Welcome to the Remgro Limited interim results presentation. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star, then zero. Please note that this call is being recorded. I would now like to turn the conference over to Jannie Durand. Please go ahead, sir.
Welcome to our interim results presentation for the period ended December 3rd 2023. Before we go into the detail of everything, I should forewarn you that today's results presentation will be longer than usual, given the corporate actions we've been executing on the last year and the need to provide you with some context of the numbers behind them and as well as the corporate actions that we've done. The outline of today's presentation has really three areas of focus. Firstly, I will give an overview of the salient features of our results for the period under review. This will include providing you with a recap of our key strategic priorities as communicated in our previous results presentation. I will then also give you a sense of our own assessment of the progress we've been made in delivering against these priorities. Secondly, I will then ask our CFO, Mr.
Neville Williams, to unpack in more detail our results for this interim period. Thirdly, in keeping in line with our new format from our last results in September, we will be then giving an update on some of our key investments, namely Mediclinic, CIVH, RCL Foods, and Rainbow Chicken. The CEO of Mediclinic, Ronnie van der Merwe, together with his CFO, Jurgens Myburgh, will speak to the Mediclinic's operating context, results, and strategic priorities. Thereafter, I'll ask the CIVH Chairperson, Pieter Uys, to do the same for CIVH. And finally, Paul Cruickshank, the CEO of RCL, and Marthinus Stander, the managing director of Rainbow, will speak to their respective entities' strategy and most recent performance. I will then close off the presentation after that by looking at our key area of focus going forward before opening the floor for questions.
Looking at the period under review, we've been doubling our efforts to deliver on our stated strategic priorities. When we presented our year-end results last September, I talked specifically about our key areas of strategic focus in the medium term. This slide revisits those priorities and outlines what we believe is a candid assessment of our own performance against these stated priorities. The execution of these priorities is not a binary target but an ongoing journey. We are satisfied with our efforts and progress made in our portfolio optimization since our last reporting period, which also includes the execution and embedding of our various transformation corporate actions, as well as the significant integration work this process has entailed along some of our companies. This has, however, as you're probably quite aware, come with many challenges as we will unpack later in this presentation.
Good strides have been made in our sustainability journey, which I will elaborate on in greater detail later. Notwithstanding the progress made in advancing our outlined strategic priorities, we consider some of them as still in progress, as I've said, it is a journey because by the standards we set ourselves, we are not where we would like to be. Let me give you three specific examples. On the earnings side, if you look at the earnings momentum in our portfolio, the following has become clear: gains have been made in certain areas, and particularly with regards to recovering from various economic shocks that continue to hit us. That said, to be quite frank, some of our assets are clearly not where we want them to be insofar as earnings contribution is concerned, and consequently, the dividends that we receive here at the centre at Remgro.
For us, driving this performance is at the core of our efforts to further unlock value in the medium term. Much work is being done with our respective investee companies on performance as well as the measurement thereof. Looking at our non-core asset portfolio, the disposal of our non-core assets is a process which requires patience. Further, in line with our value of doing the right thing, we want to make sure we exit our investments in a value-creative and responsible manner, and then allocate the capital realized in this way also in a value-creative way. As I've said in the past, while we may not be able to disclose the specifics of our non-core classification per se, we remain committed to an optimal and considered portfolio restructuring on these assets.
If we just look at the earnings momentum and resilience of our portfolio, our desired strategic outcome is to continuously build earnings momentum and growth and to strengthen our portfolio's resilience, especially during this difficult operating environment we find ourselves in at the moment. I will unpack this in the next slide when I give a snapshot of our performance. If we go to the next slide, our weaker earnings performance was largely driven by non-recurring items. These results are probably one of the more challenging ones that I've delivered in a long time. For the period under review, headline earnings decreased by 40.1% from ZAR 3.5 billion to approximately ZAR 2.1 billion, while headline earnings per share decreased by 39.1% from ZAR 6.26 to ZAR 3.81.
The difference of 100 basis points in the headline earnings per share measure compared to headline earnings represents the accretive impact of shares repurchased during the 2023 financial year as well as the period under review. A significant driver of the decline in headline earnings relates to the effect of non-recurring items as a result of the corporate actions implemented in the recent past. The difficult operating environment also contributed to the material decline in our headline earnings, especially the Heineken Beverages trading results, as you're all aware. Overall, when excluding the impact of these one-off items just mentioned, the headline earnings decreased by 13.1% from ZAR 3.26 billion to ZAR 2.8 billion. When Neville later unpacks the results, he will provide you with more detail around these drivers and the adjusted headline earnings numbers.
Delivering on our strategic priorities, for the next section of our presentation, I will go back and provide a bit more detail on our delivery against some of our stated priorities. Firstly, just to recap, as previously mentioned, the preceding financial year was mainly characterized by the execution of our various corporate actions. Post our transformative execution, we focused on the integration, the optimization, as well as the unlocking of value. Accordingly, much of our focus has been on meaningfully embedding our newly unlisted assets to the overall portfolio. It also comes with challenges. This will enable us to drive performance and generate returns. In the next slide, I will expand on what the post-transaction execution process for Heineken Beverages entailed. Thereafter, Ronnie will speak about Mediclinic's journey as well as the progress made there.
Lastly, Paul and Marthinus will respectively talk to the implementation of their strategy at RCL with a particular focus on what is being done at Rainbow. All these mentioned companies are significant contributors to Remgro's portfolio, and the strategy that we will discuss on has been a collaborative effort between us, our partners, and the respective management team, hence our excitement at what lies ahead in the future of these companies in this turnaround phases. As you're all aware, the CIVH Vodacom transaction remains in process and is still subject to regulatory approvals. Pieter will speak to the specifics on the process later in the presentation. That said, it is important to reemphasize the following: delays in regulatory approvals make the cost of doing business in our country very high. We especially experienced this with the Heineken Beverages transaction during the two years that we waited for the approvals.
That has delayed the integration phase. It also put people unsure about jobs, things like that, and that clearly has an operational performance on that. Further, the uncertainty with regulatory approval also delays confidence for foreign investors to invest in our country. We have a beautiful country with much potential. We need growth, but we need a more enabling environment for doing business locally and a lot less red tape. This will be critical for attracting foreign investments. If you spend 2-3 years of getting regulatory approvals, people do get deal fatigue in that phase. Let's look at the Heineken Beverages and the integration thereof and how we're going to position it for growth. The integration phase and resulting business performance of Heineken was exacerbated by a tough operating environment, but we think green shoots are starting to become evident.
Just talking about the revenue, on the revenue side, Heineken experienced a low and single-digit decline in revenues, although there was some recovery in Q4 of 2023. While still trailing behind in the market, its recovery was led by brand Heineken, which was boosted by the launch of Heineken Silver, combined with an improved performance of [audio distortion] and Amstel, following corrective price actions taken, including a strong closing of the year for the older stable brands of Savanna and Bernini. Volumes in the period under review have been impacted by the following: there was lower industry growth in general, load shedding, which significantly affected the trading hours for main market outlets. This has driven demand to retail, where there is increased competitor activity because of the volume shift.
There has also been a shift from premium to mainstream brands, and that impacted Heineken due to its portfolio being over-indexed in premium, and also combined with our competitors having affordable sizing price points compared to us. Sorry, we just had an interruption there. Can I continue? In addition to this, Heineken Beverages also implemented pricing ahead of the industry, with the impact on volumes and market share now being addressed. On the margin side, inflationary pressures and higher brand support levels also had an effect on the margins in an already competitive environment. Margins were also negatively impacted by non-recurring expenses relating to the integration and supply chain challenges, and imports also had an impact on market contraction. Neville will give quite a bit more detail on this whole situation later in the presentation.
Together with Heineken, we firmly believe that the transaction was and remains a very good capital allocation decision. The investment thesis remains as strong as it was at the inception of the transaction. Heineken, with its multi-category portfolio of strong brands for all consumer occasions combined with scale to unlock efficiency, presents a very strong platform going forward for sustainable, profitable future growth. In the second half of this period under review, Heineken Beverages have been able to integrate its systems and sales force now under a single route to consumer. Synergy delivery is on track to deliver against the initial business case. The short-term challenges relating to competitive performance are also being addressed. In beer this year, in line with our ESG efforts, the returnable glass bottle of 650 ml for Heineken has been introduced.
This initiative will be critical in securing the presence of the brand in key channels where the brand is currently underrepresented. Heineken is the largest beer brand in the portfolio and one of the best-selling beverages in South Africa. The brand holds a 9% share in the local market, and it achieved this without participating in the biggest sector, which is returnable bottles. Today, returnable bottles represent 70% of total beer sales in South Africa. We are excited to introduce the first Heineken returnable bottle in South Africa and thereby unlocking its vast growth potential. Customer orders opened last month on the 15th of February and began deliveries from the 22nd of February, and the early results are very promising.
Although the introduction of returnable bottles comes with a substantial capital requirement, it will vastly improve the profitability of Heineken Beverages due to the improved margins when compared to non-returnable bottles. Beyond the beer portfolio, we also see great potential for the older stale brand portfolio, and especially Savanna and Bernini is having strong momentum in the market. If we just focus a bit on our sustainability drive, Remgro has always acknowledged its ESG and sustainability responsibility. That said, it was not always measured with us as much detail as expected of corporations today. This morning, we are pleased to share with you the progress we've made on our ESG journey since we've last reported to the market.
The progress includes the following three outcomes: on the remuneration target, the setting and agreement of remuneration targets which aligns with our key focus areas including climate change, energy efficiency, water, diversity and equity, and inclusion, governance as well as responsible sourcing and procurement. For each one of our four focus areas, we have identified key ESG metrics for disclosure, which we'll also share with our investee companies to align for disclosure purposes. In the preceding period, we also completed a gap analysis in which we considered our current disclosures versus the disclosure requirements of some of the widely used rating agencies. Following this improvement, we have already seen some positive progress and an improvement in our CDP score. We also published our first-ever TCFD report. TCFD stands for Task Force for Climate-Related Disclosures. We are also working on further improvements on this for our next reporting cycle.
