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RLO
RLO
RLO - Reunert - Unaudited results for the six months ended 31 March 2008 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")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2008 AND CASH DIVIDEND
DECLARATION
- Revenue +9%
- Normalised headline earnings per share +7%
- Interim cash dividend per share +7%
Commentary
Compared to the prior interim reporting period, revenue for the half year ended
31 March increased by 9% to R5,1 billion. Operating income, excluding commission
earned from Nokia Siemens Networks (NSN) in terms of the new shareholders
agreement, grew by 6%.
Normalised headline earnings per share increased by 7% to 277,5 cents per share.
Cash on hand amounted to R294 million at the end of March.
The CBI-electric group
Revenue and operating profit grew by 8% and 9% respectively despite Reunert`s
interest in the telecom cable business reducing from 100% to 50% from 1 February
2007.
The low-voltage business had a good start to the new financial year although the
move of the assembly operations from Qwa-Qwa to Lesotho resulted in disruptions
to supply of products. The costs associated with the move were fully absorbed in
the review period. Local and international demand remains strong.
CBI-electric`s product range was further enhanced by the acquisition of Moeller
South Africa. The acquisition was effective 1 April 2008 and it is expected to
add 10% to revenue of the low-voltage business on a full year basis.
Energy cables continues to benefit from buoyant market conditions. The full
benefit of the market environment was somewhat diluted by the disruptions from
ongoing upgrading of capacity and continuing labour unrest which was finally
resolved in February. Efficiencies were not at the desired levels and should
improve shortly. Working capital is expected to reduce as efficiencies improve.
The telecommunications cable JV suffered from a collapse in demand for copper
cable from Telkom. To a certain extent this was offset by strong demand for the
instrumentation/data and fibre cable from other customers. Neotel and the
cellular operators, in particular MTN, are beginning to buy significant
quantities of fibre cable.
Going forward, CBI-electric is well positioned to benefit from expected
continued strong demand for its products. Operations have been stabilised and
further capital will be invested to ensure adequate capacity.
The Nashua group
Revenue increased by 10%. On a like-for-like basis, operating income increased
by 12%. However, a significant non-recurring income received by RC&C Finance in
the previous period increased the base and resulted in operating income
decreasing by 5%.
The office systems business experienced good growth in both revenue and
operating profit. Close to 50% of revenue is now generated by our majority owned
franchise outlets which positions us better to deal with competitive issues. The
increase in revenue can, in the main, be attributed to that strategy.
Nashua Mobile went from strength to strength. A wide footprint, giving access to
customers, resulted in growth in subscriber numbers. The sales of data products
in particular were very good. Bad debts are rising and the tighter credit
criteria being imposed as a result thereof will slow future growth in subscriber
numbers.
Nashua Electronics, the distributor of Panasonic products in Southern Africa,
held its own in a very difficult market with the consumer products division
remaining marginally profitable. Business systems, on the other hand, grew at an
acceptable rate from both revenue and operating profit perspective.
On a like-for-like basis, Nashua Finance, soon to be wholly owned by Reunert
again, managed to achieve good growth in revenue and profit. Funding is a
challenge and receives ongoing attention. The debtors book, approaching R2
billion, is of good quality and partly (R700 million) securitised. It is
expected that final funding arrangements will be in place by calendar year end.
The Nashua businesses are very strong and are expected to produce real growth
despite difficult prevailing economic conditions.
Reutech
Increased export sales and healthy margins led to a very pleasing result from
our defence businesses with revenue increasing by 40% and operating profit
growing by 396% to R65 million.
Ongoing investment in new products should ensure a higher level of contribution
from these businesses than in the past. Local sales are expected to increase
steadily providing a welcome base which should reduce volatility in earnings
from Reutech.
Telecommunications
NSN South Africa continues to be the dominant supplier of telecommunication
infrastructure equipment in South Africa. Demand from key customers, Vodacom and
Telkom, is strong with Neotel beginning to add significant volumes.
Due to a change in the shareholders agreement, Reunert now earns commission on
sales. Future commissions are expected to replace dividend flows. Reunert has
an option to exit this investment exercisable after December 2010.
