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Highlights Accounting policies
Letter to shareholders Income statements
Board and governance structure Balance sheets
Group overview Cash flow statements
Building and developing people Notes to the cash flow statements
Corporate governance Statement of changes in equity
Value added statement Notes to the annual financial statements
Segmental analysis Principal subsidiaries
Five-year financial review Share ownership analysis
Summary of statistics Shareholders' diary
Definitions Corporate administration and information
Directors' responsibility Notice of annual general meeting
Report of the independent auditors Currency conversion table
Secretaries' certification Proxy form
Statutory information

Dear shareholder

Strong performances from Reunert's own managed operations saw revenue for 2003 increasing by 21% to R6,1 billion. The group has once again improved its margins that have resulted in strong operating profit growth of 29%. This achievement was unfortunately not sufficient to offset the substantial loss incurred by our associate company, Siemens Telecommunications (Siemens). Consequently Reunert has reported a headline earnings per share decline of 20% to 183,5 cents per share for the year ended 30 September 2003.

The group continues to generate strong positive cash-flows and this has enabled Reunert to maintain its final dividend at 88 cents per share bringing the total dividend for the year to 120 cents per share (2002:118 cents per share). Cash holdings at 30 September 2003 amounted to R481 million.

Review of results
The group's results were adversely affected by the strong rand, losses incurred in certain US dollar based contracts in Siemens and the introduction of the AC133 accounting standard.

The impact on attributable earnings of applying AC133 was a charge of R31 million. This accounted for 7 of the 20% decline in headline earnings. The need for this adjustment arose as a result of the interest rate reductions in the last six weeks of the financial year and the strengthening of the rand in the last week of September 2003.

Despite that, earnings before interest, tax, depreciation and amortisation (EBITDA) as a percentage of turnover improved from 11,1% to 11,7%. The majority of our businesses experienced increased demand for products and services. In addition, the ability to react quickly to changes in a volatile market environment enabled Circuit Breaker Industries (CBI), African Cables, Nashua and Nashua Mobile to achieve record profit margins.

Group exports grew by 60% to R519 million, 9% of revenue, mainly due to the significant export orders generated by the defence electronics division, Reutech.

Working capital decreased by R210 million during the year, primarily as a result of further improvements in working capital management at African Cables, Nashua and Panasonic.

Operating overview
Electrical engineering had an excellent year with operating profit increasing by 60% to R195 million.

CBI continues its drive to add new products to its portfolio. Management resources and money are being invested in order to grow revenues outside their traditional circuit breaker business. R28 million was spent during the year on research and development for the further advancement of its own technologies, and during the year Mitsubishi motor control and factory automation products were added to its range. Export revenue increased by 13%, and with volumes growing at a significantly higher rate, helped to offset the impact of the rand's appreciation. Products are marketed in Africa, Europe, Asia and North America and CBI is currently establishing a platform from which to penetrate the Australasian market.

At the beginning of the year Reunert acquired Marconi's 50,9% and Pirelli Cables and Systems' 10,5% stakes in telecommunications cable manufacturer ATC, increasing its holding to 100%. The demand for telecommunications cables worldwide has, for the time being, decreased considerably; nevertheless Reunert is confident that the market will eventually return. A major restructuring process was undertaken to align the cost structure with current demand. ATC is therefore currently in holding mode, in anticipation that demand will gain momentum. In the short term, the market is expected to remain sluggish until the second network operator comes on stream. ATC is trading on a cash-positive basis.
As part of the group's commitment to black economic empowerment, a 25,1% stake in ATC was subsequently sold to Kgorong Investment Holdings.
Power cable manufacturer African Cables has had a good year and is entering the new financial year with a strong order book. City Power Johannesburg recently awarded its cable supply requirements for the next three years to African Cables. The demand for cables in the rest of Africa presents a significant opportunity for African Cables to grow its export revenue.
Office systems performed strongly and improved profit margins by a further 1%. Nashua's strong competitive position is constantly being evaluated and benchmarked. Building the powerful Nashua brand is a significant part of overall expenditure and is an investment which we make with confidence. Nashua's distribution channel consists of a well-established network of franchisees, which we have recently augmented with the addition of a direct corporate outlet in the Midrand area of Gauteng.
The consumer products and services division has had a year of mixed fortunes. The strong performance from cellular service provider Nashua Mobile was offset by weak performance from Reunert Consumer and Commercial Holdings (RC&C).
The Panasonic consumer business within RC&C has felt the brunt of the strengthening rand. Some imported products had to be sold below their rand cost as a result of forward cover being taken out in anticipation of a weakening rand. A review of this strategy has reduced risk in this regard, whilst also ensuring the elimination of unacceptable exposure should the rand weaken again.

