Abridged financial information
 

Audited financial summary

 
 
Notes  
      2011  
Rm  
  Restated  
2010  
Rm  
1.   EBITDA          
  EBITDA is stated after:          
  – Cost of sales     7 683,0     7 555,5  
  – Other expenses excluding depreciation and amortisation     1 773,4     1 727,5  
  – Other income     40,5     54,9  
  – Realised loss on foreign exchange and derivative instruments     (2,9)    (15,5) 
  – Unrealised gain/(loss) on foreign exchange and derivative instruments     9,3     (56,0) 
2.   Net interest and dividend income          
  Interest received     46,9     65,0  
  Interest paid     (6,6)    (7,2) 
  Dividend income     0,6     1,4  
  Total     40,9     59,2  
3.   Abnormal items          
  Gain on disposal of investment     348,2     –  
  Less: costs associated with disposal     (1,8)    –  
  Net gain on disposal of investment in Nokia Siemens Networks SA (Pty) Limited (NSN) (refer to note 8   346,4     –  
  Taxation (refer to note 4   0,3     –  
  BEE transaction expense     –     (34,0) 
  Net abnormal items after current year taxation     346,7     (34,0) 
4.   Taxation          
  An estimate of the expected capital gains tax payable on the disposal of NSN was provided for in prior years through deferred taxation. The current year taxation effect of the gain (refer to note 3) is due to an adjustment between the estimate provided for previously and the amount expected to be paid.          
5.   Number of shares used to calculate earnings per share          
  Weighted average number of shares in issue used to determine basic earnings, headline earnings and normalised headline earnings per share (millions)    165,3     178,7  
  Adjusted by the dilutive effect of unexercised share options granted (millions)    1,1     1,6  
  Weighted average number of shares used to determine diluted basic, diluted headline and diluted normalised headline earnings per share (millions)    166,4     180,3  
6.1   Headline earnings          
  Profit attributable to equity holders of Reunert     1 337,1     899,4  
  Headline earnings are determined by eliminating the effect of the following items from attributable earnings:          
  Gain on disposal of NSN (after current year tax credit of R0,3 million) (refer to notes 3 and 4   (346,7)    –  
  Net (gain)/loss on disposal of property, plant and equipment and intangible assets (after tax charge of R0,6 million (2010: RNil))    (1,5)    0,1  
  Non-controlling interests in loss on disposal of property, plant and equipment and intangible assets     –     0,1  
  Net surplus on dilution in and disposal of business (after tax of RNil)    –     (0,2) 
  Impairment charge recognised for property, plant and equipment (after tax charge of
R1,6 million) 
  –     4,0  
  Headline earnings     988,9     903,4  
6.2   Normalised headline earnings          
  Headline earnings (refer to note 6.1   988,9     903,4  
  Normalised headline earnings are determined by eliminating the effect of the following items from attributable headline earnings:          
  BEE transaction expense (after tax of RNil)    –     34,0  
  IFRS 3 profit on acquisition of Nashua Communications (Pty) Limited (after tax of RNil)    –     (8,2) 
  Rate portion of revaluation of interest rate swap derivative assets and liabilities (after tax charge of R3,1 million)    –     8,1  
  BEE share of headline earnings adjustments     –     (6,9) 
      988,9     930,4  
  Net economic interest in profit attributable to all BEE partners (refer to note 10   (13,8)    (8,8) 
  Normalised headline earnings     975,1     921,6  
7.   Goodwill          
  Carrying value at the beginning of the year     492,1     460,6  
   Acquisition of businesses     162,8     31,5  
  Carrying value at the end of the year     654,9     492,1  
8.   Investments and loans          
  Loans – at cost     44,5     42,8  
  Other unlisted investments – at cost     1,6     1,5  
  Financial instrument – NSN option at fair value1     –     299,2  
  Financial instrument – investment in NSN at fair value1     –     494,3  
  Carrying value at the end of the year     46,1     837,8  
  Non-current investments and loans     46,1     44,3  
  Current investments1     –     793,5  
  Directors’ valuation of unlisted investments          
  – NSN option and investment     –     793,5  
  – Other unlisted investments     1,6     1,5  
 
1  As announced on the Securities Exchange News Service (SENS) on 4 February 2011, Reunert exercised its option to sell its investment in NSN and received R793,5 million from the Nokia Siemens Networks group
       