We've revised and updated some key policies, and we've also been working on an overarching policy for responsible sourcing, which incorporates principles which we want to align to the rest of the group as well. We also held our first inaugural group-wide ESG conference under our collaboration network last October. Some of the topics covered included the impact of climate change on our business as well as the imperative to increase ESG disclosures as desired by our stakeholders. Our immediate and short-term priorities include the following: continuing to mature and improve our ESG metrics as a group, encouraging our investee companies to adopt best practice policies and principles such as responsible sourcing, and also to continue to encourage our investee companies to report on their carbon footprint as well as use of the TCFD framework for the reporting of climate change risk and impacts.
Lastly, we are evaluating considering setting net-zero targets as required as well as what is practically possible and also develop action plans to achieving this. I think let me hand now over to Neville to unpack the period's results further.
Good morning, everyone. Looking at the first slide headline earnings overview, a significant driver of the decline of 40% in headline earnings relates to the effect of corporate actions implemented in the recent past, majority of which are non-recurring items. And in the table on the left-hand side, we've listed these impacts of the corporate actions, and I will talk to that now. And then furthermore, the difficult operating trading environment, particularly in relation to the trading results of Heineken Beverages, also contributed to the material decline in headline earnings.
For the current and comparative periods, these corporate actions and the impact on headline earnings include the following: the first one, as listed, is the IFRS 3 amortization and depreciation charges of ZAR 178 million relating to the additional assets identified when Heineken Beverages obtained control over the Distell and Namibia Breweries. That was the first period that we've accounted for that IFRS 3 charges. Secondly, Remgro's portion of the negative fair value adjustments made by TotalEnergies on its Natref stock for the period under review amounting to ZAR 377 million due to Natref being classified as held for sale in terms of IFRS 5. You can remember on the 1st of December, TotalEnergies announced that they've concluded a share purchase agreement for the sale of its 36.36% interest in Natref to the Prax Group, so U.K. oil and gas company.
The negative fair value adjustment relates mainly to inaccessible stock, stock which cannot be accessed due to technical limitations for which no price will be paid. The industry called it SLOPS or SLOP oil, as well as three-day safe working capital stock that will be transferred to the purchaser of the Natref stake at zero value in accordance with the salient terms of the share purchase agreement concluded with the Prax Group. Then furthermore, Remgro's portion of the transaction cost amounting to ZAR 165 million, in the comparative period, we've accounted for ZAR 19 million, and that was incurred in respect of the Mediclinic acquisition. Most of the cost were accounted for in FY 2023 amounting to ZAR 602 million. So this was just additional cost that we equity accounted from the Manta Bidco structure.
In the previous financial year, we've accounted for Remgro's portion of a debt forgiveness gain amounting to ZAR 227 million from KTH in the comparative period due to the sale of its interest in Actom. Also, we accounted in the comparative period equity-accounted income from Grindrod until its unbundling in October 2022. Excluding the impact on headline earnings of these corporate actions, the headline earnings adjusted for corporate actions, we call it adjusted headline earnings, decreased by 13.1% from ZAR 3.3 billion to ZAR 2.8 billion. This is largely driven by the following. On the right-hand, you see the table for the bridge from period to period.
The biggest impact or reason for this decrease in adjusted headline earnings is the loss contributed by Heineken Beverages, excluding the Heineken IFRS 3 impact of ZAR 208 million, partly offset by Capevin Holdings' contribution of ZAR 57 million, and that's compared to the Distell contribution of ZAR 517 million in the comparative period. The movement from period to period represents a ZAR 668 million negative variance in this period. Also, we accounted for a lower contribution from CIVH, mainly due to higher finance costs resulting from increased interest rates. Also, in the comparative period, we've received a special dividend from FirstRand amounting to ZAR 154 million. That's not been repeated in this period. These decreases were partly offset by increased contributions from TotalEnergies as well as RCL Foods and Siqalo Foods due to improved operating performances.
In the next few slides, I will focus firstly on Remgro's unlisted investment portfolio, then dive into the digital platforms. This slide shows the impact of the transformative corporate actions implemented during FY 2023, namely the Mediclinic buyout of minorities as well as the Heineken-Distell transaction. If you see the impact of those corporate actions actually transformed the portfolio to a majority unlisted portfolio contributing 72% at June 30th 2023. The contribution of unlisted investments decreased to 68% at December 31st 2023, mainly due to a decrease in the overall unlisted valuations as well as an increase in the market values of the listed portfolio, most notably OUTsurance. This slide table provides a snapshot of the valuation outcomes of the valuation process conducted for the interim period and also provides the methodologies and an indication of discount ranges applied to the individual investments.
The information is intended to provide investors with additional insights and comfort around the veracity and governance of the processes informing these critically important processes conducted twice a year. Just some comments on the governance process. The valuation subcommittee established by the board during 2021 assists the Audit and Risk Committee in gaining assurance on the valuation of unlisted investments, thereby contributing to the robustness of Remgro's INAV. Year-end valuations at June 30th each year are audited, complying with the requirements of IFRS 13, but for interim valuation purposes, these valuations are not subject to audit. However, Ernst & Young, our new external auditors, was requested to perform a review on the valuation methodologies and assumptions applied in the valuation of the five largest unlisted investments, namely Mediclinic, CIVH, Heineken Beverages, Siqalo, and Air Products.
The outcome of the review indicated acceptance of the valuation ranges with no significant findings or differences on the methodologies applied, but it should be noted that this was not a full audit. The table provides significant changes since the June 2023 valuation. At June 30 th 2023, two significant previously listed investments, namely Mediclinic and Heineken Beverages, were valued as unlisted investments for the first time. Due to the significant contribution of the investment in Mediclinic to Remgro's INAV, Remgro engaged the services of an independent expert to perform the valuation on June 30th 2023. However, for purposes of the interim valuation, the valuation was performed internally based on the same valuation methodology as applied at June 30 th 2023, namely the sum of the parts approach based on the discounted cash flows of each region in determining the value range for Mediclinic.
At June 30 th 2023 , given the short period since the Heineken-Distell transaction implementation at the end of April 2023, the Heineken Beverages investment was valued using the price of a recent investment methodology. At the time, limited integration had taken place, and reliable consolidated financial forecast was also inadequate. For purposes of this interim valuation, Remgro assessed the cash flow forecast information made available. These forecasts were, however, not board approved and could not be considered for fair value determination in terms of IFRS 13. As a result, Remgro opted to use the market approach, the EBITDA multiple approach using peer set multiples after making certain adjustments to that market multiple for country-specific size, premium versus mainstream, etc., and applied our view of normalized near-term earnings for Heineken Beverages.
Consistent with Remgro's valuation approach looking forward, it is most likely that a discounted cash flow valuation methodology will be used for year-end June 30 th 2024 valuation since Heineken Beverages' budgeting cycle will provide Remgro with required board-approved cash flow forecast by June 30 th 2024 . Looking into the valuations of the significant unlisted investments, the equity value of Remgro's 50% interest in Mediclinic at December 31st is just over ZAR 43 billion or GBP 4.94 per share. In rand terms, this valuation represents a decrease of 8.8% from the June 2023 valuation, and in pound terms, a decrease of 8% from the June 2023 valuation of GBP 5.39.
The December valuation was done on a similar basis to the Deloitte independent valuation, with the three main components being Southern Africa, Hirslanden, and Middle East valued on a DCF basis, and the 29.7% interest in Spire valued at its closing market price.
We also use Mediclinic management board-approved forecast as the basis for the DCF. These forecasts were the same as those used for the June 2023 valuation. The main reason for the decrease in the valuation is due to the additional risk being factored in for Hirslanden following a weaker financial performance for the six months to September 30th 2023. For CIVH, we used the DCF valuation methodology, and that was also internally performed based on a board-approved forecast. We also applied discounts for lack of marketability control and forecast risk to this valuation. Pieter will provide more insight on the valuation of CIVH later on in this presentation. Siqalo's valuation increased by 4.9%, mainly due to a slight decrease of 33 basis points in the WACC, weighted average cost of capital, resulting in a positive impact of ZAR 205 million on the valuation.
They've also forecast single-digit volume and price growth during the five-year period, and that's aligned with the muted economic growth forecast. Margin recovery is expected in gross profit and EBITDA over the forecast period. Heineken Beverages, the equity valuation of Remgro's 18.8% interest in Heineken Beverages at December 31st amounts to ZAR 6.8 billion or ZAR 89.47 per share. This valuation represents a decrease of just under 46% from the June 2023 valuation of ZAR 12.5 billion or ZAR 165 per share. This June valuation was based on the PRI principle. So that was the price of the transaction at June 30th ` 2023. The decrease in valuation mainly results from a combination of the following. Firstly, the change in valuation approach from the PRI to an EBITDA multiple. These two valuation methodologies are not directly reconcilable. Furthermore, the 2023 EBITDA is severely impacted by one-off items.
So we used a more normalized view of EBITDA for the purposes of this valuation for this period. Just to note that from June 2024, we will transition towards a DCF valuation. So this is most likely a temporary approach that we've applied for December 31st . And also note that the PRI of ZAR 165 per share at the June 30th 2023 valuation was the negotiated price for a controlling stake in a merged entity with no adjustments made for lack of marketability or control. So this slide gives a summary of the changes in INAV since June 30th 2023 , and you will see the intrinsic net asset value decrease by 5.3%, the INAV per share decrease by 4.6%.
The decrease is mainly due to the overall decrease in the unlisted valuations that I've alluded to now, partly offset by increases in listed market values, of which the most significant is the 24% increase in the value of the OUTsurance Group. This slide just gives the contribution per platform to headline earnings as well as INAV. The top three contributors per platform are healthcare, consisting of Mediclinic, the consumer products platform, consisting now of RCL, Heineken Beverages, and Siqalo, and financial services, mainly the OUTsurance Group. In the following slides, I will highlight some key takeaways from our respective investment platforms. While I will not go into too much detail on each in the annexes to this presentation, which you can download from our website, we have provided more detailed info on the underlying performance measures and valuation considerations of each of our material investments.
The earnings measure that I will show also is based on the adjusted headline earnings. So, delving into the platforms, healthcare, adjusted headline earnings contribution from Mediclinic decreased by 2.7%. But if you look at Mediclinic's own adjusted earnings in dollar terms, it's flat at $81 million. Their Adjusted EBITDA decreased by 4% to $285 million. Ronnie and Jurgens will unpack these results later on in the presentation. The consumer products platform consisting of Heineken Beverages, Capevin, RCL Foods, and Siqalo, the Heineken Beverages contribution amounted to a loss of ZAR 208 million. Volumes were impacted by lower industry growth, load shedding, a shift from premium to mainstream, Heineken Beverages portfolio over-indexed in premium, and a challenging competitive environment. Load shedding particularly affected the trading hours for main market outlets.