The division is in a much better position than a year ago. An improved Panasonic product offering is being sourced at lower exchange rates and shorter lead times. Management anticipates that the reduced interest rates will stimulate demand. The Panasonic business systems division is growing consistently. The establishment of branch networks in Johannesburg, Cape Town and Durban has improved the distribution channels. RC&C is confident of good performance in 2004.

Nashua Mobile was not influenced by currency fluctuations and enjoys the benefit of a strong customer base at the upper end of the market. The average revenue per user increased to an all-time high of R575 while "churn" rates of customers not renewing contracts after 24 months decreased to 11,6%.

The information and communication technologies division reported an operating loss of R65 million with revenue down by 28%. Delays in anticipated contracts, combined with a stronger rand, contributed to Sietel reporting a significant decline in revenue. In certain cases, contracts had to be executed below cost. Difficulties with accessing customer sites and delays in the erection of base stations resulted in substantial cost overruns.

For 2004, the outlook for Siemens has improved. Although the fixed-line business is under pressure, the mobile business continues to grow. Cell C has contracted Siemens for the next phases of its network expansion programme. Vodacom's strong drive into other African markets, notably Mozambique and possibly Nigeria, whilst challenging the resources of Siemens gives us confidence that they will achieve acceptable levels of profitability in the new financial year.

The defence electronics division, Reutech, entered 2003 with a strong export order book, only to see excellent profit margins being steadily eroded by the strengthening rand.

Reutech, which is a significant exporter, will find it difficult to be profitable at current exchange rates as its products are priced and sold in US dollars. Companies such as Fuchs Electronics no longer enjoy a competitive price advantage and will be marginally profitable. Reutech Radar Systems will continue to do well with a strong order book and the majority of its business based in South Africa. Reunert Defence Logistics is pursuing several exciting prospects, some of which are expected to materialise in the new financial year.

The recently announced acquisition of a minority interest of 31,7% in CS Computer Services Holdings (CSH) increases our presence in the information and communication technologies sector. Opportunities exist to leverage the synergies between certain of Reunert's operations and CSH. A very similar client base to that of Nashua should lead to exciting cross-selling opportunities over time.

Siemens Telecommunications, ATC and Panasonic are all expected to return to profitability and should therefore influence group results positively for the new financial year. All other businesses are expected to produce moderate growth over the past year's high base with the exception of Reutech, which will be hard-pressed to repeat its recent past performance. Consequently, in the new financial year headline earnings per share should show acceptable growth.

Black economic empowerment
Black economic empowerment (BEE) transactions have been concluded in Reutech Radar Systems, Reunert Defence Logistics and ATC. It is envisaged that further BEE partnerships will be established over the next two to three financial years and at the Reunert Limited level, the feasibility of introducing BEE partners is constantly evaluated. Your board is committed to BEE as a means of redressing inequities of the past and as a critical factor in South Africa realising its full economic potential. We welcome the Department of Trade and Industry's broadly-based scorecard approach to black economic empowerment.

Employment equity plans are being implemented in all our businesses and at community level, the work done by the Reunert College continues. Another 30 well-equipped black students will move on to receive tertiary education in 2004 thanks to our commitment.

We would like, on your behalf, to thank all our employees who have excelled themselves in the past year in serving all our stakeholders.

We are privileged to enjoy the support of an able and strong board of directors. It is comforting to know that they are always available, sometimes at short notice, to participate and contribute to the well-being and prosperity of the company.

We would like to take this opportunity to wish all our stakeholders a peaceful and prosperous 2004. At Reunert we shall endeavour to add to your prosperity in the new financial year.

For and on behalf of the board
26 November 2003

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Copyright - Reunert - 2003