| Wed 21 Nov 2007, 10:48 | | RLO - Reunert Limited - Reviewed Results For The |
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RLO
RLO
RLO - Reunert Limited - Reviewed Results, For The Year Ended 30 September 2007
And Cash Dividend Declaration
REUNERT LIMITED
Incorporated in the Republic of South Africa
Registration number 1913/004355/06
Share code: RLO & ISIN code: ZAE000057428
("Reunert" or "the company")
REVIEWED RESULTS, FOR THE YEAR ENDED 30 SEPTEMBER 2007 AND CASH DIVIDEND
DECLARATION
Revenue up 16%
Normalised headline earnings per share up 15%
Annual cash dividend per share up 15%
CONDENSED GROUP INCOME STATEMENT
For the year ended 30 September 2007
2007 2006
R million R million %
Notes (Reviewed) (Audited) change
Revenue 9 574,4 8 236,4 16
Earnings before interest, 1 393,0 1 335,9 4
tax, depreciation and
amortisation (EBITDA)
Depreciation and 74,3 63,2 18
amortisation
Operating profit before 1 1 318,7 1 272,7 4
interest, dividends and
abnormal items
Net interest and dividend 2 54,8 64,9 (16)
income
Profit before abnormal items 1 373,5 1 337,6 3
Abnormal items 3 (447,6) 1,6
Profit before taxation 925,9 1 339,2 (31)
Taxation 4 427,4 500,5 15
Profit after taxation 498,5 838,7 (41)
Share of associate 2 148,4 95,2 56
companies` profits
Profit for the year 646,9 933,9 (31)
Profit for the year
attributable to:
Minority interests 7,6 11,1 (32)
Equity holders of Reunert 639,3 922,8 (31)
Limited
646,9 933,9
Basic earnings per share 5 361,7 527,0 (31)
(cents)
Diluted basic earnings per 5 356,5 522,4 (32)
share (cents)
Headline earnings per share 5 & 6 272,4 524,6 (48)
(cents)
Diluted headline earnings 5 & 6 268,4 520,0 (48)
per share (cents)
Normalised headline earnings 5 & 6 570,3 495,3 15
per share (cents)
Normalised diluted headline 5 & 6 562,0 490,9 14
earnings per share (cents)
Cash dividend per ordinary 314,0 273,0 15
share declared in respect of
the current year (cents)
Special dividend per share - 200,0
declared (cents)
Taxation rate excluding 32,2 34,2 6
abnormal items and STC on
the special dividend (%)
EBITDA as a % of revenue 14,5 16,2 (11)
CONDENSED GROUP BALANCE SHEET
As at 30 September 2007
2007 2006
R million R million
Notes (Reviewed) (Audited)
Non-current assets
Property, plant and equipment and 578,7 467,3
intangible assets
Goodwill 7 372,8 326,8
Investments and loans 8 727,9 148,8
RC&C Finance Company accounts 14 - 985,3
receivable
Deferred taxation 37,9 59,1
1 717,3 1 987,3
Current assets
Inventory and contracts in progress 879,8 809,0
Accounts receivable and derivative 1 716,1 1 462,7
assets
RC&C Finance Company accounts 14 - 418,5
receivable
Non-current assets held for sale - 2,6
Cash and cash equivalents 10 530,6 969,3
3 126,5 3 662,1
Total assets 4 843,8 5 649,4
Equity attributable to equity
holders of Reunert Limited
Ordinary 2 468,3 1 680,2
Preference 0,7 0,7
2 469,0 1 680,9
Minority interest 14,4 38,2
Total equity 2 483,4 1 719,1
Non-current liabilities
Long-term borrowings 9 278,8 115,0
Deferred taxation 115,8 141,6
394,6 256,6
Current liabilities
Accounts payable, derivative 1 787,6 2 068,1
liabilities, provisions and taxation
RC&C Finance Company bank borrowings 10 - 1 187,9
Shareholders for dividend - 390,7
Bank overdrafts and short-term 178,2 27,0
portion of long-term borrowings
1 965,8 3 673,7
Total equity and liabilities 4 843,8 5 649,4
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2007
2007 2006
R million R million
Notes (Reviewed) (Audited)
Share capital and premium 90,8 76,9
