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Reunert Limited - Unaudited results for the six months ended 31 March 2005
REUNERT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1913/004355/06)
ISIN: ZAE000057428
Share Code: RLO
(`Reunert`)
Unaudited results for the six months ended 31 March 2005
- Headline earnings per share up 31%
- Dividend per share up 30%
Group income statement
Six months ended 31 March
Year
ended
30 Sept
2005 2004 2004
R million R million % R million
Notes (Unaudited) (Unaudited) change (Audited)
Revenue 3 276,0 3 011,9 9 6 247,3
Earnings 459,9 390,4 18 811,9
before
interest,
tax,
depreciation
and
amortisation
(EBITDA)
Depreciation 26,9 25,7 5 57,9
Operating 433,0 364,7 19 754,0
profit
before
amortisation
of goodwill
Amortisation 10 - 25,2 - 53,5
of goodwill
Operating 1 433,0 339,5 28 700,5
profit
Net interest 2 16,5 28,5 (42) 65,1
and dividend
income
Profit 449,5 368,0 22 765,6
before
abnormal
item
Abnormal 3 - 20,3 6,0
items
Profit 449,5 388,3 16 771,6
before
taxation
Taxation 156,1 141,5 10 309,0
Profit after 293,4 246,8 19 462,6
taxation
Share of 29,6 33,1 (11) 66,8
associate
companies`
profits
Profit after 323,0 279,9 15 529,4
tax
including
associate
companies
Earnings 9,8 23,9 (59) 51,0
attributable
to outside
shareholders
in
subsidiaries
Earnings 313,2 256,0 22 478,4
attributable
to ordinary
shareholders
in Reunert
Limited
Basic 4 181,2 135,0 34 251,9
earnings per
share
(cents)
Diluted 4 178,8 133,2 34 248,4
basic
earnings per
share
(cents)
Headline 4 & 5 181,2 138,7 31 277,5
earnings per
share
(cents)
Diluted 4 & 5 178,8 136,9 31 273,6
headline
earnings per
share
(cents)
Dividends 52,0 40,0 30 160,0
per ordinary
share
declared in
respect of
the period
(cents)
Taxation 34,7 35,6 37,6
rate
excluding
amortisation
and abnormal
items (%)
EBITDA as a 14,0 13,0 13,0
% of
turnover
Note 1
Operating profit
Operating profit
is stated after:
- Cost of sales 2 239,4 2 119,1 4 268,4
- Other income (6,1) (28,1) (10,2)
- Other expenses
excluding
depreciation
and amortisation 582,8 530,5 1 177,2
Note 2
Net interest and
dividend income
Interest received 18,2 25,8 47,8
- RC&C Finance 10,2 9,8 18,6
Company
- external 8,0 16,0 29,2
Interest paid (10,5) (8,7) (10,1)
Dividend income 8,8 11,4 27,4
other than from
associates
Total 16,5 28,5 65,1
Dividend income 40,0 - -
from associate
included in share
of associate
companies profit
Note 3
Abnormal items
Surplus on the - 20,3 21,1
sale of properties
Impairment of - - (1,1)
plant and
equipment
Impairment of - - (14,0)
goodwill in
associate
Total before - 20,3 6,0
taxation
Taxation - (1,4) (1,4)
Total - 18,9 4,6
Note 4
Number of shares
used to calculate
earnings per share
Weighted average 172,8 189,6 189,9
number of shares
in issue used to
determine basic
earnings per share
and headline
earnings per share
(millions of
shares)
Adjusted by the 2,4 2,5 2,7
dilutive effect of
unexercised share
options granted to
certain group
employees
(millions of
shares)
Weighted average 175,2 192,1 192,6
number of 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 313,2 256,0 478,4
attributable to
ordinary
shareholders
Surplus on sale of (0,1) (18,9) (21,7)
property, plant
and equipment
Goodwill - 25,2 53,5
amortisation
Impairment (note - - 15,1
3)
Taxation 0,1 0,7 1,6
Headline earnings 313,2 263,0 526,9
Note 6
Goodwill
Carrying value at 321,8 306,9 306,9
the beginning of
the year
(Disposals)/acquis (68,6) 31,6 80,8
itions of
businesses,
associates and
subsidiaries
Adjustment to the - (0,5) 1,6
purchase price of
a business
acquired in a
prior period
Amortisation for - (25,2) (53,5)
the period
Impairments - - (14,0)
Carrying value at 253,2 312,8 321,8
the end of the
period
Goodwill in the prior period was amortised over periods varying between one and
ten years. In terms of AC140 on business combinations, goodwill acquired on or
after 31 March 2004 up until 30 September 2004 (note 10) was not amortised, but
was subjected to an impairment test. From 1 October 2004 goodwill has not been
amortised, but has been subjected to an impairment review.
