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REUNERT LIMITED - Audited preliminary summarised consolidated results and dividend declaration for the year ended 30 September 2019

Release Date: 19/11/2019 16:15
Code(s): RLO     PDF:  
Wrap Text
Audited preliminary summarised consolidated results and dividend declaration for the year ended 30 September 2019

REUNERT LIMITED
Incorporated in the Republic of South Africa
Registration number 1913/004355/06
Ordinary share code: RLO
ISIN code: ZAE 000057428
("Reunert" or "the Group" or "the Company")

AUDITED PRELIMINARY SUMMARISED CONSOLIDATED RESULTS1
and cash dividend declaration for the year ended 30 September 2019

The contents of this short-form announcement are the responsibility of the Board of directors of the Company (the Board),
and any forecast financial information or commentary has not been reviewed or reported on by the Group's auditors.

Shareholders are advised that this short-form announcement does not contain full or complete details and represents a
summary of the information contained in the full announcement, which is accessible via the JSE link at
https://senspdf.jse.co.za/documents/2019/JSE/ISSE/RLO/AFS_2019.pdf and on Reunert's website (http://www.reunert.com) on 
19 November 2019.

Shareholders and investors are advised to review the full announcement in making any investment decisions.

The full announcement is also available for inspection at no charge at the registered offices of the Company and its
sponsor, One Capital Sponsor Services Proprietary Limited,  17 Fricker Road, Illovo, during normal business hours.

1 Extracted financial information from the audited preliminary consolidated financial statements for the year ended 
  30 September 2019, excluding free cash flow. This announcement itself is not audited or reviewed.

SALIENT FEATURES

                               Year ended

R million            30 September  30 September                %
                             2019          2018           Change
Group revenue              10 714        10 492                2
Operating Profit            1 361         1 542              (12)
Free cash flow2             1 313           641              105
Final dividend per share      383           368                4
Profit for the year           804         1 152              (30)
EPS (cents)                   490           717              (32)
HEPS (cents)                  573           703              (19)
NHEPS (cents)                 578           687              (16)

2 Cash from operations +- interest received/(paid) - tax paid - replacement expenditure.

OVERVIEW

Group revenue increased by 2% to R10 714 million (FY183: R10 492 million). Group operating profit declined by 12% to R1
361 million (FY18: R1 542 million) primarily due to the quantum of once-off items in the prior financial year and the
decline in the Electrical Engineering (EE) segment's contribution in the current financial year.

Consistent with the prospects outlined to shareholders in the 2019 interim results, both the Information, Communication
and Technology (ICT) and Applied Electronics (AE) segments have delivered positive growth in their core operating profit4.
The reduction in the EE segment's core operating profit is due to lower electrical infrastructure spend particularly by
Eskom and municipalities.

In addition, R97 million of the Group's investment in Zamefa was impaired. This was due to the unexpected change in the
duty draw back in Zambia which negatively reduces Zamefa's gross trading margin.

Cash flow from operations improved during the financial year due to the positive impact of the targeted reduction of
working capital.

3 FY18: Financial year ended 30 September 2018.
4 A detailed analysis of the once-off items and the definition of core operating profit is available on our website
at https://www.reunert.co.za/downloads/results/2019/reconciliation.pdf.

SEGMENTAL RESULTS

Electrical Engineering
Core operating profit contracted by 27% to R323 million (FY18: R440 million), while revenue increased by 6% to R5 457
million (FY18: R5 139 million).

This contraction arose from our two local cable businesses where the demand for cables fell materially in the second half
of the year. Our channel partners reduced their orders which compounded the already weak demand from both Eskom and
municipalities. Telkom reduced its demand for copper and fibre optic cable. The efficiency of both cable factories fell as
reduced demand resulted in sub-optimum production levels. This, coupled with under-recoveries of overheads due to lower
volumes and reduced margins from the changed sales mix, resulted in the reduced core operating profit.

The strongest performer in the segment was Low Voltage where strong export volumes and good performances in the USA and
Australia provided some buffer to weakening volumes in South Africa. The business managed its cost base and margins well
and delivered a satisfactory performance in an otherwise difficult local environment.

Information, Communication and Technology

The ICT segment delivered core operating profit growth of 5% to R748 million (FY18: R715 million), despite revenues
falling by 6% to R3 236 million (FY18: R3 443 million).

