Slide 1: Presentation to Investors for the Year Ended 30 September 2015
PRESENTATION TO INVESTORS FOR THE YEAR ENDED 30 SEPTEMBER 2015
Slide 2: Agenda
AGENDA • GROUP OVERVIEW – Alan Dickson, CEO • FINANCIAL OVERVIEW – Nick Thomson, CFO • SEGMENTAL DISCUSSIONS • ICT – Mark Taylor • Applied electronics – Peter van der Bijl • Electrical engineering – Alan Dickson • GROUP STRATEGY AND PROSPECTS – Alan Dickson 2
Slide 3: Group Overview
S GROUP OVERVIEW &) Alan Dickson
Slide 4: Overview
OVERVIEW • Positive operational performance, despite a tough macro-economic environment • The expected economic growth rates have slowed materially • No indication of a significant improvement in the medium term • Reunert has delivered on its 2014 commitments • No material once-off costs • All loss-
Slide 5: Overview continued
OVERVIEW CONTINUED • Revenue up 7% from R7,8 billion to R8,3 billion • Operating profit up 15% from R1 017 million to R1 167 million • Strong free cash flow of R1 146 million, excluding the Nashua Mobile sale proceeds • NHEPS (continuing operations) up 29% to 568 cents per share • Final dividend of
Slide 6: Share Price Performance
SHARE PRICE PERFORMANCE 20% 10% 0% (10%) (20%) (30%) Sep 2014 Sep 2015 REUNERT LTD ELECTRONIC AND ELECTRICAL EQUIPMENT INDEX - J273 6
Slide 7: Financial Overview
FINANCIAL OVERVIEW Nick Thomson
Slide 8: Nashua Mobile Subscriber Base Sale
NASHUA MOBILE SUBSCRIBER BASE SALE • R1,4 billion profit on disposal accounted for in 2014 • All base sale proceeds have been received (R1,8 billion net of tax) • R42 million profit from discontinued operations in 2015 • EPS effect: 26 cents (2014: 966 cents) • Back office support will continue unti
Slide 9: Financial Results: Group Income Statement
FINANCIAL RESULTS GROUP INCOME STATEMENT – ALL OPERATIONS 2015 2014 % change Revenue Rm 8 300 7 774 7 ▲ EBITDA Rm 1 284 1 125 14 ▲ Depreciation & amortisation Rm (117) (108) Operating profit Rm 1 167 1 017 15 ▲ Net interest income/(expense) Rm 135 (10) Profit before abnormal items and tax Rm 1 302 1
Slide 10: Financial Results: Salient Features
FINANCIAL RESULTS SALIENT FEATURES – CONTINUING OPERATIONS 2015 2014 % change Revenue Rm 8 300 7 774 7 ▲ EBITDA Rm 1 284 1 125 14 ▲ Operating profit Rm 1 167 1 017 15 ▲ Earnings per share Cents 579 235 146 ▲ HEPS Cents 576 391 47 ▲ NHEPS Cents 568 439 29 ▲ EBITDA % 15,5 14,5 7 ▲ Operating profit mar
Slide 11: Financial Results: Revenue
FINANCIAL RESULTS REVENUE MOVEMENT IN GROUP REVENUE (Rm) • The cable businesses increased market share, renewed long-term contracts with good draw downs in 81 6 the current year and returned to 447 normal sales levels to the mining 8 industry after 2014 strikes • Product sales in the circuit breaker
Slide 12: Financial Results: Revenue Contribution and Region
FINANCIAL RESULTS REVENUE % REVENUE CONTRIBUTION* % REVENUE BY REGION 12% 4% 40% 4% 2015 83% 2015 1% South Africa 7% 48% 1% Africa Electrical engineering Asia ICT Australia Applied electronics Europe Other 12% 3% North America 43% 2% 1% South America 2014 84% 2014 8% 1% 45% <1% *Continuing operation
Slide 13: Financial Results: Operating Profit
FINANCIAL RESULTS OPERATING PROFIT MOVEMENT IN OPERATING PROFIT (Rm) • Improved volumes resulting in Margin improved fixed cost recoveries at 11 14,1% 80 African Cables augmented by cost 6 control 65 Margin 13,1% • Nashua optimised supply chain and realised savings in distribution and 1 017 1 167 ge
Slide 14: Financial Results: Cash Flow and Working Capital