Prospects
The South African economy and sentiment have been adversely affected by a
decline in consumer demand, higher inflation, Eskom power outages and interest
rate and fuel price increases. The sub-prime crisis has affected markets
internationally which have impacted local markets negatively. On the other
hand the continued high commodity prices and a weaker rand have improved export
prospects. Spend on infrastructure, particularly from government and
parastatals, have benefited a number of Reunert`s market sectors.
For the full year we should achieve real earnings growth.
Cash Dividend
Notice is hereby given that interim ordinary share dividend No 164 of 78,0 cents
per share (2007: 73 cents per share) has been declared by the directors for the
six months ended 31 March 2008. In compliance with the requirements of Strate,
the following dates are applicable:
Last date to trade (cum dividend) Thursday, 12 June 2008
First date of trading (ex dividend) Friday, 13 June 2008
Record date Friday, 20 June 2008
Payment date Monday, 23 June 2008
Shareholders may not dematerialise or rematerialise their share certificates
between Friday, 13 June 2008 and Friday, 20 June 2008, both days inclusive.
On behalf of the board
Martin Shaw Gerrit Pretorius
Chairman Chief Executive
Sandton 13 May 2008
CONDENSED GROUP INCOME STATEMENT
For the six months ended 31 March 2008
Year ended
30 Sept
2008 2007 % 2007
Notes R million R million change R million
(Audited)
Revenue 5 084,8 4 654,3 9 9 574,4
Earnings before 679,1 616,8 10 1 340,6
interest, tax,
depreciation,
amortisation
and other
income
Other income 1 89,8 26,4 240 52,4
Earnings before 1 768,9 643,2 20 1 393,0
interest, tax,
depreciation
and
amortisation
(EBITDA)
Depreciation 39,9 35,6 12 74,3
and
amortisation
Operating 729,0 607,6 20 1 318,7
profit
Net interest 2 30,6 27,1 13 54,8
and dividend
income
Abnormal items 3 1,5 (572,4) (447,6)
Profit before 761,1 62,3 1 122 925,9
taxation
Taxation 247,7 200,8 23 427,4
Profit/(loss) 513,4 (138,5) 498,5
after taxation
Share of 1 & 2 15,6 64,4 (76) 148,4
associate
companies`
profits
Profit/(loss) 529,0 (74,1) 646,9
for the period
Profit/(loss)
for the period
attributable
to:
Minority 2,7 3,1 (13) 7,6
interests
Equity holders 526,3 (77,2) 639,3
of Reunert
Limited
529,0 (74,1) 646,9
Basic 4 296,2 (43,7) 361,7
earnings/(loss)
per share
(cents)
Diluted basic 4 294,0 (42,2) 356,5
earnings/(loss)
per share
(cents)
Headline 4 & 5 296,1 (66,5) 272,4
earnings/(loss)
per share
(cents)
Diluted 4 & 5 294,0 (64,1) 268,4
headline
earnings/(loss)
per share
(cents)
Normalised 4 & 5 277,5 258,3 7 570,3
headline
earnings per
share (cents)
Normalised 4 & 5 275,5 249,0 11 562,0
diluted
headline
earnings per
share (cents)
Cash dividend 78,0 73,0 7 314,0
per ordinary
share declared
in respect of
the period
(cents)
Taxation rate 32,6 34,1 4 32,2
excluding
abnormal items
(%)
EBITDA as a % 1 15,1 13,8 9 14,5
of revenue
CONDENSED GROUP BALANCE SHEET
As at 31 March 2008
30 Sept
2008 2007 2007
Notes R million R million R million
(Audited)
Non-current assets
Property, plant and 599,9 545,8 578,7
equipment and
intangible assets
Goodwill 6 291,9 336,9 372,8
Investments and loans 7 1 482,5 211,3 727,9
RC&C Finance Company 14 - 1 155,4 -
accounts receivable
Deferred taxation 36,9 69,4 37,9
2 411,2 2 318,8 1 717,3
Current assets
Inventory and contracts 961,5 786,6 879,8
in progress
Accounts receivable and 1 951,3 1 425,1 1 716,1
derivative assets
RC&C Finance Company 14 - 445,0 -
accounts receivable
Cash and cash 9 294,1 72,5 530,6
equivalents
3 206,9 2 729,2 3 126,5
Total assets 5 618,1 5 048,0 4 843,8
Equity attributable to
equity holders of
Reunert Limited
Ordinary 3 125,0 1 870,6 2 468,3
Preference 0,7 0,7 0,7
3 125,7 1 871,3 2 469,0
Minority interest 16,3 31,4 14,4
Total equity 3 142,0 1 902,7 2 483,4
