25 May - 7 min read
Unaudited interim financial statements and cash dividend declaration for the six months ended 31 March 2021
Unaudited interim financial statements and cash dividend declaration for the six months ended 31 March 2021 REUNERT LIMITED Incorporated in the Republic of South Africa Registration number 1913/004355/06 Ordinary share code: RLO ISIN code: ZAE000057428 ("Reunert", "the Group" or "the Company") Unaudited interim financial statements1 and cash dividend declaration for the six months ended 31 March 2021 The contents of this short-form announcement are the responsibility of the Board of directors of the Company (the Board). Shareholders are advised that this short-form announcement does not contain full or complete details and represents a summary of the information contained in the full announcement, which is accessible via the JSE link at https://senspdf.jse.co.za/documents/2021/JSE/ISSE/RLO/Interim_21.pdf and on Reunert's website (www.reunert.com) on 25 May 2021. Shareholders and investors are advised to review the full announcement before making any investment decisions. The full announcement is also available for inspection at no charge at the registered offices of the Company and its sponsor during normal business hours. Salient features 11% increase Group revenue R4 614m March 2020: R4 144m EBITDA2 R562m March 2020: (R36m) Operating profit R436m March 2020: (R155m) Profit/(loss) for the period R311m March 2020: (R326m) 8% increase Dividend per share 70 cents March 2020: 65 cents Six months ended Rm 31 March 31 March 2021 2020 Change Earnings/(loss) per share (cents) 194 (172) 366 cents Headline earnings/(loss) per share (cents) 193 (76) 269 cents Overview Reunert's financial results for the six-month period ended 31 March 2021 (H1FY:2021) improved significantly compared to the comparative period ended 31 March 2020 (H1FY:2020), although the recovery of the operating profit to pre-COVID-19 levels continued to be adversely affected by the reduced economic activity associated with the pandemic. Pleasingly, the Group's segmental operating profit before impairment of financial assets increased by 14% to R448 million (H1FY:2020: R392 million) largely in line with the guidance provided in the annual results for the year ended 30 September 2020. Importantly, the Quince Capital (Quince) book has performed in line with our expectations with no further increases in expected credit losses or credit write-offs being incurred. Our Group companies have fully adjusted to the new conditions required by COVID-19 and are operating smoothly, albeit at slightly lower volumes than the comparative period. A significant improvement in profit attributable to Reunert shareholders to R313 million (H1FY:2020: loss of R277 million) was achieved. Revenue increased by 11% to R4 614 million (H1FY:2020: R4 144 million). Electrical Engineering (EE) Segment Despite continued weak cable infrastructure demand, particularly for medium and high-voltage energy cables, this segment's revenue increased by 47% to R2 561 million (H1FY:2020: R1 738 million), largely due to an uninterrupted half year of production at African Cables (H1FY:2020: African Cables suffered a seven-week labour dispute, resulting in no production during this period), the pass-through of increased copper and other commodity prices and the substantial increased demand for circuit breakers. This segment's operating profit recovered to R165 million (H1FY:2020: loss of R34 million), largely because of the circuit breaker business's excellent performance for the current reporting period and the energy and telecommunications cable plants all having achieved a better than break-even result, an improvement on the significant operating losses of H1FY:2020. Information Communication Technologies (ICT) Segment The ICT Segment's revenue declined by 16% to R1 253 million (H1FY:2020: R1 494 million) reflecting the ongoing impact of the COVID-19 pandemic on the South African economy and on the segment's customer base and the lower interest rate impact on Quince. Correspondingly, the segment's operating profit declined by 24% to R293 million (H1FY:2020: R384 million) which is in line with the guidance provided by the Group in the annual results for the year ended 30 September 2020. The Total Workspace Provider Cluster's performance was adversely impacted by the general economic climate resulting from the COVID-19 regulations on key customer sectors in education, tourism and hospitality which prevented them from returning to normal trading. This negatively impacted the cluster's ongoing service revenue from the customers in these segments. The Business Communication Cluster continued to increase the number of customers serviced and, in the case of SkyWire, the geographic regions its network covers. This cluster was also impacted by the reduced business activity in the education, tourism and hospitality sectors for the reasons outlined above, as well as the consequences of the general reduction in overall economic activity on the number of minutes consumed per customer. The cluster's drive into diversified product offerings continues to offset the impact of reduced minutes per customer consumption. The Finance Cluster's loan and rental book now stands at R2 753 million (H1FY:2020: R2 878 million) before expected credit losses, reflecting the lower level of activity in the Office Automation Segment. Plus 1X (+OneX), established in the Solutions and Systems Integration Cluster to provide