Interview with Moneyweb re 2004 Interim Results
Tuesday, 18 May 2004
By: Alec Hogg
MONEYWEB: Boel Pretorius is the chief executive of Reunert. He joins us now. Boel, when we spoke last about your financial results, I think it was back in November, you had the three laggards last year. They were all rand-related. In Panasonic you'd bought equipment at the price of R12 to the dollar and you had to then sell it in the market at lower prices. You also had a knock-down from a slump in telecom cables at ATC, but the real hit came from Siemens Telecoms, the group of which you own 40%. Now all of that, your shareholders will be delighted to know, has turned around in the six months to March and will get better still, according to your comments, in the following six months.
BOEL PRETORIUS: Yes, Alec, I think that's absolutely correct. We knew when it happened last year that it was a once-off, it was a spike, it would work itself out of the system, all three of those companies, and I'm very pleased that it happened the way we said it would. And I think the next six months will be better, as we said.
MONEYWEB: Up by 20% headline earnings per share, dividends up 25% to 40c a share - that's the interim dividend. So you're sending out a signal there that the group's in good shape.
BOEL PRETORIUS: I think that's a fair deduction.
MONEYWEB: What about Reutech though? That is the only blot. If one were to say you're firing on five of your six cylinders, your defence operation, Reutech, was down quite considerably in this reporting period. You mention cyclical reasons - can you perhaps elaborate?
BOEL PRETORIUS: Yes, again not unexpected in the defence business, which depends on orders coming in from big customers, normally governments. You can't dictate the pace at which those things happen. What we do know is it will come in, and when it comes in it will be big again. So we've got very little assets tied up in those businesses and the payback is quite big.
MONEYWEB: What exactly do you make there at Reutech?
BOEL PRETORIUS: We make tactical communications, airborne communications, very sophisticated equipment. We've got radar systems, we've got air weapons, we have proximity fuses, we've got world-class products and world-class technology.
MONEYWEB: Is that only sold to our own defence force?
BOEL PRETORIUS: No, no, at the moment most is exported. The requirements from our own defence force are rather modest at this time, but we know, and it's been approved, that they will start spending big money shortly again, and we hope to benefit from those programmes.
MONEYWEB: Are there any countries that you aren't allowed to sell to, Reutech?
BOEL PRETORIUS: Yes, many. You cannot sell unless it is approved by government - so before we can even market we need approval.
MONEYWEB: so if our government doesn't like the United States for instance, for whatever reason, you wouldn't be able to sell to them?
BOEL PRETORIUS: Absolutely.
MONEYWEB: I guess that's not the situation at the moment.
BOEL PRETORIUS: I can assure you the United States has got very little need for our technology.
MONEYWEB: OK. Boel, you're sitting on a lot of cash, up R180m in this period to R689m cash. It was a little surprising to see that you've now decided not to go ahead with any offer to acquire CS Holdings. You certainly do have the fire power.
BOEL PRETORIUS: That wasn't actually the problem. We're not short of money. What happened in the case of CSH is simply that it was taking too long, it was becoming too complex, too many parties involved, too many expectations, and we really didn't have that much time.
MONEYWEB: Too many parties? Is't it just yourselves and Worldwide Africa that need to come together?
BOEL PRETORIUS: There were also the big institutions that hold the majority of shares, and you've got to deal with them all.
MONEYWEB: And at 35c were they not keen to support you?
BOEL PRETORIUS: Well, they were, up to a point. But they also had a lot of conditions attached and it just turned out not to be worthwhile at the end of the day.
MONEYWEB: Boel, one concern though for shareholders in CSH is the fact that both you and the other Reunert appointee on the board resigned with immediate effect. What was behind that?
BOEL PRETORIUS: I think that's quite easy to explain, Alec. We felt that we didn't want to compromise any of the Reunert directors, because CS cannot restrain Reunert from wanting to do what it wants to do. And if we sit on the board of CS we always have to act in the interests of CS as well. By not being on the board we've got only one loyalty and that's to Reunert.
MONEYWEB: So does that mean you might be looking elsewhere for a technology partner?
BOEL PRETORIUS: Absolutely. We're free to do whatever we like.
MONEYWEB: And the bid that was proposed or the counter bid proposed by Asher Bohbot from EOH last night - did that have any influence in your decision?
BOEL PRETORIUS: Not at all. We didn't even consider it.
MONEYWEB: Might you consider selling to him?
BOEL PRETORIUS: Yes, it all depends. If he's got a big enough cheque, we might talk.
MONEYWEB: Has he spoken with you yet?
BOEL PRETORIUS: No.
MONEYWEB: That's surprising. Have you not picked up the phone to him because, if he's prepared to do a counter-bid, I think he would be a very likely taker of your stock?
BOEL PRETORIUS: I would expect him to give me a call in that case.
MONEYWEB: Boel, what about the second half of this financial year? You said that you do believe that things are going to get better. Can you accelerate from the 20% earnings growth that you've already posted?
BOEL PRETORIUS: I think that's what we've indicated under the prospects. I'm very confident that that will be the case. The orders are there, the market is there, so I can see no good reason why it shouldn't be a good half-year.
MONEYWEB: And, getting back to CS Holdings, when might all of this, in your opinion, sort itself out?
BOEL PRETORIUS: I actually have no idea. The only thing I know is that it always takes longer than one thinks - and before EOH may reach finality, eight to 12 weeks.
MONEYWEB: And are you going to retain your shareholding in the company?
BOEL PRETORIUS: For the time being, yes. We are not desperate to do anything, so we are quite comfortable to just sit and see what happens.
MONEYWEB: Reunert chief executive, Boel Pretorius. David, the plot thickens.