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 has continued to execute its strategy and has pleasure in presenting results, that reflect further real growth for the six months ended 31 March 2017. Revenue increased by 10% from R4 022 million to R4 421 million and operating profits increased by 9% from R564 million to R616 million. These results were achieved in challenging operational circumstances in which the political and economic environment contributed to reduced economic growth and increased Rand volatility. In addition, the Applied Electronics segment experienced a lull in orders from a major export market while follow-up contracts were negotiated and concluded.

The growth in revenue and operating profit as well as changes in the earnings metrics are presented in the table below.


Measure Unit 6 months to
31 March 2017
6 months to
31 March 2016
Revenue R million 4 421 4 022 10
Operating profit (before interest, dividends and empowerment transactions) R million 616 564 9
Operating margin % 13,9 14,0 (1)
Basic earnings per share cents 276 272 1
Headline earnings per share cents 275 271 1
Normalised headline earnings per share cents 292 282 4



During the reporting period, the group changed its corporate structure and created three new statutory entities which were established to hold all businesses in the respective segment. This necessitated the previous divisions of Reunert being corporatised and transferred to the appropriate segment holding company. The costs of the holding company, which were historically recovered from Reunert’s own divisions, are now recovered through increased management fees from the segments. This restructure has no impact on the consolidated group accounts.

The Segmental Analysis in the interim financial statements reflects the impact of this new structure. Similar levels of management fees were not charged in the comparative period. The Segment Performance set out overleaf reflects the like-for-like comparatives on the assumption that this restructure had not been implemented for this period.


Group revenue

Group revenue increased by 10% from R4 022 million to R4 421 million. This growth was driven by a 31% increase in revenue in the Electrical Engineering segment, from R1 824 million to R2 381 million. Revenue in the Information, Communication and Technology (ICT) segment declined by 5%, from R1 698 million to R1 602 million, and the revenue in the Applied Electronics segment was flat at R693 million.

Group operating profit

The 10% increase in revenue translated into a 9% increase in operating profit, mainly due to organic growth in our traditional operations and the positive impact of acquisitions, which more than offset the negative impact of a stronger Rand and a decline in orders from a large export market.

Electrical Engineering’s operating profit increased by 20%, ICT improved its operating profit by 11% and Applied Electronics’ operating profit reduced by 50%.

Interest received

Over the past 18 months, the group has undertaken acquisitions (R751 million), increased plant capacity (R203 million), re-financed our in-house finance company (R200 million), deployed working capital to support the group’s growth (R451 million) and bought back shares (R140 million). These investments, all of which are aligned with our strategy, have resulted in the group’s net interest received reducing from R70 million in the six months to 31 March 2016 to R44 million in the six months to 31 March 2017.


Electrical Engineering

This segment continued its strong performance, which was primarily driven by integration benefits from the acquisition of Zamefa; enhanced market share resulting in good production volumes in the circuit breaker and power cable factories; and strong local demand for optic fibre due to the acceleration of rollouts of fibre-to-the-home and fibre-to-the-business.

This resulted in revenue increasing by 31% and operating profit by 20%.


Due to a firmer Rand exchange rate and the continued movement to fewer but higher capacity machines in the market, revenue in the Nashua Office Automation business ended the period lower although margins improved. The ongoing efficiency programme and the improved margins resulted in an increased operating profit for the period under review. The strong currency also negatively impacted the Rand equivalent income of Prodoc, despite the company achieving real growth in Swedish Krone.

Our Voice Over Internet Protocol (VoIP) business continued to perform strongly as it increased both the number of customers and minutes carried. This volume increase offset the impact of the statutory reduction in in-bound interconnect rates. The benefit of lower out-bound interconnect rates and operational efficiencies resulted in an improved operating profit in this business.

Our in-house finance company increased its finance book. The quality of the book remained high despite the challenging economic conditions.

Overall, the segment’s revenues decreased by 5%, and operating profits improved by 11%.

Applied Electronics

Revenue was flat in the Applied Electronics segment. There was good growth in both revenue and profit in the Tactical Communications and Radar businesses. This improvement was offset by the reduction in revenue and profit due to a lull in orders from a major export market and the impact of a stronger Rand. New export contracts have subsequently been received and the associated businesses will return to full production in the second half of the financial year.

As a result, revenue was flat and operating profit reduced by 50%.


Over the last 18 months, the group has concluded five acquisitions totalling R751 million (inclusive of debt and minority interests assumed); R494 million was invested in the 2016 financial year and the remaining R257 million in the reporting period. These acquisitions, with the exception of Zamefa, are all early life-cycle and innovative businesses which are expected to achieve higher revenue growth than in the traditional Reunert businesses. Their contribution to the group’s operating profit should also develop positively as these businesses mature. The Board is pleased with the level of integration already achieved and with the progress made in the development of these business’s operating models.

Our cash and money market deposits ended the period at R1,8 billion. This, together with our largely unleveraged finance book of R2,2 billion in our in-house finance company and our unutilised borrowing capacity, ensures we continue to have adequate financial resources to invest in our strategy.


Under the general authority granted by shareholders, the group continued to purchase shares in the open market. During the period under review, the group purchased 1,7 million shares at a cost of R112 million, bringing the total cash returned to shareholders since the commencement of the programme to R140 million (2,1 million shares).


The group will benefit from an improvement in export orders, received during this period, which will reflect
in the second half’s profit as these export orders translate into sales. This, together with the enhanced output
in our tactical communication business, should lead to an improved second half operating profit in the Applied
Electronic segment.

This, in combination with the expected continued solid performance of the Electrical Engineering and
ICT segments, underpins our expectations that real growth for the year will be achieved, provided the
economic and political environment does not deteriorate materially and that no major disruption occurs
during the tri-annual wage negotiations in the metals industry.

The financial information on which the prospects are based has neither been reviewed nor reported
on by the group’s external auditors.


Notice is hereby given that a gross interim cash dividend No 182 of 120,0 cents per ordinary share
(2016: 113,0 cents per share) has been declared by the directors for the six months ended 31 March 2017.
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 96,0 cents
per share.

The issued share capital at the declaration date is 184 279 096 ordinary shares.


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

Last date to trade (cum dividend) Tuesday, 20 June 2017
First date of trading (ex-dividend) Wednesday, 21 June 2017
Record date Friday, 23 June 2017
Payment date Monday, 26 June 2017

Shareholders may not dematerialise or rematerialise their share certificates between Wednesday, 21 June
2017 and Friday, 23 June 2017, both days inclusive.

On behalf of the board


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

29 May 2017