-tax profit of equity accounted investments

 
R million 30 June 
 2023 
30 June 
 2022 
  Profit before taking into account impairments and non-recurring items  5 823  6 826 
  Net impairment of investments, assets and goodwill  (1 069) (190)
  Profit on the sale of investments  67  6 297 
  Other headline earnings adjustable items  –  15 
  Profit before tax and non-controlling interest  4 821  12 948 
  Taxation  (1 021) (1 605)
  Non-controlling interest  (328) (363)
    3 472  10 980 
    Continuing operations  3 296  10 786 
    Discontinued operations  176  194 

6.

 

Investments at fair value through other comprehensive income (FVOCI)

 
R million 30 June 
 2023 
30 June 
 2022 
  Carrying value at the beginning of the year  20 650  14 342 
  Fair value adjustments for the year(1)  1 657  (740)
  Investments made  306  243 
  Discovery received as a dividend in specie(2)  –  8 561 
  Momentum Metropolitan received as dividend in specie(2)  –  2 056 
  Exchange rate differences  393  352 
  Disposals(3)  (415) (2 966)
  Business disposed  (38) – 
  Transfer to assets held for sale(3)  –  (1 198)
  Other movements  11  – 
  Carrying value at the end of the year  22 564  20 650 

 
  1. The current year mainly consists of positive fair value adjustments from Momentum Metropolitan (R467 million), Discovery (R910 million) and FirstRand (R753 million).
  2. During April 2022 OUTsurance Group unbundled its investments in Discovery and Momentum Metropolitan. Remgro received a 7.7% interest in Discovery and an 8.6% interest in Momentum Metropolitan.
  3. During June 2022 Remgro sold 40.8 million FirstRand shares for R2 704 million. At 30 June 2022 19.2 million shares valued at R1 198 million were transferred to assets held for sale and sold during July 2022 for R959 million. These disposals were part of Remgro’s decision to sell 60 million of its FirstRand ordinary shares which were hedged in the 2020 financial year via a zero cost collar.
 
R million 30 June 
 2023 
30 June 
 2022 

7.

 

Long-term loans 

 
   
  20 000 Class A 7.5% cumulative redeemable preference shares(1)  3 510  3 509 
  10 000 Class B 7.8% cumulative redeemable preference shares(1)  4 347  4 329 
  Various other loans  3 201  5 835 
    11 058  13 673 
  Short-term portion of long-term loans(2)  (5 254) (1 980)
    5 804  11 693 
 
  1. Remgro's debt covenant, which relates to the Class A and B cumulative redeemable preference shares, is based on net debt at the centre. As Remgro is in a net cash position, the debt covenant is comfortably met.
  2. The short-term portion of the long-term loans includes the 20 000 Class A 7.5% cumulative preference shares as these are repayable on 15 January 2024. 
   

8.

 

Additions to and replacement of property, plant and equipment 

 
3 434  3 077 

9.

Capital and investment commitments 

4 487  6 208 
  (Including amounts authorised but not yet contracted for)    

10.

 

Guarantees and contingent liabilities 

 
15  25 

11.

 

Dividends received from equity accounted investments set off against investments 

 
1 459  12 304 

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:

Level 1 –   Quoted prices (unadjusted) in active markets for identical assets or liabilities; 
Level 2 –   Inputs (other than quoted prices included within level 1) that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and 
Level 3 –   Inputs for the asset or liability that are not based on observable market data (unobservable inputs). 

