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Reunert Limited - Audited results for the year ended 30 September 2003
Reunert Limited
Incorporated in the Republic of South Africa
(Reg No 1913/004355/06)
Share code: RLO
ISIN code: ZAE000005914
Audited results for the year ended 30 September 2003
* Revenue up 21%
* Operating profit up 29%
* Headline earnings per share down 20%
Group Income Statement
Year ended 30 September
2003 2002
R million R million %
Notes (Audited) (Audited) change
Revenue 6 103,9 5 062,9 21
Earnings before 712,3 559,7 27
interest, tax,
depreciation and
amortisation (EBITDA)
Depreciation 58,4 46,2 26
Operating profit before 653,9 513,5 27
amortisation of goodwill
Amortisation of goodwill 46,2 41,4 12
Operating profit 1 607,7 472,1 29
Net interest and 2 45,2 36,5 24
dividend income
Profit before abnormal 652,9 508,6 28
item
Abnormal item 3 - (18,7)
Profit before taxation 652,9 489,9 33
Taxation 224,4 177,3 27
Profit after taxation 428,5 312,6 37
Share of associate (82,6) 89,6
companies"
(losses)/profits
Profit after tax 345,9 402,2 (14)
including associate
companies
Earnings attributable to 50,5 31,6 60
outside shareholders in
subsidiaries
Earnings attributable to
ordinary shareholders in
Reunert Limited 295,4 370,6 (20)
Basic earnings per share 4 156,9 198,1 (21)
(cents)
Diluted basic earnings 4 154,7 194,6 (21)
per share (cents)
Headline earnings per 5 183,5 229,5 (20)
share (cents)
Diluted headline 5 181,0 225,4 (20)
earnings per share
(cents)
Dividend per ordinary 120,0 118,0
share proposed/declared
for the current year
(cents)
Taxation rate excluding 32,1 32,2
amortisation and
abnormal items (%)
EBITDA as a % of 11,7 11,1
turnover
Note 1
Operating profit
Operating profit is stated
after:
- Cost of sales 4 185,7 3 639,7
- Other income (14,6) (21,8)
- Other expenses excluding 1 220,5 885,3
depreciation and amortisation
- Net impact on income for the 44,5
year of the effect of AC133
(note 10)
Note 2
Net interest and dividend
income
Interest received 95,1 55,8
- from RC&C Finance Company 51,8 23,0
- external 43,3 32,8
Interest paid (50,1) (22,7)
Dividend income other than from 0,2 3,4
associates
Total 45,2 36,5
Dividend income from associates - 108,4
included in share of associate
companies" profits
Note 3
Abnormal Item
The group"s attributable share - (18,7)
of the impairment of fixed
assets in an equity accounted
associate
Taxation - -
Total - (18,7)
Note 4
Number of shares used to
calculate earnings per share
Weighted average number of 188,3 187,0
shares in issue used to
determine basic earnings per
share and headline earnings per
share (millions of shares)
Adjusted by the dilutive effect 2,6 3,4
of unexercised share options
granted to certain group
employees (millions of shares)
Weighted average number of 190,9 190,4
shares used to determine
diluted earnings per share and
diluted headline earnings per
share (millions of shares)
Note 5
Headline earnings
Headline earnings are
determined by eliminating the
effect of the following items
in attributable earnings:
Earnings attributable to 295,4 370,6
ordinary shareholders
Goodwill 50,3 41,4
Attributable portion of - 18,7
impairment (note3)
Other (net) (0,1) (1,4)
Headline earnings 345,6 429,3
Note 6
Goodwill
Carrying value at the beginning 360,0 10,9
of the year
Add: Acquisitions of 6,4 390,5
businesses, associates and
subsidiaries
Less: Adjustment to the (9,2) -
purchase price of a business
acquired in the prior year
Less: Amortisation for the year (46,2) (41,4)
Attributable to losses in (4,1) -
associate
Carrying value at the end of 306,9 360,0
the year
Goodwill is written off over
periods varying between one and
ten years.
