Reunert Year-end Results
12 months ended 30 September 2009
1
Salient features
Strong balance sheet
Businesses resized
Product offering rationalised
Bolt-on acquisitions
2
Salient features
Revenue R10,3 billion (6% )
Operating profit R1,1 billion (28%)
EBITDA as % of revenue from 15,2% to 12%
Cash position R1,6 billion at 30 Sep 09
Interest and dividend income up 79% to R108 million
Normalised HEPS 499,9 cents per share (21% )
Final cash dividend 188 cents per share
Total cash dividend 253 cents per share (21% )
3
Group Structure
4
InvestmentsNashua ReutechCBI-electric
Energy cables
Telecom cables
Low voltage
Medium voltage
Office automation
Mobile services
Telecommunications
Communications
Electronic fuses
Radar systems
Solutions
NSN (40%)
Business systems
Finance
Income statement
5
R Millions 2009 2008%
Change
TURNOVER 10 271 10 921 (6)
EBITDA 1 237 1 661 (26)
Depreciation (96) (87) 11
Operating Profit 1 141 1 574 (28)
Interest & Dividends 108 60 79
Profit before abnormal items 1 249 1 634 (24)
Abnormal items 299 -
Profit before taxation 1 548 1 634 (5)
Taxation (374) (487) (23)
Profit after taxation 1 174 1 148 2
Associates - 16 (100)
Minorities (9) (7) 26.76
Headline earnings adjustments 3 3 -
Headline earnings 1 168 1 160 1
Headline EPS (cents) 652 652 0
Normalised Headline EPS (cents) 500 630 (21)
EBITDA % (Before NSN commission) 12 15 (21)
Tax rate %* 27 30 (9)
Summarised balance sheet
6
R Millions 2009 2008
EMPLOYMENT OF CAPITAL
Fixed Assets 588 591
Goodwill & Investments 1 314 1 281
R C & C Finance debtors 994 1 275
Current Assets 3 072 3 620
Stock 696 980
Accounts receivable 1 666 1 935
RC&C Accounts receivable 710 682
Other Debit Balances 23
Gross Assets 5 968 6 767
Net Current Liabilities (1 770) (1 881)
Net operating Assets 4 198 4 886
CAPITAL EMPLOYED
Shareholders' Funds (4 061) (3 696)
Deferred tax liabilities (111) (176)
Long-term borrowings (14) (14)
Net Cash 1 603 782
Net R C & C Finance Borrowings (1 615) (1 782)
(4 198) (4 886)
Summarised cash flow statement
7
2009 2008
(excl movements relating to Finco receivables and borrowings) Rm Rm
EBITDA 1 237 1 661
Dividend and interest income 108 147
1 345 1 808
Decrease in inventory 293 (49)
Decrease in accounts receivable 284 (193)
Decrease in accounts payable (63) (54)
Taxation paid (478) (411)
Dividend paid (550) (569)
Capital expenditure (87) (117)
Net cash flow 744 415
Other 1 (6)
Increase in net cash and cash equivalents 745 409
% contribution to group
Revenue
R10,2 billion (FY08: R10,9 billion)
29%
62%
9%
2009
Operating profit
R1,1 billion (FY08: R1,6 billion)
36%
44%
20%
2009
8
36%58%
6%2008
46%45%
9%2008
CBI-electric
Nashua
Reutech
Seven-year performance
9
6 67
8
10
1110
0
2
4
6
8
10
122
00
3
20
04
20
05
20
06
20
07
20
08
20
09
R b
illio
n
Revenue
608
701
917
12731319
1573
1140
0
200
400
600
800
1000
1200
1400
1600
20
03
20
04
20
05
20
06
20
07
20
08
20
09
R m
illio
n
Operating Profit
Cash generation
485 451
784
969
531
795
1 603
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2003 2004 2005 2006 2007 2008 2009
R m
illio
n
Cash on hand (excl finco)
10
Normalised HEPS
184
278
380
495
570 630
500
0
100
200
300
400
500
600
700
20
03
20
04
20
05
20
06
20
07
20
08
20
09
cen
ts
Normalised headline earnings per share
2009 2008
Headline earnings 1 163.1 1 159.8
Less
NSN fair value (299.2) 0.0
Taxation effect 37.4 0.0
BEE share of headline
earnings adjustments 0.3 (0.4)
901.6 1 159.4
Net economic interest due to
BEE partners (10.0) (38.5)
Normalised headline earnings 891.6 1 120.9
