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REUNERT - REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004
Reunert Limited
Incorporated in the Republic of South Africa
(Reg No 1913/004355/06)
Share code: RLO
ISIN code: ZAE000057428
REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004
- Headline earnings per share up 51%
- Dividend per share for year up 33%
Group Income Statement - Year ended 30 September
2004 2003
R million R million %
Notes (Reviewed) (Audited) change
Revenue 6 247,3 6 103,9 2
Earnings before interest, tax, 811,9 712,3 14
depreciation and amortisation
(EBITDA)
Depreciation 57,9 58,4 (1)
Operating profit before 754,0 653,9 15
amortisation of goodwill
Amortisation of goodwill 53,5 46,2 16
Operating profit 1 700,5 607,7 15
Net interest and dividend income 2 65,1 45,2 44
Profit before abnormal items 765,6 652,9 17
Abnormal items 3 6,0 -
Profit before taxation 771,6 652,9 18
Taxation 309,0 224,4 38
Profit after taxation 462,6 428,5 8
Share of associate companies` 66,8 (82,6)
profits/(losses)
Profit after tax including 529,4 345,9 53
associate companies
Earnings attributable to outside 51,0 50,5 1
shareholders in subsidiaries
Earnings attributable to ordinary 478,4 295,4 62
shareholders in Reunert Limited
Basic earnings per share (cents) 4 251,9 156,9 61
Diluted basic earnings per share 4 248,4 154,7 61
(cents)
Headline earnings per share 5 277,5 183,5 51
(cents)
Diluted headline earnings per 5 273,6 181,0 51
share (cents)
Dividends per ordinary share 160,0 120,0 33
declared in respect of the current
year (cents)
Taxation rate excluding 37,6 32,1
amortisation and abnormal items
(%)
EBITDA as a % of turnover 13,0 11,7
Note 1
Operating profit
Operating profit is stated after:
- Cost of sales 4 268,4 4 185,7
- Other income (10,2) (14,6)
- Other expenses excluding depreciation 1 177,2 1 220,5
and amortisation
Note 2
Net interest and dividend income
Interest received 47,8 95,1
- from RC&C Finance Company 18,6 51,8
- external 29,2 43,3
Interest paid (10,1) (50,1)
Dividend income other than from 27,4 0,2
associates
Total 65,1 45,2
Note 3
Abnormal items
Profit on sale of properties 21,1 -
Impairment of plant and equipment (1,1) -
Impairment of goodwill in an associate (14,0) -
Total before taxation 6,0 -
Taxation (1,4) -
Total 4,6 -
Note 4
Number of shares used to calculate
earnings per share
Weighted average number of shares in 189,9 188,3
issue used to determine basic earnings
per share and headline earnings per share
(millions of shares)
Adjusted by the dilutive effect of 2,7 2,6
unexercised share options granted to
certain group employees (millions of
shares)
Weighted average number of shares used to 192,6 190,9
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 ordinary 478,4 295,4
shareholders
Surplus on sale of property, plant and (21,7) (0,2)
equipment
Goodwill amortisation 53,5 50,3
Impairments (note 3) 15,1 -
Taxation 1,6 0,1
Headline earnings 526,9 345,6
Note 6
Goodwill
Carrying value at the beginning of the 306,9 360,0
year
Acquisitions of businesses, associates 80,8 6,4
and subsidiaries
Adjustment to the purchase price of a 1,6 (9,2)
business acquired in a prior year
Amortisation for the year (53,5) (46,2)
Losses in associates - (4,1)
Impairments (14,0) -
Carrying value at the end of the year 321,8 306,9
Goodwill is amortised over periods
varying between one and ten years. In
terms of International Financial
Reporting Standard (IFRS) 3, goodwill
acquired on or after 31 March 2004 has
not been amortised, but has been
subjected to an impairment test.
Note 7
Investments
At cost plus equity accounted earnings 109,9 20,8
excluding goodwill
Listed - at market valuation 16,6 -
Unlisted - at directors` valuation 536,5 540,8
Note 8
RC&C Finance Company accounts receivable
Collectable within one year 137,0 434,2
Collectable after one year 391,5 785,8
528,5 1 220,0
Accounts receivable mainly comprise of
discounted deals that consist of 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 borrowings at 314,1 1 088,0
year-end per that company`s balance sheet
Less: Funded out of other Reunert cash - (187,3)
resources
RC&C Finance Company bank borrowings at 314,1 900,7
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.
Note 10
Accounting policies
Reunert has adopted Statements of Generally Accepted Accounting Practice (GAAP)
which became effective during the current financial year. This has resulted in
changes to accounting policies. In terms of IFRS 3, goodwill on subsidiaries or
associates acquired on or after 31 March 2004 has not been amortised but has
been subjected to an impairment test. Reunert also adopted AC132 - Consolidated
financial statements and accounting for investments in subsidiaries, in so far
as it requires a share trust which meets the definition of a subsidiary to be
consolidated and there is no profit effect resulting from this change. 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. This report has
been prepared in accordance with AC127 on Interim Financial Reporting.
