REUNERT LIMITED - Unaudited group results and cash dividend declarationfor the six months ended 31 March 2013
RLO RLZP 201305210002A Unaudited group results and cash dividend declaration for the six months ended 31 March 2013 Reunert Limited Incorporated in the Republic of South Africa Reg. No 1913/004355/06 Share Code: RLO ISIN code: ZAE000057428 Preference share code: RLZP ISIN code: ZAE00005930 (Reunert, the group or the company) UNAUDITED GROUP RESULTS and cash dividend declaration for the six months ended 31 March 2013 COMMENTARY Normalised headline earnings per share declined by 14% from 298 cents to 257 cents. Revenue reduced by 8% to R5,3 billion from R5,7 billion. This decrease was predominantly in the CBI-electric and Nashua segments. Operating profit was 21% lower at R583 million. This decline was experienced across all segments and is attributable primarily to the prevailing difficult business environment. Basic earnings reduced by 14% to R421 million. Headline earnings per share decreased by 15% to 258 cents compared to 304 cents. Net cash resources at 31 March 2013 amounted to R593 million, reflecting an increase of R329 million over the same date in 2012. REVIEW OF OPERATIONS CBI-electric Under the current trading conditions, the revenue from our electrical business of R1,6 billion was reasonable. The delays in external infrastructure project roll-outs have significantly impacted the segment, whilst the strike within the port and transport sector affected production at African Cables in October 2012. The instability in the mining sector exacerbated the situation further. Exports of our electrical products increased. Operating profit decreased by 20% to R234 million due to a reduction in revenue, margin pressures and an unfavourable product mix. The low voltage business continued to experience strong demand for its products from export markets, mainly as a result of 4G cellular network roll-outs in Europe. The slowdown in the Australian mining sector negatively affected our Australian operation resulting in a lower profit than achieved in 2012. The delay in certain tender awards affected the energy cables business negatively and the power installation division was underutilised due to delays in certain significant external projects. Maintenance and repair work continued at normal levels. In addition, competitive market conditions have resulted in margin reduction. The telecommunications cables operation again experienced a disappointing first six months. In the main this was due to low demand for copper cable from Telkom. Revenue was flat with strong demand for optical fibre cable supporting turnover. Margins remained under pressure in the fibre market. Nashua Revenues within the Nashua segment declined by 9% to R3,3 billion, whilst operating profit decreased by 23% to R311 million. The office automation business reflected largely static revenues. The number of units sold in the first half was lower than the prior half year where certain significant tenders boosted revenues and operating profit. Furthermore, Rand weakness resulted in lower margins as price increases could not be passed on to customers in a difficult and competitive market. Nashua Mobile reflected a 12% decrease in revenue. This deterioration was, in part, expected as Least Cost Routing (LCR) revenues continued to decline due to the drop in interconnect rates. The reduction in interconnect rates also resulted in enhanced hybrid packages from the networks, which negatively affected airtime revenue within this business. Net connections increased by 57 684. However, these new contracts are generally at lower subscription rates which, together with reductions in the high value LCR business, resulted in a further decline in margin over the comparative period in the prior year. Nashua Mobile is in the process of renegotiating its service provider agreement with Vodacom. Discount rates have been reduced, which has negatively affected our margins. The businesses