digital consulting, cloud, data, security and managed services, is making good progress in acquiring the intellectual property, licences and human skills required to provide this suite of services. Post the current reporting period end, two complementary bolt-on acquisitions were completed to build out +OneX's service capability to include the provision of private hosted cloud services and data consultancy. Applied Electronics (AE) Segment The AE Segment's revenue declined by 9% to R945 million (H1FY:2020: R1 038 million). Operating profit declined by 65% to R32 million (H1FY:2020: R92 million). This decline in performance was primarily due to: - Delayed export orders caused by the COVID-19 pandemic on the Group's export markets in this segment - The delays in concluding the contractual and regulatory requirements to complete our export sales - The stronger Rand relative to the average exchange rate in the 2020 financial year. The Renewable Energy Cluster continues its positive trajectory. The performance in this current reporting period was negatively impacted by delays in customers committing to capital investments and access to sites during the second wave of the COVID-19 pandemic. However, business confidence is recovering, and Terra Firma Solutions and Blue Nova have a strong pipeline of committed projects for the second half of the year. Update on the Company Secretarial Function The resignation of Ms Karen Louw from Reunert Management Services, the Company's registered company secretary was announced on 4 September 2020. Due to the restrictions imposed by COVID-19, Ms Louw has not been able to emigrate as planned and her resignation from the Group has been postponed. Therefore, Ms Louw continues to serve as the Group company secretary. Prospects The improvement in performance in the EE Segment is expected to be sustained into the second half of the year and the ICT Segment should continue to deliver in line with its recent performance as the economy continues to improve. The AE Segment is expected to deliver an improved second half, based on the export orders on hand together with the forecast contribution from the renewable energy businesses. The Group's performance is expected to remain robust thereby ensuring the generation of sufficient free cash flow to support the Group's growth and re- investment requirements, whilst also supporting cash returns to shareholders. Some economic uncertainty regarding our H2FY:2021 performance remains, as the third wave of COVID-19 in South Africa is expected to develop during this period and several of our key export markets continue to battle the pandemic, which may negatively impede our ability to fulfil export orders. Despite the uncertainties, the FY2021 performance remains likely to exceed that of the FY2020. Cash dividend Notice is hereby given that a gross final cash dividend No. 190 of 70,0 cents per ordinary share (March 2020: 65,0 cents per ordinary share) has been declared by the directors for the six months ended 31 March 2021. The dividend has been declared from retained earnings. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt from, or who do not qualify for, a reduced rate of withholding tax. Accordingly for those shareholders subject to withholding tax, the net dividend amounts to 56,0 cents per ordinary share (March 2020: 52,0 cents per ordinary share). The issued share capital at the declaration date is 184 969 196 ordinary shares. Income tax reference number: 9100/101/71/7P In compliance with the requirements of Strate Proprietary Limited and the Listings Requirements of the JSE Limited, the following dates are applicable: Last date to trade (cum dividend) Tuesday, 22 June 2021 First date of trading (ex dividend) Wednesday, 23 June 2021 Record date Friday, 25 June 2021 Payment date Monday, 28 June 2021 Shareholders may not dematerialise or rematerialise their shares between Wednesday, 23 June 2021 and Friday, 25 June 2021, both days inclusive. On behalf of the Board Trevor Munday Alan Dickson Nick Thomson Chair Group Chief Executive Officer Group Chief Financial Officer Sandton, 25 May 2021 1 Extracted financial information from the Unaudited Condensed Consolidated Interim Financial Statements for the six months ended 31 March 2021, excluding free cash flow, which has not been disclosed. 2 Earnings before net interest, tax, depreciation and amortisation, gain on disposal of investment, transaction-related share-based payments, impairment of non-financial assets, loss on remeasurement of subsidiary held for sale and loss on disposal of subsidiary. EBITDA includes interest income received on leases and loans receivable in the ICT Segment. Registered office Nashua Building, Woodmead North Office Park, 54 Maxwell Drive, Woodmead, Sandton PO Box 784391, Sandton, 2146 Telephone +27 11 517 9000 Investor enquiries Karen Smith Karens@reunert.co.za. For more information log on to the Reunert website at www.reunert.com Sponsor One Capital Sponsor Services Proprietary Limited 17 Fricker Road, Illovo, 2196 Directors: TS Munday (Chair)*, T Abdool-Samad*, AB Darko*, AE Dickson (Chief Executive Officer), LP Fourie (Chair of the Audit Committee)*, JP Hulley*, SD Jagoe*, S Martin*, MT Matshoba-Ramuedzisi*, MJ Husain* (Appointed: 1 November 2020), M Moodley, Adv NDB Orleyn**, NA Thomson (Chief Financial Officer) * Independent non-executive; ** Non-executive Date: 25-05-2021 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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