Reinet (RNI) financial results for the year ending 31 March 2019
Date: 21 May 2019 Category: Stock Market Share Price: R229.51 |
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Investment holding company Reinet, which was spun off from Remgro years ago and has a major holding in British American Tobacco (BTI) has published it latest set of financial results. Last time we covered Reinet was in February when they announced an aggressive share buy back program.
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Reinet (RNI) financial results highlights
- Reinet's net asset value of EUR 4.8 billion reflects a compound return of 10 per cent per annum in euro terms, since March 2009, including dividends paid
- The net asset value at 31 March 2019 reflects a decrease of EUR 297 million or 5.8 per cent from EUR 5 127 million at 31 March 2018
- Net asset value per share at 31 March 2019: EUR 25.30 (31 March 2018: EUR 26.17)
- Share buyback programme: 5.02 million shares repurchased as at 31 March 2019 for a consideration of EUR 68 million
- Commitments totalling EUR 223 million in respect of new and existing investments made during the year, and a total of EUR 250 million funded during the year
- Dividends from British American Tobacco during the year amounted to EUR 148 million
- Reinet dividend of some EUR 35 million, or EUR 0.18 per share, paid during the year - Proposed Reinet dividend of EUR 0.19 per share payable after the 2019 annual general meeting
- The net asset value at 31 March 2019 reflects a decrease of EUR 297 million or 5.8 per cent from EUR 5 127 million at 31 March 2018
- Net asset value per share at 31 March 2019: EUR 25.30 (31 March 2018: EUR 26.17)
- Share buyback programme: 5.02 million shares repurchased as at 31 March 2019 for a consideration of EUR 68 million
- Commitments totalling EUR 223 million in respect of new and existing investments made during the year, and a total of EUR 250 million funded during the year
- Dividends from British American Tobacco during the year amounted to EUR 148 million
- Reinet dividend of some EUR 35 million, or EUR 0.18 per share, paid during the year - Proposed Reinet dividend of EUR 0.19 per share payable after the 2019 annual general meeting
Chairman's commentary
Dear Shareholder,
Overview
Since inception, Reinet has invested some EUR 2.4 billion and generated an 8 per cent annual return for its investors based on the listed share price, with the underlying net asset value increasing at a rate of 10 per cent per annum.
At the annual general meeting in August 2018, shareholders gave their approval for Reinet to buy back up to 20 per cent of its own shares. Reinet subsequently initiated two share buyback programmes. The first ran from November 2018 to January 2019 when 3.2 million ordinary shares were repurchased for a cost of EUR 42 million or EUR 13.11 per share. The second programme commenced in February 2019; this programme aims to repurchase up to 5 million shares for a maximum cost of EUR 75 million.
As at 31 March 2019, 1.8 million ordinary shares had been repurchased for a cost of EUR 26 million or EUR 14.28 per share. The adjusted net asset value per share stands at EUR 25.56 on 31 March 2019. At 31 March 2019, the Company's net asset value amounted to EUR 4.8 billion, a decrease of EUR 297 million or 5.8 per cent compared to a year ago. This predominantly reflects the decrease in the share price of British American Tobacco from GBP 41.31 at 31 March 2018 to GBP 31.94 at 31 March 2019 which had a negative impact of EUR 674 million. The Company also spent EUR 68 million as part of the share buyback programmes up to the end of March 2019. Offsetting these decreases is an increase in the value of Pension Corporation of EUR 175 million, dividends received and receivable of EUR 148 million from British American Tobacco, together with the positive impact of the strengthening of the US dollar and sterling against the euro during the year.
Business developments
In the year under review, Reinet made investment commitments of EUR 223 million and invested a total of EUR 250 million in new and existing portfolio assets. Investments made include a new investment in Grab Holdings, a Singapore based technology company offering ride-hailing transport services, food delivery and payment solutions in Southeast Asia, of EUR 43 million. Reinet also supported the launch of the Prescient China Equity fund with a EUR 44 million investment, together with further amounts invested in support of our existing relationships with EUR 56 million to the Trilantic funds, EUR 22 million to Snow Phipps' third fund and our related co-investments and EUR 57 million to RLG Real Estate Partners.
The investment in British American Tobacco represented some 52.2 per cent of Reinet's net asset value at 31 March 2019, compared to 62.4 per cent a year ago. British American Tobacco continued its strong underlying performance, with Reynolds American, Inc. now fully included for the first full year. However, the market still reflects uncertainty in respect of the impact of the changes the industry is going through and anticipated regulatory developments. We are confident that British American Tobacco remains an attractive long-term investment and that the current industry challenges will be appropriately managed.
