Remgro Limited (REM) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Remgro Limited annual results. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Jannie Durand, CEO. Please go ahead.

Good morning, everybody, and welcome to the annual results presentation of Remgro Limited for the year ended 30 June 2023. Just to run you through the contents of the day, I will start by giving a performance overview. We will rate ourselves against our strategic priorities. And then I'll also briefly discuss the operating context of the environment that we've been operating during the past 12 months. Then I will hand over to Neville to give a more detailed overview of our results for the year. And then we deviated a little bit from our usual format in previous years. We will then begin an update on some of our key investments. And I welcome Ronnie van der Merwe and Jurgens Myburgh, the CEO and CFO, respectively, of Mediclinic, who will speak to the results of Mediclinic as well as their strategy. Then Pieter Uys, the Chairperson of CIVH will also do this exactly the same for our CIVH company. And finally, we've got Paul Cruickshank also on the line, the CEO of RCL that will speak to RCL's strategy and most recent performance as well. I will then close off with our key areas of focus, looking ahead and then also open the floor for questions right at the end. And we've got all my colleagues around the table that will be assisting me in answering some of the questions, specifically, as also relating to CIVH, Mediclinic as well as RCL. Just to turn across to the our results for the year. And we're actually quite proud of the results. If you look at the results, headline earnings per share up by 8.7%. Our total headline earnings actually up a little bit more to -- up by 8.9%. And the main reason between the difference uplift is 29 basis points in headline earnings per share, and that's really our share buyback program that we've commenced during the latter part of 2023 financial year. And also we did some purchases just right after year-end. Then we've increased the dividend by 60%, the final dividend by 60%. So the year dividend also increased by 60%. It's not exactly in line with the earnings. As you can see the earnings is up 8.9% per share, but dividend 60%. But what you must realize is that the cash flow at the center trails the earnings by about a year because they declare the dividend after having a good year in earnings, and we only receive the dividend at the next year. So we only get the benefit of the cash flow in the following financial year and last year with quite a good increase in some of the underlying performance of the companies. INAV per share, up nearly 17%, and we'll unpack that in detail later in the report. I think what is also critical to note, there was a tremendous amount of corporate actions during the past year, as you're probably quite aware of. And if you're actually comparing apples with apples and it's very difficult sometimes to eliminate all the noise in the results. But if we're just comparing apples with apples, the underlying earnings is up about 27%, which is quite a resilient performance going forward. The discount is still at 40.8%, and we'll unpack that later as well. Neville will discuss this quite in detail later, so I'm not going to elaborate on that, and maybe we can just quickly turn over to the operating context of how we've operated in this environment. I don't have to teach you or tell you exactly how tough it's been. It's probably been one of the toughest various I've experienced in my 30-plus year working career. I mean, the various factors we talk about load-shedding, infrastructure collapses in South Africa, inflation, economic growth, the global supply chain disruption, all of these things has make it a very, very tough environment. Put that on top of -- since 2013, if you look at the South African economy, there's hardly been any growth. People talk about the missing years. But if you just look at the actual numbers, it's actually quite a few missing years since 2013 for the last 10 years in the economic environment, especially for locally domestic operating companies in the South African context. Despite this, I must say I'm proud of some of our companies and what they've done, we call it the Vuma Core plan. We're fixing sometimes our own water infrastructure. We are fixing sometimes the municipality substation just to keep operating. So the factories keep operating. And I think -- and I must congratulate my team and the management teams that in a very, very difficult and constrained environment with collapsing infrastructure, we're managing to keep our companies afloat in going forward. Turning the page. If we look at our portfolio context, clearly, there's some positives. There are some negatives and then to some actions that we can take it. We also talk about the controllables and the uncontrollables. And really, if we can fix, if we can focus on the controllables, then we can actually outperform the opposition. I think it's important to realize that South Africa is not an island. We can't get away from what's happening on a global environment. So we're exposed to input costs and commodity costs and all of those things. And we have to deal with it. A lot of that's uncontrollables, but the only thing that we can look at the controllables, make sure our cost base is the right, our efficiencies there to make sure that we can maximize margins in our underlying companies. Clearly, some of the things that we're doing from Remgro side on a macro level, I've been involved with a business 4SA collaboration, trying to helping to fix some of the aspects in the country. Really, my portfolio, as you all know, is involved in the crime and corruption work stream. Then via RCL, they've done tremendous work on the chicken and the sugar master plan. And we've seen some of those benefits starting to pay off, not without challenges, and Paul can elaborate on that later on. At the micro level, clearly, we've started energy exchange. We're investing in the renewables in underlying companies. And we also see some opportunities, and we've actually made an investment, as you all know, that we've alluded to in the past on the energy exchange platform going forward. So despite some of these headwinds, we also see some opportunities, and we focus on the controllables. If we turn the page, it's a little bit like a scorecard and when you get your scorecard at the end of the year at school. And we've actually took the bold step to say let's rate ourselves on our strategic priorities that we set ourselves at the interim. We show you these things at the interim, and we've rated ourselves. And what we said is green, a yellow or a red. And as you can see, either we're on track. It's all in progress or we haven't started yet or not yet executed and I can -- at least the one thing I said we didn't rate us off on any of the rate things. So we probably score half a pause on some of these things. But let us just quickly -- the priority #1 is our portfolio optimization, the unlocking of the value, capital allocation, sustainability, improved disclosure and then sustaining the momentum and the resilience through the portfolio. And I'm going to go into much more detail in the next slides. Maybe just focusing a little bit on point 6, of course I'm not going to deal with that specifically later on because that's really a function of our results that you see coming through. But I think it's -- I must say -- and you're probably all aware, some parts of our portfolio is not where we want it to be. Some of them is, as we call in the recovering bucket, and there's a huge focus on the earnings and the earnings delivery of the portfolio that we all optimally deliver the desired results and the return on our investments. Just to -- and Neville will probably talk about that, just to make the point. So remember, we've got some portfolio investments that we actually don't equity accounts. So we only account for dividends and some of them don't pay dividends. So that is put a drag. And if you just do a normal accounting number of return on equity at the Remgro level. And I think it's just because of the accounting rules, it's not really -- so it's not actually a true reflection of the return on equity on the Remgro portfolio because we don't account for any earnings, for instance, on a discovery, a big part of our NAV, but we don't get any earnings on that. So there is a drag on the earnings from accounting point of view. So we flip the slide, and we go to just evaluate ourselves on strategic priority #1 and 2, which really is what we talk about unlocking value and portfolio optimization. I think it's been a busy year. We've lost a lot of here than the older years, but I think we've executed quite well on that. We've delivered the Heineken distell transaction. We've delivered the Mediclinic transaction, Grindrod has been unbundled. We also did a share repurchase program, and I'll get back to that later as part of our capital allocation program. And then RCL this we talked about the Vector Logistics disposal, the Rainbow turnaround. And the one that really have been focused for the rest of the next financial year is to deliver on the Vodacom, CIVH transaction that is now being referred to the Competition Commission Tribunal. Just on the repurchasing side, I think it's something that we've been asked a lot about. Clearly, at the current levels and at the current discounts, we think it's a very attractive capital allocation decision, and we've completed the program shortly after year end, the total ZAR 1 billion just after year-end. I think it's also we must realize it's a balancing act as well between paying dividends, doing shareholder returns to the shareholders as well as also allocating capital to our underlying companies into our core portfolio. And we're acutely aware of this and to make sure that there is this balancing between these 3 priorities is actually done in a balanced way into the enhancement and the most efficient way of unlocking value for our shareholders in that respect. We can turn over the page. And then the evolution toward asset scarcity, also a part of our strategic priority 3. And I think it's not something that we do deliberately. I think it's something -- if we say we just want to delist companies for the sake of delisting to create scarcity. I think that would be the wrong incentive and the wrong reason for that. The reason why we're doing these things because we think it is unlocking our value, it's done at the right prices for us in that instance and also in the best interest of the underlying companies. And I think that is the important message that I actually want to hear. But we've achieved now that our portfolio is now over 70% unlisted in that respect. And so it creates some scarcity to our portfolio. But I think it's -- well, it's now also in -- what it does, it also puts more responsibility on Remgro as an investment holding company as well as a lot more transparency that we have to show, especially in the underlying valuations of the unlisted investment and the disclosure that we're going to do. Turning over to slide, still focusing on strategic priority #3. So how have we deployed capital? As you can see in that instance, we've actually made quite a few investments into our core portfolio, which really relates to the Mediclinic transaction, we will spent quite a bit of money on that as well as a share purchases program as well as dividends that we've paid to that. Where did we get the cash from? We get the cash from investment income, as you can see on the right-hand side of the pie graph, we also get -- we've realized some investments as well, as well as also the investment income return on our portfolio. That is where we got the cash from and we spent it into, as we said rightly, on share repurchase, dividends based investments back into our core portfolio. And then the 6.7%, obviously, we have to pay some taxes as well, plus also the cost at the Vuma office side as well. Okay. So what is the -- if we turn over a slide, still on strategic priority 3, and we're focusing quite a bit on capital allocation because I think that's probably one of the most important things that we do. And if you look at the slide, clearly, what -- if you look at 2023, 4.2% we've got a yield that we've delivered to the shareholders, and that consists of 3 elements. It's -- one is a dividend paid, just over GBP 1 billion in 2023. And I think what we must -- just on that dividend, it's an all dividend. It's not a dividend that we declare today. So today, if you actually put the dividend today, it will be much higher than -- of then 4.2%, but that will only come into the 2024 financial year. Dividends in specie, we've unbundled Grindrod plus we did a share repurchase -- share buyback program of ZAR 830 million. Why doesn't really relate to the ZAR 1 billion that I mentioned before the balance was done after year-end. So total return to shareholders in the year under reviewed nearly ZAR 3.5 billion, putting it around market cap of just over ZAR 82 billion gives us a 4.2%. And you can clearly see the strategy is paying off for us in 2021, albeit the COVID year, was 0.7% last year, 2022, 1% and this year, 4.2%. And we hope to continue on the strength of returning capital to our shareholders going forward. Then turning over to the next slide also, Slide #3, the net deployment of capital into the core portfolio. I think I've touched on that a little bit. It's really the reinvestment into Mediclinic under the distell portfolio, we bought some additional shares in the market. And we also classified our portfolio, as you can see on the right-hand side of the slide, we're talking about what we call growth assets, cash-generating assets and also the asset in the recovery within our core portfolio. And so we've made an effort here to give you a sense of the proportion that we think that fits into the various basket. We've got many questions about that in the past so we will give you a sense of that. Obviously, we're not going to tell you which of us children are not doing so well in their scorecards, but you can probably guess some of them are with us, some of those turnarounds needs to happen. The one obvious one, you probably saw some of the same announcements this morning on the chicken side, and I think that everybody accept that's a huge turnaround thing and with the challenges that's been facing there in that respect. I think may -- just to reemphasize the point that I made right at the beginning, we acknowledge that certain parts of our portfolio is not performing optimally. And that is a big focus going forward over the next couple of years with very strict performance criteria that we're putting into place, aligning that with incentive schemes in our underlying portfolios going forward. Then just turning across the slide. Just I'm not going to deal with the FirstRand shares and the hedging on that side as well as some of the underlying investments into our funds. We've done that in -- during the interim phase and the information is here for you to see. But I think just also albeit a bit on a smaller scale, also value unlocking allocating of capital is in the Gordon's that we sold, the Gordon's Gin contract distribution contract to Diageo for consideration of ZAR 1 billion. We think that was a good deal for both parties. It was a trademark that did not belonged to us, belonged to them, and we have the distribution right. But given the complexities of the transaction of the agreement and of executing on the distribution contract in a different environment, we thought it was the best for shareholders in Capevin, that we actually sold that contract back, and we think that every -- both sides of the parties, on Diageo's side and our side, we're quite happy with the transaction, and that also always an indication of that you've actually concluded a good transaction in that respect. Now if we get to strategic priority #4, which really deals with our sustainability drive. And I think I just want to emphasize this thing, ESG and sustainability has always been part of the DNA of Remgro. We just haven't articulated in the past probably so well, and we actually haven't measured it so well, I think that's important, but it's always been part of our DNA. But I think given the new environment and what is happening out there in the world, I think we've made some good progress to get in line of what is happening in there. We've appointed [ Denise Brown ] who has over 20 years experience in this field, having worked for large lasted listed corporations like Discovery. And we look forward to her driving our ESG strategy working with our portfolio companies, and I think she will add a lot of value to that. What we've done as well is also completed our baseline assessments across the portfolio. And that will help us define our current footprint and what it looks like and also help us to set our targets going forward. This is a key milestone and approach, and we want to have measurable targets and KPIs and also then we can measure ourselves better because it's also part of our remuneration KPIs. And we also delve that down to the underlying companies that also become an important part of their scorecards. Obviously, we've completed the GAAP analysis, looking at our current disclosure versus dispose the crime and some of the widely used rating agencies, we're not there. But it's key to ensuring that we report appropriately in line with market practices that we're all exactly on a consistent basis going forward, that everybody can evaluate us in that respect. So what is going forward for us? What are we going to do? Now what is our focus period? It's no, it includes improving our reporting of the ESG metrics. We're going to use this baseline assessment to set the appropriate targets as I alluded to, and then increased level of disclosure that is going to be quite important. And the first CFD report will be published as part of an integrated annual report later this year. I think the annual report will come out in October. So we're proud of what we've achieved in terms of sustainability, but it will be a focus and continued priority for us going forward. Turning over the slide, strategic priority 5, and I think this is critical for us, especially as our portfolio evolves around to 70% unlisted. And I think we have made considerable progress and are committed to continuing to do more. I've made that promises in the past, and you can hold me responsible if we don't do it properly. Over the last 18 months, we have created more engagement platforms for shareholders to engage with our management team. Also board is appropriate. We've had our first governance road show with more than 43% of our shareholders in the last month. We're also making a lot of effort to improve our disclosure, noting that I think it's important that it's an ongoing process for efforts to continue. We also will value your input on that. We have also added additional disclosure on our material unlisted assets in this presentation. And Neville will spend considerable time on the valuation of methodology and assumptions in our -- in how we calculate the INAV. Clearly, it's important to note that since 2 year ago, we formed also a valuation committee. So just to have all of what we call these checks and balances in place to -- on the valuations, so we've got a valuation committee. We've got an audit committee that signs off and then the third one is the Board as well as the thing that we also use independent valuators in the portfolio to actually do some of these valuations. I think it's also going to -- what is important, we're going to do some of these invest in the road shows. We're going to show ourselves at some of these capital markets days going forward, and I think that is going to be an important part of this promise and transparency that we've promised to the market. I'm going to now hand over to Neville, he's going to go into the detail of the financial results as well as the INAV calculations. Neville?

