Remgro Limited · JSE:REM
Remgro — FY2019 Earnings Presentation
55 slides from Remgro's earnings presentation, Sep 20, 2019
Slide 1: Results Presentation for the Year Ended 30 June 2019
RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2019 20 SEPTEMBER 2019
Slide 2: Agenda
1. SALIENT FEATURES (Jannie Durand) AGENDA 2. SETTING THE SCENE (Jannie Durand) 3. STRATEGY (Jannie Durand) 4. EXECUTING ON STRATEGY (Jannie Durand) 5. INVESTMENT ACTIVITIES (Jannie Durand) 6. RESULTS FOR THE YEAR (Neville Williams) PRESENTERS: JANNIE DURAND NEVILLE WILLIAMS (CEO) (CFO) Remgro Limit
Slide 3: Salient Features
SALIENT FEATURES Remgro Limited 3 Final results presentation 2019
Slide 4: Salient Features
S AL I E N T F E AT U R E S Year ended Year ended 30 June 2019 30 June 2018 Headline earnings measures (Rand) Headline earnings per share (HEPS) 4.2% 14.49 15.13 HEPS excl. option remeasurement 2.6% 14.29 14.67 Total dividend (Rand) 6.0% 5.64 5.32 As at As at 30 June 2019 30 June 2018 Intrinsic net
Slide 5: Headline Earnings Excl. Option Remeasurement
H E AD L I N E E AR N I N G S E X C L . O P T I O N R E M E A S U R E M E N T Year ended Year ended % R’million 30 June 2019 30 June 2018 change Reported headline earnings 8 195 8 573 (4.4) Adjusted for: Option remeasurement (112) (261) Headline earnings excl. option remeasurement 8 083 8 312 (2.8)
Slide 6: Setting the Scene
SETTING THE SCENE Remgro Limited 6 Final results presentation 2019
Slide 7: Setting the Scene: Challenging Times
S E T T I N G T H E S C E N E | C H AL L E N G I N G T I M E S FRAGILE GROWTH OUTLOOK REGULATORY ENVIRONMENT REMGRO REMAINS ROBUST • South African domestic • National Credit Amendment • Investee companies well macroeconomic Bill positioned within sectors uncertainty remains high • National Health In
Slide 8: Strategy
STRATEGY Remgro Limited 8 Final results presentation 2019
Slide 9: Investment Strategy (Capital Allocators)
I N V E S T M E N T S T R AT E G Y ( C AP I TA L AL L O C AT O R S ) ACQUIRE HOLD DISPOSE • Significant contribution to • No value to be added Remgro’s earnings • Ex cash flow growth • Value over the long term business CONSUMER • Significant influence and FINANCIAL SERVICES PRODUCTS • Risk profile h
Slide 10: How We Manage Our Investments
H O W W E M AN A G E O U R I N V E S T M E N T S MATERIAL OPERATING SUBSIDIARIES OUR MANAGEMENT PHILOSOPHY (CONTROL) • Companies have autonomous boards and Not involved in the day-to-day management of business units of management structures investees. Not hands-off ownership, we do not merely attend
Slide 11: Valuation of Unlisted Investments: IFRS 13 Framework
VAL U AT I O N O F U N L I S T E D I N V E S T M E N T S | I F R S 1 3 F R AM E W O R K Factors taken into consideration in determining the unlisted investments’ valuations: Growth potential and risk, underlying NAV, profit history and cash flow projections, macroeconomic factors and peer group perf
Slide 12: Major Capital Allocations Since 2016
M AJ O R C AP I TAL AL L O C AT I O N S S I N C E 2 0 0 9 DISPOSALS INVESTMENTS MADE Proceeds Capital received invested Investment R’billion Rating Investment R’billion Rating Unilever 11.9 Mediclinic 20.3 Implats 3.9 Siqalo Foods 7.0 RMH / RMI 2.1 CIVH 4.4 Nampak 1.3 RCL Foods (Foodcorp) 3.3 Tracke
Slide 13: Executing on Strategy
