Reunert eyes STB opportunities

Johannesburg, 25 Nov 2008

Technology group Reunert is ready to participate in government's migration to digital terrestrial television (DTTV), it says.

It has set up facilities to manufacture and supply set-top boxes (STBs) to the market.

“We are confident that we will participate in the migration to digital television broadcasting, with the market conservatively valued at R7 billion, spread over a four- to five-year period,” says Reunert CEO Gerrit “Boel” Pretorius.

Pretorius says the group, to date, through its defence arm Reutech, has manufactured 1 500 STBs, which were supplied to the SABC for test purposes.

“The radar systems business in Stellenbosch has developed a set-top box product and limited deliveries have started.”

He adds the group is waiting for government to publish a tender for companies to supply the STBs. A government subsidy, to cover up to 70% of the expected final cost of R700 per STB, has been agreed for the country's poorest households.

Pretorius says it is unclear when a tender will be announced, but government should have done this already, if it expects to meet its deadlines for DTTV migration.

The country's new DTTV signal began broadcasting on 1 November and a period of dual-illumination - the new signal transmitted alongside the old analogue signal - will end on 1 November 2011.

“At this stage, we can't even say whether the tender will be issued by the Department of Communications, Sentech or the SABC,” Pretorius states.

“Regardless, we are in a position to supply the STBs should we win the tender. We expect it to be a very competitive market, with low margins, but high volumes.”

Pretorius expects that winning the contract could add up to 5% to the Reunert group's annual revenue.

At this stage, about five companies are expected to compete for the contract, including the USC Group, Tellumat and Psitek.

The SA Bureau of Standards (SABS) sub-committee - which has drawn up the STB standards - has finished its work and sent its recommendation to the bureau's main committee, called TC74.

It is expected that TC74 will make its final input and then the standards will be issued for public comment over December and January. Depending on the amount of comment received, the final specifications are expected to be issued in February or March.

However, industry observers have warned the SABS standards-setting process is widely inclusive of all interested parties, and standards sometimes can take up to three years to establish.

Increased revenue

The Reunert group also released its financial results for the year ended 30 September, and reported normalised headline earnings per share were up 10% during the period.

Reunert has increased revenue and operating profit for the eighth year in a row, with revenue growing by 14%, to R10.92 billion. On a like-for-like basis, operating profit increased by 9%.

“The reported number of R1.57 billion, which is an increase of 19%, includes R139 million commission earned on our 40% investment in Nokia Siemens Network SA,” says Pretorius.

Normalised headline earnings improved by 11%, to R1.12 billion. On a per share basis, normalised headline earnings increased by 10%, to 630.1c.

“Reunert's profit was underpinned by strong cash flows,” Pretorius says. Excluding borrowings associated with its finance activity, the group had R782 million cash at year-end.

Commenting on the current global economic downturn, Pretorius says the effects of the slump are already visible. “We [SA] are not isolated from the crisis. There is already a slowdown in infrastructure projects and the man in the street has less money to spend.”

He adds there is nothing that businesses can do, but to ride out the storm. “Businesses should manage their costs better and not be too adventurous.”