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



Group revenue increased by 2% to R10 714 million (FY181: R10 492 million). Group operating profit (“operating profit”) declined by 12% to R1 361 million (FY18: R1 542 million) primarily due to the quantum of once-off items included in the prior year and the decline in the Electrical Engineering (EE) segment’s contribution in the current 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 profit2. The reduction of the EE segment’s core operating profit in 2019 is due to lower electrical infrastructure spend, particularly by Eskom and municipalities. As a result, the Group’s core operating profit reduced by 6%.

In addition, R40 million of plant & equipment and R57 million of goodwill at Zamefa was impaired. This was due to the unexpected change in the duty regime in Zambia which negatively impacts Zamefa’s future gross trading margin and resulted in the impairments being required. This is despite the expected improvement in Zamefa’s cash flow resulting from the zero rating of copper cathode for VAT purposes, which was announced at the same time.

1 FY18 = Financial Year ended 30 September 2018.
2 Core operating profit comprises operating profit adjusted for the impact of once-off items such as profit or loss on disposal of assets and contingent considerations which do not realise as the measurement criteria are not met (see table below).


Key earnings metrics
2019 2018 % Change



10 714

10 492


Operating profit


1 361

1 542


Profit for the year



1 152


Earnings per share





Headline earnings per share





Normalised headline earnings per share





Total cash dividend per share for the year





Reconciliation of core operating profit to operating profit
per segment At 30 September 2019

2019 2018
EE ICT AE Other Total EE ICT AE Other Total %
Core operating profit/(loss) 323 748 356 (73) 1 354 440 715 352 (73) 1 434 (6)
Release of contingent consideration (SkyWire) 77 77 (100)
Sale of assets 2 2 4     28 28 (86)
Segment operating profit/(loss) 323 748 358 (71) 1 358 440 792 380 (73) 1 539 (12)
Operating profit/(loss) from equity accounted joint venture 11 (4) 7 9 (3) 6
Operating (loss) from equity accounted associate (4) (4) (3) (3)
Operating profit per statement of profit or loss 334 744 358 (75) 1 361 449 789 380 (76) 1 542 (12)

Segmental Results

Electrical Engineering

The EE segment delivered a disappointing performance. Although revenue increased by 6% to R5 457 million (FY18: R5 139 million), core operating profit contracted by 27% to R323 million (FY18: R440 million).

This contraction arose primarily from our two local cable businesses where the demand for cables fell materially in the second half of the year due to the factors described in the overview. Our channel partners, who provide a valuable route to market, rapidly reduced their orders. This compounded the already weak demand from both Eskom and municipalities. Telkom significantly reduced its demand for both copper telephone and fibre optic cable. The efficiency of both cable factories fell as reduced demand resulted in sub-optimum production levels in the plants. This, coupled with under-recoveries of overheads due to lower volumes and reduced margins from the changed sales mix, resulted in the reduction in the core operating profit of the segment.

Regrettably, the two South African cable plants had to conduct retrenchment exercises in the second half of 2019.

The operating conditions in Zambia remained largely consistent with those of the prior year. The currency remained fairly stable and we continued to manage Zamefa for cash generation. Of importance is that the government decided to retain the current VAT regime but to zero rate VAT on copper cathode. Unexpectedly, the government also chose to amend the duty regime which negatively impacts Zamefa’s profitability. This change resulted in the R97 million impairment charge for both goodwill (R57 million) and Zamefa’s plant and equipment (R40 million). This impairment is despite the benefit to Zamefa’s cash flow of the zero-rating of copper cathode. We continue to engage with the Zambian Minister of Finance and key members of his team, to explain the impact on Zamefa of this latest decision and to try and retain the duty regime which has been in place since 1993.

The steadiest 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. The complementary service revenues to the end customer across the total franchise channel, increased by 23% to R616 million (FY18: 501 million). These complementary services now comprise 17% of the total revenue in the franchise channel. The increase in complementary services offset weaker hardware sales due to business confidence remaining constrained for most of the year.

The Communications Cluster also had a strong performance:

> ECN, our fixed line VOIP service provider, restructured its business and is converting its network onto a “Best-in-Class” platform that has already improved cost efficiency and enabled greater scale. Record new customer sales were secured although the weak economy resulted in overall minutes remaining largely stable despite the high number of new customers gained. The increase in additional annuity revenue streams continues to build and both VBX and last mile connectivity solutions are now reaching scale. This performance enabled another year of real growth for ECN.
> The integration of SkyWire, our wireless last mile broadband connectivity provider, into the Communications Cluster was completed successfully during FY19. New connections continued to grow throughout the year, but were below expectations due to the delay in the rollout of a large state contract. Pleasingly, the execution of this contract has now commenced and accelerated growth is expected in FY20. 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) due to Quince’s support for complementary products sold by the Office Automation Franchise and Dealer channels. The fixed cost base required to manage the book remained well under control and the quality of the book is excellent. Bad debts remain well controlled, and 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). This was a commendable performance given the record level of sales into significant export contracts last year.