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

 
R million Level 1  Level 2  Level 3  Level 4 
  30 June 2023         
  Assets         
  Non-current assets         
  Financial assets at FVOCI  20 246  2 315  22 564 
  Financial assets at FVPL  –  –  150  150 
  Current assets         
  Financial assets at FVPL  –  29  –  29 
  Investment in money market funds  4 582  –  –  4 582 
    24 828  32  2 465  27 325 
  Liabilities         
  Current instruments at FVPL  –  – 
  Hedge derivatives  –  92  –  92 
    –  98  –  98 
  30 June 2022         
  Assets         
  Non-current assets         
  Financial assets at FVOCI  18 248  –  2 402  20 650 
  Financial assets at FVPL  –  –  242  242 
  Current assets         
  Financial assets at FVPL  –  78  –  78 
  Investment in money market funds  5 700  –  –  5 700 
    23 948  78  2 644  26 670 
  Liabilities         
  Current instruments at FVPL  –  33  –  33 
  Hedge derivatives  –  51  –  51 
    –  84  –  84 

 

 

The following table illustrates the reconciliation of the carrying value of level 3 assets at the beginning and end of the year: 
 
R million Financial 
assets at 
FVOCI 
Financial 
assets at 
FVPL 
Total 
   Assets       
   Balances at 1 July 2022  2 402  242  2 644 
   Additions  306  –  306 
   Disposals  (415) –  (415)
   Business disposed  (38) –  (38)
   Exchange rate adjustment  203  35  238 
   Fair value adjustments through other comprehensive income  (143) –  (143)
   Fair value adjustments through profit and loss  –  (127) (127)
   Balances at 30 June 2023  2 315  150  2 465 

 

 


Level 3 financial assets consist mainly of investments in the Milestone China entities (Milestone), Asia Partners Fund I LP and Asia Partners Fund II LP (Asia Partners) and the Pembani Remgro Infrastructure Fund (PRIF) amounting to R738 million (2022: R835 million), R658 million (2022: R398 million) and R325 million (2022: R615 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 two listed investments (11%), cash and cash equivalents (2%) and unlisted investments (87%) (2022: 27%, 1% and 72%, respectively). Asia Partners consist of cash balances and seven different investments of which 80% is measured using option pricing models. PRIF’s six assets were valued using the discounted cash flow method.

Other investments included as level 3 financial assets includes the investments in LifeQ and Bolt were valued at R202 million and R257 million, respectively, at 30 June 2023 (2022: R240 million and R210 million respectively).

Remgro’s unlisted investments classified as level 3 financial instruments are widely held. Accordingly, changes in the assumptions used to value the above-mentioned unlisted investments will not have a significant impact on Remgro’s financial statements.

 

13.

 

Segment revenue

 
 
Year ended 30 June
 
R million 2023  2022 
Restated 
   Consumer products     
   RCL Foods(1)  37 616  32 038 
   Capevin(1)  2 897  2 620 
   Siqalo Foods  3 748  3 546 
   Industrial     
   Wispeco  3 813  3 598 
   Other  77  74 
   Total revenue from continuing operations  48 151  41 876 
   Disaggregated revenue information     
   RCL Foods(1)     
   RCL Foods Value-Added Business  24 760  21 156 
     Groceries  5 034  4 732 
     Baking  8 625  7 423 
     Sugar  11 101  9 001 
   Rainbow  13 464  11 385 
   Sales between RCL Foods’ business units  (639) (530)
   Group  198  190 
     37 783  32 201 
   Capevin(1)     
   Spirits  2 632  2 290 
   Other  265  330 
     2 897  2 620 
   Siqalo Foods     
   Spreads  3 748  3 546 
       
   Wispeco     
   Extrusions and related products  3 208  3 050 
   Other  605  548 
     3 813  3 598 
   Other  77  74 
   Elimination of intersegment revenue  (167) (163)
   Total revenue from continuing operations  48 151  41 876 
 
  1. During the year under review, RCL Foods disclosed Vector Logistics business as a discontinued operation and Distell sold the bulk of its business to Heineken Beverages with its continuing operations consisting of Capevin. Refer to “Discontinued operations” here for further details.
 

14.

