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Reunert Limited - Reviewed Results For The Year Ended 30 September 2005
Reunert Limited
Incorporated in the Republic of South Africa
(Reg No 1913/004355/06)
Share code: RLO ISIN code: ZAE000057428
("Reunert" or "the company")
REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005
- Headline earnings per share up 46%
- Final dividend per share up 42%
Group income statement
for the year ended 30 September 2005
2005 2004
R million R million %
Notes (Reviewed) (Audited) change
Revenue 7 036,9 6 247,3 13
Earnings before 961,8 811,9 18
interest, tax,
depreciation and
amortisation
(EBITDA)
Depreciation and 56,3 57,9 (3)
amortisation
Operating profit 905,5 754,0 20
before abnormal
items and
amortisation of
goodwill
Amortisation of 53,5 -
goodwill
Operating profit 1 905,5 700,5 29
Net interest and 2 50,2 65,1 (23)
dividend income
Profit before 955,7 765,6 25
abnormal items
Abnormal items 3 3,9 6,0
Profit before 959,6 771,6 24
taxation
Taxation 319,1 309,0 3
Profit after 640,5 462,6 38
taxation
Share of associate 79,2 66,8 19
companies" profits
Profit after tax 719,7 529,4 36
including associate
companies
Earnings 10,5 51,0 (79)
attributable to
outside
shareholders in
subsidiaries
Earnings 709,2 478,4 48
attributable to
ordinary
shareholders in
Reunert Limited
Basic earnings per 4 409,0 251,9 62
share (cents)
Diluted basic 4 404,2 248,8 62
earnings per share
(cents)
Headline earnings 5 406,0 277,5 46
per share (cents)
Diluted headline 5 401,2 274,0 46
earnings per share
(cents)
Dividend per 222,0 160,0 39
ordinary share
proposed/declared
for the current
year (cents)
Taxation rate 33,4 37,6
excluding
amortisation and
abnormal items
EBITDA as a % of 13,7 13,0
revenue
Note 1
Operating profit
Operating profit is
stated after:
- Cost of sales 4,830,2 4 268,4
- Other income (15,5) (10,2)
- Other expenses 1 260,4 1 177,2
excluding
depreciation,
amortisation and
impairments
Note 2
Net interest and
dividend income
Interest received 60,7 47,8
- from RC&C Finance 30,1 18,6
Company
- external 30,6 29,2
Interest paid (23,3) (10,1)
Dividend income 12,8 27,4
other than from
associates
Total 50,2 65,1
Note 3
Abnormal Items
Surplus on sale of - 21,1
properties
Surplus on sale of 6,4 -
investment
Impairment of plant (4,9) (1,1)
and equipment
Negative goodwill 2,4 -
taken to profit
Impairment of - (14,0)
goodwill in an
associate
Total before 3,9 6,0
taxation
Taxation 1,4 (1,4)
Total 5,3 4,6
Note 4
Number of shares used to calculate earnings per share
(Restated)
Weighted average 173,4 189,9
number of shares in
issue used to
determine basic
earnings per share
and headline
earnings per share
(millions of
shares)
Adjusted by the 2,1 2,4
dilutive effect of
unexercised share
options granted to
certain group
employees (millions
of shares)
Weighted average 175,5 192,3
number of shares
used to determine
diluted earnings
per share and
diluted headline
earnings per share
(millions of
shares)
The prior year number of shares used to calculate diluted earnings and diluted
headline earnings per share has been restated as a result of the early adoption
of IFRS 2 on Share-based payments, as required by IAS 33 on Earnings per share.
Note 5
Headline Earnings
Headline earnings
are determined by
eliminating the
effect of the
following items in
attributable
earnings:
Earnings 709,2 478,4
attributable to
ordinary
shareholders
Loss/(surplus) on 0,2 (21,7)
sale of property,
plant and equipment
Surplus on sale of (6,4) -
investment
Goodwill 53,5
amortisation
Negative goodwill (2,4) -
reflected in
abnormal items
Impairments 4,9 15,1
Tax (1,5) 1,6
Headline earnings 704,0 526,9
Note 6
Investments and
loans
Unlisted associate 86,8 76,8
company - at cost
plus equity
accounted earnings
excluding goodwill
Listed associate 11,7
company - at
directors valuation
Other unlisted 0,7 2,4
investments - at
cost
Listed investment 7,8 4,9
held for sale - at
market value
Loans - at cost 20,9 14,1
Total carrying 116,2 109,9
values
Directors"
valuations of
unlisted
investments
Unlisted associate 520,0 520,0
Unlisted 0,7 2,4
investments
Note 7
RC&C Finance Company accounts receivable
Accounts receivable mainly comprise 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 8
RC&C Finance Company short-term bank borrowings
RC&C Finance Company has total long-term banking facilities of R1 200 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 9
Accounting policies
Reunert has adopted certain Statements of Generally Accepted Accounting Practice
(GAAP) during the current financial year. This has resulted in changes to
accounting policies which are detailed below:
During the year the International Financial Reporting Standard IFRS 2 (AC 139)
on Share-based payments was early adopted. In terms of this standard all share-
options granted after 7 November 2002 must be recognised as an expense over the
vesting period of the share-option. This resulted in a R6,7 million expense
which was recognised in the current year.
