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Reunert Limited- Interim Report To Shareholders For The 6 Months Ended 31 March
Release Date: 08/05/2003 07:01:02 Code(s): RLO
Reunert Limited- Interim Report To Shareholders For The 6 Months Ended 31 March
2003
Reunert Limited
Incorporated in the Republic of South Africa
(Reg No 1913/004355/06)
Share code: RLO
ISIN: ZAE000005914
Headline earnings per share +14%
Dividend per share +7%
Interim report to shareholders
for the six months ended 31 March 2003
Group Income Statement
Six months ended Year ended
31 March 30 Sept
2003 2002 2002
R million R million % R million
Notes (Unaudited) (Unaudited) change (Audited)
Revenue 3 047,5 2 469,4 23 5 062,9
Earnings before
interest, tax,
depreciation and
amortisation (EBITDA) 380,5 242,9 57 559,7
Depreciation 22,1 23,8 (7) 46,2
Amortisation of 25,1 14,0 41,4
goodwill
Operating profit 1 333,3 205,1 63 472,1
Net interest and 2 21,2 15,5 37 36,5
dividend income
Profit before 354,5 220,6 508,6
abnormal item
Abnormal item 3 - - - (18,7)
Profit before 354,5 220,6 61 489,9
taxation
Taxation 124,8 79,2 58 177,3
Profit after taxation 229,7 141,4 62 312,6
Share of associate (21,3) 48,3 89,6
companies"
(losses)/profits
Profit after tax 208,4 189,7 10 402,2
including associate
companies
Earnings attributable
to outside
shareholders
in subsidiaries 16,4 14,5 13 31,6
Earnings attributable
to ordinary
shareholders
in Reunert Limited 192,0 175,2 10 370,6
Basic earnings per 4 102,1 93,7 9 198,1
share (cents)
Diluted basic 4 100,6 92,0 9 194,6
earnings per share
(cents)
Headline earnings per 5 115,4 101,2 14 229,5
share (cents)
Diluted headline 5 113,6 99,2 14 225,4
earnings per share
(cents)
Dividend per ordinary
share
proposed/declared
for the period 32,0 30,0 7 118,0
(cents)
Taxation rate
excluding
amortisation and
abnormal items (%) 33,0 33,8 32,2
EBITDA as a % of 12,5 9,8 11,1
turnover
Note 1
Operating profit
Operating profit is
stated after:
- Cost of sales 2 172,2 1 795,6 3 639,7
- Other income (20,1) (16,4) (21,8)
- Other expenses 507,5 447,3 885,3
excluding
depreciation and
amortisation
- Net losses on 7,4
financial instruments
(AC 133)
Note 2
Net interest and
dividend income
Interest received 37,2 43,9 55,8
- from RC&C Finance 20,8 32,5 23,0
Company
- external 16,4 11,4 32,8
Interest paid (16,0) (31,5) (22,7)
Dividend income other - 3,1 3,4
than from associates
Total 21,2 15,5 36,5
Dividend income from
associates included
in share
of associate - 16,4 108,4
companies" profits
Note 3
Abnormal item
The group"s
attributable share of
the impairment
of fixed assets in an - - (18,7)
equity accounted
associate
Taxation - - -
Total - - (18,7)
Note 4
Basic earnings per
share and diluted
basic earnings per
share
The earnings used to
determine both basic
earnings per share
and diluted earnings
per share being
earnings attributable
to ordinary 192,0 175,2 370,6
shareholders in
Reunert (Rm)
The weighted average
number of shares in
issue used
to determine basic
earnings per share
and headline earnings
per share (millions 188,0 186,9 187,0
of shares)
Adjusted by the
dilutive effect of
unexercised share
options
granted to certain 2,9 3,6 3,4
group employees
(millions of shares)
Weighted average
number of shares used
to determine
diluted earnings per
share and diluted
headline earnings
per share (note 5) 190,9 190,5 190,4
(millions of shares)
Note 5
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 4.
Headline earnings are
determined by
eliminating the
effect
of capital items in
attributable earnings
as follows:
Earnings attributable 192,0 175,2 370,6
to ordinary
shareholders
Amortisation of 25,1 14,0 41,4
goodwill
Attributable portion - - 18,7
of impairment (note
3)
Other (net) (0,2) (0,1) (1,4)
Headline earnings 216,9 189,1 429,3
Note 6
Goodwill
Carrying value at the 360,0 10,9 10,9
beginning of the
period
Add: Acquisitions of 3,5 389,1 390,5
businesses,
associates and
subsidiaries
Less: Adjustment to
the purchase price of
a business
acquired in the prior (7,2)
year
Less: Amortisation (25,1) (14,0) (41,4)
for the period
Carrying value at the 331,2 386,0 360,0
end of the period
The goodwill is
written off over
periods varying
between
one and ten years.
