REUNERT LIMITED - Unaudited interim financial statements and cash dividend declaration for the six months ended 31 March 2018

Release Date: 28/05/2018 11:00
Code(s): RLO
 
Wrap Text
Unaudited interim financial statements and cash dividend declaration for the six months ended 31 March 2018

REUNERT LIMITED
Incorporated in the Republic of South Africa
Reg. No 1913/004355/06
Ordinary share Code: RLO ISIN code: ZAE000057428
("Reunert" or "the group" or "the company")

UNAUDITED INTERIM FINANCIAL STATEMENTS 2018
and cash dividend declaration for the six months ended 31 March 2018

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. 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 registered offices are located in Woodmead, Johannesburg, South Africa.

COMMENTARY

Overview
Reunert welcomes the new political administration appointed at the ruling party's elective conference in December 2017. Reunert recognises the commitment, and
subsequent action taken towards ethical leadership, inclusive growth and improved economic growth. We believe this will translate into improved economic conditions
for all South Africans.

Reunert provided FY2018 guidance (as part of its 2017 results overview published in November 2017) on the political and economic changes that may have an impact on
the environment in which the group operates. Several adverse changes in the operating environment occurred in the period under review. Reunert's half year results
to 31st March 2018 reflect a 10% increase in revenue and an 8% decline in operating profit (before interest, dividends and empowerment transactions) ("operating
profit"). The decrease in profitability is largely due to:

1. The significant strengthening of the Rand against the US dollar ("USD") experienced since December 2017 which has impacted the group's profitability on 30% of
   its revenue which is foreign currency denominated;
2. An unprecedented reduction in demand from State-Owned Enterprises ("SOEs") and municipalities which materially impacted the Electrical Engineering segment's
   profitability; and
3. The country liquidity constraints in Zambia.

Measure                                                                           Units        Six months   Six months     %
                                                                                              to 31 March  to 31 March
                                                                                                     2018         2017
Group revenue                                                                     R million         4 841        4 421    10
Group operating profit (before interest, dividends and empowerment transactions)  R million           567          616    (8)
Operating margin                                                                  %                  11,7         13,9   (16)
Profit for the period                                                             R million           448          469    (4)
Headline earnings per share                                                       Cents               275          275     0
Normalised headline earnings per share                                            Cents               276          292    (5)
Q1: Average exchange rate                                                         Rand:1 USD        13,61        13,90    (2)
Q2: Average exchange rate                                                         Rand:1 USD        11,95        13,22   (10)
Period end exchange rate                                                          Rand:1 USD        11,84        13,14   (10)

FINANCIAL PERFORMANCE

Group revenue
Group revenue increased by 10% from R4 421 million to R4 841 million. This was primarily driven by a 25% increase in revenue from the Applied Electronics segment
arising from our new segment subsidiaries and our large export order book. Revenue in the Electrical Engineering segment increased marginally due to higher metal
prices, offset by a substantial reduction in revenue in our telecom cable joint venture and the impact of the stronger Rand. Revenue in the ICT segment increased in
line with inflation, despite the deflationary pressure of the stronger Rand, driven by positive sales volumes.

GROUP OPERATING PROFIT

Group operating profit declined by 8% from R616 million to R567 million. The primary drivers of this decrease were:
1. The lower margin achieved on export sales and lower earnings from our foreign operations due to the appreciation in the average USD:Rand exchange rate achieved
   in the period, which directly impacted profitability;
2. The material reduction in demand from SOEs and municipalities which adversely impacted capacity utilisation and margins in the Electrical Engineering segment; and
3. The reduced manufacturing activities in Zamefa because of Zambia's ongoing liquidity constraints.

These factors resulted in the operating profit in the Electrical Engineering segment declining significantly and the Applied Electronics segment's operating profit
remaining flat despite a 25% increase in revenue.

The ICT segment achieved a 14% increase in operating profit from increased volumes, improved margins and accelerated new customer deals as the segment continued to
successfully implement its Total Office Provider strategy.

Capital allocation
During the six months under review, the group concluded two acquisitions:
- The business of SkyWire, which provides Broad Band Connectivity and is an essential component of the "Total Office Provider" solution set in the ICT segment; and
- Dopptech Proprietary Limited, which provides leading edge and complementary technology to our Applied Electronics fuze business.

These acquisitions are fully aligned with the group's strategic intent of investing into early life cycle and innovative businesses.

