[PPT] - PRESENTATION TO INVESTORS FOR THE YEAR ENDED 30 SEPTEMBER 2015 PowerPoint Presentation

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PRESENTATION TO INVESTORS

FOR THE YEAR ENDED 30 SEPTEMBER 2015

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AGENDA

GROUP OVERVIEW – Alan Dickson, CEO
FINANCIAL OVERVIEW – Nick Thomson, CFO
SEGMENTAL DISCUSSIONS
ICT – Mark Taylor
Applied electronics – Peter van der Bijl
Electrical engineering – Alan Dickson
GROUP STRATEGY AND PROSPECTS – Alan Dickson

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GROUP OVERVIEW Alan Dickson

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OVERVIEW

Positive operational performance, despite a tough macro-economic environment
The expected economic growth rates have slowed materially
No indication of a significant improvement in the medium term
Reunert has delivered on its 2014 commitments
No material once-off costs
All loss-making business units have been restored to profitability
Growth achieved in all segments

› ICT: underpinned by stabilising office automation business model and excellent performance from voice and finance businesses › Applied electronics: boosted by hard currency export orders and securing the multi-year Radiate contract › Electrical engineering: driven by volume growth, efficiency enhancements and the award of several long-term frame contracts

Steady progress has been made on the execution of the group strategy that was approved in April 2015

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OVERVIEW

CONTINUED

Revenue up 7% from R7,8 billion to R8,3 billion
Operating profit up 15% from R1 017 million to R1 167 million
Strong free cash flow of R1 146 million, excluding the Nashua Mobile sale proceeds
NHEPS (continuing operations) up 29% to 568 cents per share
Final dividend of 302 cents per share has been declared
Total dividend per share up 10% to 407 cents per share

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(30%) (20%) (10%) 0% 10% 20% REUNERT LTD ELECTRONIC AND ELECTRICAL EQUIPMENT INDEX - J273

SHARE PRICE PERFORMANCE

Sep 2014 Sep 2015

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FINANCIAL OVERVIEW Nick Thomson

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NASHUA MOBILE

SUBSCRIBER BASE SALE

R1,4 billion profit on disposal accounted for in 2014
All base sale proceeds have been received (R1,8 billion net of tax)
R42 million profit from discontinued operations in 2015
EPS effect: 26 cents (2014: 966 cents)
Back office support will continue until 2019
Customer support (operation of call centre)
Computer processing costs
Maintenance of mainframe IT hardware and software
Maintenance of records (no permanent staff)
Potential future tax queries and audits
Sufficient residual provisions to cover expected costs

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FINANCIAL RESULTS

GROUP INCOME STATEMENT – ALL OPERATIONS

2015 2014 % change Revenue Rm 8 300 7 774 7 ▲ EBITDA Rm 1 284 1 125 14 ▲ Depreciation & amortisation Rm (117) (108) Operating profit Rm 1 167 1 017 15 ▲ Net interest income/(expense) Rm 135 (10) Profit before abnormal items and tax Rm 1 302 1 007 29 ▲ Abnormal items Rm

(327)

Tax Rm (360) (278) Share of JV profit/(loss) Rm 17 (12) Profit from continuing operations Rm 959 390 146 ▲ Profit from discontinued operation Rm 42 1 584 Profit for the year Rm 1 001 1 974 (49) ▼ HEPS Cents 588 506 16 ▲ NHEPS Cents 580 553 5 ▲

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FINANCIAL RESULTS

SALIENT FEATURES – CONTINUING OPERATIONS

2015 2014 % change Revenue Rm 8 300 7 774 7 ▲ EBITDA Rm 1 284 1 125 14 ▲ Operating profit Rm 1 167 1 017 15 ▲ Earnings per share Cents 579 235 146 ▲ HEPS Cents 576 391 47 ▲ NHEPS Cents 568 439 29 ▲ EBITDA % 15,5 14,5 7 ▲ Operating profit margin % 14,1 13,1 8 ▲ Final dividend per share Cents 302 275 10 ▲ Dividend per share Cents 407 370 10 ▲ Dividend yield % 6,7 6,2 8 ▲