Note 7
Investments
Cost plus equity 80,2 237,9 151,6
accounted earnings
excluding goodwill
At directors" 520,0 653,0 586,9
valuation
Note 8
Finance company
accounts receivable
Collectable within 399,8 278,0 338,2
one year
Collectable after one 715,0 554,9 615,7
year
1 114,8 832,9 953,9
Accounts receivable mainly consists of discounted deals that comprise the
present value of discounted rental agreements which are repayable over varying
periods up to a maximum of five years from the balance sheet date.
Note 9
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. The main
change involves the adoption of AC 133 on financial instruments. In terms of the
transitional provisions of this statement the comparative figures do not need to
be restated, however the statement does require the balances at the end of the
previous financial year to be valued in terms of the statement. This has
resulted in an increase in the group"s accumulated profit of R6,7 million. (See
statement of changes in equity.) The effect in the current year has been to
reduce operating profit by R7,4 million, the tax charge by R2,7 million,
earnings attributable to outside shareholders in subsidiaries by R1,4 million
and earnings attributable to ordinary shareholders by R3,3 million.
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. The group"s
results have been prepared in accordance with SA GAAP applicable to interim
financial reporting.
Note 10
Major acquisition
In December 2002 the group acquired Marconi Plc"s 51% shareholding in ATC (Pty)
Limited at a cost of R43,3 million, which represented a discount to net asset
value of R11,0 million. This brought the group"s total effective shareholding in
ATC to 89,5%. Reunert has agreed to sell to Kgorong Investments Limited, a black
owned group, an effective 25,1% of ATC, once certain conditions have been met.
This will reduce the Reunert group"s holding in ATC to 64,4%.
Group Balance Sheet
31 March 31 March 30 Sept
2003 2002 2002
R million R million R million
Notes (Unaudited) (Unaudited) (Audited)
Non-current
assets
Property, 223,3 152,2 157,1
plant and
equipment
Goodwill 6 331,2 386,0 360,0
Investments 7 80,2 237,9 151,6
RC&C Finance 8 1 114,8 832,9 953,9
Company
accounts
receivable
Deferred 25,9 41,3 25,9
taxation
assets
1 775,4 1 650,3 1 648,5
Current
assets
Inventory and 640,2 509,6 659,8
contracts in
progress
Accounts 832,1 673,2 712,9
receivable
Cash and cash 338,7 197,5 280,7
equivalents
(net)
1 811,0 1 380,3 1 653,4
Total assets 3 586,4 3 030,6 3 301,9
Shareholders"
funds
Ordinary 1 345,1 1 162,4 1 305,0
Reunert (234,6) (234,6) (234,6)
Limited
shares bought
by a
subsidiary
Preference 0,7 0,7 0,7
1 111,2 928,5 1 071,1
Outside 103,8 94,8 103,5
shareholders
in
subsidiaries
1 215,0 1 023,3 1 174,6
Non-current
liabilities
Deferred 46,3 49,0 45,9
taxation
liabilities
Long-term - 1,8 -
borrowings
46,3 50,8 45,9
Current
liabilities
RC&C Finance 1 014,6 734,6 838,0
Company short-
term
borrowings
Accounts 1 310,5 1 221,9 1 243,4
payable,
provisions
and taxation
2 325,1 1 956,5 2 081,4
Total equity 3 586,4 3 030,6 3 301,9
and
liabilities
Segmental analysis
Six months ended
31 March
2003 2002
R million R million
(Unaudited) % (Unaudited) %
Revenue
Electronics
Office 445,3 12 419,8 12
systems
Consumer
products and
services 1 572,4 41 1 386,7 41
Telecommuni-
cations 771,0 20 866,9 25
Reutech 362,4 9 186,4 5
Total
electronics 3 151,1 82 2 859,8 83
Electrical
engineering
and cables
Low voltage
electrical 328,3 9 268,9 8
Cables 364,3 9 295,6 9
Total
electrical
engineering
and cables 692,6 18 564,5 17
Total
operations 3 843,7 100 3 424,3 100