Non-current liabilities
Long-term borrowings 8 333,6 114,4 278,8
Deferred taxation 155,7 147,1 115,8
489,3 261,5 394,6
Current liabilities
Accounts payable, 1 822,7 1 669,8 1 787,6
derivative liabilities,
provisions and taxation
RC&C Finance Company 9 - 1 198,0 -
bank borrowings
Bank overdrafts and 164,1 16,0 178,2
short-term portion of
long-term borrowings
1 986,8 2 883,8 1 965,8
Total equity and 5 618,1 5 048,0 4 843,8
liabilities
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 March 2008
Year ended
* 30 Sept
2008 2007 2007
Note R million R million R million
(Audited)
Share capital and 92,0 82,3 90,8
premium
Balance at the 90,8 76,9 76,9
beginning of the period
Issue of shares 1,2 5,5 14,0
Shares cancelled in - (0,1) (0,1)
terms of buy-back of
treasury shares -
capital portion
Share-based payment 656,1 651,5 649,9
reserve
Balance at the 649,9 40,4 40,4
beginning of the period
Share-based payment 6,2 611,1 607,4
expense
Contribution by Reunert - - 2,1
to employees of joint
venture and associate
in terms of broad-based
scheme
Fair value adjustment 552,4 - -
reserve**
Balance at the - - -
beginning of the period
Arising on fair 591,7 - -
valuation of financial
instruments
Deferred taxation on (39,3) - -
fair value gain
Treasury shares 10 (276,1) (276,1) (276,1)
Balance at the (276,1) (282,0) (282,0)
beginning of the period
Shares cancelled in - 0,1 0,1
terms of buy-back of
treasury shares -
capital portion
Shares cancelled in - 5,8 5,8
terms of buy-back of
treasury shares -
dividend portion
Non-distributable 2,1 3,7 7,3
reserves
Balance at the 7,3 3,7 3,7
beginning of the period
- restated*
Balance at the 7,3 104,8 104,8
beginning of the period
- as previously
reported
Share of associate - (101,1) (101,1)
company`s retained
earnings at the
beginning of the period
transferred to retained
earnings
Transfer from retained - - -
earnings - restated*
Transfer from retained - 64,4 -
earnings - as
previously reported
Transfer from retained - (64,4) -
earnings reversed
Translation reserve (1,3) - (0,3)
Reunert`s share of - - 3,9
previously equity-
accounted associate`s
actuarially valued
surplus of medical aid
provision
Reunert`s share of (3,9) - -
previously equity-
accounted associate`s
actuarially valued
surplus of medical aid
provision transferred
to retained earnings***
Retained earnings 2 099,2 1 409,9 1 997,1
Balance at the 1 997,1 1 841,9 1 841,9
beginning of the period
- restated*
Balance at the 1 997,1 1 740,8 1 740,8
beginning of the period
- as previously
reported
Share of associate - 101,1 101,1
company`s retained
earnings at the
beginning of the period
transferred from non-
distributable reserves
Profit/(loss) for the 526,3 (77,2) 639,3
period
Transfer to non- - - -
distributable reserves
- restated*
Transfer to non- - (64,4) -
distributable reserves
- as previously
reported
Transfer to non- - 64,4 -
distributable reserves
reversed
Reunert`s share of 3,9 - -
previously equity-
accounted associate`s
actuarially valued
surplus of medical aid
provision transferred
from
non-distributable
reserves***
Cash dividends declared (428,1) (354,8) (478,3)
Shares cancelled in - - (5,8)
terms of buy-back of
treasury shares -
dividend portion
Equity attributable to 3 125,7 1 871,3 2 469,0
equity holders of
Reunert Limited
Minority interest 16,3 31,4 14,4
Balance at the 14,4 38,2 38,2
beginning of the period
Profit for the period 2,7 3,1 7,6
Dividends declared (1,8) (4,5) (4,5)
Net movement in 1,0 (5,4) (26,9)
minorities
Total equity at the end 3 142,0 1 902,7 2 483,4
of the period
*The March 2007 information has been restated to reflect the change in
accounting policy that took place in the prior year whereby the group`s share of
the associate company`s retained earnings were previously transferred to a non-
distributable reserve.