They call it on-premise consumption and drove demand to the retail sector, resulting in increasing competitor activity within this channel because of the volume shift. In addition to this, Heineken Beverages also implemented pricing ahead of the industry, with the negative impact on volumes and market share now being addressed. Margins were also negatively impacted by non-recurring expenses relating to integration and supply chain challenges. The supply chain challenges mostly relate to malt and glass due to global price volatility, local supplier constraints, and volatile demand. This, in turn, led to the importation of beer that was sold in the local market at very thin margins, if any, in order to maintain market share. As a result of these challenges, the trading results for the six months to December 31st 2023 of Heineken Beverages is not deemed to be an accurate reflection of the long-term prospects of the business.
We expect that meaningful insights from the results will only be forthcoming following a longer trading period for the combined business. Capevin's contribution to adjusted headline earnings amounted to ZAR 57 million. Capevin's profit from continuing operations, which excludes Gordon's Gin due to it being classified as a discontinued operation, increased by 23.4% to ZAR 170 million. This increase is mainly due to the weakening of the South African rand compared to the prior period, as well as a strong performance from the Scotch whisky portfolio, especially in Taiwan. RCL Foods reported an increase in underlying headline earnings from continuing operations of 37.5%, which was mainly driven by Rainbow's recovery, notwithstanding the impact of Avian Influenza during the period, as well as a strong performance in the sugar business unit despite lower crop yields. Paul and Marthinus will unpack these results later on in the presentation.
Siqalo's headline earnings contribution amounted to ZAR 237 million, representing an increase of 46%. For Siqalo, the trading environment remains a challenge due to elevated interest rates, high inflation, volatile exchange rates, and continued load shedding. In order to recover margins from prior commodity cost drivers and to offset the impact of inflation and continued cost pressure, the business increased prices in September 2023. Furthermore, Siqalo experienced a 7.9% decrease in volume for the period under review, as consumer spend was negatively impacted by the elevated inflationary environment. Oil commodity markets have actually stabilised at pre-Ukraine war levels, which assisted to offset the decrease in volumes, resulting in a partial recovery in operational EBITDA margins to more normalised levels. OUTsurance Group announced their results yesterday. They reported normalised earnings, which exclude certain anomalies, increased by 0.5%.
This increase is mainly due to a reduction in head office cost resulting from the simplification of the group following the listing transition in December 2022. That was partly offset by a lower contribution from OUTsurance Group Limited. OUTsurance Group Limited's normalized earnings decreased by 3.3%, mainly driven by the impact of significant high natural peril claims incurred, most prominently in Australia, and a significant increase in the cost of their employee share option scheme, which is linked to the index performance of the OUTsurance Group share price. If adjusted for the increase in share-based payment expense, the normalized earnings would have been 13.4% higher. That was driven by the growth in gross written premium of 22.5% and analyzed new business increased by nearly 39%. Infrastructure, the main investment here in this portfolio is CIVH.
As alluded to, the decrease in earnings is mainly due to higher finance cost resulting from increased interest rates. Pieter will elaborate more on these results later on in the presentation. The industrial platform consists of unique assets, Air Products, TotalEnergies, and Wispeco. If you look at their contribution, the platform's contribution to headline earnings, it's nearly 18% and on an INAV contribution of 8%. So very good yield on these investments. Air Products, volumes in the large tonnage gases division were largely static overall. A lack of large project development in mining, chemicals, and metal extraction in the local economy is hampering growth prospects. The packaged gases division has shown pleasing growth in volumes in the current period from existing customers and new business signings in a number of industry sectors, including the motor mining and metals fabrication.
TotalEnergies' contribution to adjusted headline earnings includes negative stock revaluations amounting to ZAR 8 million. In the comparative period, it was ZAR 273 million. These negative revaluations in both periods resulted from the decrease in the Brent crude price from July 1st to December 31st . Excluding these revaluations, the contribution decreased by 4.7% from ZAR 129 million to ZAR 123 million, mainly resulting from refining margins coming off a high in the comparative period. Wispeco contributed a decrease in earnings, and that was as a result of a lower gross profit margin together with a reduction in their brass sprinkler sales that negatively impacted profitability. The margin, in general, was subdued, with competitive conditions being tough given the current economic climate.
Moving on to our cash flow at the centre, the main driver in cash earnings at the centre is dividends received from our underlying investing companies for this period amounting to ZAR 1.5 billion. We've also utilised ZAR 3.5 billion cash to early redeem the more expensive Class B preference shares at the beginning of December 2023. There was a window of opportunity on the swap curve to redeem without incurring substantial breakage cost. We've also refinanced the Class A preference shares, extending each maturity from January 2024 to March 2025 at a more beneficial rate. This movement results in a net cash outflow of ZAR 3.3 billion for the six months to December 31st , with cash at the centre ending at ZAR 5.5 billion in comparison with the ZAR 9 billion at the end of June 2023. This is just the slide on cash dividend evolution.
If you look at the six months, this period, the cash dividends actually have decreased from ZAR 1.7 billion in the comparative period to ZAR 1.5 billion. And the main reason for the drop is that RCL has suspended their final FY23 dividend. No interim dividend for 2024 was paid by Mediclinic. And in the comparative period, it also includes a special dividend from FirstRand of ZAR 154 million. The cash dividend, the board declared a flat interim dividend of ZAR 0.80 per share given the subdued interim results from an earnings perspective as well as a cash earnings perspective. And that dividend will be paid on the March 22nd 2024. I'll hand over to Ronnie now.
Thank you, Neville. Good morning. Thank you for the opportunity. Mediclinic is an international healthcare group.
It's structured in three divisions, and it operates in four countries and with long-term oriented strategic shareholders. The purpose or the reason for being of Mediclinic is to enhance the quality of life of our patients and their families. This is what motivates our staff every single day to come to work and to do what they do. We've developed leading market positions in all the countries in which we operate by focusing on our core and by building our brand and our reputation. Our core services offering of clinical care, which is really what we do in various care settings, are of high quality and have been improving consistently because of our very strong focus on the integrity of our offering. We continue to measure more than 150 clinical performance indicators every month.
I would like to highlight a couple of achievements or improvements that we made in the last period. We significantly improved our Net Promoter Scores in all our divisions during this last year. We've established 29 client or patient advisory groups. They all meet quarterly. We also developed clinical pathways in hip, knee, and spinal surgery, developed jointly with our doctors in both Switzerland and South Africa, and are successfully lowering complication rates, length of stay, and improving patient satisfaction by way of those pathways. We've decreased our patient fall rates in Switzerland, our medication errors in the Middle East, our infection rates in South Africa, as well as our adjusted adult mortality rates in both South Africa and the Middle East. And then onto the billing allegations situation in South Africa.
During August 2023, various allegations were made in an email communication to funders, also called medical aid schemes, and the media alleging account manipulation at six Mediclinic hospitals. Mediclinic appointed the law firm ENSafrica to conduct an independent fact-finding investigation into these allegations. The ENS investigation concluded that Mediclinic is an ethical organization with sound controls and governance in the billing environment. ENS have not identified evidence of any intentional practice of manipulating billing or coding at hospital or group level as alleged. Our current key strategic priorities are focused on driving efficiency and optimization across the business, organic growth, as well as expanding revenue-generating opportunities. When we look at Switzerland, our focus there is on building resilience. Market dynamics and context to consider include the following. We see a stable macroeconomic environment with good economic growth in Switzerland, but we also see price pressure on supplementary insurance tariffs.
We see a gradual shift to general insurance mix that has been ongoing for several years. If I can maybe just stand still on that point, just to remind everybody that in Switzerland, everybody has general insurance, health insurance. They can then opt in that country to also buy supplementary insurance. What we see at the moment is that our growth in general insurance cases is faster than our growth in supplementary insurance cases. Hence, the mix change that we could possibly say is going in the wrong direction. Onto resource constraints, especially nursing, restrict our volume growth in certain areas in the country. Also, employee costs driven by inflation and increased contractor costs, again in the field of nursing, is another factor. Increased complexity in the billing environment due to incorporation of doctors' fees into the hospital, as has been required by insurers for the last year.
So all of those are very important. In the collective, these drivers create a tough operating environment to which we are very slow to adapt or were slow to adapt, I should say. In response, in terms of our key priorities, we've developed and are now executing a comprehensive plan to adapt the business. The plan consists of three work streams and 10 focus areas and with clear short-term and medium-term operational and financial targets. The entire division has been mobilized to execute this plan under close supervision of the board. The most important elements of this plan are the following: improvements in workforce scheduling and utilization to control staff costs and reduce contractor costs, reduce administrative costs through incisive action. For example, we are reducing the headcount and head office by between 10%-15%, the size of the head office.
The process improvement is another focus area for us, especially in the field of net working capital management, especially with regard to billing and collections. We also focus on robust negotiations on the supplementary insurance tariffs more so than ever before. Lastly, a strong focus on revenue optimization as well as improving the operating model of the division. Our targeted outcomes in Switzerland are to grow our inpatient revenue, incremental increase in our operating margins, and improvement in our net working capital with very specific focus areas and timelines. Onto South Africa. In Southern Africa, our focus is to optimize and to expand the business. Market dynamics and context to consider are the following. We have a stable operating environment that supports modest growth in South Africa at the moment.
The impact of networking arrangements based on volume discounts by the medical aid schemes on average revenue per bed day and volumes is having an impact, increased employee costs, the ongoing costs and impact of electricity shortages, and all of those in the collective bring us to our key priorities, which are the following: critically assess each network participation to drive volume growth and optimize our specialty mix in each of our facilities, core system replacement of revenue cycle management and pharmacy stock control, and followed by the implementation of a new electronic health record. Staff cost optimization through efficient workforce utilization, and then also growth in revenue in related businesses. In other words, those businesses that bring us new care settings. Our targeted outcomes in South Africa include the following: revenue growth marginally ahead of inflation, broadly stable operating margins reflecting investment in our core systems replacement.
