Reunert Limited · JSE:RLO
Reunert — Investor Day (April 2017)
50 slides from Reunert's investor day presentation, Apr 11, 2017
Slide 1: Applied Electronics - Reunert Investors' Day
APPLIED ELECTRONICS Reunert Investors’ Day 11 April 2017 1
Slide 2: Agenda
AGENDA 10h00-10h10 Welcome and update on Reunert strategy Alan Dickson 10h10-10h20 Applied Electronics 10h20-10h40 Secure Communications Cluster 10h40-11h00 Reutech Communications Martin de Beer 11h00-11h20 Omnigo Rieel Schonfeldt 11h20-11h40 Nanoteq Gerrie Venter 11h40-12h00 Questions and answers 1
Slide 3: Reunert Overview
01 REUNERT OVERVIEW Alan Dickson, Group CEO 3
Slide 4: Reunert Overview: Key Facts
REUNERT OVERVIEW Key Facts Market Revenue Operating • Established in 1888. cap R8,5bn profit R13bn* R1,3bn • Listed on the JSE on 1 January 1948. • Included in the electronic and electrical equipment sector. 7 Testing laboratories • Corporate headquarters in Woodmead, 9 Innovation centres Sandton, S
Slide 5: % Revenue contribution 2016
ELECTRICAL APPLIED ENGINEERING ELECTRONICS ICT CBI-electric: Reutech Reutech Solutions Nashua African Cables Communications CBI-electric: Reutech Radar New New Omnigo ECN Zamefa Systems CBI-electric: Telecom Cables New Nanoteq Fuchs Electronics Quince Capital CBI-electric: SECURE Nashua Low Voltage
Slide 6: Strategy Execution
STRATEGY EXECUTION Concentration risk OPTIMISATION OPTIMISATION 84% of revenue* Growing competition Late life-cycle Slow top-line products growth Margin pressures * Based on FY-2014 reported revenue
Slide 7: Reunert Financial Performance
REUNERT FINANCIAL PERFORMANCE Reunert revenue (Rm) Operating profit (Rm) 8 300 8 511 1 315 7 774 1 167 7 247 1 102 1 017 2013 2014 2015 2016 2013 2014 2015 2016 100% 100% 31% 32% 36% 45% 45% 46% EE 38% 42% ICT AE 60% 59% 53% 41% 43% 37% Other 49% 47% 12% 17% 23% 9% 9% 15% 14% 15% 2013 2014 2015 2016
Slide 8: Applied Electronics
REUNERT REUNERT LIMITED APPLIED ELECTRONICS
Slide 9: Applied Electronics' Strategic Priorities
APPLIED ELECTRONICS’ STRATEGIC PRIORITIES ① Geographic diversification ─ Increase the group’s focus on export markets and securing long-term contracts. ─ Build and strengthen partnerships with OEMs and other defence companies to gain access to new markets. ② Earnings diversification ─ Continue devel
Slide 10: Progress Against the Strategic Priorities: Acquisitions and Transformation
PROGRESS AGAINST THE STRATEGIC PRIORITIES ① Acquisition activity ─ Omnigo: December 2015 ─ Nanoteq: October 2016 ─ Terra Firma Solutions (51%): March 2017 ─ Ryonic Robotics (75%): March 2017 ② Transformation ─ Phase 1 of Reutech (Pty) Ltd BEE equity ownership transaction concluded in 2016. ─ SA Defe
Slide 11: Progress Against the Strategic Priorities: Earnings Diversification
PROGRESS AGAINST THE STRATEGIC PRIORITIES ③ Earnings diversification Revenue (Rm) split (%) 1 020 1 000 1 081 1 505 • Increased sustainability of the segment and establishing a 100% higher base 49% 50% 62% 59% ─ Doubled the production capacity for production of new generation tactical radios. 51% 50
Slide 12: AE Research and Development
AE │RESEARCH AND DEVELOPMENT R&D as % of revenue 9 8 Total R&D spend 127 in Rm 7 +22% 6 46% 5 86 70 74 20% 4 59 21% 36% 3 49 24% 42% 2 80% 54% 79% 64% 1 76% 58% 0 2011 2012 2013 2014 2015 2016 Self-funded Externally funded 12
Slide 13: Applied Electronics Financial Performance
APPLIED ELECTRONICS │FINANCIAL PERFORMANCE Revenue (Rm) 1 600 1 505 1 400 1 200 1 020 1 081 1 000 Sustainability improved and less 1 000 800 600 lumpy earnings over the longer term 400 200 • Geographic diversification. 0 • Product diversification 2013 2014 2015 2016 ─ Earlier life cycle products and
Slide 14: Outlook and Trends
REUNERT REUNERT LIMITED OUTLOOK AND TRENDS
Slide 15: Mining Sector Trends
MINING SECTOR TRENDS South African Mining Industry Capital Expenditure (Rbn) 80 105 • Miners are adapting to an environment where reduced 70 100 demand will lead to lower commodity prices for the 60 95 90 foreseeable future. 50 85 • Increasing percentage of reduced capex budget 40 80 75 allocated to
Slide 16: Changing Defence Markets
CHANGING DEFENCE MARKETS • The defence market is becoming increasingly global. • Defence spending is shifting from USA and European dominance to new regions. • Asia-Pacific and Middle East-North Africa regions are expected to become the largest, most attractive and enduring markets growing at an ann
Slide 17: Arms Importer Markets
ARMS IMPORTER MARKETS • Major arms export markets located in the so-called “Golden Crescent” from Middle East to South East Asia. • Reutech companies are already active in many of the large arms-importer territories. • Opportunities exist to expand regionally to adjacent countries. 17
