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Remgro earnings impacted by continued lockdown and contribution to SME trust

‘We are still uncertain about the lingering effects of the pandemic [and] we are very encouraged by the improved performance over the previous financial year’: CFO Neville Williams.

FIFI PETERS: Investment-holding company Remgro came out with its numbers today (September 22, 2021). It holds stakes in food-producing company RCL Foods, drinks maker Distell, as well as the private hospital group Mediclinic.

The profits dipped a bit. They were impacted by the R500 million contribution Remgro made at the unset of the Covid-19 pandemic to assist small to medium enterprises, as well as a lower contribution from some of its investee companies.

We have the CFO of the company, Neville Williams, joining us to review the numbers. Neville, thanks so much for your time. How would you describe the year that was? And what does the situation look like now, given that the numbers that we are looking at today don’t even reflect the third wave?

NEVILLE WILLIAMS: Good evening, Fifi and good evening to your listeners. Maybe just to put the results into context, if you look at the portfolio it actually was a year of recovery. If you look at our headline earnings from continuing operations, after we unbundled our interest in RMH/FirstRand, they actually increased by 66% over the period. That was mainly because most of our portfolio companies are actually now on the recovery path since the onset of the pandemic in the second half of the previous financial year.

And also remember in the previous financial year, during March/April last year, the Remgro group also contributed R500 million in to the Sukuma Fund to assist small and medium enterprises during that Covid period.

Then, if you look at the impact of Mediclinic, the full impact of Covid is now in Mediclinic results, and that had a negative effect on Remgro’s results – still positively on a recovery path, but not yet at pre-Covid levels.

FIFI PETERS: That move to create further value for your shareholders by unbundling the FirstRand stake, do you think it’s been effective?

NEVILLE WILLIAMS: Yes. I think it’s been effective. We’ve actually unlocked value for our shareholders, so the shareholders now have a direct interest into FirstRand, as well as an interest into Remgro.

FIFI PETERS: Can your share holders be expecting any more moves from the company to further unlock value?

NEVILLE WILLIAMS: On Monday RMI, the investment vehicle that holds the insurance company OUTsurance, Hastings, Momentum Metropolitan (Holdings), and Discovery, also announced its plans to unbundle its investment in MMH and Discovery to its shareholders. So that’s also one of the value-creation opportunities to unlock value for our shareholders.

FIFI PETERS: Neville, we did see at the onset of the pandemic a lot of investment-holding companies looking inward, trying to ensure that the companies within their stable were okay. But now, as we talk about recovery, what does that recovery in the path to grow, so the path to pre-pandemic levels, look like for the group? Will it be motivated by staying inward-looking and going for organic growth, or are you looking outside your portfolio for possible acquisitions?

NEVILLE WILLIAMS: Our portfolio companies are still feeling the impact of the pandemic. We’re in the third wave; the third wave is actually tapering off and we see that in the drop in admissions at our private hospital group, Mediclinic. But the insurance companies also expect maybe a rise in the fourth wave during December. So the companies are still very cautious, especially regarding the strengthening of their balance sheets looking at their cost base. So it’s still cautious and we are still uncertain about the lingering effects of the pandemic. That’s why we are very encouraged by the improved performance over the previous financial year.

FIFI PETERS: So the focus is staying at home for now.

NEVILLE WILLIAMS: Yes. But we also see opportunities for growth in the market if you look at one of our growth assets, the CMH Dark Fibre ……5:11 which instals fibre to the home. There was a significant demand for internet connectivity during the lockdown phases and …… revenue actually increased by more than 50% over this period. Remgro has allocated additional capital to these fibre investments because we see the potential for further growth in those companies.

FIFI PETERS: Of course. We needed to work from home, learn from home, eat from home and shop from home and just live in the digital world, as it were.

NEVILLE WILLIAMS: Yes, we want to democratise the ……5:57

FIFI PETERS: Please do, please do. Let those prices come down as much as they can. But we’ll leave it there. Thanks so much for your time. Neville Williams is the CFO Remgro.

 

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