That concludes South Africa. Onto the Middle East. In the Middle East, we aim to grow and scale our business. Our market dynamics and context to consider over there would be continued robust economic growth in the UAE, ongoing regulatory pressures on tariffs and other requirements, below-inflation tariff increases, and mix changes towards daycare surgery and outpatient treatments. What I mean by that is stronger growth in day cases and outpatients than inpatient growth, although we see growth in all of them. Increased competition for volumes, doctors, and staff. Numerous smaller operators entered the market recently, putting pressure on volumes. But however, we have scale, we have brand, and we have reputation to our advantage.
Our key priorities in the UAE would be organic revenue growth through existing facility utilization and focused investments, ongoing turnaround of underperforming facilities, improved staff productivity, and to optimize the specialty mix per facility in the same way that we're doing it in South Africa. Our targeted outcomes there are expanded margin through operating leverage and volume-led incremental revenue growth. I'm going to hand over to Jurgens Myburgh to talk us through the numbers. Thank you.
Thank you very much, Ronnie, and good morning to everyone. The group performance for the six months to September 30th 2023 was impacted by weak performance in Switzerland, partially offset by an outperformance in the Middle East, as referenced by Ronnie. Our group revenue was up 5% at $2.2 billion. This result was driven by a 1.3% growth in inpatient admissions and a 3.9% growth in daycare admissions, partly offset, however, by lower average revenue per case due to mixed changes and below-inflation tariff increases, as referenced by Ronnie as well. Our Adjusted EBITDA was down 4% at $285 million and down 3% in constant currency terms. The group's Adjusted EBITDA margin was 13%, reflecting a softer revenue performance coupled with increased employee and contractor costs in Switzerland, as well as additional employee and energy costs in Southern Africa.
The group delivered cash conversion of 63%, mainly due to low collections in Switzerland and South Africa, but continues to target a 90%-100% conversion rate for the full year. The group's leverage ratio, including lease liabilities, stood at 3.9x EBITDA at September 30th 2023. Moving to Switzerland, the revenue and inpatient admissions for a period were broadly stable, with revenue of CHF 901 million and inpatient admissions down 0.1% compared to the comparative period. The general insurance mix, as referenced by Ronnie, increased to 52.7%. Average length of stay decreased by 5.7%, resulting in an occupancy rate of 55.2%. Outpatient and daycare revenue was up strong, with 6% to CHF 198 million, contributing some 22% to total revenue during the period.
The constrained revenue performance in the period, combined with elevated spend on employee and contractor costs, resulted in an 11% decrease in Adjusted EBITDA to CHF 104 million. The Adjusted EBITDA margin was 11.6%. In trading since the half-year results, we've seen a marginal improvement in inpatient volumes, with continued pressure on supplementary insured tariffs and staff costs. We continue to focus our attention on revenue growth and the efficient deployment of staff across the division. Hirslanden expects to deliver FY24, that's up to the end of March 2024, revenue broadly in line with FY23, and an EBITDA margin of around 13%. Moving onto Southern Africa, comprising South Africa and Namibia, revenue for the period increased by 7% to ZAR 10.4 billion, reflecting the continued recovery in client activity.
Compared with the first half of 2023, paid patient days, or PPDs, increased by 2%, with daycare growth exceeding inpatient growth. Average revenue per bed day was up 5% compared to the comparative period, below the average annual tariff increase due mainly to the impact of network formations, which was referenced by Ronnie as well. Adjusted EBITDA was stable at ZAR 1.8 billion, resulting in an Adjusted EBITDA margin of 17.5%. This lower margin was driven by higher employee costs in addition to rising energy costs due to increased load shedding. In trading since the half-year results, we've seen a more pronounced effect of network formation on volumes, with PPDs up around 1%, down from the 2% at the half-year. The division expects to deliver FY2024 revenue growth of around 6% and an EBITDA margin of around 18%.
Finally, then looking at the Middle East, revenue for the period increased by 11% to AED 2.3 billion, driven by strong growth in client activity. Inpatient admissions and daycases were up 10% and 19%, respectively, really strong growth in that environment and in those disciplines. Outpatient cases, which is the majority of the revenue that we earn in the Middle East, were also up 10%. The volume increase was partly offset by a decrease in the average revenue per case, driven by mixed changes. Adjusted EBITDA increased by 16% to AED 277 million, driven by the strong revenue performance, which is partly offset by an increase in consumables and supply costs due to specialty mix. The Adjusted EBITDA margin increased to 11.9%.
In trading since the half-year results, we've seen some continuance of the strong revenue growth and increase in consumables and supply costs due to ongoing mixed changes. The division expects to deliver FY24 revenue growth of around 9% and an EBITDA margin of around 14%. With that, I'll hand it back to Ronnie.
Thank you, Jurgens. I'm going to summarize our key priorities for the moment. The first one is executing on our comprehensive plan to build resilience and deliver future growth in Switzerland. That's the number one priority for all of us at the Mediclinic. Second one is to drive growth and operating margin improvement in the Middle East. That's followed, thirdly, by optimising the South African operating margins and initiating our core system replacement. Then onto investment for revenue growth across the continuum of care. In other words, new care settings across the entire group. We think there is quite a lot of potential in that arena for us. Then onto innovation, to drive innovation in the divisions and for the group in terms of bottom-up and top-down innovation. And then lastly, grow our return on invested capital sustainably over time across all our divisions.
With that, I would like to say thank you and hand over to Pieter Uys.
Thank you, Ronnie. Good morning, everybody. I'm going to start with this slide. I just touched base on the left-hand side with the strategy that we showed the last time. It remains mostly unchanged, focusing on open access, wholesale, and uncapped internet fibre. On the right-hand side, I show the full complete shareholder structure at CIVH. At the top, you see the Remgro 57% shareholding. We also have two other shareholders there, NewGX, represented by Khudu Pitje. He has Stanlib and Harith as his shareholder partners. CIH with 6%, represented by Joe Madungandaba. On the right-hand side, you see where a potential Vodacom transaction will come in, investing between 30%-40% into Maziv. Maziv is the holding company of all the SA fibre businesses. You can see Dark Fibre Africa, DFA there, Vumatel, or Vuma as we call it.
Also, at the bottom, you see Herotel. We've got a non-controlling 49.9% shareholding in Herotel Telecoms, with the transaction also at the Competition Commission currently for Vumatel to get control over Herotel Telecoms. On the left, in the middle, you also see CIVH Africa. CIVH Africa has already got an investment in Zimbabwe. Not large, but they tested the waters there. They are working on an investment opportunity in Tanzania that will also be done with Vodacom. And they have progressed that quite far. And we're expecting them to bring something to us for approval very soon. The next slide, I just take a step back and I look at some of the highlights of the six-month period. The first one was already mentioned by Jannie and Neville. The 400 basis point increase in the interest rates. If you look at April 2022, it was 7.75%.
End of the reporting period, September 2023, it was 11.75%. This definitely had an impact on how the business behaved, how consumers and enterprises behave. And I will give more color to that later on. Then at DFA, we started seeing some quality issues during the period. And I also touched on this the last time. So we did two things. Firstly, we started fixing some of the network issues in the Gauteng area, doing preventative maintenance, spending some maintenance CapEx on the network. But the bigger plan that they're busy executing is to redesign the network. If you look back at 2007 when the business started, they only had Vodacom as a customer. And the network was designed mostly to provide links to telecommunications companies. But over the years, the network has expanded, growing into FTTB, FTTH.
That has definitely put strain on the architecture of the network. We went back to the drawing board, redesigned the complete network. We are busy with a CapEx program that spans over multiple years to invest more or less ZAR 750 million into the network to make it more future-proof with the most modern technologies available in fibre networks. In this period, 6,500 links were built and installed in the DFA network. Vumatel, at the bottom, I mentioned the high interest rate, taking a cautionary approach, making sure that we have a stronger balance sheet, not spending everything available to us. You'll see only half the number of homes passed in the six months that we're reporting on compared to the previous, prior-year, six-month period. Let me go into a little bit more detail on the two businesses. DFA, firstly.
DFA has three business segments. Firstly, where we started, providing fiber to the telcos with Vodacom in 2007 as the original anchor tenant. That's where we connect the telco switches, their towers, and the different data center nodes that they might have. In the center, you see fiber to the business, or as we call it, FTTB. This is where we connect enterprises and also small, medium-sized enterprises on the right-hand side. The fiber backhaul business, this is where ISPs connect their equipment together, data centers, connecting back to, for example, a telecom. If you just drill into some of it, you'll see very little growth in the telco market. However, if I take a step back, with the mobile operators getting more spectrum through the bidding process that was concluded two years ago, they have plans to roll out 5G. They are planning to densify their networks.
I do see that as an opportunity for DFA. They are starting to plan in accordance with those predictions. FTTB and fiber backhaul, the links grew there by 8.5% each. Still growth, even though we are busy redesigning the architecture of the network. The next slide zooms into Vumatel, the three segments, Core. An example of Core is Sandton, a Reach market that we launched a few years ago. An example is Mitchells Plain. Then on the right-hand side, the key market. There's a slight difference between what we offer in the key market to Core and Reach. Core and Reach is what we call pure FTTH. We take fiber into the home. Whereas in key, it's more an internet product that we take to market in those areas.
Alexandra is a typical example of where Vuma Key happens, at the bottom of the living standards pyramid. It is taking uncapped, in other words, unlimited internet for video on a prepaid basis into that market. However, it is still on trial. If I look at Vuma Core, we've seen a change in behavior from the core market. During COVID, we had high growth. Everybody started working from home. That is definitely changing. And we're seeing the impact of that. Companies are not continuing to pay for home internet as people start going back to work. So we've seen affordability issues come out. And we had, in the period, probably 20,000 disconnections. If we analyze that, half of that would be people moving house. So the equipment and the link is still in the house. But we're waiting for somebody new to get into the house, affordability.
So what are we doing about this? So firstly, we've taken a renewed focus in this segment. We are not building, but we are focusing more on driving the penetration. So we've got new resources that we've allocated to come up with new attractive tariff plans to look at the affordability and competitiveness in this market. We also have dedicated staff that, together with the ISPs, go from door to door and just remarket Vumatel to those customers. And we're already seeing a difference. In the last month, we've had 2,000 new connections, just as an update, to show that the new strategy is working. Most of the focus went into the Reach market, building the 100,000 new homes there, passing 100,000 new homes with 50,000 new customers. And the Reach market increase is also what drove the revenue.
