Wrap Text
Reviewed preliminary condensed consolidated results and cash dividend declaration for year ended 30 September 2017
REUNERT LIMITED
Incorporated in the Republic of South Africa
Reg. No 1913/004355/06
Ordinary share Code: RLO ISIN code: ZAE000057428
("Reunert", "the group" or "the company")
REVIEWED PRELIMINARY CONDENSED CONSOLIDATED RESULTS 2017
and cash dividend declaration for the year ended 30 September 2017
Group profile
Reunert manages a diversified portfolio of businesses in the fields of electrical engineering, information
communication technologies (ICT), and applied electronics. The group was established in 1888, by Theodore Reunert
and Otto Lenz, and has contributed to the South African economy in numerous ways over the past 129 years. Reunert
was listed on the JSE in 1948 and is included in the industrial goods and services (electronic and electrical
equipment) sector of the JSE. The group operates mainly in South Africa with minor operations in Australia,
Lesotho, Sweden, the USA, Zambia and Zimbabwe. Reunert's offices are located in Woodmead, Johannesburg, South
Africa.
Commentary
Overview
Reunert's 2017 results reflect a 14% growth in operating profit and a 19% growth in profit for the year. This
improvement in profitability flowed through to headline earnings per share which also grew by 19%. This was
achieved, as highlighted in our previous prospects statements, through a strong second half performance across all
segments, including the export businesses.
The execution of the group strategy led to three further acquisitions in the year and a continued focus on customer
service and operational efficiencies.
Measure Units 2017 2016 %
change
Revenue R million 9 773 8 511 15
Operating profit (before net interest income and dividends, and empowerment transactions) R million 1 497 1 315 14
Profit for the year R million 1 142 963 19
Headline earnings per share Cents 679 570 19
Normalised headline earnings per share Cents 697 662 5
Financial performance
Group revenue
Group revenue increased by 15% to R9,8 billion (2016: R8,5 billion). The major area of growth was in the Electrical
Engineering segment, where segment revenue grew by 28%. Revenue in the Applied Electronics segment grew by 14%,
despite a stronger Rand impacting export revenue, and full export fuze production only resuming in the second half.
Revenue in the ICT segment was flat. In the office automation business, revenue increased from the sales of fewer,
but higher-value units. In the voice-over-internet business, the final statutory reduction in interconnect rates
resulted in lower income despite the positive customer growth.
Group operating profit
Group operating profit increased by 14% from R1,3 billion to R1,5 billion. The 16% increase in the ICT segment was
mainly due to the successful implementation of margin enhancement programmes, in both Nashua and ECN and volume
growth on higher-volume office automation equipment and voice minutes.
The Electrical Engineering segment's operating profit improved by 14%, driven by strong performance in our cable
businesses and the incorporation of Zamefa, our acquisition in Zambia. The stronger Rand negatively impacted our
circuit breaker business.
Despite profit growth in the majority of Applied Electronics segment's businesses, the segment returned a 10%
decline in operating profit because of reduced export sales in the fuze business. The fuze business returned to
full production in the second half of the year after securing new long-term contracts.
Group cash resources
We continued our share buyback programme under general authority from shareholders. During the year, we repurchased
a further 2,9 million (2016: 0,4 million) shares at an average price of 6 739 (2016: 6 269 cents) cents per share,
including transaction costs. This brings the total shares repurchased since commencing the programme in September
2016 to 3,3 million or 2% of shares in issue.
Capital of R199 million was allocated for the share buyback programme and R241 million was invested in
acquisitions, reflecting the execution of the Board's dual mandate to return surplus cash to shareholders and seek
appropriate acquisitions.
At year end, we had combined money market deposits and other liquid resources totalling R1 455 million (2016: R1
982 million). This provides sufficient residual cash resources to continue the implementation of our strategy.
Segmental results
Despite the challenging local political and economic conditions, Reunert's operating profit from our traditional
businesses in the Electrical Engineering and ICT segments again increased in real terms. Applied Electronics only
returned to full export production in the second half of the year, but still delivered a solid segmental
performance. The positive contribution from our acquisitions assisted in the delivery of a strong overall
operational result.
