Dark Fibre boost for Remgro
• Improved performance stemmed mainly from solid growth in annuity income of more than R115m per month
Investment conglomerate Remgro has again experienced a scintillating performance from its strategic holding in fibreoptic cable specialist Dark Fibre Africa. Remgro holds a 51% stake in Community Investment Venture Holdings, which has Dark Fibre as its main operating asset.
Investment conglomerate Remgro has again experienced a scintillating performance from its strategic holding in fibre optic cable specialist Dark Fibre Africa (DFA).
Remgro holds a 51% stake in Community Investment Venture Holdings (CIV), which has DFA as its main operating asset.
Three-quarters of the company’s intrinsic value is tucked up in JSE-listed counters such as Mediclinic International, RMI, Distell, FirstRand, RCL Foods and Grindrod.
In an investment presentation on Thursday, Remgro CEO Jannie Durand said the group was pleased with the performance of DFA, which was only launched in 2008 as a start-up company.
DFA pumped up turnover 37%, to R1.63bn in the year to end-March with earnings before interest, tax, depreciation and amortisation (ebitda) 24% higher at R1bn.
DFA’s contribution to Remgro’s headline earnings was up 72%, to R110m.
The intrinsic value of Remgro’s investment in CIV and DFA was increased more than 50%, to R4.8bn.
Durand said the improved performance by DFA stemmed mainly from a solid 29% yearon-year growth in annuity income. DFA’s annuity income was flowing in at more than R115m per month.
Durand also revealed that DFA’s book value of the fibre optic network was more than R6.6bn and the future value of the current annuity contract base topped R11.5bn.
A total 9,854km of fibre network was completed in major metropolitan areas and on longhaul routes at the end of March.
Although DFA was the standout performer for Remgro in the year to end-June, other smaller parts of the group’s unlisted investment portfolio also performed commendably.
Most surprising was that 100%-owned aluminium building products specialist Wispeco pushed up revenue 6%, to R2.2bn and operating profit 9.4%, to R233m — defying the dour trading conditions prevailing across most South African industries. Net profits surged 23.5%, to R168m after reduced debt levels meant lower finance costs for the trading period.
Durand attributed Wispeco’s revenue growth to higher average selling prices with sales volumes remaining flat.
Profitability was helped by continued improvements in efficiencies and productivity. Durand cautioned that intense price competition was prevalent at all levels of the industry.
The 50%-owned industrial gases group Air Products also held its own despite subdued trading conditions as volumes and pricing came under pressure, particularly in the manufacturing and resource minerals sectors. Air Products increased revenue about 7%, to R2.8bn, with operating profit 5%, higher at R857m.
Remgro’s biggest unlisted investment, the 25.8% stake in consumer brands giant Unilever SA, took some strain.
Unilever — which owns brands such as Surf, Joko, Lux, Omo, Sunlight, Flora and Robertsons — reported a 2.6% decline in its headline earnings contribution to R449m.
Durand said Unilever’s performance was hampered by lower tax allowances following the completion of manufacturing investments as well as the weak trading environment.