Then I go to some of the financial highlights of the businesses, CIVH, DFA, and Vumatel. This is the results of the six months ending September 2023. Firstly, you can see the impact of the increased interest rates across all of the businesses. I mentioned it previously. But it comes through in the headline earnings, DFA, Vumatel. The DFA revenue for the period increased by 3.4% to ZAR 1.34 billion. And just by the way, the monthly annuity revenue at the end of the reporting period was around ZAR 250 million a month. The Vumatel revenue increased 11% to ZAR 1.8 billion. And most of that revenue growth comes from the focus that we had in the period on Vuma Reach. Also, I can mention that Vumatel has a program where, when they go into a suburb, they also see if there are schools that they pass by.
And then they connect those schools with a high-speed 1 Gbps internet connection. So at the moment, there are 780, was the last time I looked, schools that they provide this free internet, 1 Gbps. That is super fast. The next one, I look at the cash flows and the different cash flow drivers. Waterfall, starting on the left for the reporting period with ZAR 2.1 billion EBITDA. The interest charge, you can see in the middle there, changing from ZAR 664 million from the prior period to ZAR 900 million in this period, a big impact on the cash flow. But in the middle, you see there's still healthy cash flows from operations, just over ZAR 1 billion. Most of that we have plowed back into the network, building the Reach, the DFA networks, and also starting the work on refocusing the quality in DFA, building the new architecture.
On the right-hand side, you'll see that leaves us with a shortfall this time, just over ZAR 400 million compared to the ZAR 1.1-ZAR 1.2 billion shortfall the previous year. But definitely, in the period and in the last six months, management has been much more cautious how they spend the CapEx, taking into account the macro environment, the high interest rates, and inflation. So it definitely has an impact on the network. We're also cautious how we look at the Vodacom transaction and when new cash will come into the business. So the focus is shifting from just building new, grabbing land, to mining what we have in the ground already and focusing on penetration. This waterfall shows how we get to the CIVH valuation in the Remgro results, starting on the left top for the six months ending December 2023 with ZAR 50.1 billion valuation at Maziv.
That is using the management five-year forecast. That results in an EBITDA multiple of 12.6x. I can just also mention that the discount rate in the period over the previous period increased mostly because of the high interest rate. And that had a ZAR 600 million, just short of ZAR 600 million impact on the valuation. Next bar shows the debt, ZAR 19.5 billion. I would say ZAR 17.8 billion of that is bank debt. The rest, subscriber equipment lease liabilities. That gives us then a Maziv equity value of ZAR 31.5 billion. That will also compare to the Vodacom investment into Maziv, because this is the level that they come in at. That valuation still needs to be concluded when the transaction is finally approved by the competition authorities. And I'll speak a little bit more to that just now. Then we apply our customary discounts, forecast risk.
I mentioned we also apply the non-control and tradability discounts that we normally do. So you'll see that's a little bit up from prior year because of the uncertainty in the macros, giving us the CIVH equity value, the full value of ZAR 22.9 billion. And if you take our 57%, it gets down to the ZAR 13 billion. Last two slides, Vodacom investment in Maziv. It started back in 2021, so a long time ago. That was when it was submitted to ICASA, the telecommunications regulator, and also the Competition Commission. The commission did all their work. And then last year in August, they recommended it to the tribunal with a prohibition. That followed a process. Then to November, where two intervenors, namely MTN and Rain, were allowed into the process. We are currently busy preparing to go to the tribunal hearings at the end of May.
It starts on the 20th of May. We'll run for twthree weeks. They'll take a week break and continue in early June. Hopefully, by then, we are still confident that the transaction will be approved. We have also, last week, submitted conditions that we feel will address all the concerns that the intervenors have and all the concerns that the competition commission had in their submission with the prohibition recommendation to the tribunal. So I'm still pretty confident that we will be successful in concluding this transaction. The last slide just shows some of the benefits that will come from such a transaction. Firstly, Vodacom, in their commitments to TTI and also the commission, will invest at least ZAR 10 billion over a five-year period into the network. We will pass one million new homes in the lower LSM areas, mostly Key.
We will facilitate the creation, again, in rural areas, underserviced areas, of 10,000 new jobs over a five-year period. We will establish a development fund, ZAR 300 million, over 3 years. And then that will be spent over five years to facilitate small and medium enterprises development. We will also acquire most of the Vodacom fiber and make that available to the whole market on an open access basis. And then the investment by Vodacom will be more than ZAR 10 billion cash and infrastructure that will go into the transaction. With that, I'm now going to hand over to Paul, sitting on my right-hand side.
Thanks, Pieter. Good morning, everybody. Three parts to the RCL Foods presentation today. I'll touch briefly on the strategy, give a quick update, then go through the operational performance for the six-month period. Then Marthinus will talk more specifically to the Rainbow turnaround and the good progress that's been made in that space. Let me start with the strategy. We announced in August 2021, following a portfolio strategic review, that RCL Foods would change shape and become a value-added business in future. We have made good progress in that in the six-month period. I'll come back to that in a minute. I just want to start on the left-hand side of the slide, which talks to the RCL Foods of the future. We have three strategic pillars, people first, right growth, and future fit, which are all underpinned by purpose. We grow what matters.
Just starting on people first, it's the area we've probably made the most progress on in the six-month period and pleased with where we've got to in most of the areas in terms of our five-year strategic plan. Right growth, I'll come back to and talk to in a little bit more detail later. The market is in a very difficult place right now. It's been mentioned many times this morning around the consumer being under pressure and inflation, etc., that's having an impact. And I have a slide which I'll talk to what's specifically happening in the food market. Then future fit, just want to touch on the one, become best in class, good progress also made in the six-month period. We started quite slowly in this space and have made some significant strides.
This is really about cost and efficiency as well as becoming best manufacturing facilities and following best practice in manufacturing. Pleased with the progress we've made there. Then, on the right-hand side, in terms of the portfolio shift, Vector Logistics sale happened on the August 28th 2023. That is finalized. We are in a 12-month transitory period and handing over some of the operational aspects to Vector and its new owners. That will be completed by end of August 2024. We've run well on track to deliver that. Then, Rainbow. On the 1st of March, the RCL Foods Board gave preliminary approval for the formal separation of Rainbow, unbundling to shareholders, and a concurrent listing on the JSE. This is important that it'll enable both businesses to pursue their prospective growth areas and better align capital allocation.
We did announce in August 2021 that both Rainbow and Vector would be better in a pure-play environment. And that's what this is intended to achieve. While significant steps have been made in the unbundling and work has progressed quite well, there is still work to be done. Hopefully, this will be concluded in the next while. As I've said in our results, various interviews, we're talking months and not years. But I think the caution here is that Rainbow's performance is one key part, as well as the capital allocation, capital structure, which we continue to work through. Marthinus will talk to that performance a little bit later.
Then moving on to the performance for the six months to December, I'll just start with the outer two bars, ZAR 1 billion-ZAR 1.5 billion, is our strategy EBITDA for the period six months, December 2022 to six months, December 2023. What we do do in the middle is show our underlying performance. And this is an attempt to give the market the best view of the actual operational performance of each of our business units. So we are very diligent as a board on what items we are allowed to reconcile out. And they are largely either material in nature or recurring items. We have two in this period, IFRS 9, which is ZAR 70 million in the prior year and ZAR 500,000 in the current year. That is a standard one, which we do every period.
One additional one in this period, which is the second bar from the far right, is the Komati insurance proceeds, which relates to the fire that happened at the Komati sugar mill where our sugar storage shed burned down. In the middle, and we'll unpack this in a little bit more detail, you can see the movement from just short of ZAR 1.1 billion-ZAR 1.4 billion, the real operational performance, largely coming from Rainbow and sugar. We'll go through this in a little bit more detail. Just to touch on a key metric for us as a management team is return on invested capital. We have split it this time between Rainbow, given the earlier part of the unbundling, and group, so two parts to it.
I think what we'll acknowledge is that the 9% for 2023 in group and certainly Rainbow's return on invested capital is not what we as a team are striving for. This is getting significant focus within the business. We are making progress in this regard. Just one other thing to highlight is that in the 9% group excluding Rainbow includes the H2 of FY23 performance. We use a rolling 12-month average for our ROI calculation. That was a period that significant challenges were felt in our business in RCL, in particular our pet food business. We are confident that by the end of FY24, we will see a better number than the 9% that we have reported for the interim results. Just to touch on the markets, I'll start on the left-hand side. This is ASK data.
This is food manufacturers' data that is submitted into ASK. They produce a consolidated dataset for us. I'm only going to focus on 2 lines. Just to know, firstly, that this is producer, manufacturer, numbers submitted in. It is not sales out. The 2 lines I want to focus on are food excluding staples. You can see there's 4 columns. The first 2 are volume for the 12 months to December 2023 and then 3 months for December 2023. Then the last 2 columns are inflation numbers, 12 months, December 2023, and the latest 3-month period. Food excluding staples, you can see improving in the last 3 months, but moderate growth of between 1% and 1.5%. This is driven by inflation of about 8.5% in that basket of goods.
The concerning one is staples, where you can see reductions of 6.5% and 8.3% in the more recent period. This has been driven by 13.3% inflation and 7.1% in the most recent period. This is where our poor consumers are in the staples market. It remains extremely concerning that they are consuming less food. On the right-hand side, just unpacking our market shares. As a branded business that we want to build, it's important that we reflect on our market shares as they are a sign of your relevance in the market. I'm pleased that our market shares in culinary, which is Yum Yum and Nola, have remained largely intact and happy with our positioning in the market.
The pet food category is where we were most significantly hit by load shedding between January and April this year, where we did not have backup generation power. That has now been resolved. We've seen an improvement in our market shares and service levels into that market. The most recent periods, which is not only the last three months, sees even more improved results, particularly in Bobtail and Catmor, as we try to regain our market shares lost during that period. Just to briefly go through each business unit. Groceries, flat on the prior year. I've spoken to the volume challenges. I'm not going to repeat that. Some recovery in pet food volume during the period, but drove a muted result. In this number includes ZAR 85 million of unrecovered direct load shedding costs.