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 of the financial year. Fuchs developed a lower cost supply chain and improved product optimisation which is expected to improve future margins and the business’ ability to secure contracts. Pleasingly, there are also an increasing number of opportunities developing in new geographies that could materialise in the near future1. 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 continues to underpin 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. It also commenced research into and the development of a suite of new radios for its key South East Asia markets. Customer acceptance of the new airborne radios continues to increase their international presence.

Reutech Radar Systems returned a solid performance and concluded a large export contract for a defence radar system. Mining radars returned to normal volumes as penetration into new markets increased. It opened new offices in Australia and we expect a positive impact on sales in this important mining market. The next generation of Mining Surveillance Radar (MSR), named Esprit, which provides significant performance improvement was released. The demand for the Sub-Surface Profiler, launched in FY18, continues to grow.

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.

1 Any forecast financial information has not been reviewed or reported on by the Group’s auditors.

Disposal of Subsidiary

In March 2019, the Group disposed of its controlling shareholding in Prodoc Svenska AB (Prodoc), the Swedish office automation business. The rationale for this disposal was the consistently low earnings from this business and the growing misalignment with the ICT segment strategy. This disposal resulted in a loss of R44 million.

Capital Expenditure

The group invested R56 million (FY18: R56 million) into the replacement of property, plant and equipment and a further R102 million (FY18: R106 million) to expand its operations. All expenditure was financed out of available cash resources and represented 12% (FY18: 23%) of free cash flow before replacement capital expenditure2.

2 Cash from operations ± interest received/(paid) – tax paid.

Cash Resources

The Statement of Financial Position was managed well and, pleasingly, released R318 million (FY18: (R498) million) from working capital. This resulted in free cash flow of R1 313 million (FY18: R641 million) being 163% of the profit for the year (FY18: 56%), comfortably leaving the Group with the financial resources to pursue its strategy, expand organically, and protect the dividend which underpins the Reunert Investment case.

The Group’s net cash and cash equivalent amounted to R616 million (FY18: R572 million) at the financial year end. The Group continues to have significant facilities with tenures up to one year available to it.

New Accounting Standards

The Group adopted the new accounting standards IFRS9: Financial Instruments and IFRS 15: Revenue from contracts with customers.

Due to the significant preparatory work undertaken in anticipation of the adoption of these standards, their introduction progressed without any significant issues arising in the current financial year. The audited impact on the 2019 opening retained income of the Group is reflected in the table below.

Gross Impact
Tax Impact
Impact on NCI1
Impact on opening retained income
Increase in impairment relating to adoption of expected credit loss model 39 (9) (3) 27
Revenue recognition impact of applying IFRS 15 48 (13) (6) 29
1 Non-controlling interest.


With effect from 1 October 2019 Mr AB Darko and Mr LP Fourie were appointed as independent non-executive directors.

Mr Fourie will serve on the Audit, Risk, and Investment Committees and Mr Darko on the Audit, Risk, and Social, Ethics and Transformation Committees.

Mr MAR Taylor resigned as an executive director with effect from 1 October 2019, but will continue in his role as the head of the ICT segment until the end of the 2020 financial year. Mr SG Pretorius and Mr van Rooyen were due to retire from the Board at the Annual General Meeting (AGM) having both reached mandatory retirement age, however at the request of the Board, their retirement was delayed for a year and as such will retire at the upcoming AGM.

There were no other changes to the Board in the year under review.


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.

2 Any forecast financial information has not been reviewed or reported on by the Group’s auditors.


We owe our performance to the dedication of our employees at each of our business units and thank them for their efforts. We thank our customers for their business and commit to continue to place them at the centre of our efforts. We thank all the stakeholders for their support.

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 cents per ordinary share (2018: 368 cents per share) has been declared by the directors for the year ended 30 September 2019.

The dividend has been declared from retained earnings, bringing the total dividends declared out of 2019 profits to 513 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 306,4 cents per share (2018: 294,4 cents per share).

The issued share capital at the declaration date is 184 950 196 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, 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
Chief executive officer
Nick Thomson
Chief financial officer

18 Novermber 2019