Balance at the beginning of the year 76,9 49,4
Issue of shares 14,0 27,5
Shares cancelled in terms of buy-back (0,1) -
of treasury shares - capital portion
Share-based payment reserve 649,9 40,4
Balance at the beginning of the year 40,4 30,8
Share-based payment expense 607,4 9,6
Contribution by Reunert to employees
of joint venture and associate
in terms of broad based scheme 2,1 -
Treasury shares 11 (276,1) (282,0)
Balance at the beginning of the year (282,0) (282,0)
Shares cancelled in terms of buy-back 0,1 -
of treasury shares - capital portion
Shares cancelled in terms of buy-back 5,8 -
of treasury shares - dividend portion
Non-distributable reserves 7,3 3,7
Balance at the beginning of the year - 3,7 5,4
restated
Balance at the beginning of the year - 104,8 67,3
as previously reported
Share of associate company`s retained 12 (101,1) (61,9)
earnings at the beginning of the year
transferred to retained earnings
Transfer from retained earnings - - -
restated
Transfer from retained earnings - as - 39,2
previously reported
Transfer from retained earnings 12 - (39,2)
reversed
Translation reserve (0,3) 0,8
Reunert`s share of equity-accounted
associate`s actuarially valued
surplus of medical aid provision 3,9 -
Fair value adjustments - (2,5)
Retained earnings 1 997,1 1 841,9
Balance at the beginning of the year - 1 841,9 1 758,1
restated
Balance at the beginning of the year - 1 740,8 1 696,2
as previously reported
Share of associate company`s retained 12 101,1 61,9
earnings at the beginning of the year
transferred from non-distributable
reserves
Profit for the year 639,3 922,8
Transfer to non-distributable reserves - -
- restated
Transfer to non-distributable reserves - (39,2)
- as previously reported
Transfer to non-distributable reserves 12 - 39,2
reversed
Cash dividends declared (478,3) (839,0)
Shares cancelled in terms of buy-back (5,8) -
of treasury shares - dividend portion
Equity attributable to equity holders 2 469,0 1 680,9
of Reunert Limited
Minority interest 14,4 38,2
Balance at the beginning of the year 38,2 43,0
Profit for the year 7,6 11,1
Dividends declared (4,5) (15,9)
Net movement in minorities (26,9) -
Total equity at end of the year 2 483,4 1 719,1
CONDENSED GROUP CASH FLOW STATEMENT
For the year ended 30 September 2007
2007 2006
R million R million
Notes (Reviewed) (Audited)
EBITDA 1 393,0 1 335,9
Increase in net working capital (739,7) (628,4)
Increase in RC&C Finance Company 14 (300,7) (375,6)
accounts receivable up to date of
transfer
Increase in other working capital (439,0) (252,8)
Cash generated from operations 653,3 707,5
Net interest and dividend income 200,8 120,9
(including associates)
Taxation paid (568,6) (347,4)
Dividends paid (including to (879,3) (464,2)
minorities)
Other (net) 23,7 (4,3)
Net cash flows from operating (570,1) 12,5
activities
Net cash flows from investing 1 008,6 (185,7)
activities
Net cash flows from financing 274,5 27,0
activities
Increase/(decrease) in net cash 713,0 (146,2)
resources
Net short-term bank borrowings at (230,2) (84,0)
beginning of the year
Net cash resources at end of the year 482,8 (230,2)
Cash and cash equivalents 530,6 969,3
Bank overdrafts (47,8) (11,6)
Net cash resources excluding RC&C 10 482,8 957,7
Finance Company bank borrowings
RC&C Finance Company bank borrowings 10 - (1 187,9)
Net cash resources including RC&C 482,8 (230,2)
Finance Company bank borrowings at
end of the year
SUPPLEMENTARY INFORMATION