Just to contextualize that, we were not affected by load shedding in H1 of F23. So that is a new cost, which is in the system. And that is simply running generation capacity and diesel cost. And then there was a decline in oil sales revenue. This is a fairly volatile market. And the market was quite buoyant in H1 of the prior year. It is our flagship part of the business. And it's a part that we focus intently on, our performance. And we'll continue to give it focus to improve our performance in this area. From a baking point of view, 5.8% growth in EBITDA, mainly driven by improved volumes in milling, pars, and specialty, also improved margins in that area, and the best-in-class savings that I spoke to earlier coming through. This has been offset by our challenges in our bread operating unit.
The bread market is a focus area for a significant amount of promotional activity at the moment. This has compressed volumes and margins in the market. Simply put, the market is under recovering. We are certainly under recovering in prices, the wheat costs that have come at us as a consequence of the war in Ukraine. Then finally, on sugar, a very pleasing performance, 35% up. Neville did touch on earlier, the cane yields fell off quite significantly at the end of the season, which was unusual. But a strong underlying result is also attributable to higher local and export prices. There was a price increase in the tail end of the F23 financial year, which flowed into H1 of F24. Export prices were buoyant in the period. This has certainly set up the result.
Best-in-class initiatives in sugar remain a key focus area. There's a number of additional initiatives which we're focusing on. Then finally, on Tongaat, which is important for both an industry and RCL Foods perspective, last year had a material impact on our results. And we have spent significant time trying to navigate through the business rescue process with the practitioners and Tongaat and the South African Sugar Association. There's been a number of court cases and public media postings on this topic. I think we have positioned ourselves well as RCL and SASA to navigate through what remains a difficult period for SASA. The business rescue plan was approved in January. It still remains in progress for implementation towards the end of the financial year. And there is a good prospect of recovery of export monies that are withheld in SASA, provided the plan is implemented.
And then there's a court case pending with the business rescue practitioners regarding a further portion of recovery of money owed to SASA from Tongaat. And this will take an extended period of time. But we remain confident in our position and the way in which we position ourselves legally in this regard. And with that, I'll hand over to Marthinus.
Thank you, Paul, and good morning. Ours is a value chain that runs from farm to fork. It takes about 2 years to fill that pipeline. We start with importing grandparent chicks. We then multiply them via 2 more generations. We end up with the broilers that we then process. We take to the market under the brands Rainbow, Farmer Brown, and Simply Chicken, mostly in the quick service restaurant channel, as well as retail and wholesale. We sit with volatile input costs. We are subject to commodity cycles. Therefore, the most important and key metric to move this business along is a low-cost base. It is a composite metric. It is supported by KPIs and also supported by some of the following actions. Particularly, we did a breed change. It took us 2 years. It will be completed in April. It is not fully reflected in FY24.
So there's more upside to come. I'll talk to the KPIs in the next slide. It's all about the brand basics and setting up these birds in a uniform manner and healthy so that they can convert the vegetable protein into animal protein. We integrated this value chain in each of our regions. We created business units. They compete with each other and has been driven mostly by putting the right people in the right place, central to any business turnaround. We've brought volume back via second shift at Hammarsdale. We brought jobs back. And the factory is running to design capacity. And we're back to higher volume than in 2017 when the one shift was removed. We're obviously still busy fixing assets. We did a lot of investment in that engine room, also specifically on the feed side, in molds and creating capacity.
We obviously got to still prove that we can deliver profitability through these commodity cycles. The team and I are very enthused by the results, the traction that we've obtained and managed up to now. We're excited about the industry in many ways. The poultry industry is the dynamo in Agri because it uses so much of the maize and the soya. If one looks at the KPIs, just briefly, they're all trending in the right position, converting to reduced cost, that low-cost base. Left graph just shows that we have achieved the right egg numbers per bird with the change in breed. Feed conversion rate, very important, just shows how we convert that vegetable protein to animal protein. Lower numbers are the better ones.
So the graph trending downwards is the right one, similarly with mortality or conversely livability, while average daily gain one wants to maximize so that you can have more meat to process or that you can reduce the slaughter days. It all converted to better revenue as a combination of better price and the volume that we talked about that we brought to the business. EBITDA margin still sits at 3.7%. We're tracking at about 4.2% year to date. In the short and medium term, we are aiming for 6%. And we think that is achievable. We will then obviously try and improve on that. We suffered from avian influenza, very significant numbers there. We were at the epicenter in Gauteng in the Midrand area, highly congested in terms of poultry.
We are doing everything we can, also in combination with looking towards vaccination and working with government in that regard. Load shedding hit us like all other agribusinesses or all other businesses in South Africa and obviously led to significant cost in terms of fuel and generation. Talked about Hammersdale, finally. We are looking at the Competition Commission's poultry inquiry. It is all about the concentration within or the perceived concentration within the industry, vertical integrated nature of the business. We are trying to influence that discussion towards what is best for ultimately South Africa, lowest and cheapest chicken cost to the consumer. We think it is a game of scale. It's cents per kilogram. And we would rather see the whole discussion move towards achieving that goal. The import rebate is another concern. We're also interacting with the department and the minister.
Two conditions for this rebate was that there must be a shortage of chicken. The shortage should be a result of avian influenza. None of those conditions currently occur. We are interacting with them, hoping to change that discussion as well. It remains a concern. Thank you very much.
Thank you, everybody. It's now back to me again. I think I want to thank all my colleagues that did the presentations here this morning and for all the contributions they've made. But maybe it's good for me to summarize where we are and what are the key areas of focus going forward. But it's probably the most important to learn from the mistakes that you've made in the past because that will determine the context of what you have to do going forward in the future. There's a lot of noise in these results. There's a lot of underlying companies. We've been through a restructuring of the portfolio. But maybe just to highlight four areas of what has happened and actually created these difficult results that we are to present today. I think the first one is Heineken Beverages.
I've alluded to the delay that we experienced with the Competition Commission. But you can't blame that all on that. I think we must acknowledge that we've made some scores, some own goals. We've made some once-off mistakes that are not to be repeated. I think the company is now very well positioned for future growth. As I alluded to, there's some future green shoots coming through. We think we're well positioned in that. We're excited about the future of Heineken Beverages. We don't think we will repeat those own goals. We've learned our lessons. The management team is settled. We've got a very excited and very much motivated going forward. The second thing is really, as Pieter has mentioned on the CIVH side, also a big impact on the delay in the regulatory approvals. It had two impacts.
Firstly, the business was sitting with debt for longer than we've anticipated. So the high interest rate cost us money. And secondly, because of that, we had to scale back in some of our growth plans. Hopefully, that will be repeated if we capitalise the business with a Vodacom transaction. If that doesn't happen, we've got a plan B. The fourth one clearly is on the medical side. And I don't want to repeat what Ronnie and Jurgens have said. But clearly there, we need to have a determined effort to make sure on the revenue line that we actually make sure the cost line actually matches that we can get a decent margin on our capital invested. And that is very, very much a critical step going forward with our new partners in this journey. But I think it highlights two things if you actually summarise, look for it.
It's really there were some operational issues. But clearly also the capital structure of some of our underlying investments. And that is where the capital allocation thing comes to forth. And we as a group, we're going to look at it seriously. We've been looking at it seriously for the past. But clearly, we're sitting on some, I won't call it unproductive assets, but what we call non-core assets. Do we realise them? Make sure that we've got the right adequate capital structures at the underlying companies, that they've got the right debt levels. Also, where do we allocate some of these capital? Do we make re-share repurchase? Do we increase the dividends? So these are all very critical decisions that we're going to make going forward in the next 6 months to 12 months. We think our portfolio is geared for growth.
I mean, the bar hasn't been set so high in some of these companies, especially if you look at our beverages company. I mean, to improve from here is not going to be a difficult task. But we're excited about the future. And I think a lot of our companies are geared for growth. We've got some pockets of excellent growth. If you looked at the rest of the portfolio, I think in very difficult circumstances, they have actually performed very well apart from these four things that I've mentioned that I just mentioned. I think having got a lot of these companies private makes a big difference in our lives. We can be more agile. We can execute quite quicker. And I think very much important, it is a process of learning your partners, what value they can add.
I can categorically say that the partners that we've got now in Heineken as well as in MSC, much closer to the business, we're learning the business, they're learning the business together with us. And they're already adding a tremendous amount of value, especially on the Swiss operational side in that regard. So yes, it's been a difficult set of results. But I think we set for growing from here. It's not easy out there in the market, as we've alluded to, if the consumer is stressed. But we are cautiously optimistic that we can deliver on our strategic priorities going forward, also looking at the capital structures of where we are. I mean, Remgro, we're excited about the future. I know it's not a great set of results that we've delivered to you. But we're excited about and we can only go forward from here.
I think that is it from my side. Thank you very much. We can go over to questions and answers.
Thank you, Jannie. We'll start with the questions on the webcast. Two questions, Pieter, on CIVH. If the Vodacom transaction doesn't proceed, what would the capital requirements be on shareholders? And secondly, what would the impact be on CIVH's CapEx?
Thank you. Wonderful question. So as I mentioned in my presentation, we are currently being more cautious how we spend our cash at the moment and also how we draw down on the debt. In fact, we stopped drawing more debt already during the second half of last year. So you'll see that the debt is not going to grow when we next report. We are also focusing more and more on, as I said, mining our existing infrastructure, not building as fast as we did in the past. You could see that from the homes passed, especially in the Reach area, where it's less than half of what we did the prior year. Having said all of that, if the Vodacom transaction doesn't happen, there will be a few things that we are busy with. For example, Key will definitely slow down.
We have ambitions to democratize the internet, take Key to as many lowest LSM suburbs as possible in the country in the next 2, 3 years. That will definitely be a much slower rollout if the Vodacom injection doesn't happen. We are talking to our banking partners and talking through the different options with them. We are also, as shareholders looking at the business, there are some variables that we do not have control over. For example, the interest rates. We'll continue to monitor how that plays out. But I would say, Jannie, you said a plan B. Worst case, there are many plans. But worst case, we could come to shareholders next year. There's not an immediate requirement. We have proactively already started taking this into account with the Vodacom transaction already a year later than we originally expected.
That's, in general, just some comments of what will play out, what is already playing out, and what could happen. Thank you, Lwanda.
Thanks, Pieter. Ronnie, a question on Mediclinic. With the potential threat stemming from the NHI bill, how does management view this threat playing out? And how is it taken into account in your plans?