Less:
Reunert"s
attributable
portion of
associate
companies"
revenue (796,2) (954,9)
Revenue as
reported 3 047,5 2 469,4 23
Operating
profit
before
goodwill
amortisation
Electronics
Office 76,7 22 70,9 23
systems
Consumer
products
and services 115,8 33 78,4 25
Telecommuni-
cations 3,8 1 100,3 33
Reutech 66,0 18 12,0 4
Total
electronics 262,3 74 261,6 85
Electrical
engineering
and
cables
Low voltage
electrical 64,7 18 41,9 13
Cables 28,2 8 6,0 2
Total
electrical
engineering
and cables 92,9 26 47,9 15
Total 355,2 100 309,5 100
operations
Reunert"s
attributable
portion of
associate
companies"
net
operating
loss/(profit) 3,2 (90,4)
Operating
profit before
amortisation
of goodwill
as reported 358,4 219,1
Segmental analysis continued
Year ended
30 Sept
2002
% R million
change (Audited) %
Revenue
Electronics
Office 6 876,6 12
systems
Consumer
products and
services 13 2 782,1 39
Telecommuni-
cations (11) 1 959,5 27
Reutech 94 375,3 5
Total
electronics 10 5 993,5 83
Electrical
engineering
and cables
Low voltage
electrical 22 555,2 8
Cables 23 629,9 9
Total
electrical
engineering
and cables 23 1 185,1 17
Total
operations 12 7 178,6 100
Less:
Reunert"s
attributable
portion of
associate
companies"
revenue (2 115,7)
Revenue as
reported 5 062,9
Operating
profit
before
goodwill
amortisation
Electronics
Office 8 147,2 21
systems
Consumer
products
and services 48 175,2 25
Telecommuni-
cations (96) 209,0 30
Reutech 450 38,5 6
Total
electronics - 569,9 82
Electrical
engineering
and
cables
Low voltage
electrical 54 94,8 14
Cables 370 27,6 4
Total
electrical
engineering
and cables 94 122,4 18
Total 15 692,3 100
operations
Reunert"s
attributable
portion of
associate
companies"
net
operating
loss/(profit) (178,8)
Operating
profit before
amortisation
of goodwill
as reported 64 513,5
Group Cash Flow Information
Six months ended Year ended
31 March 30 Sept
2003 2002 2002
R million R million R million
(Unaudited) (Unaudited) (Audited)
EBITDA 380,5 242,9 559,7
Increase in (123,0) (2,7) (366,0)
net working
capital
Increase in (160,9) (87,8) (208,8)
RC&C Finance
Company
accounts
receivable
Other working 37,9 85,1 (157,2)
capital
changes (net)
Cash 257,5 240,2 193,7
generated
from
operations
Net interest 21,2 31,9 144,9
and dividends
received
(including
associates)
Taxation paid (121,5) (165,4) (209,0)
Dividends (178,5) (143,7) (201,0)
paid
(including
outside
shareholders)
Net cash (21,3) (37,0) (71,4)
outflow from
operating
activities
Net asset (19,7) (12,9) (38,2)
additions
Other (net) 2,6 3,9 29,5
Net cash (38,4) (46,0) (80,1)
outflow from
operations
Other (80,2) (456,8) (442,9)
acquisitions
Net decrease (118,6) (502,8) (523,0)
in cash and
cash
equivalents
Net (557,3) (34,3) (34,3)
borrowings at
beginning of
the period
Net (675,9) (537,1) (557,3)
borrowings at
end of the
period
Cash
resources of
the group
- Deposit on 158,7 110,6 -
call with
RC&C Finance
Company
- Other cash 180,0 86,9 280,7
reserves
338,7 197,5 280,7
Borrowings of
the group
RC&C Finance (1 014,6) (734,6) (838,0)
Company
borrowings
Net (675,9) (537,1) (557,3)
borrowings at
end of the
period
The deposits on call with RC&C Finance Company are repayable on demand. RC&C
Finance Company has total long-term banking facilities of R900 million which can
be utilised to replace part of these deposits. The banks who have granted these
facilities are contractually bound to provide these on a long-term basis but
they may give notice to run down these facilities. Once notice has been given
these facilities reduce in line with the reduction in the underlying rental
debtors to zero after a maximum of five years.
