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Electronics and electrical engineering group Reunert today released its results for the year ended 30 September 2010. Revenue increased by 4% from R10,3 billion to R10,7 billion. Operating profit increased by 7% to R1,2 billion and normalised headline earnings per share improved by 3% to 515,7 cents. Ebitda margins improved from the 12% achieved in 2009 to 12,5%.
A final dividend of 220 cents was declared, 17% up on last year's 188 cents per share. This brings the total dividend to 287 cents per share for the year (2009: 253 cents).
Reunert's balance sheet has remained strong and the cash flow generated by the group's operations increased net cash resources by R498 million. Cash and cash equivalents at the end of the year amounted to R1.8 billion.
"This year was always going to be challenging, following one of the worst financial crises the global economy has experienced since the world war," said Reunert chief executive Nick Wentzel. "Strict cost control and operating efficiency gains followed through from actions taken in 2009."
Lower interest rates have resulted in an IFRS, non-cash, mark-to-market charge of R40 million for the year on the interest rate swops. The strong rand cost the group more than R50 million in lower revenue and margins, Wentzel commented.
CBI-electric has produced strong results for the year with operating profit up by 24% to R521 million. Revenue was flat for the year at R2,9 billion, mainly as a result of lower activity in our telecommunications cable joint venture.
"Building activity remained subdued but increased exports to Europe and Asia and the return to profitability of our Australian operations helped our low-voltage operation to be significantly up on the previous year," said Wentzel.
At CBI-electric: African Cables the electrical installations required for the 2010 Soccer World Cup was a welcome stimulus for the cable and electrical service market. African Cables has expanded its service and project operation, Power Installations, to meet key customer's requirements. Market conditions, however, remain challenging with the strong rand encouraging importers to enter our market, Wentzel cautioned.
The telecommunications business had a mixed year. The first half was below expectations due to reduced activity in the copper telecommunications cable market. The second half has been stronger. "We expanded our product range after a micro-duct production line was commissioned last year. The fibre optic cable connections between the major cities in South Africa are going ahead, with the demand for fibre and micro-duct increasing significantly."
Nashua's revenue was boosted by the inclusion of Nashua Communications from 1 November 2009, which enabled Nashua to achieve 9% growth in revenue to R6,9 billion (2009: R6,3 billion). Operating profit was up by 19% to R615 million (2009: R518 million) due to increased revenue, cost control and profit contributed by Nashua Communications.
"Nashua Office Automation gained market share, which at 21%, is comfortably ahead of their closest competition," Wentzel said. "Unit sales grew by 20%, assisted by the strong rand and lower interest rates and the weakening of the euro against the dollar assisted in making our product more competitive."
Nashua Mobile was able to increase ongoing revenue by 6% due to a strong sales drive and a net gain of 96 000 connections was achieved for the year. The total contract base now stands at 819 000 customers which is a 13% increase over the prior year.
Despite the refocusing at Nashua Electronics after Panasonic consumer products were exited last year, the business has continued to produce disappointing results. Kyocera Mita products have been added to the office systems product range which, together with further restructuring, should improve performance in the year ahead.
The substantial contribution by Reutech in the previous year was not repeated, mainly as a result of a large follow-on order not being received during the year. Reutech's operating profit decreased by 73% from R223 million to R61 million. Revenue was down 13% from R904 million to R791 million. "The prospects for receiving this order are good and we hope that we will be successful in 2011," Wentzel said.
Reunert invested R180 million in acquiring Nashua Communications (formerly Siemens Enterprise Communications) and R126 million in buying back 2,1 million Reunert shares at an average price of R59.18 per share.
"The economy is in a delicate state with lower interest rates encouraging growth. However, the strength of the rand is of serious concern with increased imports and reduced export opportunities hampering growth. Subject to the prevailing economic conditions remaining unchanged, the group predicts an increase in earnings for the year ahead," commented Wentzel on Reunert's prospects.
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