Covid-19 lockdown knocks 61% off Remgro’s earnings
Investment holding group Remgro reported a massive drop in earnings for the year ended June 2020, taking a 61.3% knock as a result of the Covid-19 pandemic and the nationwide lockdown implemented to combat it.
For the year, total headline earnings decreased by 61.4% from R8 195 million to R3 167 million, while total headline earnings per share (HEPS) decreased by 61.3% from 1 448.9 cents to 560.6 cents, it said.
As a result of the unbundling of Remgro’s 28.2% interest in RMB Holdings Limited (RMH), headline earnings is also presented for continuing operations and discontinued operations. The investment in RMH is treated as a discontinued operation and, accordingly, discontinued operations include the equity accounted income of RMH.
For the year under review the investment in RMH was equity accounted for the nine months to 31 March 2020 (2019: twelve months to 30 June 2019). Headline earnings and HEPS from continuing operations decreased by 68.7% from R5 551 million to R1 737 million and from 981.4 cents to 307.5 cents, respectively.
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.
Salient features:
- Total headline earnings per share: down by 61.3% to 560.6 cents;
- Headline earnings per share from continuing operations: down by 68.7% to 307.5 cents;
- Earnings per share: down by 9.1% to 1,176.4 cents;
- Ordinary dividend per share: down by 53.0% to 265 cents;
- Intrinsic net asset value per share as at 30 June 2020: R154.47.
A final gross dividend of 50 cents (2019: 349 cents) per share has been declared out of income reserves. The final dividend was adjusted downwards to take into account the RMH unbundling and the impact of the Covid-19 pandemic.
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 various Remgro investments, the group said.
This includes:
- Rand Merchant Investment Holdings Limited;
- FirstRand Limited;
- Total South Africa Proprietary Limited;
- Kagiso Tiso Holdings Proprietary Limited;
- Distell Group Holdings Limited; and
- RCL Foods Limited.
The impact of the lockdown was also exacerbated by lower interest income, increased losses from Community Investment Ventures Holdings Proprietary Limited (CIVH) as they expand their fibre network footprint, organically and acquisitively, and a once-off donation of R500 million to The South African SME Relief Trust (Sukuma donation), it said.
CIVH and SEACOM
CIVH’s contribution to Remgro’s headline earnings amounted to a loss of R649 million (2019: loss of R204 million).
This decrease is mainly due to significant transaction and funding costs incurred relating to the acquisition of a further 65.1% stake in Vumatel during May 2019, as well as additional losses (ten months) accounted for Vumatel due to the interest acquired.
CIVH’s results were also negatively impacted by prudent credit provision due to the uncertainties created by the Covid-19 pandemic.
Despite the increase in losses, Dark Fibre Africa Proprietary Limited’s (DFA) revenue increased by 5.0%, as its annuity income grew to in excess of R179 million per month at 31 March 2020 (31 March 2019: R159 million).
DFA’s contribution was negatively impacted by higher depreciation and finance costs as a result of the expanding network. Vumatel’s revenue increased by 80.0% to R1.5 billion compared to the prior year, driven by accumulated subscriber uptake growth.
However, its results were also negatively impacted by higher depreciation and finance costs driven by the expanding network.
SEACOM’s contribution to headline earnings amounted to a loss of R10 million (2019: a loss of R2 million).
Read: Remgro expects tough times will last for at least a few more years
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