**This reserve relates to fair value adjustments on financial assets designated
as "available for sale" financial assets in terms of IAS 39.
***Since Reunert`s investment in NSN is no longer equity-accounted (refer to
note 7) this reserve has been transferred to retained earnings.
CONDENSED GROUP CASH FLOW STATEMENT
For the six months ended 31 March 2008
Year ended
30 Sept
2008 2007 2007
Notes R million R million R million
(Audited)
EBITDA 768,9 643,2 1 393,0
Increase in net (292,4) (411,1) (739,7)
working capital
Increase in RC&C - (196,6) -
Finance Company
accounts receivable
Increase in RC&C 14 - - (300,7)
Finance Company
accounts receivable up
to date of transfer
Increase in other (292,4) (214,5) (439,0)
working capital
Cash generated from 476,5 232,1 653,3
operations
Net interest and 30,6 27,1 200,8
dividend income
(including associates)
Taxation paid (231,3) (340,3) (568,6)
Dividends paid (429,9) (750,1) (879,3)
(including to
minorities)
Other (net) 6,1 2,8 23,7
Net cash flows from (148,0) (828,4) (570,1)
operating activities
Net cash flows from (129,1) (78,2) 1 008,6
investing activities
Net cash flows from 88,4 11,3 274,5
financing activities
(Decrease)/increase in (188,7) (895,3) 713,0
net cash resources
Net short-term bank 482,8 (230,2) (230,2)
borrowings at the
beginning of the
period
Net cash resources at 294,1 (1 125,5) 482,8
the end of the period
Cash and cash 9 294,1 72,5 530,6
equivalents
Bank overdrafts - - (47,8)
Net cash resources 9 294,1 72,5 482,8
excluding RC&C Finance
Company bank
borrowings
RC&C Finance Company 9 - (1 198,0) -
bank borrowings
Net cash resources 294,1 (1 125,5) 482,8
including RC&C Finance
Company bank
borrowings at the end
of the period
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
Year ended
30 Sept
2008 2007 2007
R million R million R million
(Audited)
Note 1
EBITDA
EBITDA is stated after:
- Cost of sales 3 670,5 3 355,5 6 763,1
- Other expenses excluding 793,4 640,8 1 369,8
depreciation and amortisation
- Other income 89,8 26,4 52,4
Commission income 86,1 - -
Other 3,7 26,4 52,4
- Realised (profit)/loss on (28,0) 50,7 106,9
foreign exchange and derivative
instruments
- Unrealised (profit)/loss on (30,2) (9,5) (6,0)
foreign exchange and derivative
instruments
The commission income is in respect of commission earned from the
Nokia Siemens Networks Group based on the sales revenue for the Sub-
region of which South Africa forms part. The commission is related
to Reunert`s investment in Nokia Siemens Networks South Africa
(Pty) Limited (NSN). The current year`s share of associate
companies` profit does not include any income in respect of NSN due
to the change in the nature of the investment (refer to note 2 and
7).
