Reunert Year-end Results 12 months ended 30 September 2009 1 - - PowerPoint PPT Presentation

Reunert Year-end Results

12 months ended 30 September 2009

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Salient features

 Strong balance sheet  Businesses resized  Product offering rationalised  Bolt-on acquisitions

2

Salient features

 Revenue R10,3 billion (6% )  Operating profit R1,1 billion (28%)  EBITDA as % of revenue from 15,2% to 12%  Cash position R1,6 billion at 30 Sep 09  Interest and dividend income up 79% to R108 million  Normalised HEPS 499,9 cents per share (21% )

 Final cash dividend 188 cents per share  Total cash dividend 253 cents per share (21% )

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Group Structure

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Investments Nashua Reutech CBI-electric

Energy cables Telecom cables Low voltage Medium voltage Office automation Mobile services Telecommunications Communications Electronic fuses Radar systems Solutions NSN (40%) Business systems Finance

Income statement

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R Millions 2009 2008 % Change TURNOVER 10 271 10 921 (6) EBITDA 1 237 1 661 (26) Depreciation (96) (87) 11 Operating Profit 1 141 1 574 (28) Interest & Dividends 108 60 79 Profit before abnormal items 1 249 1 634 (24) Abnormal items 299

• Profit before taxation

1 548 1 634 (5) Taxation (374) (487) (23) Profit after taxation 1 174 1 148 2 Associates

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(100) Minorities (9) (7) 26.76 Headline earnings adjustments 3 3

• Headline earnings

1 168 1 160 1 Headline EPS (cents) 652 652 Normalised Headline EPS (cents) 500 630 (21) EBITDA % (Before NSN commission) 12 15 (21) Tax rate %* 27 30 (9)

Summarised balance sheet

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R Millions 2009 2008

EMPLOYMENT OF CAPITAL

Fixed Assets 588 591 Goodwill & Investments 1 314 1 281 R C & C Finance debtors 994 1 275 Current Assets 3 072 3 620 Stock 696 980 Accounts receivable 1 666 1 935 RC&C Accounts receivable 710 682 Other Debit Balances 23 Gross Assets 5 968 6 767 Net Current Liabilities (1 770) (1 881) Net operating Assets 4 198 4 886

CAPITAL EMPLOYED

Shareholders' Funds (4 061) (3 696) Deferred tax liabilities (111) (176) Long-term borrowings (14) (14) Net Cash 1 603 782 Net R C & C Finance Borrowings (1 615) (1 782) (4 198) (4 886)

Summarised cash flow statement

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2009 2008

(excl movements relating to Finco receivables and borrowings)

Rm Rm EBITDA 1 237 1 661 Dividend and interest income 108 147 1 345 1 808 Decrease in inventory 293 (49) Decrease in accounts receivable 284 (193) Decrease in accounts payable (63) (54) Taxation paid (478) (411) Dividend paid (550) (569) Capital expenditure (87) (117) Net cash flow 744 415 Other 1 (6) Increase in net cash and cash equivalents 745 409

% contribution to group

Revenue

R10,2 billion (FY08: R10,9 billion)

29% 62% 9%

2009

Operating profit

R1,1 billion (FY08: R1,6 billion)

36% 44% 20%

2009

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36% 58% 6%

2008

46% 45% 9% 2008

CBI-electric Nashua Reutech

Seven-year performance

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6 6 7 8 10 11 10 2 4 6 8 10 12 2003 2004 2005 2006 2007 2008 2009 R billion

Revenue

608 701 917 1273 1319 1573 1140

200 400 600 800 1000 1200 1400 1600 2003 2004 2005 2006 2007 2008 2009 R million

Operating Profit

Cash generation

485 451 784 969 531 795 1 603 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2003 2004 2005 2006 2007 2008 2009 R million

Cash on hand (excl finco)

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Normalised HEPS

184 278 380 495 570 630 500 100 200 300 400 500 600 700

2003 2004 2005 2006 2007 2008 2009

cents Normalised headline earnings per share

2009 2008

Headline earnings

1 163.1 1 159.8

Less NSN fair value

(299.2) 0.0

Taxation effect

37.4 0.0

BEE share of headline earnings adjustments

0.3 (0.4) 901.6 1 159.4

Net economic interest due to BEE partners

(10.0) (38.5) Normalised headline earnings 891.6 1 120.9

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Acquisitions

 Siemens Enterprise Communications

• Acquired remaining 60% stake from Siemens Limited South Africa
• Competition Commission & Tribunal approval 29 Oct 2009
• Annual sales of about R450 million

 Blue Lake Investments

• Least-cost routing

 Nashua Central

• Nashua Holdings bought 60% in Nashua Central
• Major franchise

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Nokia Siemens Networks

 Commission income on comparable basis

• R97 million (31% ) from R139 million

 Market share

• More competition
• Delayed benefits of merger

 Reduced spending by networks  Prospects

• Unlikely to make significant progress in short term
• Further weakness likely

13

Restructuring Nashua Electronics

 Panasonic

• Exited consumer electronics
• Focus on

 Telecommunications  Business systems

14

CBI-electric

3 315 3 952 2 952 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 2007 2008 2009 R million