of Nashua ECN and Nashua Communications were merged into a single operation with effect from 1 October 2012. The business had a challenging first half due to difficult market conditions. We are confident that the combined business is well-positioned with our converged communication offering. Sales and installations of the VoIP solution continue to be robust, although with the decreased interconnect rates, revenue reflects only nominal growth. Quince had a sound six months with a marginal increase in its net rental book. Both revenue and operating profit increased. Reutech The uneven demand and phasing of contract roll-outs that characterises the business is reflected in an increase of 2% in revenue and a decline of 29% in operating profit. The increase in revenue is largely due to the continued demand for mining surveillance radars as well as the additional revenues from the acquisition of the SAAB Grintek business, offset by lower sales in Fuchs due to the timing of contract awards. The decrease in operating profits is largely due to the impact of once-off costs associated with the acquisition of SAAB Grintek, which is now complete. Prospects While Reunert will plan for and pursue earnings growth, given the tough trading conditions, it will continue to focus on rigorous cost control, effective cash management and extracting efficiencies from its businesses. Further, we will continue to act with prudence and foresight in the short term. Directorate and secretarial With effect from 7 December 2012 Mr Trevor Munday was appointed as a member of the audit committee. Mr Pat Gallagher retired from the board on 28 March 2013. The board extends its thanks to him for his service over the years and wishes him and his wife all the best in their retirement. With effect from 1 April 2013 Ms Louisa Mojela was appointed to the board and the audit committee. With effect from 17 May 2013 Ms Yolanda Cuba resigned from the board and the audit committee. CASH DIVIDEND Notice is hereby given that a gross interim cash dividend No 174 of 95 cents per ordinary share (2012: 95 cents per share) has been declared by the directors for the six months ended 31 March 2013. The dividend has been declared from income reserves and no secondary tax on companies credits have been used. A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt from or who do not qualify for a reduced rate of withholding tax. The net dividend payable to shareholders subject to withholding tax at a rate of 15% thus amounts to 80,75 cents per share. The issued share capital at the declaration date is 200 807 585 ordinary shares and 350 000 5,5% cumulative preference shares. Reunerts income taxation reference number is 9100/101/71/7P. In compliance with the requirements of Strate, the following dates are applicable: Last date to trade (cum dividend) Thursday, 13 June 2013 First date of trading (ex dividend) Friday, 14 June 2013 Record date Friday, 21 June 2013 Payment date Monday, 24 June 2013 Shareholders may not dematerialise or rematerialise their share certificates between Friday, 14 June 2013 and Friday, 21 June 2013, both days inclusive. On behalf of the board Trevor Munday David Rawlinson Chairman Chief Executive Sandton 20 May 2013 Financial information Condensed group income statement Six months ended 31 March Year ended 30 September 2013 2012 2012 R million R million % R million Notes (Unaudited) (Unaudited) change (Audited) Revenue 5 272,2 5 748,8 (8) 11 662,2 Earnings before interest, taxation, depreciation, amortisation, other income and dividends 637,0 792,2 (20) 1 629,7 Other income 14,4 11,2 31,0 Earnings before interest, taxation, depreciation and amortisation (EBITDA) 651,4 803,4 (19) 1 660,7 Depreciation and amortisation 68,4 67,3 2 136,1 Operating profit 1 583,0 736,1 (21) 1 524,6 Net interest and dividend income 2 13,6 22,1 (38) 41,8 Profit before taxation 596,6 758,2 (21) 1 566,4 Taxation 171,5 260,0 (34) 483,8 Profit after taxation 425,1 498,2 (15) 1 082,6 Profit