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FINANCIAL RESULTS

REVENUE

The cable businesses increased

market share, renewed long-term contracts with good draw downs in the current year and returned to normal sales levels to the mining industry after 2014 strikes

Product sales in the circuit breaker

business performed well while contribution from the solutions business was disappointing

Nashua OA repositioned its market
ffering with a negative impact on

pricing but a positive impact on market share

Excellent voice minute growth

in ECN at lower connection rates

Significant export orders secured

by Reutech and delivered in H2

7 774 8 300 447 81 6 8 2014 Electrical engineering ICT Applied electronics Other 2015 MOVEMENT IN GROUP REVENUE (Rm)

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3% 2% 1% 8% 1% 4% 4% 1% 7% 1%

FINANCIAL RESULTS

REVENUE

48% 40% 12% % REVENUE CONTRIBUTION*

2015

Electrical engineering ICT Applied electronics Other 45% 43% 12%

2014

% REVENUE BY REGION 83%

2015

South Africa Africa Asia Australia Europe North America South America <1% 84%

2014

*Continuing operations

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42% 47% 15%

FINANCIAL RESULTS

OPERATING PROFIT

* Excludes Other segment of (4%) in FY2015 and (3%) in FY2014

Improved volumes resulting in

improved fixed cost recoveries at African Cables augmented by cost control

Nashua optimised supply chain and

realised savings in distribution and general overhead costs

ECN increased customer base and

both outgoing and incoming minutes

Significant cost savings in Nashua

Communications

Reutech delivered a good result

despite slow down in the radar and communications divisions

1 017 1 167 65 80 11 6 2014 Electrical engineering ICT Applied electronics Other 2015 MOVEMENT IN OPERATING PROFIT (Rm) OPERATING PROFIT CONTRIBUTION* (%) Margin 13,1% Margin 14,1%

2015

Electrical engineering ICT Applied electronics 36% 53% 14%

2014

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1 408 1 146 2 221 62 133 1 789 19 415 42 104 629 Cash generated from

perations*

Working capital Net interest Tax paid Capex replacement Free cash flow Capex expansion Dividends paid Nashua Mobile Other Increase in cash resources

FINANCIAL RESULTS

CASH FLOW AND WORKING CAPITAL

MOVEMENT IN CASH FLOW (Rm)

* Before working capital movement

WORKING CAPITAL MOVEMENT (Rm) 2015 2014 Inventory and contracts in progress 24 128 Accounts receivable and derivative assets (84) 85 Trade and other payables, provisions and derivative liabilities (243) (180) Advance payments 365 (77) 62 (44)

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FINANCIAL RESULTS

BALANCE SHEET SUMMARISED

FY15 FY14 PP&E and intangible assets 745 722 Goodwill 653 649 Non current investments and loans 253 241 Net assets of discontinued operation (excl cash) 2 1 653 Rental and finance lease receivables 2 191 2 187 Net working capital 691 969 Long and short-term liabilities (440) (434) Deferred tax (6) (70) Cash and cash equivalents of continuing operations 2 636 415 Net assets 6 725 6 332 Equity 6 725 6 332

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FINANCIAL RESULTS

EFFICIENCY INDICATORS – CONTINUING OPERATIONS

FY15 FY14 Inventory turnover Times 5,5 5,5 ► Trade receivables Days 53 43 ▼ Trade payables Days 57 60 ▼ Net worth (NAV) per share R 40,5 38,2 ▲ Gross profit margin (%) % 34,7 33,8 ▲ Net profit margin % 11,6 9,2 * ▲ Bad debt as % revenue % 0,3 0,3 ► Overhead and related costs as % of revenue % 21,1 21,6 ▲ Cash generated by operations vs operating profit % 121,4 98,1 ▲

* 5,0% including prior year abnormal items

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ICT Mark Taylor

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ICT

SALIENT FEATURES

CONTINUING OPERATIONS (Rm) 2015 2014 % change Revenue 3 431 3 439 0% ► Operating profit 533 453 17% ▲ Profit margin 16% 13%