For the year ended 30 September 2007
2007 2006
R million (unless otherwise stated) Notes (Reviewed) (Audited)
Net asset value per share (cents) 1 390 953
Current ratio excluding interest- 1,7 1,5
bearing current liabilities (:1)
Net number of ordinary shares in issue 177,7 176,3
(million)
Number of ordinary shares in issue 196,2 195,3
(million)
Less: Held by subsidiary (million) 11 (18,5) (19,0)
Capital expenditure 149,0 194,3
- expansion 86,9 134,1
- replacement 62,1 60,2
Capital commitments in respect of 80,2 108,2
property, plant and equipment
- contracted 54,5 56,2
- authorised not yet contracted 25,7 52,0
Commitments in respect of operating 97,1 84,0
leases
Contingent liabilities - 3,7
CONDENSED SEGMENTAL ANALYSIS
For the year ended 30 September 2007
2007 2006
R million % R million % %
(Reviewed) (Audited) change
Revenue*
Electrical engineering** 3 315,1 29 2 573,7 27 29
Electronics
Office Systems 1 224,1 11 1 234,8 13 (1)
Consumer products and 4 592,2 41 4 109,0 43 12
services
Telecommunications 1 712,9 15 1 285,7 14 33
Reutech 490,5 4 317,3 3 55
Total electronics 8 019,7 71 6 946,8 73 15
Total operations 11 334,8 9 520,5 19
100 100
Less: Reunert`s attributable
portion of associate
companies` revenue (1 760,4) (1 284,1)
Revenue as reported 9 574,4 8 236,4 16
*Inter-segment revenue is immaterial and has not been disclosed.
**Revenue includes an amount of R96,3 million for inventory sold at
book value by ATC (Pty) Limited (ATC) to CBI-Electric Aberdare ATC
Telecom Cables (Pty) Limited (ATC/Aberdare Joint Venture).
Operating profit
Electrical engineering 553,9 36 552,1 39 -
Electronics
Office Systems 306,5 20 314,1 22 (2)
Consumer products and 368,2 24 374,5 27 (2)
services
Telecommunications 211,2 13 142,9 10 48
Reutech 109,2 7 30,4 2 259
Total Electronics 995,1 64 861,9 61 15
Total operations 1 549,0 1 414,0 10
100 100
Less: Reunert`s attributable (230,3) (141,3)
portion of associate
companies` net operating
profit
Operating profit as reported 1 318,7 1 272,7 4
NOTES
2007 2006
R million R million
(Reviewed) (Audited)
Note 1
Operating profit before interest, dividends
and abnormal items
Operating profit is stated after:
- Cost of sales 6 763,1 5 647,9
- Other expenses excluding depreciation and 1 369,8 1 401,6
amortisation
- Other income (52,4) (15,7)
- Realised loss/(profit) on foreign exchange 106,9 (65,6)
and derivative instruments
- Unrealised profit on foreign exchange and (6,0) (67,7)
derivative instruments
Note 2
Net interest and dividend income
Interest received 104,3 92,9
- From RC&C Finance Company (Pty) Ltd (RCCF) 43,5 57,2
up to date of transfer (refer to note 14)
- External 60,8 35,7
Interest paid (57,2) (34,9)
Dividend income other than from associate 7,7 6,9
companies
Total 54,8 64,9
Dividend income from associate companies 146,0 56,0
included in share of associate companies`
profits
Note 3
Abnormal items
Net surplus on dilution in (refer to note 118,1 5,0
14)and disposal of business
Surplus on sale of non-current assets to the 34,5 -
ATC/Aberdare Joint Venture
Black Economic Empowerment (BEE) expense - (556,6) -
share-based payment (refer to note 11)
Share-based payment expense in terms of broad (42,2) -
based scheme to group employees (refer to
note 11)
Net impairments (1,4) (3,4)
Total before taxation (447,6) 1,6
Taxation 14,7 -
Minority interest 0,2 -
Total (432,7) 1,6
Note 4
Taxation
The tax charge for 2006 includes Secondary
Tax on Companies of R43.7 million in respect
of the special dividend.