In addition to the two acquisitions, the group continued to re-purchase its own shares under its general authority from shareholders. In the six months, the group
purchased a further 1,2 million shares at a total consideration of R85,3 million.

CASH RESOURCES
The reduction in the group's cash resources mainly resulted from the two acquisitions (R227 million), the share buy-back programme (R85 million), investment in
working capital (R269 million) and the increase in the Quince rental book (R195 million). The group's cash resources are expected to improve in the second half of
the financial year.

Taxation
During the period under review, the company was successful with a tax appeal in the Supreme Court of Appeal in Bloemfontein. The favourable ruling resulted in the
group releasing a provision for normal taxation of R40 million resulting in a 21% effective rate of tax incurred for the six month period.

SEGMENTAL RESULTS

Electrical Engineering
The segment's revenue increased by 2% from R2 381 million to R2 431 million.

The power cable revenue was positively impacted, and operating margins negatively impacted, by the pass through of increased metal prices as part of the standard
contract pricing formulae. The adverse liquidity environment in Zambia resulted in Zamefa reducing its manufacturing output to curtail its ongoing funding
requirements caused by the build-up of trade receivables. This development substantially reduced Zamefa's contribution to the group.

Our telecom cable joint venture's key customer substantially reduced its demand for both copper and fibre communication cable as it sought to improve its working
capital management by reducing its stock holdings. This resulted in this business returning a loss to the group of R9 million for the period under review as against
a profit of R23 million in the prior period.

Our circuit breaker business suffered the impact of reduced revenue and operating profit due to the impact of the strengthening of the Rand on its hard currency
revenues and a weakening in local demand particularly in the building sector.

The segment's operating profit declined by 33% from R327 million to R219 million.

Information Communication Technologies
The positive momentum built through the successful execution of the total office provider strategy, together with the firmer exchange rate continues to benefit the
office automation business. The business was able to provide better pricing into the franchise channel leading to a further increase in both its market share and
the number of higher capacity/higher margin units sold which contributed to a substantial increase in profitability.

The segment's voice over internet business continued to attract a significant number of new customers and thereby grow its annuity business although this was
partially offset by a reduction in minutes utilised per customer due to the weak economic climate. Good progress was also made in preparing this business for the
provision of data connectivity to its customers.

The Quince book increased to R2,6 billion due to the strong sales in Office Automation and the quality of the book remains excellent.

The ICT segment's revenue accordingly increased by 4% from R1 602 million to R1 670 million with another strong improvement in its operating profit which increased
by 14% from R278 million to R317 million.

Applied Electronics
The segment's revenue increased by 25% from R693 million to R863 million on the back of positive export sales and the impact of the acquisitions made in this
segment. However, due mainly to the stronger average exchange rate experienced, margins were reduced in the segment resulting in operating profit being flat for the
period at R61 million.

The sales of mining radars was well under expectations in the first half of the financial year but are expected to recover to normal levels in the second half.
Reutech Communications has made good progress in the negotiation of the next phase of the order for tactical radios from the local customer, as well as in securing
good export orders, some of which will be executed in the second half of the financial year.

Although the fuze factory operated at full capacity, the exchange rate and mix of products delivered in the first half of the financial year tempered the results
from this business.

Terra Firma continues to make good progress in concluding and executing Engineering, Procurement, Construction and Management contracts for the installation of
large scale industrial and commercial solar solutions.

Directorate
Tumeka Ramuedzisi was appointed to the Board as an independent non-executive director and as a member of the Audit Committee and the Social Ethics and
Transformation Committee with effect from 1 April 2018.

Thabang Motsohi, an independent non-executive director who was a member of the Risk Committee and Social, Ethics and Transformation Committee, retired at the
conclusion of the Annual General Meeting ("AGM") held on the 12th of February 2018 on reaching the prescribed retirement age of 70.

The Board welcomes Tumeka to the Board and thanks Thabang for his input and contribution over the period of his tenure.

There were no other changes to the composition of either the Board or the Board Committees during the period under review.

Prospects
The group expects an improved performance in the second half of the financial year, subject to there being no material changes to the macro economic conditions. The
expectation is supported by the strong export order books of the Applied Electronics segment, our anticipation of some improvement in volumes and product mix in the
Electrical Engineering segment and the contribution of the ICT segment's performance reinforced by the contribution from the acquisition of SkyWire.

Business risk to Reunert remains in terms of the Rand's strength, exchange rate volatility and from the fiscal and organisational capacity of key state and
municipal customers to place orders at a normal rate.

