Reunert Limited · JSE:RLO
Reunert — Investor Day (June 2018)
58 slides from Reunert's investor day presentation, Jun 6, 2018
Slide 1: Reunert ICT Investors Day
REUNERT ICT INVESTORS DAY 6 June 2018
Slide 2: Agenda
AGENDA 01 Welcome and Overview [Alan Dickson] 10:00-10:30 02 ICT strategy execution [Mark Taylor] 10:30-11:00 03 Communications cluster [Andy Openshaw] 11:00-11:30 04 Walk-about [Andy Openshaw] 11:30-12:00 12:00-12:45: lunch break 05 Office Automation cluster [Mark Taylor] 12:45-13:30 06 Finance clu
Slide 3: Overview
= es > & LL > fe) c je) Q xX 2 (a) cS & <x
Slide 4: Reunert Overview
REUNERT OVERVIEW KEY FACTS ► Established in 1888 Market Revenue Operating Cap* profit ► 70 years listed on the JSE ► Included in the electronic and electrical equipment R14,8bn R9,8bn R1,5bn sector ► Corporate headquarters in Woodmead, Sandton, South Africa ► International operations in Australia, L
Slide 5: Group structure and acquisitions
ELECTRICAL APPLIED ICT ENGINEERING ELECTRONICS CBI-electric: OFFICE AUTOMATION COMMUNICATIONS SECURE COMMS African Cables Reutech Solutions Nashua ECN Reutech 2016 CBI-electric: Communications Zamefa Reutech Radar Systems CBI-electric: PanSolutions SkyWire 2018 2015 Omnigo Telecom Cables Fuchs Elect
Slide 6: Review: What we set out to do
REVIEW │ WHAT WE SET OUT TO DO Concentration risk 2014: 84% revenue generated in South Africa (R1,2 billion non-ZAR) Growing competition Slow Late life cycle products top-line growth Margin pressures Reunert ICT Investors Day June 2018 6
Slide 7: Diversification: Geographic
DIVERSIFICATION │GEOGRAPHIC NON-ZAR REVENUE GROWTH (Rm) ► 31% CAGR in non-ZAR revenue to R2,8 billion (2014: R1,2 billion) ► Electrical Engineering 3 000 ► 28% of revenue from non-ZAR (FY2017) ► Applied Electronics 2 500 ► Export revenues increased by 72% since 2014 +31% (2014: R490 million to 2017:
Slide 8: Diversification: ICT segment
DIVERSIFICATION │ICT SEGMENT ICT SEGMENT ICT SEGMENT REVENUE SPLIT (%) ► The segment’s customer base creates a strong opportunity for both scale and new 9 10 9 revenue streams 22 26 ► 55 000 customers with only a 20% cross sell 36 ► Successful strategy execution is resulting in financial performance
Slide 9: ICT: 1H2018 Results
ICT: 1H2018 RESULTS REVENUE (Rm) ► Operating profit increased by 14% ► Increased volumes due to improved market share 1 572 1 733 1 643 1 705 ► 8% growth in units sold including higher capacity MFPs ► Growth in number of voice customers 1 867 1 698 1 689 1 670 1 602 ─ Lower average usage per custome
Slide 10: Video
VIDEO
Slide 11: ICT Strategy Execution
ICT STRATEGY EXECUTION Mark Taylor
Slide 12: The ICT Segment in a Nutshell
THE ICT SEGMENT IN A NUTSHELL ► We aim to be a preferred partner to our customers, enabling their purpose by offering integrated information and communication business solutions ► Our vertically integrated strategy is executed through ► The Office Automation cluster providing total office solutions
Slide 13: Transformation of the ICT Segment
TRANSFORMATION OF THE ICT SEGMENT Diversify office automation and voice revenues ► Nashua product offering expanded Offer connectivity (last mile and internet access) ► Repositioning Nashua brand from printer supplier to total ► ECN network upgraded to office provider (TOP) carry high volume data Ma
Slide 14: Go-to-market strategy
GO-TO-MARKET STRATEGY Government SOE Enterprise Mid-Sized SME/SMME Customer Layer Nashua Franchises Shared Services Direct Wholesalers Dealers Distribution Layer Holdings Independent Factory Layer OEMs Software Vendors Other Vendors Telco’s Supplier Layer Reunert ICT Investors Day June 2018 14
Slide 15: Communications Cluster
COMMUNICATIONS CLUSTER Andy Openshaw
Slide 16: Expand the Communications cluster
Expand the Communications cluster to provide unified communications, connectivity and cloud solutions, meeting the needs of a broadening ICT customer base. connect.communicate.content Increasing the products offered through the existing segment businesses and actively searching for additional comple
Slide 17: The Communications, Connectivity Environment
THE COMMUNICATIONS, CONNECTIVITY ENVIRONMENT ► The completion of the interconnect glide-path led to relatively stable pricing in the market ► Disruptive technologies (e.g. WhatsApp Calling, FaceTime etc.) and a tendency for users to call from mobile instead of desk-phone ► Physical PBX to Cloud PBX
Slide 18: Communications Cluster: ECN
electronic communications COMMUNICATIONS CLUSTER
Slide 19: History