Good morning, everyone. Jannie has alluded to the noise that was created by corporate actions over the last 2 years. And in this slide, on the right-hand side, I'm just giving an analysis of the impact of corporate actions at Remgro level as well as OUTsurance group level over the last 2 years. And the impact is a negative swing of approximately ZAR 949 million year-on-year. If you exclude that impact, the underlying portfolio actually increased by 27% that thus maintaining positive earnings momentum despite a very challenging business environment that Jannie also has described now. The main contributors to this increase are firstly, Mediclinic. Mediclinic reported a 75% increase in headline earnings, resulting in the significant increased contribution to Remgro's headline earnings. The adjusted earnings increased by 15%, and that 15% represent the underlying operational performance. Then secondly, the OUTsurance group normalized earnings from continuing operations, and that's excluding the discontinued operations, increased by 62.2% mainly driven by outstanding results from Youi Australia as well as lower funding costs where last year, they utilized the proceeds from the Hastings sale to reduce the debt at head office. Also, we've earned significantly higher interest income due to the 350 basis points increase in the repo rates over the year under review on higher average cash balances. KTH benefited from a one-off debt forgiveness gain of EUR 520 million. Remgro's portion in that increase is ZAR 226 million. And we've already disclosed this also during the interim period. And then Pembani Remgro Infrastructure fund paid a significant dividend to Remgro of ZAR 358 million with the sale of their interest in ETG. Also included in the increased contribution by FirstRand is a special dividend of ZAR 154 million that they paid in October last year. The decreased contribution by RCL mainly as a result of continued under-recovered input cost pressure in Rainbow, the chicken business, the load-shedding impact as well as a payment of a special sugar levy of ZAR 171 million after tax, and that decrease was partly offset by an improved financial performance by the sugar division. And then if you look at Total, the significant decrease in contribution by Total Energies is mainly due to negative stock revaluation losses, resulting in a swing of approximately ZAR 900 million year-on-year negatively. And this also creates volatility in headline earnings. The other, the PRIF significant dividend as well as that KTH one-off debt forgiveness gain all created these volatility in headline earnings. So excluding all these corporate actions, the comparable headline earnings of Remgro actually increased by 27%. Next slide. We -- this is a new table that we now include and with the inclusion of this table, we attempt to provide more insight on our valuation process as well as improve the closure on the valuation methodology supplied. Firstly, some insight around the governance process, and Jannie has also alluded to that. In line with one of Remgro's strategic priorities, namely portfolio optimization to improve the asset scarcity of the portfolio. The Board established a valuation subcommittee during the 2021 financial year to assist the Audit and Risk Committee in gaining assurance on the valuations of unlisted investments, thereby ensuring the robustness of Remgro's intrinsic net asset value. This function has become increasingly important as Remgro's portfolio has now evolved towards a more -- towards more unlisted investments. So more than 70% of Remgro portfolio is now unlisted. And then in addition to that, if you look at the year-end, the INAV table is actually part of the audited consolidated financial statements. So the auditors do perform an independent assessment on these valuations. And the outcome of these independent assessments is that most -- that all of these valuations are actually in the range with the auditor's valuation ranges. So that's also now been signed off by the auditors. Secondly, the table provides a snapshot of the valuation approach for each of the large listed unlisted investments. And here, you can see what the primary approach is for each investment and the type of discounts that we applied to the valuation, and that's for improved disclosure. Just want to mention 3 or 4 major investments. So at Citi June 2023, 2 significant investments, namely Mediclinic, which was previously listed and the Heineken Beverages were valued at as unlisted investments for the first time in this regard. Due to the significant contribution of the investment in Mediclinic to Remgro's INAV, it's more than 1/4 of Remgro INAV. Remgro engaged the services of an independent expert to perform the valuation. The valuation methodology used was the sum of the parts methodology, which was underpinned by the discounted cash flows of the underlying businesses. And the 3 big businesses of Southern Africa, East London and the Middle East. And each business valuation range was performed in their currency and based on that country's forecast signed off by management and the Board of that country -- companies. The increase of 7.6% represent the uplift in the pound price per share from the transaction price of GBP 5.01 to the current value per share of GBP 5.39 so that GBP 5.39 is the midrange of the independent expert valuation range, which the valuation committee has signed off and was approved by the Board and the Audit and Risk Committee. Then regarding Heineken beverages, given the short period since the distell Heineken transaction implementation at the end of April 2023, the Heineken Beverages investment was valued using the price of a recent investment methodology. Since limited integration has taken place as at 30 June 2023 and reliable consolidated forecast information is also limited. They are still busy with the integration of this merger. So going forward and consistent with Remgro's valuation approach, it is most likely that a different valuation methodology be used, for example, the discounted cash flow methodology. In such an instance, various discounts for a lack of marketability, lack of control, forecast risk, et cetera, would be applicable, which would affect the valuation in future. But for 30 June 2023, the Valuation Committee and the Board has decided on the price of a recent investment methodology to value of the Heineken Beverages merged entity. The valuation of CIVH is performed internally and tested for reasonability with the outcome of the annual external valuation done at CIVH level. So Pieter will also provide more insight on the valuation of CIVH later on in this presentation. Then Capevin, which is the offspring of the distill Heineken transaction, Capevin's valuation increased by 50.5%. And that 50.5% represents the uplift in the sum of the parts valuation from transaction price of ZAR 15 per share to the current value of ZAR 22.60 per share. And that uplift is mainly due to the disposal of Gordon's Gin to Diageo, resulting in net cash received to date. So that's additional cash that sits on the balance sheet. And Gordon's Gin operations also continued its good performance since the Heineken transaction announcement to the transaction effectively, which also had a positive cash flow impact on this valuation. Then the whiskey business, over the last 2 years, the performance improved, which is reflected in the DC evaluation of the whiskey business. And then in addition to that, the rand valuation also benefited from the weakening of the rand against the hard currencies. Therefore, the result in 50% increase in the valuation of Capevin. Next slide. This is just a summary of the contribution per platform to headline earnings as well as INAV. Here I just want to highlight on the headline earnings side. The contribution by health care increased substantially relative to the other platforms to 25% of Remgro's earnings, headline earning from 18% in 2022, mainly due to a 76% increase in headline earnings year-on-year, partly offset by additional transaction costs that we've accounted for during the lag period. Another significant increase in headline earnings contribution is the diversified investment vehicle platform. And that's mainly because of the PRIF dividend that we received and the KTH one-off debt forgiveness gain. Decreased contributions are from the consumer goods due to the underperformance of RCL as well as industrial and mainly due to the impact of the negative stock revaluations at Total Energies. If you look at the INAV per platform, the significant contributor to INAV is Mediclinic with increased contribution from 25% to 34% year-on-year, mainly due to a 60% increase in the ZAR value. And I'll unpack that 60% increase later. So in the following slides, I will highlight some key takeaways from our respective investment platforms. And while I will not go into too much detail on each in the annexes to this presentation, which you can download from our website, we have provided more detailed information on the underlying performance measures and valuation considerations of each of our material investments. Next slide. So the health care platform. As I alluded to, the health -- headline earnings contribution increased by 76%. While if you look at the adjusted earnings in pound terms, that's up by 15%. We've also accounted for transaction cost portion, during the lag period amounting to that ZAR 539 million. So Ronnie van der Merwe and Jurgens Myburgh who will unpack these results later on in this presentation. Just want to highlight on the right-hand side, the 60% increase in the ZAR valuation, the rand valuation, mainly due to an 18% increase in the pound value per share from the GBP 4.58 close at 30 June 2022 to the valuation of GBP 5.39 at 30 June 23. We've also acquired an additional 5.4% interest -- indirect interest in Mediclinic through the Manta structure at GBP 221 million. And then the rand valuation also benefited from the weakening of the rand against the pound year-on-year. Next slide. Consumer Goods, it's a busy slide. If I quickly go through the main components of headline earnings in consumer goods. If you look at distill, distill's numbers are included for 10 months up to end of April this year, and that's compared to the 12 months of the previous year. Distill reported normalized earnings adjusted for abnormal transactions and currency movements for the 10 months, and that increased by 16.3%, mainly due to an increase of 14% in gross revenue on 6% higher volumes, and that was mainly driven by double-digit revenue growth in ciders and ready-to-drink categories. And Savanna and Hunter's are the standout performers in that category. Heineken Beverages' results is included for 2 months and that 2 months result amount to a loss of ZAR 75 million. And included in that ZAR 75 million amortization and depreciation charges of ZAR 56 million relating to the intangible assets identified with the merger. So excluding these charges, the contribution amounted to a loss of ZAR 19 million, mainly as a result of constrained consumer environment and load-shedding affecting customer behavior as well as supply challenges, most notably on the multi class due to global price volatility, local supplier constraints and volatile demand. Just quickly an update on the Heineken distill integration process. The IT integration was implemented at the beginning of this month on the 3rd -- the 4th of September. So for the 2023 year, the priorities for the merged entity includes the setup of the new organizational structure, harmonizing of systems, network consolidation and joint planning and reporting. And in 2024, the business expect increased synergy deliveries as the merged entity settles into new ways of working. Capevin's results for the 2 months amounted to EUR 14 million. If you look at year-on-year profit from the continuing operations, that's the whiskey business, increased by 13%, mainly due to strong revenue growth of the single malt whiskeys and as well as Scottish Leader. RCL had a challenging year, reporting a decrease in underlying headline earnings from continuing operations of 20%, which Paul Cruickshank, RCL Foods CEO, will unpack later in this presentation. Siqalo, the sprits business, the same message, the trading environment remained challenging due to volatile commodity prices and exchange rates, increased load shedding and rising inflation and interest rates. Siqalo has experienced a decrease of 5.2% in volumes as consumer spend was negatively impacted by elevated inflationary environment. The decrease in volumes coupled with a 17.6% increase in material costs driven by volatile commodity prices -- commodity prices and exchange rates resulted in an 8% overall decrease in operational EBITDA. Okay. Then on the financial services, the major investment here is the listed OUTsurance Group. OUTsurance's normalized earnings from continuing investments increased by 62%, mainly driven by higher earnings from OUTsurance Holdings and lower funding costs as the Hastings proceeds were utilized to settle group debt. OUTsurance Holdings' earnings increased by 44%, mainly driven by pleasing financial and operational results from Youi Australia, as strong premium growth continued and favorable weather conditions supported a significant increase in profitability. OUTsurance announced their annual results a week ago. On the infrastructure, mainly the investment in CIVH, the increase in headline earnings is due to improved performances by CIVH's underlying businesses, DFA and Vumatel, which Pieter Uys, CIVH Chairman will elaborate on later in this presentation. Just on the industrial portfolio, I will quickly just comment on the results of APSA, Total Energies and Wispeco. APSA also experienced erratic and generally low levels of demand, especially from several large tonnage customers, combined with high levels of plant maintenance activity. And these factors weighed in on the results of the tonnage division, which is the biggest part of their business. The packaged gases volumes continue to improve and the acquisition of Weldamax, a welding consumables and equipment supplier further enhanced performance in this division despite significant cost pressures. Total Energies, excluding the volatility of the stock revaluations, their contribution to headline earnings decreased by approximately 30%. And the decrease is mainly due to higher input costs, heavily impacted by supply challenges experienced in the importation of their finished fuel products as well as crude oil. Wispeco's aluminum extrusion volumes were negatively impacted by lower business confidence as well as reduced activity levels in the commercial and residential business building sectors. Next slide. This is the normal cash flow bridge that we supply to the market. And you can see the main driver of cash earnings at the center is dividends received from our underlying invested companies. So this year, amounting to ZAR 3 billion. We've also utilized approximately ZAR 6 billion cash in investing activities during the year under review, of which the most significant is the acquisition of an additional 5.4% indirect interest in Mediclinic for GBP 221 million. And that results in a net cash outflow of ZAR 3.2 billion year-on-year, with a cash balance at the center of ZAR 9 billion at year-end. Next slide. This graph shows the evolution of cash generation to the center of the current portfolio since pre-COVID period in 2020. So you can see it's just under ZAR 3 billion, ZAR 2.7 billion in 2020. The impact of COVID in the first half of 2021 down to ZAR 1.5 billion as well as the recovery path since then. So if you look at currently ZAR 3.1 billion dividends received at the center. So this current portfolio has now recovered from and surpassed pre-COVID levels on an absolute basis, so rand for rand. And I think it's a good story if you look at the increase from last year to this year. And on the next slide, these -- this increase actually drove the declaration of the dividend, the final dividend of ZAR 1.60, an increase of 60%. So the total dividend for the year is ZAR 2.40 and that also is an increase of 60%. But you'll see the evolution of the recovery path since COVID, a 66% increase in dividends from that low base last year and then this year, another 60% increase in dividends. The 60% is not an expectation of things to come in the next few years. So it's just -- I think we now recovered on an absolute basis from cash generation at the center since COVID. And then just if you look at yields, Jannie mentioned the yields. So the cash yield on the dividend yield for this year, based on the 30 June 2023 price is 1.6%. Last year, it was 1.2%. And in 2021, it was below 1%, 0.8%. So also an improvement in the cash yield from Remgro in respect of dividends paid. Thank you, Jannie. And I'll hand over to Ronnie from Mediclinic.