attributable to: Non-controlling interests 4,6 6,6 (30) 15,9 Equity holders of Reunert 420,5 491,6 (14) 1 066,7 Basic earnings per share (cents) 3 & 4 258,1 303,8 (15) 658,2 Diluted earnings per share (cents) 3 & 4 255,2 301,6 (15) 654,2 Headline earnings per share (cents) 3 & 4 258,2 303,7 (15) 658,3 Diluted headline earnings per share (cents) 3 & 4 255,2 301,5 (15) 654,3 Normalised headline earnings per share (cents) 3 & 4 256,5 298,0 (14) 644,4 Normalised diluted headline earnings per share (cents) 3 & 4 253,6 295,9 (14) 640,5 Cash dividend per ordinary share declared (cents) 95,0 95,0 - 370,0 Condensed group statement of comprehensive income Six months ended 31 March Year ended 30 September 2013 2012 2012 R million R million R million (Unaudited) (Unaudited) (Audited) Profit after taxation 425,1 498,2 1 082,6 Other comprehensive income, net of taxation: Gains/(losses) arising from translating the financial results of foreign subsidiaries 3,2 (1,4) -* Total comprehensive income 428,3 496,8 1 082,6 Total comprehensive income attributable to: Non-controlling interests 4,6 6,6 15,9 Equity holders of Reunert 423,7 490,2 1 066,7 * Nil due to rounding. Condensed group balance sheet 31 March 31 March 30 September 2013 2012 2012 R million R million R million Notes (Unaudited) (Unaudited) (Audited) Non-current assets Property, plant and equipment and intangible assets 685,9 684,2 706,8 Goodwill 6 706,0 661,1 707,0 Investments and loans 7 61,9 41,8 64,3 Accounts receivable 1 186,7 1 023,2 1 066,5 Deferred taxation 28,5 27,6 33,3 Non-current assets 2 669,0 2 437,9 2 577,9 Current assets Inventory and contracts in progress 1 045,7 924,1 969,3 Accounts receivable, derivative assets and taxation 2 235,8 2 307,7 2 343,9 Cash and cash equivalents 818,8 454,5 696,9 Current assets 4 100,3 3 686,3 4 010,1 Total assets 6 769,3 6 124,2 6 588,0 Equity attributable to equity holders of Reunert Ordinary 4 449,0 3 983,0 4 441,7 Preference 0,7 0,7 0,7 4 449,7 3 983,7 4 442,4 Non-controlling interests 52,5 47,4 56,1 Total equity 4 502,2 4 031,1 4 498,5 Non-current liabilities Deferred taxation 122,7 106,3 127,4 Long-term borrowings 8 26,7 0,4 25,4 Non-current liabilities 149,4 106,7 152,8 Current liabilities Accounts payable, derivative liabilities, provisions and taxation 1 891,7 1 795,7 1 860,1 Bank overdrafts and short-term portion of long-term borrowings (including finance leases) 226,0 190,7 76,6 Current liabilities 2 117,7 1 986,4 1 936,7 Total equity and liabilities 6 769,3 6 124,2 6 588,0 Condensed group cash flow statement Six months ended 31 March Year ended 30 September 2013 2012 2012 R million R million R million (Unaudited) (Unaudited) (Audited) EBITDA 651,4 803,4 1 660,7 Increase in net working capital (31,7) (360,8) (398,9) Other (net) 14,8 7,5 26,2 Cash generated from operations 634,5 450,1 1 288,0 Net interest and dividend income 13,6 22,1 41,8 Taxation paid (194,5) (213,1) (447,2) Dividends paid (including to non-controlling interests) (456,1) (422,8) (577,4) Net cash flows from operating activities (2,5) (163,7) 305,2 Net cash flows from investing activities (46,8) (151,1) (291,2) Capital expenditure (52,6) (52,2) (106,5) Net cash flows from acquisition of businesses - - (76,8) Payment of outstanding purchase consideration for previous years acquisitions - (90,9) (91,5) Non-current loans granted - - (28,5) Other 5,8 (8,0) 12,1 Net cash flows from financing activities 21,6 14,0 42,1 Shares issued 20,5 14,3 42,5 Other 1,1 (0,3) (0,4) (Decrease)/increase in net cash resources (27,7) (300,8) 56,1 Net cash resources at the beginning of the period 620,7 564,6 564,6 Net cash resources at the end of the period 593,0 263,8 620,7 Cash and cash equivalents 818,8 454,5 696,9 Bank overdrafts (225,8) (190,7) (76,2) Net cash resources at the end of the period 593,0 263,8 620,7 Condensed group statement of changes in equity Six months ended 31 March Year ended 30 September 2013 2012 2012 R million R million R million (Unaudited) (Unaudited) (Audited) Share