9.   Long-term borrowings          
  Total long-term borrowings (including finance leases)    7,7     711,0  
  Less: short-term portion (including finance leases)    (7,0)    (0,1) 
      0,7     710,9  
  In February 2011 Quince repaid its long-term securitised borrowings.          
10.   BEE transactions          
  BEE transactions, where the significant risks and rewards of ownership in respect of their equity interests have not passed to the BEE partners, are not recognised as non-controlling interests.          
  Had the non-controlling interests been recognised, the effect would be the following:          
  – Net economic interest in current year profit that is attributable to all BEE partners     13,8     8,8  
  – Balance sheet interest that is economically attributable to all BEE partners     77,3     154,1  
11.   Major Corporate Activity  
 

All the acquisitions were funded from cash resources within the group.

Acquisition of Nashua franchises

With effect from 1 November 2010 Nashua Holdings purchased 51% of the Nashua Tygerberg and Nashua Paarl franchises for R10,6 million and R7,1 million respectively. The non-controlling shareholders of these 2 businesses provided R1,0 million of equity each.

With effect from 1 May 2011 the business and net assets of Nashua Durban were purchased by Nashua Holdings for R48,9 million. In terms of the agreement with the previous owners the balance of R47,8 million is payable six months after the acquisition date.

With effect from 1 June 2011 the business and net assets of Nashua Cape Town were purchased by Nashua Holdings for R67,0 million. In terms of the agreement with the previous owners the balance of R41,1 million is payable six months after the acquisition date.

The R41,1 million goodwill arising on these acquisitions is due to the price paid being in excess of all assets delivered, and represents the intrinsic value of the existing businesses to produce profits into the future. These purchases are in line with Nashua Office Automation’s strategy of acquiring a controlling share in all key existing franchise operations.

Acquisition of ECN Telecommunications (ECN)

With effect from 1 June 2011 Reunert purchased the business and net assets of ECN for R171,9 million.

The goodwill of R107,8 million arising from the acquisition consists largely of the synergies expected from enhancing the group’s ability to provide fully converged communications solutions.

Acquisition of ITmatic

With effect from 1 July 2011 the business and net assets of ITmatic were purchased by CBI-electric: low voltage division of Reunert for R1,0 million.

The R13,9 million goodwill arose on the acquisition as ITmatic is a leading process control and automation systems integrator and the acquisition is set to accelerate the division’s growth into other foreign markets.  

    Nashua  
franchises  
Rm  
ECN  
Rm  
ITmatic  
Rm  
Group  
Rm  
  Net assets acquired          
  Deferred taxation   (5,4)  (7,8)  –   (13,2) 
  Property, plant and equipment and intangible assets   28,6   67,4   1,0   97,0  
  Inventory   17,0   5,2   –   22,2  
  Accounts receivable1   74,2   49,5   4,8   128,5  
  Payables and provisions   (21,9)  (50,2)  (18,7)  (90,8) 
  Goodwill   41,1   107,8   13,9   162,8  
  Cost of investment   133,6   171,9   1,0   306,5  
  Profit/(loss) since acquisition   4,8   (0,6)  (0,3)  3,9  
  Revenue for the 12 months ended 30 September 2011 as though the acquisition date had been 1 October 2010   325,7   397,4   65,2   788,3  
  Profit/(loss) for the 12 months ended 30 September 2011 as though the acquisition date had been 1 October 2010   14,0   2,8   (7,4)  9,4  
 
1  Gross contractual amounts of accounts receivable at acquisition date 
74,2   49,5   4,8   128,5  
 
1  The best estimate of contractual cashflows of accounts receivable not expected to be received 
–   –   –   –  
12.   Basis of preparation  
  These condensed consolidated financial statements have been prepared in accordance with the framework concepts and the recognition and measurement criteria of IFRS and its interpretations adopted by the International Accounting Standards Board (IASB) in issue and effective for the group at 30 September 2011 and the AC500 standards issued by the Accounting Practices Board. This condensed consolidated information has been prepared using the information as required by IAS 34 – Interim Financial Reporting, and comply with the Listings Requirements of the JSE Limited and the requirements of the Companies Act. This report was compiled under the supervision of MC Krog CA (SA) (group financial director). These financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 30 September 2011.