Revenue

554 675 393 100 200 300 400 500 600 700 800 2007 2008 2009 R million

Operating Profit

16

Market conditions

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 Volume decrease

• Reduction in residential and commercial activity
• 100
• 80
• 60
• 40
• 20

20 40 60 80 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2002 2003 2004 2005 2006 2007 2008 2009

Building confidence: Growth in building activity

Residential and non-residential contractors

Source: BER

Impact of copper price

 Significant volatility during the period  R52 million in copper losses

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20 000 24 000 28 000 32 000 36 000 40 000 44 000 48 000 52 000 56 000 60 000 64 000 68 000 72 000 76 000 80 000 84 000 88 000 October 2007 November 2007 January 2008 February 2008 April 2008 May 2008 June 2008 August 2008 September 2008 November 2008 December 2008 February 2009 March 2009 May 2009 June 2009 July 2009 September 2009 October 2009 R-value per ton

RCP Current

Average

Energy cables

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 Total market historically R5-6 billion  Offer a complete product range

• HV, MV, LV, ACSR & special cables
• No house wire

 Services

• Installation & service of MV & HV cables

 Consistent improvement in market share (both sector and

product)

• LV products – purchase and consolidation of Rosslyn Cables
• ACSR market share grow from zero to >20%
• Utility and industrial sectors
• Current market share in excess of 30%

Market conditions

 Margin pressure

• Over capacity in manufacturing across all product groups
• Consistent import activity under favourable trade agreements

and a strong rand

• Rand-copper price alignment

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Outstanding order book

100 200 300 400 500 600 700 800

Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09

R million

 Local order book declined by 64%

• Impact of copper price
• General market decreased by 61% vs rest of sectors around 35%
• Reduction in stock holding within general market

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Energy cables

 Our response

• Reduced working capital
• Company resized for market demand to improve efficiencies
• Investment in key operational areas

– Mains – XLPE – Extrusion control

22

Energy cables prospects

 Volumes expected to be nominally the same as the past year

except for

• Improved transmission business volumes
• Increased HV & MV service offering
• Exports
• Eskom’s power station requirements

 Lower cost base and improved efficiencies will improve

profitability

23

Low-voltage product range

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Market Segment

Miniature circuit breakers Earth leakage protection Electricity metering Circuit breakers for equipment Surge protection devices Moulded case circuit breakers Wiring accessories Automation equipment Motor control

Residential

    

Commercial

      

Mining

    

Utilities

   

Industrial

       

Original Equipment Manufacturer

   Manufactured Traded Product

Low voltage

 Revenue down 15%  Volumes down by 48%  Working capital down 38%  Headcount reduced by 30%  Position in residential market strengthened  Australia contributed positively during the second semester

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Low voltage

 Weak local demand  Increased presence of low-cost products in certain markets  Effect of commodity prices on industrial projects  Leading to pressure on volumes and margins  Low voltage restructured to face challenges  Signs of stability in our more important market segments  Well positioned to return acceptable results

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Low-voltage revenue contributions

Residential 25%

Commercial 15%

Industrial 10% Mining 12% Industrial Controls 11%

Other 2%

Export 25%

Revenue by market segment

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North America 13% Europe 24% Africa 32%

Other 3%

Australia 10%

Far East 18%

Export revenue by region

Low-voltage volume declines

Volumes (poles per day)

2009 2008 % Change

2010

Local

Residential & commercial property

11 970 18 782 (36%)



Mining

487 657 (26%)



Industrial

793 1 863 (57%)



Retail

4 484 6 991 (36%)



Local total

(37%) Export

Residential & commercial property

2 226 3 881 (43%)

Mining

47 44 7%



Industrial

5 889 17 476 (66%)



Retail

77 57 35%



Export total (62%)

Grand total 25 973 49 751 (48%)

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Low-voltage prospects

 Market share likely to grow where base is low

• Automation
• Motor control
• Australia

 Low cost products will help residential sales

• Required in some cases

 Profitability of exports may increase

• Exchange rate sensitive

 Lower cost base will improve profitability

29

Medium voltage

 Grown three-fold past year

• Sales >R36 million

 Supplied 16 power transformers  Delivered first medium-voltage switchgear panels  Strong momentum should be maintained

30

Telecom cables

 50% JV with Aberdare  Estimated SA market R1,5bn - R1,7bn  Market share >50%  Customers

