PRESENTATION TO INVESTORS For the six months ended 31 March 2016 - PowerPoint PPT Presentation

PRESENTATION TO INVESTORS For the six months ended 31 March 2016

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

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 excellent performance on the execution of export contracts in Applied Electronics contributed to strong export revenues. • Resulting in strong financial performance from continuing operations • Revenue up 2% from R3,9 billion to R4,0 billion. • Operating profit up 12% from R503 million to R564 million. • HEPS and NHEPS up by 12% to 271 and 268 cents per share respectively. • 7,6% increase in interim dividend to 113 cents per share declared out of free cash flow. 3

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. 4

Customers People GROUP Diversification STRATEGY Innovation Efficiency Alan Dickson Transformation

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 existing expertise in industries in which we have key competitive advantages. • Improved revenue streams with geographic diversification. • Access to operational efficiencies through vertical integration. • Creation of a solutions offering for traditional component sales. • Zamefa acquisition is progressing through regulatory approval at the Competition Commission. 6

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 2H16. › A further subsidiary deal is expected to be completed before financial year-end. 7

FINANCIAL OVERVIEW Nick Thomson

FINANCIAL RESULTS │ REVENUE MOVEMENT IN GROUP REVENUE (Rm) ELECTRICAL ENGINEERING ↓ 4 Product mix favoured aluminium cable. ↓ Local circuit breaker market under pressure. 272 ↑ Circuit breaker export gains. (180) ↑ Increased optical fibre cable demand. 4 022 3 935 (9) ICT → OA flat with market pressure volume 2015 Electrical ICT Applied Electronics Other 2016 off set by price increases from weak currency. Engineering → VoIP volume growth offset by lower interconnect rate. % REVENUE CONTRIBUTION* 17% 11% APPLIED ELECTRONICS 43% Electrical engineering 42% ↑ Large volume increase through fuze 1H16 1H15 ICT factory assisted by weaker exchange rate. Applied electronics 41% → Service and maintenance components under 46% pressure in line with local economy. 9 *From continuing operations

FINANCIAL RESULTS │ OPERATING PROFIT MOVEMENT IN OPERATING PROFIT (Rm) • Operating profit margin improved from 12,8% to 14,0%. • Margin M&A and B-BBEE transaction costs impacted (43) 87 14% operating margin by 0,8%. 6 11 ELECTRICAL ENGINEERING Margin 564 13% → Volumes consistent with prior year, but change in mix of products. 503 ↑ Improved export margins in circuit breakers. 2015 Electrical ICT Applied Electronics Other 2016 Engineering ICT → Segment margin intact. OPERATING PROFIT CONTRIBUTION* (%) 7% (5%) ↑ (12%) Efficiency gains across the segment. 22% ↓ OA volumes under pressure. Electrical engineering 1H16 1H15 49% ICT 46% APPLIED ELECTRONICS 49% Applied electronics ↑ Excellent execution of high volume export 44% Other orders. ↑ Further margin gains from weaker ZAR. 10 10 * From continuing operations

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 • moderate growth Operating profit Rm 564 503 12 • positive impact from exports Net interest income Rm 70 57 23 • efficiency & cost management. Profit before tax Rm 634 560 13 Rm Tax (190) (157) 21 • Tax rate 2% higher due to Share of JV profit Rm 9 6 50 non-deductable M&A costs. Profit from continuing operations Rm 453 409 11 Profit from discontinued operation Rm - 67 (100) • Last year that Nashua Mobile Profit for the period Rm 453 476 (5) discontinued operations will HEPS from continuing operations Cents 271 242 12 need to be reported. NHEPS from continuing operations Cents 268 239 12 11 11

FINANCIAL RESULTS │ CASH FLOW MOVEMENT IN CASH FLOW (Rm) (502) 177 (235) 70 2 636 (231) 650 2 311 (20) (54) 234 (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 replacement flow expansion activities activities generated from operations* 12 * Before working capital movement

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 and other payables, provisions and Trade payables Days 125 115 62 (225) derivative liabilities Net worth (NAV) per share R 40,38 38,32 Advance payments (27) 319 Gross profit margin (%) % 36,2 32,9 (235) 166 Net profit margin % 11,3 10,4 Inventory increases are mainly due to • Raw material buy-in for 2H16. Bad debt as % revenue % 0,1 0,5 • OA purchase opportunity. Cash generated by operations • Radiate preparation increased both scale and lead times. % 74 143 vs operating profit • Effect of weaker exchange rate. 13 13

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 Long and short-term liabilities (448) (415) (440) Deferred tax 13 (45) (6) Net cash and cash equivalents of continuing 2 311 2 446 2 636 operations Net assets 6 718 6 361 6 725 Equity 6 718 6 361 6 725 14

ICT OVERVIEW Mark Taylor

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 and margins in the OA and PBX business units. • Focus on improving operational efficiencies across all business units. • The voice business unit performed well, with good growth in customers and voice traffic. • Good profit growth in Swedish operating unit. 16 16

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. 60 300 • Some pressure on total document volume of 2,2 billion, however colour copies showed a modest growth over 1H15. 200 • Diversification of channels into voice services progressing 30 well with good growth in PBX and voice minutes sales. 100 • Prodoc business has stabilised with strong profit growth recorded over previous financial year. 0 0 • Pansolutions performing according to expectations. 13 14 15 Mar 16 Total Clicks Multi-functional printers Printers • Asset finance business • Total discounting reflected slower OA sales – 11% down on previous year, however the loan book still increased by 4% to R2,1 billion. • No material increase in credit losses, despite challenging economic conditions. 17

ICT │ OVERVIEW ECN number of minutes per call type • Voice business 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 • Virtual PBX product launched in order to transition PBX business into the cloud. 0 13 14 15 1H16 Inbound Outbound • Enterprise telecommunications • Sales decreased as a result of low growth and downsizing of many medium and large enterprises. • Cost pressures at customers result in service level agreement increases being marginal. • Increased competition in the Unify product set due to appointment of alternate distributor of entry-level products. 18