Durban - Investment holding company Remgro said it expected its headline earnings a share to grow between 852.3 cents and 887.5c a share for the six months to December.
The group said this would represent an increase of between 21 percent and 26percent compared with 704.4c a share reported in 2015.
Remgro said the expected increase in headline earnings a share was because of a positive fair value adjustment of R667 million relating to the decrease in value of the bondholders’ exchange option (accounted for as a derivative liability) of the bonds that were issued during March last year.
Refinance
The bonds were meant to partially refinance the foreign bridge funding that was raised for the Al Noor Hospitals Group transaction.
The group said the bonds were exchangeable into Mediclinic International shares and/or cash and fair value adjustments on the option (reflecting the movement in the underlying Mediclinic share price) were expected to cause volatility in headline earnings during its five-year term.
Remgro has a 44.6 percent stake in Mediclinic International. Mediclinic acquired United Arab Emirates’ Al Noor Hospitals Group for about $2.2 billion (R28.6 billion) in 2015. The move gave Mediclinic an upper hand on its rival, NMC Health, in a tussle for expansion in the fast growing Gulf region.
Though business has not been going well for Al Noor, it accounts for about a third of Mediclinic’s group net profit.
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Remgro has diversified interests in many businesses and in sectors such as banking, healthcare, insurance, food, homecare, liquor, media, infrastructure and sport.
The company invests in businesses that can deliver superior earnings, cash flow generation and dividend growth over the long term.
Impressive value
The group has a history of unlocking impressive shareholder value as evidenced by the unbundling of British American Tobacco in 2008, which is now one of the five biggest companies on the JSE in terms of market capitalisation.
Michael Treherne, portfolio manager at Vestact, said the market would have to wait for the half-year results in order to make sense of the company.
In the year to June, Remgro reported an intrinsic net asset value which was up by 6.1 percent. The Remgro results are expected to be released on or around March 16.
Remgro shares rose 0.59 percent on the JSE to close at R224.96.