Office Automation further expanded its market position as a Total Workspace Provider. Good operational efficiencies and
the increase in complementary services offset weaker hardware sales and the business delivered a solid result.

The Communications Cluster also had a strong performance:

- ECN achieved record new customer sales although the weak economy resulted in overall minutes remaining largely stable.
  Improved complementary products and operational efficiency enabled another year of real growth for ECN.
- The integration of SkyWire into the Communications Cluster was completed successfully. The cash flow returns of the
  business remain in line with the investment case.

The Finance Cluster delivered another good financial performance. The book grew to R2 975 million (FY18: R2 811 million).
The fixed costs remained well under control and the quality of the book is excellent. Bad debts were limited to only 0,27%
of assets managed (FY18: 0,28%) despite the challenging environment faced by many of our customers.

Applied Electronics
The AE segment's core operating profit increased by 1% to R356 million (FY18: R352 million). Revenue increased by 7% to R2
346 million (FY18: R2 198 million).

Fuchs executed their export fuze contracts and achieved another excellent performance with its major export contract being
fully completed by the end of the third quarter in the financial year. The factory will, however, not be fully loaded in
H1:2020 until the next phase of the export contract to Southern Asia is negotiated.

Reutech Solutions had an excellent year as it sold a large volume of dynamic control platforms into export markets. Local
volumes and margins remain challenging but export demand continued to underpin its performance.

Reutech Communications had a record year as it delivered secure communication products into both local and export
markets. The factory ran largely at full capacity. The investment in shop floor management systems over the past few years
resulted in improved operational efficiency.

Reutech Radar Systems returned a solid performance and concluded a large export contract for a defence radar system, and
mining radars returned to normal volumes as penetration into new markets increased.

Terra Firma Solutions had another good year of growth as a record number of engineering, procurement and construction
projects were executed and it concluded its first projects in Africa. These opportunities are expected to continue to
grow.

PROSPECTS

Reunert's ICT and AE segments continue to perform well as their strategic execution translates into good financial
performance. We expect this to continue into the new financial year. There remains uncertainty on the timing, rate and
quantum of any EE recovery. Current industrial action is likely to negatively impact the first half of 2020.

Our Statement of Financial Position remains strong and cash flow generation is expected to continue at levels that support
our dividend philosophy and operational and strategy execution.

Reunert remains positively positioned for a material improvement in performance when economic activity in South Africa
improves.

CASH DIVIDEND

Our final and total dividend increase of 4% is again inflation related and reflective of our pleasing cash performance. It
takes cognisance of our ungeared Statement of Financial Position and our strategic plans going forward.

Therefore, notice is hereby given that a gross final cash dividend No 187 of 383,0 cents per ordinary share (2018: 368,0
cents per share) has been declared by the directors for the year ended 30 September 2019.

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 306,4 cents per ordinary
share.

The issued share capital at the declaration date is 184 950 196 ordinary shares.

Income tax reference number: 9100/101/71/7P
In compliance with the requirements of Strate Proprietary Limited and the Listings Requirements of the JSE Limited, the
following dates are applicable:

Last date to trade (cum dividend)    Tuesday, 14 January 2020
First date of trading (ex dividend)  Wednesday, 15 January 2020
Record date                          Friday, 17 January 2020
Payment date                         Monday, 20 January 2020

Shareholders may not dematerialise or rematerialise their shares between Wednesday, 15 January 2020 and Friday, 
17 January 2020, both days inclusive.

On behalf of the Board

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

Sandton
19 November 2019

Registered office
Nashua Building, Woodmead North Office Park, 54 Maxwell Drive, Woodmead, Sandton
PO Box 784391, Sandton, 2146
Telephone +27 11 517 9000

Sponsor
One Capital

Investor enquiries
Karen Smith +27 11 517 9000 or email invest@reunert.co.za.
For more information log on to the Reunert website at http://www.reunert.com.

Directors: TS Munday (Chair)*,T Abdool-Samad*, AB Darko*, AE Dickson (Chief Executive Officer), LP Fourie*, JP Hulley*,
SD Jagoe*, S Martin*, MT Matshoba-Ramuedzisi*, M Moodley, Adv NDB Orleyn**, SG Pretorius*, NA Thomson (Chief Financial
Officer), R Van Rooyen*      
* Independent non-executive; ** Non-executive



Date: 19/11/2019 04:15:00
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