The groups’ accounting policies, as per the audited annual financial statements for the year ended 30 September 2010, have been consistently applied. These accounting policies comply with IFRS.  
13.   Unconsolidated subsidiary  
  The financial results of Cafca Limited, a subsidiary incorporated in Zimbabwe, have not been consolidated in the group results as the directors believe there is a lack of control and the amounts involved are not material to the group’s results.

At 30 September 2011 the company’s retained earnings amounted to US$ 2,8 million.  
14.   Related party transactions  
  The group entered into various transactions with related parties which occurred in the ordinary course of business and under terms that are no more favourable than those arranged with independent third parties.  
15.   Events after balance sheet date  
  No events have occurred after the balance sheet date that require additional disclosure or adjustment to the annual financial statements.  
16.   Audit opinion  
  The consolidated financial statements for the year have been audited by Deloitte & Touche. The consolidated financial statements, the accompanying unmodified audit report, as well as the unmodified audit report on this set of condensed financial information are available at the company’s registered office.  
17.   Prior year numbers  
 

Income statement  

  The prior year numbers have been restated to fully eliminate intergroup transactions between Reunert and Quince. The impact of the eliminations is reflected below:  
    Previous  
Rm  
Restated  
Rm  
Difference  
Rm  
  Revenue   10 679,9   10 675,1   4,8  
  Earnings before interest, tax, depreciation, amortisation, other income and dividends   1 281,4   1 320,6   (39,2) 
  EBITDA   1 336,3   1 375,5   (39,2) 
  Operating profit   1 223,6   1 262,8   (39,2) 
  Net interest and dividend income   98,4   59,2   39,2  
  Profit before tax   1 288,0   1 288,0   –  
  Profit after tax   911,4   911,4   –  
 

Balance sheet  

  Disclosures relating to Quince have been condensed into the appropriate line items on the consolidated balance sheet. Quince non-current receivables of R821,7 million, Quince receivables of R646,3 million, Quince bank balances and cash of R72,5 million, Quince long-term borrowings of R699,9 million and Quince bank borrowings of R691,5 million have been incorporated into the relevant line items of the Reunert group balance sheet.  

 

Supplementary information 

    2011  
  2010  
R million (unless otherwise stated)         
Net worth per share (cents)    2 401     2 502  
Current ratio (:1)    1,8     2,2  
Net number of ordinary shares in issue (million)    161,6     177,2  
Number of ordinary shares in issue (million)    199,3     197,8  
Less: BEE Shares (million)    (18,5)    (18,5) 
Less: Treasury shares (million)    (19,2)    (2,1) 
Capital expenditure     99,4     148,9  
– expansion     62,6     111,0  
– replacement     36,8     37,9  
Capital commitments in respect of property, plant and equipment     57,1     65,1  
– contracted     7,2     11,0  
– authorised not yet contracted     49,9     54,1  
Commitments in respect of operating leases     170,0     85,8  

 

Condensed segmental analysis 

    2011  
Rm  
  %  
of total  
%  
change  
Restated  
2010  
Rm  
%  
of total  
Revenue1                
CBI-electric     3 336,0     30   13   2 961,3   28  
Nashua     6 927,5     64   1   6 867,2   65  
Reutech     639,3     6   (19)  791,0   7  
Other     3,0     –   11   2,7   –  
Total operations     10 905,8     100   3   10 622,2   100  
NSN     16,9       (68)  52,9    
Revenue as reported     10 922,7       2   10 675,1    
1  Inter-segment revenue is immaterial and has not been disclosed. 
             
Operating profit                
CBI-electric     592,1     43   14   521,1   43  
Nashua     794,2     58   21   653,7   54  
Reutech     48,7     3   (20)  60,6   5  
Other     (60,5)    (4)    (25,5)  (2) 
Total operations     1 374,5     100   14   1 209,9   100  
NSN     16,9       (68)  52,9    
Operating profit as reported     1 391,4       10   1 262,8    
Total assets                
CBI-electric     1 580,8         1 494,8    
Nashua     3 847,7         3 595,4    
Reutech     355,7         659,7    
Other2     322,1         2 202,9    
Total assets as reported     6 106,3         7 952,8    
2  Included in Other are bank balances of R224,7 million (2010: R1 207,6 million) held by the group’s treasury.