EXECUTING ON STRATEGY Remgro Limited 13 Final results presentation 2019
Slide 14: Executing on Strategy During the Year
E X E C U T I N G O N S T R AT E G Y D U R I N G T H E Y E AR SECTOR FOCUS AND SUPPORT EXIT SMALLER INVESTMENTS OPPORTUNITIES EVALUATED • CONSUMER PRODUCTS • RUGBY INVESTMENT • > 170 DURING THE YEAR › Unilever exit and EXIT › Opportunities evaluated acquisition of Spreads, › Saracens Group on a cont
Slide 15: Strategic Priorities: Key Issues
S T R AT E G I C P R I O R I T I E S | K E Y I S S U E S MEDICLINIC RCL FOODS • Investment case for long-term value creation • Sugar and Chicken exposure to struggling agriculture sector • Al Noor alignment with group values • Health Promotion Levy (sugar tax) • Permanent Swiss regulatory change • F
Slide 16: Investment Activities
INVESTMENT ACTIVITIES Remgro Limited 16 Final results presentation 2019
Slide 17: Investment Activities for the Year Ended 30 June 2019
I N V E S T M E N T AC T I V I T I E S F O R T H E Y E AR E N D E D 3 0 J U N E 2 0 1 9 UNILEVER SOUTH AFRICA HOLDINGS (PTY) LTD (UNILEVER) • On 2 July 2018 Unilever acquired Remgro’s 25.75% interest in Unilever in exchange for Unilever’s Spreads business in Southern Africa, as well as a cash consid
Slide 18: Investment Activities: Milestone
I N V E S T M E N T AC T I V I T I E S MILESTONE CAPITAL STRATEGIC HOLDINGS LTD (MCSH) • Remgro previously invested $43 million in MCSH, consisting of an interest-bearing loan of $38 million and an investment of $5 million • During August 2018 MCSH repaid the loan and interest amounting to $42 milli
Slide 19: Investment Activities: Prescient, RMI, RCL Foods
I N V E S T M E N T AC T I V I T I E S PRESCIENT CHINA EQUITY FUND (PRESCIENT FUND) • The Prescient Fund was launched during October 2018. Remgro and Reinet provided seed capital for the fund • Remgro invested $50 million • The Prescient Fund invests in listed stocks in the Chinese market by using a
Slide 20: Investment Activities: Saracens Exit
I N V E S T M E N T AC T I V I T I E S PREMIER TEAM HOLDINGS LTD (PTH) AND SARACENS COPTHALL LLP (COPTHALL) • On 24 October 2018 Remgro entered into an agreement to: › dispose of its investment in PTH (the owners of the Saracens rugby club) for a nominal amount; and › the right to sell its Copthall
Slide 21: Results for the Year
RESULTS FOR THE YEAR Remgro Limited 21 Final results presentation 2019
Slide 22: Contribution to Headline Earnings by Platform
C O N T R I B U T I O N T O H E AD L I N E E AR N I N G S B Y P L AT F O R M ( E X C L . O T H E R I N V E S T M E N T S , T R E A S U R Y A N D C O R P O R AT E C O S T S ) June 2019 June 2018 Media and Infrastructure sport 0.6% 0.3% Industrial Industrial 11.1% 10.9% Insurance Insurance 13.7% 13.7%
Slide 23: Contribution to Headline Earnings
C O N T R I B U T I O N T O H E AD L I N E E AR N I N G S (EXCL. OPTION REMEASUREMENT) Year ended Year ended % % R’million 30 June 2019 30 June 2018 change contribution RMH and FirstRand 3 737 3 525 6.0 46.2 Mediclinic 1 693 1 556 8.8 20.9 RMI 1 161 1 228 (5.5) 14.4 Distell 459 467 (1.7) 5.7 RCL Foo
Slide 24: Banking
B AN K I N G Headline earnings Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change RMH 2 644 2 486 6.4 33 545 30 123 11.4 FirstRand 1 093 1 039 5.2 15 069 14 045 7.3 Total 3 737 3 525 6.0 48 614 44 168 10.1 • FirstRand and