Note 5
Number of shares used to calculate earnings
per share
Weighted average number of shares in issue 176,7 175,1
used to determine basic earnings, headline
earnings and normalised headline earnings per
share (millions of shares)
Adjusted by the dilutive effect of:
- Unexercised share options granted 1,5 1,5
(millions of shares)
- The notional unencumbered Reunert Limited 1,1 -
(Reunert) shares held by Bargenel Investments
Limited (Bargenel)(millions of shares)*
Weighted average number of shares used to 179,3 176,6
determine diluted basic, diluted headline,
and normalised diluted headline earnings per
share (millions of shares)
*The notional unencumbered Reunert shares
represent the number (based on the year end
share price) of the 18,5 million treasury
shares held by Bargenel that could be settled
out of the year end equity value of Bargenel.
Note 6.1
Headline earnings
Headline earnings are determined by
eliminating the effect of the following items
in attributable earnings:
Profit attributable to equity holders of 639,3 922,8
Reunert - IAS 33 basic earnings
Net surplus on dilution in and disposal of (118,1) (5,0)
business
Surplus on disposal of property, plant and (35,2) (2,6)
equipment and intangible assets
Net impairments 1,4 3,4
Minority effect of adjustments (nil due to - -
rounding)
Taxation effect of adjustments (6,1) -
Headline earnings 481,3 918,6
Note 6.2
Normalised headline earnings are determined
by eliminating the effect of the following
items in attributable headline earnings:
Headline earnings 481,3 918,6
BEE expense - share-based payment 556,6 -
Share-based payment expense in terms of broad 42,2 -
based scheme to group employees
BEE share of headline and normalised headline 8,2 -
earnings adjustments
Contribution by Reunert to employees of joint 2,1 -
venture and associate
Minority effect of adjustments (0,1) -
Taxation effect of adjustments (9,1) -
1 081,2 918,6
Interest in profit that is economically (73,5) (51,4)
attributable to BEE partners (refer to note
11)
Normalised headline earnings (basic and 1 007,7 867,2
diluted)
Note 7
Goodwill
Carrying value at the beginning of the year 326,8 329,0
Acquisitions of businesses and minority 45,7 1,2
interests
Negative goodwill taken to profit in terms of 1,1 -
IFRS 3
Impairments (0,8) (3,4)
Carrying value at the end of the year 372,8 326,8
Note 8
Investments and loans
Unlisted associate companies - at cost plus 400,3 126,0
equity-accounted earnings excluding goodwill
(refer to note 14)
Other unlisted investments - at cost 7,0 0,3
Loans - at cost 54,5 22,5
Long-term accounts receivable 266,1 -
Total carrying value 727,9 148,8
Directors` valuation of unlisted investments
- Unlisted associate companies 908,0 520,0
- Other unlisted investments 7,0 0,3
Note 9
Long-term borrowings
Total long-term borrowings (including finance 386,9 115,9
leases)
Less: Short-term portion (including finance (130,4) (15,4)
leases)
256,5 100,5
Loan repaid by BEE partner* 22,3 14,5
278,8 115,0
The long-term borrowings in the current year is an obligation to RCCF, which
is now owned by Quince Capital Holdings (Pty) Limited (Quince), an equity-
accounted associate. Various operations in the group dealing in office
equipment discounted debtors with RCCF on the basis that the risk of bad debts
is carried by the Reunert group operations. In terms of current accounting
practice, these debtors cannot be derecognised by the Reunert group
operations, accordingly the long-term portion of the debtors are included in
long-term accounts receivables (refer to note 8), the short-term portion in
accounts receivable and the outstanding balance of cash received from RCCF in
long-term borrowings.
The group entered into an agreement with Powerhouse Utilities (Pty) Limited
(Powerhouse), whereby on 1 December 2004, 25,1% of the A shares of ATC were
sold to Powerhouse at a cost of R130 million. IFRS requires that this
transaction is not accounted for as a sale, since the loan has not been fully
paid by Powerhouse and conditions are attached to the unpaid portion,
notwithstanding that the economic reality of this transaction is, in fact, a
sale.