Note 7
Investments
At cost plus equity accounted 20,8 151,6
earnings excluding goodwill
At directors" valuation 520,0 586,9
Note 8
RC&C Finance Company accounts
receivable
Collectable within one year 434,2 338,2
Collectable after one year 785,8 615,7
1 220,0 953,9
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
Group cash resources/borrowings
Total RC&C Finance Company 1 088,0 838,0
borrowings at year-end per that
company"s balance sheet
Less: Funded out of other (187,3) -
Reunert cash resources (see
below)
RC&C Finance Company bank 900,7 838,0
borrowings at year-end
RC&C Finance Company has total long-term banking facilities of R900 million. The
banks, which 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 to zero in line
with the reduction in the underlying rental debtors over a maximum of five
years.
Total Reunert net cash 668,7 280,7
resources at year end
Less: Utilised to fund RC&C (187,3) -
Finance Company (see above)
481,4 280,7
Note 10
Accounting policies
Reunert has adopted both 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 AC133 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 at 1 October
2002 of R6,7 million. (See group statement of changes in equity.) The effect in
the current year has been to reduce operating profit by R44,5 million, the tax
charge by R13,3 million and earnings attributable to ordinary shareholders by
R31,2 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 year. The group"s
results have been prepared in accordance with AC127 on interim financial
reporting.
Note 11
Major acquisition
In December 2002 the group acquired Marconi Plc"s 51% shareholding in ATC (Pty)
Limited at a cost of R43,4 million. In July 2003 the group acquired the
effective 10,5% shareholding that Pirelli held in ATC. This brought the group"s
total shareholding to 100%. In August 2003 Reunert sold to Kgorong Investment
Holdings (Pty) Limited, a black-owned group, an effective 25,1% of ATC for R22,8
million. This reduced the Reunert group"s effective holding in ATC to 74,9%. In
total negative goodwill of R8,4 million arose on these transactions.
Group Balance Sheet
at 30 September
2003 2002
R million R million
Notes (Audited) (Audited)
Non-current assets
Property, plant and 213,7 157,1
equipment
Goodwill 6 306,9 360,0
Investments 7 20,8 151,6
RC&C Finance Company 8 1 220,0 953,9
accounts receivable
Deferred taxation assets 33,1 25,9
1 794,5 1 648,5
Current assets
Inventory and contracts in 531,8 659,8
progress
Accounts receivable and 826,7 712,9
derivative assets
Cash and cash equivalents 9 481,4 280,7
(net)
1 839,9 1 653,4
Total assets 3 634,4 3 301,9
Shareholders" funds
Ordinary 1 390,4 1 305,0
Reunert Limited shares held (234,6) (234,6)
by a subsidiary
Preference 0,7 0,7
1 156,5 1 071,1
Outside shareholders in 121,2 103,5
subsidiaries
1 277,7 1 174,6
Non-current liabilities
Deferred taxation 63,8 45,9
liabilities
Current liabilities
RC&C Finance Company short- 9 900,7 838,0
term borrowings
Accounts payable, 1 392,2 1 243,4
derivative liabilities,
provisions and taxation
2 292,9 2 081,4
Total equity and 3 634,4 3 301,9
liabilities
Segmental analysis
Year ended 30 September
2003 2002
R million R million %
(Audited) % (Audited) % change
Revenue
Electrical 1 367,7 18 1 185,1 17 15
Engineering
Electronics
Office systems 952,9 13 876,6 12 9
Consumer products 3 192,5 42 2 782,1 39 15
and services
Information and 1 413,7 19 1 959,5 27 (28)
communication
technologies
Reutech 615,7 8 375,3 5 64
Total Electronics 6 174,8 82 5 993,5 83 3
Total operations 7 542,5 100 7 178,6 100 5
Less: Reunert"s (1 438,6) (2 115,7)
attributable
portion of
associate
companies" revenue
Revenue as reported 6 103,9 5 062,9 21
Operating profit
before goodwill
amortisation
Electrical 195,2 34 122,4 18 60
Engineering
Electronics
Office systems 157,4 27 147,2 21 7