Electrical Engineering
The double-digit growth in Electrical Engineering was driven by the acquisition of Zamefa and the strong
performance of the power and telecommunications cable business units. Revenue increased by 28% to R5,2 billion
(2016: R4,1 billion) and operating profit by 14% from R610 million to R696 million.
Telecom Cables continued to benefit from the local FTTX1 roll-out and enjoyed strong production volumes. The
diverse market position of the South African power cable business allowed it to secure meaningful volumes, despite
the weak general infrastructure demand. The integration of the Zambian operation, Zamefa, progressed well and many
of the vertical integration benefits are being realised. All of the cable business units have implemented long-term
continuous improvement projects, and efficiency gains were realised in all factories.
Low Voltage, our circuit breaker business, faced a challenging year as local investor sentiment slowed residential
and commercial building activity. The strong Rand softened export margins, which added pressure. Several new
product releases, including high-capacity DC breakers for telecommunication and renewable energy applications,
supported this business unit's performance, which ended the year slightly down on the prior year.
Information Communication Technologies
The ICT segment delivered a strong performance underpinned by positive margin movement in both the office
automation and voice business portfolios, despite segment revenue remaining flat at R3,3 billion. Operating profit
increased by 16% from R549 million to R635 million.
Nashua progressed well in the execution of its strategy to change from an office automation hardware supplier to a
total office services provider to its 28 000-strong customer base. A continued move to larger machines underpinned
its positive market share movement, and a strong Rand supported the hardware margins. Several newly launched
services increased cross-sell revenue and improved the performance of the franchise channel.
Our voice business, ECN, enjoyed a 9% growth to 1,2 billion minutes carried on the network. The impact of lower
business confidence reduced demand per customer. This was offset by substantial growth in the number of customers
serviced. We invested R12 million into the ECN network, and the upgrade has resulted in a more robust, high-quality
and simplified network, creating scale for our new business-internet-access product suite. The ability to provide
both voice and data to our customers offers a new diversified sales stream and underpins the continued growth rate
of this business.
Our in-house finance book in Quince Capital increased from R2,1 billion to R2,4 billion on the back of improved
office automation sales. The quality of the book remains high and, despite the tough economic times, bad debts
remain well below industry norms.
1 Fibre-to-the-x: Collective term for various optical fibre delivery topologies that are categorised
according to where the fibre terminates.
Applied Electronics
The Applied Electronics segment's revenue increased by 14% to R1,7 billion (2016: R1,5 billion), and operating
profit reduced by 10% to R276 million (2016: R305 million), due to lower export orders in the first six months. As
the year progressed, the order position improved significantly. The strong Rand negatively impacted export margins
particularly in the areas of export fuzes, mining surveillance radars and electronic subassemblies. Fuchs
Electronics is now at full production with large-scale export orders.
Reutech Radar Systems had a record year in the mining and commercial market sectors. The increased volume improved
production efficiencies and this, to a large degree, offset the stronger Rand's impact on its export margins. The
business unit secured a large defence export order which improved our year-on-year performance and will support
sales throughout the next financial year.
Reutech Communications completed the industrialisation of its new range of tactical communication products. While
this took longer than expected, record production levels during the second half of the year were achieved.
Efficiencies are reaching the levels envisaged at the start of the capital investment project. Securing the next
phase of orders from the local customer remains an important element of this unit's business case.
Reutech Solutions responded well to their major customers' ongoing budget reductions and delivered a solid result.
The acquired businesses performed well. Omnigo executed their advanced PCB export orders successfully and, as a
result, received further hard currency orders. This allows them to continue operating at full capacity. More
equipment was deployed into the business unit which increased their capability to manufacture high-specification
electronic sub-assemblies and, in turn, to enter new geographic markets. Nanoteq, our specialist encryption
business, performed in line with its business case despite key customers in a new geography having budget
constraints that delayed the placement of a large order.
Directorate
Phuti Mahanyele resigned as an independent non-executive director and member of the Audit and the Social, Ethics
and Transformation committees with effect from 1 November 2017 due to her growing commitments as the owner of an
investment company. The Board would like to express its gratitude to Ms Mahanyele for her tenure.