Thank you, Neville. Thank you very much, and good morning, everybody. I'm going to spend the next few minutes on the long-term group strategy of Mediclinic, after which Jurgens Myburgh will discuss the operational performance. We've been working consistently over the last 4 years on our long-term group strategy. And the purpose of this strategy is to deliver value for our shareholders, first of all, and secondly, also to reposition the business for the future, for growth in the future, and we can only say that this is important for us in a fast changing health care environment as it stands today, things are moving along quite fast. We are -- the strategy consists of 6 components, as you can see there on the slide, and they are all interrelated to one another. Starting off with integrated health care provider, we redefined ourselves 4 years ago, not as a hospital, pure-play hospital group anymore, but an integrated health care provider. That gives us the opportunity to start investing and developing revenue streams outside and around the hospital care setting. It also gives us the opportunity to develop our referral channels into our facilities a lot more effectively. The second component is digitalization. And there, we talk about digital health transformation as well as digital operational transformation. What we want to do there and busy doing objectively is we are improving patient access and engagement with Mediclinic. We are working on and developing digital health functionalities, also virtual care functionalities that will interact seamlessly with our physical care environments. And we are quite excited about what we are doing there. The last thing we're also doing under digitalization, is robotic process automation. The third component is innovation. And there, we're taking a dual approach. First, starting with a bottoms-up approach, where we're really making use of the innovative and really good ideas of our people on the front lines to improve our operational processes and operational efficiency in the hospitals and also to improve our care processes and therefore, getting better patient outcomes. On the top-down part of innovation, what we do is we are developing new revenue streams as well as new business models. The fourth component is data. Health care is a very data-rich environment, as you all know, and data, good data is becoming an asset in health care. So what we are doing is we are working by developing our data sets, the integrity of our data sets for that to be much better. Also, our ability to use our data much more productively, we want to make sure that we make better decisions faster in all layers of the organization as well as in all functions of the organization. And we're quite happy with what we have been doing so far. Also, we want to track our patients and we want to monitor them inside of hospitals, but also in all the other care settings. The fourth component is operational excellence, a tough environment in which we are. Jurgens will unpack that a little bit more. There, we're looking at staff deployment and staff scheduling. On consumables and supplies, we are looking at standardizing that ever more. We're looking at process redesign and automation and lastly, we are streamlining back office wherever we can. The last component is growth. We are looking at growth prospects in our divisions wherein which we are by way of investing in the continuum of care, and we're making good progress there. And then we are also looking at expanding our footprint to countries in which we are not at the moment. Thank you. That is all from me. I think just to add to that is to say that we are really -- we really believe that the strategy will position Mediclinic very well for the future, and we are quite comfortable with the progress we've made. I'm handing over to Jurgens Myburgh, CFO of Mediclinic Group to talk about the operational performance.

