Investment holding company Remgro recorded a strong financial year ended June 30, despite headwinds that the company says can be regarded as extreme events, which disrupted the global and local economy.

This includes the Covid-19 pandemic, coupled with the civil unrest in KwaZulu-Natal and Gauteng in July 2021, which was followed by the ongoing Russia-Ukraine conflict, continuous power supply constraints and high single-digit inflation in the US and elsewhere.

“Despite these challenges, Remgro has managed to deliver a robust recovery, with most financial metrics ahead of pre-pandemic levels, and made good progress in its journey to optimise its portfolio and unlock value for its stakeholders, as evidenced by the various transformative corporate actions initiated during this financial year,” the company highlights.

These include the recently announced cash acquisition of Mediclinic International, as well as the Distell Group Holdings, Community Investment Ventures Holdings (CIVH) and Rand Merchant Investment (RMI) transactions.

The Mediclinic, Distell and CIVH transactions are still subject to various approvals.

For the period, headline earnings increased by 125.1% year-on-year to R6.49-billion and headline earnings per share increased by 125.3% year-on-year to R11.51.

The headline earnings for the comparative year to June 30, 2021, were significantly impacted by the Covid-19 pandemic and the resultant lockdown measures, Remgro points out.

It says that, from this low base, the increase in headline earnings for the year under review is mainly owing to the recovery of the earnings of most of Remgro’s underlying investee companies, most notably Mediclinic, TotalEnergies Marketing South Africa, Kagiso Tiso Holdings, Grindrod, Grindrod Shipping, FirstRand and Distell.

Mediclinic’s contribution for the comparative year includes the full impact of the Covid-19-related lockdown measures during the first and second waves of the pandemic, on its results for the year ended March 31, 2021.

However, during the financial year ended March 31, this year, Mediclinic was noted to have delivered a strong operational and financial performance, driven by increased patient activity, thereby considerably increasing its contribution to Remgro’s headline earnings.

The results for the year under review were also positively impacted by TotalEnergies’ favourable stock revaluations, CIVH turning profitable and lower finance costs, owing to the redemption of the exchangeable bonds during March 2021.

The increase is partly offset by a lower contribution from RMI, owing to the unbundling of its investments in Discovery and Momentum Metropolitan, as well as the disposal of its investment in Hastings Group during the period.

Compared with the reported headline earnings from continuing operations for the 2019 financial year of R5.55-billion, which Remgro says represents a reasonable comparison to a pre-pandemic period, headline earnings increased by 17%.

Remgro notes that this indicates that the earnings of most of Remgro’s underlying investee companies, which had been affected by the Covid-19 pandemic, have substantially recovered to pre-pandemic levels.

“It should also be noted that the headline earnings from continuing operations for the 2019 financial year still included the equity accounted earnings of FirstRand of R1.09-billion as opposed to dividend income of R625-million, as this investment was subsequently reclassified from an equity accounted investment to an investment at fair value through other comprehensive income,” the company points out.

Further, total earnings for the year under review increased by 270.1% year-on-year to R13.14-billion mainly owing to Remgro’s portion of the profits realised by RMI on the unbundling of its investments in Discovery and Momentum Metropolitan and the disposal of its investment in Hastings, as well as the increase in headline earnings of R3.61-billion.

Remgro’s intrinsic net asset value per share increased by 20.2% from R177.33 in the previous financial year to R213.10 at the end of the financial year under review. The closing share price at the end of the year was R129.91, representing a discount of 39% to the intrinsic net asset value.

For the period, a final gross dividend of 100c apiece 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.

“We are encouraged by the progress we have made, amid all the headwinds, in our continued journey of recovery and in delivering on our strategy to optimise our portfolio in order to unlock stakeholder value.

“While considerable uncertainty still remains, with much of the global economic outlook being negative amid continued geopolitical volatility, Remgro remains optimistic about its future prospects as it stays committed to shape the future and partner for South Africa’s prosperity,” says CEO Jannie Durand.

“Key to Remgro’s ongoing commitment to the country is to ensure that it puts its ethical approach to business that it has long pursued into a  practical, modern form, and addresses the most pressing social and environmental issues it faces.

“Remgro remains committed to do that, understanding not only that they present challenges, but also opportunities to change for the better, for all,” Durand adds.