capital and premium Balance at the beginning of the period 242,8 200,3 200,3 Issue of shares 20,5 14,3 42,5 Balance at the end of the period 263,3 214,6 242,8 Share-based payment reserve Balance at the beginning of the period 766,9 751,0 751,0 Share-based payment expense 11,0 7,9 15,9 Balance at the end of the period 777,9 758,9 766,9 Equity transactions with BEE partner and non-controlling shareholder Balance at the beginning of the period (34,9) (35,3) (35,3) Transferred to retained income (0,4) - - Acquisition of non-controlling interest - 0,4 0,4 Balance at the end of the period (35,3) (34,9) (34,9) BEE shares* (276,1) (276,1) (276,1) Treasury shares (1 253,6) (1 253,6) (1 253,6) Non-distributable reserves 3,9 3,9 3,9 Foreign currency translation reserves Balance at the beginning of the period (2,8) (2,8) (2,8) Other comprehensive income 3,2 (1,4) - Balance at the end of the period 0,4 (4,2) (2,8) Retained earnings Balance at the beginning of the period 4 996,2 4 493,0 4 493,0 Profit after taxation attributable to equity holders of Reunert 420,5 491,6 1 066,7 Transferred from non-distributable reserves 0,4 - - Cash dividends declared and paid (447,9) (409,5) (563,5) Balance at the end of the period 4 969,2 4 575,1 4 996,2 Equity attributable to equity holders of Reunert 4 449,7 3 983,7 4 442,4 Non-controlling interests Balance at the beginning of the period 56,1 55,2 55,2 Share of total comprehensive income 4,6 6,6 15,9 Dividends declared and paid (8,2) (13,3) (13,9) Acquisition of non-controlling interest - (1,1) (1,1) Balance at the end of the period 52,5 47,4 56,1 Total equity at end of the period 4 502,2 4 031,1 4 498,5 * These are shares held by Bargenel Investment Limited (Bargenel), a company sold by Reunert to an accredited BEE partner in 2007. Until the amount owing by the BEE partner is repaid to Reunert, Bargenel is to be consolidated by the group as the significant risks and rewards of ownership of the equity have not passed to the BEE partner. Condensed segmental analysis Six months ended 31 March Year ended 30 September 2013 2012 2012 R million % R million % % R million % (Unaudited) of total (Unaudited) of total change (Audited) of total Revenue* CBI-electric 1 577,8 30 1 738,3 30 (9) 3 634,3 31 Nashua 3 308,3 63 3 636,1 63 (9) 7 218,3 62 Reutech 380,5 7 372,6 7 2 805,7 7 Other 5,6 - 1,8 - 3,9 - Revenue as reported 5 272,2 100 5 748,8 100 (8) 11 662,2 100 * Inter-segment revenue is immaterial and has not been separately disclosed. Operating profit CBI-electric 233,8 40 292,2 40 (20) 592,9 39 Nashua 310,5 53 402,5 55 (23) 838,6 55 Reutech 49,3 8 69,1 9 (29) 150,5 10 Other (10,6) (1) (27,7) (4) 62 (57,4) (4) Operating profit as reported 583,0 100 736,1 100 (21) 1 524,6 100 31 March 31 March 30 September 2013 % 2012 % 2012 % R million of total R million of total R million of total Total assets CBI-electric 1 752,9 26 1 581,8 26 1 515,2 23 Nashua 4 184,4 62 3 899,1 64 4 101,6 62 Reutech 604,9 9 460,2 7 598,2 9 Other* 227,1 3 183,1 3 373,0 6 Total assets as reported 6 769,3 100 6 124,2 100 6 588,0 100 * Included in Other are bank balances of Rnil (2012: Rnil; September 2012: R206,4 million) relating to the groups treasury function. Notes 31 March 31 March 30 September 2013 2012 2012 R million R million R million (Unaudited) (Unaudited) (Audited) 1. OPERATING PROFIT Operating profit includes: - Cost of sales 3 763,0 4 068,8* 8 130,9 - Realised profit/(loss) on foreign exchange and derivative instruments 4,1 (6,5) (0,1) - Unrealised gain on foreign exchange and derivative instruments 9,9 22,5 14,3 * To improve disclosure certain costs have been reallocated to cost of sales. 