Thank you, Ronnie, and good morning to everyone. Before I speak to the contents of the slide that you see in front of you, just to recap some of the group numbers that Neville mentioned earlier at a Mediclinic level. For our year ended to March 2023, revenue was up 12% in -- at a group level, up 4% in constant currency. Our adjusted EBITDA, which is in line with the way that we've presented this in the past, was up 9%, up 1% in constant currency. And our earnings has never indicated, adjusted earnings was up 15%. What I'd like to do is go through this in a per division basis. And what I will do is, firstly, talk about a little bit of detail on the year ended 31 March 2023 and then provide an update of trading up to the end of August of where we are right now. So starting in Switzerland. Revenue for the year ended 31 March 2023 increased by 1% to CHF 1.9 billion, driven by inpatient revenue growth of 2% and outpatient and day case revenue growth of 3%, offset by reducing revenues from COVID-19 related testing and vaccination activities. Inpatient admission growth of 1.4% was impacted by nursing capacity constraints in certain parts of the division. Inpatient admissions were 4% above pre-pandemic FY '20 levels. The constrained revenue growth in the period, combined with the elevated spend on temporary staff and employee overtime costs resulted in a 6% decrease in adjusted EBITDA to CHF 280 million at an EBITDA margin of 14.7%. In terms of the current trading to the end of August, there's been a continuation of the trends -- the challenging trends experienced during the FY '23 period. In particular, inpatient admissions are stable compared to FY '23 with an ongoing shift towards generally insured patients. And we continue to see elevated operating costs relating to temporary staff and overtime compensation resulting from nursing capacity constraints. Additionally, we expect the usual seasonality we experienced in the first half of the year due to the summer holiday period impacting on the margin. To address the challenges relating to nursing staff shortages, we've enhanced already existing initiatives aimed at improved attraction and retention of clinical personnel as well as improved resource management. Over the page on Southern Africa, revenue for the year ended 31 March 2023 increased by 6% to ZAR 19.5 billion, reflecting strong growth in patient volumes. Compared with the previous year, paid patient days increased by 7.1%. This was partly offset by the average revenue per bed day, which was down 1.1% compared with FY '22, reflecting an expected change in mix following the prior periods with more pronounced COVID-19 cases. Paid patient days were 3.6% above our pre-pandemic FY '20 levels. Adjusted EBITDA increased by 10% to ZAR 3.8 billion, driven by the revenue performance and responsible cost management, delivering an improved adjusted EBITDA margin of 19.4%. In terms of the current trading to the end of August, there's been modest growth in overall bed days sold compared to FY '23, the comparable period within FY '23 driven by strong demand in day case admissions. Average revenue per bed day is impacted by the specialty mix, and we continue to absorb rising diesel costs due to increased load shedding. Finally, then on to the Middle East. Revenue for the year ended 31 March 2023, increased by 8% to AED 4.5 billion. Demand for our services was strong with inpatient and day cases up 17% and outpatient cases up 14%. The volume increase was partly offset by a decrease in the average revenue per case, reflecting mix changes. Patient volumes in the Middle East are significantly ahead of pre-pandemic FY '20 levels given the growth trajectory of the division. Adjusted EBITDA increased by 4% to AED 641 million, reflecting additional head count compared with the prior year period, given investment for continued growth in new and existing facilities, which combined with the growth in pharmacy revenue resulted in a modest decrease in adjusted EBITDA margin to 14.4%. In terms of the current trading to the end of August, we're encouraged by the continued benefit from the multiyear investment program, resulting in strong growth in volumes across the inpatient, day case and outpatient environments compared with the prior year period. As always, we expect the first half performance to reflect the seasonality of the quieter summer period in the Middle East. With that, I'd like to hand it over to Pieter Uys, the Chairman of CIVH.