The long-term borrowings in the prior year related to funding provided by
Nedbank Limited (Nedbank) to Powerhouse for their purchase of 25,1% of the A
shares of ATC. The loan was guaranteed by Reunert and in terms of current
accounting practice for this transaction, was recognised on the Reunert
balance sheet. The Nedbank loan was repaid by Reunert on
1 June 2007, with the effect that the loan is now payable by Powerhouse to
Reunert and is disclosed as an investment in subsidiary.
*Loan repaid by the BEE partner represents a portion of the dividends paid by
ATC to Powerhouse, which were used to repay a portion of the loan. In terms of
current accounting practice, this is to be reflected as a long-term liability
on the Reunert balance sheet. When the significant risks and rewards of
ownership in the equity of ATC are deemed to have passed to the BEE partner,
this portion of the loan repaid by Powerhouse will be transferred to minority
interest.
2007 2006
R million R million
(Reviewed) (Audited)
Note 10
Group cash resources/borrowings
Total RCCF borrowings at the end of the - 1 254,3
year (refer to note 14)
Less: Funded out of other Reunert cash - (66,4)
resources (see below)
RCCF bank borrowings at end of year - 1 187,9
(refer to note 14)
Total Reunert net cash resources at the 482,8 1 024,1
end of the year
Less: Utilised to fund RCCF(see above) - (66,4)
(refer to note 14)
482,8 957,7
Add: Bank overdrafts 47,8 11,6
Cash and cash equivalents 530,6 969,3
Note 11
BEE transactions
The BEE deal of Reunert was approved by shareholders on 6 February 2007. Due
to the sale of Bargenel to the BEE partners, the shareholders of Peotona Group
Holdings (Pty) Limited (Peotona) and the Rebatona Educational Trust, a share-
based payment expense (IFRS 2) of R556.6 million has been recognised. The sale
by Bargenel, which holds 18,5 million shares in Reunert was done at a 10%
discount on the Reunert share price. This expense differs from the amount
disclosed in the circular to shareholders issued on 13 December 2006 largely
as a result of the movement in the Reunert share price up to the date of the
approval of this transaction. IFRS requires that this disposal is not
accounted for as a sale, since the preference shares issued by Bargenel to
Reunert, financing the purchase of Bargenel, have not been fully repaid and
conditions are attached to the unpaid portion, notwithstanding that the
reality of this transaction is, in fact, a sale.
All employees in the Reunert group who did not participate in any other share
incentive scheme were awarded 100 Reunert shares each which will be held in a
trust for a period of five years. The employees will only be able to sell the
shares after five years, but have full rights to receive all dividends
declared during the five-year period. The resultant expense to the Reunert
group has been raised on the difference between the fair value of a Reunert
share on 6 February 2007 (R83,90) and its cost price of 10 cents each. A
deferred tax asset has been raised as a result of the future tax deduction.
As referred to in note 9 certain BEE transactions involving the disposal of
equity interests have not been recognised because the significant risks and
rewards of ownership of the equity have been deemed not to have passed to the
BEE partners. Accordingly, the equity interests in subsidiaries have not been
recognised in the group income statement and balance sheet.
The effect of this has been to not recognise the following:
- Interest in current year profit that is 73,5 51,4
economically attributable to BEE partners
- Balance sheet interest that is economically 161,8 106,3
attributable to BEE partners
Note 12
Basis of preparation
These condensed group financial statements have been prepared in terms of
International Financial Reporting Standards and IAS 34 "Interim Financial
Reporting" and are in compliance with the Companies Act of South Africa, Act
61 of 1973, as amended ("the Companies Act") and the Listing Requirements of
the JSE Limited.
The group`s accounting policies as set out in the audited annual financial
statements for the year ended 30 September 2006 have been consistently
applied, with the following exception: The group`s share of the associate
company`s retained earnings were previously transferred to a non-distributable
reserve. This policy has been changed and the effect on the prior years`
retained earnings and non-distributable reserves have been shown in the
statement of changes in equity.
Note 13
Unconsolidated subsidiary
The financial results of Cafca Limited (Cafca), a subsidiary incorporated in
Zimbabwe, have not been consolidated in the group results as the directors
believe there is a lack of control as defined in IAS 27 "Consolidated and
Separate Financial Statements", and the
amounts involved are not material to the group`s results.
