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



Reunert’s 2017 results reflect a 14% growth in operating profit and a 19% growth in profit for the year. This improvement in profitability flowed through to headline earnings per share which also grew by 19%. This was achieved, as highlighted in our previous prospects statements, through a strong second half performance across all segments, including the export businesses.

The execution of the group strategy led to three further acquisitions in the year and a continued focus on customer service and operational efficiencies.


Measure Units 2017 2016 % change
Revenue R million 9 773 8 511 15
Operating profit (before net interest income and dividends, and empowerment transactions) R million 1 497 1 315 14
Profit for the year R million 1 142 963 19
Headline earnings per share cents 679 570 19
Normalised headline earnings per share cents 697 662 5



Group revenue

Group revenue increased by 15% to R9,8 billion (2016: R8,5 billion). The major area of growth was in the Electrical Engineering segment, where segment revenue grew by 28%. Revenue in the Applied Electronics segment grew by 14%, despite a stronger Rand impacting export revenue, and full export fuze production only resuming in the second half. Revenue in the ICT segment was flat. In the office automation business, revenue increased from the sales of fewer, but higher-value units. In the voice-over-internet business, the final statutory reduction in interconnect rates resulted in lower income despite the positive customer growth.

Group operating profit

Group operating profit increased by 14% from R1,3 billion to R1,5 billion. The 16% increase in the ICT segment was mainly due to the successful implementation of margin enhancement programmes, in both Nashua and ECN and volume growth on higher-volume office automation equipment and voice minutes.

The Electrical Engineering segment’s operating profit improved by 14%, driven by strong performance in our cable businesses and the incorporation of Zamefa, our acquisition in Zambia. The stronger Rand negatively impacted our circuit breaker business.

Despite profit growth in the majority of Applied Electronics segment’s businesses, the segment returned a 10% decline in operating profit because of reduced export sales in the fuze business. The fuze business returned to full production in the second half of the year after securing new long-term contracts.

Group cash resources

We continued our share buyback programme under general authority from shareholders. During the year, we repurchased a further 2,9 million (2016: 0,4 million) shares at an average price of 6 739 (2016: 6 269 cents) cents per share, including transaction costs. This brings the total shares repurchased since commencing the programme in September 2016 to 3,3 million or 2% of shares in issue.

Capital of R199 million was allocated for the share buyback programme and R241 million was invested in acquisitions, reflecting the execution of the Board’s dual mandate to return surplus cash to shareholders and seek appropriate acquisitions.

At year end, we had combined money market deposits and other liquid resources totalling R1 455 million (2016: R1 982 million). This provides sufficient residual cash resources to continue the implementation of our strategy.


Despite the challenging local political and economic conditions, Reunert’s operating profit from our traditional businesses in the Electrical Engineering and ICT segments again increased in real terms. Applied Electronics only returned to full export production in the second half of the year, but still delivered a solid segmental performance. The positive contribution from our acquisitions assisted in the delivery of a strong overall operational result.

Electrical Engineering

The double-digit growth in Electrical Engineering was driven by the acquisition of Zamefa and the strong performance of the power and telecommunications cable business units. Revenue increased by 28% to R5,2 billion (2016: R4,1 billion) and operating profit by 14% from R610 million to R696 million.

Telecom Cables continued to benefit from the local FTTX1 roll-out and enjoyed strong production volumes. The diverse market position of the South African power cable business allowed it to secure meaningful volumes, despite the weak general infrastructure demand. The integration of the Zambian operation, Zamefa, progressed well and many of the vertical integration benefits are being realised. All of the cable business units have implemented long-term continuous improvement projects, and efficiency gains were realised in all factories.

Low Voltage, our circuit breaker business, faced a challenging year as local investor sentiment slowed residential and commercial building activity. The strong Rand softened export margins, which added pressure. Several new product releases, including high-capacity DC breakers for telecommunication and renewable energy applications, supported this business unit’s performance, which ended the year slightly down on the prior year.

1 Fibre-to-the-x: Collective term for various optical fibre delivery topologies that are categorised according to where the
fibre terminates.

