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C H I E F   E X E C U T I V E S   R E P O R T
It is with satisfaction that I look back on the past year. The results achieved vindicate the decision taken more than a year ago to restructure the group. Essentially we have accomplished everything that we set ourselves to do.
The group's greater focus has assisted us to act decisively on the future positioning of our remaining businesses, with the sole objective of ensuring sustainable growth.
Comparable headline earnings per share grew by a satisfactory 30,7%. Sales from our ongoing businesses increased by 20,2%, while total turnover declined by 30,3% as expected, following the disposals of Alstom, Temsa and Reumech OMC in the previous year.
In addition, we returned R510 million (R2,50 per share) to our shareholders by way of a special dividend in October 1999. This was appropriate at the time as the group had generated substantial cash reserves from the restructuring and disposal process. From a financial standpoint we are satisfied that our actions and timing were correct.
The bigger question facing the group is whether, strategically, we are progressing in the right direction. The group's greater focus has assisted us in acting decisively on the future positioning of our remaining businesses, with the sole objective of ensuring sustainable growth. Achieving that objective is not easy, as evidenced by the lack of real growth in the South African economy. I am satisfied that, however tentative, we have taken steps in the right direction. The urge to move too fast had to be resisted to ensure sustainability going forward.
Nashua changed markedly in the past year. The cellular business was merged with that of Nedcor to form the supplier of choice for the corporate customer in July 2000. More than 200 000 business people are customers of Nashua NedTel Communications and we are proud to have such an elite clientele. Substantial investments are being made in order to guarantee superior service and efficiency. Management is conscious that differentiation and value-added services are key to the future of that business. Reunert owns 58% of the combined entity.
The office automation business subtly changed from being only an equipment supplier to being a provider of solutions. Incorporating reliable equipment into a bigger network is creating major opportunities for growth. There was a shortage of skills in the areas of networking and software which had to be obtained.
Revenue on a comparable basis grew by 20%, while operating profit improved by 30%.
Reunert formed a strategic alliance with The IQ Business Group, and a new company IQ Works was established in July this year. This company will provide the total office solution in all areas of networking and information technology. A close working relationship exists between Nashua and lQ Works. Progress to date has been excellent and I am confident that all expectations will be met in the short to medium term.
Panasonic continues to endure tough market conditions. Strong management action ensured profitable trading under difficult circumstances. Although returns fall short of group expectations, I am optimistic that positive economic value added is achievable in the short term.
Siemens Telecommunications (Sietel) is going from strength to strength. Its presence and undisputed leadership in fixed line and wireless communications ensure record order books and demand for its products and services. We are confident that Sietel will not only maintain its position as the leading telecommunications company in South Africa, but will further widen the gap between it and its nearest competitor. Great opportunities that still need to be exploited exist in the field of networks.
The defence businesses have had an excellent year. Reutech Radar Systems was awarded a major contract for the supply of electro-optic trackers for the South African Navy. It is a just reward for years of hard work and investment in what is arguably the finest example of high technology in South Africa.
Reutech Defence Industries secured its first export orders for the new, all-digital, wide-band airborne radio. This product is testimony to the quality of our engineers and technicians and is essentially "soft" from antenna to audio.
Fuchs Electronics continues to export its entire production. Few South African companies can boast that 100% of sales are exported.
Reunert Defence Logistics is suffering from the severe cutback in local defence expenditure. This situation is not expected to improve in the short term. Alternative models are being examined to mitigate this downturn.
ATC currently benefits greatly from the worldwide shortage of fibre. The plant is running at capacity and is expected to continue doing so for the foreseeable future. More capacity will come on stream in December after the installation of an additional draw tower that should further enhance prospects. The strategic significance of manufacturing one's own fibre is highlighted by the current high demand on fibre-producing sources.
Circuit Breaker Industries (CBI) expanded its global presence by opening wholly-owned subsidiaries in Europe and North America. Ongoing product certification in those continents is a priority and market penetration is dependent upon the speed of that process. Sales are increasing on a monthly basis and the scope for real growth is better than ever. It is a greenfields approach and calls for great investment in time, patience and money. However, with the rand's weakness against the dollar and the dearth of suitable acquisitions, this strategy is appropriate at present.
In the domestic market, the decision was taken to increase CBI's product offering in order to leverage the considerable goodwill enjoyed by CBI in the local market. The benefit of that decision is not expected to have an impact in the short term.
African Cables (Afcab) acquired the energy cable business of Rosslyn Cables from ATC. Afcab now offers a complete product range from house wire to super-tension cables. The additional capacity and greater access to African markets position Afcab strongly for future growth.
Efficiency at Afcab improved considerably as a result of management action. A programme of continuous improvement has been implemented and we are positive that the desired results will be achieved.
In conclusion, I would like to express my sincere gratitude to everyone who has contributed so greatly during the past year. Without their help and support it simply would not have been possible. The assertiveness and determination to succeed are evidence of the calibre of our people. I look to the future with confidence, knowing that we can achieve anything we set our minds to.

Gerrit Pretorius

Chief Executive


15 November 2000

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