Media Releases

Reunert rewards shareholders and announces BEE deal
Monday, 20 November 2006

Electronics and electrical engineering group Reunert today announced strong financial results for the year ended 30 September 2006 as well as its intention to introduce strategic black economic empowerment partners into the business.

The buoyant domestic economy of the past year assisted top line growth and revenue improved by 17% to R8,2 billion while operating profit grew by 39% to R1,3 billion. The higher percentage growth in profit compared to turnover was achieved by containing the increase in overheads to under 8%.

Shareholders have been well rewarded and will receive R4,73 in the form of ordinary and special dividends for the 2006 financial year. “For the past few years cash flow has been consistently strong, leading to an earlier decision to declare a R2,00 special dividend payable on 18 December 2006,” said Reunert chief executive Gerrit (Boel) Pretorius. A final ordinary dividend of 210 cents per share (2005:170) was declared today, a 24% increase from last year.

Electrical engineering, now consolidated under the brand CBI-electric, experienced exceptional growth on the back of the countrywide strong infrastructure spent. Revenue rose by 30% to R2,6 billion while operating profit grew by 66% to R552 million.

Gerrit Pretorius said CBi-electric’s energy cables order book remains strong. “We have invested R47 million during the past year at our plant in Vereeniging to expand capacity. A further R40 million is earmarked to be spent in 2007.”

CBi-electric: telecom cables experienced a complete turnaround from previous years which led to a strong profit recovery. Agreement has been reached with Aberdare, subject to Competition Commission approval to acquire the assets of Aberdare’s telecommunications cable businesses in exchange for a 50% share in a new company which will be a joint venture between ATC and Aberdare. The additional capacity acquired will enable the company to meet anticipated strong demand for both copper and fibre optic telecommunications cables in Africa.

The low voltage business performed well and continues to make progress in export markets, particularly in Europe. Sales were fairly evenly spread amongst residential, industrial/mining and exports. Exports grew by 21%. A second assembly facility was opened in Lesotho which is geared for exports. Nearly R92 million will have been spent on capital improvements by the end of 2007 of which half was during the past financial year.

The electronics division, including Reunert’s share of Siemens Telecommunications, grew overall operating profit by 20% to R862 million on the back of a 15% increase in turnover to R6,9 billion.

The office automation business Nashua grew sales by a pleasing 26%. A foothold was established in the printer business boding well for the future. Pretorius said he expects total document volume to grow as a result of the fast growing base.

Nashua Mobile achieved good results in an increasingly competitive industry. Good progress was made in the provision of 3G and other data devices to allow customers internet access. The company increased it subscriber base by 39% to 576 820 contract subscribers.

“Consumer electronics is an increasingly difficult business to manage,” Pretorius said. “Price deflation and the volatility of the rand make the business of Reunert Consumer & Commercial Holdings (RC&C) challenging. The business systems side of RC&C continued its strong growth path and offset the negative influence of the consumer side to render an overall positive result.“

Siemens Telecommunications reported strong sales growth during the year. Siemens recently announced that they will be merging their telecommunications business world wide with Nokia on 1 January 2007. This will present opportunities and challenges for the business going forward.

The defence businesses reported improved profitability from a low base and both their existing order books and prospects are better than a year ago. A process was initiated during 2006 which could result in some or all of the businesses being sold.

Reunert recently announced the start of a joint venture finance company with PSG subject to the fulfillment of certain suspensive conditions. Reunert is contributing its stake in RC&C Finance for 49,9% of the new company. The PSG Group (39,9%) and minority shareholders (10,2%) will contribute R375 million in cash for their stakes.

“We aim, with our partners, to grow this business together into a force in asset financing,” said Pretorius.

Prospects

Commenting on the group’s prospects Pretorius said, “Generally the business climate is expected to be favourable and most of the group’s businesses are likely to continue producing real growth in earnings. The consumer business may experience slower demand in a higher interest rate environment.”

“Overall the group should achieve real earnings growth before the one off charge arising from the BEE transaction.”


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For more information contact
Carina de Klerk
Tel 011 517 9035
Mobile 083 631 5743
e-mail carina@reunert.co.za