GAAP requires the reversal of the sale of the black economic empowerment (BEE)
transaction relating to African Cables, where the purchase consideration has not
been fully paid for by the BEE partner and conditions are attached to the unpaid
portion, notwithstanding that the legal effect of this transaction is in fact a
sale. The earnings attributable to the BEE partner are included in arriving at
the earnings attributable to shareholders in Reunert Limited and an equity
instrument of R24,1 million, which values the BEE deal in terms of IFRS 2, has
been expensed in arriving at operating profit in the current year. When
dividends are paid to these BEE partners they are treated as an appropriation of
profit.
During the year the International Financial Reporting Standard IFRS 3 (AC 140)
on Business Combinations was adopted. In terms of this standard all existing
negative goodwill at 1 October 2004 (R3,0 million) was transferred to opening
accumulated profit. Thereafter negative goodwill must be reflected in income in
the year in which it arises. In addition, goodwill is no longer amortised, but
is subjected to an annual impairment test.
The group"s accounting policies are in accordance with South African GAAP and,
except for the above changes, are consistent with those of the prior year. This
report has been prepared in terms of AC 127 on Interim Financial Reporting.
Note 10
Acquisitions
In January 2005 the business of Nashua Direct, a division of Nashua Office
Automation was merged with that of Kopano, an independent franchise dealing in
Nashua products to form Kopano Copier Company (Pty) Limited, trading as Nashua
Kopano. Nashua Direct contributed 74% of the net assets of the new business and
Kopano 26%, the latter amounting to R5,6 million. The respective share holdings
are in the same ratio.
Note 11
Restatement
The previous annual financial statements included a provision for debtors"
recourse guarantee. This R46,6 million provision was no longer required
following the realisation of RC&C Finance Company"s debtors book in December
2003 and has been adjusted in the group statement of changes in equity. This
amount had previously been reflected as a provision.
GROUP BALANCE SHEET
as at 30 September 2005
2004
2005 R million
R million (Audited)
Notes (Reviewed) Restated
Non-current assets
Property, plant and equipment 191,9 196,2
Goodwill 329,0 324,8
Investments and loans 6 116,2 109,9
RC&C Finance Company accounts 7 726,0 391,5
receivable
Deferred taxation 42,4 56,2
1 405,5 1 078,6
Current assets
Inventory and contracts in 559,6 491,9
progress
Accounts receivable and 1 004,9 928,7
derivative assets
RC&C Finance Company accounts 7 302,2 137,0
receivable
Cash and cash equivalents 784,4 451,3
2 651,1 2 008,9
Total assets 4 056,6 3 087,5
Shareholders" funds
Ordinary 1 452,8 982,4
Preference 0,7 0,7
1 453,5 983,1
Outside shareholders in 42,5 39,7
subsidiaries
1 496,0 1 022,8
Non-current liabilities
Deferred taxation 51,4 44,3
Long-term borrowings 111,4 -
Current liabilities
Bank overdrafts and short-term 20,2 170,4
portion of long-term borrowings
RC&C Finance Company short-term 8 866,8 314,1
bank borrowings
Accounts payable, derivative 1 510,8 1 535,9
liabilities, provisions and
taxation
2 397,8 2 020,4
Total equity and liabilities 4 056,6 3 087,5
SEGMENTAL ANALYSIS
for the year ended 30 September 2005
2005
R million
(Reviewed) %
Revenue
Electrical Engineering 1 986,7 25
Electronics
Office systems 981,3 12
Consumer products and services 3 770,5 47
Telecommunications 993,0 12
Reutech 298,4 4
Total Electronics 6 043,2 75
Total operations 8 029,9 100
Less: Reunert"s attributable (993,0)
portion of associate companies"
revenue
Revenue as reported 7 036,9
Operating profit before
abnormalitems and goodwill
amortisation
Electrical Engineering 324,0 31
Electronics
Office systems 256,3 25
Consumer products and services 324,2 31
Telecommunications 131,9 13
Reutech 1,7 -
Total Electronics 714,1 69
Total operations 1 038,1 100
Less: Reunert"s attributable (132,6)
portion of associate companies"
net operating profit
Operating profit before abnormal 905,5