HISTORY ► Founded in 2005 and acquired by Reunert in 2011 ► The fastest growing telecommunications network in SA servicing any size business customers covering all towns in South Africa ► Has ECS and ECNS licences ► Interconnected with all major operators ► Head office and NOC in Midrand with branch
Slide 20: Evolution: Voice and Data
EVOLUTION Voice ► Pure VoIP business taking advantage of the Data / Internet access interconnect asymmetry ► VoIP a new home for Mobile ► ECN network upgraded to least cost routing high capacity data capable Cloud ► Voice an additional service network to the Panasonic PABX ► ECN data or broadband cu
Slide 21: Products and customer numbers
PRODUCTS NUMBER OF VOICE CUSTOMERS 14 Thousands 12 ► Routed over 1,2 billion minutes in FY2017 10 8 ► ECN has 1,6 million of its own numbers and has 6 over 140 000 ported numbers on its network 4 ► Over 300 channel partners selling ECN products 2 2014 2015 2016 2017 1H2018 and services ► A distribut
Slide 22: Network
NETWORK ► Upgraded its network in FY2017 with a capex investment of R12 million ► Fully redundant network, hosted in carrier neutral Data Centres. Midrand DR site ► Maintains a core network uptime of over 99,9% ► Customer satisfaction levels are network quality are in line with international carrier
Slide 23: Communications Cluster: Nashua Communications
NASHUAMA COMMUNICATIONS CLUSTER
Slide 24: Evolution
EVOLUTION PABX ► 2009 Reunert purchased the balance of Siemens Systems Integrator Telecommunications ► Branded Nashua ► Risk of dependence on Communications single brand identified Physical to Cloud ► Large enterprise customer ► Skill set and customer base PABX base allowed for shift to a trusted ►
Slide 25: Communications Cluster: SkyWire
G skyWire COMMUNICATIONS CLUSTER
Slide 26: Network Coverage
NETWORK COVERAGE Reunert ICT Investors Day June 2018 26
Slide 27: Evolution: History, Services and Infrastructure
EVOLUTION History ► 2004: 1st ADSL customer for Services and Infrastructure data back up ► 2005: 1st wireless customer ► Licenced and unlicensed ► 2009/10: ICASA License spectrum capability Synergies/opportunities and first Telkom co-location ► Voice, Data and Cloud PBX ► 2015: Presence in all nine
Slide 28: Equipment and Support
EQUIPMENT AND SUPPORT ► Licensed & unlicensed spectrum options ► The NNOC is the heart of our business, 22 000+ end points monitored to ensure service, uptime ► Tailored speeds (1Meg to 1 Gig) ► 24/7/365 Network Management and Monitoring ► High availability, guaranteed 99,5% uptime (Client, Tower an
Slide 29: ECN NOC Tour & Lunch
ECN NOC TOUR & LUNCH 29
Slide 30: Office Automation Cluster
OFFICE AUTOMATION CLUSTER Mark Taylor
Slide 31: Nashua
é CREATING bn USTOME I] “*CONNECTIONS NASHUA
Slide 32: Nashua History
NASHUA HISTORY Reunert ICT Investors Day June 2018 32
Slide 33: Key Trends in Office Automation
ICT │KEY TRENDS IN OFFICE AUTOMATION ► Significant pressure on OEMs in the international market ► Consolidation and mergers of many players ─ Xerox and Fuji ─ Samsung printers and HP ─ OCE and Canon ► Concern that some of this pressure may be transferred to distributors in terms of higher pricing ►
Slide 34: Evolution
EVOLUTION Print ► Basic print services the core 8 Lines of business introduced ► Managed print services with strong governance ► Customers use Nashua for ► Managed document the Voice solutions Total Office Provider solutions enabling the ► Nashua now largest reseller digital office of PABX in the SM
Slide 35: Progression to TOP (OaaS)
PROGRESSION TO TOP (OAAS) Traditional 8 Lines Full ICT Service OaaS Office Space Office Space Office Space Office Space ISP Cloud Services ISP Cloud Services ISP Cloud Services ISP Cloud Services PC & Server PC & Server PC & Server PC & Server Connectivity Connectivity Connectivity Connectivity Acce
Slide 36: Sustainable Growth
SUSTAINABLE GROWTH ► Add products used in the office that ► New cloud GL system for all ► Add complementary services and use IP connections franchises products to existing services ► Rolled-out ► New cloud-based stock forecasting ► Single bill and point of contact for all ► voice services totalling
Slide 37: The Nashua Advantage
THE NASHUA ADVANTAGE ► A well-known brand with a solid footprint across Southern Africa that will be difficult and expensive to replicate ► More that 28 000 customers ► Customer-centric model – based on personal relationships ► Substantial focus on customers in the SME market ► A strong service ethi
Slide 38: Customers Mapping
CUSTOMERS MAPPING Reunert ICT Investors Day June 2018 38
