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Reunert’s renewables segment grows amid load-shedding

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 23 Nov 2023
Reunert Group CEO Alan Dickson.
Reunert Group CEO Alan Dickson.

JSE-listed technology services group Reunert’s renewable energy business is continuing to cash in on South Africa’s energy shortages.

This emerged when the group yesterday announced its annual financial results for the year ended September 2023.

According to the firm, group revenue for the period jumped by 24% to R13.8 billion (2022: R11.1 billion).

It explains that earnings growth was driven by the electrical engineering and applied electronics segments, with strong operational performances on the back of improved demand for their products and services.

The electrical engineering segment delivered another year of financial growth, as the power cable and circuit breaker businesses delivered solid results and revenue increased by 14% to R7.2 billion (2022: R6.3 billion), while operating profit increased by 27% to R552 million (2022: R436 million).

In the renewable energy cluster, the positive market growth conditions continued, with revenue increasing by 24% to R1.1 billion, says the company.

It notes this growth was driven by record levels of load-shedding that drove the sales of residual and small commercial batteries, and the private sector investment in solar energy as an alternate to expensive and unreliable grid power.

Renewables demand

The growth in this segment comes as SA continues to endure power shortages, with embattled power utility Eskom struggling to keep the lights on.

This has led South African businesses and households to rely on alternative energy sources in a bid to reduce reliance on Eskom.

Amid the crisis, earlier this year, Reunert group CEO Alan Dickson told ITWeb that the embattled power utility is “the company’s biggest salesman”.

Reunert points out the expansion of the renewable energy market has led to an increase in competition, in terms of an increase in the number of competitor products and also in the pursuit of the skilled human resources required to operate the businesses.

It adds that the solar company has invested in the human resources and systems needed to drive its strategic aspirations on the ownership of solar build-own-operate assets. It now owns 57MW of operating, work in progress and near financial-close assets and has a strong commercial and industrial (C&I) pipeline.

It believes the segment is well-positioned due to its record defence order book and the continued growth of the renewable energy investment in SA.

Meanwhile, Reunert says the ICT segment had a challenging year as its key small and medium enterprise customer base came under increased pressure, due to the weakening South African macro-economy.

The segment revenue increased by 18% to R3.1 billion (2022: R2.6 billion), while segment operating profit increased by 2% to R660 million (2022: R644 million).

It explains that the financial performance of the ICT segment was negatively affected by record levels of load-shedding, which reduced the minutes sold by the Electronic Communications Network by 17%; the sale of R250 million of the Quince loan book to fund the acquisition of Etion Create; and the South African Post Office being placed under business rescue, all of which resulted in a reduced segment operating profit.

“Pleasingly, the finance rental company performed well, +OneX accelerated its digital integration solutions income and Skywire leveraged its national broadband connectivity network to deliver year-on-year operating profit performances,” says the firm.

“It is expected that the South African macro-economic environment will not materially improve in the first half of 2024. The growth of the segment is underpinned by Nashua’s robust print offering and complementary sales, the finance book, +OneX’s continued growth in market share and the addition of IQbusiness for a full 12 months.”

It adds that the applied electronics segment had an excellent year, as defence revenue reached a multi-year high and demand for its renewable energy products and solutions remained positive.

These dynamics resulted in segment revenue increasing by 51% to R3.6 billion (2022: R2.4 billion) and delivered an operating profit increase of 163% to R432 million (2022: R164 million), the company notes.

‘Pleasing’ performance

“Reunert’s three key strategic growth initiatives are the expansion of our ICT segment’s capabilities, investment in our renewable energy ecosystem and the increase in non-South African revenue streams − all proceeded on track this year,” says Dickson.

“In the ICT segment, the solutions and systems integration cluster’s acquisition of IQbusiness, together with +OneX, places them as a leading digital integration solutions provider to SA’s large customer and enterprise market. The relevance of their offering is evidenced by the growth in new customers, breadth of offering and the increased revenue.

“In our renewable energy cluster, the positive market growth conditions continued. The cluster’s primary C&I target market continues to invest in reliable, alternate renewable energy and storage solutions to replace expensive and unreliable grid power and is expected to continue in the medium-term.

“Our international revenues grew materially this year, as a more stable political and business environment in Zambia and our record defence exports delivered a significant growth in revenue. Importantly, we enter 2024 with record orders on hand.

“In conclusion, I am pleased with the financial, operational and strategic performance of Reunert in 2023, which delivered increased value for shareholders.”

Group CFO Nick Thomson says: “Despite the challenging macro-economic environment, the group released working capital and delivered a free cash flow of nearly R1.3 billion.

“In addition, the group arranged longer-term funding, which will enable the execution of the group’s strategy, and the continued investment in both expansionary and replacement capital and to meet our working capital requirements.”