Note 7
Investments
At cost plus 110,2 70,4 109,9
equity accounted
earnings excluding
goodwill
Listed - at market 21,2 30,5 16,6
valuation
Unlisted - at 542,2 541,9 536,5
directors`
valuation
Note 8
RC&C Finance
Company accounts
receivable
Collectable within 197,8 54,3 137,0
one year
Collectable after 563,0 181,9 391,5
one year
760,8 236,2 528,5
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
RC&C Finance Company borrowings
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 these down. 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
The group`s accounting policies are in accordance with South African Statements
of Generally Accepted Accounting Practice and are consistent with those of the
prior year except that in terms of AC 140 goodwill has not been amortised in the
current period. All goodwill has been subjected to an impairment review. AC 140
has been applied prospectively and accordingly no comparative figures have been
restated.
This report has been prepared in accordance with AC 127 on interim financial
reporting.
Note 11
Major acquisition
On 1 December 2004 Reunert reacquired the 25,1% indirect shareholding that
Kgorong Investment Holdings (Pty) Limited held in ATC (Pty) Limited. At the same
date ATC acquired the business of African Cables Limited as a going concern and
Powerhouse Utilities (Pty) Limited, a black owned company subscribed for new
shares in ATC (Pty) Limited resulting in it holding a 25,1% stake in the
restructured cable entity.
Group balance sheet
At 31 March
At 30
Sept
2005 2004 2004
R million R million R million
Notes (Unaudited) (Unaudited) (Audited)
Non-current
assets
Property, plant 192,5 201,4 196,2
and equipment
Goodwill 6 253,2 312,8 321,8
Investments 7 110,2 70,4 109,9
RC&C Finance 8 760,8 236,2 528,5
Company accounts
receivable
Deferred taxation 46,7 32,6 56,2
1 363,4 853,4 1 212,6
Current assets
Inventory and 518,6 442,6 491,9
contracts in
progress
Accounts 962,0 790,8 928,7
receivable and
derivative assets
Cash and cash 319,1 688,8 280,9
equivalents (net)
1 799,7 1 922,2 1 701,5
Total assets 3 163,1 2 775,6 2 914,1
Shareholders`
funds
Ordinary 1 057,8 1 255,6 932,8
Preference 0,7 0,7 0,7
1 058,5 1 256,3 933,5
Outside 96,9 120,5 39,7
shareholders in
subsidiaries
1 155,4 1 376,8 973,2
Non-current
liabilities
Deferred taxation 46,6 60,3 44,3
Current
liabilities
RC&C Finance 9 625,1 44,5 314,1
Company short-
term borrowings
Accounts payable, 1 336,0 1 294,0 1 582,5
derivative
liabilities,
provisions and
taxation
1 961,1 1 338,5 1 896,6
Total equity and 3 163,1 2 775,6 2 914,1
liabilities
Segmental analysis
Six months ended 31 March
2005 2004
R million R million
(Unaudited) % (Unaudited) %
Revenue
Electrical Engineering 876,8 22 667,1 18
Electronics
Office Systems 418,9 11 501,8 13
Consumer products and 1 847,2 46 1 664,2 45
services
Telecommunications 704,2 18 704,1 19
Reutech 133,1 3 178,7 5
Total Electronics 3 103,4 78 3 048,8 82
Total operations 3 980,2 100 3 715,9 100
Less: Reunert`s (704,2) (704,0)
attributable portion of
associate companies`
revenue
Revenue as reported 3 276,0 3 011,9
Operating profit before
goodwill amortisation
Electrical Engineering 170,5 35 114,1 27
Electronics
Office Systems 110,9 23 85,4 20
Consumer products and 155,9 32 150,0 36
services
Telecommunications 52,3 11 56,4 13
Reutech (3,9) (1) 15,8 4
Total Electronics 315,2 65 307,6 73
Total operations 485,7 100 421,7 100
Less: Reunert`s (52,7) (57,0)
attributable portion of
associate companies` net
operating profit
Operating profit before 433,0 364,7
amortisation of goodwill
as reported
Segmental analysis
Six months ended 31 March
Year ended
30 Sept
2004
% R million
change (Audited)
Revenue
Electrical Engineering 31 1 456,7