Post FY18, recent political changes position both the country and the general business environment on a positive trajectory which should result in improved economic
activity. The group remains well positioned to capitalise on the expected improvements in South Africa's economic activity and increase in infrastructure spend.

CASH DIVIDEND
Notice is hereby given that an inflation related increase has been considered in the declaration of a gross interim cash dividend No 184 of 125,0 cents per ordinary
share (2017: 120,0 cents per share) for the six months ended 31 March 2018.

The dividend has been declared from retained earnings.
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 100,0 cents per share.

The issued share capital at the declaration date is 184 439 996 ordinary shares.

In compliance with the requirements of Strate Proprietary Limited and the Listing Requirements of the JSE Limited the following dates are applicable:
Last date to trade (cum dividend)            Tuesday, 19 June 2018
First date of trading (ex dividend)        Wednesday, 20 June 2018
Record date                                   Friday, 22 June 2018
Payment date                                  Monday, 25 June 2018

Shareholders may not dematerialise or rematerialise their shares between Wednesday, 20 June 2018 and Friday, 22 June 2018, both days inclusive.
On behalf of the board

Trevor Munday        Alan Dickson                   Nick Thomson
Chairman             Chief Executive Officer        Chief Financial Officer

Sandton, 25 May 2018

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the six months ended 31 March 2018
                                                                                            Six months ended 31 March
R million                                                                                                                        Year ended
                                                                                                                               30 September
                                                                                                  2018         2017                    2017
                                                                       Notes                (Unaudited)  (Unaudited) % change      (Audited)
Revenue                                                                                          4 841        4 421        10         9 773
EBITDA*                                                                                            636          681        (7)        1 635
Depreciation and amortisation                                                                      (69)         (65)        6          (138)
Operating profit before net interest income and dividends, and
empowerment transactions                                                   2                       567          616        (8)        1 497
Net interest income and dividends                                          3                         8           44       (82)           65
Profit before empowerment transactions                                                             575          660       (13)        1 562
Empowerment transactions                                                   4                        (2)         (20)                    (20)
Profit before taxation                                                                             573          640       (10)        1 542
Taxation                                                                                          (119)        (188)      (37)         (437)
Profit after taxation                                                                              454          452         -         1 105
Share of joint ventures' and associate's profit                                                     (6)          17                      37
Profit for the period                                                                              448          469        (4)        1 142
Profit attributable to:
Non-controlling interests                                                                            3           17       (82)           30
Equity holders of Reunert                                                                          445          452        (2)        1 112
Cents
Basic earnings per share                                                 5,6                       275          276         -           680
Diluted earnings per share                                               5,6                       270          273        (1)          670

* Earnings before net interest income and dividends; taxation; depreciation and amortisation; and empowerment transactions.

Other measures of earnings per share
                                                       Six months ended 31 March
Cents                                           Notes                       2018         2017  % change    Year ended
                                                                      (Unaudited)  (Unaudited)           30 September
                                                                                                                 2017
                                                                                                             (Audited)
Headline earnings per share                      5, 6                        275          275         -           679
Diluted headline earnings  per share             5, 6                        270          272        (1)          670
Normalised headline earnings per share           5, 6                        276          292        (5)          697
Diluted normalised headline earnings per share   5, 6                        271          289        (6)          687
Interim/total cash dividend per share                                        125          120         4           474

CONDENSED CONSOLIDATED STATEMENT  OF COMPREHENSIVE INCOME
for the six months ended 31 March 2018
                                                                                     Six months ended 31 March
R million                                                      Notes                       2018         2017    Year ended
                                                                                     (Unaudited)  (Unaudited) 30 September
                                                                                                                      2017
                                                                                                                  (Audited)
Profit for the period                                                                       448          469         1 142
Other comprehensive income, net of taxation:
Items that may be reclassified subsequently to profit or loss                               (62)          (3)            8
(Losses)/gains arising from translating the financial
results of foreign subsidiaries                                                             (40)          (3)            8
Translation loss on net investment in subsidiary*                                           (22)           -             -

Total comprehensive income                                                                  386          466         1 150
Total comprehensive income attributable to:
Non-controlling interests                                                                    (2)          19            34
- Share of profit for the period                                                              3           17            30
- Share of other comprehensive income                                                        (5)           2             4
Equity holders of Reunert                                                                   388          447         1 116
- Share of profit for the period                                                            445          452         1 112
- Share of other comprehensive income                                                       (57)          (5)            4

* Translation loss arising on the loan component of the group's net investment in a foreign subsidiary.

