Letter to stakeholders

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Chairman: Trevor Munday   Chief executive: Nick Wentzel
  Continued strong cash generation by the group and its favourable operational performance have resulted in an increase of 17% in the final dividend to 220 cents per share. Together with the interim dividend of 67 cents, our total 2010 distribution is 287 cents per share (2009: 253 cents).

Financial performance

  • Revenue up 4% to R10,7 billion
  • Operating profit up 7% to R1,2 billion
  • Cash on hand improves to R1,8 billion
  • Normalised headline earnings per share at 515,7 (2009: 499,5) cents per share
  • Headline earnings per share down 22% to 505,5 cents per share

Dear stakeholder

Following the worst financial crisis the global economy has experienced in the post-war period, this year was always going to be challenging. Revenue for the year increased by 4% from R10,3 billion to R10,7 billion. Operating profit rose by 7% to R1,2 billion and normalised headline earnings per share increased by 3% to 515,7 cents. EBITDA (earnings before interest, taxation, depreciation and amortisation) margins improved to 12,5% from 12% in 2009.

Nashua and CBI-electric performed beyond our expectations and management is to be commended for these results. The 24% increase in operating profit at CBI-electric and the 19% increase at Nashua reflect strict cost control and operating efficiency gains following the resizing undertaken in the 2009 financial year.

The substantial contribution by Reutech in the prior year was not repeated. A large follow-on export order anticipated at Fuchs was not received during the year and this, together with the strong rand, resulted in a R162 million reduction in the contribution from Reutech. Indications are that this order will be received in 2011 and we are confident Reutech will continue to be an important contributor although its results can be volatile.

The sustained reduction in interest rates has been positive for the economy and the consumer. These lower interest rates have resulted in an IFRS, non-cash, mark-to-market charge of R40 million for the year arising from interest rate swaps. IFRS however does not recognise the gain from the fixed interest book in the finance company. This R40 million charge to the income statement will reverse over the duration of these hedges. The higher interest rates in South Africa, compared to those of first-world economies, have resulted in substantial inflows of capital into bond and equities market, strengthening the rand considerably. The strong rand adversely affected revenue and margins by an estimated R50 million.

The acquisition of Nashua Communications (formerly Siemens Enterprise Communications) in November 2009 has proved successful. This operation has brought a wealth of technical talent to the group and enhanced our product offering and communications solution capability. Operating profit in its first year in the Reunert group came close to the 10% margin target despite having to move to a new computer platform and premises. We are delighted to have this operation on board.

Reunert also welcomed empowerment partners to its Divitech set-top box operation and into Reutech. We look forward to a long and mutually beneficial partnership with these businesses.

Continued strong cash generation by the group and its favourable operational performance have resulted in an increase of 17% in the final dividend to 220 cents per share. Together with the interim dividend of 67 cents, our total 2010 distribution is 287 cents per share (2009: 253 cents).


Our electrical businesses have produced strong results for the year with operating profit up 24%. Revenue was flat for the year mainly due to lower activity in our telecommunications cable joint venture. Cost-reduction actions and resizing of the businesses in 2009 boosted margins in the cable operations.

Building activity remained subdued but increased exports to Europe and Asia and the return to profitability of our Australian operation helped our low-voltage operation to be significantly up on the previous year. Material cost control and increased efficiency improved gross margins.

Refurbishments and additions to residential buildings and the replacement market were buoyant. As the installed base of our product in the residential market is high, any improvement in this activity is positive.

The energy cable business, CBI-electric: African Cables, had an excellent year. With the factory operating on a normal shift system, efficiency increased with scrap and material over-consumption levels significantly reduced. African Cables has invested in its service and project operation, Power Installations, and has expanded its value-added service to match key customer requirements. The electrical installations required for the 2010 FIFA Soccer World Cup™ were a welcome stimulus for the cable and electrical service market, adding to revenue and operating profit. Market conditions remain challenging, with the strong rand encouraging importers to enter our market.


CBI-electric: Aberdare ATC Telecom Cables, our joint venture with Altron, had a mixed year. The first half was below expectations because of reduced activity in the copper telecommunications cable market. The second half was stronger. All operations in the joint venture are now located at our Brits factory with the data cable manufacturing plant relocated during the year. The micro-duct production line, commissioned last year, has expanded our product range. The fibre-optic cable connections between major cities in South Africa are going ahead, with demand for fibre and micro-duct increasing significantly.

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