11
Acquisitions
Siemens Enterprise Communications
• Acquired remaining 60% stake from Siemens Limited South Africa
• Competition Commission & Tribunal approval 29 Oct 2009
• Annual sales of about R450 million
Blue Lake Investments
• Least-cost routing
Nashua Central
• Nashua Holdings bought 60% in Nashua Central
• Major franchise
12
Nokia Siemens Networks
Commission income on comparable basis
• R97 million (31% ) from R139 million
Market share
• More competition
• Delayed benefits of merger
Reduced spending by networks
Prospects
• Unlikely to make significant progress in short term
• Further weakness likely
13
Restructuring Nashua Electronics
Panasonic
• Exited consumer electronics
• Focus on
Telecommunications
Business systems
14
CBI-electric
3 315
3 952
2 952
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
2007 2008 2009
R m
illio
n
Revenue
554
675
393
0
100
200
300
400
500
600
700
800
2007 2008 2009
R m
illio
n
Operating Profit
16
Market conditions
17
Volume decrease• Reduction in residential and commercial activity
-100
-80
-60
-40
-20
0
20
40
60
80
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2002 2003 2004 2005 2006 2007 2008 2009
Building confidence: Growth in building activityResidential and non-residential contractors
Source: BER
Impact of copper price
Significant volatility during the period
R52 million in copper losses
18
20 000
24 000
28 000
32 000
36 000
40 000
44 000
48 000
52 000
56 000
60 000
64 000
68 000
72 000
76 000
80 000
84 000
88 000
Oc
tob
er
20
07
No
ve
mb
er
20
07
Ja
nu
ary
20
08
Fe
bru
ary
20
08
Ap
ril 2
00
8
Ma
y 2
00
8
Ju
ne
20
08
Au
gu
st
20
08
Se
pte
mb
er
20
08
No
ve
mb
er
20
08
De
ce
mb
er
20
08
Fe
bru
ary
20
09
Ma
rch
20
09
Ma
y 2
00
9
Ju
ne
20
09
Ju
ly 2
00
9
Se
pte
mb
er
20
09
Oc
tob
er
20
09
R-v
alu
e p
er
ton
RCP Current
Average
Energy cables
19
Total market historically R5-6 billion
Offer a complete product range
• HV, MV, LV, ACSR & special cables
• No house wire
Services
• Installation & service of MV & HV cables
Consistent improvement in market share (both sector and product)
• LV products – purchase and consolidation of Rosslyn Cables
• ACSR market share grow from zero to >20%
• Utility and industrial sectors
• Current market share in excess of 30%
Market conditions
Margin pressure
• Over capacity in manufacturing across all product groups
• Consistent import activity under favourable trade agreements and a strong rand
• Rand-copper price alignment
20
Outstanding order book
0
100
200
300
400
500
600
700
800
Sep
-08
Oct
-08
No
v-0
8
Dec
-08
Jan
-09
Feb
-09
Mar
-09
Ap
r-0
9
May
-09
Jun
-09
Jul-
09
Au
g-0
9
Sep
-09
R m
illio
n
Local order book declined by 64%• Impact of copper price
• General market decreased by 61% vs rest of sectors around 35%
• Reduction in stock holding within general market
21
Energy cables
Our response
• Reduced working capital
• Company resized for market demand to improve efficiencies
• Investment in key operational areas
– Mains
– XLPE
– Extrusion control
22
Energy cables prospects
Volumes expected to be nominally the same as the past year except for
• Improved transmission business volumes
• Increased HV & MV service offering
• Exports
• Eskom’s power station requirements
Lower cost base and improved efficiencies will improve profitability
23
Low-voltage product range
24
Market Segment M
inia
ture
cir
cuit
b
reak
ers
Eart
h le
akag
e
pro
tect
ion
Ele
ctri
city
met
eri
ng
Cir
cuit
bre
ake
rs fo
r e
qu
ipm
en
t
Surg
e p
rote
ctio
n
dev
ice
s
Mo
uld
ed
cas