Thank you, Jurgens. My first slide will show the landscape that CIVH operates in. I will also just mention that I'm going to speak as CIVH Chairman, but also as a Remgro executive. So as CIVH, we also have to other shareholders, CIH, Joe Madungandaba and also New GX, Khudu Pitje CIVH, then we also has the Remgro shareholding of 57.03%. On the left of the slide, you will see the recent formation of the massive group that's put together Vumatel and DFA. During the process, it was also re-branded to VUMA and DFA with the new logos shown there. As a CIVH Group, we're also slowly starting to look outside the borders of South Africa. On the right-hand side, you will see CIVH Africa. We are looking at opportunities. Currently, we're focusing on Tanzania, maybe do something there with Vodacom. In the center, you will see the core strategy and makeup of Maziv, which is Open Access, wholesale, uncapped fiber. Around the center, you can see how the business has evolved over time. 2007, it started with fiber to the telcos. Vodacom at that time was the anchor tenant. And that evolved then into metro fiber. Metro fiber is mostly used to connect our other customers, the nonmobile operators, for example, the ISPs. And then from there, it evolved to fiber to the business. This is where we provide products into the actual enterprise or corporate. At the top, you will see the residential or consumer products on the left, where we started in the leafy suburbs of Sandton, Parker's Park View with FTTH. We call that Vuma Core. On the right-hand side, Vuma Reach, where we expanded into lower layers of the pyramid with coverage into places like Soweto, Mitchell's Plain, Fort Lewis. And then more recently, we launched a trial in Alex, Alexandra near Sandton with the Vuma Key Internet product. I'm going to go into each of these in a little bit more detail now. The first slide just shows some of the consumer metrics with Vuma Core on the left-hand side. At the top, I show the homes passed. It's almost 1 million homes passed at the moment. And of that, we have connected 300 and -- or almost 400,000 customers. You will see that the focus there is not so much on building more fiber, but on connecting and penetrating those areas that are already covered. Vuma Reach in the middle, that's the Mitchell's Plain, Soweto, Fort Lewis. There, we've invested heavily and most of the CapEx for the year went into the Vuma Reach product, increasing the homes passed from 664 to over 1 million. So in total now, we almost have 2 million homes passed subscribers in the Reach areas, 263,000. On the right-hand side, Vuma Key, it's a trial. Alex, I mentioned it earlier in the week, we took some journalists to Alex and just showed them what progress we've made there. But maybe the next slide depicts it better. This is really -- this is a picture from Google Earth in the Johannesburg area showing the contrast of the digital divide. You can see the core market segment, $2.2 million reach estimated at ZAR 5 million. But in the core homes together with Reach can be supplemented by the key market, which is really the bottom of the pyramid with another 10 million homes that can be passed and potentially connected in the future. So in Alex, while the journalists were there, we took some videos as well. And right at the end, I will show some of the videos there. But really, what we are trying to deliver into Alex is a product that is equivalent to what we offer in Sandton, uncapped Internet , unlimited Internet but at good speeds, 20 megabits per second. And then also affordable, our target price, and we are achieving it is to get to close to ZAR 100 for uncapped Internet in the month. Why are we doing this? We also continue to connect schools. Wherever we pass a school, we give them connectivity of 1 gigabits per second connectivity. And we've done a few of those across the country, not just in Alex, but also in the leafy suburbs. The demand in Alex seems to develop quickly. What we are seeing is we also have customers upgrading from a Vuma Key product to a Vuma Reach product, where they are paying more for more speeds in the month, which is a very positive development that we didn't expect to happen. On the next slide, I'm going to show you the enterprise side of the business. This has slowly recovered post COVID. You'll see in the middle, we've grown 4.5% on the FTTB product. On the left-hand side, it's the FTTT or fiber to the telcos. Not a lot of growth recently. I'm expecting to see some growth in that segment once the mobile operators start building their 5G networks because then they won't require more bandwidth to connect the higher speed base stations in. My next slides is then some of the financial results. I'm not going to go into the detail. It's there for completeness and also showing more of the granularity of the financials. At the bottom, the revenue growth, 16.7% to ZAR 6.2 billion at the CIVH consolidated level. Headline earnings that was mentioned, ZAR 361 million for the consolidated CIVH. But what's more interesting is if I start looking into the cash flows generated. So the ZAR 4.3 billion was generated at CIVH level. Of that, we paid ZAR 1.6 billion in interest, and that delivered ZAR 2.2 billion cash. All of that cash was then put into building network. Most of it in the Vuma Reach area. However, we also added ZAR 1.3 billion extra that we got from additional debt facilities that we had. So the total CapEx, almost ZAR 3.5 billion that went into the network during the year. And as I said, most of that CapEx for Vuma Reach. The next one just shows the valuation buildup starting on the left with a Maziv enterprise value based on discounted cash flow of almost ZAR 50 billion. Take off the debt, ZAR 18 billion. It increased from the GBP 15.9 million or ZAR 16 billion, and most of that went into building the network at Maziv, delivering a Maziv equity value of ZAR 31 billion. Then at Remgro, we apply some discounts, almost ZAR 6 billion, delivering ZAR 25 billion. If you take out ZAR 57.03 million, it gives us the ZAR 14.3 billion valuation. Neville also mentioned independent valuation, we - that was recently done through sanity check. That came out at almost just short of ZAR 40 billion, which you can then compare to the CIVH equity value there and add back the discounts. Next, I want to conclude with the current status of the whole Vodacom investment into Maziv and the regulatory process. The transaction was submitted to the Competition Commission and ICASA during December 2021. Recently on the 8th of August, the commission recommended to the tribunal, that the transaction be prohibited. We have a process that we're going through now. There are third parties that could possibly intervene next, and we should hear what they have to say by the 10th of November, depending on how many intervenors, the date is currently set for May 2024 as the final hearing. When I mentioned the recent visit to Alex, with the journalist. I've put together a shorter video. I've taken some of the videos that TechCentral has put onto their website, but I've also added some of my own video. And you will see what it looks like in Alex, but also the difference it's making to people's lives in Alex right now at this moment. [Presentation]

Thank you. I'm handing over to Paul Cruickshank now, who will tell us more about RCL Foods.