Slide 18: Secure Communications Cluster
SECURE COMMUNICATIONS CLUSTER 18
Slide 19: Creating a Secure Communications Cluster
CREATING A SECURE COMMUNICATIONS CLUSTER • The Omnigo and Nanoteq acquisitions have created a vertically integrated provider of next generation tactical communication products. • The cluster is well positioned to supply into existing long-term contracts and complementary offshore geographies. • Thes
Slide 20: The Strategic Rationale
THE STRATEGIC RATIONALE ① Geographic diversification ─ Omnigo: long-term, hard currency contracts. ─ Nanoteq: world class encryption technology in demand by non-aligned states. ─ All the companies operate in complementary geographies which open new sales opportunities and offer sales synergies. ② Co
Slide 21: Reutech Communications
02 REUTECH COMMUNICATIONS Martin de Beer 21
Slide 22: Company Overview
COMPANY OVERVIEW • A South African OEM company, established 1968 to support the need for military radio communications within the SANDF. • Secure tactical communications is a strategic capability. ─ World class technology is sustained through continued investment in technology and product enhancemen
Slide 23: Market Penetration
MARKET PENETRATION Regions Southern Africa North Africa West/Central Africa Northern Asia South-Central Asia South East Asia Middle East South America
Slide 24: Product Timeline - 50 Years
PRODUCT TIMELINE – 50 YEARS 1960 / 70s 1980 / 90s 2000 to date 1985 to date 1st Gen 2nd Gen 3rd Gen Airborne • Licensed • Local development, • Technology • ToT of MRV3,4 for Manufacture & ToT production and support of establishment SAAF of Radios ground /airborne comms • Product • Dev ACR430 for • A
Slide 25: CNR Product Offering
CNR PRODUCT OFFERING REUNERT REUNERT LIMITED REUTECH COMMUNICATIONS - THE COMPLETE TACTICAL COMMUNICATIONS SOLUTION |_| 4 J T_T T co i + & Ae vero MANPACK weRaes <= = -— ae VEHICULAR pase STATIN |
Slide 26: New Generation CNR Features
NEW GENERATION CNR FEATURES Common HMI ─ Ease of operation ─ Ease of training Common Interfaces ─ H/W & S/W ─ Ease of system integration Common Battery pack ─ HF/VHF/UHF Manpacks ─ Built-in charger ─ Ease of support Common Maintenance Philosophy ─ Ease of support Software Defined Radios ─ Ease of up
Slide 27: BBBEE Scores: 2012 - 2016
BBBEE SCORES : 2012 – 2016 Our progress in transforming the business in South Africa is measured against the BBBEE codes of Good Practice 2012 Level 4 2013 Level 3 2014 Level 3 2015 Level 2 2016 Level 1 • Going beyond compliance • Committed leadership • Partnership with all key stakeholders
Slide 28: Transformation - Radiate
EMPLOYMENT EQUITY TRANSFORMATION – RADIATE Workforce Diversity • 145 Direct production staff Black • 6 disabled learners 1% White • 24 unemployed leaners, all have been absorbed 36% Foreign 63% Trained Semi-skilled Operators 8% Technicians trained Operators, 14% Testers and Workforce split Technicia
Slide 29: Subcontracting to SMMEs
SUBCONTRACTING TO SMMES SPLIT OF 36% SUBCONTRACTING BLACK OWNED OTHER SUBCONTRACTORS SUBCONTRACTORS 11% 13% SUPPLIER DEVELOPMENT TO CREATE B/F OWNED REUTECH OWNED SUBCONTRACTOR SUBCONTRACTORS 5% 7%
Slide 30: Transformation - ED
ENTERPRISE DEVELOPMENT TRANSFORMATION – ED • ED agreement with start up Black owned company Commercial Editt. • Provide portable network & training solution to assist teachers and learners in rural schools. • Reutech Communications engineers assisted in the design development of charging trolley for
Slide 31: Transformation - SED
SOCIAL ECONOMIC DEVELOPMENT TRANSFORMATION – SED • Initiative between Philangethemba Trust and RC in the Molweni valley (~ 6km from Reutech). • It is situated at the Tholulwazi High School and has been in operation since 2013. • Dramatic improvement in Matric results. • Assist learners on maths and
Slide 32: Omnigo
04 OMNIGO Rieel Schonfeldt 32
Slide 33: Background
BACKGROUND • We started out as a micro enterprise (Factum Electronics) in the 1980’s. Omnigo was founded in 1999 as a joint venture between Grintek and Factum. • Omnigo is now a wholly owned Reutech company. • Omnigo currently employs 200+ people. • Based in Pretoria in a 4 500m2 facility. • Our foc
Slide 34: Products and Services
PRODUCTS AND SERVICES • Omnigo provides a complete Turnkey Electronic Manufacturing service to Customer’s design, which entails: ─ Procurement of components, the manufacture / population, test, stress screening of PCA’s and sub-assemblies. • Other services include product industrialisation and envir
Slide 35: Product Application
PRODUCT APPLICATION • We allow Customers to focus on their core business • Our assemblies form a core part of the electronics of a variety of different products.
