The purpose behind Remgro’s investments is to ensure superior returns to shareholders by way of sustainable dividend and capital growth. INVESTMENT INVESTMENT REVIEWS INVESTING IN SECTORS THAT HAVE A SOLID TRACK RECORD BANKING HEALTHCARE CONSUMER PRODUCTS INSURANCE INDUSTRIAL INFRASTRUCTURE MEDIA AND SPORT OTHER INVESTMENTS 42 REPORTS TO SHAREHOLDERS | Investment reviews BANKING 29% CONTRIBUTION TO 30 June 2019 30 June 2018 HEADLINE EARNINGS R million R million BANKING 2019 RMH 2 644 2 486 FirstRand 1 093 1 039 71% 3 737 3 525 RMH FirstRand PROFILE RMH is the biggest shareholder in FirstRand Limited (FirstRand), South Africa’s 28.2% largest banking group, with a 34% stake. RMH is the founding shareholder of EFFECTIVE FirstRand and views this as its core asset. On a selective basis, RMH invests in INTEREST other banking and property businesses. CORPORATE INFORMATION FINANCIAL HIGHLIGHTS SUSTAINABILITY MEASURES Market cap at 30 June 2019 Year ended Refer to FirstRand as RMH is an R119 148 million 30 June 2019 investment holding company. R million % Listed on the JSE Limited Chief Executive Officer Headline earnings 9 390 6 H L Bosman Normalised Remgro nominated directors earnings 9 394 7 J J Durand, F Knoetze (alternate) Dividends Website declared per rmh-online.co.za share (cents) 376 7 RMB HOLDINGS LIMITED (RMH) RMH’s main asset is a fully diluted interest of 34% in FirstRand, and its performance is therefore primarily related to that of FirstRand. The RMH strategy also includes investments in the property sector with a long-term capital growth focus. RMH’s contribution to Remgro’s headline earnings for the year under review increased to R2 644 million (2018: R2 486 million) due to the good operational performance of FirstRand. FirstRand’s contribution to RMH’s normalised earnings amounted to R9 502 million (2018: R8 995 million), while RMH Property contributed a normalised earnings of R44 million (2018: R16 million). RMH’s funding and administration costs increased to R248 million (2018: R196 million). RMH’s property investments are housed in a wholly owned subsidiary, RMH Property Holdings Proprietary Limited (RMH Property), managed by a dedicated investment team. During the financial year, the intrinsic value of RMH Property decreased from R722 million to R649 million. www.remgro.com | Remgro Limited | Integrated Annual Report 2019 43 PROFILE FirstRand’s portfolio of integrated financial services businesses comprises FNB, 3.9% RMB, WesBank, Aldermore and Ashburton Investments. The group operates in EFFECTIVE South Africa, certain markets in sub-Saharan Africa and the United Kingdom, and INTEREST offers a universal set of transactional, lending, investment and insurance products and services. FirstRand can provide its customers with differentiated and competitive (TOTAL value propositions due to its unique and highly flexible model of leveraging the EFFECTIVE most appropriate brand, distribution channel, licence and operating platform INTEREST: 13.5%) available within the portfolio. This approach, which is underpinned by the disciplined allocation of financial resources and enabled by disruptive digital and data platforms, allows the group to fully optimise the franchise value of its portfolio. CORPORATE INFORMATION FINANCIAL HIGHLIGHTS SUSTAINABILITY MEASURES Market cap at 30 June 2019 Year ended CSI/Training spend R384 530 million 30 June 2019 R646 million R million % Listed on the JSE Limited Number of employees Chief Executive Officer Operating income 94 107 11 48 780 A P Pullinger Operating profit 39 968 8 BBBEE status Remgro nominated directors Headline earnings 27 887 5 Level 1 F Knoetze, J P Burger, J J Durand Normalised Environmental aspect earnings 27 894 6 (alternate) Scope 1 and 2 emissions Dividends Website of 224 190 tonnes CO e declared per 2 www.firstrand.co.za share (cents) 291 6 FIRSTRAND LIMITED (FIRSTRAND) FirstRand’s contribution to Remgro’s headline earnings represents Remgro’s 3.9% direct interest in FirstRand and excludes the indirect contribution from FirstRand through Remgro’s 28.2% interest in RMH. The contribution of FirstRand to Remgro’s headline earnings for the year under review increased to R1 093 million (2018: R1 039 million). FirstRand’s headline earnings for its year ended 30 June 2019 increased by 5% to R27 887 million (2018: R26 509 million). The group’s performance to June 2019 includes a full 12 months’ contribution from Aldermore, compared to a three-month contribution in the previous year. Net interest income (NII) increased 9% (18% including Aldermore), underpinned by strong growth in deposits of 11% and solid advances growth of 9%, partially offset by the negative capital and deposit endowment impact given the five basispoints decline in average interest rates over the year. Non-interest revenue (NIR) increased 6%, a resilient performance given the lack of private equity realisations compared to the prior year. Realisations were down 