Remgro reports profit jump, increases dividend

‘We are a proudly South African company, and invest and allocate our capital in growth sectors like this fibre infrastructure, CIVH’: Neville Williams – CFO, Remgro.

FIFI PETERS: Investment firm Remgro, some of whose biggest investments include Mediclinic and Distell – probably for now – and RCL Foods, released their half-year results earlier today. Profit soared, boosted by a strong bounce-back in some of their investee companies that showed signs of strong recovery from the Covid-19 pandemic.

We’ve got Neville Williams, the CFO of Remgro, on the Market Update for more on the results. Neville, thanks so much for your time. Would you say that most of your investee companies are now over the worst from the Covid-19 pandemic, just based on the results presented – or are there still some areas of concern?

NEVILLE WILLIAMS: Good evening Fifi, and good evening to your listeners. Most of the investment companies have substantially recovered from the Covid pandemic.

If you look at Mediclinic, Mediclinic is still in a recovery phase compared to the pre-Covid December 2019 period. They are up on their top-line revenue basis, but on the profitability basis they are still lagging and hopefully they will recover to full profitability in the next few months, [or] year or two.

But if you look at the other companies like Grindrod Shipping, TotalEnergies Marketing, Distell, RCL, they have substantially recovered from the Covid pandemic.

FIFI PETERS: I want to talk more about the future, as you point to the expected recovery of Mediclinic in the forthcoming set of results. But what we also saw recently is the spectrum auction happening last week, I think the first in 17 years or in a very, very long time. We’ve heard about the value unlock of this auction, some R14 billion or so on the table. I want to ask what this means for your business, your fibre assets of Vumatel and Dark Fibre – any indirect or direct impact as a result of the spectrum release?

NEVILLE WILLIAMS: CIVH [Community Investment Ventures Holdings] and Vumatel and Dark Fibre – the cash generation at the moment is still reinvested into the growing of the infrastructure platform. They connect houses on an accelerated basis at the moment, especially in the lower LSM markets, like Soweto and Mitchells Plain, Vosloorus. So we still see lots of growth in the fibre infrastructure space. We don’t foresee a slowdown of the development of that infrastructure platform in the foreseeable future, so we are still investing into that platform and into connectivity of the market.

FIFI PETERS: You also warned a bit – it came through a bit in your forward guidance about Russia and the Ukraine and the conflict there – of the potential impact of sanctions and the like. In that warning – am I reading too much into things or could this be problematic for some of your investee companies going forward?

NEVILLE WILLIAMS: We are monitoring and actively managing the effect, especially on the increase in the commodity into prices, especially from our FMCG businesses, RCL, wheat and maize, as well as the spreads business, with the palm oils and the vegetable oils that have increased substantially over the last month or two.

So we see input-cost pressures at the moment, and I don’t think we can pass through all the increases in input costs to the consumer. So we expect margin compressions in the short term in the next few months.

Hopefully the situation will stabilise in a month or two, but that’s where the uncertainty is at the moment, looking at the next six months.

FIFI PETERS: We’ve just held our Fourth Investment Conference as a country. And I’m interested in Remgro’s view on investing in SA Incorporated right now.

NEVILLE WILLIAMS: If you look at our portfolio, our portfolio is actually [mostly] SA-based. We also have exposures through the health platform, Mediclinic in Switzerland and the UAE, and through Distell in the rest of Africa. But we are a proudly South African company, and we at the moment invest and allocate our capital in growth sectors in South Africa, like this fibre infrastructure that we invest in through CIVH. So we are exposed to the South African economy, and we are positive about growth prospects going forward.

FIFI PETERS: Okay. You mentioned Distell. We’re all looking at the hot deal on the table there regarding the takeover by Heineken. Things have been a bit quiet, unless I might have missed some news, but can you update us on anything that’s happened so far?

NEVILLE WILLIAMS: Yes. The shareholders actually approved the deal in the middle of February and now the business is implementing the deal. Regulatory approvals will take a while and it looks like the deal will be completed by the end of this calendar [period].

FIFI PETERS: Okay, good to know. Thanks for that update, Neville, we’ll leave it there for now. Neville Williams, the CFO of Remgro.

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