Slide 36: Our Technology
OUR TECHNOLOGY • Surface-Mount Technology (SMT) lines. • Selective Solder and Wave Solder lines. • AOI and X-ray Inspection. • Refined production process with over 30 years of experience.
Slide 37: Capabilities
CAPABILITIES • Placements as small as 1 005 packages. • Total capacity of 236 000 components per hour. • Average of 50 000 PCB assemblies per month. • Value added capabilities ─ Test Facility. ─ Industrialisation. ─ Coil Winding. ─ Reworks.
Slide 38: Markets and Capacity
MARKETS AND CAPACITY • Business operates within the Low Volume-High Mix environment ideally suited for Aerospace and Defence sector. • Turnover 50% direct export, with 30% of local sales indirectly destined for export. • EMS industry resolves around a trust relationship with customers. • New markets
Slide 39: Markets and Capacity
MARKETS AND CAPACITY • Growth opportunities exists in non-traditional developed world regions and the developed world through SA counterparts. • Untapped potential in SA (new customers & expanded service offering). • Significant investment in capacity and throughput speed has been made to ensure bus
Slide 40: Accreditations
ACCREDITATIONS • IPC Manufacturing standards USA • Armscor • ISO 9001: 2008 Dekra • BBBEE Level 2 Compliant
Slide 41: Nanoteq
5 NANOTEQ Gerrie Venter i % REUNERT REUNERT LIMITED Nanoteq
Slide 42: Welcome to the World of Strategic Crypto Products and Technologies
Welcome to the World of Strategic Crypto Products and Technologies
Slide 43: Nanoteq Then...
NANOTEQ THEN... • Established in 1988. • Private company focused on cryptographic product development. • Initial major technology projects: ─ World-first remote control code hopping solution (Keeloq). ─ Secure pay-television solution designed (MNET).
Slide 44: Nanoteq Today...
NANOTEQ TODAY… • Part of the JSE listed Reunert group. • 100% South African company. • 28 years in Strategic Information Security. • Focused on development of cryptographic products and solutions. • Strategic partner to the SANDF. • Has a product range that; ─ Offers true high-grade cryptographic so
Slide 45: What Do We Do?
WHAT DO WE DO? “Provide products that ensure secrets remain secret!” Stored data Information in transit HDD Voice Laptop Fax GSM File server Wi Fi Tablet Radio E-mail Satellite Prevent rather than investigate
Slide 46: Product Suites
PRODUCT SUITES Desktop • State of the art Cryptographic module suite. Voice (GSM, VoIP) • Common architecture for Central On-line management. Voice/Fax (PSTN) • Cryptographic autonomy compliant. Network (Layer 3) • FIPS 140-2 Level C compliant. Links (Layer 2) Tactical Level
Slide 47: Support Offering
SUPPORT OFFERING • Cryptographic component Management System (MS) The MS is used for the management of the various cryptographic products. • Custom development Through propagation of our cryptographic autonomy principal, Nanoteq is geared to engage in custom development projects our willingness to b
Slide 48: In Conclusion: Why Nanoteq?
IN CONCLUSION: WHY NANOTEQ? • Achievable Crypto autonomy offering ─ Solution driven based on Crypto autonomy friendly products • Trust ─ RSA politically neutral in target markets • Agile ─ Quick response to market changes • Track record ─ Long-term relationship establishment • Workforce ─ Battle pro
Slide 49: Questions
6 04 03 05 02 06 01 07 QUESTIONS 49
Slide 50: Factory Tour
REUNERT REUNERT LIMITED FACTORY TOUR