Note 14
Major corporate activity
ATC/Aberdare Joint Venture
A new joint venture, was formed between the telecom cable divisions of ATC and
Aberdare Cables (Pty) Limited (Aberdare), each holding a 50% share in the
joint venture. ATC contributed all its property, plant and equipment (PPE)
(R114 million) and intangible assets (R9 million) to the value of R123
million. Aberdare also contributed PPE (R106,2 million), intangible assets
(R3,3 million) and cash (R13,5 million) to the value of R123 million. The
balance sheet and income statement of the joint venture have been
proportionately consolidated from the effective date (1 February 2007).
Acquisition of Nashua Franchises
With effect from 1 April 2007, Nashua Holdings Limited (Nashua) purchased 51%
of the Eastern Cape Nashua franchise. Nashua provided R11,8 million of loan
finance to the other shareholders. In addition, effective from 1 June 2007,
Nashua acquired 51% of the Tshwane franchise. Nashua has provided loan finance
of R10,8 million to the other shareholders.
Acquisition of EADS`s shares in Reutech Radar Systems (RRS)
With effect from 1 July 2007, Reunert bought the 36,5% shareholding EADS owned
in RRS for R31,5 million, making it a 100% owned subsidiary. This gave rise to
goodwill of R10,2 million.
Reutech
Nashua Radar
Aberdare Franchises Systems Group
Net assets acquired: Rm Rm Rm Rm
Property, plant and 53,2 15,9 - 69,1
equipment
Intangible assets 1,6 - - 1,6
Goodwill 10,7 25,7 10,2 46,6
Inventory - 4,7 - 4,7
Accounts receivable - 12,9 - 12,9
Net cash 6,8 1,4 - 8,2
Payables and provisions - (14,5) - (14,5)
Long-term loans - (24,1) - (24,1)
Receiver of Revenue - (0,3) - (0,3)
Deferred tax (10,7) 0,5 - (10,2)
Outside shareholders` - 0,4 21,3 21,7
interest
Cost of investment 61,6 22,6 31,5 115,7
Profit since acquisition - 3,6 - 3,6
Revenue for the full year
ended
30 September 2007 as though
the acquisition date had
been 1 October 2006 - 108,6 - 108,6
Profit for the full year - 2,9 - 2,9
ended 30 September 2007 as
though the acquisition date
had been
1 October 2006
RCCF
With effect from 1 May 2007 RCCF became a wholly-owned subsidiary of Quince.
In terms of the deal Reunert sold the entire share capital of RCCF to Quince,
a then wholly-owned subsidiary of Reunert, at a value of R375 million in
exchange for additional shares in Quince. Quince then issued further shares to
PSG and individuals for cash which diluted the Reunert shareholding in Quince.
This transaction has resulted in Reunert recognising a profit on dilution of
its shareholding in Quince of R118,1 million. Quince is now regarded as an
associate company and its results have been equity-accounted for in Reunert`s
group results. Quince has been granted a bridging bank loan facility amounting
to R1,4 billion and is finalising a securitisation facility of R5 billion.
The bridging facility will lapse once the securitisation has been completed.
Reunert has provided a guarantee to the bank for the bridging finance.
Financial effect of the RCCF transfer to Quince: Rm
Net assets transferred 149,8
Attributable portion of goodwill arising in Quince on 107,1
this transaction
Surplus on dilution (refer to note 3) 118,1
Transfer value of shares in Quince 375,0
COMMENT
In the past year Reunert`s normalised headline earnings per share increased by
15% to 570,3 cents. Revenue grew by 16% to R9,6 billion, while operating
profit increased marginally by 4% to R1,319 billion. The contribution from
associates, mainly our 40% interest in Siemens Telecommunications (Pty)
Limited, was up by 56% to R148 million.
Net cash at the end of the year amounted to R483 million despite having paid
out R879 million to shareholders by way of special (R353 million) and normal
(R526 million) dividends during the year.