e c
ircu
it
bre
ake
rs
Wir
ing
acce
sso
rie
s
Au
tom
atio
n
eq
uip
me
nt
Mo
tor
con
tro
l
Residential
Commercial
Mining
Utilities
Industrial
Original EquipmentManufacturer
Manufactured Traded
Product
Low voltage
Revenue down 15%
Volumes down by 48%
Working capital down 38%
Headcount reduced by 30%
Position in residential market strengthened
Australia contributed positively during the second semester
25
Low voltage
Weak local demand
Increased presence of low-cost products in certain markets
Effect of commodity prices on industrial projects
Leading to pressure on volumes and margins
Low voltage restructured to face challenges
Signs of stability in our more important market segments
Well positioned to return acceptable results
26
Low-voltage revenue contributions
Residential25%
Commercial15%
Industrial10%
Mining12%
Industrial Controls
11%
Other2%
Export25%
Revenue by market segment
27
North America
13%
Europe24%
Africa32%
Other3%
Australia10%
Far East18%
Export revenue by region
Low-voltage volume declinesVolumes (poles per day)
2009 2008 % Change 2010
Local
Residential & commercial property 11 970 18 782 (36%)
Mining 487 657 (26%)
Industrial 793 1 863 (57%)
Retail 4 484 6 991 (36%)
Local total (37%)
Export
Residential & commercial property 2 226 3 881 (43%)
Mining 47 44 7%
Industrial 5 889 17 476 (66%)
Retail 77 57 35%
Export total (62%)
Grand total 25 973 49 751 (48%)28
Low-voltage prospects
Market share likely to grow where base is low
• Automation
• Motor control
• Australia
Low cost products will help residential sales
• Required in some cases
Profitability of exports may increase
• Exchange rate sensitive
Lower cost base will improve profitability
29
Medium voltage
Grown three-fold past year
• Sales >R36 million
Supplied 16 power transformers
Delivered first medium-voltage switchgear panels
Strong momentum should be maintained
30
Telecom cables
50% JV with Aberdare
Estimated SA market R1,5bn - R1,7bn
Market share >50%
Customers • Telkom: copper & fibre
• MTN, Neotel: fibre
• Industry & mines: copper & fibre
Products
• 69% Copper
• 24% Fibre
• 7% Accessories
• Duct: Capex +R8 million
Telkom
43
%
Ind
ust
rial
39
%
Export18%
Revenue by market
31
Copper telecom
47%
Industrial copper
30%
Acc
esso
ries
3%
Optic fibre cable20%
Revenue by product
Accessories3%
Telecom cables prospects
Telephone copper cable demand declining
Fibre margins under constant pressure
Growing demand for projects
• Installation of fibre cables
• First installation done
Related products needed
• Ducts – manufacturing capacity added
• Received a 2-year contract from Neotel for micro-duct
• Accessories
Instrumentation cable demand related to industrial pick-up
2010 not expected to be as strong as 2009
32
Nashua
5 816
6 445
6 365
5 500
5 600
5 700
5 800
5 900
6 000
6 100
6 200
6 300
6 400
6 500
2007 2008 2009
R m
illio
n
Revenue
675 654
481
0
100
200
300
400
500
600
700
800
2007 2008 2009
R m
illio
n
Operating Profit
34
Nashua
Office automation
Telecommunications
Mobile services
Business systems
Finance
Electronics
35
Office automation
Nashua office products
• Multifunctional copiers/printers
• Storage retrieval and tracking software
• Consumables (toner, ink and paper)
• PABX
Aggressive marketing philosophy – Nashua a household name
61 outlets in Southern Africa
Franchises bought back:
• Eastern Cape, Tshwane, West Rand & Central
• 40% of total sales via own outlets
Mostly corporate customers
36
Office automation prospects
Market expected to be weak
Competitive offering