Thank you, Lwanda. So the bill envisages two phases, 2023 to 2026, where certain legal matters have to be attended to. And only high-level care will be purchased from public hospitals. That's what the bill envisages. And then in the second phase, 2026 onwards, there will also be services purchased from the private sector. However, the bill has not been signed yet. And it's envisaged that once it's enacted, there will be numerous legal challenges. It might happen in a stepwise fashion. That might push out the implementation date of the act into the distant future. So at the moment for us, we carry on business as usual. We focus on growing our business, improving our processes, improving our quality of care.
Thank you, Ronnie. And Jurgens, on the balance sheet, how has the management team's thinking on optimal debt levels evolved since being enlisted? And if possible, are you able to give an indication on any debt refinancing plans and what rate you'd be able to do that at?
Thank you very much. Lwanda, excuse me. So being listed hasn't changed our view on optimal leverage. Jannie and Ronnie are still as strict with me on leverage now as they were when we were listed. So our view on optimal leverage is around 3x-4x . We're currently sitting at 4x . We have completely repaid our Middle Eastern debt. And so the leverage that is outstanding is in Southern Africa, which is 2026, and Switzerland, which is 2027. And so that's still quite far out. I think the assurance that I can give that we'll continue to approach this with a view of responsible leverage. And what that means is managing the cost of that leverage and also the refinance risk of that. But as I said, it's probably premature to envisage the refinancing and the terms of that just yet because it's still quite far out.
Thank you. Jannie, just on opportunities, with the South African equity capital markets being depressed and assets trading at discounts, how are you thinking about opportunities and investments in the future?
Thanks, Lwanda. I think I've been quite clear. I mean, we've got Paul in the room as well. I think what we especially if you actually split out the Rainbow, the RCL side, I think there must be opportunities in the food side to bulk up so that we can get to a food player of scale. So hopefully, Paul and his team can bring us some opportunities that we as shareholders can look at properly and integrate that. But the pricing must be reasonable. So I've always said that. Clearly, I think opportunities, as I said, the scale back of some of the growth opportunities on the dark fiber side and on the fiber, the home side, I think there must be clearly some opportunities if we capitalize the business properly going forward. I think so those are the two very exciting opportunities going forward for us.
Thanks, Jannie. Just on Heineken and the valuation, we valued Heineken based on the PRI principle. Do you expect a significant differential between the DCF and the PRI applied? If not, what would be the justification for the loss in value?
Yeah, I think the PRI principle we valued, that was June 30th last year. So just to that was on this year, we actually valued on an EBITDA multiple because the PRI principle was not applicable anymore. And I've warned the market that when I presented the results end of last year, that we will change it and we'll have a significant difference because of the discounts that we've applied. So I warned the market about the Heineken Beverages. What we didn't anticipate in total was obviously the operational performance. So that had an influence on the EBITDA multiple because using an EBITDA multiple of a very low profitability actually had a significant influence on the overall valuations of Heineken. And on top of that, we apply those discounts that Neville mentioned. So you can't really compare our current valuation with the PRI principle at all.
If you just take the PRI principle, start applying discounts and things like that, you get to a significantly less value. And that's just trying to be consistent in our valuation methodologies. And I think that's why Neville also mentioned that we'll also move back to a DCF way at the end of the year if we've got all of those board-approved free cash flow statements. And hopefully, that will get to better results if we can show that the recovery plan for Heineken is on track.
Thanks, Jannie. And then on the Rainbow listing, with the cyclical nature of the business and poor returns over time, it would suggest that it's probably better unlisted. So do you see Rainbow remaining listed in the long term? Or is the purpose of the listing to set a market valuation for potential corporate action in the future?
I'm not going to commit to anything. But clearly, we will have a look at what the valuation parameters are and what value the market places on Rainbow Chicken. And then from a Remgro point of view, if there's a good opportunity for capital allocation and it makes sense, it's something we always look at.
Thanks, Jannie. And the last question on the webcast for Pieter. Of the Vodacom proceeds, if the deal goes ahead, how much would be allocated to paying down debt? And if it doesn't happen, what would be the plan in terms of debt repayment?
We've already, as I said, taken a cautionary approach and started repaying debt, knowing when the covenants come into play next year. The ZAR 6 billion cash that will come in, that has not been finally allocated. Definitely, we want to get the debt EBITDA ratios to levels around 3, better than 3 going forward. It's more sustainable levels to where we are at the moment. We definitely took on a lot of debt hoping that the Vodacom transaction comes through earlier. We're 12 months later than anticipated. And then we will leave enough in the business to kickstart the whole internet to the lower LSM segment where we can see that there's clearly millions of homes that can still be passed, democratizing the internet and giving good returns to the company and the shareholders.
But also the way I see it, mostly to South Africa, building on accessibility to video internet to the masses.
Thank you, Pieter. Can we go to the questions on the chorus line?
The first question we have comes from Rey Wium of SBG Securities. Please go ahead.
Jannie, the question is basically around Heineken. There's sort of like three elements in it. If I can just start off, it looks like the supply chain disruptions were obviously a major issue in the profitability. Now, I just want to know into the remainder of the year whether there will be an improvement in that or we expect further loss to the second half of the year. So that's my first question. The other one is just an accounting one. I think I know the answer. But the ZAR 178 million charge of IFRS 3, that's going to be a recurring charge if I'm not mistaken. Yeah, then my third question is just on this potential change in the valuation of Heineken back to a DCF. Obviously, you have the value quite low now.
Is there a chance that we may have a bit of a whiplash and all of a sudden, by then, we have a much higher valuation? Or are you fairly confident with the level of the valuation that will then probably transpire into a DCF so that we don't have so much volatility in that? So thank you.
Change side, I think we sorted out most of those issues. So we're expecting a much better six months on that. I mean, it really was for some once-off things, supply challenges, boilers breaking down. That has all been fixed. I think an important aspect, as we've mentioned, is the returnable bottles. Also, we stopped importing beer on Heineken because of the supply chain issues. And as we sold those beer, we made no margin on that at all. So that is out of the system. So giving all of those facts, we anticipate a much better six months going forward than in the past. Clearly, there is some seasonality in that. We must just acknowledge it. But we must look at the margin side. I think on your last question on the valuation, the jury is out.
But hopefully, as I said, the investment thesis for the long term really looks, we still believe in it, intact. So clearly, if you do a DCF and compare it to a point in time just on an EBITDA multiple, the valuations could be different. And we anticipate that hopefully to be different unless there's something else that we don't know about. But I think it will also depend a lot on the trading for the next six months to see that we've actually delivered on what we should be doing. And that will influence the DCF to a large extent, as you can imagine, hopefully. But yeah, but I think what is important is clearly, there will still be discounts applied because it's not listed. It's a minority discount. So you must just bring that into effect.
Clearly, if you start selling some of these ads, hopefully, you can eliminate that discount on a sales process. But we, as our valuation methodology, want to be consistent with the past. We will always apply those discounts. I'm not going to let Neville answer the other question. I think I didn't on that 178.
Hi, Rey. Maybe just to add to Rey's question on the valuation, the potential valuation at June 30th, I think we're not ready to preempt that answer. I think we should let the business planning process run its course with an approved plan signed off by the Heineken Beverages board. And that will ultimately deliver the DCF valuation at June 30th 2024. But having said this, we feel that the current value provides a reasonable assessment of the value of our stake. And we expect that the recovery in value will happen over time as the business deliver on its investment thesis. Just on the IFRS amortization and depreciation charges, yeah, that will be a recurring charge going forward. But the expectation is that the amount will reduce because some of the non-current assets will also revalue at acquisition.
That will filter through in the short to medium term, more quicker than the longer-term intangibles and brands, which will be amortized over a period of 5-10 years. It will be a recurring charge. We expect that this charge will be reduced over time.
Okay. May I just throw in a last question just on valuations there? Just the Mediclinic valuation. I mean, maybe you have published it somewhere. I haven't read it yet. But it looks to me that the value is in pounds. In fact, I just have to share so that I think the buyout was at 5 GBP. Then it moved up to 5 GBP. Now we're back at 5 GBP. Now, I mean, if I just sort of read between the lines about the commentary about the margin placement, do a bit of a back-of-the-envelope calculation on earnings, it looks like it's sort of that value that you have there is still on a 4x EV/LTM. Is that value reasonable? Or because the multiple appears on the high side. So is there the expectation of stronger earnings growth beyond the first year?
Yes, so clearly, I think the price is ZAR 4.94.
4.94.
4.94. So it's below the takeout price of ZAR 5.01. You must remember the ZAR 5.01 was a full price without discounts applied. So we've actually applied discounts to the ZAR 4.94. So on the DCF, we come at a higher value. And then we've applied some discounts on the Swiss operation, some liquidity, a total 15% discount. So I think you just need to put that in perspective. But clearly, you're absolutely right. If you look at a point in time, this implies that there will be some margin improvements going forward with all the plans that we've got in place. Absolutely, yes. I think, Neville, I don't know what you expand on that.
Okay. Thank you.
No, that's sufficient.
Thank you. The next question we have comes from Mayur Rajaratnam of MIPF. Please go ahead.
Good morning, guys. And thank you for the opportunity. My first question is to Pieter about CIVH. I'm maybe a bit old school. But if something is a structural growth story, you would expect it to grow through the economic cycles largely, right, I mean, given circumstances. It seems like DFA seems mature. Revenue growth is low single digit. And Vuma Core, which is a big cash-generating unit, is you're not adding customers. I know there's economic issues out there. But structural growth story, it doesn't seem to be there. So I'm just wondering, is this ex growth, if you really take a hard look at it, or you guys still think it's growth? I know you say it's growth stock, that part of your business. But I just want to understand that a bit.
I mentioned some of it. But I'll just highlight some of the key aspects again. On the core side, we have a good penetration of fiber in the ground. We've seen subscriber behavior change because of the macros. We are refocusing on it. So we are shifting from just building in core to more penetrating that market. The penetration is below 40%. We believe that it can go to at least 60% of the fiber that we've got in the ground in the core segment. In the Reach markets, we've not seen, as you would call, a lot of churn. So subscribers there are more sticky. They definitely need access to the internet. We've only touched the basis of what's the potential market in Reach. We have slowed down the build.
We will also, in the Reach market, shift to also monetizing the infrastructure that we have in the ground. So yes, this is an in-between phase. We're using this as a pause year, fixing the DFA network, making it more future-proof for growth. We're waiting to see how much capital we're going to get into the business to reconfigure the balance sheet for future growth. But personally, I have not seen that this is an ex-growth investment. The potential, especially in the home market and the small, medium enterprise business segment, is still there. And we will continue to develop that. Thank you.
