Reutech profits up

Reutech, the defence arm of the JSE-listed electronics and services group Reunert, has increased operating profit to R69 million.
Reunert, in its interim results for the six months to the end of March, added it was “pleased to report an increase in revenue of 21% to R373 million…” This was due, in the main, to the contribution from Fuchs as execution of a long anticipated export order commenced, the company says. “Production against these orders is continuing at a high rate and these production levels are set to continue until mid FY2013. The order book coverage for 2013 is already approximately 60%, with further orders expected before the end of the financial year.” However, the group warns defence “is a cyclical business” even though “the order pipeline indicates that we have entered a period of revenue stability.”
Reutech subsidiary Reutech Solutions “has repositioned its business and reflected an operating profit increase of 70%.” The business, which also operates in the mining sector, completed development of the remote mine-scraper control winch and the first ten units were sold to a launch customer. “This is a safety enhancement for the mines, which allows the machine operator to control the machinery from a safe distance in the event of cable breakage underground.”
Reutech Radar Systems enjoyed a successful six months, “principally due to the continued success of the mining surveillance radar internationally. The business delivered its first system in China.  In addition, the delivery of two modified systems for the Arctic Circle has been completed with the system operating reliably in -50°C conditions.”
Reunert also reported that Reutech Communications has reached an in-principle agreement with SAAB Grintek, subject to regulatory approvals, to acquire its high frequency radio business “which completes the range of our product offering to include very high frequency (VHF) and ultra-high frequency (UHF) radios. This acquisition will enhance the business’s product portfolio.”
At group level, Reunert reported a 14% increase in normalised headline earnings per share to 298 cents from 261 cents in March 2011. Revenue increased by 10% to 5.7 billion. Operating profit grew by 18% to R736 million. “The margin improvement was achieved through productivity and process improvements.”
The interim dividend was  increased to 95 cents per share (2011: 77 cents) which is a 23% increase over the comparable period. With the change in tax legislation with respect to dividends from Secondary Tax on Companies (STC) to a withholding tax, Reunert has increased its dividend to take account of this change.
Looking at prospect, Reunert said: “The continued volatility in the global market provides an unpredictable backdrop for the South African economy. Reunert is experiencing reasonable demand for most of its products and services in the electrical segment, which we anticipate will continue. … We are anticipating continued growth in Reutech. 
“International economic events unfolding daily, amidst considerable uncertainty, are having a knock-on effect on emerging markets and we believe that the environment will be more challenging in the next six months. Subject to prevailing economic conditions not deteriorating, we believe the group will reflect earnings growth for the full year, but we anticipate that the rate of growth will be lower for the full year.”