The Reunert group recorded a satisfactory performance under challenging conditions this year. In various market sectors, depressed economic conditions adversely affected demand for our products and services and most of our operations faced increased competition, which put additional pressure on margins.
Change programmes which were introduced to streamline various operations and improve productivity yielded pleasing short-term benefits although on-going and close management oversight of them will be required to ensure that the improvements achieved remain sustainable in the long term. Operations actively sought opportunities to diversify revenue sources and worked hard to bring on stream products, services and systems that will add value to their offerings.
Reunert remained a strong cash generator in 2011 and we continued to seek meaningful growth opportunities that are either compatible with our leading competencies or which are sensible, strategically-aligned extensions of our existing businesses. During the year under review, ECN was acquired at a cost of some R172 million. This is a pleasing, value-enhancing addition to Nashua’s product and service offering.
Reunert’s balance sheet and key financial indicators remained robust throughout the year.
14 November 2011
All CBI-electric operations performed well this year. African Cables benefited from the South African government’s commitment to continue investing in basic infrastructure and services. Low Voltage achieved considerable success in tough export markets despite rand strength. These operations, as well as Telecoms Cables, have invested in value-added services and products that should in future further differentiate them from their competitors.
Nashua was negatively affected by the general economic slowdown and, in particular, by government-mandated reductions in mobile interconnect rates. In a mobile market which is now almost fully mature, various cost-reduction initiatives were initiated.
Lower interconnect rates impacted directly on the business’ least-cost routing offering. The board believes that the acquisition of ECN was an important, timely acquisition that will enable Nashua to retain its market leadership by substituting least-cost routing with a voice-over-internet-protocol offering.
Reutech’s diverse operations ended 2011 well positioned to take advantage of new opportunities both locally and internationally. In 2012, sales of mining radar systems are expected to continue building on the successes achieved in 2011. Renewable energy is an emerging sector in which the group is planning to play a leading role.
Corporate governance and sustainability
The board is fully cognisant of its responsibility to the company. In discharging our obligations, both legal and moral, we recognise the roles and rights of all major stakeholders including shareholders, customers, employees, suppliers, government and their various representative bodies. We seek to achieve equity and fairness as we continue to pursue an inclusive strategy for sustainable performance across the group.
The directors and management of the group aspire to sound governance principles and practices in all of our activities. We foster respect for ethical business practices and expect common sense and transparency to underpin our quest to be a responsible corporate citizen.
We are committed to the King Code of Governance Principles 2009 (King III). We present the board’s review of our progress against these standards in the corporate governance report starting here. We provide explanations in those instances where we presently do not comply.
Reunert has complied with the requirements of the new Companies Act, 2008 since it was introduced on 1 May 2011. Senior executives and management throughout the group are required to attest annually in writing that they comply with relevant laws and regulations, most notably the Competition Act.
In terms of our business structure and organisational philosophy, we are in the process of enhancing Reunert’s federal model which has historically provided a high level of decentralised authority and operating autonomy to our various businesses. While our goal is to retain all of the positive aspects of this decentralised structure, we will strengthen it going forward by centrally synchronising group-wide values, governance standards and policies and procedures relating particularly to upholding our leading brands and the effectiveness of our risk management, human resources and financial and accounting functions. As a consequence, while our operating subsidiary boards will retain essential aspects of authority, the role and scope of the group executive committee will be substantially elevated and strengthened.
During the year under review, the terms of reference and composition of the board and its various committees were reviewed and amended. The risk committee was established as a separate entity and a social, ethics and transformation committee was constituted in accordance with the requirements of the new Companies Act. This committee is in the formative stages of its activities.
The non-executive members of the board, individually and collectively, offer wide-ranging experience and knowledge both to the board and the various committees on which they serve. From a transformation perspective, four of our nine non-executive members are black, three of them women. I am grateful to all members of the board for their diligent and committed approach to their duties in what has been a challenging year.