 

Related party transactions

Mediclinic Group Limited (Mediclinic)

On 26 September 2022, the Mediclinic shareholders voted in favour of a cash offer by Manta Bidco Limited (Bidco), a newly formed company which is jointly owned by Remgro and MSC Mediterranean Shipping Company SA (MSC), to acquire the entire issued and to be issued ordinary share capital of Mediclinic, other than the Mediclinic shares Remgro already owned (the Mediclinic acquisition). The last conditions precedent in respect of the Mediclinic acquisition were met during May 2023 and on 6 June 2023 Mediclinic shareholders received 501 pence per Mediclinic share, being the offer price of 504 pence per Mediclinic share less the dividend of 3 pence per Mediclinic share that was paid on 26 August 2022.

To enable the Mediclinic acquisition, Remgro sold its existing 328 497 888 Mediclinic shares (representing an interest of 44.6%) to Bidco in exchange for shares in Bidco and subscribed for further shares in Bidco amounting to £221 million (representing an additional indirect interest in Mediclinic of 5.4% and approximately 50% of Bidco’s transaction costs). MSC also subscribed for shares in Bidco amounting to £1 867 million (representing an indirect interest in Mediclinic of 50% and 50% of Bidco’s transaction costs).

As both Remgro’s investments in Mediclinic (associate) and Bidco (joint venture) are accounted for using the equity method, Remgro effectively ceased the equity accounting of its 44.6% interest in Mediclinic at the end of May 2023 and commenced with the equity accounting of its 50% indirect interest in Mediclinic, through its 50% interest in Bidco. Bidco made fair value adjustments to Mediclinic’s statement of financial position when it acquired its 100% stake in Mediclinic. These fair value adjustments mainly relate to the Mediclinic properties and the Mediclinic brand in South Africa and the Middle East. Going forward, Remgro will account for depreciation and amortisation on these additional assets identified, inside headline earnings. The additional depreciation and amortisation will only relate to Remgro’s newly acquired 5.4% indirect interest in Mediclinic as Remgro already owned the 44.6% interest.

Distell Group Holdings Limited (Distell)

On 15 February 2022, the Distell shareholders approved the combination of the Heineken Southern African business, including an interest in Namibia Breweries, with the bulk of the Distell business (consisting of its cider, other RTDs and spirits and wine business) in Heineken Beverages, a new unlisted entity controlled by Heineken. The transaction included the unbundling by Distell of the unlisted shares in Distell’s subsidiary, Capevin, which holds Distell’s remaining assets, including its Scotch whisky business. The transaction, which was implemented on 26 April 2023, also included an offer by Heineken Beverages to Distell shareholders to acquire their Distell shares for R165 per share and/or unlisted shares in Heineken Beverages, or a combination thereof (subject to a potential scaling back of the issue of Heineken Beverages shares to Distell shareholders, electing to receive Heineken Beverages shares, to ensure a 65% shareholding by Heineken in Heineken Beverages), and an offer by Heineken to Distell shareholders to acquire their Capevin shares for R15 per share.

Remgro elected to receive Heineken Beverages shares for its Distell shares. However, as a result of the scale back, Remgro sold 7 607 803 Distell shares to Heineken Beverages on 26 April 2023 for R1 255 million (being R165 per Distell share) and exchanged the remaining 62 242 453 Distell shares for 62 242 453 Heineken Beverages shares (representing an interest of 15.5%). Following the implementation of the transaction, Remgro acquired a further 13 218 475 shares in Heineken Beverages for R2 181 million (or R165 per share excluding transaction costs), in a series of off-market transactions. These transactions increased Remgro’s interest in Heineken Beverages to 18.8%. As Remgro has significant influence over Heineken Beverages through its board representation, the investment is classified as an associate and is accounted for using the equity method. Both Remgro and Heineken Beverages made fair value adjustments to the statements of financial position of Heineken Beverages and Distell and Namibia Breweries, respectively. These fair value adjustments mainly relate to the various brands held by these companies (inter alia Savanna, Heineken, Amstel, Windhoek Lager and Amarula), as well as Distell’s properties and inventory. Going forward, Remgro will account for depreciation and amortisation on these additional assets identified, inside headline earnings.