Slide 25: Healthcare
H E ALT H C AR E Headline earnings Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change Mediclinic 1 693 1 556 8.8 17 891 31 329 (42.9) • Mediclinic uses adjusted earnings in evaluating its performance • The main difference
Slide 26: Consumer Products
CONSUMER PRODUCTS Headline earnings Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change RCL Foods 254 647 (60.7) 7 960 11 534 (31.0) Distell 412 459 (10.2) 9 060 9 674 (6.3) Entity contribution 459 467 (1.7) IFRS 3 charge
Slide 27: Consumer Products: RCL Foods
CONSUMER PRODUCTS RCL FOODS (77.5% EFFECTIVE INTEREST) • The decrease in RCL Foods’ results was largely attributable to the adverse performance of the Chicken and Sugar business units • The local poultry and sugar industries are under significant pressure, impacted by: › oversupply in the market res
Slide 28: Consumer Products: Distell
CONSUMER PRODUCTS DISTELL (31.8% EFFECTIVE INTEREST, 56.5% VOTING RIGHTS) • Distell adjusted headline earnings for abnormal transactions and currency movements, which included: • retrenchment and restructuring costs; and • a credit loss provision relating to the USD denominated savings bonds with th
Slide 29: Consumer Products: Siqalo Foods
CONSUMER PRODUCTS SIQALO FOODS (100.0% EFFECTIVE INTEREST) Year ended Year ended % R’million 30 June 2019 30 June 2018 change Revenue 2 626 - na Operating profit 447 - na na: not applicable • During a challenging, turbulent year of transition from Unilever to a standalone business, Siqalo Foods mana
Slide 30: Insurance
I N S U R AN C E Headline earnings Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change RMI 1 161 1 228 (5.5) 15 947 17 285 (7.7) • On a normalised basis, RMI’s earnings decreased by 4.3%, mainly due to lower contributions
Slide 31: Industrial
I N D U S T R I AL Headline earnings / (loss) Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change Air Products 343 289 18.7 4 264 4 158 2.5 KTH 161 55 192.7 2 127 2 218 (4.1) Total 328 501 (34.5) 2 722 2 382 14.3 Wispeco 1
Slide 32: Industrial: Air Products and KTH
I N D U S T R I AL AIR PRODUCTS (50.0% EFFECTIVE INTEREST) 12 months to 12 months to % R’million 31 March 2019 31 March 2018 change Revenue 3 148 2 894 8.8 Operating profit 964 855 12.7 • The increase is mainly due to modest overall volume growth and cost containment measures KTH (36.3% EFFECTIVE IN
Slide 33: Industrial: Total
I N D U S T R I AL TOTAL (24.9% EFFECTIVE INTEREST) 12 months to 12 months to % R’million 30 June 2019 30 June 2018 change Revenue 75 432 59 637 26.5 Operating profit 1 735 2 736 (36.6) • The increase in revenue was mainly due to higher sales volumes in the mining and commercial sectors • Total’s re
Slide 34: Industrial: Wispeco and PGSI
I N D U S T R I AL WISPECO (100% EFFECTIVE INTEREST) Year ended Year ended % R’million 30 June 2019 30 June 2018 change Revenue 2 377 2 266 4.9 Operating profit 145 167 (13.2) • Revenue increased mainly due to higher selling prices driven by higher raw material costs. Southern Africa demand for alum
Slide 35: Infrastructure
I N F R AS T R U C T U R E Headline earnings / (loss) Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change Grindrod* 72 56 28.6 1 049 1 624 (35.4) Grindrod Shipping* (65) (102) 36.3 292 623 (53.1) CIVH (204) 48 (525.0) 8 40
Slide 36: Infrastructure: CIVH
