The stars finally aligned for investment behemoth Remgro* after years of underperformance, when shareholders might have felt returns risked being sucked into a black hole.
What’s not to like in the end-June 2026 numbers? Free cash flow generated at the centre more than doubled to R8.3bn, with ordinary dividends from companies in the portfolio up a sturdy 24% to R4.6bn.
The ordinary dividend was hiked a confident 73% to 595c a share with a special payout of 550c a share (eat your hearts out, Reinet shareholders!). The big chunks in the portfolio performed commendably — Mediclinic and Outsurance increased their contributions to headline earnings by 24%, while unlisted fibreoptics hub CIVH (Maziv), Rainbow Chicken and Heineken Beverages (the last, admittedly off a low base) all increased their contributions by more than 100%.
Remgro CEO Jannie Durand says the five-year transformative corporate actions delivered, highlighting a more focused, resilient and better-performing portfolio. “Active partnership with management teams continues to bear fruit,” he says.
He adds that reinforced foundations now provide Remgro with optionality for growth (especially, one might imagine, in a higher interest rate environment in South Africa). Remgro, for the record, finished the period with more than R20bn in free cash, a number that grew to almost R23bn at the end of July after the Mediclinic “restructuring equalisation dividend” was paid. This means that, before the latest dividends are issued, Remgro’s cash pile represents about 13% of the total investment portfolio value.
Poor track record
In a volatile investment environment, Remgro — on paper — might not be the worst place to park funds. But some market watchers still remain sharply critical of the business.
Value investor Piet Viljoen, writing in a newsletter for investment firm RECM, suggests that Remgro is stuck in the 20th century and “unable to adapt to 21st-century realities”.
Viljoen argues that Remgro’s management consistently neglects the key determinant of investment success: return on capital invested. “This has directly resulted in an exceedingly poor investment track record.
“In the results presentation, there was again a lot of talk about revenue and ebitda growth. But no-one mentioned how much capital was invested to generate this growth, and definitely nothing about the return achieved on that capital.”
Viljoen points out that since 2010, Remgro has grown its intrinsic NAV (iNAV) by a mediocre 7% a year (including all the special dividends and unbundlings). “Management has done marginally better than if it had kept its capital in a bank account, and is well behind the all share index’s [Alsi’s] total return of 13% a year.”
Viljoen says Remgro consistently grew its iNAV by 6%–7% a year less than the Alsi, adding: “That difference compounds into a big number over time, justifying the share price’s wide discount to iNAV.”
He suggests the discount — now at about 33% to iNAV — should be bigger. “Remgro management seems to share this view; how else do you explain paying special dividends rather than share buybacks?”
“Management is stuck in the past century, playing to the Stellenbosch gallery by consistently overpaying for trophy assets. Capital allocation remains the Achilles heel of this business.”
Market watchers might find Viljoen’s comments a little rich, given that his own listed investment vehicle RECM & Calibre (now trading as Goldrush Holdings) and unlisted Astoria have not exactly been the gold standard for capital allocation either.
Some might also argue that the comparison with the Alsi is disingenuous, as for many years the index was driven by offshore rand hedges and later by commodities such as gold and platinum. Other large South Africa Inc counters have also not fared very well since 2010.
The truth, however, is that new investments at Remgro have not been inspiring. Mediclinic overpaid for offshore assets, the Distell/Heineken deal has (so far) lacked the necessary froth and RCL Foods still does not have the critical mass in higher-margin grocery brands.
There is also a big thrust in fibreoptics with Maziv. The new-look venture has made a sprightly start, but it’s still early days in terms of determining what return on invested capital can be achieved over the longer term.
A pragmatic view
Still, older investors will know not to underestimate Rupert-controlled ventures — even if there is a sense that the family’s enormous success at luxury brands business Richemont has now relegated Remgro to an afterthought.
Titanium Capital founder Charles Boles is pragmatic. “One aspect of Remgro’s results that I found encouraging is the comment that they are ensuring that investee companies have strong balance sheets. There is a lot of truth to this.”
Boles says a key reason investors should hold Remgro is that their capital will be preserved and grow in the long term. “I think that has considerable value.”
Another point to ponder is Remgro chief investment officer Carel Vosloo’s remark that the company is investing more energy and resources in new investments. “Certainly, there are many interesting things out there that we’ve been evaluating and looking at … but I want to reassure [you] that we’ll be incredibly disciplined in making new investments.”
This, Vosloo confirmed, would include weighing up the “compelling merits” in buying back Remgro shares. After the large dividend payouts, Remgro might well offer a tantalising enough discount.
*The writer holds shares in Remgro
