Operating profit at Reutech, the defence division of the JSE-listed Reunert group, has fallen 73% year-on-year mainly as a result of a large follow-on order not materialising. Reunert this morning admitted to an operating profit for Reutech of just R61 million from R223 million the year before.
Revenue at the business was also down 13% from R904 million to R791 million. Reunert chief executive Nick Wentzel was, however, upbeat. “The prospects for receiving this order are good and we hope that we will be successful in 2011,” he said.
Overall group revenue increased by 4% from R10.3 billion to R10.7 billion, Wentzel said. Operating profit increased by 7% to R1.2 billion and normalised headline earnings per share improved by 3% to 515.7 cents. “EBITDA margins improved from the 12% achieved in 2009 to 12.5%,” Reunert said in a statement. A final dividend of 220 cents was declared, 17% up on last year’s 188 cents per share. This brings the total dividend to 287 cents per share for the year (2009: 253 cents).
Reunert’s balance sheet has remained strong and the cash flow generated by the group’s operations increased net cash resources by R498 million. Cash and cash equivalents at the end of the year amounted to R1.8 billion. “This year was always going to be challenging, following one of the worst financial crises the global economy has experienced since the world war,” said Wentzel. “Strict cost control and operating efficiency gains followed through from actions taken in 2009.”
Lower interest rates have resulted in an IFRS, non-cash, mark-to-market charge of R40 million for the year on the interest rate swops. The strong rand cost the group more than R50 million in lower revenue and margins, Wentzel noted.
“The economy is in a delicate state with lower interest rates encouraging growth. However, the strength of the rand is of serious concern with increased imports and reduced export opportunities hampering growth. Subject to the prevailing economic conditions remaining unchanged, the group predicts an increase in earnings for the year ahead,” commented Wentzel on Reunert’s prospects.