FINANCIAL RESULTS CASH FLOW AND WORKING CAPITAL MOVEMENT IN CASH FLOW (Rm) 1 789 19 133 62 415 42 104 1 408 1 146 629 2 221 Cash Working Net Tax Capex Free Capex Dividends Nashua Other Increase generated capital interest paid replacement cash flow expansion paid Mobile in cash from resources operati
Slide 15: Financial Results: Balance Sheet Summarised
FINANCIAL RESULTS BALANCE SHEET SUMMARISED FY15 FY14 PP&E and intangible assets 745 722 Goodwill 653 649 Non current investments and loans 253 241 Net assets of discontinued operation (excl cash) 2 1 653 Rental and finance lease receivables 2 191 2 187 Net working capital 691 969 Long and short-term
Slide 16: Financial Results: Efficiency Indicators
FINANCIAL RESULTS EFFICIENCY INDICATORS – CONTINUING OPERATIONS FY15 FY14 Inventory turnover Times 5,5 5,5 ► Trade receivables Days 53 43 ▼ Trade payables Days 57 60 ▼ Net worth (NAV) per share R 40,5 38,2 ▲ Gross profit margin (%) % 34,7 33,8 ▲ Net profit margin % 11,6 9,2 * ▲ Bad debt as % revenue
Slide 17: ICT
(=) ICT Mark Taylor REUNERT REUNERT LIMITED
Slide 18: ICT Salient Features
ICT SALIENT FEATURES TDV vs MFP and printer MIF ECN number of minutes per call type 500 90 100 Millions Millions Thousands 400 80 60 300 60 200 40 30 100 20 0 0 0 11 12 13 14 15 11 12 13 14 15 Total Clicks Multi-functional printers Printers Inbound Outbound CONTINUING OPERATIONS (Rm) 2015 2014 % cha
Slide 19: ICT Overview
ICT OVERVIEW • Good progress was made on stabilising OA business • Initial focus was on repositioning the office automation business • Strengthened leadership with the deployment of key team from Nashua Mobile • Excellent performance from voice businesses • ECN’s voice business was launched through
Slide 20: ICT Overview: Office Automation and Voice
ICT OVERVIEW • Office automation • Financial performance largely flat • Overall MFP volume sales improved by 35%, total market share improved from 15% to 16% • Focus on improving the Basic Print Services (BPS) value offering • 23% revenue growth in SADC countries, albeit off a low base • Prodoc impr
Slide 21: ICT Overview: Enterprise Telecoms and Asset Finance
ICT OVERVIEW • Enterprise telecommunications • Now managed separately from ECN business • Nashua Communications’ focused efforts on Unify business contributed a R22 million improvement in operating profit • Asset finance business • Quince Capital delivered another solid performance growing book by 8
Slide 22: ICT 2016 Focus Areas
ICT 2016 FOCUS AREAS • Add complementary technologies in ICT to evolve the business to a holistic document management and managed office provider • Offer more services through same channels while integrating back-end operations • Office Automation and MPS/MDS opportunities being developed in new Afr
Slide 23: Applied Electronics
APPLIED ELECTRONICS Peter van der Bijl
Slide 24: Applied Electronics Salient Features
APPLIED ELECTRONICS SALIENT FEATURES MARKET SECTOR REVENUE DISTRIBUTION 24% 30% 20% 50% 51% 27% 2015 2014 2015 2014 50% 49% 56% 43% Commercial Defence SOEs Exports Local Rm 2015 2014 % change Revenue 1 081 1 000 8% ▲ Operating profit 181 170 6% ▲ Profit margin 17% 17% 24
Slide 25: Applied Electronics Research and Development
APPLIED ELECTRONICS RESEARCH AND DEVELOPMENT R&D AS A % OF REVENUE R&D FUNDING (Rm) 9% 80 60 6% 40 3% 20 0% 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Funded Self-funded • Total R&D spend R86 million (2014: R74 million) 25
Slide 26: Applied Electronics Overview