There were no other changes to the composition of either the Board or Board committees during the year under
review.
Prospects
Reunert's traditional businesses have continued to deliver real growth in tough local economic conditions. Applied
Electronics' export orders are at record high levels and should translate into a strong operating performance, with
exchange rates providing some uncertainty in the financial results. Subject to no adverse changes in the local
economic, social and political environment, we expect another year of real growth in 2018. The order mix of the
group again favours a stronger financial performance in the second half of the financial year.
CASH DIVIDEND
Notice is hereby given that a gross final cash dividend No 183 of 354,0 cents per ordinary share (2016: 326,0 cents
per share) has been declared by the directors for the year ended 30 September 2017.
The dividend has been declared from retained earnings, bringing the total dividends declared out of 2017 profit for
the year to 474 cents per share.
A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt from, or who do not
qualify for a reduced rate of withholding tax.
Accordingly for those shareholders subject to withholding tax, the net dividend amounts to 283,20 cents per share.
The issued share capital at the declaration date is 184 324 396 ordinary shares.
In compliance with the requirements of Strate, the following dates are applicable:
Last date to trade (cum dividend) Tuesday, 16 January 2018
First date of trading (ex dividend) Wednesday, 17 January 2018
Record date Friday, 19 January 2018
Payment date Monday, 22 January 2018
Shareholders may not dematerialise or rematerialise their share certificates between Wednesday, 17 January 2018
and Friday, 19 January 2018, both days inclusive.
On behalf of the board
Trevor Munday Alan Dickson Nick Thomson
Chairman Chief Executive Officer Chief Financial Officer
Sandton, 20 November 2017
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the year ended 30 September 2017
R million Notes Reviewed Audited %
2017 2016 change
Revenue 9 773 8 511 15
EBITDA* 1 635 1 433 14
Depreciation and amortisation (138) (118) 17
Operating profit before net interest income and dividends, and empowerment transactions 2 1 497 1 315 14
Net interest income and dividends 3 65 137 (53)
Profit before empowerment transactions 1 562 1 452 8
Empowerment transactions 4 (20) (113)
Profit before taxation 1 542 1 339 15
Taxation (437) (404) 8
Profit after taxation 1 105 935 18
Share of joint ventures' and associate's profit 37 28 32
Profit for the year 1 142 963 19
Profit attributable to:
Non-controlling interests 30 9 233
Equity holders of Reunert 1 112 954 17
Cents
Basic earnings per share 5, 6 680 577 18
Diluted earnings per share 5, 6 670 572 17
* Earnings before net interest income and dividends; taxation; depreciation and amortisation; and empowerment
transactions.
Other measures of earnings per share
Cents Notes Reviewed Audited %
2017 2016 change
Headline earnings per share 5, 6 679 570 19
Diluted headline earnings per share 5, 6 670 565 19
Normalised headline earnings per share 5, 6 697 662 5
Diluted normalised headline earnings per share 5, 6 687 656 5
Total cash dividend per share for the year 474 439 8
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2017
R million Reviewed Audited
2017 2016
Profit for the year 1 142 963
Other comprehensive income, net of taxation:
Items that may be reclassified subsequently to profit or loss
Gains/(losses) arising from translating the financial results of foreign subsidiaries 8 (19)
Total comprehensive income 1 150 944
Total comprehensive income attributable to:
Non-controlling interests 34 3
Share of comprehensive income 30 9
Share of translation gains/(losses) 4 (6)
Equity holders of Reunert 1 116 941
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2017
R million Notes Reviewed Audited
2017 2016
Non-current assets
Property, plant and equipment, investment properties and intangible assets 1 095 1 019
Goodwill 7 921 737
Investments and loans 55 53
Investment in joint ventures and associate 159 152
Rental and finance lease receivables 1 682 1 449
Deferred taxation 105 104
4 017 3 514
Current assets
Inventory 1 439 1 295
