REU EUNERT F FY1 Y19 RESU ESULTS PRESEN SENTAT ATION For the - - PowerPoint PPT Presentation

REU EUNERT F FY1 Y19 RESU ESULTS PRESEN SENTAT ATION

For the year ended 30 September 2019

AGEN AGENDA Salient features Strategy update Financial performance Segmental performance Business outlook and prospects

1 2 3 4 5

SALI SALIEN ENT FEAT EATURES ES

► Core operating profit decreased by 6%

̶ Impact of R37,6 million of restructuring costs included in these results

► ICT delivered real growth despite weak business

confidence

► Applied Electronics delivered another record year ► Electrical Engineering experienced a very

challenging year

̶ Weak infrastructure expenditure in cables business ̶ Zambia duty system changes

► Released R318 million from working capital ► Free cash flow of R1 313 million, 96% of

• perating profit

► Dividend increase of 4% to 513 cents

(FY18: 493 cents)

► Strong export and complementary service

revenues in Applied Electronics and ICT respectively

► M&A activity bolsters early life cycle

businesses

̶ Last mile broadband connectivity: OculusIP ̶ Renewable energy storage: Blue Nova ̶ Increased stake in Terra Firma Solutions (TFS)

Reunert audited results for the year ended 30 September 2019

Core operating profit* remains resilient despite cable company challenges Strong cash flow reflects the Group’s ability to sustain the investment case The Group’s strategy execution continues to yield positive results

3

*core operating profit is operating profit adjusted for once-off items

FI FINA NANCI NCIAL PERFO RFORMA RMANCE NCE

Year ended 30 September 2019 2019 019 2018 2017 Revenue R million 10 10 714 14 10 492 9 773 Operating profit R million 1 1 36 361 1 542 1 497 Normalised headline earnings per share Cents 578 78 687 697 Total dividend per share Cents 513 13 493 474

2% 2% 7% 7% 4% 4% 4% 16% 16%

Reunert audited results for the year ended 30 September 2019

4

12% 12% 6% 6% 105% 105% 4% 4%

Operating profit Core operating profit* Free cash flow Total dividend per share

R1 361m 1 361m R1 354m 1 354m R1 313m 1 313m 513 cent 513 cents

FY18: R1 542m FY18: R1 434m FY18: R641m FY18: 493 cents

12% 12% 3% 3% 1% 1%

STRATEG EGY Y EXECUTION CUTION

6

Reunert’s key strategic initiatives centre on

► Accelerating growth by building scale businesses in rapidly

developing markets:

̶ Last mile broadband connectivity ̶ Renewable energy

► Leveraging the strength of our ICT segment by:

̶ Transforming office automation into a Total Workspace Provider by increasing complementary products and services ̶ Expanding our traditional VOIP services into a vertically integrated communications offering for the SME market ̶ Creating a fourth cluster to broaden our ICT service offering

► Diversifying Reunert’s revenue streams by increasing penetration

into targeted geographies where we have a competitive advantage

ST STRAT ATEGY EGY EXEC EXECUTION ON

Reunert audited results for the six months ended 31 March 2019

REN ENEW EWABLE ABLE EN ENER ERGY GY ST STRAT ATEGY EGY

► The drivers for the growth of renewable energy market have

strengthened

̶ IRP2019 promulgated by Cabinet on 18 October 2019 requires 500MW per annum of distributed generation (R5bn per annum market) ̶ Eskom’s cost of electricity and security of supply remain key concerns to corporate customers ̶ Opportunities in Africa continue to develop ̶ Storage is increasingly being recognised as a mainstream solution as costs per kWh continue to reduce

► Reunert has strengthened its participation in the solar renewable

energy market

̶ Increased equity stake in TFS to 62% from 54% in September 2019 ̶ Acquired 51% of Blue Nova solutions on 1 August 2019 ̶ Early entry into storage opens the opportunity to access the next wave

• f renewable energy growth

Reunert audited results for the year ended 30 September 2019

7

REN ENEW EWABLE ABLE EN ENER ERGY GY ST STRAT ATEGY EGY

► Solar renewable energy strategy is progressing well ► Engineering, procurement and contracting (EPC) build continues

strongly

̶ TFS is one of the pre-eminent suppliers of distributed energy solutions in South Africa ̶ FY20 pipeline supports strong growth ̶ EPC projects in Africa have been successfully executed