CONDENSED CONSOLIDATED STATEMENT  OF FINANCIAL POSITION
as at 31 March 2018

R million                                                                Notes         2018         2017  30 September
                                                                                 (Unaudited)  (Unaudited)         2017
                                                                                                              (Audited)
Non-current assets
Property, plant, equipment, investment properties and intangible assets               1 246        1 066         1 095
Goodwill                                                                     7        1 088          925           921
Investments and loans                                                                    61           49            55
Investment in joint ventures and associate                                              153          169           159
Rental and finance lease receivables                                                  1 851        1 578         1 682
Deferred taxation                                                                       111           83           105
                                                                                      4 510        3 870         4 017
Current assets
Inventory                                                                             1 372        1 430         1 439
Rental and finance lease receivables                                                    773          656           747
Accounts receivable and taxation                                                      2 256        2 016         2 222
Derivative assets                                                                        16            5            12
Money market instruments                                                                  -          270           130
Cash and cash equivalents                                                             1 055        1 562         1 522
                                                                                      5 472        5 939         6 072
Total assets                                                                          9 982        9 809        10 089
Equity attributable to equity holders of  Reunert Limited                             6 896        6 858         7 138
Non-controlling interests                                                                97           98           105
Total equity                                                                          6 993        6 956         7 243
Non-current liabilities
Deferred taxation                                                                       112           96           112
Put option liability                                                         8          125            -           121
Long-term borrowings                                                         9           69           42            73
                                                                                        306          138           306
Current liabilities
Accounts payable, provisions and taxation                                             2 095        2 112         2 304
Derivative liabilities                                                                   26            1            28
Bank overdrafts and short-term loans                                                    551          399           197
Current portion of long-term borrowings                                      9           11          203            11
                                                                                      2 683        2 715         2 540
Total equity and liabilities                                                          9 982        9 809        10 089

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2018
                                                                                         Six months ended 31 March
R million                                                            Notes                       2018         2017    Year ended
                                                                                           (Unaudited)  (Unaudited) 30 September
                                                                                                                            2017
                                                                                                                        (Audited)
Share capital                                                                                     365          356           359
Balance at the beginning of the period                                                            359          343           343
Issue of shares                                                                                     6           13            16
Share-based payment reserves                                                                      198          165           176
Balance at the beginning of the period                                                            176          136           136
Equity-settled share-based payments                                                                24           29            40
Shares acquired for incentive scheme                                                               (2)           -             -
Equity transactions/put option with  non-controlling shareholders                                (118)           -          (116)
Balance at the beginning of the period                                                           (116)           -             -
Put option                                                                                          -            -          (116)
Equity transaction with non-controlling interests                                                  (2)           -             -
Empowerment shares*                                                                              (276)        (276)         (276)
Treasury shares**                                                                                (312)        (136)         (227)
Balance at the beginning of the period                                                           (227)         (28)          (28)
Shares bought back during the period                                                              (85)        (112)         (203)
Shares used for incentive scheme                                                                    -            4             4
Foreign currency translation reserves                                                             (38)         (12)           (3)
Balance at the beginning of the period                                                             (3)          (7)           (7)
Other comprehensive income                                                                        (35)          (5)            4
Translation loss on net investment in foreign subsidiary                                          (22)           -             -
Balance at the beginning of the period                                                              -            -             -
Current period loss                                                                               (22)           -             -
Retained earnings                                                                               7 099        6 761         7 225
Balance at the beginning of the period                                                          7 225        6 843         6 843
Profit for the period attributable to equity holders of Reunert                                   445          452         1 112
Cash dividends declared and paid                                                                 (571)        (534)         (730)

Equity attributable to equity holders of  Reunert                                               6 896        6 858         7 138
                                                                                        
Non-controlling interests                                                                          97           98           105
Balance at the beginning of the period                                                            105           81            81
Share of total comprehensive income                                                                (2)          19            34
Dividends declared and paid                                                                        (5)          (6)          (15)
Net changes in non-controlling interests                                                           (1)           4             5

Total equity at end of the period                                                               6 993        6 956         7 243

* 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: 4 604 380 (2017: 2 107 979) (September 2017: 3 392 422).