Rental and finance lease receivables 747 695
Accounts receivable and taxation 2 222 2 008
Derivative assets 12 15
Money market instruments 130 670
Cash and cash equivalents 1 522 1 712
6 072 6 395
Total assets 10 089 9 909
Equity attributable to equity holders of Reunert 7 138 7 011
Non-controlling interests 105 81
Total equity 7 243 7 092
Non-current liabilities
Deferred taxation 112 102
Put option liability 8 121 -
Long-term borrowings 9 73 43
306 145
Current liabilities
Accounts payable, provisions and taxation 2 304 2 037
Derivative liabilities 28 6
Bank overdrafts and short-term loans 197 400
Current portion of long-term borrowings 9 11 229
2 540 2 672
Total equity and liabilities 10 089 9 909
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2017
R million Reviewed Audited
2017 2016
Share capital 359 343
Balance at the beginning of the year 343 318
Issue of shares 16 25
Share-based payment reserves 176 136
Balance at the beginning of the year 136 16
Equity-settled share-based payments 40 120
Equity transactions/put option with empowerment partners and
non-controlling shareholders (116) -
Balance at the beginning of the year - -
Put option (116) -
Net changes in non-controlling interests - (40)
Transferred from retained earnings - 40
Empowerment shares* (276) (276)
Treasury shares** (227) (28)
Balance at the beginning of the year (28) -
Shares bought back during the year (203) (28)
Shares used for incentive scheme 4 -
Foreign currency translation reserves (3) (7)
Balance at the beginning of the year (7) 6
Other comprehensive income 4 (13)
Retained earnings 7 225 6 843
Balance at the beginning of the year 6 843 6 615
Total comprehensive income attributable to equity holders of Reunert 1 112 954
Cash dividends declared and paid (730) (687)
Other - 1
Transfer to equity transactions - (40)
* These are Reunert Limited shares held by Bargenel Investments Proprietary Limited (Bargenel), a company
sold by Reunert to its empowerment partner in 2007. Until the amount owing by the empowerment partner is
repaid to Reunert, Bargenel is consolidated by the group as the significant risks and rewards of ownership
of the equity have not passed to the empowerment partner.
** Reunert shares bought back and held by a subsidiary: 3 392 422 (2016: 443 331)
R million Reviewed Audited
2017 2016
Equity attributable to equity holders of Reunert 7 138 7 011
Non-controlling interests 105 81
Balance at the beginning of the year 81 46
Share of total comprehensive income 34 3
Dividends declared and paid (15) (3)
Net changes in non-controlling interests 5 35
Total equity at the end of the year 7 243 7 092
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2017
R million Notes Reviewed Audited
2017 2016
EBITDA 1 635 1 433
Increase in net working capital (225) (396)
Other net non-cash movements 60 50
Cash generated from operations 1 470 1 087
Net interest income and dividends 70 137
Taxation paid (375) (431)
Dividends paid (including to non-controlling interests) (745) (690)
Net inflow from operating activities 420 103
Net outflow from investing activities (21) (1 205)
Capital expenditure (143) (222)
Net inflow arising from disposal of businesses 15 -
Gross cashflows on acquisition of businesses* 10 (241) (462)
(Increase)/decrease in total rental and finance lease receivables (231) 14
Net other investments and loans (granted)/repaid (2) 43
Proceeds from investment in insurance cell captive - 48
Dividends received from joint venture 30 35
Investments net of other capital proceeds** 551 (638)
Other - (23)
Net outflow from financing activities (386) (222)
Shares issued 16 25
Investment in treasury shares (203) (28)
Net long-term borrowings repaid (199) (181)
Equity transactions with non-controlling interests - (40)
Other - 2
Increase/(decrease) in net cash resources 13 (1 324)
Net cash resources at the beginning of the year 1 312 2 636
Net cash resources at the end of the year 1 325 1 312
Cash and cash equivalents 1 522 1 712
Bank overdrafts (138) (327)
Short-term borrowings (59) (73)
Net cash resources at the end of the year 1 325 1 312
* Including debt assumed of R23 million (2016: R282 million).
** This includes R540 million withdrawal from investments in long-dated money market instruments (2016:
Investments made R670 million).