Consumer products 173,7 30 175,2 25 (1)
and services
Information and (64,6) (11) 209,0 30 (131)
communication
technologies
Reutech 117,9 20 38,5 6 206
Total Electronics 384,4 66 569,9 82 (33)
Total operations 579,6 100 692,3 100 (16)
Reunert"s 74,3 (178,8)
attributable
portion of
associate
companies" net
operating
loss/(profit)
Operating profit
before
amortisation of 653,9 513,5 27
goodwill as
reported
Group Cash Flow Information
Year ended 30 September
2003 2002
R million R million
(Audited) (Audited)
EBITDA 712,3 559,7
Increase in net working capital (59,3) (366,0)
Increase in RC&C Finance Company (269,8) (208,8)
accounts receivable
Decrease/(increase) in other working 210,5 (157,2)
capital
Cash generated from operations 653,0 193,7
Net interest and dividends received 45,2 144,9
(including associates)
Taxation paid (178,7) (209,0)
Dividends paid (including outside (258,4) (201,0)
shareholders)
Net cash inflow/(outflow) from 261,1 (71,4)
operating activities
Net asset additions (40,3) (38,2)
Acquisitions of subsidiaries, (61,3) (442,9)
businesses and other investments
Other (net) (21,5) 29,5
Net increase/(decrease) in cash and 138,0 (523,0)
cash equivalents
Net borrowings at beginning of the (557,3) (34,3)
year
Net borrowings at end of the year (419,3) (557,3)
Cash resources of the group
Cash and cash equivalents (net) 481,4 280,7
Borrowings of the group
RC&C Finance Company short-term (900,7) (838,0)
borrowings
Net borrowings at end of the year (419,3) (557,3)
Group Statement of changes in equity
Year ended 30 September
2003 2002
R million R million
(Audited) (Audited)
Balance at beginning of year as 1 071,1 878,5
previously reported
Adjustment to opening accumulated 6,7
profit due to changes in accounting
policies (note 10)
Net profit for the year 295,4 370,6
Dividends paid (226,2) (181,4)
Issue of shares in terms of Share 11,0 2,8
Option Scheme
Other (1,5) 0,6
Balance at end of year 1 156,5 1 071,1
Supplementary information
Year ended 30 September
R million (unless otherwise stated) 2003 2002
Net asset value per share (cents) 612 572
including goodwill
Net asset value per share (cents) 450 380
excluding goodwill
Current ratio including short-term
portion of RC&C Finance
Company accounts receivable (:1) 1,6 1,6
Net number of ordinary shares in 188,8 187,3
issue (million)
Number of ordinary shares in issue 206,0 204,5
(million)
Less: Held by subsidiary (million) (17,2) (17,2)
Capital expenditure 44,6 42,0
- expansion 27,1 26,1
- replacement 17,5 15,9
Capital commitments 16,6 18,9
- contracted 16,2 9,4
- authorised not yet contracted 0,4 9,5
Commitments in respect of operating 81,4 65,2
leases
Contingent liabilities 3,7 0,3
Comments
The strong performance of the Reunert-managed businesses was insufficient to
offset the difficulties experienced by our associate company, Siemens
Telecommunications.
Headline earnings per share declined by 20% mainly as a result of losses
incurred by Siemens Telecommunications and adjustments necessitated by the
application of the AC 133 accounting standard which contributed to seven of the
20% headline earnings per share decline.
Review of operations
Electrical engineering
Strong demand and gains in market share and efficiencies drove Circuit Breaker
Industries (CBI) and African Cables to achieve record profits. The continuing
slump in demand for telecommunications cables, however, necessitated a major
restructuring of ATC to ensure prospects for profitable future trading.
Exports increased in volume, but declined in rand value as CBI"s products gained
acceptance from its international customer base. Production capacity had to be
increased to meet this demand. Product offering has been expanded by the
addition of motor control systems.
African Cables continued on its path of strong growth. Its dominance in the high
value cable market stood it in good stead.