Note 2
Net interest and dividend income
Interest received 48,6 40,0 104,3
- From RC&C Finance Company
(Pty) Limited (RCCF) up to date
of transfer
(refer to note 14) - 25,4 43,5
- External 48,6 14,6 60,8
Interest paid (21,6) (16,6) (57,2)
Dividend income other than from 3,6 3,7 7,7
associate companies
Total 30,6 27,1 54,8
Dividend income from associate - - 146,0
companies included in share of
associate companies` profits
Note 3
Abnormal items
Net surplus on dilution in 1,5 - 118,1
(refer to note 14) and disposal
of business
Surplus on sale of non-current - 34,5 34,5
assets to the ATC/Aberdare joint
venture
Black Economic Empowerment (BEE)
expense - share-based payment
(refer to note 10) - (556,6) (556,6)
Share-based payment expense in - (50,3) (42,2)
terms of broad-based scheme to
group employees (refer to note
10)
Net impairments - - (1,4)
Total before taxation 1,5 (572,4) (447,6)
Taxation - 15,9 14,7
Minority interest - - 0,2
Total 1,5 (556,5) (432,7)
Note 4
Number of shares used to
calculate earnings per share
Weighted average number of 177,7 176,5 176,7
shares in issue 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 1,3 2,1 1,5
granted (millions of shares)
- The notional unemcumbered - 4,5 1,1
Reunert Limited (Reunert) shares
held by Bargenel Investments
Limited - (Bargenel) (millions
of shares)*
Weighted average number of 179,0 183,1 179,3
shares used to 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 period`s average share price) of the 18,5 million
treasury shares held by Bargenel that could be settled out of the
period-end equity value of Bargenel.
Note 5.1
Headline earnings
Headline earnings are determined
by eliminating the effect of the
following items in attributable
earnings:
Profit/(loss) attributable to 526,3 (77,2) 639,3
equity holders of Reunert - IAS
33 basic earnings
Net surplus on dilution in and (1,5) - (118,1)
disposal of business
Loss/(surplus) on disposal of 0,9 (36,1) (35,2)
property, plant and equipment
and intangible assets
Net impairments - - 1,4
Taxation effect of adjustments 0,5 (4,1) (6,1)
Headline earnings/(loss) 526,2 (117,4) 481,3
Note 5.2
Normalised headline earnings
Normalised headline earnings are
determined by eliminating the
effect of the following items in
attributable headline earnings:
Headline earnings/(loss) 526,2 (117,4) 481,3
BEE expense - share-based - 556,6 556,6
payment
Share-based payment expense in - 50,3 42,2
terms of broad-based scheme to
group employees
BEE share of headline and - - 8,2
normalised headline earnings
adjustments
Contribution by Reunert to - - 2,1
employees of joint venture and
associate
Minority effect of adjustments - - (0,1)
Taxation effect of adjustments - (11,4) (9,1)
526,2 478,1 1 081,2
Interest in profit that is (33,0) (22,2) (73,5)
economically attributable to BEE
partners (refer to note 10)
Normalised headline earnings 493,2 455,9 1 007,7
(basic and diluted)
Note 6
Goodwill
Carrying value at the beginning 372,8 326,8 326,8
of the year
Acquisitions of businesses and 13,7 10,1 45,7
minority interests
Negative goodwill taken to - - 1,1
profit in terms of IFRS 3
Impairments - - (0,8)
Unamortised goodwill arising in (94,6) - -
a previous period on a further
acquisition of NSN now
transferred to investment in NSN
(refer to note 7)
Carrying value at the end of the 291,9 336,9 372,8
year
Note 7
Investments and loans
Unlisted associate companies - 297,7 190,4 400,3
at cost plus equity-accounted
earnings excluding goodwill
- NSN - 190,4 119,7
- Quince (refer to note 14)* 297,7 - 280,6
Other unlisted investments - at 7,0 7,1 7,0
cost
Loans - at cost 52,4 13,8 54,5
Long-term accounts receivable 319,4 - 266,1
Financial instruments - 806,0 - -
investment in NSN - at fair
value*
Carrying value of NSN at 1 119,7 - -
October 2007, previously an
unlisted company, now a
financial instrument
Unamortised goodwill arising on 94,6 - -
a further acquisition in a
previous period (refer to note
6)
Fair value adjustment (refer to 591,7 - -
statement of changes in equity)
Total carrying value 1 482,5 211,3 727,9
Directors` valuation of unlisted
investments
- Unlisted associate companies 404,0 520,0 908,0
(2008:Quince, 2007:NSN)
- Other unlisted investments 813,0 7,1 7,0
(2008 includes NSN at R806,0
million)
*The nature of the investment in NSN and the income received from
this investment (refer to note 1) has changed, following post-
merger restructuring within the Nokia Siemens Networks Group, with
effect from 1 October 2007. Significant influence ceased as Reunert
no longer has representation on the board of directors, even though
Reunert retained a 40% legal ownership. The investment in NSN has
consequently been reclassified as a financial instrument, and
designated as "available for sale", as defined in IAS 39 -
Financial Instruments: Recognition and Measurement. Due to a
change in the shareholders agreement, Reunert now earns commission
on sales of NSN products. Future commissions are expected to
replace dividend flows. Previously income relating to the
investment in NSN was recognised in terms of the equity method and
included in share of associate companies` profits in the income
statement. The fair value of the investment was obtained using a
discounted cash flow methodology on the amount the shareholders`
agreement specifies as the minimum value to be placed on Reunert`s
shareholding in the event of a sale to Nokia Siemens Networks
Group, together with an estimation of future commissions. The
first time a sale may take place in terms of the agreement is 31
December 2010.