Presentation this morning and just touching on the strategy, our performance in 2023. And then I'll end off with a reflection on our brand performance, which is important given that we are a consumer goods business. If we just go to the first slide on the strategy, and if I capture the strategy in one sentence, RCL Foods is trying to create a value-added brand business of scale. I will just draw your attention to the left-hand side following on a strategic portfolio review, which was taken place in 2021. We announced to the market in August 2021, that our portfolio was not optimally configured. And as a result, that at the right stage in time, Rainbow and Vector would be separated from RCL Foods mainly to drive a consistent and better quality of earnings. So with the strategic intent clear, we've spent the last couple of years sharpening our strategic focus, and I'll bring a bit more color to that on the next slide. On the right-hand side of this slide just shows our operating structure, where we're in 3 business units: groceries, baking and sugar. And sitting under groceries is the Siqalo business, which as mentioned earlier, which we manage on behalf of Remgro. The last comment on this slide, I'll just draw your attention to the strapline at the top. We have spent the last 12 months unpacking our purpose of bringing clarity to RCL Food's vision with the purpose of we grow what matters and a vision is a purpose of a business that delivers value for all and creates fuel to fund enduring positive impact. And we're confident that this will now pull together our entire strategy and enable implementation thereof to be more effective. If we just go to the next slide. I'll just touch on the strategy briefly. We've got 3 strategic pillars in blue, the gray section just refers to the parts that I already mentioned that will be separated at the right moment in time. We've got 3 strategic pillars: People first, right growth and future fit. Under people first is about culture. It's about our communities in which we operate a number of our businesses work in rural communities, and it's critical that we interact and help and develop and support those communities. And then lastly, investing in our strategic capabilities. Growth is about our brands, and I'll share some of that at the end and new channels and markets in which we want to move into to ensure that we enable some growth in what is a very challenging environment. And then lastly, under growth is partnering with our strategic customers. Future-fit, best-in class, best quality manufacturing as well as the lowest cost producer and then also building a net positive business, which is a longer-term ambition. On the right-hand side, growing our portfolio. And we -- what we refer to as leveraging our dynamic platform. So what we have set up is a back-office platform together with centers of excellence as well as a go-to-market growth team. And we believe that, that is nicely positioned now to enable growth as well as bolt-on potential partnerships and acquisitions. Vector has been mentioned earlier, is sold 28th of August 2023 is the first big step in our strategic transformation. And then Rainbow while it remains part of the group is focused on low-cost value chain in this new breed doubling Hammarsdale and growing market shares as a consequence of that volume coming to the market and then managing risk, which is evident in a chicken business, particularly AR. If we just go to the next slide to talk through some of the numbers. At the bottom, I won't go through that, it just gives a sense of scale of our different operations. It's there more for information. I'll just talk to the 2 graphs, which show a 5-year trend of revenue and EBITDA. Starting with revenue, it's been a very difficult trading environment as mentioned. We've needed to trade off price increases against the consumers under monumental pressure. And it's been a fine line that we've walked. And you can see the extent of the revenue growth compared to the previous years, which shows the actual extent of the price increases that have come through. Just to mention there as well, is that during F '23, at various points in time, every single category in which we operate was in some form of decline. So we're dealing in an environment which is extremely challenging. Moving to EBITDA, our progress on F '22 through F '23, sadly took a turn in F '23, and Neville has unpacked some of that, but I'll just highlight some of the key items, load-sharing impact, particularly at our grocery facility in Randfontein affecting our pet food business, and I'll come to the numbers on the next page, but ZAR 158 million is our low shedding impact of direct cost of load shedding. This excludes the indirect cost. Rainbow also significantly impacted by load shedding making sure that the bears on the ground have food and water to now them to grow effectively. Neville has touched on the commodity cycle. I won't elaborate on that anymore, but as a big driver in our decrease in our EBITDA profitability. And clearly, our price increases, although we have taken significant price increases have not been enough to recover costs. If we go to the next slide, this just shows the bridge between our absolute reported performance. So those are the outer 2 bars, which is what was on the previous slide, ZAR 2.2 billion down to ZAR 1.7 billion, 25% drop. And then what we do is we try and strip out the material items, which are either one-off in nature or accounting technical adjustments. And I'm just going to call out the one which is material in the current year. It's the third bar from the right, which is the sugar levy. Neville also touched on this, and this is a consequence of Tongon and Gladhouse business rescue process and the business rescue practitioners suspending payments to industry. And I'll come back and give an update on that in the following slide. In the middle is 11% decrease in our operating performance. And there are 4 big blocks to highlight there. Groceries, I've already spoken to pet, largely load shutting related having a major impact on the Groceries business. We now have generation capacity in place and are playing catch up in that area. With sugar an excellent performance again in this financial year, and I'll show the context of its performance versus prior on the next slide. Rainbow challenged, it has been referenced previously, and I'll talk to the turnaround plan shortly. And then in group, there was a one-off adjustment in group, which is an impairment of our international investments and our plant-based joint venture with the Livekindly Collective. If we go to the next slide, it just hits the context and scale of the relative business units. So I'm not going to touch on the numbers. The sugar results, just to highlight, we -- the ZAR 785 million in F '22 was its second highest profit ever and F '23, it's highest profit ever. And so a very good operational performance in sugar I'll just talk to Rainbow turnaround, which Jannie alluded to earlier, and progress has been made in that despite the number is 75% down, which is largely the inability to recover costs in pricing, but there has been progress in the turnaround. And there's 2 key parts to that. One is the switch from a Cobb breed to the Indian River breed, and that will be completed in F24. Unfortunately, it's a 2-year process to switch breeds and good progress has been made and the new breed is performing exceptionally well. And then also the doubling of Hammarsdale opening was in the past couple of weeks, and that is a significant play in reducing costs and having an impact on Rainbow becoming a low-cost producer. Just on -- while I'm on this slide, I'm going to touch on the 2 master plans. Sugar master plan ended on the 31st of March. There will be a master plan 2.0 but right now, our industry is dealing with the Tongon and Gladhouse issue and the suspension of those payments and their business rescue plan. And we're hoping in the next couple of months, it will be resolved. In our results, we referenced the industry and the court case regarding the sugar industry agreements, which we regard as legislation. So therefore, it's a statutory payment and the business rescue practitioners should not be able to suspend that payments. That matter was heard in court last week, and we should get the results soon. And then obviously, what's critical is that Tongon's business facially process and their sale that needs to be closely monitored going into this financial year. With regards to Rainbows master plan, it's been slow progress. The most significant positive impact going forward is that the antidumping duties, which were suspended by the minister last year, were reenacted in August 2023. So this should have positive price performance going forward. If we just go to the next slide, which is the last slide, being a consumer-facing business, it is important for us to focus on our brands. And this is what we call our relevance in the market. On the left-hand side, I'm not going to go through full information. It just shows you the scale of the brands between ZAR 100 million and ZAR 1 billion. So significant brands within RCL Foods portfolio and quite a wide range, as you can see from the slide. But let me focus on the right-hand side, which is our shares and just going from left to right, 12 months to June 2022, our market shares. And then what is our performance for the full financial year. And then we've given you the trend over the last 6 months. And I'll just quickly talk through some of the challenged ones. I mentioned earlier the Pet food brands dog and cat food down, and it's a significant challenge for us and we need to regain our market shares that have been lost there. And you can see the most recent trend even further down, which is concerning, but we have clear plans in place to recover that volume. Good performance in Yum Yum, Nola Mayonnaise, the 46% share is too high and more of a correction ion Nola towards the 41%, but somewhere between 40% and 45% is where we need to operate. Sunbake this represents the national bread statistics, so slightly down in the 12 months, significant promotional activity in the bread market currently, which has put pressure on our results and to see an improvement in the last 6 months is we've had more promotional activity to make sure that we maintain our brand relevance. And in all 3 parts of the Rainbow brands and the value-added part of Rainbow performing very well and improving over all periods. And with that, I'll hand back to Jannie.

Thanks, Paul. If I can just get my slide back on the screen. There we go. Thank you. I mean we're not unaware of what is happening on the discount side, and I think we're acutely aware of that. And maybe just one point that I want to make it the discount widened significantly since the first rand unbundling because of the relative size of our portfolio has got smaller and maybe that has an influence. But we're acutely aware of that. And maybe I'll discuss 3 levers that we're actually going to focus on actually to drive the performance of Remgro in the next financial year and going forward. I'm going to actually focus on those 3 yellow ones that we've rated ourselves. So remember the scorecard right at the start that I gave you, and I'm going to talk briefly through them going forward of what we'll be focusing and the key focus areas. If we can just hop over to the next slide, please. And really, it's accelerated portfolio performance that we talked about, capital allocation, a fine balance between what do we put behind our core portfolio, what do we invest into new growth opportunities as well as returning capital to shareholders, as I've shown on that slide between unbundling sale of assets, dividends and share buybacks. And then very, very importantly, from our side, we also have got noncore assets that we need to clean up and we're aware of that, the smaller investments, and we spoke about that in the past as well. And -- but we need to do that in a responsible manner going forward. Then critically drive underlying performance of clear performance measurement metrics on our underlying companies. Having some of these companies now unlisted makes a big difference for us. We can interact much more intimate with the management team closely, get them aligned with our philosophy and way of thinking and we've actually some of these layers of listed company boards actually make the reporting lines and the interaction much easier in a much regular basis. And then clearly, across the whole portfolio disciplined cost management, considering the constrained environment that we're operating in, load-shedding and all of those things become the master of our own destiny infrastructure products, water electricity and get some price certainty in some of these underlying cost drivers. Then clearly improved disclosure and stakeholder management. We've done that today. We spent a lot of time today exposing of shareholders to our underlying companies that are not listed, Vector and RCL. I think I want to touch briefly because of open and transparent communication with shareholders, Neville mentioned the Heineken valuation and the reason why we use that. We actually bound also maybe just give you some more transparency because our underlying NAVs are audited as well. We use independent valuation, but they are audited. And so we are also combined by some IFRS rules. And those guardrails are very strict of what we can do. That is why we actually quite openly that we will most probably use a different valuation methodology next year when we do the Heineken Beverages SA. As you've seen, we use DCF. And then on top of that, we put discounts. So you should expect something along those lines. The reason why we didn't do it this year as Neville communicate, I want -- don't want to go into that completely. Also, it's -- you must realize the companies only become integrated in September until from May to September operated separate companies. On the beer side, there were some challenges that we experienced both from -- in the constrained consumer. There were also some -- in the market, some a lot of discounting happening load shedding at -- issuing where the beer was available. There are also some significant ones of cost on the Heineken side regarding some issues on the supply chains and the brewery side and things like that, but they will order one-off cost. So we think the 2-month period is not a real reflection of the underlying business. We're getting the grips of it. We're getting the strategy getting in place and it's a business that can turn around very quickly. So some of these challenges in the short term is not a real reflection of the long-term performance and the potential of this tremendous portfolio that we've got with it, also the exciting potential into the rest of Africa. So I just want to put a health warning on that in the valuation, you'll probably see a different valuation that really will be more consistent with the Remgro valuations going forward where we do DCF and we apply discounts on that. So I've mentioned that to my team tomorrow it is a little bit like in the banking industry today, you can't just do an overlay on provisions, so auditors will caught the fire, okay? So we can't just do some of these overlays. It needs to be audited, it needs to be done within the guardrails of IFRS. But I just want to for total transparency and communication, we will definitely probably use a different valuation methodology next year. And the last one, I've dealt with that extensively, we'll continue our sustainability drive and to position Remgro as an ESG industry leader. On that note, I want to conclude, and we can go over to questions and answers.

Thank you, Jannie, and we'll start with the questions on the webcast. We've got a few questions. Maybe the first one for you, Jannie. Once we've implemented on the CIVH transaction. Do you foresee any other large corporate actions? Or will the focus shift to returning capital to shareholders through share repurchases?

I think it's probably part of my answer it is a balanced approach. So clearly, it will be returning capital to shareholders. I think that has become one of our core capital allocation decision increasing the dividends, share buyback program, although it's a dynamic thing, it's a balance, if there's new opportunities that arise in the availability of capital and things like that. But as I said in the start, share buybacks at these discount levels makes economic sense. In other corporate actions, I think I've mentioned, we need to -- there still some assets that are noncore that we need to clean up. And then we said some of the portfolio assets as well that we also -- and as I said, probably form part of the noncore portfolio, what we're going to do with that. So the journey is not finished. That's why we rated ourselves a yellow and there's still work to be done. So we're not going to sit back and relax after CIVH Vodacom has a lot of work to be done.

