Reunert bolsters war chest

Electronics company Reunert grew its cash position to R1.6 billion in the year to September, despite a decline in revenue.

Revenue dropped 6% to R10.3 billion, and operating profit declined 28% to R1.1 billion. Headline earnings were unchanged at R1.2 billion, but normalised earnings declined 21% to R892 million as the company revalued a 40% interest in the local operation of Nokia Siemens Networks.

Despite the decline in revenue and profit, the company grew its cash position to just over double the R794 million it had in the bank a year ago.

Reunert declared a dividend of 188c a share, taking total payouts to shareholders for the year to 253c, a 21% drop on last year.

CE Gerrit Pretorius says this year's results were a mixed bag, with some divisions doing better than others. “Looking forward, it is our view that the economy has stabilised, although we do not expect any meaningful recovery in the short-term,” he says.

Reunert's defence division, Reutech, had a good year. The division benefited from exports at favourable exchange rates, and grew revenue 40% to R874 million. Operating profit increased 55% to R212 million.

“Our radios, radars and fuses are now supplied to many countries around the globe. The mining surveillance radar, a safety product that we have developed, is being sold or leased to most multinational mining companies in increasing numbers,” Pretorius says.

Revenue in the Nashua group, comprising Nashua, Nashua Mobile, Nashua Electronics and RC&C Finance, declined 1% to R6.4 billion. Operating profit was down 27% to R481 million.

However, the company says its office automation business, Nashua, increased market share in a tough market. But the strong rand meant it had to decrease prices, which put pressure on revenue and margin.

Nashua Mobile, while growing its base of high-value customers, reported increased churn from 12.8% to 13.6%. Bad debts as a percentage of revenue improved from 1.3% to 1.2%.

During the year, three new outlets were opened, essentially completing the roll-out to 155 franchised stores.

Nashua Electronics exited the consumer electronics business after more than 40 years, costing the company more than R60 million. “We are confident the restructured business, with estimated annual sales of R450 million, will be profitable and capable of strong growth,” says Pretorius.

RC&C Finance was hit by escalating bad debts and had a poor year. The division has adjusted interest rates to reflect increased risk. Credit granting has also been tightened, which has lowered the book value.

CBI-electric, the electrical engineering business, had a disappointing year. The low-voltage and energy-cable businesses, due to a direct exposure to infrastructure development, saw volume declines of up to 60%. The result was a slump in revenue to R3 billion and operating profit to R393 million.

“Local order books declined by as much as 64% and although it remains low, appears to have stabilised,” says Pretorius. “Extensive restructuring was undertaken to size businesses appropriately and we continued our programme of capital expenditure to improve plant efficiencies.”

The telecommunications cable joint venture with Altron had a good year. Both revenue and operating profit were up, mainly due to increased demand for copper telecommunications cable, although fibre demand was subdued.

The new venture into medium voltage has grown threefold, although this is off a low base with sales of more than R36 million. “With short lead times and attractive pricing, we are steadily gaining market share,” comments Pretorius.

Reunert's shares were 3.23% higher in mid-morning trade at R53.75, after opening at R52.42.

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