Note 11
Major acquisitions
In October 2003 the group acquired 32% of the share capital of C S Holdings at a
cost of R42,9 million, including goodwill of R21,2 million. Reunert has recently
accepted the Bytes Technology Group offer for its C S Holdings shares resulting
in a total loss of R31,2 million should the offer become unconditional. This
offer is worth approximately R11,7 million. In July 2004 100% of the share
capital of Heinemann Australia was purchased for R25,1 million. This included
goodwill of R1,3 million. In September 2004 the remaining 50% of Afcab Holdings
(owner of 100% of African Cables) not owned by the group was purchased from
Pirelli. Goodwill on this transaction amounted to R58,3 million and the total
cost was R166,2 million.
Group Balance Sheet - at 30 September
30 Sept 30 Sept
2004 2003
R million R million
Notes (Reviewed) (Audited)
Non-current assets
Property, plant and equipment 196,2 213,7
Goodwill 6 321,8 306,9
Investments 7 109,9 20,8
RC&C Finance Company accounts 8 528,5 1 220,0
receivable
Deferred taxation 56,2 33,1
1 212,6 1 794,5
Current assets
Inventory and contracts in 491,9 531,8
progress
Accounts receivable and derivative 928,7 826,7
assets
Cash and cash equivalents (net) 280,9 481,4
1 701,5 1 839,9
Total assets 2 914,1 3 634,4
Shareholders` funds
Ordinary 932,8 1 155,8
Preference 0,7 0,7
933,5 1 156,5
Outside shareholders in 39,7 121,2
subsidiaries
973,2 1 277,7
Non-current liabilities
Deferred taxation 44,3 63,8
Current liabilities
RC&C Finance Company short-term 9 314,1 900,7
borrowings
Accounts payable, derivative 1 582,5 1 392,2
liabilities, provisions and
taxation
1 896,6 2 292,9
Total equity and liabilities 2 914,1 3 634,4
Segmental analysis - Year ended 30 September
2004 2003
R million R million %
(Reviewed) % (Audited) % change
Revenue
Electrical Engineering 1 456,7 19 1 367,7 18 7
Electronics
Office systems 1 071,0 14 952,9 13 12
Consumer products and services 3 382,7 44 3 192,5 42 6
Telecommunications 1 321,1 17 1 413,7 19 (7)
Reutech 443,0 6 615,7 8 (28)
Total Electronics 6 217,8 81 6 174,8 82 1
Total operations 7 674,5 100 7 542,5 100 2
Less: Reunert`s attributable (1 427,2) (1 438,6)
portion of associate companies`
revenue
Revenue as reported 6 247,3 6 103,9 2
Operating profit before
goodwill amortisation
Electrical Engineering 217,1 25 195,2 34 11
Electronics
Office systems 226,3 26 157,4 27 44
Consumer products and services 250,9 29 173,7 30 44
Telecommunications 130,2 15 (64,6) (11) 302
Reutech 48,5 5 117,9 20 (59)
Total Electronics 655,9 75 384,4 66 71
Total operations 873,0 100 579,6 100 51
Less: Reunert`s attributable (119,0) 74,3
portion of associate companies`
net operating (profit)/loss
Operating profit before 754,0 653,9 15
amortisation of goodwill as
reported
Group Cash Flow Information - Year ended 30 September
2004 2003
R million R million
(Reviewed) (Audited)
EBITDA 811,9 712,3
Decrease/(increase) in net working capital 804,5 (59,3)
Decrease/(increase) in RC&C Finance Company 691,5 (269,8)
accounts receivable*
Decrease in other working capital 113,0 210,5
Cash generated from operations 1 616,4 653,0
Net interest and dividends received 65,1 45,2
Taxation paid (313,5) (178,7)
Dividends paid (Including outside (268,1) (258,4)
shareholders)
Net cash inflow from operating activities 1 099,9 261,1
Net asset additions (15,0) (40,3)
Acquisition of subsidiaries, businesses and (239,4) (61,3)
other investments
Share buy back - capital portion (247,2) -
Share buy back - dividend portion (229,4) -
Other (net) 17,2 (21,5)
Net increase in cash and cash equivalents 386,1 138,0
Net borrowings at beginning of the year (419,3) (557,3)
Net borrowings at end of the year (33,2) (419,3)
Cash resources of the group
Cash and cash equivalents (net) (note 9) 280,9 481,4
Borrowings of the group
RC&C Finance Company short-term borrowings (314,1) (900,7)
(note 9)
Net borrowings at end of the year (33,2) (419,3)
* In December 2003 R1 255,5 million was received on the sale of the RC & C
Finance Company debtors book.
