| Wed 8 May 2002, 0:00 | | Reunert Limited - Interim Report |
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REUNERT LIMITED
Interim report
TO SHAREHOLDERS FOR THE SIX MONTHS ENDED 31 MARCH 2002
Headline earnings per share +30%
Dividend per share 30 cents
Group income statement
Six months ended Year ended
31 March 30 Sept
2001 2001
2002 R million R million
R million (Unaudited % (Audited
Notes (Unaudited) and restated)(8) change and restated)(8)
Revenue 2 469.4 2 112.2 17 4 229.8
Earnings before interest,
tax, depreciation
and amortisation
(EBITDA) 242,9 200,4 21 425,3
Depreciation 23,8 16,7 43 43,8
Amortisation of
goodwill 14,0 - 2,3
Operating profit 1 205,1 183,7 12 379,2
Net interest and
dividend income 2 15,5 33,5 (54) 59,1
Profit before taxation 220,6 217,2 2 438,3
Taxation 79,2 73,8 145,6
Profit after taxation 141,4 143,4 292,7
Share of associate
companies' profits 48,3 28,6 69 81,8
Profit after tax including
associate companies 189,7 172,0 374,5
Earnings attributable to
outside shareholders in
subsidiaries 14,5 19,3 42,3
Earnings attributable to
ordinary shareholders
in Reunert Limited 175,2 152,7 15 332,2
Basic earnings per
share (cents ) 3 93,7 77,8 20 173,3
Diluted earnings
per share (cents) 3 92,0 76,8 20 170,9
Headline earnings
per share (cents) 4 101,2 77,7 30 174,8
Diluted headline
earnings per
share (cents) 4 99,2 76,7 29 172,4
Dividend per
ordinary share
(cents ) 30,0 24,0 25 91,0
Taxation rate excluding
amortisation (%) 33,8 34,0 33,0
EBITDA as a % of
turnover 9,8 9,5 10,1
Note 1
Operating profit
Operating profit is stated after:
- Cost of sales 1 795,6 1 509,5 3 036,6
- Other income (16,4) (13,4) (9,6)
- Other expenses excluding
- Depreciation
- and amortisation 447,4 408,1 777,5
Note 2
Net interest and
dividend income
Interest received 43,9 36,8 64,5
- from RC&C Finance
Company 32,5 24,2 32,1
- external 11,4 12,6 32,4
Interest paid (31,5) (7,1) (13,1)
Dividend income other
than from associates 3,1 3,8 7,7
Total 15,5 33,5 59,1
Dividend income from
associates included
in share of associate
companies' profits 16,4 22,8 70,9
Note 3
Basic earnings per share
and diluted earnings per share
The earnings used to
determine both basic
earnings per share and
diluted earnings per
share being the earnings
attributable to ordinary
shareholders in Reunert
(Rm) 175,2 152,7 332,2
The weighted average
number of shares in
issue used to determine
basic earnings per share
and headline earnings
per share
(millions of shares) 186,9 196,3 191,7
Adjusted by the dilutive
effect of unexercised share
options available
to executives employed
in the group (millions
of shares) 3,6 2,6 2,7
Weighted average number of
shares used to determine
diluted
earnings per share and
diluted headline earnings
per share (note 4)
(millions of shares) 190,5 198,9 194,4
Note 4
Headline earnings per share
and diluted headline
earnings per share
Headline earnings per
share and diluted headline
earnings per share
have been calculated using
the weighted average
number of shares
in issue as detailed
in note 3.
Headline earnings are
determined by eliminating
the effect of capital
items in attributable
earnings as follows:
Earnings attributable
to ordinary
shareholders 175,2 152,7 332,2
Amortisation of
goodwill 14,0 - 2,3
Other (net) (0,1) (0,1) 0,7
Headline earnings 189,1 152,6 335,2
Note 5
Goodwill
Carrying value at the
beginning of the period 10,9 - -
Add: Acquisitions of
businesses/investments 389,1 - 13,2
Less: Amortisation
for the period (14,0) - (2,3)
Carrying value at the
end of the period 386,0 - 10,9
Goodwill is written off
over periods varying
between one
and ten years.