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 March 2018
                                                                             Six months ended 31 March
R million                                                Notes                       2018         2017    Year ended
                                                                              (Unaudited)  (Unaudited)  30 September
                                                                                                                2017
                                                                                                           (Audited)
EBITDA                                                                                636          681         1 635
Increase in net working capital                                                      (269)         (55)         (225)
Other net non-cash movements                                                           25           11            60
Cash generated from operations                                                        392          637         1 470
Net interest income and dividends                                                      12           44            70
Taxation paid                                                                        (210)        (206)         (375)
Dividends paid (including to non-controlling interests)                              (576)        (540)         (745)
Net (outflow)/inflow from operating activities                                       (382)         (65)          420
Net (outflow)/inflow from investing activities                                       (351)          49           (21)
Capital expenditure                                                                   (54)         (49)         (143)
Net inflow arising from disposal of businesses                                          -            -            15
Gross cashflows on acquisition of businesses                10                       (227)        (242)         (241)
Increase in total rental and finance lease receivables                               (195)         (77)         (231)
Net other investments and loans (granted)/repaid                                       (6)           4            (2)
Dividends received from joint venture                                                   -            -            30
Investments net of other capital proceeds*                                            131          413           551
Net outflow from financing activities                                                 (88)        (133)         (386)
Shares issued                                                                           6           13            16
Investment in treasury shares                                                         (85)        (112)         (203)
Net long-term borrowings repaid                                                        (4)         (34)         (199)
Shares acquired for incentive scheme                                                   (2)           -             -
Equity transactions with non-controlling interests                                     (3)           -             -

(Decrease)/increase in net cash resources                                            (821)        (149)           13
Net cash resources at the beginning of the period                                   1 325        1 312         1 312
Net cash resources at the end of the period                                           504        1 163         1 325
Cash and cash equivalents                                                           1 055        1 562         1 522
Bank overdrafts                                                                      (344)        (325)         (138)
Short-term borrowings                                                                (207)         (74)          (59)
Net cash resources at the end of the period                                           504        1 163         1 325

* This includes R130 million withdrawal from investments in long-dated money market instruments (2017: R400 million) (September 2017: R540 million).

CONDENSED SEGMENTAL ANALYSIS
at 31 March 2018

                                                                                                                      Six months ended 31 March
R million                                                                                                           2018         %         2017  % of total  % change  Year ended  % of total
                                                                                                             (Unaudited)  of total  (Unaudited)                           30 Sept
                                                                                                                                      Restated3                              2017
                                                                                                                                                                        (Audited)
Revenue1
Electrical Engineering                                                                                             2 431        49        2 381          51         2       5 247          51
ICT                                                                                                                1 670        34        1 602          34         4       3 307          32
Applied Electronics                                                                                                  863        17          693          15        25       1 720          17
Other                                                                                                                  5         -            8           -       (38)         14           -
Total segment revenue                                                                                              4 969       100        4 684         100         6      10 288         100
Revenue from equity- accounted joint venture  in Electrical Engineering segment                                     (114)                  (251)                             (489)
Revenue from equity- accounted associate in  ICT segment                                                             (14)                   (12)                              (26)
Revenue as reported                                                                                                4 841                  4 421                    10       9 773
Operating profit
Electrical Engineering                                                                                               219        39          327          51       (33)        696          45
ICT2                                                                                                                 317        57          278          43        14         635          41
Applied Electronics                                                                                                   61        11           61          10         -         276          18
Other                                                                                                                (38)       (7)         (26)         (4)       46         (59)         (4)
Total segment  operating profit                                                                                      559       100          640         100       (13)      1 548         100
Operating loss/(profit) from equity-accounted joint venture in Electrical Engineering segment                          9                    (23)                              (48)
Operating profit from equity-accounted associate in ICT segment                                                       (1)                    (1)                               (3)
Operating profit as reported                                                                                         567                    616                    (8)      1 497

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
  R70 million (2017:R56 million, September 2017: R125 million).
  Should Quince be externally funded, this would result in a reduction of ICT's operating profit by the quantum of the external interest paid.
3 The segment analysis for March 2017 has been restated in order to eliminate the effect of head office administration costs from the operating segments.