Thanks, Pieter. My second question is just on your DCF valuations at large. As investors, we are somewhat cautious about DCF. I know you have some what sounds very official-sounding board-approved forecasts. DCFs generally have a typical numerator effect and a denominator effect, right, when interest rates go up. The numerator effect is just interest rates eat up more of the cash flow that's available to equity holders. But there's also a denominator effect when interest rates have gone up around the world in Switzerland, in South Africa, everywhere. By significant amounts, I mean, it doesn't seem to affect your DCF valuations too much. I mean, I think Pieter said 400 basis points of DCF hit is only ZAR 600 million in a ZAR 50 billion CIVH valuation, EV/EBITDA valuation, or ZAR 30 billion equity valuation. It seems not enough to me, sitting outside.
The DCF valuations are not moving to the interest rate effect on the denominator. Maybe some comments on that. I have one more question.
Yeah. You'll see most of the impact of the macros come through not in the discount rate that comes through the DCF on the left of that slide that gave the ZAR 50.1 billion enterprise value at Maziv. But you'll see it when we apply the discounts. So a lot of the forecast risk in that discount that increases from previous half-year ZAR 5.8 billion to almost ZAR 9 billion discounts, most of that is in the forecast risk where we are cautious about the macros, the interest rates, the impact of that on the consumer. So from where I look at it, we've definitely taken it into account. And that's why the ZAR 9 billion discount after taking everything else into account.
Maybe just to add to that.
I think a couple of a year or so ago, sorry.
I still see the numerator effect, right? I just don't see you guys talking about the denominator effect where increasing interest rates increases cost of equity, cost of debt, increases your WACC. That doesn't seem to be talked about. I'm just missing something. Maybe some help.
Neville can add to that. But I think we did a couple of years ago too when the interest rate cycle where I went through, we actually gave the impact of the increase in WACC of the interest rate. So that definitely has a significant influence on our valuation. But some of that is already in the base effect of the comparative, some of that increase in the interest rate. So we've already accounted for that. So they would add a significant impact on our DCFs, the increase in the interest rates, on a worldwide basis.
So, Roger, you can see also we compare the valuation since the June 30th. So that significant increases have already been adjusted in the WACC at June 30th 2023. But in any case, since June 30th to December 31st , in the WACC, there was also an increase in the cost of debt. So the WACC also increased from period to period, June 30th to December 31st. And that's on top of the additional discounts.
The interest rates are up 400. But how much did the WACC go up by, Neville?
No, the 400 basis points is in comparison with the six months to September 30th 2022. So that's not the impact of the movement in the WACC from June 30th 2023 to December 31st 2023 because we compare our valuations since the year-end and not since September or December 2022. But maybe I can, in any case, give you the December 31st valuation and maybe the impact of the increase in interest rates from December 31st 2022 valuation to December 31st 2023 valuation. But I can take that offline with you through Lwanda.
Right. Okay. Fair enough. Just last question. I manage old people's money, right, pensioners' money. So I have to ask this question. It's a bit cheeky. But Charlie Munger said he's passed away. But he said, "Show me the incentives. And I'll show you the outcomes," right? And your incentive structure is linked to INAV growth, which is marked to model in some sense, right, the DCF valuations. I have done economic work on DCF valuations. It's difficult for me to come up with these numbers that you have. But how do you—I mean, is there enough dissenting voices in the team that says there's enough people who argue on both sides of these valuation numbers that you put up? Because as it stands, I know it's cheeky to say this. But you guys have INAV growth as your long-term incentive, one of your long-term incentives.
How do you stop even the people from human nature to want to increase a little bit, little bit? How do you stop it? That's the question, I suppose. How do you overcome human nature when you have this incentive structure that builds an INAV growth?
Maybe I can answer it. So we've got four checks. So we do have an internal check that we've got. EY do a reasonability check. We'll do it going forward. We have Deloitte going forward. Then we've got our valuation committee. And then we've got the audit committee. And then the board. And there's enough people that are not incentivized at all by having the increase in the INAV. I think it's, as you can show, we didn't increase the INAV this time around. We actually decreased it. So there is enough dissenting voices. There's enough robust discussions that I can assure you around these valuations going forward. I don't know if you want to add to that, Neville.
Yeah. So I talked about the governance process regarding the unlisted valuations. And I can ensure you, at the board meeting yesterday, we still had some questions about the valuations. But I mean, the valuation subcommittee consists of members of the audit and risk committee as well as the board. And that subcommittee really interrogates the corporate finance guys that performed the valuations. And then those valuations are also then considered and reviewed at the audit and risk committee before it is finally approved as directors' valuation at the board. So I am comfortable with the robustness of this governance process. And I can ensure you the management view is interrogated through these three and four checkpoints up to the board.
I think the proof will always be in the pudding when we sell—sorry, just one final comment. The proof in the pudding will always be when we sell these assets, what do we realize comparable to our valuations? And I think if you look at our track record in the past, that we've always been doing at least the same or better than what we've had, carrying it on our books going forward. And I think that is the proof in the pudding. And hopefully, we can show that in the future as well when we start selling some of these assets which can actually realize the underlying investments. That's how we should be evaluated.
Great. Thanks for entertaining my questions. Thanks, Jannie, Neville.
Thank you, sir. The next question we have comes from Chris Logan of Opportune. Please go ahead.
Yes. Thanks very much. Obviously, a very tough period with a lot of one source. But if we stand back a bit, we now have something like 75% of the portfolio unlisted. And we've just gone to probably a record or close to a record discount, 43%. And at the same time, it's perhaps noticeable that your top-performing investment has been a recently listed company, OUTsurance. And your worst performing Total. But how do you see value going forward? Or how do you see crystallizing value going forward? Because one of the problems with all these unlisted things, they lack transparency. It's hard for us to know what's going on. Do you see the potential for share buybacks or potentially listing and spin-outs? Perhaps you could talk to that. Thanks.
Clearly, I mean, the unlisted assets, we know what the problems are, as you said, at Heineken. So the thing there is clearly actually making sure the business turns around, that it delivers on its operating margin, what it should be a sustainable operating margin going forward. So that's going to be critical. I think in terms, yes, they're unlisted. But I think we can react quicker when things go wrong. What we've committed to is on the disclosure side. That's why we've got the teams here from Mediclinic. And in the future, we'll have some of these investor days. We will be totally transparent with what we're doing, what the underlying assets are performing. So on our disclosure being much better. So we've committed to that. And we'll keep our promise on that.
Unlocking value, clearly, as I said, alluded to in my discussion about capital allocation, yes, we're looking at dividends. There can also be share buybacks as we've done in the period under review and in the prior year. Obviously, we've redeemed the preference share dividends. So we utilize the cash for that. But that is an ongoing evaluation of capital allocation decisions in that respect. Yes, OUTsurance has performed well. I mean, they've had some of their own problems in Australia. But I think it's got actually nothing to do with being listed or unlisted. The listed versus unlisted from us is responsible in our side to be as good in our disclosure as a listed company and run it as good as a listed company with all the checks and balances in place.
Yeah. Thanks. Yeah. I agree with that, OUTsurance. If there's just one thing I can pick up on, Berkshire Hathaway, the only two things they do at the center, that's their capital allocation and their incentive structures. Can you give us some insight into the progress you're making, particularly in the unlisteds, on getting a greater degree of alignment? For instance, I know RCL, there's a focus there. But we can't see what's going on. For instance, I don't know how the guys are incentivized at Mediclinic. And these are pretty key things. Thanks.
So at Mediclinic, on the short term, I would say the majority of the talks are all financial-related. But there are certain things like clinical performance, some ESG scoring as well. But clearly, it's aligned with what we want to see at Remgro: cash flow, growth in cash flow, growth in profitability, and growth in the underlying asset value. So all of the underlying companies is incentivised exactly on that. So it's pretty much aligned with what we've got. Maybe we can add obviously, not the detail. But we can probably give you the guidelines if we do a disclosure of what the incentives not in percentage terms but the main things that we do track. I think I've mentioned all three of them. There might be one or two others. But we can give you that information.
Okay. Thanks a lot. Good luck.
Thanks, Chris.
Thank you. There are no further questions on the conference call.
Thank you. Just two last questions that have come through on the webcast. Jannie, on the discount, the discount is still quite high. And it seems that the steps that have been taken to date have not had the effect of reducing it. Does management still feel that the appropriate steps have been taken? And if not, is there anything else you believe can be done to narrow the discount?
I think the steps that we've taken in order to actually taking some assets from a listed to an unlisted environment was not because of the discount. It actually was in the natural progression of things. So I think let's put that into perspective. So it wasn't that we deliberately took things off the market to narrow the discount. I mean, the market determines the discount because we thought strategically, it was in the best way of doing that. So I think the only way we can address the discount is we start actually that we grow the earnings profile, we grow the underlying INAV, that we're growing the underlying cash flow of the businesses. They must perform optimally. And then the market can see that our businesses are performing well. And then they might narrow the discount.
But it's up to the market to evaluate us in terms of that. So it's not something that I think we can do specifically. It's actually more that we must actually make sure the underlying performance of the company is up to scratch. And we acknowledge the last six months, especially in one of our investments, was not good enough.
Thanks, Jannie. And a last one on Mediclinic, Ronnie. On the network deals, what risk for Mediclinic for more of these deals in the market? And does Mediclinic have contracts currently that could be lost if these go out to tender?
Thank you. It's a very dynamic environment. These network deals are basically volume discount deals. It's what it comes down to. And what we do is we just evaluate all of them in terms of the value they might bring. And we participate in the majority of these deals because we do provide quite high-value care. And that's been acknowledged by the medical aid schemes. But it depends on where these network deals are situated, which part of the country, which of our facilities are impacted. And we take all of those things into consideration when we make balanced decisions about these deals. But it's very dynamic. Sometimes we lose out on some of them. Sometimes we gain again. When the discounts become deep, we really think twice.
Thank you, Ronnie. That brings us to the end of the questions on the webcast, Jannie.
Okay. Thank you, everybody. And thanks for attending. As I've warned you right at the start, it was going to be longer than normal. And it turned out to be the case. Thanks a lot. Thank you.