Electronics
Office Systems (17) 1 071,0
Consumer products and 11 3 382,7
services
Telecommunications - 1 321,1
Reutech (26) 443,0
Total Electronics 2 6 217,8
Total operations 7 7 674,5
Less: Reunert`s (1 427,2)
attributable portion of
associate companies`
revenue
Revenue as reported 9 6 247,3
Operating profit before
goodwill amortisation
Electrical Engineering 49 217,1
Electronics
Office Systems 30 226,3
Consumer products and 4 250,9
services
Telecommunications (7) 130,2
Reutech (125) 48,5
Total Electronics 2 655,9
Total operations 15 873,0
Less: Reunert`s (119,0)
attributable portion of
associate companies` net
operating profit
Operating profit before 19 754,0
amortisation of goodwill
as reported
Group cash flow information
Six months ended 31 March
Year
ended
30 Sept
2005 2004 2004
R million R million R million
(Unaudited) (Unaudited) (Audited)
EBITDA 459,9 390,4 811,9
(Increase)/decrease in (311,7) 1 064,9 804,5
net working capital
(Increase)/decrease in (232,3) 983,8 691,5
RC&C Finance Company
accounts receivable*
(Increase)/decrease in (79,4) 81,1 113,0
other working capital
Cash generated from 148,2 1 455,3 1 616,4
operations
Net interest and 56,5 28,5 65,1
dividends received
(including associates)
Taxation paid (243,8) (198,7) (313,5)
Dividends paid (217,7) (191,9) (268,1)
(including outside
shareholders)
Net cash (256,8) 1 093,2 1 099,9
(outflow)/inflow from
operating activities
Net asset additions (22,5) 7,0 (15,0)
Acquisition of (3,8) (47,4) (239,4)
subsidiaries, businesses
and other investments
Share buy back - capital - - (247,2)
portion
- dividend portion - - (229,4)
Other (net) 10,3 10,8 17,2
Net (decrease)/increase (272,8) 1 063,6 386,1
in cash and cash
equivalents
Net borrowings at (33,2) (419,3) (419,3)
beginning of the period
Net (borrowings)/cash (306,0) 644,3 (33,2)
and cash equivalents at
end of the period
Cash resources of the
group
Cash and cash 319,1 688,8 280,9
equivalents (net)
Borrowings of the group
RC&C Finance Company (625,1) (44,5) (314,1)
short-term borrowings
Net (borrowings)/cash (306,0) 644,3 (33,2)
and cash equivalents at
end of the period
* 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
Six months ended 31 March
Year
ended
30 Sept
2005 2004 2004
R million R million R million
(Unaudited) (Unaudited) (Audited)
Balance at beginning of 933,5 1 156,5 1 156,5
year as previously
reported
Net profit for the 313,2 256,0 478,4
period
Dividends paid (208,0) (167,3) (243,5)
Issue of shares in terms 16,5 11,9 18,7
of share option scheme
Reunert Limited shares - - (47,4)
bought back by
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 3,3 (0,8) -
Balance at end of the 1 058,5 1 256,3 933,5
period
Supplementary Information
Six months ended 31 March
Year ended
30 Sept
2005 2004 2004
R million (unless (Unaudited) (Unaudited) (Audited)
otherwise stated)
Net asset value per 609 660 543
share (cents)
including goodwill
Net asset value per 463 495 356
share (cents)
excluding goodwill
Current ratio 1,5 1,5 1,3
including short-term
portion of RC&C
Finance Company
accounts receivable
(:1)
Net number of ordinary 173,7 190,3 171,8
shares in issue
(million)
Number of ordinary 192,7 207,5 190,8
shares in issue
(million)
Less: Held by (19,0) (17,2) (19,0)
subsidiary (million)
Capital expenditure 23,6 20,7 48,8
- expansion 12,7 9,9 28,7
- replacement 10,9 10,8 20,1
Capital commitments 22,3 20,4 25,1
- contracted 13,4 10,3 22,4
- authorised not yet 8,9 10,1 2,7
contracted
Commitments in respect 30,3 39,4 36,4
of operating leases
Contingent liabilities 6,9 3,7 9,6
Commentary
Report to shareholders
Reunert is pleased to announce headline earnings per share growth of 31% for the
six months to March 2005.