• Telkom: copper & fibre
• MTN, Neotel: fibre
• Industry & mines: copper & fibre

 Products

• 69% Copper
• 24% Fibre
• 7% Accessories
• Duct: Capex +R8 million

Telkom 43% Industrial 39% Export 18%

Revenue by market

31 Copper telecom 47% Industrial copper 30% Accessories 3% Optic fibre cable 20%

Revenue by product

Accessories 3%

Telecom cables prospects

 Telephone copper cable demand declining  Fibre margins under constant pressure  Growing demand for projects

• Installation of fibre cables
• First installation done

 Related products needed

• Ducts – manufacturing capacity added
• Received a 2-year contract from Neotel for micro-duct
• Accessories

 Instrumentation cable demand related to industrial pick-up  2010 not expected to be as strong as 2009

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Nashua

5 816 6 445 6 365 5 500 5 600 5 700 5 800 5 900 6 000 6 100 6 200 6 300 6 400 6 500 2007 2008 2009 R million

Revenue

675 654 481 100 200 300 400 500 600 700 800 2007 2008 2009 R million

Operating Profit

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Nashua

 Office automation  Telecommunications  Mobile services  Business systems  Finance  Electronics

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Office automation

 Nashua office products

• Multifunctional copiers/printers
• Storage retrieval and tracking software
• Consumables (toner, ink and paper)
• PABX

 Aggressive marketing philosophy – Nashua a household name  61 outlets in Southern Africa  Franchises bought back:

• Eastern Cape, Tshwane, West Rand & Central
• 40% of total sales via own outlets

 Mostly corporate customers

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Office automation prospects

 Market expected to be weak  Competitive offering  Financing to remain difficult (deals declined)  Printer sales off a low base  Channel well positioned to take more share & benefit

from any uptick

 Colour as % of revenue grew from 15% to 22%

37

Finance company

 Asset-backed finance  Providing a service to

• Nashua
• Panasonic
• Siemens
• Other

 Funding

• R700m securitisation funding (amortisation commences in 2012)
• Initially commercial paper
• Followed by matching bonds

 Bad debts

• The worst is over

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90% of lending book

Nashua Mobile

 Independent Service provider

• > 700 000 subscribers
• > 80 000 broad band users
• 155 outlets

 High ARPU base  Prospects

• Battle for revenues – more churn, bigger corporate discounts
• Operational efficiencies and services
• Growth may be difficult to achieve

39

Nashua Mobile

2009 2008 % Change Contract connections for year 136 362 132 210 3.1 3G/HSDPA connections 23 198 28 782 (19.4) Total connections 159 560 160 992 (0.9) Closing company base 722 638 663 787 8.8 ARPU 488 472 3.4 Churn % 13.6 12.8 (6.2) Net bad debts % turnover 1.24 1.34 7.5 Number of retail outlets 155 152 2

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Nashua Electronics

 Restructured

• Exited consumer electronics
• Cost R60 million
• R70 million cash released due to reduction in working capital

 Future focus on

• Office automation and telecommunications
• Online-shop
• Estimated sales of R400 million
• The aim: 10% operating margin

41

Reutech

491 622 874 100 200 300 400 500 600 700 800 900 1000 2007 2008 2009 R million

Revenue

109 137 212 50 100 150 200 250 2007 2008 2009 R million

Operating profit

43

Total exports 49% of revenue

Reutech Radar Systems

• Military Radars

 Local 50%  Exports 50%

• Mining surveillance radars

 SA, Australia, other  Orders received from Anglo, Billiton, others  Local 10%  Exports 90%

• Set-top box developments

 Design and initial testing concluded  Waiting

44

Reutech Communications

 Military communications systems  Multi-mode airborne VHF/UHF radios

• Mostly exported (90%)

 Ground-based VHF/UHF radios

• Exclusive to SANDF (100%)

45

Fuchs Electronics

 Electronic fuses

• Land
• Naval
• Air

 95% export sales

46

Reutech Solutions

 Systems engineering and logistic support

• SANDF
• Telecommunications operators
• Mining industry

 South Africa and rest or Africa

47

Reutech prospects

 Local business will gradually increase and build up over

next 3 years

 Exports of airborne radios

• Stable

 Exports of fuses

• Timing uncertain

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Going forward

Prospects

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Looking forward, it is our view that the economy has stabilised, although we do not expect any meaningful recovery in the short term. Actions taken to adjust to the lower volumes of the past year should have a positive impact on earnings. The forecast financial information has not been reviewed or reported on by Reunert’s auditors.

50 100 150 200 250 300 350 400 450 500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Cents per share Special Final Interim

Cash dividends per share

51

Statement of intent

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Reunert will manage businesses in the services, electronics and electrical engineering sectors, supplying value added products, solutions and systems to local and international markets. Each of these businesses will remain capable of meeting the group’s

• bjectives for sustainable growth and earnings.

We will consider investing in businesses that operate outside our historic business areas, provided that all our criteria for investment returns and growth are met.

Contact details

Carina de Klerk Reunert Investor Relations carina@reunert.co.za +27 (0)83 631 5743 +27 (0)11 517 9000

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