Remgro did not accept the cash offer made by Heineken for the Capevin shares and, as a result, Remgro’s shareholding in Capevin mirrors the shareholding that was previously held in Distell, being an economic interest of 31.4% and a voting interest of 55.9%. Therefore, the Capevin investment remains classified as a subsidiary.

Community Investment Ventures Holdings Proprietary Limited (CIVH)

As previously reported, Vodacom Proprietary Limited (Vodacom) will, through a combination of assets of approximately R4.2 billion and cash of at least R6.0 billion, acquire up to 40% of the ordinary shares of a newly created wholly owned subsidiary of CIVH (namely Maziv Proprietary Limited (Maziv)). Maziv holds inter alia CIVH’s current interests in Vumatel and DFA. As a result of the proposed transaction, Remgro’s indirect interest in DFA and Vumatel will dilute with the entrance of Vodacom as a shareholder, however Remgro will also obtain an indirect interest in the assets contributed by Vodacom. During August 2023, The Competition Commission South Africa announced its non-binding recommendation to the Competition Tribunal, to prohibit the proposed transaction. Remgro and CIVH remain committed to the proposed transaction and firmly believe that, should the implementation of the proposed transaction ultimately be permitted by the Competition Tribunal, it will deliver significant benefits to South African consumers and the broader economy.

Grindrod Limited (Grindrod)

On 17 October 2022 Remgro unbundled its investment in Grindrod to its shareholders as a dividend in specie amounting to R1 640 million, in the ratio of 30.70841 Grindrod shares for every 100 Remgro shares held.

 

15.

 

Events after year-end

RCL Foods: Sale of Vector Logistics

The sale of the RCL Foods’ Vector Logistics segment, which has been presented as held for sale at 30 June 2023, was finalised on 28 August 2023, resulting in a net cash receipt of R1 307 million, comprising the purchase price of R1 250 million, plus interest and less the post-tax share option liability of Vector Logistics. The purchase price is subject to certain EBITDA targets being met, which may result in a future upwards or downwards adjustment of up to R100 million in the purchase price. The transition of Vector Logistics out of RCL Foods and its shared services platform is expected to take place over the next 12 months.

Capevin: Termination of Gordon’s Gin distribution agreement

The Gordon’s Gin and Pimm’s No1 Cup distribution agreement, which has been presented as held for sale at 30 June 2023, was included in the remaining assets that were allocated to Capevin as part of the Distell/Heineken transaction. On 19 July 2023 the Competition Commission of South Africa approved the proposed transaction, whereby this distribution agreement will be terminated in favour of the brand owner Diageo, without conditions. The consideration amounts to R1 billion, of which R700 million was received on 4 August 2023. The outstanding amount of R300 million is payable over the next ten months subject to achieving certain thresholds relating to the continued supply and manufacturing of the products by Capevin to Diageo.

Other than the above-mentioned events, there were no other significant events subsequent to 30 June 2023.

 

16.

 

Discontinued operations

16.1

 
 

Disposal of certain assets and liabilities of Distell

Refer to “Comparison with prior year” here.

 

16.2

 
 

Transfer to non-current assets/(liabilities) held for sale of Vector Logistics

Refer to “Comparison with prior year” here.

 

16.3

 
 

Gordon’s Gin

During May 2023 Capevin reached an agreement with Diageo Brands B.V. to terminate the longstanding Gordon’s Gin and Pimm’s No1 Cup distribution agreement. The financial results of the disposed business have been disclosed as part of discontinued operations and the related assets and liabilities transferred to held for sale.