Slide 39: Street View
STREET VIEW Reunert ICT Investors Day June 2018 39
Slide 40: Product Lines
PRODUCT LINES Reunert ICT Investors Day June 2018 40
Slide 41: Products
PRODUCTS Reunert ICT Investors Day June 2018 41
Slide 42: Service Through Personal Relationships
SERVICE THROUGH PERSONAL RELATIONSHIPS Reunert ICT Investors Day June 2018 42
Slide 43: The Total Office
THE TOTAL OFFICE Reunert ICT Investors Day June 2018 43
Slide 44: Our Strategic Intent 2019 - 2023
OUR STRATEGIC INTENT 2019 - 2023 Scalable and adaptable solutions to future-proof your business MISSION ABOUT US VISION ► Ensuring customers are at the ► Enabling people, places and ► A leading provider of total office core of innovative ideas and spaces to work smarter with solutions designed to ma
Slide 45: South African Market Size of the Total Office
SOUTH AFRICAN MARKET SIZE OF THE TOTAL OFFICE ► The office print industry is estimated at about R12 billion per annum ► The PC market is estimated to be over R25 billion per annum ► The IT services, software and hardware markets are estimated to be over R100 billion per annum. There are a lot of com
Slide 46: Reunert ICT Investors Day June 2018
Reunert ICT Investors Day June 2018 46
Slide 47: Prodoc
PRODOC ► Nashua acquired a 60% stake in Prodoc in 2014 ► Prodoc has direct sales offices in Stockholm, Malmö, Helsingborg and Gothenburg ► It is an independent reseller of office systems with a strong sales and services culture as well as extensive IT background ► Investments has been made in new te
Slide 48: Finance Cluster
FINANCE CLUSTER Zahir Mahomed
Slide 49: Quince at a Glance
QUINCE AT A GLANCE ► Quince provides asset-based financial solutions to the Reunert ICT segment ► Strong distribution channel: 37 franchises and 192 dealers ► Access to over 35 000 customers ► Trades as Quince Capital and Nashua Finance ► Major competitors: Sasfin, Mercantile Bank ► GCR Rating (Augu
Slide 50: Product Offering
PRODUCT OFFERING ► Primary customer relationship vests with the distribution channel ► Reduced bad debts (local presence, redeploy equipment) PRODUCT CHARACTERISTICS ► Single invoice seen by customer: major competitive advantage ► Operating leases, i.e. rentals ► Providing convenience to the custome
Slide 51: Strategy Alignment
STRATEGY ALIGNMENT ► Providing segment access to annuity ► Our people, our asset ► Best in industry turnaround time income ► Making our people act with ► Credit decisions within 3 to 4 ► Adapting to rapidly changing ICT integrity and take ownership for hours landscape actions and decisions ► Cost to
Slide 52: Our Competitive Advantage
OUR COMPETITIVE ADVANTAGE Risk VISION Mitigator To offer niche financial solutions to enable sales in the ICT segment, by providing specialised capabilities, Quince allowing and supporting growth at customer level Capital Efficiency Funding BUSINESS MODEL Reunert ICT Investors Day June 2018 52
Slide 53: Business Snapshot
BUSINESS SNAPSHOT ► Advances book of R2,6bn (1H2018) RENTAL BOOK (Rm) ► Key financial metrics: 3 000 000 ► Five year CAGRs 5-year CAGR: 6.7% ─ Interest income: 11% 2 500 000 ─ Operating Profit: 13% ► Five year averages 2 000 000 ─ Credit loss ratio: 60bps ─ Cost to income ratio: 25% 1 500 000 1 000
Slide 54: Credit Vetting
CREDIT VETTING ► Objective ► Credit decisions through a matrix model scoring selected variables to determine risk of failure ► Sources of information ► Existing user reference ► Audited financial statements (grading tool) ► TransUnion SME scorecard and Dynamic Rating ► Experian score ► Industry and
Slide 55: Book Analysis
BOOK ANALYSIS CREDIT LOSSES (BPS) 81 79 57 46 38 2013 2014 2015 2016 2017 CUSTOMER CONCENTRATION (% OF BOOK) APPROVAL RATIO (%) 26 70 73 71 70 70 20 11 Top 10 Top20 Top 100 2013 2014 2015 2016 2017 Reunert ICT Investors Day June 2018 55
Slide 56: Funding
FUNDING ► Current funding a blend of Reunert cash and banks ► R2,2 billion Reunert ► Remainder from external sources ► Long-term strategy ► To reduce reliance on Reunert for funding ► Reunert’s current excess cash position ─ limited opportunity to implement long-term funding plans ► Work in progress
Slide 57: Value Proposition
VALUE PROPOSITION ► One-stop solution: Gives ICT segment companies a considerable competitive advantage ► Base protection ► Flat decision making structure: allows quick decisions ► Ease of use and industry leading service ► Reliability and consistency ► Competitive offerings ► Online credit applicat
Slide 58: Wrap-up
WRAP-UP Alan Dickson