Slide 1: Presentation to Investors
PRESENTATION TO INVESTORS For the six months ended 31 March 2016
Slide 2: Agenda
AGENDA • GROUP OVERVIEW AND STRATEGY UPDATE • Alan Dickson, CEO • FINANCIAL OVERVIEW • Nick Thomson, CFO • SEGMENTAL OVERVIEW • ICT – Mark Taylor • Applied Electronics – Peter van der Bijl • Electrical Engineering – Alan Dickson • PROSPECTS • Alan Dickson 2
Slide 3: Overview
OVERVIEW • Reunert has delivered a good half-year operational performance in challenging local economic and political conditions. • The performance is characterised by • The business segments with high South African exposure are experiencing growth commensurate with that of the local economy. • An e
Slide 4: Overview Continued
OVERVIEW │CONTINUED • Good progress has been made on strategy execution • Operational efficiencies across the group have been realised. • Bolt-on, complimentary acquisitions have been concluded. • B-BBEE transactions in the key subsidiaries, in line with the new B-BBEE Codes, are nearing completion.
Slide 5: Group Strategy: Diversification, Innovation, Efficiency, Transformation
Customers People GROUP Diversification STRATEGY Innovation Efficiency Alan Dickson Transformation
Slide 6: Strategy Review: Diversification
STRATEGY REVIEW │ DIVERSIFICATION • Acquisition activity has resulted in the completion and successful integration of complementary bolt-on acquisitions • Deals in Electrical Engineering and Applied Electronics segments have been concluded. • The acquisitions have resulted in • Leveraging of existin
Slide 7: Strategy Review: Efficiencies and Transformation
STRATEGY REVIEW │ EFFICIENCIES AND TRANSFORMATION • Efficiencies • Continued focus on operational efficiencies and waste. • Total cost increases held below inflation. • Transformation • Ownership › Electrical engineering transaction concluded in May » Notional IFRS2 B-BBEE charge of R92 million in 2
Slide 8: Financial Overview
FINANCIAL OVERVIEW Nick Thomson
Slide 9: Financial Results: Revenue
FINANCIAL RESULTS │REVENUE MOVEMENT IN GROUP REVENUE (Rm) ELECTRICAL ENGINEERING 4 ↓ Product mix favoured aluminium cable. ↓ Local circuit breaker market under pressure. 272 (180) ↑ Circuit breaker export gains. 4 022 ↑ Increased optical fibre cable demand. 3 935 (9) ICT → OA flat with market pressu
Slide 10: Financial Results: Operating Profit
FINANCIAL RESULTS │OPERATING PROFIT MOVEMENT IN OPERATING PROFIT (Rm) • Operating profit margin improved from 12,8% to 14,0%. (43) Margin • M&A and B-BBEE transaction costs impacted 87 14% operating margin by 0,8%. 6 Margin 11 ELECTRICAL ENGINEERING 13% 564 → Volumes consistent with prior year, but
Slide 11: Financial Results: Group Income Statement
FINANCIAL RESULTS │GROUP INCOME STATEMENT % • Revenue from continuing 1H16 1H15 change operations increased by 2%. Revenue Rm 4 022 3 935 2 • 12% operating profit EBITDA Rm 622 559 11 improvement due to Depreciation & amortisation Rm (58) (56) 4 Operating profit Rm 564 503 12 • moderate growth Net i
Slide 12: Financial Results: Cash Flow
FINANCIAL RESULTS │CASH FLOW MOVEMENT IN CASH FLOW (Rm) (502) 177 (235) 70 2 636 (231) 2 311 650 (20) 234 (54) (16) 13 177 Opening Dividends Total cash Closing Cash Working Net interest Tax paid Capex Free cash Capex Investing Financing Total cash balance paid generated balance generated capital rep
Slide 13: Financial Results: Efficiency
FINANCIAL RESULTS │EFFICIENCY INDICATORS AND WORKING CAPITAL 1H16 1H15 WORKING CAPITAL MOVEMENT (Rm) 1H16 1H15 Inventory turnover Times 4,5 5,8 Inventory and contracts in progress (257) 95 Trade receivables Days 65 50 Accounts receivable and derivative assets (13) (23) Trade payables Days 125 115 Tr