Information Communication Technologies

The ICT segment delivered a strong performance underpinned by positive margin movement in both the office automation and voice business portfolios, despite segment revenue remaining flat at R3,3 billion. Operating profit increased by 16% from R549 million to R635 million.

Nashua progressed well in the execution of its strategy to change from an office automation hardware supplier to a total office services provider to its 28 000-strong customer base. A continued move to larger machines underpinned its positive market share movement, and a strong Rand supported the hardware margins. Several newly launched services increased cross-sell revenue and improved the performance of the franchise channel.

Our voice business, ECN, enjoyed a 9% growth to 1,2 billion minutes carried on the network. The impact of lower business confidence reduced demand per customer. This was offset by substantial growth in the number of customers serviced. We invested R12 million into the ECN network, and the upgrade has resulted in a more robust, high-quality and simplified network, creating scale for our new business-internet-access product suite. The ability to provide both voice and data to our customers offers a new diversified sales stream and underpins the continued growth rate of this business.

Our in-house finance book in Quince Capital increased from R2,1 billion to R2,4 billion on the back of improved office automation sales. The quality of the book remains high and, despite the tough economic times, bad debts remain well below industry norms.

Applied Electronics

The Applied Electronics segment’s revenue increased by 14% to R1,7 billion (2016: R1,5 billion), and operating profit reduced by 10% to R276 million (2016: R305 million), due to lower export orders in the first six months. As the year progressed, the order position improved significantly. The strong Rand negatively impacted export margins particularly in the areas of export fuzes, mining surveillance radars and electronic subassemblies. Fuchs Electronics is now at full production with large-scale export orders.

Reutech Radar Systems had a record year in the mining and commercial market sectors. The increased volume improved production efficiencies and this, to a large degree, offset the stronger Rand’s impact on its export margins. The business unit secured a large defence export order which improved our year-on-year performance and will support sales throughout the next financial year.

Reutech Communications completed the industrialisation of its new range of tactical communication products. While this took longer than expected, record production levels during the second half of the year were achieved. Efficiencies are reaching the levels envisaged at the start of the capital investment project. Securing the next phase of orders from the local customer remains an important element of this unit’s business case.

Reutech Solutions responded well to their major customers’ ongoing budget reductions and delivered a solid result.

The acquired businesses performed well. Omnigo executed their advanced PCB export orders successfully and, as a result, received further hard currency orders. This allows them to continue operating at full capacity. More equipment was deployed into the business unit which increased their capability to manufacture high-specification electronic sub-assemblies and, in turn, to enter new geographic markets. Nanoteq, our specialist encryption business, performed in line with its business case despite key customers in a new geography having budget constraints that delayed the placement of a large order.


Phuti Mahanyele resigned as an independent non-executive director and member of the Audit and the Social, Ethics and Transformation committees with effect from 1 November 2017 due to her growing commitments as the owner of an investment company. The Board would like to express its gratitude to Ms Mahanyele for her tenure.

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


Reunert’s traditional businesses have continued to deliver real growth in tough local economic conditions. Applied Electronics’ export orders are at record high levels and should translate into a strong operating performance, with exchange rates providing some uncertainty in the financial results. Subject to no adverse changes in the local economic, social and political environment, we expect another year of real growth in 2018. The order mix of the group again favours a stronger financial performance in the second half of the financial year.


Notice is hereby given that a gross final cash dividend No 183 of 354,0 cents per ordinary share (2016: 326,0 cents per share) has been declared by the directors for the year ended 30 September 2017.

The dividend has been declared from retained earnings, bringing the total dividends declared out of 2017 profit for the year to 474 cents per share.

A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt from, or who do not qualify for a reduced rate of withholding tax.

Accordingly for those shareholders subject to withholding tax, the net dividend amounts to 283,20 cents per share.

The issued share capital at the declaration date is 184 324 396 ordinary shares.

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

Last date to trade (cum dividend) Tuesday, 16 January 2018
First date of trading (ex-dividend) Wednesday, 17 January 2018
Record date Friday.,19 January 2018
Payment date Monday, 22 January 2018

Shareholders may not dematerialise or rematerialise their share certificates between Wednesday,
17 January 2018 and Friday, 19 January 2018, both days inclusive.

On behalf of the board


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

Sandton, 20 November 2017