Reconciliation of segment operating profit:
R million                                           2017  Elimination of          2017
                                               Operating     head office     Operating
                                               profit as  administration     profit as
                                              previously           costs  reported now
                                                reported
Electrical Engineering                               309               8           327
ICT                                                  263              15           278
Applied Electronics                                   54               7            61
Other                                                 14             (40)          (26)
Total segment operating profit                       640               -           640


                                                         At 31 March
R million                                                                                                  At  
                                                                                                      30 Sept
                                                    2018               %          2017                   2017
                                              (Unaudited)       of total    (Unaudited) % of total   (Audited) % of total
Total assets
Electrical Engineering                             2 869              29         2 758          28      3 115          31
ICT                                                4 490              45         3 777          39      3 952          39
Applied Electronics                                1 970              20         1 853          19      1 854          18
Other4                                               653               6         1 421          14      1 168          12
Total assets as reported                           9 982             100         9 809         100     10 089         100

4 Other consists mainly of group treasury cash balances.

NOTES

1 Basis of preparation
This unaudited interim financial report has been prepared in accordance with the framework concepts and the recognition and measurement requirements of
International Financial Reporting Standards (IFRS) in effect for the group at 1 October 2017, and further complies 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. This interim
financial report was prepared using the 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, No 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 period ended 31 March 2018, were consistent with those applied in the prior financial year's audited consolidated
annual financial statements. These accounting policies comply with IFRS.

                                                                                            Six months ended 31 March
R million                                                                                                                   Year ended
                                                                                                                          30 September
                                                                                                 2018            2017             2017
                                                                                           (Unaudited)     (Unaudited)        (Audited)
2  Operating profit
   Operating profit includes:
   - Cost of sales                                                                              3 350           2 931            6 366
   - Other expenses excluding depreciation  and amortisation                                      855             828            1 783
   - Other income                                                                                  21              11               30
   - Realised (loss)/gain on foreign exchange  and derivative instruments                         (10)             19              (20)
   - Unrealised (loss)/gain on foreign exchange and derivative instruments                        (11)            (11)               1
3  Net interest income and dividends
   Interest income and dividends                                                                   31              64              113
   Interest expense                                                                               (19)            (20)             (43)
   Put option liability: unwinding of discount                                                     (4)              -               (5)
   Total                                                                                            8              44               65
4  Empowerment transactions
   BBBEE costs                                                                                      2              20               20
   Taxation thereon                                                                                 -               -                -
   Net empowerment transactions after taxation*                                                     2              20               20

*  Included in March and September 2017 is a donation to create an empowerment structure for R1 million.



                                                                                            Six months ended 31 March
R million/millions of shares granted                                                                                     Year ended
                                                                                                                       30 September
                                                                                                 2018            2017          2017
                                                                                           (Unaudited)     (Unaudited)     (Audited)
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)                                                                                     162             164          164
   Adjusted by the dilutive effect of unexercised  share options granted (millions of shares)       3               2            2
   Weighted average number of shares used to determine diluted basic,
   headline and normalised headline earnings per share (millions of shares)                       165             166          166

6  Headline earnings
6.1  Profit attributable to equity holders of Reunert                                             445             452        1 112
     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) (March and September 2017:tax and NCI of Rnil)                 -              (2)          (1)
                                                                                                                                
     Headline earnings                                                                            445             450        1 111


                                                                                            Six months ended 31 March
R million                                                                                                                Year ended
                                                                                                                       30 September
                                                                                                2018             2017          2017
                                                                                          (Unaudited)      (Unaudited)     (Audited)

6.2  Normalised headline earnings*
     Headline earnings                                                                           445              450         1 111
     Normalised headline earnings are determined by eliminating
     the effect of the following items from headline earnings:
     Empowerment transactions                                                                      2               20            20
     Once-off IFRS 2 share based payment cost of BBBEE transactions
    (tax and NCI of Rnil)  (March and September 2017: tax and NCI of Rnil)                         -               19            19
     Once-off donation to create empowerment structure (tax and NCI of Rnil)                       -                1             1
     Once-off other BBBEE costs                                                                    2                -             -
     Recurring merger and acquisition costs  (tax and NCI of Rnil)
    (March and September 2017: tax and NCI of Rnil)                                                -                9             9
     Normalised headline earnings                                                                447              479         1 140

* 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 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 necessitate 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.

                                                                                            Six months ended 31 March
R million                                                                                                                Year ended
                                                                                                                       30 September
                                                                                                2018             2017          2017
                                                                                          (Unaudited)      (Unaudited)     (Audited)

7  Goodwill
   Carrying value at the beginning of the period                                                 921              737           737
   Acquisition of businesses1 (Note 10)                                                          183              172           171
   Adjustment to goodwill on finalisation of  acquisition made in prior financial year             -               33            33
   Disposal of a controlling interest in a subsidiary                                              -              (12)          (12)
   Disposal of businesses                                                                          -                -            (9)
   Exchange differences on consolidation of  foreign subsidiaries                                (16)              (5)            1
   Carrying value at the end of the period                                                     1 088              925           921