Turnover increased by 9% and operating profit by 28% as a result of sound
performances from all operations except the Group`s defence businesses.
Associate company, Siemens Telecommunications, performed well but profitability
was marginally below the previous year. Minority share of profits decreased as a
result of the acquisition of Pirelli`s 50% share of African Cables. The Group
posted a 19% increase at the headline earnings level. The reduced number of
ordinary shares in issue following the share buyback completed in 2004
contributed a further 12% to the growth in headline earnings per share.
Positive cash flow increased the Group`s cash resources to R319 million in spite
of higher tax and dividend payments made during the period under review.
Review of operations
Electrical engineering
The electrical engineering market continued to expand which enabled the division
to increase turnover by 31%. Expense levels were well controlled resulting in a
49% increase in operating profit.
African Cables, which has entered into an empowerment deal with Powerhouse
Utilities, maintained its growth in earnings as the market for power cable
remained firm. Municipalities have continued upgrading and expanding their
electrical infrastructures.
Circuit Breaker Industries performed well. The buoyant residential market and
the acquisition of Heinemann Electric in Australia contributed to earnings and
profit growth. Demand from the mining sector has not grown as the strength of
the rand continues to affect this industry.
Although the market for telecommunication cables remained subdued, ATC traded
profitably for the six months under review.
Electronics
This division grew turnover and operating profit by 2%.
Nashua and Nashua Mobile contributed positively to group profits. Demand for
consumer & commercial products remained strong in a highly competitive
marketplace. Unit sales have increased substantially and, despite a reduction in
selling price, rand turnover growth has been achieved.
Associate company Siemens Telecommunications` profits were down slightly
reflecting the effect of the strong rand. Order intake remains firm.
Reutech continues to suffer from a low order intake and reported a small loss.
However, with continued effort from management, profitability should be
restored.
Prospects
With the exception of Reutech, the Group`s operations are expected to enjoy
buoyant market conditions. Reunert should continue to deliver real headline
earnings growth.
Dividend
Notice is hereby given that interim ordinary share dividend No. 158 of 52 cents
per share (2004: 40 cents per share) has been declared by the directors for the
half year ended 31 March 2005. In compliance with the requirements of STRATE,
the following dates are applicable:
Last date to trade (cum dividend) Friday, 17 June 2005
First date of trading (ex dividend) Monday, 20 June 2005
Record date Friday, 24 June 2005
Payment date Monday, 27 June 2005
Shareholders may not dematerialise or rematerialise their share certificates
between Monday, 20 June 2005 and Friday, 24 June 2005, both days inclusive.
On behalf of the board
Derek Cooper Gerrit Pretorius
Chairman Chief Executive
Sandton, 9 May 2005
Reunert Limited
Incorporated in the Republic of South Africa
(Reg No 1913/004355/06)
Share code: RLO
ISIN code: ZAE000057428
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
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
Secretaries` certification:
For the half year ended 31 March 2005
The company has lodged with the Registrar all such returns as are required by a
public company in terms of the Companies Act (Act 61 of 1973) as amended (`the
Act`).
John Simmonds
For Reunert Management Services Limited
Company secretaries
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
Die verslag is ook in Afrikaans beskikbaar.
www.reunert.com
Date: 10/05/2005 07:00:57 AM
Produced by the JSE SENS Department
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