Shares in Stellenbosch-based investment holding company Remgro fell almost 7% on the JSE on Tuesday following a trading update after the previous day's market close.
The share price closed 6.85% lower at R138.55 per share. Remgro is a notable shareholder in a series of companies including Discovery, FirstRand, OUTsurance, and RCL Foods.
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In a trading update, the group said that its headline earnings per share (Heps) for the half year ended December 31, 2023 (the 'current period') compared to the Heps of 626 cents reported for the year ended December 2023. It warned that it would fall between 344 cents and 407 cents. previous interim period. This means Heps is expected to slide between his 35% and 45%.
However, Remgro revealed that the decline was mainly due to the impact of corporate activities such as Heineken Beverage's acquisition of Distel Group and the split of shares in Mediclinic and Grindrod.
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“A significant factor in the decline in overall revenue is related to the impact of corporate activities undertaken in the recent past. [the] Most of these are non-recurring items,” the group said.
“The challenging operating environment, particularly related to the trading performance of Heineken Beverage Holdings Limited, also contributed to the significant decline in overall profit,” it added.
To facilitate comparisons between reporting periods, Remgro also discloses an alternative Heps measure that excludes the impact of these corporate activities.
“Remgro's activity-adjusted Heps for the current period are expected to be between 492 cents and 533 cents, while the comparable period activity-adjusted Heps are expected to be 579 cents, a decline of 8% to 15 cents. ”%,” the group noted.
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According to Remgro, these corporate activities and their respective impact on total revenue for the current (FY2024) and comparative period (FY2023) include:
- Current period IFRS 3 amortization expense related to additional assets identified when Heineken Beverages acquired control of Distel Group Holdings Limited and Namibia Breweries Limited. and depreciation
- Remgro’s portion of the negative fair value adjustment (FVA) made by TotalEnergies Marketing South Africa Proprietary Limited on Natref shares during the period as Natref was classified as held for sale in terms of IFRS 5.
- Remgro’s portion of transaction costs incurred in connection with the acquisition of Mediclinic Group Limited.
- The portion of Remgro's debt forgiveness proceeds recorded by Kagiso Tiso Holdings Proprietary Limited (“KTH”) during the comparative period as part of its disposal (the lender waived its right to receive the outstanding loan amount to KTH). Investment in Actom Investment Holdings Proprietary Limited.and
- Equity accounting profits of Grindrod Limited until separation during October 2022.
Other aspects mentioned regarding the reduction of Heps include:
- Percentage of Heineken Beverage's losses (excluding the impact of Heineken IFRS 3) compared to Distell's profits for the comparative period. Heineken Beverage volumes were affected by slowing industry growth, load shedding, and a shift from premium to mainstream. [alcoholic drinks] The decline in competitiveness was also negatively impacted by non-recurring costs related to integration and supply chain challenges.
- The decrease in contribution from Community Investment Ventures Holdings Proprietary Limited was primarily due to higher financing costs due to higher interest rates.and
- We received a special dividend of R154 million from FirstRand Limited during the comparative period.
The group is scheduled to release its latest interim report on the JSE on March 19th.
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