Reutech reports R212 million profit

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Reutech, the defence division of diversified electronics and defence group Reunert, generated revenue of R874 million in the year to September 30 while operating profit increased by 55% to R212 million.

Reunert, announcing its financial results this morning, says revenue was up 40% year-on-year, buoyed by exports at favourable exchange rates.

Group CE Gerrit “Boel” Pretorius says Reutech had a very good year.

“Our radios, radars and fuses are now supplied to many countries around the globe. The mining surveillance radar, a safety product that we have developed, is being sold or leased to most multinational mining companies in increasing numbers,” Pretorius said in a media statement announcing the group’s results.

Pretorius says that despite a decline in revenue and operating profit, Reunert Limited improved its “already strong” financial position to R1.6 billion cash at year-end.

The group reported a drop of 6% in revenue to R10.3 billion, whilst operating profit declined by 28% to R1.1 billion.

Headline earnings was unchanged at R1.2 billion while normalised earnings declined by 21% to R892 million.

The non-cash, mark-to-market accounting gain of an option that Reunert holds to sell its 40% interest in the South African operation of Nokia Siemens Networks mainly accounted for the difference.

A final cash dividend of 188 cents per share was declared bringing the total dividend for the year to 253 cents per share, 21% down from the previous year.

Commenting on the group’s results, Pretorius said the operating results were varied.

Revenue and operating profit in the Nashua group, comprising Nashua, Nashua Mobile, Nashua Electronics and RC&C Finance declined 1% to R6.4 billion and 27% to R481 million respectively.

Nashua, the office automation business, increased market share in a tough market. The strengthening rand, necessitating price decreases, exerted pressure on revenue and margin.

Nashua Mobile, the cellular service provider business, continued to grow its base of high value customers, although churn increased from 12.8% to 13.6%. Bad debts as a percentage of revenue improved from 1.3% to 1.2%. During the year, three new outlets were opened essentially completing the roll-out to 155 franchised stores.

Nashua Electronics exited the consumer electronics business after more than 40 years. The associated cost was in excess of R60 million. The activities in business systems were retained as was the online shop. “We are confident that the restructured business, with estimated annual sales of R450 million, will be profitable and capable of strong growth,” said Pretorius.

RC&C Finance had a poor year. Bad debts escalated and resulted in significantly reduced earnings. Rates have been adjusted to reflect increased risk. Credit vetting has been tightened, resulting in a steady decline in the book. In the new year this business should be an improved contributor.

Prospects for the Nashua group are closely tied to the prosperity of the consumer. By eliminating non-performing activities, the group is well positioned to benefit from any uptick in the economy.

CBI-electric, the electrical engineering business, had a disappointing year. The low-voltage and energy-cable businesses, with their direct exposure to infrastructure development, experienced volume declines of up to 60%. The result was a slump in revenue to R3 billion and operating profit to R393 million.

“Local order books declined by as much as 64% and although it remains low appear to have stabilised,” said Pretorius. “Extensive restructuring was undertaken to size businesses appropriately and we continued our programme of capital expenditure to improve plant efficiencies.”

The telecommunications cable joint venture with Altron had a good year. Both revenue and operating profit were up mainly due to increased demand for copper telecommunications cable. Fibre demand was subdued.

The new venture into medium voltage has grown three-fold albeit off a low base with sales in excess of R36 million. “With short lead times and attractive pricing we are steadily gaining market share.”

“Looking forward, it is our view that the economy has stabilised, although we do not expect any meaningful recovery in the short term. Actions taken to adjust to the lower volumes of the past year should have a positive impact on earnings,” Pretorius commented on the group’s prospects.



Pic: The RSR 940 Spider covert air and sea surface surveillance radar, a new Reutech product, undergoing testing at Simon’s Town.