REVIEW OF OPERATIONS
Electrical Engineering
The Electrical Engineering division, CBI-Electric, increased revenue by a
pleasing 29% to R3,3 billion. However, operating profit of R554 million was
similar to that achieved a year ago.
On 1 February 2007 the merger between ATC and the telecommunications cables
business of Altron became effective. The results of the joint venture have
been proportionately consolidated since that date.
Telecommunications cables exceeded our expectations despite the dilutionary
effect of the loss of 50% of the profit since the merger with Altron`s
telecommunications cable business. The merger increased capacity and gave the
business an economy of scale and an expanded order book. Demand increased from
existing wire line operators and the second network operator, Neotel, started
to add volume to the business. Vodacom and MTN, being allowed to self provide,
will shortly roll out their own fibre optic transmission networks.
Revenue growth in our energy cable operation was particularly strong,
resulting in improved margins.
A programme to modernise and increase capacity in the facility started two
years ago and was completed in September. Unfortunately, some of the benefit
in margin was lost due to industrial action that lasted about four weeks.
Two new product lines were added and, given the continued strong demand for
energy cables, the next reporting period should see a continued strong
performance from this business.
The low-voltage business of CBI-Electric took strain during the year. Revenue
was flat and operating margins came under pressure mainly because of increases
in material cost and more competition in the market place.
Action has been taken to increase efficiency in the manufacturing process and
reduce material costs by improving procurement practices. Marketing efforts
have been stepped up in order to reclaim some of the market share lost on the
residential side to Chinese imports. Thus far indications are that the
corrective steps taken have been effective.
The performance of our Australian operation has been disappointing and
management changes have been made which are expected to yield results.
Electronics
In the Electronics division revenue increased by 15% to R8 billion, including
associate revenue of R1,8 billion. Operating profits increased by 15% to R995
million.
The Nashua group consisting of Nashua (office systems), Nashua Mobile
(telecommunications service provider) and Nashua Electronics (distributor of
the Panasonic range of products) now all benefit from promoting the valuable
Nashua brand.
Nashua (office systems) maintained volumes, but margins declined. The rapid
decline of the rand against the euro and our inability, in the short-term, to
increase prices to customers, affected the bottom line negatively. In
addition, in one particular category of the market our product offering was
not competitive. Both these problems have been addressed and margins and
revenues should be restored in the future.
Our stated strategy to get closer to our customers is slowly being implemented
and, to date, we have acquired majority interests in the franchises in Tshwane
and Eastern Cape. This process is ongoing and we hope to acquire interests in
at least two more franchises during 2008.
Acuo Technologies, Nashua`s software integration business enabled Nashua to
undertake projects and services higher up the technology chain. We believe
these initiatives will enable us to be more competitive, thereby retaining our
position as the number one supplier of office systems in the country.
Revenue in the Consumer Products and Services segment, which includes Nashua
Mobile and Nashua Electronics, increased by 12% to R4,6 billion, however
operating profit declined marginally to R368 million. Nashua Mobile had an
excellent year increasing both sales and operating profits excess of 17%.
However, the consumer electronics business struggled to grow sales in a
fiercely competitive market. Although trading profitably, operating profit was
substantially lower.
It is expected that Nashua Electronics and in particular its consumer
electronics business will face another tough year. Nashua Mobile on the other
hand, is well positioned to produce good results.
Reutech, the defence business, had an excellent year contributing 7% (R109
million) (2006: R30 million) to Reunert`s operating profit. Revenue increased
by 55% to R490 million. Indications are that future demand from the South
African National Defence Force will ensure Reutech remains viable. Products
that have been developed over the past five years are now nearing the
production phase and should contribute meaningfully. Exports of airborne
radios and electronic fuzes continued at an acceptable level and we are
confident that these markets will provide a reasonable base in future.
Reutech Radar Systems has developed a product that detects moving slope walls
in open pit mines. With mining safety becoming all-important, we are well
positioned to benefit from this addition to our product portfolio. Systems
have been sold to mining operations in South Africa, Australia and South
America.