The investment in Pension Corporation represented some 30.6 per cent of Reinet's net asset value at 31 March 2019, compared to 25.4 per cent a year ago. Pension Corporation continues to perform well, writing some GBP 7.1 billion of new business in 2018 compared to GBP 3.7 billion in 2017, with its embedded value increasing from GBP 2.9 billion to GBP 3.6 billion, assets under management increasing from GBP 25.7 billion to GBP 31.4 billion and with a solvency ratio of 167 per cent at the end of 2018. The outlook remains positive for Pension Corporation as it is very well placed to compete for the ever-increasing pipeline of business coming to market in the UK. New business volume in 2019 to date has remained strong.
Last year I commented on our focus of investing to achieve long-term growth in net asset value in an increasingly more volatile global context. We will continue to invest in and support our portfolio of assets whilst looking to realise value from those smaller investments where the time and money spent is disproportionate to their ability to make a meaningful long-term impact on the net asset value. Reinet remains committed to provide shareholders with an investment vehicle which will manage their funds in a conservative manner whilst aiming to achieve growth over the long-term. General rising risk levels and uncertainty require us to place great emphasis on long-term outcomes and on investing in and supporting our portfolio where further funding may be required to reach their full potential.
Dividend
The Board of Directors of Reinet Investments Manager S.A. proposes a dividend of EUR 0.19 per share, payable in September 2019. This represents an increase of 5.6 per cent over the dividend paid last year.
Changes to the board of overseers
Following the retirement of Mr Denis Falck from the Board of Overseers at the 2018 annual general meeting, the shareholders approved the appointment of Mr Stuart Robertson with effect from 1 October 2018. Mr Robertson is a Chartered Accountant and a former partner at KPMG based in Zurich.
Outlook
With rising debt levels, global uncertainty and political divisions in both the USA and Europe, finding good opportunities for investment can be a challenge and protecting the downside becomes more important.
In times of uncertainty, Reinet's approach is to maintain value for its shareholders over the long-term. Our focus will remain on businesses that we understand and business partners that we know and trust. In addition, the buyback programme allows Reinet to repurchase shares at prices substantially below the intrinsic value of the underlying assets.
Reinet's Directors, Overseers and employees have continued to provide valuable support over the year, I thank them all for their commitment to Reinet's future development.
Overview
Since inception, Reinet has invested some EUR 2.4 billion and generated an 8 per cent annual return for its investors based on the listed share price, with the underlying net asset value increasing at a rate of 10 per cent per annum.
At the annual general meeting in August 2018, shareholders gave their approval for Reinet to buy back up to 20 per cent of its own shares. Reinet subsequently initiated two share buyback programmes. The first ran from November 2018 to January 2019 when 3.2 million ordinary shares were repurchased for a cost of EUR 42 million or EUR 13.11 per share. The second programme commenced in February 2019; this programme aims to repurchase up to 5 million shares for a maximum cost of EUR 75 million.
As at 31 March 2019, 1.8 million ordinary shares had been repurchased for a cost of EUR 26 million or EUR 14.28 per share. The adjusted net asset value per share stands at EUR 25.56 on 31 March 2019. At 31 March 2019, the Company's net asset value amounted to EUR 4.8 billion, a decrease of EUR 297 million or 5.8 per cent compared to a year ago. This predominantly reflects the decrease in the share price of British American Tobacco from GBP 41.31 at 31 March 2018 to GBP 31.94 at 31 March 2019 which had a negative impact of EUR 674 million. The Company also spent EUR 68 million as part of the share buyback programmes up to the end of March 2019. Offsetting these decreases is an increase in the value of Pension Corporation of EUR 175 million, dividends received and receivable of EUR 148 million from British American Tobacco, together with the positive impact of the strengthening of the US dollar and sterling against the euro during the year.
Business developments
In the year under review, Reinet made investment commitments of EUR 223 million and invested a total of EUR 250 million in new and existing portfolio assets. Investments made include a new investment in Grab Holdings, a Singapore based technology company offering ride-hailing transport services, food delivery and payment solutions in Southeast Asia, of EUR 43 million. Reinet also supported the launch of the Prescient China Equity fund with a EUR 44 million investment, together with further amounts invested in support of our existing relationships with EUR 56 million to the Trilantic funds, EUR 22 million to Snow Phipps' third fund and our related co-investments and EUR 57 million to RLG Real Estate Partners.
The investment in British American Tobacco represented some 52.2 per cent of Reinet's net asset value at 31 March 2019, compared to 62.4 per cent a year ago. British American Tobacco continued its strong underlying performance, with Reynolds American, Inc. now fully included for the first full year. However, the market still reflects uncertainty in respect of the impact of the changes the industry is going through and anticipated regulatory developments. We are confident that British American Tobacco remains an attractive long-term investment and that the current industry challenges will be appropriately managed.
