Remgro reported a 39.1% slide in headline earnings per share on Tuesday for the six months ended 31 December 2023, due to corporate action in the recent past as well as global pressures, exacerbated by South Africa’s structural challenges.
The investment holding firm, in which billionaire Johann Rupert has a significant stake, said that its intrinsic net asset value per share decreased by 4.6% to R236.95 for the period.
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The group nevertheless declared an interim gross dividend of 80 cents per share out of income reserves.
Remgro’s share price traded around 3% weaker by midday, following the release of its interim results. It has lost around 10% of its value since the group published a voluntary trading update on 13 March in which it flagged a significant drop in earnings.
Read: Remgro slides almost 7% after a trading update
For the period under review, headline earnings dropped by 40.1% from R3.5 billion to R2.1 billion. Total earnings amounted to a loss of R2.3 billion (2022: a profit of R3.9 billion) in the six months to end December.
Remgro attributed the decline in headline earnings to among other things a difficult operating environment. The trading results of Heineken Beverages also contributed to the material decline in headline earnings. If these corporate actions are excluded, the headline earnings dropped by 13.1%.
The group noted in a results statement that the second half of the 2023 calendar year was characterised by macroeconomic and geopolitical instability and “unrelenting inflationary pressures” due to supply chain disruptions and weak economic growth.
‘Erosion’ in investment confidence
“In the South African context, the period’s global pressures were exacerbated by well-known power supply constraints, breakdown in state infrastructure relating to transport and logistics, slow pace of economic and structural reforms, high interest rates and a general erosion of foreign investment confidence in the country,” it said in the statement.
In the context of the operating environment, Remgro said it will focus on the factors within its control, while still pursuing growth opportunities.
It added that there would be a strong focus on driving turnaround and momentum in core and growth assets, such as Mediclinic, Heineken Beverages, Community Investment Ventures Holdings Proprietary Limited (CIVH), RCL Foods and Siqalo Foods Proprietary Limited.
Remgro is of the view that the operating environment is starting to show signs of moderation, and the group will take advantage of the opportunities. Its immediate priority is driving performance in its underlying portfolio companies.
In terms of portfolio optimisation efforts, the group said that remains intensely focused on achieving a favourable outcome on the proposed transaction between Vodacom Proprietary Limited (Vodacom) and CIVH.”
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In 2023, CIVH created a new entity that would house assets, such as Vumatel and Dark Fibre Africa (DFA).
Under the transaction, Vodacom wants to buy a 30% stake in the newly-created Maziv, with an option to increase its stake by 10%.
Although the deal was approved the Independent Communications Authority of South Africa (Icasa), it was blocked by the Competition Commission. The deal is now before the Competitions Tribunal.
Remgro CEO Jannie Durand said all parties believe the Vodacom-CIVH transaction will have benefits for all stakeholders once completed.
“These benefits include the democratisation of the internet in rural and lower income areas by means of providing cheaper fibre to the greater South Africa; the potential for job creation, and economic growth for our country.”
Despite the poor performance in the interim period, Remgro noted that the results are reflective of a point in time.
“Throughout the seven decades of doing business in South Africa, Remgro has successfully navigated periods of heightened uncertainty with varying challenges, and we are well positioned to weather the current storms and create sustainable long-term stakeholder value,” Durand added.
The decrease in Remgro’s interim earnings was largely driven by the following:
- The loss contributed by Heineken Beverages (excluding the Heineken IFRS 3 impact) of R208 million, partly offset by Capevin Holdings Proprietary Limited’s (Capevin) contribution of R57 million, compared to Distell’s contribution of R517 million in the comparative period;
- A lower contribution from CIVH mainly due to higher finance costs resulting from increased interest rates;
- A special dividend of R154 million received from FirstRand Limited (FirstRand) in the comparative period, partly offset by increased contributions from TotalEnergies (excluding the negative FVA on Natref’s stock), as well as RCL Foods and Siqalo Foods due to improved operating performances.