I N F R AS T R U C T U R E CIVH (54.4% EFFECTIVE INTEREST) DFA Year ended Year ended % R’million 31 March 2019 31 March 2018 change Revenue 2 349 1 916 22.6 EBIT 276 605 (54.4) • The increase in revenue was mainly as a result of solid growth of 28.7% in annuity revenue • Annuity income is in excess
Slide 37: Infrastructure: CIVH Continued (Vumatel)
I N F R AS T R U C T U R E CIVH (54.4% EFFECTIVE INTEREST) CONTINUED Vumatel • CIVH acquired a 34.9% shareholding in Vumatel in June 2018 and the remaining 65.1% during May 2019 • Vumatel is a leader in the Fibre-to-the-Home (FTTH) market, with a FTTH network that spans over 16 000 km • The results
Slide 38: Infrastructure: SEACOM
I N F R AS T R U C T U R E SEACOM (30.0% EFFECTIVE INTEREST) • The decrease from a headline earnings to a headline loss was mainly driven by: › a once-off realisation of deferred revenue relating to the early termination of long-term contracts in the comparative period, as well as › the negative imp
Slide 39: Media and Sport
M E D I A AN D S P O R T Headline earnings / (loss) Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change eMedia 39 1 nm 773 866 (10.7) Other (19) (48) 60.4 267 268 (0.4) Total 20 (47) 142.6 1 040 1 134 (8.3) nm: not meaning
Slide 40: Other Investments, Treasury and Corporate Costs
O T H E R I N V E S T M E N T S , T R E AS U RY AN D C O R P O R AT E C O S T S Headline earnings / (loss) Intrinsic value Year ended Year ended As at As at 30 June 30 June % 30 June 30 June % R’million 2019 2018 change 2019 2018 change Other investments 39 66 (40.9) 4 795 4 196 14.3 Central treasur
Slide 41: Summary of Intrinsic Net Asset Value
S U M M ARY O F I N T R I N S I C N E T AS S E T VAL U E As at As at % % R’million 30 June 2019 30 June 2018 change contribution RMH and FirstRand 48 614 44 168 10.1 36.0 Mediclinic 17 891 31 329 (42.9) 13.2 61.0% RMI 15 947 17 285 (7.7) 11.8 Distell 9 060 9 674 (6.3) 6.7 CIVH 8 403 4 940 70.1 6.2 R
Slide 42: Net Movement in Intrinsic NAV
N E T M O V E M E N T I N I N T R I N S I C N AV 20,000 1,111 2,201 15,000 3,463 4,446 10,000 6,164 5,000 (13,438) R’million 0 -5,000 -10,000 (11 900) (3 574) -15,000 (2 498) (14 025) -20,000 Siqalo RMH and CIVH Net cash at Potential Mediclinic Unilever SA RCL Foods Other Net INAV Foods FirstRand th
Slide 43: Contribution to Intrinsic Value by Platform
C O N T R I B U T I O N T O I N T R I N S I C VAL U E B Y P L AT F O R M ( E X C L . O T H E R I N V E S T M E N T S , T R E A S U R Y A N D C O R P O R AT E C O S T S ) 30 June 2019 30 June 2018 Media and Media and sport sport 0.8% Infrastructure 0.8% Infrastructure 8.6% 5.7% Industrial 7.1% Indust
Slide 44: Summary of Intrinsic Net Asset Value
S U M M ARY O F I N T R I N S I C N E T AS S E T VAL U E As at As at As at % R’million 18 Sep 2019 30 June 2019 30 June 2018 change Discount to intrinsic value 24.6% 19.4% 20.5% (110 bps) Intrinsic value – after CGT (Rand) 231.66 233.03 256.97 (9.3) Closing share price (Rand) 174.70 187.90 204.29 (8
Slide 45: Debt at the Centre: Maturity Schedule
D E B T AT T H E C E N T R E M AT U R I T Y S C H E D U L E Preference shares Refinanced terms Original terms Class A preference shares (RMB) Face value (R’million) 3 500 3 500 Redemption date 15 Jan 2024 13 Jan 2020 Dividend rate 7.5% 7.7% Class B preference shares (Standard Bank) Face value (R’mil