The investment in Pension Corporation represented some 30.6 per cent of Reinet's net asset value at 31 March 2019, compared to 25.4 per cent a year ago. Pension Corporation continues to perform well, writing some GBP 7.1 billion of new business in 2018 compared to GBP 3.7 billion in 2017, with its embedded value increasing from GBP 2.9 billion to GBP 3.6 billion, assets under management increasing from GBP 25.7 billion to GBP 31.4 billion and with a solvency ratio of 167 per cent at the end of 2018. The outlook remains positive for Pension Corporation as it is very well placed to compete for the ever-increasing pipeline of business coming to market in the UK. New business volume in 2019 to date has remained strong.
Last year I commented on our focus of investing to achieve long-term growth in net asset value in an increasingly more volatile global context. We will continue to invest in and support our portfolio of assets whilst looking to realise value from those smaller investments where the time and money spent is disproportionate to their ability to make a meaningful long-term impact on the net asset value. Reinet remains committed to provide shareholders with an investment vehicle which will manage their funds in a conservative manner whilst aiming to achieve growth over the long-term. General rising risk levels and uncertainty require us to place great emphasis on long-term outcomes and on investing in and supporting our portfolio where further funding may be required to reach their full potential.
Dividend
The Board of Directors of Reinet Investments Manager S.A. proposes a dividend of EUR 0.19 per share, payable in September 2019. This represents an increase of 5.6 per cent over the dividend paid last year.
Changes to the board of overseers
Following the retirement of Mr Denis Falck from the Board of Overseers at the 2018 annual general meeting, the shareholders approved the appointment of Mr Stuart Robertson with effect from 1 October 2018. Mr Robertson is a Chartered Accountant and a former partner at KPMG based in Zurich.
Outlook
With rising debt levels, global uncertainty and political divisions in both the USA and Europe, finding good opportunities for investment can be a challenge and protecting the downside becomes more important.
In times of uncertainty, Reinet's approach is to maintain value for its shareholders over the long-term. Our focus will remain on businesses that we understand and business partners that we know and trust. In addition, the buyback programme allows Reinet to repurchase shares at prices substantially below the intrinsic value of the underlying assets.
Reinet's Directors, Overseers and employees have continued to provide valuable support over the year, I thank them all for their commitment to Reinet's future development.
Reinet (RNI) share price history
The fortunes of RNI's share price is closely linked to the fortunes of its biggest holding. British American Tobacco, with the group making up just over 50% of the total net asset value of RNI. Below two screenshots, taken from Moneyweb, which shows the share price performance of RNI over the last year as well as the share price performance of British American Tobacco (BTI) over the last 12 months
So while BTI's share price has increased by almost 20% year to date,the share price of RNI has only increased by 8%. So there seems to be a decoupling between the performance of BTI and that of RNI. Perhaps there is scope for RNI's share price to move up a bit more so that it is in line with the growth in the share price of their single biggest asset.
Share buy back update as at 21 May 2019
REINET INVESTMENTS S.C.A. SHARE BUYBACK PROGRAMME - UPDATE 21 MAY 2019
Reinet Investments S.C.A. has repurchased 201 599 ordinary shares in the period 13 to 17 May 2019. The shares were repurchased on the Johannesburg Stock Exchange at an average price of ZAR 230.27 per share (highest price: ZAR 236.05; lowest price: ZAR 225.13) for a total consideration of some ZAR 46.42 million (EUR 2.9 million), plus transaction costs.
These repurchases were made as part of the share buyback programme announced on 6 February 2019. The total number of shares repurchased under this programme to date is 3 056 416 ordinary shares for a total consideration of some ZAR 710.05 million (EUR 44.2 million), plus transaction costs.
So on average RNI has spent R232.29 a share to buy back their own shares since the share repurchase program was announced in February. We asked then if the group feels that there is no value in the markets , if it is using its cahs to buy back it's own shares instead of investing in new assets. We still believe that RNI doesn't see value in other assets, so they are using their cash to buy back their own shares.
Reinet Investments S.C.A. has repurchased 201 599 ordinary shares in the period 13 to 17 May 2019. The shares were repurchased on the Johannesburg Stock Exchange at an average price of ZAR 230.27 per share (highest price: ZAR 236.05; lowest price: ZAR 225.13) for a total consideration of some ZAR 46.42 million (EUR 2.9 million), plus transaction costs.
These repurchases were made as part of the share buyback programme announced on 6 February 2019. The total number of shares repurchased under this programme to date is 3 056 416 ordinary shares for a total consideration of some ZAR 710.05 million (EUR 44.2 million), plus transaction costs.
So on average RNI has spent R232.29 a share to buy back their own shares since the share repurchase program was announced in February. We asked then if the group feels that there is no value in the markets , if it is using its cahs to buy back it's own shares instead of investing in new assets. We still believe that RNI doesn't see value in other assets, so they are using their cash to buy back their own shares.