CONDENSED SEGMENTAL ANALYSIS
at 30 September 2017
R million Reviewed % Audited % %
2017 of total 2016 of total change
Revenue1
Electrical Engineering 5 247 51 4 106 46 28
ICT 3 307 32 3 332 37 (1)
Applied Electronics 1 720 17 1 505 17 14
Other 14 - 21 - (33)
Total segment revenue 10 288 100 8 964 100 15
Revenue from equity-accounted joint venture - Electrical Engineering (489) (453)
Revenue from equity-accounted associate - ICT (26) -
Revenue as reported 9 773 8 511 15
Operating profit
Electrical Engineering 696 45 610 45 14
ICT2 635 41 549 41 16
Applied Electronics 276 18 305 23 (10)
Other (59) (4) (111) (9) 47
Total segment operating profit 1 548 100 1 353 100 14
Operating profit from equity-accounted joint venture - Electrical Engineering (48) (38)
Operating profit from equity-accounted associate - ICT (3) -
Operating profit as reported 1 497 1 315 14
1 Inter-segment revenue is immaterial and has not been separately disclosed.
2 Net interest charged on group funding provided to Quince has been eliminated in line with the consolidation
principles of IFRS. This elimination amounted to R125 million (2016: R95 million).
R million Reviewed % Audited %
2017 of total 2016 of total
Total assets
Electrical Engineering 3 115 31 2 699 27
ICT 3 952 39 4 084 41
Applied Electronics 1 854 18 1 477 15
Other3 1 168 12 1 649 17
Total assets as reported 10 089 100 9 909 100
3 Other consists mainly of group treasury cash balances.
NOTES
1.Basis of preparation
These preliminary condensed consolidated financial statements have been prepared in
compliance with the framework concepts and the recognition and measurement requirements of
International Financial Reporting Standards (IFRS) in effect for the group at 30 September
2017, and further comply with the SAICA Financial Reporting Guides, as issued by the
Accounting Practices Committees and the Financial Reporting pronouncements as issued by the
Financial Reporting Standards Council. These condensed consolidated financial statements
contain the minimum information as required by IAS 34 - Interim Financial Reporting, and
complies with the Listings Requirements of the JSE Limited and the requirements of the
Companies Act, 71 of 2008, of South Africa. This report was compiled under the supervision
of NA Thomson CA(SA) (chief financial officer).
The group's accounting policies applied for the year ended 30 September 2017 were
consistent with those applied in the prior year's audited consolidated annual financial
statements. These accounting policies comply with IFRS.
R million Reviewed Audited
2017 2016
2.Operating profit
Operating profit includes:
- Cost of sales 6 366 5 402
- Other expenses excluding depreciation and amortisation 1 759 1 710
- Other income 30 45
- Realised (loss)/gain on foreign exchange and derivative instruments (20) 26
- Unrealised gain/(loss) on foreign exchange and derivative instruments 1 (16)
- Auditors' remuneration 24 21
3.Net interest income and dividends
Interest income and dividends 113 164
Interest expense (48) (27)
Total 65 137
4.Empowerment transactions
IFRS 2 share based payment cost of BBBEE transaction* 20 113
Taxation thereon - -
Net empowerment transactions after taxation 20 113
* Included in the current year charge is a donation to create an empowerment
structure for R1 million.
