Investment holding giant Remgro, which is chaired by South Africa’s second richest man Johann Rupert, declared a final gross dividend of 50 cents per share (2019: 349 cents) out of income reserves after the market closed on Monday, for its financial year ending June 30.
The move comes despite the Stellenbosch-based group reporting a 68.7% plunge in headline earnings from continuing operations, due largely to the Covid-19 crunch hitting most of its investee companies badly.
In rand terms, Remgro’s headline earnings from continuing operations plummeted more than R3.8 billion to just over R1.73 billion for its 2020 financial year. Headline earnings per share (Heps) fell from 981.4 cents to 307.5 cents.
“The decrease in headline earnings from continuing operations is mainly due to the negative impact that the Covid-19 pandemic and the resultant lockdown measures had on the earnings of [Rand Merchant Investment Holdings, FirstRand, Total SA, Kagiso Tiso Holdings, Distell Group and RCL Foods],” the group noted in a results media statement.
Remgro also highlighted lower interest income, increased losses from Community Investment Ventures Holdings (which is pumping money into expanding its fibre network), and its once-off donation of R500 million to the South African SME Relief Trust (Sukuma donation) as contributing factors to the decline in earnings.
The group unbundled its 28.2% interest in RMB Holdings (RMH) earlier this year.
“The investment in RMH is treated as a discontinued operation and, accordingly, discontinued operations include the equity accounted income of RMH,” Remgro explained.
“For the year under review the investment in RMH was equity accounted for the nine months to 31 March 2020 [2019: 12 months to 30 June 2019] … Headline earnings and Heps from discontinued operations decreased by 45.9% from R2 644 million to R1 430 million and from 467.5 cents to 253.1 cents, respectively,” it added.
The group is set to host an investor presentation on its latest results on Tuesday morning.
Virus has hastened change
However, Remgro CEO Jannie Durand said in a statement that “the onslaught of Covid-19” has undoubtedly changed economic, political and social environments faster than anyone would have anticipated prior to its outbreak.
“It has forced individuals and companies alike to re-evaluate the manner in which we interact and the way in which we will continue to do business going forward. While Covid-19 has forced change on us all, 2020 has also been another major inflection point for Remgro following the unbundling of our interest in RMH,” he said.
“As with previous inflection points in Remgro’s history [a major one being the unbundling of Remgro’s interest in British American Tobacco plc in 2008], this provides Remgro with another opportunity to reshape its trajectory while continuing to drive value creation through a portfolio that has now been rebalanced with an increase in the unlisted investments’ weighting,” added Durand.
Remgro pointed out in its results statement that the group’s intrinsic net asset value per share decreased by 33.7%, from R233.03 at June 30 2019 to R154.47 at June 30 2020.
“The decrease reflects the impact of the RMH unbundling and the negative impact of the Covid-19 pandemic on market values [listed] and fair values [unlisted] of underlying investee companies. The closing share price at 30 June 2020 was R99.90 [2019: R187.90] representing a discount of 35.3% [2019: 19.4%] to the intrinsic net asset value,” it noted.
Remgro’s share price has fallen further, by around R10, since its June 30 year-end. However, the stock was up by almost 5% on Monday ahead of the release of its latest results, closing at R90.99 a share.
Despite the economic fallout from the global coronavirus pandemic, which has seen dozens of JSE-listed companies withholding, deferring or partially paying out dividends (to retain cash and bolster balance sheets), Remgro remains cash-flush and decided to pay out a final dividend.
Remgro’s total cash reserves as at June 30 stood at just over R17 billion, compared with R15.72 billion at the end of its 2019 financial year.
“For the year ended 30 June 2020, a final gross dividend of 50 cents per share [2019: 349 cents] was declared out of income reserves in respect of both the ordinary shares of no par value and the unlisted B ordinary shares of no par value,” the group said.
“The final dividend was adjusted downwards to take into account the RMH unbundling and the impact of the Covid-19 pandemic.”