► Build-own-operate (B-O-O) gaining significant traction

̶ External financing has been secured to facilitate the acceleration of investment into these assets ̶ Strong order book of projects for FY20

► Targeting commercial and light industrial storage solutions

̶ First 250kW unit integrated into a solar installation before year end

Reunert audited results for the year ended 30 September 2019

8

10 20 30 40

B-O-O A O ASS SSET T BUI BUILD

Total MW

ICT CT SEGM SEGMEN ENT DIVER VERSI SIFICAT ATION ON

The Total Workspace Provider strategy accelerates strongly:

► Complementary revenues are:

̶ Service revenues ̶ Annuity in nature and supported by long-term contracts ̶ Capital light ̶ Supportive of improved segment margins

► Value offering increased by launch of PCs and associated

services in Q4 FY19

► Complementary revenues to end-customers has reached critical

mass

̶ Increased 23% y/y to R616 million (FY18: 501 million)

► Significant further cross-sale opportunities exist as only 22% of

• ur customer base have more than one Nashua service

(FY18: 18%)

9

429 501 616

17% 23%

0% 5% 10% 15% 20% 25%

• 100

200 300 400 500 600 700

2017 2018 2019

Complementary revenues % increase in complementary revenues

15% 18% 22%

0% 5% 10% 15% 20% 25%

2017 2018 2019

END CUST END CUSTOMER PURC PURCHAS ASES O S OF COMPL PLEM EMENT NTARY P RY PRODUCT DUCTS ( S (Rm) CUST CUSTOMERS W WITH H MORE RE THAN O HAN ONE NE PRO PRODUCT

GEOGR GEOGRAPH APHIC EXPAN EXPANSI SION ON

► Applied Electronics local presence in Southern Asia is yielding the

desired benefits

̶ Improved access to high quality local supply chain ̶ Achieved local beneficiation requirements enabling market access for new contracts and ̶ Increased brand presence has opened new market opportunities for

• ther Applied Electronics products

̶ Exports were under pressure due to various once-off events affecting customers of Nanoteq and Omnigo

► Applied Electronics order book for FY20 is more than 60% of

budgeted revenue

► Zambian liquidity crisis continues to hamper African expansion ► Increasing percentage of R&D funding targeted at our international

markets

̶ Radars (Esprit, SSP) ̶ Circuit breakers (5G, solar energy and rail) ̶ Secure communications (new Airborne platform) 2017 017 2018 018 2019 019 Total revenue R million 9 773 10 492 10 714 Non-ZAR revenue as a % of total revenue % 28 30 30

1 422 2015 2017 2016 2018 3 141 2019 2 076 2 769 3 164

+1%

Europe Australia Americas Middle East & Asia Africa

FINANCIA NCIAL PERFORM FORMANCE NCE

NICK THOMSON

03

CONSOLIDATED STATEMENT OF PROFIT & LOSS

Rm FY 19 FY 18 % change

• n PY

Revenue 10 714 10 492 2 EBITDA 1 526 1 699 (10) Depreciation & amortisation (165) (157) 5 Operating profit 1 361 1 542 (12) Net interest (expense)/income (15) 11 (236) Profit before capital & other items 1 346 1 553 (13) Disposals & impairments (151)

• Empowerment transactions

(3) (42) (93) Profit before Tax 1 192 1 511 (21) Tax (387) (358) 8 Profit after Tax 805 1 153 (30) Share of JV’s & Assoc. loss (1) (1) Profit for the Year 804 1 152 (30)

Core operating profit reconciliation FY 19 FY 18 % change

• n PY

Operating profit 1 361 1 542 (12) Equity Accounted JV's & Associates (3) (3) Segment operating profit 1 358 1 539 (12) Skywire contingent consideration gain (77) Profit on sale of PPE (4) (28) Core operating profit 1 354 1 434 (6) Core earnings reconciliation FY 19 FY 18 % change

• n PY

EE 323 440 (27) ICT 748 715 5 AE 356 352 1 Other (73) (73)

• Core operating profit

1 354 1 434 (6) Disposal & impairment FY 19 Prodoc 44 Impairments 107 Goodwill 67 PPE 40 Total 151

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

• No material changes to the

balance sheet since 30 September 2018.