R million/millions of shares Reviewed Audited
2017 2016
5.Number of shares and earnings used to calculate earnings per share
Weighted average number of shares in issue used to determine basic earnings, headline
earnings and normalised headline earnings per share (millions of shares) 164 165
Adjusted by the dilutive effect of unexercised share options granted (millions of
shares) 2 2
Weighted average number of shares used to determine diluted basic, headline and normalised
headline earnings per share (millions of shares) 166 167
Profit attributable to equity holders of Reunert 1 112 954
6.Headline earnings
6.1.Profit attributable to equity holders of Reunert 1 112 954
Headline earnings are determined by eliminating the effect of the following items from
attributable earnings:
Net gain on disposal of assets (after a tax charge of Rnil and non-controlling interest
(NCI) portion of Rnil) (2016: tax charge of R2 million, NCI of Rnil) (1) (20)
Impairment of intangible asset (tax and NCI of Rnil) (2016: tax credit of R3 million and
NCI of R2 million) - 8
Headline earnings 1 111 942
R million Reviewed Audited
2017 2016
6.2.Normalised headline earnings*
Headline earnings 1 111 942
Normalised headline earnings are determined by eliminating the effect of the following
items from headline earnings:
Empowerment transactions 20 113
Once off IFRS 2 share-based payment cost of BBBEE transactions (tax and NCI of Rnil) (2016:
tax and NCI of Rnil) 19 113
Once off donation to create empowerment structure (tax and NCI of Rnil) 1 -
Recurring merger and acquisition costs (tax and NCI of Rnil) (2016: tax and NCI of
Rnil) 9 39
Normalised headline earnings 1 140 1 094
* The pro forma financial information above has been prepared for illustrative
purposes only to provide information on how the normalised earnings adjustments might have
impacted on the financial results of the group. Because of its nature, the pro forma
financial information may not be a fair reflection of the group's results of operation,
financial position, changes in equity or cash flows.
The summarised pro forma financial effects have been prepared in a manner consistent in all
respects with IFRS, the accounting policies adopted by Reunert Limited as at 30 September
2017, the revised SAICA guide on pro forma financial information, and the Listings
Requirements of the JSE Limited.
There are no post-balance sheet events which require adjustment to the pro forma financial
information.
The directors are responsible for compiling the pro forma financial information on the
basis of the applicable criteria specified in the JSE Listings Requirements.
The pro forma financial information should be read in conjunction with the unmodified
Deloitte & Touche independent reporting accountants' reasonable assurance report thereon,
which is available for inspection at the company's registered office.
7.Goodwill
Carrying value at the beginning of the year 737 653
Acquisition of businesses1 171 90
Adjustment to goodwill on finalisation of acquisition made in prior year 33 -
Disposal of a controlling interest in a subsidiary (12) -
Disposal of businesses (9) -
Exchange differences on consolidation of foreign subsidiaries 1 (6)
Carrying value at the end of the year 921 737
1 At 30 September 2017, the purchase price allocation of the acquisitions made in
2017 have not been finalised and therefore the amounts reported are provisional and subject
to change.
R million Reviewed Audited
2017 2016
8.Put option liability
As part of the Terra Firma and Ryonic acquisitions, the group has granted put options in
favour of the non-controlling shareholders for 25% of the issued share capital, in both
cases.
A reconciliation of the closing balance is as below:
Balance at the beginning of the year - -
Raised at acquisition at fair value 116 -
Fair value remeasurements - -
Unwinding of interest expense 5 -
Balance at the end of the year 121 -
The obligations were classified as level 3 instruments in the fair value hierarchy.
For Terra Firma, the fair value of the put option liability has been determined using a
discounted cash flow valuation technique and is based on multiples stipulated in the sales
and purchase agreement.
Significant unobservable inputs include:
The 2020 forecast revenue and net profit after tax (NPAT) have been used. This forecast is
based on management's best estimate of the revenue and NPAT likely to be achieved in 2020.
The multiples stipulated in the sales and purchase agreement.
The discount rate of 8%, being the average cost of borrowing.
The put option for Ryonic is immaterial.
If the key unobservable inputs to the valuation model being estimated were 1% higher/lower
while all the other variables were held constant, the carrying amount of the put option
liabilities would decrease/increase by R3 million respectively.
9.Long-term borrowings
Total long-term borrowings (including finance leases)2 84 272
Less: short-term portion (including finance leases) (11) (229)
73 43
2 In 2016, these borrowings included R200 million in respect of the Quince rental
book, which was repaid in May 2017.