1 At 31 March 2018, the purchase price allocation of the acquisitions made in the 2018 financial year have not been finalised and therefore the amounts
  reported are provisional and subject to change.
                                                                                            Six months ended 31 March
R million                                                                                                                Year ended
                                                                                                                       30 September
                                                                                                2018             2017          2017
                                                                                          (Unaudited)      (Unaudited)     (Audited)
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 period                                                        121                -             -
   Raised at acquisition at fair value                                                             -                -           116
   Fair value remeasurements                                                                       -                -             -
   Unwinding of discount                                                                           4                -             5
   Balance at the end of the period                                                              125                -           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 earnings 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.
   These forecasts are based on management's best estimate of the revenue and NPAT
   likely to be achieved in 2020.
   -  The earnings 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)                                         80                245           84
   Less: short-term portion (including finance leases)                                          (11)              (203)         (11)
                                                                                                 69                 42           73

R million                                                                                                        2018
                                                                                                           (Unaudited)
10  Acquisition of businesses
    During the current period the group made the following acquisitions:
    -  SkyWire Proprietary Limited: With effect from 1 March 2018, the group
       acquired 100% of the business and related assets of SkyWire, a provider of  broad band
       connectivity. The R146 million in goodwill arising from the acquisition
       is attributable to the expected high growth in this business and the ability to harvest
       significant synergies through the ICT segment's distribution network.
       As the group is seeking to diversify their product offerings, and their existing services
       depend on reliable high-speed data connections, SkyWire data-access products
       provide a natural extension of the segment's service offering.  Synergies will also be
       obtained from the vertical integration with the group's
       other businesses in the ICT Segment. A contingent purchase consideration amounting to R93 million was
       raised on acquisition. This is disclosed in note 13.                                                       205

    -  Dopptech Proprietary Limited: With effect from 1 March 2018, the group
       acquired 100% of the share capital of Dopptech Proprietary Limited. The  R37 million in
       goodwill arising from the acquisition is attributable to the business's core product
       offerings; customer relationships in key geographic regions not currently
       accessible to the group; and a well-developed R&D capability in electro-mechanical
       engineering that will assist with product development within the Applied
       Electronics segment. A contingent purchase consideration amounting  to
       R17,5 million was raised on acquisition. This is disclosed in note 13.                                      20

    Cost of investments                                                                                           225
    Net borrowings acquired on acquisition                                                                          2
    Net cashflows on acquisition of businesses                                                                    227
    Contingent purchase considerations                                                                            111
    Total purchase price                                                                                          338
    Gross assets acquired and liabilities taken over:
    Property, plant and equipment and intangible assets                                                           183
    Inventory                                                                                                       3
    Deferred taxation                                                                                             (31)
    Goodwill                                                                                                      183
    Net assets acquired                                                                                           338
    Revenue since acquisition                                                                                      10
    Loss after taxation since acquisition                                                                          (2)
    Revenue for the 6 months ended 31 March 2018
    as though the acquisition dates had been 1 October 2017                                                        50
    Profit after taxation for the 6 months ended 31 March 2018
    as though the acquisition dates had been 1 October 2017                                                        12
    2017
    Refer to 2017 published results



11  Unconsolidated subsidiary
    The financial results of Cafca Limited (Cafca), a 70% held 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 (eg. 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 31 March 2018, Cafca's share capital and reserves amounted to USD17 million.

    Counterparty R million                                                           Relationship               Sales  Purchases     Lease  Treasury
                                                                                                                                  payments    shares
12  Related party transactions
    All related-party transactions, trading account and loan balances
    are on the same terms and conditions as those with non-related parties.
    March 2018
    CBI-electric Telecom Cables Proprietary Limited                                  A joint venture                -          1         -         -
    Oxirostax Proprietary  Limited (Nashua Winelands)                                An associate                   8          5         -         -
    Bargenel Investments Proprietary Limited                                         Owns 18,5m Reunert shares      -          -         -       276
    Lexshell 661 Investment Proprietary Limited                                      A joint venture                -          -         -         -
    March 2017
    CBI-electric Telecom  Cables Proprietary Limited                                 A joint venture                3          1         -         -
    Oxirostax Proprietary  Limited (Nashua Winelands)                                An associate                   7          5         -         -
    Bargenel Investments  Proprietary Limited                                        Owns 18,5m Reunert shares      -          -         -       276
    Lexshell 661 Investment Proprietary Limited                                      A joint venture                -          -         -         -
    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         -


