Letter to stakeholders

  • 1
  • 2


Revenue was boosted by the inclusion of Nashua Communications from 1 November 2009, which enabled Nashua to achieve 9% growth. Operating profit was up 19% due to increased revenue, cost control and profit contributed by Nashua Communications.

Nashua Office Automation gained market share which, at 21%, is comfortably ahead of its closest competition. Unit sales grew by 20%, assisted by the strong rand and lower interest rates. The weakening of the euro against the dollar assisted in making our product more competitive. We are now an HP (Hewlett-Packard) preferred partner and this has increased the range of products we offer. Our managed print services offering, together with enhanced digital software solutions, has seen us secure the majority of tenders we pursued. The strategy of purchasing a controlling interest in larger franchises continues.

Nashua Communications has integrated the Panasonic PABX division into its operation, increasing its product offering to small and medium-sized enterprises and strengthening its position as a leading unified communications provider. Management in the enlarged operation has embraced Nashua’s philosophy and has revelled in the opportunities presented by this new environment.

Nashua Mobile was able to increase ongoing revenue by 6% due to a strong sales drive and a net gain of 96 000 connections was achieved for the year. The total contract base is now 819 000 customers, 13% higher than the prior year. This is supported by a network of 149 outlets nationwide. The focus remains on quality customers with an emphasis on retail due to a relatively saturated corporate market.

Significant reductions in data tariffs have prevailed over the last year. Interconnection rates were reduced on 1 March 2010 with further reductions to occur up to 2013. The increased focus on retail customers and reduction in data tariffs has reduced average revenue per user by 5% to R463. The Legendary Service campaign introduced two years ago has improved customer satisfaction. This remains a core strategy and will continue in future with significant training programmes in the customer care and service areas.

Least-cost routing remained a large contributor to revenue and profit during the year, but will face challenges in future given reductions in interconnect rates. Alternative solutions are being developed to retain these customers. Advanced technologies and regulatory changes have enabled the development of strategies to complement our product offerings.

Despite the refocusing at Nashua Electronics, the business has continued to produce disappointing results. Kyocera Mita products have been added to the office systems product range which, together with further restructuring, should improve performance in the year ahead.

Nashua’s financing operation, Quince, had another difficult year although, by year-end, impairments had settled to more normal levels. Over 70% of the assets financed by Quince are written at fixed interest rates and interest swaps are taken out to convert our floating interest rate to fixed rates. IFRS requires these swaps to be marked to market and the lower interest rate has resulted in a R40 million charge to the income statement. We are confident that the spike in bad debts is now behind us and, while interest rates may move marginally lower, the mark-to-market charge should not be repeated in 2011.

Nashua Mobile   2010   2009   % change  
Gross contract connections   150 519   136 362   10,4  
Data connections (3G/HSDPA)  36 863   23 198   58,9  
Gross total connections   187 382   159 560   17,4  
Closing company base   819 035   722 638   13,3  
Average revenue per user   463   488   (5,1) 
Churn %   11,8   13,6   13,2  
Net bad debts % revenue   0,95   1,24   (23,4) 
Number of retail outlets   149   155   (3,9) 


Reutech’s operating profit decreased by 73% from R223 million to R61 million. Revenue was down 13% from R904 million to R791 million. As reported, the contribution from Fuchs was significantly down for the year. Prospects for receiving this order in 2011 are good. The remaining businesses in the division performed as expected and are well positioned for the years ahead.


Reunert has an option to put its shares in NSN to the other shareholders in that company. The minimum price of the put option is R793,5 million. Following the Nokia and Siemens merger of their telecommunications infrastructure operations and subsequent restructuring of NSN in 2007, we intend to exercise the option on 31 December 2010. A minimum price of R793,5 million will be the amount payable by the other shareholders of NSN for Reunert’s 40% share in NSN.

Capital investment and cash management

Our capital investment totalling R149 million over the past year has ensured that our capability and capacity to meet future demand is sustained. We have invested in our IT infrastructure to enhance business efficiency and reporting.

We have extended the RRS premises at the Technopark outside Stellenbosch and have also invested in new premises for Reutech Communications. The initial production of new-generation radios by Reutech Communications for the country’s ground forces will begin in 2011 and the new factory in New Germany has a state-of-the-art production line to meet the most stringent requirements.

In addition, Reunert invested R180 million in acquiring Nashua Communications and R126 million in buying back 2,1 million Reunert shares at an average price of R59,18 per share.

Reunert’s balance sheet remains strong and cash flow generated by the group’s operations increased net cash resources by R498 million. Cash and cash equivalents at the end of the year were R1,8 billion.

Strategic direction

Reunert will continue to focus on its three main operating segments, adding products and services to meet and exceed customer requirements. Selective acquisitions will be made to add meaningfully to these businesses or where we believe there is suitable strategic alignment with our core competencies.

Nashua Mobile is managing the change brought about by the lower interconnect rate. Voice remains the primary revenue source for Nashua Mobile. Opportunities in the data market will be pursued to increase market share and revenue.

Planned infrastructure spending by government and parastatals will remain a focus area for the businesses in the electrical segment, as will opportunities for growth in the African market.

Reunert will continue to improve group productivity and strive to be the most efficient organisation in the segments in which we operate.

Reunert will further increase its cash resources in February 2011 with proceeds from the sale of its shares in NSN. Suitable acquisitions continue to be identified and evaluated. The buyback of Reunert shares began in August 2010 and will be continuing outside of closed periods.


The economy is in a delicate state with lower interest rates encouraging growth. However, the strength of the rand is of serious concern with increased imports and reduced export opportunities hampering growth.

Subject to prevailing economic conditions remaining unchanged, the group predicts increased earnings for the year ahead.


Reunert is conscious of its impact on society and the environment in which it operates. We are proud of the success of our social investment initiative with the Reunert College. This year, it has given more than 80 black matriculants the opportunity to achieve a high-level matric in mathematics, science, accounting and English, paving the way for them to pursue tertiary education. Since inception, we have assisted close to 880 students of whom about 450 have entered university. Our training philosophy is that there are no shortcuts and what we offer must have a lasting effect. There is no substitute for a first-class education and experience. We endeavour to provide both.

We are conscious of the environment and the need to protect it. Our operations have a low to medium impact on the environment and we comply with laws and regulations. Several initiatives to reduce energy consumption have been implemented in the group, including an experimental 50kWh solar-driven solution at the Nashua Mobile premises in Midrand.

Directorate and appreciation

At the annual general meeting on 2 February 2010, Messrs MJ Shaw and KS Fuller retired from the board. Martin served as chairman of the board from June 2003 to May 2009 and Kingsley as chairman of the audit and risk committee from June 2005 to February 2010. The board expresses its appreciation to both for their valuable service to the group.

Mr Gerrit (Boel) Pretorius retired in August after 12 years as chief executive of the group. It is with heartfelt thanks that the board bids him farewell. His contribution to the group was outstanding and we wish him and his wife, Adele, a happy retirement.

The board welcomes Mr Nick Wentzel as chief executive of the group.

Thank you to the members of our board, executives and all our employees for their contribution to the success of Reunert. With their constant energy and support, we look forward to a bright future. Finally, we thank our customers, as well as our suppliers and technology providers, for their ongoing support.

Trevor Munday

Nick Wentzel
Chief executive

16 November 2010


  • 1
  • 2