Group Statement of changes in equity - Year ended 30 September
30 Sept 30 Sept
2004 2003
R million R million
(Reviewed) (Audited)
Balance at beginning of year as previously 1 156,5 1 071,1
reported
Adjustment to opening accumulated profit due - 6,7
to changes in accounting policies
Net profit for the year 478,4 295,4
Dividends paid (243,5) (226,2)
Issue of shares in terms of Share Option 18,7 11,0
Scheme
Reunert Limited shares bought back by (47,4) -
subsidiary as part of the share buy back
Shares cancelled in terms of the share buy
back
- Capital portion (199,8) -
- Dividend portion (229,4) -
Other - (1,5)
Balance at end of year 933,5 1 156,5
Supplementary information - Year ended 30 September
R million (unless otherwise stated) 2004 2003
Net asset value per share (cents) including 543 612
goodwill
Net asset value per share (cents) excluding 356 450
goodwill
Current ratio including short-term portion
of
RC&C Finance Company accounts receivable 1,3 1,6
(:1)
Net number of ordinary shares in issue 171,8 188,8
(million)
Number of ordinary shares in issue (million) 190,8 206,0
Less: Held by subsidiary (million) (19,0) (17,2)
Capital expenditure 48,8 44,6
- expansion 28,7 27,1
- replacement 20,1 17,5
Capital commitments 25,1 16,6
- contracted 22,4 16,2
- authorised not yet contracted 2,7 0,4
Commitments in respect of operating leases 36,4 81,4
Contingent liabilities 9,6 3,7
COMMENTARY
Headline earnings per share increased by 51% from 184 cents to 278 cents. This
significant improvement stems from good performances by the group`s managed
operations and a return to profitability at Siemens Telecommunications.
Strong cash generation during the year enabled the company to propose a share
buyback to shareholders of 10% of the issued shares in the company through which
the company returned R477 million to shareholders during September 2004.
Dividends declared (excluding the dividend portion of the share buyback) for the
year have increased by 33% to 160 cents per share.
Review of operations
Electrical engineering
Divisional turnover grew 7% to R1,5 billion and operating profit by 11% to R217
million. African Cables benefited from strong demand for energy cable. The
building boom has resulted in increased demand on South Africa`s electrical
distribution infrastructure with the power cable network being upgraded in large
parts of the country. Equipment is being installed at African Cables to increase
capacity.
Circuit Breaker Industries also benefited from the strong demand and increased
sales volumes and operating profits. Export sales have grown and the recent
acquisition of Heinemann Australia will provide the necessary base for growth in
that region.
ATC continues to operate in a subdued market but operating results improved
considerably during the year. The company was awarded part of the Telkom optical
fibre contract and as costs are largely fixed, any increase in volume will
result in improved profitability.
Electronics
The electronics division increased operating profits by 71% to R656 million on a
similar turnover to that achieved in the previous year.
The market for office automation equipment has remained strong and market share
gains have been made in the competitive laser colour printer market. Office
systems represented by Nashua and its associated finance company reported a 44%
increase in operating profit. RC & C Finance Company sold its rental book in
December 2003 which also contributed to this improvement.
Consumer products and services increased turnover by 6% to R3,4 billion with a
44% increase in operating profit. The improvement was mainly due to the
turnaround at Reunert Consumer and Commercial Holdings. Improved inventory
management greatly reduced the risks associated with currency fluctuations. The
multi-brand strategy has also enabled the operation to service the entire
consumer electronic market.
Nashua Mobile had another good year with contract subscribers increasing to 361
000.
Telecommunications
Associate company Siemens Telecommunications returned to profitability this year
with a very strong performance. Order intake has remained high and the prospects
in both fixed line and wireless business are encouraging. The company has been
selected to roll out Africa`s first 3G network with switch-on anticipated in
December 2004.
Reutech
Reutech`s performance has been disappointing with operating profit reducing from
R118 million in 2003 to R49 million. Order intake this year did not meet
expectations with both exports and profit being negatively affected by the
strong rand.
Prospects
The board is confident that Reunert will achieve continued earnings growth in
the new financial year. Focus remains on ensuring longer-term sustainable growth
in headline earnings per share.
Dividend
Notice is hereby given that a final dividend No. 157 of 120 cents per share
(2003: 88 cents per share) has been declared by the directors for the financial
year ended 30 September 2004. In compliance with the requirements of STRATE, the
following dates are applicable:
Last date to trade (cum dividend) Friday, 14 January 2005
First date of trading (ex Monday, 17 January 2005
dividend)
Record date Friday, 21 January 2005
Payment date Monday, 24 January 2005
Shareholders may not dematerialise or rematerialise their holdings of Reunert
shares between Monday, 17 January 2005 and Friday, 21 January 2005, both days
inclusive.
On behalf of the board
Derek Cooper Gerrit Pretorius
Chairman Chief Executive
Sandton, 15 November 2004
Secretaries` certification
For the year ended 30 September 2004
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
Reviewed results
The above results have been reviewed by the group auditors, Messrs Deloitte &
Touche, and a copy of their unqualified review report is available for
inspection at the company`s registered office.
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) 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
Directors: DE Cooper (Chairman)*, G Pretorius (Chief Executive), BP Connellan*,
BP Gallagher, SD Jagoe*, KJ Makwetla*, GJ Oosthuizen, KC Radebe*, DJ Rawlinson,
MJ Shaw*, 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
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