APPLIED ELECTRONICS OVERVIEW • An improved performance in H2 on back of orders received and weaker rand • Performance from communications and radar business units slowed down • Did not secure sufficient new projects to compensate for non-recurring projects in FY2014 • Mining surveillance radar flat
Slide 27: Applied Electronics Overview: Markets and Innovation
APPLIED ELECTRONICS OVERVIEW • Expanding of direct product sales into the African, Middle East and Asian markets • Security radars in SADC and Central Africa • Rogue, radar and fuze systems to Middle East • Radios and radars to Asia • Innovation • Client-funded R&D will yield a new generation techno
Slide 28: Applied Electronics 2016 Focus Areas
APPLIED ELECTRONICS 2016 FOCUS AREAS • Build and strengthen partnerships with OEMs and other distributors to gain access to new export markets and long-term contracts • Continue to develop commercial applications using in-house technologies, thereby broadening our customer base • Continue to drive i
Slide 29: Electrical Engineering
ELECTRICAL ENGINEERING Alan Dickson
Slide 30: Electrical Engineering Salient Features
ELECTRICAL ENGINEERING SALIENT FEATURES % FACTORY CAPACITY UTILISATION COPPER PRICE 100 90 R000 per tonne 80 80 60 40 70 20 0 60 Sep Mar Sep Mar Sep 12 13 14 15 13 14 15 Low voltage Energy cables Total price FY13 average Copper telecom cables Fibre telecom cables FY14 average FY15 average (Rm, inclu
Slide 31: Electrical Engineering Overview
ELECTRICAL ENGINEERING OVERVIEW • Diversification • Two new circuit breaker product range developments were completed › Commercial product range launched in Australia › Rail rolling product range launched worldwide • Improved energy cable market leadership with the completion of high and extra-high
Slide 32: Electrical Engineering 2016 Focus Areas
ELECTRICAL ENGINEERING 2016 FOCUS AREAS • Local market conditions are expected to soften resulting in continued focus on margin controls and efficiencies • Geographic expansions • Cables into Africa • New circuit breaker ranges • Market alignment with expectations of key long-term customers • Invest
Slide 33: Group Strategy
ja) GROUP STRATEGY Alan Dickson REUNERT
Slide 34: Strategic Review: Material Matters
STRATEGIC REVIEW MATERIAL MATTERS • Concentration risk • Mainly South African based revenue streams • Mature business life-cycle products • Slow growth rates • Reunert’s core competitive advantages • Well-known and respected brands • Diverse and loyal customer base • Number one or two in the majorit
Slide 35: Strategic Pillars
STRATEGIC PILLARS Implementation of the Reunert group strategy will provide • Opportunities for further growth • A more balanced group with additional products and services • Diversified geographical revenues Strategic review completed and received board approval at end April 2015 35
Slide 36: Strategic Execution Progress
STRATEGIC EXECUTION PROGRESS • Acquisitions are a key element of Reunert’s growth strategy • A board approved acquisition methodology is followed • Targets are aligned to the current three segments of Reunert • The internal M&A capability has been strengthened • Small acquisition in applied electron
Slide 37: Prospects
PROSPECTS Alan Dickson
Slide 38: Prospects
PROSPECTS • Reunert’s future growth prospects are • Likely to have a correlation to the South African macro-economic trends • Augmented by recently secured long-term contracts in the applied electronics segment • Execution of Reunert strategy • Continued focus on acquisitions that deliver enhanced s