20 40 60 80 100 11 12 13 14 Inbound Outbound ECN number of minutes per call type TDV vs MFP and printer MIF 30 60 90 100 200 300 400 500

11 12 13 14 15

Total Clicks Multi-functional printers Printers Millions Thousands Millions 15

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ICT

OVERVIEW

Good progress was made on stabilising OA business
Initial focus was on repositioning the office automation business
Strengthened leadership with the deployment of key team from Nashua Mobile
Excellent performance from voice businesses
ECN’s voice business was launched through Nashua franchises
Driving efficiency and synergies throughout the segment
Go-to-market distribution and service framework enhanced

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ICT

OVERVIEW

Office automation
Financial performance largely flat
Overall MFP volume sales improved by 35%, total market share improved from 15% to 16%
Focus on improving the Basic Print Services (BPS) value offering
23% revenue growth in SADC countries, albeit off a low base
Prodoc improved SEK revenues by 13%, while costs reduced by 1%
Voice business
Excellent performance from ECN breaking through one billion voice minutes per year
Increased volumes had a positive impact on fixed-cost base and scalable business model
Largest independent VoIP solution provider in South Africa
Cloud (virtual) PBX offering developed and launched
Load-shedding contributed to estimated 2,5 million voice minutes being lost

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ICT

OVERVIEW

Enterprise telecommunications
Now managed separately from ECN business
Nashua Communications’ focused efforts on Unify business contributed a R22 million

improvement in operating profit

Asset finance business
Quince Capital delivered another solid performance growing book by 8% to R2,1 billion
Bad debt ratio remains less than 1% of the book
Retained A⁺(ZA) long-term and A1(ZA) short-term national credit rating for 2016
Focus on service automation to drive efficiencies, customer service and sales

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ICT

2016 FOCUS AREAS

Add complementary technologies in ICT to evolve the business

to a holistic document management and managed office provider

Offer more services through same channels while integrating back-end operations
Office Automation and MPS/MDS opportunities being developed in new African countries
Continue to leverage the Nashua franchise model
Seek appropriate new products and services for delivery through the channel
Expand the franchise model into other African territories
Enhance collaboration with key OEMs
Improve operational efficiencies to enhance margins
ECN network optimisation project
Segment logistics consolidation (Warehouse, distribution and customer service)
Improved customer centricity
Build on a culture of customer service through continued measurement of all engagements

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APPLIED ELECTRONICS Peter van der Bijl

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APPLIED ELECTRONICS

SALIENT FEATURES

Rm 2015 2014 % change Revenue 1 081 1 000 8% ▲ Operating profit 181 170 6% ▲ Profit margin 17% 17%

49% 51% MARKET SECTOR REVENUE DISTRIBUTION 20% 56% 24%

2015

Commercial Defence SOEs 27% 43% 30%

2014

50% 50%

2015 2014

Exports Local

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0% 3% 6% 9% 2011 2012 2013 2014 2015

APPLIED ELECTRONICS

RESEARCH AND DEVELOPMENT

Total R&D spend R86 million (2014: R74 million)

R&D AS A % OF REVENUE 20 40 60 80 2011 2012 2013 2014 2015 Funded Self-funded R&D FUNDING (Rm)

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APPLIED ELECTRONICS

OVERVIEW

An improved performance in H2 on back of orders received and weaker rand
Performance from communications and radar business units slowed down
Did not secure sufficient new projects to compensate for non-recurring projects in FY2014
Mining surveillance radar flat year-on-year
Despite depressed commodity cycle, demand for MSRs continued as safety and efficiencies are

critical drivers worldwide

Increased competition resulted in pricing pressure
Communications has secured phase 1 of SANDF new generation radio contract
Contractual pre-payment had a positive impact on working capital requirements
First production radios from an additional facility in Durban will be delivered early next year
Fuze export order
Received in H1
Production and deliveries were at full capacity in H2
Solutions
Fierce local price competition led to some loss of traditional logistical support business
Strong export orders received for Rogue stabilisation platforms due to price and performance advantage