Slide 14: Financial Results: Balance Sheet Summarised
FINANCIAL RESULTS │BALANCE SHEET SUMMARISED 1H16 1H15 FY15 PPE and intangible assets 766 710 745 Goodwill 671 648 653 Non-current investments and loans 247 248 253 Net assets of discontinued operation - (178) 2 Rental and finance lease receivables 2 239 2 273 2 191 Net working capital 919 674 691 Lo
Slide 15: ICT Overview
ICT OVERVIEW Mark Taylor
Slide 16: ICT: Salient Features
ICT │SALIENT FEATURES • Overall market conditions are tough with % (Rm) 1H16 1H15 change many long-term contract decisions deferred by customers. Revenue 1 689 1 698 1% • The rapid devaluation of the ZAR in Operating profit 250 244 2% December 2015 placed pressure on new Profit margin 15% 14% sales
Slide 17: ICT: Overview
ICT │OVERVIEW • Office automation TDV vs MFP and printer MIF 500 90 Thousands Millions • MFP unit sales reflected overall pressure on the market. • Deteriorating ZAR impacted on costs for hardware, parts 400 and consumables and price increases were unavoidable. 60 • Some pressure on total document v
Slide 18: ICT: Overview
ICT │OVERVIEW • Voice business ECN number of minutes per call type 100 Millions • Voice minutes usage continued growing by 80 14% to 550 million minutes • The further reduction in interconnect rates in 60 October 2015 resulted in flat revenue growth, 40 but strong operating profit growth. 20 • Virtu
Slide 19: Applied Electronics Overview
APPLIED ELECTRONICS OVERVIEW Peter van der Bijl
Slide 20: Applied Electronics: Salient Features
APPLIED ELECTRONICS │ SALIENT FEATURES • Excellent performance underpinned by % (Rm) 1H16 1H15 change successful delivery of large scale export fuze order boosted by a weak ZAR. Revenue 696 424 64% Operating profit 122 35 248% • Good progress has been made with the upgrade of production lines for th
Slide 21: Applied Electronics: Overview
APPLIED ELECTRONICS │OVERVIEW MARKET SECTOR • Ongoing pressure in mining surveillance radar market due to slump in commodity prices 15% • Increased competition resulted in further pricing pressure 19% and less market share. 1H16 • Traditional project businesses were in line with 66% expectations • E
Slide 22: Applied Electronics: Overview
APPLIED ELECTRONICS │OVERVIEW REVENUE DISTRIBUTION • Expansion of direct product sales into the African, Middle East and Asian markets • Security radars supplied in DRC and in Kruger National Park. 49% • Rogue, radar, radio and fuze systems to Middle East position are 1H16 improving. 51% • Long-term
Slide 23: Electrical Engineering Overview
ELECTRICAL ENGINEERING OVERVIEW Alan Dickson
Slide 24: Electrical Engineering: Salient Features
ELECTRICAL ENGINEERING │ SALIENT FEATURES • Market conditions remain challenging with lower (Rm, includes portion of JV) 1H16 1H15 % change GDFI rates experienced. Revenue 1 824 1 965 7% • Revenue reduction due to Operating profit 272 257 6% • Product mix at power cables business. • Restructure at L
Slide 25: Electrical Engineering: Overview
ELECTRICAL ENGINEERING │ OVERVIEW The segment has enjoyed a solid performance. % FACTORY CAPACITY UTILISATION 100 • Maintained volumes despite tough local challenges by • Growing market share in our key markets. 80 • Fibre-to-the-Home roll-out. 60 • Good export growth with recently released product
Slide 26: Prospects
PROSPECTS Alan Dickson @
Slide 27: Prospects
PROSPECTS • The overwhelming consensus is that the South African economy is not expected to show any material improvement in the near future. • Reunert expects to deliver a positive financial performance for full year from continuing operations • Improved order intake in key businesses. • Augmented
Slide 28: Questions & Answers
QUESTIONS & ANSWERS www.reunert.co.za