Financing to remain difficult (deals declined)
Printer sales off a low base
Channel well positioned to take more share & benefit from any uptick
Colour as % of revenue grew from 15% to 22%
37
Finance company
Asset-backed finance
Providing a service to
• Nashua
• Panasonic
• Siemens
• Other
Funding
• R700m securitisation funding (amortisation commences in 2012)
• Initially commercial paper
• Followed by matching bonds
Bad debts
• The worst is over
38
90% of lending book
Nashua Mobile
Independent Service provider
• > 700 000 subscribers
• > 80 000 broad band users
• 155 outlets
High ARPU base
Prospects
• Battle for revenues – more churn, bigger corporate discounts
• Operational efficiencies and services
• Growth may be difficult to achieve
39
Nashua Mobile
2009 2008 % Change
Contract connections for year 136 362 132 210 3.1
3G/HSDPA connections 23 198 28 782 (19.4)
Total connections 159 560 160 992 (0.9)
Closing company base 722 638 663 787 8.8
ARPU 488 472 3.4
Churn % 13.6 12.8 (6.2)
Net bad debts % turnover 1.24 1.34 7.5
Number of retail outlets 155 152 2
40
Nashua Electronics
Restructured
• Exited consumer electronics
• Cost R60 million
• R70 million cash released due to reduction in working capital
Future focus on
• Office automation and telecommunications
• Online-shop
• Estimated sales of R400 million
• The aim: 10% operating margin
41
Reutech
491
622
874
0
100
200
300
400
500
600
700
800
900
1000
2007 2008 2009
R m
illio
n
Revenue
109
137
212
0
50
100
150
200
250
2007 2008 2009
R m
illio
n
Operating profit
43
Total exports 49% of revenue
Reutech Radar Systems
• Military Radars
Local 50%
Exports 50%
• Mining surveillance radars
SA, Australia, other
Orders received from Anglo, Billiton, others
Local 10%
Exports 90%
• Set-top box developments
Design and initial testing concluded
Waiting
44
Reutech Communications
Military communications systems
Multi-mode airborne VHF/UHF radios
• Mostly exported (90%)
Ground-based VHF/UHF radios
• Exclusive to SANDF (100%)
45
Fuchs Electronics
Electronic fuses
• Land
• Naval
• Air
95% export sales
46
Reutech Solutions
Systems engineering and logistic support
• SANDF
• Telecommunications operators
• Mining industry
South Africa and rest or Africa
47
Reutech prospects
Local business will gradually increase and build up over next 3 years
Exports of airborne radios
• Stable
Exports of fuses
• Timing uncertain
48
49
Going forward
Prospects
50
Looking forward, it is our view that the economy has stabilised, although we do not expect any meaningful recovery in the short term. Actions taken to adjust to the lower volumes of the past year should have a positive impact on earnings.
The forecast financial information has not been reviewed or reported on by Reunert’s auditors.
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Ce
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r sh
are
Special
Final
Interim
Cash dividends per share
51
Statement of intent
52
Reunert will manage businesses in the services, electronics and electrical engineering sectors, supplying value added products, solutions and systems to local and international markets. Each of these businesses will remain capable of meeting the group’s objectives for sustainable growth and earnings.
We will consider investing in businesses that operate outside our historic business areas, provided that all our criteria for investment returns and growth are met.
Contact detailsCarina de Klerk
Reunert Investor Relations
+27 (0)83 631 5743
+27 (0)11 517 9000
53