Group Statement of changes in equity
Six months ended Year ended
31 March 30 Sept
2003 2002 2002
R million R million R million
(Unaudited) (Unaudited) (Audited)
Balance at 1 071,1 878,5 878,5
beginning of
period as
previously
reported
Adjustment to
opening
accumulated
profit due to
changes
in accounting 6,7
policies
(note 9)
Net profit 192,0 175,2 370,6
for the
period
Dividends (166,0) (125,2) (181,4)
paid
Shares issued 7,4 - 2,8
in terms of
the Reunert
Share Option
Scheme
Translation - - 0,6
reserve
movement
during the
year
Balance at 1 111,2 928,5 1 071,1
end of period
Supplementary information
Unaudited Unaudited Audited
March March Sept
R million 2003 2002 2002
(unless
otherwise
stated)
Net asset 589 497 572
value per
share (cents)
including
goodwill
Net asset 414 290 380
value per
share (cents)
excluding
goodwill
Current ratio
including
short-term
portion of
RC&C Finance
Company
accounts 1,7 1,3 1,6
receivable
(:1)
188,6 186,9 187,3
Number of 205,8 204,1 204,5
ordinary
shares in
issue
(million)
Less: Held by (17,2) (17,2) (17,2)
subsidiary
Capital 20,0 13,2 42,0
expenditure
- expansion 12,8 9,0 26,1
- 7,2 4,2 15,9
replacement
Capital 15,7 14,6 18,9
commitments
- contracted 2,1 7,7 9,4
- authorised 13,6 6,9 9,5
not yet
contracted
Commitments 80,2 53,7 65,2
in respect of
operating
leases
Contingent 0,2 3,7 0,3
liabilities
REVIEW OF RESULTS
Headline earnings per share increased by 14% for the period despite the
contribution from associate companies being significantly down.
REVIEW OF OPERATIONS
electronics
The Office Systems businesses were affected by the strengthening rand but were
able to post higher turnover and profit. Both the Finance Company and Royce
performed above expectation during the period under review.
Consumer Products and Services increased turnover and margins, mainly as a
result of the growth achieved by Nashua Mobile without a commensurate increase
in the cost base. The consumer market was difficult and the strength of the rand
had a negative effect on margins.
The orders secured by Reutech during the previous financial year have resulted
in higher turnover and a major profit improvement. Again, the strong rand is
having a negative impact and it is unlikely that this performance will be
matched in the second half.
The dollar denominated revenue stream of associate Siemens Telecommunications,
where a large portion of costs were in rands, resulted in the business incurring
significant losses. Most of these loss making contracts will be completed in the
current financial year. Hedging mechanisms have been put in place to protect
future revenue.
Electrical Engineering and Cables
The low voltage business performed strongly due to both turnover growth and
operating improvements.
African Cables enjoyed buoyant demand for its products. This, together with
improvements in efficiencies and sound control of overheads, resulted in a
significant improvement in profits.
ATC"s position has weakened in line with the continuing downturn in demand for
telecommunication cables. The outlook for this business is uncertain and of
concern. During the period, Reunert acquired Marconi"s 51% share increasing its
effective interest to 89,5%. As set out in Note 10, 25,1% of ATC has been sold
to Kgorong.
PROSPECTS
The operations managed directly by Reunert performed particularly well in the
first six months. Should the rand stay at current levels, the rate of growth in
profits in the second half of the year for these businesses will be
substantially lower than that achieved in the first half.
Associate company, Siemens Telecommunications, should perform better in the
second half. Nevertheless, profits will be significantly lower than those
achieved last year.
Assuming some weakening of the rand, growth in headline earnings per share for
the year is expected to be modest.
DIVIDEND
Notice is hereby given that an interim dividend No. 154 of 32 cents per share
(2002: 30 cents per share) has been declared by the directors for the half year
ended 31 March 2003. In compliance with the requirements of Strate, the
following dates are applicable:
Last date to trade (cum Friday, 20 June 2003
dividend)
First date of trading (ex Monday, 23 June 2003
dividend)
Record date Friday, 27 June 2003
Payment date Monday, 30 June 2003
Share certificates may not be dematerialised or rematerialised between Monday,
23 June 2003 and Friday, 27 June 2003, both dates inclusive.
On behalf of the board
Derek Cooper, Chairman Gerrit Pretorius, Chief Executive
Sandton, 8 May 2003
Secretaries" certification
For the six months ended 31 March 2003
The company has lodged with the Registrar all such returns as are required by a
public company in terms of the Companies Act.
R G Drakes
For Reunert Management Services Limited
Company Secretaries
Reunert Limited
Incorporated in the Republic of South Africa (Reg No 1913/004355/06) Share
code: RLO ISIN: ZAE000005914
Directors: DE Cooper (Chairman)*, G Pretorius (Chief Executive), BP Connellan*,
BP Gallagher, SD Jagoe*, KJ Makwetla*, GJ Oosthuizen, DJ Rawlinson, MJ Shaw*, CL
Valkin*, 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 (011) 517 9000
Transfer secretaries:
Computershare Investor Services Limited, 70 Marshall Street, Johannesburg, 2001,
PO Box 61051, Marshalltown, 2107
Sponsor: Rand Merchant Bank Corporate Finance
Company secretaries: Reunert Management Services Limited
Hierdie verslag is ook in Afrikaans beskikbaar.
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