Remgro 6M - Focus Shifts to NAV

Remgro released half-year numbers for the year ended on the 31st of December 2019, which is referred to as pre-Covid-19. As CEO of Remgro Jannie Durand said in a Business Day Interview, these numbers are supposed to be viewed in a totally different context since the local economy was battling just a recession; as compared to today's pandemic.

The biggest contributor to the investment holding company's earnings and net asset value (NAV) was Banking which contributed R1.838 billion to earnings, this was up 3.5%. Remgro has previously shared plans to unbundle its Firstrand and RMH stakes, with more detail on the proposed action coming in the next couple of weeks.

The main reason for the unbundling of its interest in banking is because Firstrand has performed so well that its shares are now worth more than the market capitalisation of Remgro as a whole. There's definitely value in doing the unbundling.

Mediclinic's contributions was R858m, up 37.7% off a very low base. We've written in great detail on Mediclinic which you can read here. Recently, Mediclinic's biggest hiccups include the regulatory changes in Switzerland, which has hurt the group earnings but has shown great resilience in its local market.

The other interesting bit of the business that will remain is the consumer products bit. This division includes RCL Foods, Distell, and Siqalo Foods which all contribute about a fifth towards earnings. This division saw its earnings come in at R977m, a 4.8% increase year-on-year thanks to a 28.6% increase in Siqalo Foods earnings.

RCL was hit hard by the sugar tax that was introduced in the year, maybe there might be a glimmer of hope for the chicken side of things as there's a proposed tax on imported chicken. However, oversupply/dumping remains a great threat and RCL needs to adapt or it will die a slow and painful death. The liquor business saw volumes slow, which is expected under such harsh economic conditions. The earnings contribution from Distell was R384 million, lower by 3.8%.

RMI, which is the insurance division didn't have a good year at all with its earnings down 13.4% to R504 million as 2019 was full of unpleasant surprises for insurers across the spectrum, such as hail storms which damaged everything from crops to cars.

Covid-19 is causing a lot of panic for both consumers and businesses. The consumer side should benefit from the panic buying, that's if the factories can produce and deliver on time, which in my experience has never been possible since many factory operate at 'capacity'. Interesting times ahead, the good news is that Remgro is sitting on a large cash pile which gives it flexibility to take advantage of the temporary situation.