Unaudited Interim Financial Report and Cash Dividend Declaration for the 6 months ended 31 March 2016



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”)


Reunert delivered another pleasing result in 2016 primarily evidenced by an increase of 12,7% in operating profit from continuing operations to R1 315 million (2015: R1 167 million). The improvement follows on from the 14,7% increase achieved in 2015, reflecting two years of double digit earnings growth from our core operations. NHEPS, after removing merger and acquisition and empowerment IFRS 2 – Share-based Payment transaction costs, increased by 16,5% to 662 cents per share (2015: 29%).

The growth in revenue, operating profit and in the earnings metrics are presented in the table below.


Units 2016 2015 %
Revenue R million 8 511 8 300 3
Operating profit (before interest, dividends and empowerment transactions) R million 1 315 1 167 13

Continuing operations

Basic earnings per share cents 577 579
Headline earnings per share cents 570 576 (1)
Normalised headline earnings per share cents 662 568 17

All operations

Basic earnings per share cents 577 604 (4)
Headline earnings per share cents 570 588 (3)
Normalised headline earnings per share cents 662 580 14


Financial performance

Group revenue

Overall group revenue from continuing operations increased by 2,5% to R8,5 billion (2015: R8,3 billion). This was underpinned by significant growth of 39,2% in the Applied Electronics segment. The Electrical Engineering segment remained static at R4,1 billion. Revenue in the ICT segment was 2,9% down as the economic conditions resulted in weaker unit sales offset by an increase in average selling prices, in part due to a weaker Rand and a strategy of moving the sales mix towards more expensive units.

Group operating profit

The 2,5% increase in group revenue was leveraged to a 12,7% increase in operating profit through improved margins. This can be ascribed to the positive impact from Applied Electronics arising from large export orders and a good performance in the Electrical Engineering segment. Gains were tempered by the impact of the difficult trading conditions in the ICT segment.


Our cash resources and money market deposits ended the year at R2,4 billion. This balance, together with a largely ungeared finance book of R2,1 billion in our in-house finance company, and the capacity to leverage the rest of our balance sheet, provides us with significant resources to invest in achieving our strategy.

Segmental performance

Electrical Engineering

The Electrical Engineering segment delivered a strong performance on the back of a good result in 2015.

The energy cable business’ operating profit is in line with that of the prior year despite a 7,8% decline in revenue due to changes in product mix and the delay in the award of key infrastructure projects. The telecommunications cable business enjoyed an excellent year on the back of the roll-out of the national fibre to the home programme.

The low voltage business benefited from the closure of its underperforming solutions unit at the end of 2015. The business offset muted local volumes through an excellent export performance. Its Australian operations continued to be impacted by the global downturn in commodities, whereas its North American business performed strongly. The circuit breaker business launched several new products, which bodes well for the future.


The main components of this segment made solid progress despite adverse economic conditions. The number of office automation units sold was down on the prior year, although an improvement in product mix yielded an increase in the average selling price. The office automation business continued to drive efficiencies throughout its supply chain and together with the enhanced product mix enabled the business to nominally retain its financial performance.

Our voice business, ECN, continued to increase its market share by securing a continuous stream of new customers resulting in the sale of 1,1 billion voice minutes. Future revenue should reflect the impact of this positive growth now that the last interconnect rate reduction became effective in October 2016 and the regulated floor has been reached.

Quince Capital, our in-house finance company continued to enjoy the benefits of credit loss ratios that remain well below market levels.

Applied Electronics

This segment delivered an outstanding performance driven by major export orders, most of which were completed in 2016. In particular, the Fuchs business completed the execution of its large export order with delivery being finalised in the latter part of the financial year.

Our tactical communication business had a difficult year as it industrialised its new production processes and expanded production lines, from three to eight, to accommodate the new multi-year Radiate contract. The impact of full production is expected to be realised from the second quarter of the 2017 financial year.

Our radar business continued to innovate its product line, launching the latest version of its mining surveillance radar and a new handheld radar for assessing faults in the ceiling of underground stopes. On the defence side of the business, significant effort was made to secure future research funding and position the business to participate in future large-scale radar orders. However, due to the delay in certain key programmes in the current year, revenue and profit were below those of the prior year. This unit is, however, well positioned for the future due to marketing efforts undertaken in the current year.

Omnigo, our high technology printed circuit board manufacturer, was recapitalised after being acquired in December 2015, and this enabled a significantly improved performance. This business unit exceeded all investment criteria and has secured more long-term orders.

The Solutions logistics business out-performed inflation with a pleasing increase in operating profit due to stringent cost and margin control.

Strategy execution

The progress made in the execution of the group’s strategy yielded pleasing results with the conclusion of three complementary acquisitions that should deliver geographically diversified revenue streams and provide good growth opportunities.

With our cash resources, the confidence we have in Reunert’s future and recognising our shareholders’ desire for greater clarity regarding cash reserves, we commenced a share buyback programme in September 2016, under general shareholder authority permitting us to purchase up to nine million shares. By year-end we had repurchased 443 000 shares at an average price of R62,69 per share and at total consideration of R27,8 million. We continued to repurchase shares during the closed period, in terms of a firm mandate that was effected prior to the closed period in accordance with the JSE Listings Requirements.

We will continue to carefully balance our opportunities to invest in new businesses together with the benefit of share buybacks.

The execution of our transformation pillar progressed well. The demographic at all management levels has improved and the business units are well advanced in their activities in compliance to the new BBBEE Codes or Sector Codes, as applicable.

We took concrete action in ensuring our businesses have the appropriate equity structures to participate in the local markets. We concluded the new BEE equity ownership transaction in our Electrical Engineering segment. The equity transaction in the Applied Electronics segment is progressing according to schedule.

These transactions will position the respective segments to continuously participate in the local markets in which they operate.


We have made good progress on the execution of the group strategy, underpinned by our ongoing programme of strategic acquisitions, positioning the group positively for growth. In the short term, although diminished, our concentration in South Africa will continue to expose the group to the local macro-economic drivers resulting from the country’s current and emerging economic and political environment. In 2017, growth in the second half of the year is likely to be stronger than in the first half as our export businesses return to full capacity on the back of expected new orders.


There were no changes in the directorate during the year under review.

Cash dividend

Notice is hereby given that a gross final cash dividend No 181 of 326,0 cents per ordinary share (2015: 302,0 cents per share) has been declared by the directors for the year ended 30 September 2016.

The dividend has been declared from income reserves.

A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt from, or who do not qualify for, a reduced rate of withholding tax. The net dividend payable to shareholders is subject to withholding tax at a rate of 15%, and thus amounts to 277,10 cents per share.

The issued share capital at the declaration date is 184 005 796 ordinary shares.

In compliance with the requirements of Strate, the following dates are applicable:


Last date to trade (cum dividend) Tuesday, 10 January 2017
First date of trading (ex-dividend) Wednesday, 11 January 2017
Record date Friday, 13 January 2017
Payment date Monday, 16 January 2017

Shareholders may not dematerialise or rematerialise their share certificates between Wednesday, 11 January 2017 and Friday, 13 January 2017, both days inclusive.

On behalf of the board


Trevor Munday
Alan Dickson
Chief executive officer
Nick Thomson
Chief financial officer

21 November 2016