The pivot from traditional banking to technology – Remgro CFO Neville Williams

Chief financial officer of Remgro Neville Williams joined the BizNews Power Hour to shed light on the investment holding giant’s performance for the 2021 financial year. After reporting its worst results on record in 2020, Remgro’s investee companies for the large part have bounced back strongly. Despite Mediclinic, Remgro’s largest constituent, being a drag on performance – the rest of the listed counters within the stable, that being Distell, RMI and RCL Foods all outperformed the prior period. The most exciting avenue of growth for Remgro going forward comes from the CIVH group – which holds Dark Fibre Africa and Vumatel. Remgro have recently used R2bn in proceeds from the sale of FirstRand shares to fund growth within the CIVH stable. – Justin Rowe-Roberts

Neville Williams on Mediclinc’s underperformance within the Remgro stable: 

If you look at Mediclinic results to Remgro’s headline earnings this year, there is a lag – Mediclinic’s results were for the year April 2020 to 31st March 2021. You can imagine the full impact of the restrictive lockdown measures from April 2020 due to the Covid pandemic being included in the current years Mediclinic results. Since April, with the gradual lifting of restrictions, Mediclinic has also improved on its results and operations. So in South Africa, they were severely hit in that first few months of the Covid lockdown. But the other divisions, like in Switzerland and the Middle East, were actually not that severely hit. They are already recovering back to pre-Covid levels where they actually can institute a non-elective surgery. In South Africa non-elective surgery is actually gradually coming back with improved margins in Mediclinic South Africa’s results.

On the corporate action within RMI: 

The Remgro board has actually given it in principle support for this deal. We support the RMI strategy going full forward after the unbundling of the long term insurance assets. When the deal is implemented in quarter two to 2022 , Remgro will also receive the direct interest in Discovery and Momentum in its portfolio. So we are still supportive of the short term as well as a long term insurance industry. And as you can see, the market actually reacted very positively to that announcement.

On pivoting towards more technology focused businesses: 

That’s also a strategy that our CEO Jannie Durand has already announced to the market, looking at the portfolio optimisation of our underlying investee companies. So we will focus on turnaround assets in the growth companies like CIVH, as well as cash generating assets for sources of capital. This is part of the rebalancing of our portfolio. And I mean, if you look at the underlying companies, they are very resilient and were very resilient during the last year – during the Covid period. And if you look at the results excluding Mediclinic, the rest of the portfolio actually improved and is on a recovery path subsequent to last year’s worst ever results in the Remgro’s history.

On Dark Fibre Africa and Vumatel within the CVIH stable: 

This is the focus – this is our growth portfolio and if you look at the Vumatel results for the last year, its revenue actually increased by around 50% – there’s economies of scale. So the operating profit also increased more than 60%. That’s because of accumulated subscriber growth uptake as well as further net network expansion. So on a growth path and if you look at what the investment executive Peter Uys has actually told the market this morning is that we hope to be profitable on a headline earnings basis in CIVH in 2023/2024 financial year.

On management’s efforts to close the discount to net asset value: 

Management can only focus on what we have under control – we don’t control the discount. It’s the shareholders and the market that actually view and control the discount. But we will focus on growing our underlying investment portfolio on an earnings basis, a cash earnings basis, as well as an internal net asset value accretive basis. So that’s what we focus on. Hopefully the market will see the underlying value and value creation ability of management going forward.

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