A N N U A L   R E P O R T   –   2 0 0 2 
Financial highlights Statutory information
Letter to the shareholders Accounting policies
Board of directors Income statements
Group operations Balance sheets
Developing people Cash flow statements
Corporate governance Notes to the cash flow statements
Value added statement Statements of changes in equity
Segmental analysis Principal subsidiaries
Five-year financial review Share ownership analysis
Summary of statistics Shareholders’ diary
Definitions Administration
Directors’ responsibility Notice of annual general meeting
Report of the independent auditors Currency conversion table
Secretaries’ certification Board, Director and Committes

L E T T E R   T O    T H E    S H A R E H O L D E R S
  Dear Shareholder
  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).
  Derek Cooper - chairman
  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.
  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.
  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.

Group operations


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%.


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.


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.


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.


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.



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.


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.


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.


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.  


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.

  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.
  Black economic empowerment
  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.
  Developing people
  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.
  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.
  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
  Yours sincerely

Derek Cooper
18 November 2002

  "Black economic empowerment is recognised and embraced as an economic imperative in South Africa."
  "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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