• Goodwill reduced due to:
• Working Capital improved by

R318m

• Balance sheet ungeared with net

cash and cash equivalents of R616m

Rm FY19 FY18 2015 PPE, investment property & intangible assets 1 292 1 297 Goodwill 999 1 053 Investments and loans 60 56 Investments in joint ventures and associate 154 158 Finance leases and loans receivable 2 082 1 990 Deferred taxation 143 151 Non-current assets 4 730 4 705 Inventory 1 376 1 461 Finance leases and loans receivable 893 821 Trade and other receivables and taxation 2 356 2 694 Derivative assets 10 7 Cash and cash equivalents 939 765 Current assets 5 574 5 748 Total assets 10 304 10 453 Shareholders' Funds 7 431 7 526 Deferred taxation 138 156 Put option liability

• 120

Share-based payment liability 14 23 Long-term loans 57 82 Non-current liabilities 209 381 Put option liability 120

• Current portion of long term loans

3 18 Share-based payment liability 18

• Derivative liabilities

16 65 Trade and other payables, provisions and taxation 2 184 2 270 Bank overdrafts and short term facilities 323 193 Current liabilities 2 664 2 546 Total equity and liabilities 10 304 10 453

Sale of Prodoc

(63)

Impairments

(67)

Acquisition of Blue Nova

53

Acquisition of OculusIP

23

Net movement

(54)

CASH FLOWS FOR YEAR ENDED 30 SEPTEMBER 2019

MOVEMENT IN CASH FLOW (Rm)

572 616

Dividends Paid

(817)

Opening Balance

859

Total Cash Generated

2

FX effect

• n cash

Closing Balance

1 460 1 313 859 318 (403) (102) (260) (92) (56)

Cash generated from operations Working capital changes Interest, dividends and other

(6)

Capital expenditure- replacement Taxation paid Free cash flow Capital expenditure- expansion Investing activities Financing activities Total Cash Generated

Investing activities

• Acquisition of Oculus and Blue Nova for R32m and increase in Finance book of

R252m Financing activities

• Skywire contingent consideration settled for R16m and CSP shares settled for R74m

2018 2019 Cash and Cash Equivalents 765 939 Bank overdrafts (193) (323) Total 572 616

WORKING CAPITAL MOVEMENT (Rm) FY 2019 FY 2018 Inventory and contracts in progress 66 (48) Accounts receivable and derivative assets 392 (538) Trade and other payables, provisions and derivative liabilities (171) 127 Advance Payments 31 (39) 318 (498)

• Capital expenditure in 2019 amounted to R158

million (2018: R162 million) divided between replacement capital R56 million (2018: R56 million) and expansion capital R102 million (2018: R106 million).

• All capital expenditure was funded from internal

resources.

CAPITAL EXPENDITURE

35 13 82 74 75 27 22 25 30 31 45

4

Applied Electronics

2017 2018 2019

ICT Electrical Engineering Other

158 143 162

+13,3%

• 2,5%

Categ egor

• ry

Rm Rm

Plant & Equipment 64 Computer Equipment 9 Intangibles (Incl. Software) 60 Motor vehicles 4 Land and Buildings 10 Capital Work in Progress 11 Total 158

SEGMENTAL P AL PERFORMAN ANCE

ALAN DICKSON

04

ELECT CTRI RICAL E ENGINEERI RING NG

ELEC ELECTRICAL AL EN ENGI GINEER EERING

Cable companies

► Trading conditions in South Africa materially weakened in H2FY19

̶ Structural impediments to SOE’s and municipalities’ weak financial state remained ̶ Business confidence continues to be subdued ̶ General market reduced orders to manage stock holding ̶ Telkom reduced copper telecoms cable demand

► Operational efficiency reduced as factory volumes decreased ► Significant restructure exercises were completed and financial impact

included in the results

► Zamefa

̶ Implemented zero VAT rating on copper cathode, but changed the duty regime ̶ Impaired the investment on Zamefa ̶ Continue to engage with the Zambian government

Circuit breakers

► Good export volumes due to growth in Australian and USA

• perations

► Good cost management lead to stable margins ► Increasing OEM opportunities for products in rail, 5G and renewable

energy

Reunert audited results for the year ended 30 September 2019

REVEN REVENUE ( E (Rm Rm) CO CORE RE O OPER PERAT ATING PRO PROFIT (Rm) m)

+6 +6%

% FACT ACTORY CAPA Y CAPACITY UT UTILISATION

17 17

610 696 440 323 200 400 600 800 2016 2017 2018 2019

• 27%

7%

30 50 70 90 2016 2017 2018 2019 African Cables Zamefa Low Voltage Copper cables 4 106 5 247 5 139 5 457 1 000 2 000 3 000 4 000 5 000 6 000 2016 2017 2018 2019