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APPLIED ELECTRONICS

OVERVIEW

Expanding of direct product sales into the African, Middle East and Asian markets
Security radars in SADC and Central Africa
Rogue, radar and fuze systems to Middle East
Radios and radars to Asia
Innovation
Client-funded R&D will yield a new generation technology radar for the SA Navy
Newly developed mining radar sensor has been successfully tested in Canada to detect

underground rock faults. Final phase of client development funding received

First successful flight trials concluded on the new generation airborne radio (ACR510)
Acquisition
Vertical integration acquisition undertaken to gain control of critical IP

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APPLIED ELECTRONICS

2016 FOCUS AREAS

Build and strengthen partnerships with OEMs and other distributors to gain

access to new export markets and long-term contracts

Continue to develop commercial applications using in-house technologies,

thereby broadening our customer base

Continue to drive improvement in transformation to ensure that we are aligned

with South Africa’s national goals

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ELECTRICAL ENGINEERING Alan Dickson

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60 70 80 90 12 13 14 15 R000 per tonne Total price FY13 average FY14 average FY15 average COPPER PRICE 20 40 60 80 100 Sep Mar Sep Mar Sep 13 14 15 Low voltage Energy cables Copper telecom cables Fibre telecom cables

ELECTRICAL ENGINEERING

SALIENT FEATURES

% FACTORY CAPACITY UTILISATION

(Rm, includes portion of JV) 2015 2014 % change Revenue 4 112 3 611 14% ▲ Operating profit 520 428 21% ▲ Profit margin 13% 12%

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ELECTRICAL ENGINEERING

OVERVIEW

Diversification
Two new circuit breaker product range developments were completed

› Commercial product range launched in Australia › Rail rolling product range launched worldwide

Improved energy cable market leadership with the completion of high and extra-high

voltage project capability at 275kV and 400kV

Efficiency improvements
Manufacturing efficiencies improved, partly due to increased production volumes
Operating cost increases were contained to below CPI levels
Strong operating cash flows of R505 million (2014: R375 million)
Despite adverse trading conditions, operating profit margin improved from 12% to 13%

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ELECTRICAL ENGINEERING

2016 FOCUS AREAS

Local market conditions are expected to soften resulting in continued focus on

margin controls and efficiencies

Geographic expansions
Cables into Africa
New circuit breaker ranges
Market alignment with expectations of key long-term customers
Investment is expected to result in market leading ratings on the amended B-BBEE codes
Expand project-based offerings to meet the evolving requirements of our customers

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GROUP STRATEGY Alan Dickson

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STRATEGIC REVIEW

MATERIAL MATTERS

Concentration risk
Mainly South African based revenue streams
Mature business life-cycle products
Slow growth rates
Reunert’s core competitive advantages
Well-known and respected brands
Diverse and loyal customer base
Number one or two in the majority of the market sectors we participate in
Strong operational performance culture with a credible track record
Healthy cash flows

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STRATEGIC PILLARS

Strategic review completed and received board approval at end April 2015

Implementation of the Reunert group strategy will provide

Opportunities for further growth
A more balanced group with

additional products and services

Diversified geographical

revenues

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STRATEGIC EXECUTION PROGRESS

Acquisitions are a key element of Reunert’s growth strategy
A board approved acquisition methodology is followed
Targets are aligned to the current three segments of Reunert
The internal M&A capability has been strengthened
Small acquisition in applied electronics awaiting Competition Commission approval
Dividend growth is aligned to support the strategy execution

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PROSPECTS Alan Dickson

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PROSPECTS

Reunert’s future growth prospects are
Likely to have a correlation to the South African macro-economic trends
Augmented by recently secured long-term contracts in the applied electronics segment
Execution of Reunert strategy
Continued focus on acquisitions that deliver enhanced shareholder value will continue
Dividends
Reunert’s cash flows are expected to support both the execution of the Reunert strategy and