Reunert experienced challenging trading conditions in the six months ended 31 March 2020 (H1FY20).
Despite these conditions, the Information, Communication and Technology (ICT) segment delivered real growth in operating profit while the Applied Electronics (AE) segment performed in line with expectations. However, the Electrical Engineering (EE) segment suffered material underperformance primarily as a result of a seven-week labour disruption at African Cables, significant foreign exchange losses at Zamefa in Zambia, and weak cable infrastructure investment demand across our key Southern African markets. The EE segment’s performance over-shadowed and negatively affected the overall performance of the Group.
The Group’s financial results were also adversely affected by impairments, arising from the predicted impact of the COVID-19 pandemic and the resulting highly uncertain future economic conditions. These impairments were raised in terms of the forward-looking requirements encapsulated in International Financial Reporting Standards (IFRS). The Group also suffered an abnormal item in the form of an external fraud.
Pleasingly, the generation of free cash flow during the period under review was in line with the Group’s historic conversion ratios and R355 million was generated notwithstanding the difficult trading environment.
The National State of Disaster and the accompanying national lockdown, that commenced on 27 March, resulted in lost sales and adversely affected the interim operating profit. The rapid depreciation in the Rand as investors moved to the US$ and other safe-haven assets, also caused mark-to-market losses.
Before the COVID-19 impairments made in response to the forward-looking requirements of IFRS and the impact of the abnormal item (incurred credit loss) (see below and note 7), adjusted basic earnings per share (EPS) of 161 cents were 94 cents (37%) lower than the comparable six months of the previous financial year and adjusted headline earnings per share (HEPS) of 161 cents were 92 cents (36%) lower (see table below).
| Six months to 31 March 2020 |
Six months to 31 March 2019 |
% Change | |||
Extract from statement of profit or loss |
Rm | ||||
| (Loss)/profit attributable to equity holders of Reunert | |||||
| as reported | (277) | 366 | (176) | ||
| Add: Expected credit losses1 | 529 | – | |||
| Add: Impairment of goodwill and property, plant and | |||||
| equipment | 79 | – | |||
| Add: Loss on remeasurement of subsidiary held for sale | 22 | – | |||
| Add: Impairment of joint venture property, plant | |||||
| and equipment2 | 68 | – | |||
| Add: Loss on disposal of subsidiary | – | 44 | |||
| Taxation impact of adjustments | (161) | – | |||
Adjusted profit attributable to equity holders of Reunert |
260 | 410 | (37) | ||
| Adjusted basic earnings per share (cents) | 161 | 255 | (37) | ||
| Adjusted headline earnings per share (cents) | 160 | 253 | (37) | ||
| 1 | Includes abnormal item – incurred credit loss of R298 million (see note 7). |
| 2 | Included in share of joint ventures’ and associate’s (loss)/profit. |
Group profileReunert comprises a diversified portfolio of businesses in the fields of electrical engineering, information communication technologies (ICT), and applied electronics. The Group was established in 1888, by Theodore Reunert and Otto Lenz, and has contributed to the South African economy in numerous ways. Reunert was listed on the JSE in 1948 and is included in the industrial goods and services (electronic and electrical equipment) sector of the JSE. The Group operates mainly in South Africa with minor operations in Australia, Lesotho, Mauritius, the USA, Zambia and Zimbabwe. Reunert’s offices are located in Woodmead, Johannesburg, South Africa. |
Incorporated in the Republic of South Africa |
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Unaudited interim financial statements 2020 - PDF