R million Reviewed
2017
10.Acquisition of businesses
During the current year, the group obtained control over the following entities through the
acquisition of a majority interest in the equity shares:
Nanoteq Proprietary Limited: With effect from 1 October 2016, the group acquired 100% of
the share capital of Nanoteq Proprietary Limited. The acquisition and related goodwill of
R69 million is attributable to the synergies from the vertical integration with the group's
other businesses in the Applied Electronics segment. 95
Terra Firma Solutions Proprietary Limited: With effect from 1 March 2017, the group
accounted for its acquisition of 51% of the share capital of Terra Firma Solutions
Proprietary Limited. The acquisition and related goodwill of R88 million is attributable to
the expected high growth in this business and the ability for the group to diversify into
new products and geographical areas. The following options exist: a call option in favour
of Reunert Limited for a further 9% (exercisable in September 2018); and a put at the
option of the non-controlling interests for 25% (exercisable in either September 2019 or
September 2020), which if all are exercised, will increase the group's holding of Terra
Firma's share capital to 85%. At the reporting date, it is estimated that the fair value of
the call option is Rnil and the fair value of the put option is R112 million. A put
obligation liability has been recognised in non-current liabilities with a corresponding
entry to equity. Refer to note 8. 102
Ryonic Robotics Proprietary Limited: With effect from 1 March 2017, the group accounted for
its acquisition of 74,9% of the share capital of Ryonic Robotics Proprietary Limited. The
acquisition and related goodwill of R14 million is attributable to the ability of the
group to leverage its interest in Ryonic into new products and geographical areas in the
rapidly advancing field of robotics, automation, machine learning and autonomous machine
control. A put option has been granted in favour of the non-controlling interests for some
or all of the non-controlling interest's equity in the company. The put option is
exercisable at any time after the fifth anniversary of the effective date of the
acquisition. At the reporting date, it is estimated that the fair value of the put option
is R9 million. A put obligation liability has been recognised in non-current liabilities
with a corresponding entry to equity. Refer to note 8. 21
Cost of investments 218
Net borrowings acquired on acquisition 23
Gross cash flows on acquisition of businesses 241
Non-controlling interest* 14
Total funding of acquisitions 255
* Non-controlling interests have been recognised using the proportionate share
basis.
R million Reviewed
2017
Gross assets acquired and liabilities taken over:
Property, plant and equipment and intangible assets 82
Non-current receivables 2
Inventory 4
Gross accounts receivable and taxation** 69
Short-term borrowings (7)
Deferred taxation (10)
Accounts payable, provisions and taxation (56)
Goodwill 171
Net assets acquired 255
Revenue since acquisition 170
Profit after taxation since acquisition 19
Revenue for the 12 months ended 30 September 2017 as though the acquisition dates had been
1 October 2016 270
Profit after taxation for the 12 months ended 30 September 2017 as though the acquisition
dates had been 1 October 2016 29
** The value of uncollectible debtors receivable at acquisition was negligible.
Change made to prior year acquisition accounting
Metal Fabricators of Zambia Plc (Zamefa): The goodwill arising on the 2016 acquisition of
Zamefa was increased by R33 million due to the reassessment of the trade receivables at
acquisition. There was no impact on the actual purchase price.
2016
Refer to 2016 published results.
11.Unconsolidated subsidiary
The financial results of Cafca Limited (Cafca), a subsidiary incorporated in Zimbabwe, have
not been consolidated into the group results as the group does not exercise management
control:
Reunert has not appointed a majority of the directors to the board of directors of Cafca
and therefore does not control the board; and
the difficult economic circumstances in Zimbabwe have resulted in a major liquidity crisis
which renders Reunert's access to economic benefits from Cafca (e.g. dividends) such that
it does not have the ability to affect its variable returns through its powers over Cafca.
The amounts involved are not material to the group's results.
At 30 September 2017, Cafca's share capital and reserves amounted to US$15 million.
12.Related-party transactions
Counterparty R million Relationship Sales Purchases Lease Treasury
payments shares
All related-party transactions, trading account and loan balances
are on the same terms and conditions as those with non-related parties.
September 2017
CBI-electric Telecom Cables Proprietary Limited A joint venture 3 35 - -
Oxirostax Proprietary Limited (Nashua Winelands) An associate 2 22 - -
Bargenel Investments Proprietary Limited Owns 18,5m Reunert shares - - - 276
Lexshell 661 Investment Proprietary Limited A joint venture - - 1 -
September 2016
CBI-electric Telecom Cables Proprietary Limited A joint venture 1 - - -
Bargenel Investments Proprietary Limited Owns 18,5m Reunert shares - - - 276
Lexshell 661 Investment Proprietary Limited A joint venture - - - -
13.Litigation
There is no material litigation being undertaken against the group. The group has made
adequate provision against any cases where the group considers there are reasonable
prospects for the litigation to succeed. The group has adequate resources and good grounds
to defend any litigation it is aware of.