Note 6
Investments
At cost excluding
goodwill 237,9 179,4 188,4
At directors' valuation 653,0 179,4 188,4
Note 7
Finance Company accounts
receivable
Collectable within one
year 278,0 312,8 278,0
Collectable after one
year 554,9 435,4 467,1
832,9 748,2 745,1
Note 8
Accounting policies
Reunert has adopted the South African Statements of Generally Accepted
Accounting Practice (SA GAAP) which became effective during the current
financial year. This has resulted in changes to accounting policies,
requiring the restatement of the comparative figures for 2001. The main
change involves the depreciation of properties. Previously, all properties
which the group regarded as investment properties were not depreciated. Now,
in terms of AC 123, the group is depreciating all properties.
In accordance with AC 107, distributions to shareholders are now accounted
for in the period the distribution takes place. This change does not require
the restatement of information previously reported.
The group's accounting policies are in accordance with SA GAAP and, except
for the above changes, are consistent with those of the prior period.
Note 9
Major acquisitions
In December 2001 the group acquired Marconi's 21,5% shareholding in Siemens
Telecommunications (Pty) Ltd ("Sietel"). During January 2002, Siemens
exercised an option to purchase 9% of Marconi's 21,5% from Reunert. The net
effect of this transaction was that Reunert purchased an extra 12,5% of
Sietel at a cost of R161,3 million, including goodwill of R137,7 million. In
December 2001 Reunert purchased the remaining 42% of Nashua Nedtel
Communications (Pty) Ltd ("NNC") not previously held by it for R261,6
million, including goodwill of R220,7 million. The name of NNC was
subsequently changed to Nashua Mobile (Pty) Ltd.
Group balance sheet
31 March 30 Sept
31 March 2001 2001
2002 R million R million
R million (Unaudited (Audited
Notes (Unaudited) and restated)(8) and restated)(8)
Non-current assets
Property, plant and
equipment 152,2 155,6 161,8
Goodwill 5 386,0 - 10,9
Investments 6 237,9 179,4 188,4
RC&C Finance Company
accounts
receivable 7 832,9 748,2 745,1
Deferred taxation
assets 41,3 22,6 42,0
1 650,3 1 105,8 1 148,2
Current assets
Inventory and contracts
in progress 509,6 432,2 496,5
Accounts receivable 673,2 570,5 595,9
Cash and cash equivalents
(net) 197,5 522,7 584,5
1 380,3 1 525,4 1 676,9
Total assets 3 030,6 2 631,2 2 825,1
Shareholders' funds
Ordinary 1 146,9 912,6 971,7
Reunert Limited shares
bought by a subsidiary (234,6) (226,2) (234,6)
Preference 0,7 0,7 0,7
913,0 687,1 737,8
Outside shareholders
in subsidiaries 94,8 112,1 120,7
1 007,8 799,2 858,5
Non-current liabilities
Deferred taxation
liabilities 49,0 33,1 48,6
Long-term borrowings 1,8 2,7 2,7
50,8 35,8 51,3
Current liabilities
RC&C Finance Company
short-term borrowings 734,6 636,6 618,8
Accounts payable,
provisions and taxation 1 237,4 1 112,7 1 171,3
Shareholders for
normal dividend 8 - 46,9 125,2
1 972,0 1 796,2 1 915,3
Total equity and
liabilities 3 030,6 2 631,2 2 825,1
R million (unless
otherwise stated)
Net asset value per
share (cents) including
intangible assets 489 367 395
Net asset value per
share (cents)
excluding intangible
assets 282 367 389
Current ratio including
short-term portion of
RC&C Finance Company
accounts receivable
(:1) 1,3 1,4 1,3
Net number of ordinary
shares in issue
(million) 186,9 187,4 186,9
Number of ordinary shares
in issue (million) 204,1 204,0 204,1
Less: held by
subsidiary (17,2) (16,6) (17,2)
Capital expenditure 13,2 18,6 52,8
- expansion 9,0 4,7 32,4
- replacement 4,2 13,9 20,4
Capital commitments 14,6 15,6 20,7
- contracted 7,7 5,7 3,3
- authorised not yet
contracted 6,9 9,9 17,4
Commitments in respect
of leases 53,8 69,8 64,4
- operating 53,7 69,8 64,4
- finance 0,1 - -
Contingent liabilities 3,7 0,3 0,3
Group cash flow information
Six months ended Year ended
31 March 30 Sept
2002 2001 2001
R million R million R million
(Unaudited) (Unaudited (Audited
and restated)(8) and restated)(8)