2. Net interest and dividend income Interest income 18,7 26,2 52,0 Interest expense (5,1) (4,1) (10,7) Dividend income - - 0,5 Total 13,6 22,1 41,8 3. Number of shares used to calculate earnings per share Weighted average number of shares in issue used to determine basic earnings, headline earnings and normalised headline earnings per share (millions of shares) 162,9 161,8 162,0 Adjusted by the dilutive effect of unexercised share options granted (millions of shares) 1,9 1,2 1,0 Weighted average number of shares used to determine diluted basic, diluted headline and diluted normalised headline earnings per share (millions of shares) 164,8 163,0 163,0 4.1. Headline earnings Profit attributable to equity holders of Reunert 420,5 491,6 1 066,7 Headline earnings are determined by eliminating the effect of the following items from attributable earnings: Net loss/(gain) on disposal of property, plant and equipment and intangible assets (after tax charge of R0,1 million (2012: Rnil)(September 2012: R0,4 million)) 0,1 (0,2) (1,0) Gain on change in shareholding in investment (after tax charge of Rnil) - - (0,3) Impairment charge recognised for property, plant and equipment (after tax charge of Rnil (2012: Rnil)(September 2012: R0,5 million)) - - 1,4 Headline earnings 420,6 491,4 1 066,8 31 March 31 March 30 September 2013 2012 2012 R million R million R million (Unaudited) (Unaudited) (Audited) 4.2. Normalised headline earnings (unaudited for all periods)# Headline earnings (refer to note 4.1) 420,6 491,4 1 066,8 It is the groups policy to determine normalised headline earnings by eliminating the effect of the following items from attributable headline earnings: Net economic interest in profit attributable to all BEE partners (refer to note 5) (2,8) (9,2) (22,2) BEE share of headline and normalised headline earnings adjustments - - (0,3) Normalised headline earnings 417,8 482,2 1 044,3 5. BEE transactions (unaudited for all periods)# It is the groups policy that where the significant risks and rewards of ownership in respect of their equity interests have not passed to the BEE partners, these are not recognised as non-controlling interests. Had the non-controlling interests been recognised, the effect would be the following: - Net economic interest in current period profit that is attributable to all BEE partners 2,8 9,2 22,2 - Balance sheet interest that is economically attributable to all BEE partners 118,3 94,5 107,7 # The unaudited pro forma financial information above has been prepared for illustrative purposes only to provide information on how the normalised earnings adjustments might have impacted on the financial results of the group. Because of its nature, the unaudited pro forma financial information may not be a fair reflection of the groups results of operation, financial position, changes in equity or cash flows, insofar as the economic impact of BEE transactions is concerned. The underlying information used in the preparation of the unaudited pro forma financial information has been prepared using the relevant group accounting policy. The amounts of the adjustments are consistent with the amounts recorded under International Financial Reporting Standards (IFRS). The adjustments are expected to continue until such time as risks and rewards of ownership transfer to the BEE partners. The directors of the company are responsible for the compilation, contents and preparation of the unaudited pro forma financial information. Their responsibility includes determining that the unaudited pro forma financial information has been properly compiled on the basis stated; the basis is consistent with the accounting policy of the group; and the pro forma adjustments are appropriate for the purposes of the unaudited pro forma financial information disclosed in terms of the JSE Limited Listings Requirements. 