14.Events after reporting date
No events have occurred after the reporting date that require additional disclosure or
adjustment to the results presented.
15.External auditors review opinion
Deloitte & Touche has issued its unmodified review report on the reviewed condensed
consolidated financial statements for the year ended 30 September 2017. The review was
concluded in accordance with ISRE 2410 - Review of Interim Financial Information performed
by the independent auditor of the entity. A copy of their unmodified review report is
available for inspection at Reunert's registered office. The auditor's review report does
not necessarily report on all information contained in this announcement. Investors are,
therefore, advised that in order to obtain a full understanding of the nature of the
auditor's engagement, they should obtain a copy of that report from Reunert's registered
office. Any reference to future performance included in this announcement has not been
reviewed or reported on by the auditors.
ADDITIONAL INFORMATION
R million (unless otherwise stated) Reviewed Audited
2017 2016
Current ratio (:1) 2,4 2,4
Quick ratio (:1) 1,8 1,9
Dividend yield (%)* 7,0 7,2
Return on capital employed (%) 19,8 18,2
Net number of ordinary shares in issue (million) 162 165
Number of ordinary shares in issue (million) 185 184
Less: Empowerment shares (million) (19) (19)
Less: Treasury shares (million) (4) -
Capital expenditure 143 222
expansion 98 174
replacement 45 48
Capital commitments in respect of property, plant and equipment 39 60
contracted 20 10
authorised not yet contracted 19 50
Commitments in respect of operating leases 126 63
Contingent liabilities** - -
* Calculated as the total dividend declared out of the 2017 profits (interim 120 cents per share and final
354 cents per share) (2016: 113 cents and 326 cents respectively) divided by the closing Reunert share price of 6
772 cents (2016: 6 110 cents).
** The directors are confident that Reunert Limited and its subsiaries have no exposure arising from the
guarantees and sureties in issue, beyond the liabilities recognised in the condensed consolidated statement of
financial position at financial year-end.
Definitions of ratios and other financial terms are incorporated in the Integrated Report.
ADMINISTRATION
REUNERT LIMITED
Incorporated in the Republic of South Africa
Reg. No 1913/004355/06
Ordinary share Code: RLO ISIN code: ZAE000057428
("Reunert", "the group" or "the company")
Directors: TS Munday (Chairman) *,T Abdool-Samad*, AE Dickson (chief executive officer), SD Jagoe*, S Martin*, M
Moodley, TJ Motsohi*, NDB Orleyn**, SG Pretorius*, MAR Taylor, NA Thomson (chief financial officer), R Van Rooyen*
* Independent non-executive ** Non-executive
Registered office
Nashua Building
Woodmead North Office Park
54 Maxwell Drive
Woodmead, Sandton
PO Box 784391
Sandton, 2146
Telephone +27 11 517 9000
Income taxation reference number 9100/101/71/7P
Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
P O Box 61051
Marshalltown, 2107
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Registered auditors
Deloitte & Touche
Secretaries' certification
In terms of section 88(2)(e) of the Companies Act, 71 of 2008, I, Karen Louw, duly authorised on behalf of the
company secretary, Reunert Management Services Proprietary Limited (Registration number 1980/007949/07) certify
that, to the best of my knowledge and belief, the company has lodged with the Companies and Intellectual Property
Commission for the financial year ended 30 September 2017 all such returns and notices as are required in terms of
the aforesaid Act and that all such returns and notices appear to be true and correct.
Karen Louw
for Reunert Management Services Proprietary Limited
Group Company Secretaries
Investor enquiries
Carina de Klerk +27 11 517 9000 or e-mail invest@reunert.co.za.
For additional information log on to the Reunert website at http://www.reunert.com.
21 November 2017 (publication date)
http://WWW.REUNERT.CO.ZA
Date: 21/11/2017 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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