Note 8
Long-term borrowings
Total long-term borrowings 475,4 108,1 386,9
(including finance leases)
Less: Short-term portion (164,1) (16,0) (130,4)
(including finance leases)
311,3 92,1 256,5
Loan repaid by BEE partner* 22,3 22,3 22,3
333,6 114,4 278,8
The long-term borrowings in the current year and at 30 September
2007 are an obligation to RCCF, which is currently 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
receivable (refer to note 7), 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 March 2007 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.
Note 9
Group cash resources/borrowings
Total RCCF borrowings at the end - 1 469,0 -
of the period (refer to note 14)
Less: Funded out of other - (271,0) -
Reunert cash resources (see
below)
RCCF bank borrowings at the end - 1 198,0 -
of the period (refer to note 14)
Total Reunert net cash resources 294,1 343,5 482,8
at the end of the period
Less: Utilised to fund RCCF (see - (271,0) -
above) (refer to note 14)
294,1 72,5 482,8
Add: Bank overdrafts - - 47,8
Cash and cash equivalents 294,1 72,5 530,6
Note 10
BEE transactions
Reunert`s BEE deal 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 was recognised in the previous financial year. The sale by
Bargenel, which holds 18,5 million shares in Reunert was done at a
10% discount to the Reunert share price. 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 economic 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 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 tax
deduction, which occurs in the future.
As referred to in note 8 certain BEE transactions involving the
disposal of equity interests have not been recognised because the
significant risk and rewards of ownership of the equity have been
deemed not to have passed to the BEE partners, until the shares
have been fully paid for. Accordingly, the equity interests in the
affected 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 period 33,0 32,0 73,5
profit that is economically
attributable to BEE partners
- Balance sheet interest that is 194,8 122,7 161,8
economically attributable to BEE
partners
Note 11
Basis of preparation
These condensed interim group financial statements have been
prepared in terms of IAS 34-Interim Financial Reporting as well as
in compliance with the Companies Act of South Africa, Act 61 of
1973, as amended, and the Listings 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 2007, have
been consistently applied. However, due to the change in the nature
of the investment in NSN, the accounting treatment for this
investment has changed. (Refer to notes 1 and 7).
These condensed interim financial statements have not been reviewed
or audited by the group`s auditors.
Note 12
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 13
Major corporate activity
Acquisition of Nashua franchise
With effect from 1 November 2007 Nashua Holdings (Pty) Limited
(Nashua) purchased 51% of the West Rand Nashua franchise. Nashua
provided R20,4 million of loan finance to the other shareholders.
The minority shareholders provided R1,0 million of equity.