ICT CT

ICT CT

Office Automation

► Challenging market conditions reflected in hardware sales ► Cross-selling of complementary services showed good growth and

• ffset the hardware volumes

► Improved efficiencies in business processes and increased

complementary business services yielded improved margins

Communications

► Record number of new customer deals completed ► Minutes continue to be under pressure in tough economic conditions ► New product and services revenue delivered good growth

̶ Virtual PBx (VBx) ̶ Last mile connectivity

► System and process efficiencies resulted in real growth for ECN

Finance

► Quince finance book increased to R3,0 billion ► No material credit losses and tight cost control yielded a strong

performance

Reunert audited results for the year ended 30 September 2019

18 18

REVEN REVENUE ( E (Rm Rm) CO CORE RE O OPERA PERATING PRO PROFIT ( (Rm Rm)

• 6%

6% 5%

VB VBX PO PORT RTS O S ON N NET NETWORK ( (total) NEW BROADB ADBAND C AND CONNECT NNECTIVI VITY

4 054 9 475 16 056 4 000 9 000 14 000 19 000 2017 2018 2019 361 938 250 500 750 1000 2017 2018 2019 549 635 715 748 200 400 600 800 2016 2017 2018 2019 3 332 3 307 3 443 3 235 3 100 3 150 3 200 3 250 3 300 3 350 3 400 3 450 3 500 2016 2017 2018 2019

APPL APPLIED EL ELEC ECTRONICS 1 505 1 720 2 198 2 347 2016 2017 2018 2019

APPLI APPLIED ED ELEC ELECTRON ONICS

Reunert unaudited results for the year ended 30 September 2019

REVEN REVENUE ( E (Rm Rm) CO CORE RE O OPERA PERATING PRO PROFIT ( (Rm Rm)

305 276 352 356 2016 2017 2018 2019

+7%

59 47 56 41 41 53 44 59 2016 2017 2018 2019

Exports Local REVEN REVENUE DI E DIST STRIBUTION (%)

+1 +1%

19 19

Strong execution

► Record local sales in energy and secure communications

companies

► Further implemented our geographical diversification strategy by

• pening new offices in Australia

► Further expanded exports into Europe, Asia and South East

Asia

Segment’s order book

► Reutech Solutions received the new annual cash allocation of

the five-year contract

► Secure Communications secured the next multi-year production

tranche Radiate order

► Fuchs has new prospects for multi-year fuze orders in traditional

and new markets

► Nanoteq secured major export order for the cryptographic

equipment

► Omnigo have multi-year contracts in the pipeline ► Current orders on hand represent more than 50% of expected

FY20 sales

BUSINE INESS OUTLO LOOK A K AND PROSPEC SPECTS

05

► Reunert’s ICT and Applied Electronics segments are performing well:

̶ Strategy execution is translating into good financial performance ̶ This is expected to continue into FY20

► There remains uncertainty on the timing and quantum of the recovery in the Electrical Engineering segment

̶ Industrial action is likely to impact 1H2020

► Our balance sheet remains strong and cash flow generation is expected to continue to support dividend growth, operational and strategy

execution

► Reunert remains positively positioned as economic activity in South Africa improves

PR PROSPEC OSPECTS

Reunert audited results for the year ended 30 September 2019

21 21

APPE APPENDIX

23

CALCULATION OF EARNINGS PER SHARE

Rm FY 19 FY 18 % change on PY Profit for the year 804 1 152 (30) Non-controlling interests (14) 6 Attributable profit 790 1 158 (32) Headline earnings adjustments Loss on disposal of Prodoc 44 Goodwill impairment 67 Impairment of PPE 26 Profit on disposal of assets (3) (23) Headline earnings 924 1 135 (19) Normalised headline earnings adjustments Empowerment transactions 2 42 Skywire contingent consideration (77) M&A costs 6 9 Normalised headline earnings 932 1 109 (16) Weighted average number of shares 161.3 161.4 EPS (cents) 490 717 (32) HEPS (cents) 573 703 (19) NHEPS (cents) 578 687 (16)

Reconciliation of year on year EPS EPS in 2018 717 Once off's in 2018 (62) Once off's in 2019 (84) Impact of current year trading (81) EPS in 2019 490 Current year trading impact Core operating profit net of tax* (36) Impact of reduction in interest earned (12) NCI impact (12) Tax and othe impacts (21) Total (81) *EE impact (84)