And maybe linked to that, Jannie, would the discount remaining elevated would you consider using some of the portfolio investments to fund an accelerated buyback?

I think given that answer, so it's a balanced approach. So it depends on other capital commitments that we might have. But I think we've shown that we've already now executed on a big buyback program. So I think it's part of the core strategy. So clearly, that will remain and we'll continuously evaluate that going forward.

Thanks, Jannie. A question for Neville. On the CIVH valuation, what was the carrying value of the Gordon's Gin distribution agreement at June 2023? And was the sale value accretive?

So for sure, the sale was value accretive. So if you look at the value of Gordon's Gin, there are 2 pots. And it's 2 cash pots. The one is the proceeds of the Gordon's Gin distribution agreement, the sale and the other part is the cash generation on the Gordon's Gin operations since the transaction announcement up to the effective date of the transaction. You can remember the terms, one of the terms of the transaction was the prohibition of any distributions that will diminish the equity value of the entities. And at Remgro level, we actually felt that because we didn't receive any dividends over the last 2 years from distill. So that also had a positive impact on the valuation. So that was approximately 20%, the 2 cash pots of this valuation. And the biggest portion of the valuation is the Scotch whiskey business, which also improved because of improved performance, contributing around 75% of this valuation.

Thanks, Neville. And on Mediclinic, Ronnie, what is the outlook on nursing shortages in Switzerland? And do you see a similar dynamic playing out in the South African market, given some of the challenges surrounding training of nurses in the country?

I think Jurgens is best positioned to give that summary quickly. Thank you.

Yes, I think in the Swiss environment, it's a combination of 2 things. Firstly, if we look at our revenue growth, it's constrained firstly by the nursing capacity shortage and secondly, also by the changes in mix, which is impacting our average revenue per case. That is then enhanced or increased by what's happening to our cost base, where we're spending on temporary staff and also employee overtime costs. So this is creating a challenging environment for us. And what we're doing about it, firstly, engaging publicly on the need for tariff increases, specifically in our base rate. And then secondly, looking at our staff and enhancing what we already have in place with respect to attracting and retaining clinical personnel and also improving the resource management, the way in which we allocate and work with our staff as well. I do think that there are aspects of this that are globally relevant, in South Africa, we do have training facilities aimed at bringing those skills into our organization. And so we could perhaps be a little bit more proactive. And similarly, we also have an agency component in South Africa that we're able to deploy as well. So it's slightly different dynamics, but it certainly is part of a broader global dynamic.

Thanks, Jurgens. And just on Mediclinic South Africa, we've reported a 67.7% occupancy and at an EBITDA margin of 19.4% in 2022. Could you maybe comment on the outlook for occupancy and margins in 2024 going forward?

So we don't provide specific guidance. We will -- I've given the numbers, an indication up to the end of August, our half year numbers up to them in September. We will make available through Remgro as and when. But what I can say is just to reiterate what I mentioned earlier is we're seeing an increase in our volumes driven specifically by day case admissions. What that does is it brings through a change in specialty mix, it impacts our average revenue per case. But we -- the underlying growth that we're also seeing in related businesses like an increase in -- and some of this is organic, some of this is acquisitive through exposure to mental health, oncology, precision medicine dialysis. So these are sort of things that sits outside of our existing inpatient capacity that we see growth in the South African environment.

Thanks, Jurgens. And maybe a last one. Can you give a breakdown of your mix between surgical and medical cases and whether you're seeing higher surgical activity recovering towards pre-COVID levels.

What we're seeing at the moment is our surgical is more or less in line with where it was last year. Again, the point to make here is that what we're seeing is the strong growth in our day case admissions. But other than that, what we're seeing is basically in line with last year.

Thanks, Jurgens. And maybe on CIVH Pieter, a few questions. DFA's revenue is up 6.8%, while headline earnings is almost up 1,000%. How did it achieve the substantial growth?

So DFA has used to try and during COVID and post-cut to also look at the way they do business. So they've optimized and also gained synergies from the massive integration with Vumatel that has resulted in cost savings. They have also paid down some of their debt, which resulted in lower interest rate payments. So I would say that those are the 2 biggest contributors.

And on Vumatel, Pieter, what's the negative impact on headline earnings of -- while revenues increased by 15%?

So firstly, Vumatel is now also starting to pay taxes, which is good. And then all of the additional debt that was added to the cash coming from the business was used in Vumatel. So the big difference here is the increased interest rate payments on that debt.

Sure. And on the debt, Pieter, your debt is up ZAR 18 billion -- up to ZAR 18 billion. How much can its balance sheet still be pushed up before it becomes a problem at the massive level?

Yes. So we measure ourselves on the debt EBITDA ratio, we were 4.5x a year ago. We're down to 4x now. Eventually, we want to get down to a level of 3x. So in the -- but in the meantime, we're applying all the available cash back into the business. So if I take a step back, if we want to really democratize the Internet and do everything that I was talking about in the key markets and connect and pass those additional 10 million homes, the current balance sheet wouldn't have the capacity to do that. And that's also one of the reasons we looked around for additional investors resulting in the transaction that's currently in front of the competition tribunal where Vodacom will invest equity into the business to help us free up some additional investment opportunity.

Thanks, Pieter. Jannie, just on disclosure, what specific measures are you putting in place to ascertain reporting transparency for the large unlisted portfolio going forward?

I think it's today is part of this. So that we expose our management teams underlying to -- in unlisted to the shareholders. We also again at the Capital Markets Day, we will do additional disclosures and presentations on that. And then as you've probably seen that we've published on our website, we published a full set of Mediclinic results for the year ended March 2022 that was done. So I think you'll see more of that going forward and that total transparency. But I mean, still it's a journey. So we also can have some input from the shareholders if they think there are certain things that we're not disposing. I can't promise that we might fulfill everything but some of the things might be competitor sensitive, et cetera, et cetera. But all this -- but we'll -- it's a journey, and we'll try to be accommodating as possible.

Another one for you, Jannie, just on general portfolio management. As an investment holding company, how do you see your competitive advantage over a normal asset management firms?

I think asset management firms wouldn't invest into CIVH as a start-up, wouldn't have invested into Vodacom as a startup. They wouldn't have invested in Tracker as a start-up. And I think that's the ability that we've got that we can continue on this journey as an investment holding company. We've been invested in CIVH since 2007, Mediclinic in -- since 1984. So it's a totally different set of factors for an asset manager where their time arises are different must and rightly so. And that is why we say we're unashamed as a investment holding company. I think we play a critical role in capital allocation, not just from a Remgro point of view, but also from a South African end point of view, we see some of these opportunities that we can participate in and drive growth forward, not just for ourselves but also for SA Inc. I think we've made a tremendous difference in the social impact that we've done just by some of our sustainable investments via Mediclinic, CIVH, RCL on the food side, some of the foundation. So I think we play a critical role in that respect.

Thanks, Jannie. And for Ronnie, can you give us an update on the investigations about the allegations by the whistleblower and how that has influenced your trading relationships with maybe contractors or schemes?

Thank you, Lwanda, yes we became aware of these allegations in August, the allegation of billing irregularities in 6 of our hospitals. We were not aware of this prior to this allegation that came about. In the 40 years in which we've been operating in South Africa, we've always been responsible and ethical in our actions. We don't tolerate wrongdoing in our company. So when something like this happens, we take it extremely seriously. We immediately started an investigation. We appointed a third-party investigation firm, E&S Africa under the leadership of Steven Powell as a forensic investigator. And they are busy investigating these allegations. The investigation is going quite well, but it's not done yet. The way we understand these allegations, this is -- it pertains to a specific part of our company's activities that is represented by a small portion of our revenue. A very small portion, I have to say. We -- I might have to just point out as well that we have very rigorous structures and processes in place for our staff to be able to report these -- any wrongdoing or anything that might be bothering them through an FX line both by way of telephone or e-mail. It's all anonymous. It's managed by our risk management team. The FX line itself is run by Deloitte. In the last 5 years, we had not a single complaint about billing irregularities. Our relationship with our funders, maybe just to point that out quickly as well, it's incredibly important to our business to have constructive and transparent and trustful relations with our medical scheme partners that we work with, and we've been doing this for all the 40 years we've been in South Africa. And we are very transparent with them. They, obviously, according to their own governance rules, they also investigate from their side, whether they could -- can find anything. But at the moment, it's not impacting -- this hasn't impacted on our relationship with the schemes because of the foundation that we've formed over years and the reputation that we've built up. And we all collaborate with one another at this point. So there is no impact on trading with regards to the -- our relationship with schemes. And if and when we find, get to the end of the findings, and we find any areas of concern, we will obviously act accordingly and swiftly and to rectify the situation should that be necessary.