Nashua
franchise
R million
Net assets acquired:
Property, plant and equipment 2,4
Goodwill 13,7
Inventory 4,8
Accounts receivable 3,9
Payables and provisions (4,4)
Cost of investment 20,4
Loss since acquisition (0,9)
Revenue for the period ended 31
March 2008 as though the
acquisition
date had been 1 October 2007 25,5
Loss for the period ended 31 (0,9)
March 2008 as though the
acquisition date had been 1
October 2007
Note 14
Subsequent events
On 1 May 2007 RCCF was sold to Quince in exchange for equity in
Quince. From that time Quince has been treated as an equity-
accounted associate in the Reunert group results. Agreement has
been reached with the other shareholders of Quince for Reunert to
acquire the share capital of Quince not already owned by Reunert,
for approximately R433 million. The valuation was on the same basis
on which the original transaction was concluded. Simultaneously the
other shareholders will acquire the businesses they sold to Quince
last year, namely Scripfin and Quince Property Finance, for
approximately R17 million. RCCF will remain a 100%-held subsidiary
of Quince. Competition Commission approval of the transaction is
awaited and is expected by the end of May 2008. Until that time the
results of Quince will continue to be equity-accounted in the
Reunert group results.
With effect from 1 April 2008 Moeller South Africa was acquired for
R24,3 million. This purchase will enhance the product range of CBI-
electric: low voltage.
SUPPLEMENTARY INFORMATION
For the six months ended 31 March 2008
Year ended
30 Sept
2008 2007 2007
Note (Audited)
R million (unless otherwise
stated)
Net asset value per share 1 758 1 061 1 390
(cents)
Current ratio excluding 1,8 1,6 1,7
interest-bearing current
liabilities (:1)
Net number of ordinary shares 177,8 176,6 177,7
in issue (million)
Number of ordinary shares in 196,3 195,1 196,2
issue (million)
Less: Held by subsidiary 10 (18,5) (18,5) (18,5)
(million)
Capital expenditure 66,2 87,0 149,0
- expansion 36,0 68,1 86,9
- replacement 30,2 18,9 62,1
Capital commitments in respect 33,1 105,2 80,2
of property, plant and
equipment
- contracted 13,6 52,8 54,5
- authorised not yet contracted 19,5 52,4 25,7
Commitments in respect of 91,7 81,8 97,1
operating leases
Contingent liabilities 700,0 3,5 -
- guarantees in respect of 700,0 - -
Quince
- warranties on debtors sold - 0,3 -
- guarantees on behalf of third - 3,2 -
parties
CONDENSED SEGMENTAL ANALYSIS
For the six months ended 31 March 2008
Year ended
30 Sept
2008 2007 % 2007
R % R million % change R %
million million
(Audited)
Revenue*
CBI- 1 750,3 34 1 615,3 32 8 3 315,1 29
electric**
Nashua 3 125,8 61 2 837,4 55 10 5 816,3 52
NSN*** - - 454,0 9 1 712,9 15
Reutech 281,7 5 201,6 4 40 490,5 4
Total 5 157,8 5 108,3 1 11 334,8
operations 100 100 100
Less: (73,0) (454,0) (1 760,4)
Reunert`s
attributable
portion of
associate
companies`
revenue
Revenue as 5 084,8 4 654,3 9 9 574,4
reported
*Intersegment revenue is immaterial and has not been disclosed.
**Revenue for the year ended 30 September 2007 included an amount
of R96,3 million for inventory sold at book value by ATC (Pty)
Limited to CBI-Electric Abedare ATC Telecom Cables (Pty) Limited.
***Revenue excludes commission received attributable to the
investment in NSN (refer to notes 1 and 7).
Operating
profit
CBI-electric 289,3 39 266,1 37 9 553,9 36
Nashua 310,2 41 325,1 46 (5) 674,7 44
NSN* 86,1 11 105,7 15 (19) 211,2 13
Reutech 65,0 9 16,4 2 296 109,2 7
Total 750,6 713,3 5 1 549,0
operations 100 100 100
Less: Reunert`s (21,6) (105,7) (230,3)
attributable
portion of
associate
companies` net
operating
profit
Operating 729,0 607,6 20 1 318,7
profit as
reported
*Operating profit in 2008 represents commission received (refer to notes 1 and
7), whereas the 2007 figures represent 40% of the NSN operating profits.
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 six months ended 31 March 2008 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 log onto the Reunert website at www.reunert.com.
Directors: MJ Shaw (Chairman)*, G Pretorius (Chief Executive),
BP Connellan*, KS Fuller*, BP Gallagher, SD Jagoe*, KJ Makwetla*, 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 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 14/05/2008 07:00:03 Produced by the JSE SENS Department.
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