Johann Rupert’s Remgro warns of increased social instability

South Africa’s largest investment holding company, Remgro, warned that the country faces increased social instability due to the current economic environment and stagnant growth. 

Remgro issued this warning during the company’s financial results presentation for the year ended 30 June 2023. 

“The current economic environment is troubling. The disruption in business operations directly impacts consumers and runs the risk of increased social instability due to the undoing of livelihoods and rise in poverty levels,” the company said. 

“With low levels of expected economic growth – combined with the breakdown of state infrastructure relating to energy, transport and logistics, and the slow pace of economic reforms to date – the urgency to address these issues cannot be overstated.”

Remgro emphasised the negative impact of consistently elevated levels of load-shedding, high inflation and interest rates, electricity price increases, exchange rate volatility, geopolitical tensions, and crime and corruption. 

These structural constraints erode the confidence of both local and international investors. 

“All of these features, compounded together, have created what is probably one of the most difficult business environments to operate in since Remgro’s inception.”

Despite this, Remgro managed to grow headline earnings by 8.7% from R6.49 billion to R7.06 billion, while headline earnings per share (HEPS) increased by 8.9% from 1,151 cents to 1,254 cents. 

The 8.7% increase in headline earnings is mainly due to higher contributions from OUTsurance Group’s continuing operations, Mediclinic, the Pembani Remgro Infrastructure Fund, KTH and FirstRand.

The company’s earnings also got a boost from higher interest income and a foreign exchange gain realised on foreign exchange contracts entered in respect of acquiring an additional 5.4% indirect interest in Mediclinic. 

However, the earnings increase is partly offset by lower contributions from TotalEnergies, RCL Foods and Grindrod (due to its unbundling) and transaction costs relating to the Mediclinic acquisition and the Distell/Heineken transaction, the company said.

In addition, the comparative year also included the contributions of Grindrod Shipping, which was disposed of, and the discontinued operations of OUTsurance Group, which unbundled its investments in Discovery, Momentum Metropolitan, and Hastings.

Remgro’s intrinsic net asset value per share increased by 16.6% from R213.10 as of 30 June 2022 to R248.47 as of 30 June 2023.

The company declared a final gross dividend of 160 cents per share, a 60% increase from the year before.