Media Releases

Reunert still seeking right equity mate
Friday, 28 November 2003

By: John Fraser´╗┐

Strong rand punishes earnings Trade and Industry Editor

TECHNOLOGY group Reunert had so far failed to find a suitable empowerment partner , CE Gerrit Pretorius said yesterday.

This was because of the challenge of funding an empowerment deal for the group, whose market capital is R3,8bn.

"We are studying this nonstop, and have not found a way around the funding problem," he said. "We don't want the sort of complex schemes which only work if the share price doubles.

"That would be a problem, without massive inflation."

Pretorius said, however, that empowerment remained on the agenda.

He was reporting on Reunert's financial data for the year to September, in which there was a mixed performance.

Revenue grew 21% to R6,1bn, and attributable earnings rose 20% to R295,4m. Headline earnings a share, however, fell 20% to 183,5c. The final dividend was the same last year at 88c a share.

Pretorius said that a change in accounting rules was responsible for "7% of the 20% drop in headline earnings a share from 2002".

The other major factor was the poor performance of Siemens Telecommunications, a joint venture between Reunert and German multinational Siemens Reunert owns 40% of the venture.

Pretorius said the strong rand meant that some of Siemens Telecommunications' dollarpriced work was performed for more than the charged fee.

On top of this, there were delays in contracts in Nigeria and Mozambique, as well as exchange rate losses.

Attributable profit in this division fell from R115,8m last year to an attributable loss of R76,2m a swing of R192m, which Pretorius said was equivalent to 100c a share.

He said that the Siemens Telecommunications' "problem child" had encountered one-off problems, and was now restored to profitability.

It has won an important Vodacom contract in Mozambique and is hoping for a similar contract in Nigeria.

The strengthening rand also had a negative impact on Reunert's Panasonic SA subsidiary, where hedging policies have been scrapped.

"In the current environment, this sort of hedging is totally inappropriate, as the rand is strengthening and not weakening," said Pretorius. "We have got rid of that policy."

He said the impact of the strengthening currency had meant that imported consumer electronics goods had been sold at a loss.

"We bought goods at R12, and had to sell at R8,50. It was a very painful exercise," said Pretorius.

"Today we have resolved our overstocking problem, and we are short of stock, so if you buy today, we may deliver in February."

Pretorius said that Reunert had a healthy cash position, and would continue to seek appropriate acquisitions.

He expected the prospects for 2004 to be much brighter "and we are very confident shareholders will not be disappointed in 2004".

SA Stockbrokers analyst Ronnie Klipin said: "These results were pretty much as expected, and they are indicating the worst is over."

Reunert closed 50c higher at R18,90 yesterday.
Nov 28 2003 07:08:52:000AM John Fraser Business Day 1st Edition´╗┐