Thank you, Ronnie. Last question is for Pieter on Energy Exchange. How will the exchange compete with the existing role players like Discovery and Vodacom? And do you have any clients yet? Are you fully operational?

Thank you, Lwanda. Yes, Energy Exchange has been in existence, must be for 5 years now. We have had time to put together a business model, develop the technology and the plumbing behind putting together the business, trading business, so they received their license during November of 2022. So they're actually live now. They have traded electricity, probably more than 1 gigawatt hour quantum of electricity that's gone through there, which is still subscale, but it's no longer a pilot. We have live paying customers, and we're buying electricity to trade. So we will continue -- we firstly welcome competitors to the space. There is enough energy requirements in the country for more than one player. So we think it's good that there's more interest in this space. And we will continue to put energy into making the energy space work for us.

Thank you, Pieter. And that brings us to the end of the questions on the webcast. We will now take questions on the Chorus call.

[Operator Instructions] The first question we have is from Rey Wium of SBG Securities.

Well, first of all, congratulations on the presentation format. I mean it's really informative. Just a quick question. On the -- I mean, basically deals with the Heineken Beverages valuation. Am I correct, that you said that it is based on the transaction value? So if that is the case, then should we use that ZAR 165 bid price as a base to get to the ZAR 12.45 billion. And just to that, I just want to clarify the Capevin value of $1.6 billion, does it include the cogen termination fee?

If I don't get the answer 100% right, Neville can correct me. But -- so the Heineken valuation is the ZAR 165. Remember the offer price was ZAR 180 consists of 2 elements: ZAR 165 million for, let's call it, the in-scope assets and ZAR 15 for the Capevin assets. So the valuation to ZAR 12 billion is on the -- based on the ZAR 165 million plus the additional shares that we bought. So that's why there's an increase. So remember, we bought some additional shares. So that is why -- so you mustn't just take our previous shareholding. We bought some additional shares. Neville, that's correct.

Yes. So we were scaled back firstly by around 10%, and we bought additional 13 million shares there.

But yes so we got actually...

There were 75 million shares in Heineken bev at 18.8% interest.

So on the Capevin side, the ZAR 15, really, there's an increase to just over ZAR 22 and really it relates to the cost of the cash in the -- because of the Gordon's sales. So there's more cash in the business itself plus the uplift in the value of the whiskey asset, those are the 2 main things. So the ZAR 15 you must compare the ZAR 22, ZAR 22.60.

ZAR 22.60. Yes.

ZAR 22.60.

Yes. I just want to know when the cash comes in of the ZAR 1 billion, whether we should reduce the value of that value of ZAR 1.6 million to ZAR 600 million...

The cash will be sitting in the Capevin business unless...

A portion of the ZAR 1 billion has already been received.

In energy.

Yes. So that's included in the valuation.

Okay. Excellent. Got it. Just a question maybe for Pieter. In terms of the competition ruling, there's a scheme. I mean just -- I mean obviously, we hope it will go through. But in a worst-case scenario, I mean, how does it impact your business plans? Does it mean that you will need to look for new investors or that it will slow down your view of CapEx rollout?

Thanks, Rey, the quick answer is, yes, it will have an impact in the long term. If we want to connect the 10 million homes, that's potentially available in the Key market and 4 more in the Reach market, we will require additional investment. It will take us 10 years to do it on our own. However, I think it will make a big difference to the country and to the business if we can scale that up. So there is enough capacity to continue with our business plan, but it's really to scale up the rollout of Internet into the country. Thank you.

Just if I may...

Important to note -- okay, just sorry, it's important to note that the valuation of CIVH was done not assuming that the Vodacom deal is done. It was done on a basis that is no Vodacom deal. I think that's important to note.

Yes. And maybe just a quick follow-up. I mean you talked about a balanced approach in terms of your investments. Yes, I'm just curious about the portfolio investments. I mean they totaled about over ZAR 15 billion, and you don't have any sort of meaningful board representation on any of those assets. Is there maybe an opportunity to go the other way and not to realize it, but maybe increase in investment to a sizable size in order to get to significant influence.

I think we see that as more cash or near cash portfolio investments, as you probably see now what we've done in the FirstRand stack we put hedges around that. Also make sure quite convenient sometimes when our debt matures. So this is a deliberate strategy around some of those portfolio investments. So I don't think you'll -- we are firmly believe that probably it's not -- you'd rather buy some of your portfolio investments and you actually swapped in for your own share at a discount. So remember, you take a FirstRand setting at a x amount if you unbundle it, but in our portfolio sitting at x minus 40%. So I don't think that would be a good capital allocation decision. But that is clearly that's away from our side the way we see it.

The next question we have is from [ Feng Dove of Investec & Wealth Investment ].

Hopefully you guys can hear me?

Please go ahead with your questions, [ Feng ].

Okay. A quick one initially and hopefully an easy one. On the Heineken Beverages and Capevin side, when would you envisage start seeing dividend flows out of those? And am I correct? It's the 80% profit after tax that I think was indicated at time of transaction, just to confirm that.

So to give you the straight author of when we will see dividends depends on the cash flow generation, how the integration goes. I mean the integration it's not a 2020 game. So it's going to take at least a year to realize some of these synergies to get to all the operations going. So I'm not going to commit to anything time at this point. I don't want to overpromise and under deliver. So let's see how things pan out. I mean, we went dark on the 1st of September on to manual system to switch over on to one platform, one system, one invoice and actually remarkably probably went quite well. But there is still some lots of integration work that needs to be done. So I don't want to commit on anything when we start paying dividends. And clearly, I mean, as we all know, the marketing stuff out there, there is a lot of discounting and the beer things were happening load-shedding combined with all of those things. So put all of these things into but it's difficult for me to say we need to analyze the business. So forgive me for not giving you a firm commitment on that. I didn't get the second part of the question. I didn't get the second part of the question.

Capevin.

Okay. Sorry, on Capevin what was...

Also expected dividend going forward?

Neville is waiting for a nice dividend out of Capevin.

Yes. The second one, and hopefully, legally, you can answer this now that the transaction has been consummated. But can you give us a bit more color in terms of the Mediclinic transaction and really the introduction of MSC as a shareholder, which don't really seem to have any strategic sort of adjacency if I can term at that in terms of what they were invested in previously. And I mean in the presentation, the Mediclinic gentlemen spoke about moving into adjacent markets was part of the reason of taking Mediclinic private in terms of growth initiatives within Mediclinic that you felt that perhaps the market wouldn't be willing to stomach and that having yourselves and potentially a deep pocket investor in the form of MSC was the right route to go? I mean I'm just trying to get an idea in terms of from a high level, why the takeout was affected and what MSC really brings to the party.

I'm going to ask Ronnie to help me, but just -- because he's also now experienced him as a shareholder. And I think we also surprised that some of the things that we can do together. But just so we didn't go actively looking to delist Mediclinic or somebody approached us. So there was no that we were worried about the company or there were some things that were going to happen that we were looking for somebody with deep pockets. So that was totally from the lay field that we got approached by the party to look at this. So it was in that regard, and we saw that as a group opportunity to take Mediclinic private to let Ronnie and the management team focus on the operations, not dealing with the London capital markets all the day that they can actually spend about 50% more time on the business. But yes, I don't want to preempt what was Ronnie saying, but Ronnie, maybe just share briefly some of your experience, I think we're having people in Switzerland a shareholders where we are having a few challenges, makes a huge difference as well from that perspective. But maybe you can just share some of your initial thoughts.

Yes. Jannie, thank you very much. I think firstly, the strategy hasn't changed. We still have the same strategy as you would have heard when I explained it. It's a strategy we've been working on for 4 years, and it's supported by the shareholders. Secondly, having a shareholder that sits in Switzerland, as Jannie has just said, definitely has advantages. It has advantages for various reasons. They are very well connected in Switzerland. They understand that market, and they can work closely with our local team on the ground to optimize our business. They are very focused on supporting us to become the best version of ourselves. I think that's really very highly appreciated. They are incredibly operationally involved. They're very experienced and therefore, they will very quickly get into the depth of what we do and how we do this, and that can only be a benefit to Mediclinic. Then just to remind you that they also run medical services on their ships, their passenger ships takes up to 9,000 people each. They have hospitals on there. So we are looking at various synergies in terms of procurement on the ICT side and on medical services, and there may be more. But in terms of mergers and acquisitions, we never bank an acquisition purely on synergies, as you know. So there are other imperatives. But also, the company is very well connected throughout the world. They operate in 155 countries and they can give us a lot of advice in terms of territories as well. So there's going to be big advantages over time.

We have no further questions on the conference call.

Okay. Thank you. Then I'm going to aim the session, and thanks everybody for attending and see you in probably 6 months' time. Thank you very much. All the best. Bye-bye.