Remgro Ltd (STU:RE7) (Q1 2025) Earnings Call Highlights: Strong Earnings Growth and Strategic ...

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Wed, Mar 26, 2025, 1:00 AM 4 min read

Headline Earnings: Increased by 38.7% from a restated ZAR2.7 billion to ZAR3.7 billion.
Headline Earnings Per Share: Increased by 38.6% from ZAR4.85 to ZAR6.72.
Interim Dividend: Increased by 20% to ZAR0.96 per share.
Intrinsic Net Asset Value (INAV): Increased by 10.5% to ZAR153.9 billion.
INAV Per Share: Increased by 10.3% to ZAR276.89.
Cash at the Center: Increased by ZAR668 million to ZAR7.5 billion.
Net Cash at the Center: Increased by ZAR3.2 billion due to redemption of preference shares.
Mediclinic Contribution to Headline Earnings: Increased by 56% to ZAR883 million.
Heineken Beverages Contribution: Loss reduced from ZAR386 million to ZAR11 million.
RCL Foods Contribution: Increased by 29% in underlying headline earnings from continuing operations.
Siqalo Foods Contribution: Increased by 7.6% to ZAR255 million.
Rainbow Contribution: Increased to ZAR255 million from ZAR18 million.
OUTsurance Group Contribution: Increased by nearly 46% to ZAR624 million.
CIVH Contribution: Resulted in a loss of ZAR141 million compared to a profit of ZAR6 million.
Revenue Growth (Mediclinic): Group revenue up 6% to $2.3 billion.
Adjusted EBITDA (Mediclinic): Up 13% to $323 million.
Revenue Growth (Heineken Beverages): Net revenue grew by 11% to ZAR30 billion.
Normalized Headline Earnings (Heineken Beverages): ZAR562 million for the six months.

Warning! GuruFocus has detected 5 Warning Signs with STU:RE7.

Release Date: March 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Remgro Ltd (STU:RE7) reported a 38.7% increase in headline earnings, rising from ZAR2.7 billion to ZAR3.7 billion.
The company has successfully de-geared its balance sheet, creating capacity for exploring new growth opportunities.
Key portfolio companies like Mediclinic and RCL Foods have shown notable operational improvements and earnings growth.
The interim dividend was increased by 20%, reflecting improved cash earnings and dividends received at the center.
Remgro Ltd (STU:RE7) has made significant strides in sustainability, setting ESG goals and enhancing shareholder engagement.

Negative Points

The regulatory environment in South Africa poses challenges, with lengthy processes impacting transactions like the Vodacom-Maziv deal.
Mediclinic faces challenges in the Swiss market due to regulatory pressures and fluid volumes in the Heineken Beverages market.
Despite improvements, some investee companies like Heineken Beverages are still not performing at desired levels, with ongoing volume and margin pressures.
The geopolitical tensions and macroeconomic uncertainties, such as the Russia-Ukraine war and US-China tariff disputes, continue to pose risks.
Capevin's contribution to headline earnings decreased by 70%, driven by a decline in global sales of Scotch whiskey and the exit of certain distribution agreements.

Q & A Highlights

Q: On the Vodacom deal, what are the implications of the long stop date for the transaction being before the appeal hearing dates? And what do you mean by looking at revised terms with Vodacom? A: The tribunal has set the hearing dates for July 22, subject to the tribunal publishing their reasons by April 30. The long stop date was set before we had certainty, but now we can extend it past the hearing dates. We are revisiting the terms as the original valuation mechanism is outdated. The investment from Vodacom will still be at least ZAR6 billion cash into Maziv, with Maziv acquiring Vodacom fiber assets for shares.

Q: If the Vodacom transaction doesn't happen, how should we be thinking about the strategy? Will you accelerate CapEx rollout for network expansion? A: We have agreed on covenants with banks to continue our business without the Vodacom transaction. We are spending about ZAR2 billion annually on network improvements and customer connections. The Vodacom investment would help reduce debt and increase capacity for network expansion, but our strategy will continue regardless.

Q: On Heineken Beverages, what are the key regions or countries of interest for growth? A: The main markets for growth are Kenya, Botswana, Zambia, and Tanzania. We have joint ventures and associates across Africa, including Angola and Zimbabwe. We aim for high double-digit growth to offset currency devaluation and plan to expand our beer offerings on existing platforms.

Q: With a strong balance sheet and increased dividends received, how do you think about the likelihood of increasing dividends paid or buying back shares? A: We have increased the dividend by 20% and are considering share buybacks given the discount above 40%. We will also maintain enough cash for investment opportunities, including supporting existing investments or exploring new areas.

Q: Can you give us some color on what value you hold Capevin at and what engagements have been had with Campari on plans for the business? A: Capevin is valued at around ZAR23.40. Campari, a 15% shareholder, is currently focused on internal portfolio value. We are focused on providing operational and shareholder support to ensure value preservation and unlocking at the right time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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