 
 
 
30 June 2023
 
R million Distel  Vector 
Logistics 
Gordon’s 
Gin 
Total 
   Profit for the year from discontinued operations:         
   Revenue  27 296  3 067  2 329  32 692 
   Inventory expenses  (17 990) (597) (1 864) (20 451)
   Staff costs  (2 892) (1 124) (16) (4 032)
   Depreciation  (669) (150) –  (819)
   Other net operating expenses  (4 181) (1 041) (224) (5 446)
   Trading profit  1 564  155  225  1 944 
   Dividend income  – 
   Interest received  108  31  –  139 
   Finance costs  (198) (111) –  (309)
   Loss allowances on loans  (22) –  –  (22)
   Consolidated profit before tax  1 455  81  225  1 761 
   Taxation  (478) (17) (61) (556)
   Consolidated profit after tax  977  64  164  1 205 
   Share of after-tax profit of equity accounted investments  164  12  –  176 
   Net profit for the year from discontinued operations  1 141  76  164  1 381 
   Profit on sale of investments  4 374  –  –  4 374 
   Reserves recycled  (23) –  –  (23)
   Taxation  (615) –  –  (615)
   Total profit for the year from discontinued operations  4 877  76  164  5 117 
   Attributable to:          
   Equity holders  3 677  59  52  3 788 
   Non-controlling interest  1 200  17  112  1 329 
   Other comprehensive income for the year from discontinued operations:         
     Net profit for the year  4 877  76  164  5 117 
     Exchange rate adjustments  (174) –  (171)
     Fair value adjustments  –  – 
     Reclassification of other comprehensive income to the income statement  22  –  –  22 
     Remeasurement of post-employment benefit obligations  (24) –  (22)
     Deferred taxation on remeasurement of post-employment benefit obligations  –  – 
   Total comprehensive income  4 711  81  164  4 956 
   Attributable to:          
   Equity holders  3 623  63  52  3 738 
   Non-controlling interest  1 088  18  112  1 218 
   Cash flows for the year from discontinued operations:         
   Operating activities  (457) (197) 15  (639)
   Investment activities  184  (179) – 
   Financing activities  (1 044) (126) –  (1 170)
   Net increase/(decrease) in cash generated  (1 317) (502) 15  (1 804)

30 June 2022
Distell  Vector 
Logistics 
Gordon’s 
Gin 
Total 
  Profit for the year from discontinued operations:         
  Revenue  29 202  2 706  2 312  34 220 
  Inventory expenses  (18 914) (451) (1 765) (21 130)
  Staff costs  (2 756) (1 084) –  (3 840)
  Depreciation  (769) (179) –  (948)
  Other net operating expenses  (4 287) (846) (166) (5 299)
  Trading profit  2 476  146  381  3 003 
  Dividend income  –  – 
  Interest received  126  23  –  149 
  Finance costs  (249) (93) –  (342)
  Impairment of investments, assets and goodwill  –  (6) –  (6)
  Loss allowances on loans  (7) –  –  (7)
  Consolidated profit before tax  2 352  70  381  2 803 
  Taxation  (719) (19) (107) (845)
  Consolidated profit after tax  1 633  51  274  1 958 
  Share of after-tax profit of equity accounted investments  181  13  –  194 
  Net profit for the year from discontinued operations  1 814  64  274  2 152 
  Attributable to:          
  Equity holders  557  50  87  694 
  Non-controlling interest  1 257  14  187  1 458 
  Other comprehensive income for the year from discontinued operations         
  Net profit for the year  1 814  64  274  2 152 
  Exchange rate adjustments  16  –  17 
  Fair value adjustments  37  –  –  37 
  Other comprehensive income of equity accounted investments  –  – 
  Remeasurement of post-employment benefit obligations  60  –  –  60 
  Deferred taxation on remeasurement of post-employment benefit obligations  (7) –  –  (7)
  Total comprehensive income  1 922  65  274  2 261 
  Attributable to:          
  Equity holders  591  51  87  729 
  Non-controlling interest  1 331  14  187  1 532 
  Cash flows for the year from discontinued operations:         
  Operating activities  2 988  344  –  3 332 
  Investment activities  (1 324) (149) –  (1 473)
  Financing activities  (1 164) (150) –  (1 314)
  Net increase/(decrease) in cash generated  500  45  –  545 

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