items and goodwill amortisation
as reported
2004
R million %
(Audited) % change
Revenue
Electrical Engineering 1 456,7 20 36
Electronics
Office systems 1 071,0 15 (8)
Consumer products and services 3 382,7 46 11
Telecommunications 931,8 13 7
Reutech 443,0 6 (33)
Total Electronics 5 828,5 80 4
Total operations 7 285,2 100 10
Less: Reunert"s attributable (1 037,9)
portion of associate companies"
revenue
Revenue as reported 6 247.3 13
Operating profit before
abnormalitems and goodwill
amortisation
Electrical Engineering 217,1 25 49
Electronics
Office systems 226,3 26 13
Consumer products and services 250,9 29 29
Telecommunications 130,2 15 1
Reutech 48,5 5 (96)
Total Electronics 655.9 75 9
Total operations 873,0 100 19
Less: Reunert"s attributable (119,0)
portion of associate companies"
net operating profit
Operating profit before abnormal 754,0 20
items and goodwill amortisation
as reported
GROUP CASH FLOW INFORMATION
for the year ended 30 September 2005
2005 2004
R million R million
(Reviewed) (Audited)
EBITDA 961,8 811,9
(Increase)/decrease in net working (600,7) 804,5
capital
(Increase)/decrease in RC&C Finance (499,7) 691,5
Company accounts receivable*
(Increase)/decrease in other working (101,0) 113,0
capital
Cash generated from operations 361,1 1 616,4
Net interest and dividends received 119,4 65,1
(including dividends from
associates)
Taxation paid (364,9) (313,5)
Dividends paid (including outside (307,1) (268,1)
shareholders)
Net cash (outflow)/inflow from (191,5) 1 099,9
operating activities
Net fixed asset and intangible (35,5) (15,0)
additions
Acquisition of subsidiaries, (3,2) (239,4)
businesses and other investments
Share buyback - (476,6)
Long-term borrowings raised 130,0 -
Other (net) 49,4 17,2
Net (decrease)/increase in cash and (50,8) 386,1
cash equivalents
Net short-term borrowings at (33,2) (419,3)
beginning of the year
Net short-term borrowings at end of (84,0) (33,2)
the year
Cash and cash equivalents 784,4 451,3
Bank overdrafts (1,6) (170,4)
Cash and cash equivalents (net) 782,8 280,9
RC&C Finance Company short-term bank (866,8) (314,1)
borrowings (refer note 8)
Net short-term borrowings at end of (84,0) (33,2)
the year
* 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
for the year ended 30 September 2005
2004
2005 R million
R million (Audited)
(Reviewed) Restated
Balance at beginning of the year as 933,5 1 156,5
previously reported
Restatement (debtor recourse 46,6 46,6
provision) (refer note 11)
Change in accounting policy 3,0 -
(negative goodwill) (refer note 9)
Restated balance 983,1 1 203,1
Earnings attributable to ordinary 709,2 478,4
shareholders in Reunert Limited
Dividends paid (298,6) (243,5)
Issue of shares in terms of Share 26,7 18,7
Option Scheme
Share option reserve arising (refer 6,7 -
note 9)
Reserve created on expensing of 24,1 -
option to Powerhouse Utilities
(refer note 9)
Reunert Limited shares bought back - (47,4)
by subsidiary as part of the share
buyback
Shares cancelled in terms of the - (429,2)
share buyback
Change in accounting policy - 3,0
(negative goodwill) (refer note 9)
Fair value adjustments and other 2,3 -
Balance at end of the year 1 453,5 983,1
SUPPLEMENTARY INFORMATION
for the year ended 30 September 2005
2004
2005 (Audited)
R million (unless otherwise stated) (Reviewed) Restated
Net asset value per share (cents) 834 572
including goodwill
Net asset value per share (cents) 645 383
excluding goodwill
Current ratio excluding interest- 1,8 1,3
bearing current liabilities (:1)
Net number of ordinary shares in 174,4 171,8
issue (million)
Number of ordinary shares in issue 193,4 190,8
(million)
Less: Held by subsidiary (million) (19,0) (19,0)
Capital expenditure 55,0 48,8
- expansion 22,6 28,7
- replacement 32,4 20,1
Capital commitments 68,9 25,1
- contracted 42,6 22,4
- authorised not yet contracted 26,3 2,7
Commitments in respect of operating 50,7 36,4
leases
Contingent liabilities 5,6 9,6
COMMENTS
The past year has been exceptional for Reunert. Strong domestic economic growth
and the share buyback in September 2004 resulted in headline earnings per share
increasing by 46% from 278 to 406 cents per share.