EBITDA 242,9 200,4 425,3
(Increase)/reduction
in net working capital (2,7) 7,7 (55,4)
(Increase)/reduction in
RC&C Finance Company
accounts receivable (87,8) 3,4 6,5
Other working capital
changes (net) 85,1 4,3 (61,9)
Cash generated from
operations 240,2 208,1 369,9
Net interest and dividends
received (including
associates) 31,9 56,3 130,0
Taxation paid (165,4) (105,0) (133,0)
Dividends paid (143,7) (120,2) (169,0)
Net cash (outflow)/inflow
from operating
activities (37,0) 39,2 197,9
Net asset additions (12,9) (16,7) (48,6)
Other (net) 3,9 2,1 5,0
Net cash (outflow)/inflow
from operations (46,0) 24,6 154,3
Reunert Limited shares
purchased by subsidiary - (209,5) (217,9)
Other acquisitions (456,8) (1,8) (43,5)
Net decrease in cash and
cash equivalents (502,8) (186,7) (107,1)
Net (borrowings)/cash and
cash equivalents at
beginning of the period (34,3) 72,8 72,8
Net borrowings at end of
the period (537,1) (113,9) (34,3)
Net cash resources of the
group excluding the
RC&C Finance Company
borrowings
- Deposit on call with
- RC&C Finance Company 110,6 220,7 294,8
- Other cash reserves 86,9 302,0 289,7
197,5 522,7 584,5
RC&C Finance Company
borrowings (734,6) (636,6) (618,8)
Net borrowings at end
of the period (537,1) (113,9) (34,3)
The deposits on call with the RC&C Finance Company are repayable on demand.
RC&C Finance Company has long-term banking facilities which can be utilised
to replace these funds.
Group statement of changes in equity
Six months
Six months ended Year ended
ended 31 March 30 Sept
31 March 2001 2001
2002 R million R million
R million (Unaudited (Audited
(Unaudited) and restated)(8) and restated)(8)
Balance at beginning
of period as previously
reported 737,8 810,7 810,7
Adjustment to opening
accumulated profit
due to changes (19,9) (19,9)
in accounting policies
(note 8)
Net profit for the
period 175,2 152,7 332,2
Dividends declared - (46,9) (168,3)
Shares issued in terms
of the Reunert Share
Option Scheme - - 0,4
Reunert Limited shares
bought by subsidiary - (209,5) (217,9)
Translation reserve
movement during the
year - - 0,6
Balance at end of
period 913,0 687,1 737,8
Segmental analysis
Six months Six months ended Year ended
ended 31 March 30 Sept
31 March 2001 2001
2002 R million R million
R million (Unaudited) % (Audited
Unaudited) % and restated)(8) % change and restated)(8) %
Revenue
Electronics
Office systems 419,8 12 324,6 13 29 694,3 13
Consumer products
and services 1 386,7 41 1 153,2 44 20 2 335,3 44
Telecom-
munications 866,9 25 401,0 15 116 922,5 17
Reutech 186,4 5 253,2 10 (26) 399,7 7
Total
Electronics 2 859,8 83 2 132,0 82 34 4 351,8 81
Electrical
Engineering
and Cables
Low-voltage
electrical 268,9 8 183,6 7 46 399,2 8
Cables 295,6 9 292,9 11 1 607,8 11
Total Electrical
Engineering
and Cables 564,5 17 476,5 18 18 1 007,0 19
Total
operations 3 424,3 100 2 608,5 100 31 5 358,8 100
Less: Reunert's
attributable
portion of
associate
companies'
revenue (954,9) (496,3) (1 129,0)
Revenue as
reported 2 469,4 2 112,2 17 4 229,8
Operating profit
before amortisation
Electronics
Office systems 70,9 23 37,2 16 91 104,5 20
Consumer products
and services 78,4 25 55,2 23 42 123,2 24
Telecom-
Munications 100,3 33 35,1 15 186 102,7 20
Reutech 12,0 4 44,7 19 (73) 40,0 8
Total Electronics 261,6 85 172,2 73 52 370,4 72
Electrical
Engineering
and Cables
Low-voltage
electrical 41,9 13 30,1 13 39 74,0 14
Cables 6,0 2 32,5 14 (82) 70,4 14
Total Electrical
Engineering and
Cables 47,9 15 62,6 27 (23) 144,4 28
Total operations 309,5 100 234,8 100 32 514,8
Less: Reunert's
attributable
portion of
associate
companies'
operating profit (90,4) (51,1) (133,3)
Operating profit
before amortisation
of goodwill as
reported 219,1 183,7 19 381,5
Commentary
REVIEW OF RESULTS
Reunert has produced strong results for the six months ended 31 March 2002
with headline earnings per share increasing by 30%. Turnover grew 17% while
cost controls and improved efficiencies led to an increase in operating
profit before depreciation and amortisation of 21%.
