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E T T E R T O T H E
S H A R E H O L D E R S |
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Dear
Shareholder |
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For the
fifth consecutive year, the Reunert group of
companies has achieved an annual growth in headline
earnings per share of more than 25%. In the same
period, more than R1,2 billion has been distributed
to shareholders through both ordinary dividends and
a special dividend which was paid in 1999.
Headline earnings per share increased by 31%, aided
by strong growth in the economy during 2002 and
increased demand for the group's products and
services, as well as the additional contribution
resulting from our increased shareholding in Nashua
Mobile (now 100%-owned) and Siemens
Telecommunications (now 40%-owned). |
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Derek
Cooper - chairman |
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These
additional shareholdings were acquired for cash. The
balance sheet remains effectively ungeared with cash
resources at year-end approaching R300 million.
These cash resources exclude the requisite
non-recourse funding for RC&C Finance Company
(Nashua Finance), which is provided by three major
South African banks. |
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The
group benefited from strong growth in the
platinum-mining sector, as well as increased
spending on infrastructure, especially in the
telecommunications field. Demand was further
stimulated by the rapid increase in low-cost housing
development. These programmes are ongoing and the
group's order books are at healthy levels. |
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Since
June 2001, the group has not repurchased any of its
shares. We are of the view that opportunities may
present themselves to further strengthen our
position in our chosen fields of activity.
Management is constantly on the lookout for
potential new business acquisitions. With this in
mind, we plan to continue to build the group's cash
resources. |
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Group operations |
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In the low-voltage engineering sector, Circuit Breaker Industries (CBI) has enhanced its position as the dominant force in the local market. With a wider product offering, strong local distribution channels, a well-diversified customer base, strong development capability and motivated management, the company has grown sales at a compound rate of 25% over the past three years. In the international market, sales over the same period grew by a compound 45%.
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CBI's current share of the world market is small. The challenge going forward lies in unlocking this vast potential of international markets far quicker than we have done in the past. Given the current state of some of our international competitors, we are hopeful that the right opportunity for an offshore acquisition will present itself.
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Nashua, Nashua Mobile and Nashua Finance have all made excellent progress and further entrenched the Nashua name in the South African marketplace. Our strategy remains one of leveraging off a well-established brand name supported by far-reaching distribution channels which will ensure continued growth in our chosen markets.
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Nashua Mobile
experienced another year of good growth. The benefits
from our substantial investment in technology and systems are standing us in
good stead in an increasingly challenging and competitive environment which is
reaching saturated levels. Differentiation is important in this business and
influences our future strategies. It is a dynamic market with new technologies
being introduced all the time. We expect the value-added services that can be
offered in this industry to continue to provide opportunities for future growth
and diversification. |
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Nashua
continued along its growth path. Its franchise network and strong office
automation systems and product offering make it a strong force in the South
African market. Along with
Nashua Finance and IQ Works,
it offers a
complete product package and an integrated service to customers.
Royce Imaging,
the manufacturer of replacement ink-jet cartridges, has doubled its sales since
being acquired a little more than a year ago. This encouraging trend clearly
demonstrates the distribution strength of the Nashua channel.
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NPC (Electronics),
the exclusive distributor of Panasonic products in southern Africa, had a good
year despite a declining consumer electronics market. The decision to focus and
develop the non-consumer segment of the business is reaping rewards.
Consequently the consumer electronics component contributes less than 30% of
earnings. Opportunities for new growth will be vigorously pursued. NPC's
principal, Matsushita of Japan, continues to provide exciting products and
support in a long-standing, mutually beneficial relationship.
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The order books of
Reutech,
the defence division, were filled to the extent we anticipated. Although the
current year's earnings reflect a standstill situation, we are convinced our
stakeholders will be rewarded for their patience. Efforts to develop specialised
products by focusing on specific export markets continue to be orchestrated in a
selective manner. |
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Siemens Telecommunications (Siemens)
benefited from the buoyant African telecommunications
market. By growing its customer base both inside and outside of South Africa,
Siemens has taken its business to a new level, which augurs well for continued
growth in the ensuing years. |
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Management and staff responded in an admirable way,
meeting tight deadlines, which underlines the company's inherent strength.
Siemens has demonstrated that it has the design and integration skills and the
ability of designing, installing and commissioning networks to world-class
standards. Africa remains primarily underequipped with telecommunications
infrastructure and, despite the anticipated increase in competition, we are
confident Siemens will continue to produce sound financial results.
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African Cables
is running at high-capacity levels. Its Zimbabwean
subsidiary, Cafca, augments supplies in certain strategically important areas.
Order books are at record levels, with margins increasing as a result of
improved manufacturing efficiency and the pursuit of continuous operational
improvement. Due to high local demand, export sales have not grown and capital
expenditure to increase capacity is planned for the year ahead with a consequent
growth of sales into Africa. |
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Since the year-end Reunert has acquired Marconi plc's
51% stake in
ATC.
The transaction will become unconditional once
approval has been received from the Competition
authorities. We are now, for the first time,
managing this troubled business and have every
intention of ensuring that it reclaims its position
as the leading supplier of telecommunications cable
in the southern hemisphere. |
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Black
economic empowerment |
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Black
economic empowerment is recognised and embraced as
an economic imperative in South Africa. We have
concluded empowerment deals in two of our businesses
and are in the process of negotiating with
historically disadvantaged people to create
additional empowerment deals in other operations.
The commitment and challenge of ensuring meaningful
and sustainable economic empowerment at the highest
level in the group is fully accepted. |
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Developing people |
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The
development of our people continues to be a major
focus. Government and business leaders have
recognised Reunert's corporate social involvement
programme as a worthy cause which is making a
positive difference to underresourced South African
communities. The high-level corporate training
programme started a decade ago, is gaining momentum
and former students from the Reunert College have
been integrated successfully into various group
operations.
Effective employee succession plans are in place in
all of the group's operations. Training programmes
are aimed at developing and optimising our human
resources, as well as at augmenting identified
weaknesses in key skills needed to sustain long-term
competitiveness and shareholder value. The
percentage of employees with tertiary qualifications
is the highest in the industry. This is especially
so in the field of electronic engineering where
Reunert has become the employer of choice for many
gifted graduates. |
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Directorate |
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It is a
privilege to have a board of the calibre that we
have at Reunert. Their support and guidance are
invaluable and greatly appreciated. In particular,
we thank Mr P T W Curtis who retired from the board
after many years of valuable and devoted service. We
wish him the very best of health and luck in his
retirement.
The management and staff of all our businesses have
proven themselves over many years. We thank them for
their valued support and continuing loyalty. It is
pleasing to see how well they have coped with the
increased demands placed on them as their businesses
have grown. They are fully capable of taking their
respective businesses further along the path of
growth. |
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Prospects |
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Although
it will be difficult to repeat the past year's
financial performance, we are confident the results
of the new year will not disappoint shareholders. We
are committed to achieving real and sustainable
growth in the year ahead.
Derek Cooper Gerrit Pretorius
Chairman Chief Executive |
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Yours
sincerely |
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Derek
Cooper
Chairman
Sandton
18 November 2002 |
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"Black economic empowerment is recognised and
embraced as an economic imperative in South Africa." |
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 "The challenge going forward lies in unlocking this
vast potential of international markets far quicker
than we have done in the past." |
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