Analysts are waiting for Reunert's analyst presentation to understand the company's mediocre performance for the half-year, ended 31 March.
The company released its interim results on the Stock Exchange News Service on Friday. It is holding analyst presentations in Cape Town today and Johannesburg tomorrow.
JSE-listed Reunert has five areas of interest. Its CBI-electric division is involved in the manufacture and distribution of electric and telecommunication cables. Its office systems division trades mostly under the name of Nashua, but includes specialist software company Acuo Technologies.
Its consumer products and services division includes Nashua Mobile and Panasonic, Futronic and Akai distributor, RC&C. Reutech encompasses the defence side of the business and its telecommunications division is made up of a 40% interest in Siemens Telecommunications.
One analyst, who asked not to be named, says the company's financials offer few highlights for investors.
"There are a lot of unanswered questions in Reunert's results. The only division which showed some hope was its defence business, but even that was off a low base," he comments.
Revenue for the period increased 19%, to R4.6 billion, off R3.9 billion in its previous interim results. Operating profit grew 16%, from R524 million in 2006 to R607.6 million.
However, the R557 million cost of this year's black economic empowerment (BEE) deal with Peotona Group Holdings and the Rebatona Educational Trust contributed significantly to the R572 million loss incurred from abnormal items.
This deal has been heavily criticised by trade unions, Cosatu and Numsa, as being too narrow-based and benefiting only the pockets of those who are "filthy rich" already.
Overall, the company made a R74.1 million loss in the period.
Divisional performance
While the company declared strong performances from its CBI-electric, Reutech and telecommunications businesses, the analyst says scrutiny of the figures suggest otherwise.
"Reunert's electronic engineering division, or CBI-electric, delivered a 41% increase in revenue, to R1.6 billion; however, operating profit from this division only grew 20%, to R266 million. Obviously there is some margin pressure at play here," he explains.
Similarly, he is unimpressed by the electronics office system unit, which delivered revenue of R576 million, up 2% year-on-year, and operating profit of R161.6 million, up 35% year-on-year.
"The increase in operating profit here appears to have been driven by a performance bonus received on the finalisation of a discounting deal in the finance company. Without this, the division's profits probably would have been rather flat."
The telecommunications business also appears to have benefited from reorganisation and optimisation. Although its revenue declined by 24%, to R454 million, its operating profit came in at R105 million, 23% up on R85.8 million in 2006.
However, Reutech had a solid year. Revenue in this division increased 60%, to R201.6 million, with operating profit up 332%, from R2 million in 2006 to R16.4 million. Nevertheless, the analyst warns the low base should be considered when noting growth rates.
As for its consumer electronics business, Reunert noted its performance had been adversely impacted by slow sales in the sector. This division delivered a 9% growth in revenue to R2.2 billion, but showed a 7% decrease in operating profit to R163.5 million.
"[In this division] margins are under constant pressure and unlikely to improve in the near term. Cellular activity at Nashua Mobile continues at an acceptable level amid signs of increased competition for high-value customers. The provision of data services, to a certain extent, offset this negative trend," said Reunert.
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