All the Group's operations, with the exception of ATC and Reutech, have
achieved topline and operating profit growth. The acquisition in November
2001 of additional stakes in Sietel and Nashua Mobile together with last
year's share buyback programme contributed to Reunert's growth in headline
earnings per share.
REVIEW OF OPERATIONS
Electronics
The Office Systems businesses capitalised further on the strength of the
Nashua brand. The strong demand for Nashua's digital products and systems
solutions has continued.
The Consumer Products and Services businesses reported strong growth. The
Nashua Mobile customer base has continued to expand in the corporate and
commercial market. Average revenue per subscriber continues to grow with the
focus on improving customer service. Panasonic has achieved encouraging
sales growth in the period under review. This market, however, remains
highly competitive and the Consumer and Commercial division has responded by
launching key mass market consumer products under the Futronic brand to
complement the premium Panasonic line-up.
The Telecommunications Division's contribution to Reunert's results has more
than doubled in the period under review. This increase has been achieved
through organic growth and as a consequence of Reunert increasing its
investment in Sietel to 40%. Sietel's successful expansion into Africa as
well as its award of the supply contract for Cell-C and its preferred
supplier status for Eskom Enterprises has enhanced its position as the
leading telecommunications equipment supplier in southern Africa.
Reutech's turnover declined by 26% and operating profit by 73%. This was
caused by the lower order book noted in last year's annual report. The
recent receipt of a large export contract has improved the outlook for
Reutech and revenue and income will return to more normal levels during the
second half of the financial year. The bulk of the export contract will run
into the 2003 financial year and prospects for further increases in the
order book remain good.
Electrical engineering and cables
CBI's low voltage electrical business has continued to expand with 46%
growth in revenue. Operating profit growth was lower at 39%. The margins on
meter products and the newly acquired Mitsubishi product range are at a
lower level than achieved by the other operations in CBI. The domestic and
industrial market is likely to continue at the current lower levels but
growth will continue to be achieved from the new product offerings and from
exports.
African Cables' order book has remained strong and the company continues to
increase market share. Continued improvements in factory output and a
reduction in scrap and overconsumption has enabled African Cables to achieve
a satisfactory operating margin in this period.
The demand for ATC's optical fibre was weak, resulting in a loss for the
half-year. Major restructuring of the business has taken place to reduce
costs in the light of expected weak demand.
PROSPECTS
Continued strong growth in the second half is expected.
DIRECTORATE
In terms of the Company's mandatory retirement rules, Mr P T W Curtis
retired at the annual general meeting on
29 January 2002. The board wishes to thank him for his enthusiasm and
commitment over the last nine years.
DIVIDEND
Notice is hereby given that an interim dividend No 152 of 30 cents per share
(2001: 24 cents per share) has been declared by the directors for the half
year ended 31 March 2002. In compliance with the requirements of Strate, the
following dates are applicable:
Last date to trade (cum dividend) Tuesday, 11 June 2002
First date of trading (ex dividend) Wednesday, 12 June 2002
Record date Wednesday, 19 June 2002
Payment date Thursday, 20 June 2002
Share certificates may not be dematerialised or rematerialised between
Wednesday, 5 June 2002, and Wednesday,
19 June 2002, both dates inclusive.
On behalf of the board
Derek Cooper Gerrit Pretorius
Chairman Chief Executive Officer
Sandton
8 May 2002
Reunert Limited
Incorporated in the Republic of South Africa Registration number
1913/004355/06
Share code: RLO ISIN code: ZAE000005914
Directors
D E Cooper (Chairman)*, G Pretorius (Chief Executive), B P Connellan*, B P
Gallagher, S D Jagoe*, K J Makwetla*, G J Oosthuizen, D J Rawlinson, M J
Shaw*, C L Valkin*, Dr J C van der Horst* *Non-executive
Registered office
Lincoln Wood Office Park, 6 - 10 Woodlands Drive, Woodmead, Sandton, PO Box
784391, Sandton, 2146 , Telephone (011) 517-9000
Sponsor
Rand Merchant Bank, Corporate Finance
Share transfer secretaries
Computershare Investor Services Ltd
Company secretary
Reunert Management Services Limited
www.reunert.com