ATC incurred substantial trading and restructuring losses. Trading will remain
under pressure, but the restructuring has resulted in the business turning
profitable. The cash flow generation has been pleasing and this is anticipated
to continue.
Electronics
All businesses except consumer electronics performed above expectations.
Nashua and Nashua Mobile experienced excellent growth, which, coupled with sound
cost containment, contributed strongly to group results. Synergies between these
two companies" customer base continues to be explored.
Panasonic"s consumer electronics felt the brunt of the strengthening rand.
Products had to be sold far below cost as a result of forward cover taken out to
guard against a weakening rand. A review of the hedging strategy has reduced
risk in this regard, while also ensuring no unacceptable exposure should the
rand weaken.
In the Reutech stable, Fuchs Electronics, Reutech Radar Systems (RRS) and
Reunert Defence Logistics (RDL) all had a good year. Reutech Defence Industries
(RDI), however, suffered from a lack of orders, which led to a downscaling of
its manufacturing capacity.
The results of Fuchs were negatively affected by the exchange rate. Products are
sold in American dollars at internationally competitive prices. The
rationalisation of production facilities will improve its competitiveness. RRS
delivered the first optronic radar tracker system to the South African Navy on
schedule. This four-year project is nearing completion and meeting all
expectations. RDL continues to make inroads into the commercial sector. The
company"s involvement in infrastructural projects increased and is now expected
to constitute a significant part of its future business portfolio.
The top priority for the Reutech division remains the ongoing challenge of
maintaining strong order books. Due to the peculiar nature of these specialist
companies, however, most notably the long lead times involved in securing and
fulfilling specialised customer orders, the vast majority of income streams come
in intermittent waves. It is therefore virtually impossible to avoid volatility
in earnings.
Information and communication technologies
Siemens Telecommunications posted significant losses in the past year. We are
confident that the causes, which led to this disappointing performance, have
been identified and dealt with by management. Prospects are good and profitable
trading is once more expected from this strong business.
Prospects
Siemens Telecommunications, ATC and Panasonic are all expected to return to
profitability and should therefore influence group results positively for the
new financial year. All other businesses are expected to produce moderate growth
over this year"s high base with the exception of Reutech, which will be hard-
pressed to repeat it"s recent past performance. Consequently, continued growth
should be achieved in the new financial year.
Dividend
Notice is hereby given that a final dividend No. 155 of 88 cents per share
(2002: 88 cents per share) has been declared by the directors for the financial
year ended 30 September 2003. In compliance with the requirements of Strate, the
following dates are applicable:
Last date to trade (cum dividend) Friday 16 January 2004
First date of trading (ex dividend) Monday 19 January 2004
Record date Friday 23 January 2004
Payment date Monday 26 January 2004
Shareholders may not dematerialise or rematerialise their holdings of Reunert
shares between Monday, 19 January 2004 and Friday, 23 January 2004, both days
inclusive.
On behalf of the board
Derek Cooper Gerrit Pretorius
Chairman Chief Executive
Sandton, 26 November 2003
Secretaries" certification
For the year ended 30 September 2003
The company has lodged with the Registrar all such returns as are required by a
public company in terms of the Companies Act.
RG Drakes
For Reunert Management Services Limited
Company Secretaries
Audited results
The above results have been audited by the group auditors, Messrs Deloitte &
Touche, and a copy of their unqualified report is available for inspection at
the company"s registered office.
Transfer secretaries: Computershare Limited, 70 Marshall Street, Johannesburg,
2001, PO Box 61051, Marshalltown, 2107
Sponsor: Rand Merchant Bank, a division of FirstRand Bank Limited, Corporate
Finance
Die verslag is ook in Afrikaans beskikbaar.
Enquiries: Carina de Klerk +27 11 517 9000 or e-mail invest@reunert.co.za. For
background information on Reunert visit our website at www.reunert.com
Reunert Limited
Incorporated in the Republic of South Africa (Reg No 1913/004355/06) Share
code: RLO ISIN code: 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
www.reunert.com
Date: 27/11/2003 07:00:48 AM Produced by the JSE SENS Department
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