To ensure the group’s sustainability and its moral licence to operate in South Africa, it is imperative that we improve our transformation credentials, especially by appointing more senior management from designated groups. We have an inspiring pipeline of talented black professionals at our middle-management level and we must ensure that they are nurtured, retained and developed to their full potential. We can, and must, do better in this respect and, as a result, the performance criteria for incentive schemes throughout the group are being altered to ensure heightened management focus and success in this critical area.
We are appreciative of the continuing sound relationship with our lead empowerment partner, the Peotona group, and are particularly grateful for their active contributions to various aspects of our transformation ambitions.
The Reunert College remains an important part of our investment in education and in developing our youth. An independent survey commissioned during the year highlighted various aspects of the college’s activities where improvements are both desirable and necessary. These will be attended to and implemented in the year ahead.
We are well aware of our responsibilities towards the environment and communities that may be affected by our operations. We strive, in all respects, to minimise or eradicate any negative impacts our operations may have. The group has a low to medium environmental impact but, as we position ourselves to become a player in providing renewable energy, it is incumbent on all Reunert operations to implement clean energy solutions wherever feasible.
The South African economy and those of most of our export markets remain fragile and 2012 is expected to be yet another challenging year. We will continue to promote innovation, a commitment to meeting our customers’ requirements, sound governance principles and a people-oriented culture.
The board has the utmost confidence in the group’s new executive leadership team with its balance of deep understanding of the group and fresh perspectives, and is satisfied that chief executive David Rawlinson, and his senior team possess the skills, knowledge and vision needed to develop and grow our various businesses.
Subject to prevailing economic conditions not worsening, we anticipate achieving growth in earnings in the year ahead.*
At the annual general meeting held on 8 February 2011, Mr Brian Connellan and Mr Bobby Makwetla retired from the board. Brian served as a member for twelve years and Bobby just a year less. Brian’s and Bobby’s contributions to the board during their tenure are deeply admired and appreciated.
Brian set extremely high standards as a non-executive director and his business acumen, probing questions and staunch defence of ethical conduct, sound governance and fairness will be remembered. We thank him and wish him and Merle a healthy and happy retirement. Bobby always stood out as a gentleman and we valued his well-considered counsel and experience. Our very best wishes accompany him and Angie in their retirement.
Ms Yolanda Cuba and Mr Brand Pretorius joined the board as independent non-executive directors early in the year. We welcome them.
Prior to their appointments, an exercise was undertaken to analyse the skills, knowledge and experience profile of the board and its members. Certain requirements in terms of strategic competencies and marketing and financial management capabilities were identified. Yolanda and Brand both bring varied and valuable attributes to the board and their respective appointments admirably address these requirements.
As announced on the Stock Exchange News Service at the time, chief executive Nick Wentzel left Reunert under a mutual separation agreement on 21 September 2011. We wish him well in his future endeavours. On that date, financial director David Rawlinson was appointed as chief executive and Manuela Krog was appointed as financial director. We are delighted that Manuela has joined the board. We welcome both David and Manuela to their new roles and wish them much success.
On 14 October 2011, executive director Gerrit Oosthuizen left Reunert under a mutual separation agreement. We also wish Gerrit well in his future endeavours.
The board remains committed to returning value to shareholders. Given the group’s strong cash reserves, we are pleased to declare a final cash dividend for the year of 253 cents per share. With the interim cash dividend, announced in May 2011 of 77 cents per share, this translates into a total payout for 2011 of 330 cents per share (2010: 287 cents per share).
I thank the members of the board and our executives and employees for their hard work and contribution to Reunert during the past year. Their commitment and energy in a demanding year is highly appreciated. We in turn thank our customers and various business partners for their support and assure them of our continuing quest for mutually beneficial relationships and the shared pursuit of lasting value.
||The financial information on which the above forecast is based has not been reviewed or reported on by the company’s external auditors.