PRESENTATION TO INVESTORS FOR THE YEAR ENDED 30 SEPTEMBER 2015 - PowerPoint PPT Presentation

PRESENTATION TO INVESTORS FOR THE YEAR ENDED 30 SEPTEMBER 2015

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

GROUP OVERVIEW Alan Dickson

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-making business units have been restored to profitability • Growth achieved in all segments › ICT: underpinned by stabilising office automation business model and excellent performance from voice and finance businesses › Applied electronics: boosted by hard currency export orders and securing the multi-year Radiate contract › Electrical engineering: driven by volume growth, efficiency enhancements and the award of several long-term frame contracts • Steady progress has been made on the execution of the group strategy that was approved in April 2015 4

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 302 cents per share has been declared • Total dividend per share up 10% to 407 cents per share 5

SHARE PRICE PERFORMANCE 20% 10% 0% (10%) (20%) (30%) Sep 2014 Sep 2015 REUNERT LTD ELECTRONIC AND ELECTRICAL EQUIPMENT INDEX - J273 6

FINANCIAL OVERVIEW Nick Thomson

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 until 2019 • Customer support (operation of call centre) • Computer processing costs • Maintenance of mainframe IT hardware and software • Maintenance of records (no permanent staff) • Potential future tax queries and audits • Sufficient residual provisions to cover expected costs 8

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 1 007 29 ▲ Rm Abnormal items - (327) Tax Rm (360) (278) Share of JV profit/(loss) Rm 17 (12) Rm 146 ▲ Profit from continuing operations 959 390 Profit from discontinued operation Rm 42 1 584 Profit for the year Rm 1 001 1 974 (49) ▼ HEPS Cents 588 506 16 ▲ NHEPS Cents 580 553 5 ▲ 9

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 margin % 14,1 13,1 8 ▲ Final dividend per share Cents 302 275 10 ▲ 10 ▲ Dividend per share Cents 407 370 Dividend yield % 6,7 6,2 8 ▲ 10

FINANCIAL RESULTS REVENUE MOVEMENT IN GROUP REVENUE (Rm) • The cable businesses increased market share, renewed long-term contracts with good draw downs in 6 81 the current year and returned to 447 normal sales levels to the mining 8 industry after 2014 strikes • Product sales in the circuit breaker business performed well while contribution from the solutions business was disappointing • Nashua OA repositioned its market offering with a negative impact on 7 774 8 300 pricing but a positive impact on 2014 Electrical ICT Applied Other 2015 market share engineering electronics • Excellent voice minute growth in ECN at lower connection rates • Significant export orders secured by Reutech and delivered in H2 11 11

FINANCIAL RESULTS REVENUE % REVENUE CONTRIBUTION * % REVENUE BY REGION 12% 4% 40% 4% 1% 2015 2015 83% South Africa 7% Africa 1% 48% Electrical engineering Asia ICT Australia Applied electronics Europe Other 12% North America 3% 43% 2% South America 1% 84% 2014 2014 8% 1% 45% <1% *Continuing operations 12 12

FINANCIAL RESULTS OPERATING PROFIT MOVEMENT IN OPERATING PROFIT (Rm) • Improved volumes resulting in improved fixed cost recoveries at Margin 11 14,1% 80 African Cables augmented by cost 6 control 65 Margin • Nashua optimised supply chain and 13,1% realised savings in distribution and general overhead costs 1 017 1 167 • ECN increased customer base and 2014 Electrical ICT Applied Other 2015 engineering electronics both outgoing and incoming minutes OPERATING PROFIT CONTRIBUTION* (%) • Significant cost savings in Nashua Communications 15% 14% • Reutech delivered a good result Electrical engineering despite slow down in the radar and 2015 2014 ICT 36% 42% 47% communications divisions 53% Applied electronics * Excludes Other segment of (4%) in FY2015 and (3%) in FY2014 13 13

FINANCIAL RESULTS CASH FLOW AND WORKING CAPITAL MOVEMENT IN CASH FLOW (Rm) 1 789 19 133 62 415 42 104 629 1 408 1 146 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 operations* WORKING CAPITAL MOVEMENT (Rm) 2015 2014 Inventory and contracts in progress 24 128 Accounts receivable and derivative assets (84) 85 Trade and other payables, provisions and derivative liabilities (243) (180) Advance payments 365 (77) 62 (44) * Before working capital movement 14

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 liabilities (440) (434) Deferred tax (6) (70) Cash and cash equivalents of continuing operations 2 636 415 Net assets 6 725 6 332 Equity 6 725 6 332 15

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 % 0,3 0,3 ► Overhead and related costs as % of revenue % 21,1 21,6 ▲ Cash generated by operations vs operating profit % 121,4 98,1 ▲ * 5,0% including prior year abnormal items 16

ICT Mark Taylor

ICT SALIENT FEATURES TDV vs MFP and printer MIF ECN number of minutes per call type 500 90 100 Millions Thousands Millions 400 80 60 60 300 40 200 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 % change Revenue 3 431 3 439 0% ► Operating profit 533 453 17% ▲ Profit margin 16% 13% 18

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 Nashua franchises • Driving efficiency and synergies throughout the segment • Go-to-market distribution and service framework enhanced 19

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 improved SEK revenues by 13%, while costs reduced by 1% • Voice business • Excellent performance from ECN breaking through one billion voice minutes per year • Increased volumes had a positive impact on fixed-cost base and scalable business model • Largest independent VoIP solution provider in South Africa • Cloud (virtual) PBX offering developed and launched • Load-shedding contributed to estimated 2,5 million voice minutes being lost 20

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% to R2,1 billion • Bad debt ratio remains less than 1% of the book • Retained A ⁺ (ZA) long-term and A1 (ZA) short-term national credit rating for 2016 • Focus on service automation to drive efficiencies, customer service and sales 21