Total dividends increased by 39% to 222 cents per share and a final dividend of
170 cents per share has been declared.
Review of operations
Electrical Engineering
Turnover grew by 36% to R2 billion while operating profit increased to R324
million up 49%.
Both CBI and African Cables experienced a period of outstanding growth.
Residential and industrial construction continued to grow strongly and the
necessary expansion in infrastructure for the distribution of electricity
increased the demand for their products. ATC finally turned the corner and
earned a modest profit with volumes increasing towards the end of the year.
Electronics
The divisions" turnover increased by 4% to R6,0 billion and operating profit
grew 9% to R714 million.
Nashua"s volumes grew by 22% in the multi-function machine market. Its
aggressive entry into the colour laser printers resulted in significant market
share gains in little over a year. The Finance Company discounted more deals
than ever before and the book now exceeds the R1 billion mark after the sale of
its receivables book in December 2003.
The consumer businesses, Nashua Mobile and RC&C Holdings, experienced strong
demand with turnover growth of 11% to R3,8 billion and operating profit up 29%
to R324 million.
Panasonic is recognised as South Africa"s premier consumer electronics brand,
while Futronic at the more affordable end made big inroads in the local market.
The Akai brand was launched during the year and will focus on the middle range
of the market.
Nashua Mobile has continued delivering quality service to more than 415 000
contract customers. Subsequent to the year-end a five-year agreement was entered
into with Vodacom securing the future of this business. Nashua Mobile"s aim is
to continue as an independent service provider offering all three networks.
Growth in the cellular phone market has been above expectations in recent years
but inevitably this must tail off at some stage with resultant pressure on
margins.
Siemens Telecommunications, in which Reunert holds a 40% share, experienced good
order intake. Turnover on an attributable basis increased by 7% to R1 billion
while operating profit increased to R132 million.
Reutech"s defence businesses struggled and turnover dropped by 33% resulting in
a significant reduction in operating profit to R2 million. While prospects for
Reutech remain uncertain, today it forms a small part of the company"s business.
Prospects
It remains our aim to grow headline earnings per share at a rate higher than
inflation in a sustainable way. However, it is unlikely that this year"s growth
rate will be achieved in the coming financial year.
Directorate
During the year Derek Cooper resigned as chairman and director. The board
records its great appreciation for his leadership, support and guidance and
wishes him well in the future.
Martin Shaw was appointed chairman of the board. Kingsley Fuller joined the
board in June 2005 and was appointed as chairman of the audit committee.
Reviewed results
The above results have been reviewed by the group auditors, Deloitte & Touche,
and a copy of their unqualified review report is available for inspection at the
company"s registered office.
Dividend
Notice is hereby given that final ordinary share dividend No 159 of 170 cents
per share (2004: 120 cents per share) has been declared by the directors for the
year ended 30 September 2005. In compliance with the requirements of STRATE, the
following dates are applicable:
Last date to trade (cum dividend) Friday, 13 January 2006
First date of trading (ex Monday, 16 January 2006
dividend)
Record date Friday, 20 January 2006
Payment date Monday, 23 January 2006
Shareholders may not dematerialise or rematerialise their share certificates
between Monday, 16 January 2006 and Friday, 20 January 2006, both days
inclusive.
On behalf of the board
Martin Shaw Gerrit Pretorius
Chairman Chief executive
Sandton, 14 November 2005
Secretaries" certification: For the year ended 30 September 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
Directors: MJ Shaw (Chairman)*, G Pretorius (Chief Executive), BP Connellan*, KS
Fuller*, BP Gallagher
SD Jagoe*, KJ Makwetla*, KC Morolo*, GJ Oosthuizen, DJ Rawlinson, 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 +27 11 517 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)
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
Hierdie verslag is ook in Afrikaans verkrygbaar.
Date: 15/11/2005 09:27:16 AM Produced by the JSE SENS Department
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