60% year-on-year. FirstRand believes that normalised earnings more accurately reflect operational performance and therefore headline earnings are adjusted to take into account non-operational items and accounting anomalies. Normalised earnings for the year ended 30 June 2019 increased 6% to R27.9 billion, at a normalised return on equity (ROE) of 22.8% (2018: 23.0%). FNB’s normalised earnings increased 11% to R25.3 billion. ROE increased from 38.8% to 41.9%. FNB’s results reflect another strong operating performance from its domestic franchise, driven by healthy NIR growth on the back of ongoing customer gains and increased transactional volumes, and high-quality NII growth, particularly from deposit generation. The performance of FNB’s rest of Africa portfolio improved significantly. RMB’s normalised earnings decreased by 4% to R7.1 billion and the ROE reduced from 25.3% to 21.7%. RMB’s results were impacted year-on-year by the non-repeat of significant private equity realisations in the second half of the prior year, however, the rest of its portfolio delivered a resilient performance driven by growth in earnings and solid operational leverage. WesBank delivered a subdued performance and its normalised earnings was down 2% to R1.8 billion. FirstRand acquired Aldermore effective 1 April 2018. Aldermore delivered a solid operational performance, contributing normalised earnings of R1.7 billion for the 12 months (2018: R0.3 billion for the three months) at an ROE of 12.4% (2018: 12.1%). 44 REPORTS TO SHAREHOLDERS | Investment reviews HEALTHCARE CONTRIBUTION TO 30 June 2019 30 June 2018 HEADLINE EARNINGS R million R million Mediclinic 1 693 1 556 PROFILE Mediclinic’s business consists of the provision of comprehensive, high-quality 44.6% hospital services on a cost effective basis in Southern Africa, the United Arab EFFECTIVE Emirates, Switzerland and the United Kingdom. INTEREST CORPORATE INFORMATION FINANCIAL HIGHLIGHTS SUSTAINABILITY MEASURES Market cap at 30 June 2019 Year ended CSI/Training spend £2 248 million 30 June 2019 R127 million £ million % Primary listing: Number of employees London Stock Exchange Revenue 2 932 1.9 32 398 Secondary listing: Operating profit 81 128.1 BBBEE status JSE Limited Adjusted earnings 198 (10.4) Level 5 Chief Executive Officer Dividends Environmental aspect R van der Merwe declared per Scope 1 and 2 emissions of share (pence) 7.9 – 165 760 tonnes CO e Remgro nominated directors 2 J J Durand, P J Uys (alternate) Website www.mediclinic.com MEDICLINIC INTERNATIONAL PLC (MEDICLINIC) Mediclinic has a March year-end and therefore the results for the 12 months to 31 March 2019 have been equity accounted in Remgro’s results for the year under review. Mediclinic’s contribution to Remgro’s headline earnings for the year under review amounted to R1 693 million (2018: R1 556 million). Mediclinic’s turnover for the financial year ended 31 March 2019 increased by 2% to £2 932 million (2018: £2 876 million). Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 4% from £515 million to £493 million, while underlying margins declined from 17.9% to 16.8%. Mediclinic has an interest of 100% in Hirslanden, the holding company of the largest private hospital group in Switzerland. Hirslanden’s revenue for the year under review increased by 2% to CHF1 778 million (2018: CHF1 735 million) and adjusted EBITDA was 10% lower at CHF285 million (2018: CHF318 million). The adjusted EBITDA margin decreased from 18.3% to 16.0% due to tariff reductions and less favourable insurance mix. Cost savings and efficiency savings partly offset this. Mediclinic Southern Africa’s revenue increased by 5% to R15 960 million (2018: R15 204 million) for the year under review, mainly due to a 4.3% increase in the average income per bed-day. Adjusted EBITDA increased by 4% to R3 385 million (2018: R3 245 million), resulting in the underlying EBITDA margin decreasing from 21.3% to 21.2% due to lower patient volumes, partly offset by cost management and efficiency initiatives. At 31 March 2019, Mediclinic Middle East owned and operated seven hospitals and 20 clinics with a total of 926 beds in Dubai and Abu Dhabi. Revenue increased by 7% to AED3 262 million (2018: AED3 050 million) for the year under review. Adjusted EBITDA increased by 7% to AED425 million (2018: AED397 million), while the adjusted EBITDA margin remained flat at 13.0%. These increases were mainly due to increased patient volumes. www.remgro.com | Remgro Limited | Integrated Annual Report 2019 45 CONSUMER PRODUCTS 32% 44% CONTRIBUTION TO 30 June 2019 30 June 2018 HEADLINE EARNINGS R million R million CONSUMER PRODUCTS Distell – entity contribution 459 467 2019 – IFRS 3 charge (47) (8) RCL Foods 254 647 Siqalo Foods – entity contribution 332 – 24% – IFRS 3 charge (80) – Unilever* – 499 918 1 605 Distell RCL Foods Siqalo Foods * Effective 2 July 2018, Unilever repurchased Remgro’s interest in the company for a total consideration amounting to R11.9 billion.