Associates
Siemens Telecommunications (Pty) Limited had its best year ever, contributing
in excess of R120 million after tax profits. Effective 1 April 2007, Siemens
merged its telecommunications operations with the networks businesses of Nokia
to form Nokia Siemens Networks. We continue to own 40% of Nokia Siemens
Networks South Africa (Pty) Limited.
Competitive pressures in the market for telecommunications infrastructure
products are increasing and it is highly unlikely that the same result will be
achieved in the 2008 financial year. However, our position in the market
remains very strong and, if anything, the new entity is better equipped to
counter any attacks from the opposition. Apart from the traditional RCCF
business (financing of office equipment) Quince also offers bridging finance
(ZS Rationale) and lending against scrip (Scripfin). A capital injection of
R379 million provided by the PSG Group in exchange for roughly 50% of the
business has resulted in Quince being over capitalised in the short term. As
foreseen, the contribution from Quince was dilutive compared to the wholly
owned RCCF. This may continue for as long as Quince has excess capital. We
anticipate that this position will reverse during the new year.
Prospects
The local economic environment is characterised by efforts to curb consumer
spending on the one hand and published intentions to invest vast sums of money
on improving the infrastructure on the other.
Rising interest rates, food and oil prices coupled with the requirements of
the National Credit Act, are definitely slowing down consumer spending. The
overall effect is to reduce demand, thus slowing growth. Margin pressure is
inevitable.
On the fixed investment side, construction is booming with the exception of
residential property.
The Gautrain project is going ahead and the airport expansion projects and
building of stadia are underway. Eskom has announced plans and, in certain
cases, issued tenders to increase capacity - as has Transnet. The mining
industry, especially platinum, continues to expand. We are well positioned to
benefit from these developments. In particular our low voltage and cable
businesses are well entrenched as suppliers and our electrical businesses have
the products and capacity to meet increased demand.
On balance, we believe that the investments into the infrastructure will more
than offset the slowdown in consumer spending, assisting Reunert to achieve
real earnings growth.
REVIEWED RESULTS
The above results have been reviewed by the group auditors, Deloitte & Touche,
and a copy of their unmodified review report is available for inspection at
the company`s registered office.
DIRECTORATE
Ms ND Orleyn was appointed to the board effective 23 May 2007.
CASH DIVIDEND
Notice is hereby given that a final cash dividend, No 163, of 241 cents per
share (2006: 210 cents per share) has been declared by the directors for the
year ended 30 September 2007. In compliance with the requirements of Strate,
the following dates are applicable:
Last date to trade (cum dividend) Friday, 11 January 2008
First date of trading (ex dividend) Monday, 14 January 2008
Record date Friday, 18 January 2008
Payment date Monday, 21 January 2008
Shareholders may not dematerialise or rematerialise their share certificates
between Monday, 14 January 2008 and Friday, 18 January 2008, both days
inclusive.
On behalf of the board
Martin Shaw Gerrit Pretorius
Chairman Chief Executive
Sandton, 21 November 2007
Directors: MJ Shaw (Chairman)*, G Pretorius (Chief Executive), BP Connellan*,
KS Fuller*, BP Gallagher, SD Jagoe*, KJ Makwetla*, KC Morolo*, GJ Oosthuizen,
ND Orleyn*, DJ Rawlinson, Dr JC van der Horst * *Non-executive
Registered office: Lincoln Wood Office Park
6 - 10 Woodlands Drive, Woodmead, Sandton
PO Box 784391, Sandton, 2146. Telephone +27 11 517 9000
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Secretaries` certification:
In terms of section 268 G(d) of the Companies Act, 61 of 1973, as amended, I
certify that, to the best of my knowledge and belief, the company has lodged
with the Registrar of Companies for the year ended 30 September 2007 all such
returns as are required by a public company in terms of the Companies Act and
that all such returns are true, correct and up to date.
JAF Simmonds
For Reunert Management Services Limited
Company Secretaries
Enquiries: Carina de Klerk +27 11 517 9000 or e-mail invest@reunert.co.za.
For more information on Reunert Limited
Visit our website at www.reunert.com
Date: 21/11/2007 10:48:01 Produced by the JSE SENS Department.
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