Slide 46: Total Cash at the Centre
T O TAL C AS H AT T H E C E N T R E As at As at 30 June 2019 30 June 2018 R’million Local Offshore Total Total Per consolidated statement of financial position 5 274 7 388 12 662 12 169 Investment in money market funds 5 095 80 5 175 3 996 Less: Cash of operating subsidiaries (1 337) (773) (2 110) (
Slide 47: Cash Flow at the Centre
C AS H F L O W AT T H E C E N T R E 12,000 1,001 38 (4,439) 4,432 10,000 8,000 (3,069) R’million 5,887 6,000 4,000 (813) (618) (396) 2,023 2,000 0 Investments Dividends Interest Exchange Investments Dividends Finance Corporate Treasury Net cash sold and received income and rate made and paid costs c
Slide 48: Dividends Received at the Centre
D I V I D E N D S R E C E I V E D AT T H E C E N T R E % Year ended Year ended % R’million contribution 30 June 2019 30 June 2018 change Listed investments 82.3 3 648 3 402 7.2 RMH 32.4 1 435 1 359 5.6 FirstRand 14.1 624 585 6.7 RMI 11.5 511 471 8.5 Mediclinic 10.3 456 458 (0.4) Distell 6.4 282 264
Slide 49: Earnings and Dividend Yields by Platform
E AR N I N G S AN D D I V I D E N D Y I E L D S B Y P L AT F O R M Earnings yield % Dividend yield % 30 June 30 June 30 June 30 June R’million 2019 2018 2019 2018 Banking 7.7 8.0 4.2 4.4 RMH 7.9 8.3 4.3 4.5 FirstRand 7.3 7.4 4.1 4.2 Healthcare - Mediclinic 9.5 5.0 2.5 1.5 Consumer products 4.0 4.8 3
Slide 50: Cash Dividend
C AS H D I V I D E N D 2.3% 2.6% 3.0% 700 6.0% 600 7.5% 564 532 495 349 6.4% 500 9.0% 328 301 400 Cents 300 5.4% 5.2% 200 204 215 194 100 0 30 June 2017 30 June 2018 30 June 2019 Interim dividend Final dividend Total dividend Dividend yield • The final dividend of 349 cents represents an increase of
Slide 51: Thank You
THANK YOU For more information visit our website www.remgro.com Investor Relations contact: Mari Rabie (021) 888-3345 mrabie@remgro.com Remgro Limited 51 Final results presentation 2019
Slide 52: Remgro's Effective Shareholding in Investments
R E M G R O ’ S E F F E C T I V E S H AR E H O L D I N G I N I N V E S T M E N T S Effective Effective Listed investment shareholding Unlisted investment shareholding FirstRand 13.5% 3.9% Siqalo Foods 100.0% RMH 28.2% Total 24.9% Mediclinic 44.6% Air Products 50.0% RCL Foods 77.5% KTH 36.3% Distell
Slide 53: Contribution by Investment Platform
C O N T R I B U T I O N B Y I N V E S T M E N T P L AT F O R M ( E X C L . O T H E R I N V E S T M E N T S , T R E A S U R Y A N D C O R P O R AT E C O S T S ) Headline earnings for the Intrinsic value year to 30 June 2019 as at 30 June 2019 Media and Media and sport sport Infrastructure 0.8% 0.3% 8
Slide 54: Information on Unlisted Investments
I N F O R M AT I O N O N U N L I S T E D I N V E S T M E N T S Business Profile Consumer products Siqalo Foods Siqalo Foods manufactures and markets well-known brands which include Rama, Flora, Stork and Rondo. Industrial Air Products Air Products produces oxygen, nitrogen, argon, hydrogen and carbo
Slide 55: Information on Unlisted Investments
I N F O R M AT I O N O N U N L I S T E D I N V E S T M E N T S Business Profile Media and sport eMedia eMedia has a range of media interests, which includes e.tv, eNews Channel Africa (eNCA), Gauteng-based radio station, Yfm and various studio and facilities businesses. It also owns the free-to-air