                                                                                                  Six months ended 31 March
R million                                                                                                                      Year ended
                                                                                                                             30 September
                                                                                                      2018             2017          2017
                                                                                                (Unaudited)      (Unaudited)     (Audited)
13  Contingent purchase considerations
    As part of the acquisitions of SkyWire and Dopptech (note 10),
    the group recognised  further additional contingent purchase considerations as follows:
    Balance at the beginning of the period1                                                             27               40            40
    Raised at acquisition at fair value (SkyWire and Dopptech)                                         111                -             -
    Fair value re-measurements and other  profit/loss adjustments                                      (11)              (7)          (13)
    Balance at the end of the period2                                                                  127               33            27
    
    These were classified as level 3 instruments in the fair value hierarchy based on the following unobservable inputs:
    For SkyWire and Omnigo, the fair value of the contingent payable is determined using a cash flow valuation technique and is based
    on earning multiples stipulated in the purchase agreement
                                                                                         
    SkyWire has two payments due within a one year period:
    -  R70 million based on the expected profit after tax (PAT) at 31 March 2019 at an agreed earnings multiple.
    -  R25 million based on a defined business plan according to which the company has to achieve certain predefined strategic tasks and
    objectives within 12 months of the acquisition date.
    The discount rate used is 9,1% (Jibar plus 2%).
                                                                                         
    The purchase consideration for Omnigo was determined by deducting, from profit before interest and tax (PBIT), 25% of the average capital (total assets less
    current liabilities) employed in the business. The amount is assessed on an annual basis using forecasted average capital employed and PBIT. The discount rate used
    is 9,1% (Jibar plus 2%).
        
    For Dopptech, R17,5 million was classified as a level 1 instrument in the fair value hierarchy as the amounts are fixed and stipulated within the purchase
    agreement.
    
    1 This relates to the acquisition of Omnigo in the 2016 period
    2 The balance of the contingent purchase considerations have been included in 'Accounts payable, provisions and taxation' on the balance sheet
                                                                                      
14  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.
                                                                                      
15  Events after reporting date
    No events have occurred after the reporting date that require additional disclosure or adjustment to the results presented.

ADDITIONAL INFORMATION
                                                                               Six months ended 31 March
R million (unless otherwise stated)                                                                         Year ended
                                                                                                          30 September
                                                                                       2018         2017          2017
                                                                                 (Unaudited)  (Unaudited)     (Audited)
Current ratio (:1)                                                                      2,0          2,2           2,4
Quick ratio (:1)                                                                        1,5          1,7           1,8
Dividend yield (%)*                                                                     6,4          6,2           7,0
Return on capital employed (%)                                                         15,5         17,4          19,8
Net number of ordinary shares in issue (million)                                        161          163           162
Number of ordinary shares in issue (million)                                            185          184           185
Less: Empowerment shares (million)                                                      (19)         (19)          (19)
Less: Treasury shares (million)                                                          (5)          (2)           (4)
Capital expenditure                                                                      54           49           143
- expansion                                                                              32           29            98
- replacement                                                                            22           20            45
Capital commitments in respect of property,  plant and equipment                         64           83            39
- contracted                                                                             43           46            20
- authorised not yet contracted                                                          21           37            19
Commitments in respect of operating leases                                              231           62           126
Contingent liabilities**                                                                  -            -             -

* Calculated as the total dividend (interim 125 cents per share and prior financial year final dividend per share 354 cents) (2017: 120 cents per share and
  326 cents per share respectively) divided by the closing Reunert share price of 7 448 cents (2017: 7 200 cents).
** The directors are confident that Reunert Limited and its subsidiaries have no exposure arising from the guarantees and sureties in issue, beyond the liabilities 
   recognised in the condensed consolidated statement of financial position at 31 March 2018. Definitions of ratios and other financial terms are the same as those
   incorporated in the 2017 Integrated Report.

ADMINISTRATION

Directors: TS Munday (chairman) *,T Abdool-Samad*, AE Dickson (chief executive officer), SD Jagoe*, S Martin*, M Moodley, NDB Orleyn**, SG Pretorius*, 
T Ramuedzisi*, 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
PO Box 61051
Marshalltown, 2107

Sponsor
One Capital Sponsor Services Proprietary 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 period ended 31 March 2018 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 Secretary

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.

28 May 2018 (publication date)


http://WWW.REUNERT.CO.ZA


Date: 28/05/2018 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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