31 March 31 March 30 September 2013 2012 2012 R million R million R million (Unaudited) (Unaudited) (Audited) 6. Goodwill Carrying value at the beginning of the period 707,0 654,9 654,9 Acquisition of businesses - - 44,0 Adjustment to goodwill on finalisation of acquisitions made in the prior period (1,0) 6,2 8,1 Carrying value at the end of the period 706,0 661,1 707,0 7. Investments and loans Loans - at cost 60,2 40,2 62,6 Other unlisted investments - at cost 1,7 1,6 1,7 Carrying value at the end of the period 61,9 41,8 64,3 8. Long-term borrowings Total long-term borrowings (including finance leases) 26,9 0,4 25,8 Less: short-term portion (including finance leases) (0,2) - (0,4) 26,7 0,4 25,4 9. Basis of preparation These condensed consolidated financial statements have been prepared in accordance with the framework concepts and the recognition and measurement criteria of IFRS and its interpretations adopted by the International Accounting Standards Board (IASB) in issue and effective for the group at 30 September 2013 and the AC500 standards issued by the Accounting Practices Board. This condensed consolidated information has been prepared using the information as required by IAS 34 - Interim Financial Reporting, and complies with the Listings Requirements of the JSE and the requirements of the Companies Act, No. 71 of 2008 of South Africa. This report was compiled under the supervision of MC Krog CA (SA) (Chief Financial Officer). The groups accounting policies, as per the audited annual financial statements for the year ended 30 September 2012, have been consistently applied. These accounting policies comply with IFRS. 10. Unconsolidated subsidiary The financial results of Cafca Limited, a subsidiary incorporated in Zimbabwe, have not been consolidated as the group does not have management control. The amounts involved are not material to the groups results. At 31 March 2013 Cafcas retained earnings amounted to US$9,3 million. 11. Related party transactions The group entered into various transactions with related parties, which occurred in the ordinary course of business and under terms that are no more favourable than those arranged with independent third parties. 12. Events after balance sheet date No events have occurred after the balance sheet date that require additional disclosure or adjustment to the results presented. Supplementary information 31 March 31 March 30 September 2013 2012 2012 R million (unless otherwise stated) (Unaudited) (Unaudited) (Audited) Net worth per share (cents) 2 728 2 459 2 732 Current ratio (:1) 1,9 1,9 2,1 Net number of ordinary shares in issue (million) 163,1 162,0 162,6 Number of ordinary shares in issue (million) 200,8 199,7 200,3 Less: BEE shares (million) (18,5) (18,5) (18,5) Less: Treasury shares (million) (19,2) (19,2) (19,2) Capital expenditure 52,6 52,2 106,5 - expansion 25,0 39,3 79,9 - replacement 27,6 12,9 26,6 Capital commitments in respect of property, plant and equipment 89,6 28,7 78,3 - contracted 81,0 14,2 16,5 - authorised not yet contracted 8,6 14,5 61,8 Commitments in respect of operating leases 82,9 175,0 99,2 Secretaries certification In terms of section 88(2)(a) of the Companies Act, 71 of 2008, we certify that, to the best of our knowledge and belief, the company has lodged with the Companies and Intellectual Property Commission for the financial period ended 31 March 2013 all such returns and notices as are required of a public company in terms of the aforesaid Act and that all such returns and notices appear to be true, correct and up to date. Karen Louw For Reunert Management Services Proprietary Limited Group Company Secretaries Directors TS Munday (Chairman)* NDB Orleyn** SD Jagoe* SG Pretorius* MC Krog (Chief Financial Officer) DJ Rawlinson (Chief Executive) LM Mojela* Dr JC van der Horst* TJ Motsohi* R Van Rooyen* * Independent non-executive ** Non-executive Registered office Lincoln Wood Office Park PO Box 784391 6 - 10 Woodlands Drive Sandton Woodmead 2146 Sandton Telephone +27 11 517 9000 Transfer secretaries Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 PO Box 61051, Marshalltown, 2107 Sponsor Rand Merchant Bank (A division of FirstRand Bank Limited) Enquiries Carina de Klerk +27 11 517 9000 or e-mail invest@reunert.co.za For more information log on to the Reunert website at www.reunert.com 21 May 2013 www.reunert.co.za Date: 21/05/2013 07:05:00 Produced by the JSE SENS Department. 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