Remgro ends the year with strong dividend and a much-changed investment portfolio
REMGRO lifted intrinsic net asset value by 20.2% to R213.10 per share in the year to June 30 after earnings recovered to above pre-pandemic levels and it was able to declare a hefty 66.7% increase in dividends, following a year of massive changes in the group’s investments.
Headline earnings per share increased by 125.3% to 1 150.6 cents compared with 2021, and were up 17% compared with the last pre-pandemic period.
Dividends came to 150c per share, after a final 100c (2021: 60c) dividend was declared.
“We are encouraged by the progress we made, amidst all the headwinds, in our continued journey of recovery and in delivering on our strategy to optimise our portfolio in order to unlock stakeholder value,” said chief executive Jannie Durand in a statement.
He said although there was uncertainty about the global economic outlook, he remained optimistic about the group’s future prospects.
The closing share price at June 30, 2022, was R129.91 (2021: R114.60), representing a discount of 39% (2021: 35.4%) to intrinsic net asset value. The share pricerose 7.57% to close at R138.62 on the JSE yesterday.
Total earnings increased 270.1% to R13.14 billion, mainly due to Remgro’s portion of the profits realised by RMI on the unbundling of its investments in Discovery and Momentum Metropolitan, and the disposal of its investment in UK insurer Hastings, as well as the increase in headline earnings of R3.61bn.
The group’s 24.9% investment in TotalEnergies Marketing South Africa also grew its contribution to total earnings by 194% to R1.16bn due to favourable stock valuations and much improved refining margins.
Directors said the year had many headwinds that could be regarded as extreme events, such as the unrest in KwaZulu-Natal and the Russia-Ukraine conflict, which disrupted the global and local economy. “Remgro has managed to deliver a robust recovery, with most financial metrics ahead of pre-pandemic levels, and made good progress in its journey to optimise its portfolio and unlock value for its stakeholders,” said Durant.
Portfolio changes include the recently announced cash acquisition of Mediclinic International plc, as well as the Distell Group Holding, Community Investment Ventures Holdings (CIVH) and Rand Merchant Investment Holdings (RMI) transactions. Remgro said prudent management and its strong financial position would stand it in good
stead to weather the current storms.
For the past year, headline earnings increased 125.1% to R6.49bn, while headline earnings per share increased by 125.3% from 510.6c to 1 150.6c– headline earnings for the year to June 30, 2021, was significantly impacted by the Covid-19 pandemic.
From this low base, headline earnings grew from a recovery of the earnings of most of Remgro’s underlying investee companies, notably Mediclinic, TotalEnergies Marketing South Africa, Kagiso Tiso Holdings, Grindrod, Grindrod Shipping Holdings, FirstRand and Distell.
Mediclinic’s contribution for the comparative year included the full impact of Covid-19 lockdown measures in the first and second waves of the pandemic, on its results for the year
ended March 31, 2021. However, in the year under review, Mediclinic’s strong financial performance was driven by increased patient activity.
CIVH turned profitable and lowered finance costs due to the redemption of the exchangeable bonds during March 2021. The increase is partly offset by a lower contribution from RMI, due to the unbundling of its investments in Discovery and Momentum Metropolitan Holdings, as well as the disposal of its investment in Hastings Group.
The comparison of the headline earnings for the 2019 financial year also still included the equity accounted earnings of FirstRand of R1.009bn, as opposed to dividend income of R625 million, as this investment was subsequently reclassified from an equity account investment to an investment at fair value.