REUNERT 1H2020 RESULTS PRESENTATION For the six months ended 31 March 2020
AGENDA 01 Salient features 02 Covid-19 update 03 Financial performance 04 Segmental performance 05 Business outlook 2 2
SALIENT FEATURES| OPERATIONAL PERFORMANCE Good strategy execution supported a positive Significant challenges Interim results impacted Positive cash generation financial performance experienced at cable by cable performance remained in line with in ICT and companies and level 5 lockdown historic norms Applied Electronics • ICT diversified revenue • Material • Moderate Covid-19 impact • R355 million free cash flow streams augment good underperformance at the generated in 1H2020 Delayed sales due to - early month-end in March sales activity cable companies • 95% of operating profit Export sales in Applied Complementary revenues 7-week labour disruption - - - converts to free cash flow Electronics grow by double digits in at African Cables in Office Automation 1Q2020 • Resulting in ungeared Mark-to-market losses on - export hedging Strong growth of last mile Zambia’s liquidity balance sheet on a net - - instruments broadband connectivity challenges resulted in basis and cloud-based solutions forex losses on Zamefa’s • Adjusted headline in Communications cluster USD borrowings earnings per share Low cable infrastructure • Applied Electronics’ export - down 36% investment continues drive continues to yield across all key Southern good performance African markets Record sales of tactical - communication systems Radar sales significantly - exceed prior year 3 Reunert unaudited results for the six months ended 31 March 2020
SALIENT FEATURES| POST COVID ADJUSTMENTS Abnormal item IFRS forward-looking Interim results statements at Quince • Loss after tax of • Impairment of goodwill and • Whistle blower identified activities R277 million property, plant and at an external, arms-length equipment at the cable company • Headline loss per share of companies 76 cents • Comprehensive, independent • Increased expected credit forensic investigations in process • Dividend of 65 cents per loss (ECL) impairments at share declared • Initial report completed Quince Prima facie evidence indicating - Quince defrauded • Completed Prevention and Combatting of Corrupt Activities Act submissions • Impairments created for potential loss • Board and management commitment to a full legal process 4 Reunert unaudited results for the six months ended 31 March 2020
COVID-19 IMPACT
6 OUR RESPONSES TO COVID-19 Increased our resilience Partnering with in preparation for Adapting quickly as stakeholders to ensure predicted economic circumstances evolve our sustainability conditions • Rigorous return to work and business • Salary reduction across all white collar continuity plans implemented at all • Increased debt capacity workers, ensuring salaries for those unable companies, enabling a return to work Committed facilities of R1 billion to work - on 1 May Total debt capacity of R2,1 billion - • Directors donations to Solidarity Fund • Companies steadily increasing output • Cost structures being reviewed, including: • Aligned our requirements with key May: 60% of normal trading - Freeze on all new hires - stakeholders including customers, June expected to be: 98% of normal - Hold on expansionary capex - employees, unions and banks trading • Protected cash flow by tight management • Prioritised safety of all employees with • Early indications reflect: across the working capital cycle rigorous implementation of health and Good debtor receipts - safety regimes Supply chain intact - • Provided essential services throughout Reduced new order placement - lockdown levels 5 and 4 Sharing collective responsibilities to Catering for uncertain market activity Responding to emerging challenges respond to the pandemic 6
FINANCIAL PERFORMANCE 7 7
GROUP STATEMENT OF PROFIT OR LOSS Six months ended 31 March % R million 2020 2019 change (Unaudited) (Unaudited) Revenue 4 144 5 288 (22) EBITDA* 493 698 (29) Depreciation and amortisation (119) (83) 43 Operating profit 374 615 (39) Net interest expense (19) (4) 375 Impairment of financial assets Expected credit losses (529) - Impairment of non-financial assets Impairment of goodwill and property, plant and equipment (79) - Loss on remeasurement of subsidiary held for sale (22) - Loss on disposal of subsidiary - (44) (Loss)/profit before taxation (275) 567 (149) Taxation 31 (195) (116) (Loss)/profit after taxation (244) 372 (166) Share of joint ventures' and associate's (loss)/profit (82) 5 (Loss)/profit for the period (326) 377 (186) Non-controlling interests 49 (11) (545) (Loss)/profit attributable to equity holders of Reunert (277) 366 (176) * Earnings before net interest, taxation, depreciation and amortisation, impairment of goodwill and property, plant and equipment, expected credit losses, loss on remeasurement of subsidiary held for sale, profit and loss on disposal of businesses and empowerment transactions. 8
SUMMARISED FINANCIAL POSITION As at 31 March As at R million 2020 2019 30 Sep 2019 (Unaudited) (Unaudited) (Audited) Property, plant and equipment, investment property and intangible assets 1 256 1 270 1 292 Right-of-use assets 200 - - Goodwill 924 991 999 Investments and loans 65 55 60 Investments in joint ventures and associates 69 169 154 Finance leases and loans receivable 1 766 1 995 2 082 Deferred taxation 242 137 143 Non-current assets 4 522 4 617 4 730 Inventory 1 643 1 567 1 376 Finance leases and loans receivable 850 854 893 Trade and other receivables and taxation 2 306 2 401 2 356 Derivative assets 16 4 10 Cash and cash equivalents 793 894 939 Current assets 5 608 5 720 5 574 Total assets 10 130 10 337 10 304 Equity 6 422 7 200 7 431 Deferred taxation 101 141 138 Put option liability - 125 - Long-term loans 40 66 57 Lease liabilities 169 - - Share-based payment liability - 11 14 Non-current liabilities 310 343 209 Put option liability 125 - 120 Current portion of long-term loans - 1 3 Lease liabilities 55 - - Share-based payment liability 9 - 18 38 11 16 Derivative liabilities 2 450 2 314 2 184 Trade and other payables, provisions and taxation Bank overdrafts and short-term facilities 721 468 323 Current liabilities 3 398 2 794 2 664 Total equity and liabilities 10 130 10 337 10 304 9
CASH FLOW| AS AT 31 MARCH 2020 1H2020 Rm OB CB EBITDA 493 Cash and cash equivalents 939 793 DBP settlement (22) Bank overdrafts (323) (721) Non-cash items 100 Total 72 616 Cash generated from operations 571 10
CASH FLOW MOVEMENTS Investing activities (Rm) 1H2020 Movement in rentals and finance leases (169) Other 4 (165) Financing activities (Rm) 1H2020 Settlement of 2015 CSP scheme (54) IFRS 16 lease payment (26) Other 1 (79) 11
CAPITAL EXPENDITURE ► Capital expenditure amounted to R66 million CAPITAL EXPENDITURE (Rm) (1H2019: R59 million) divided between: +12% ● replacement capital R10 million (1H2019: R23 million) 66 ● expansion capital R56 million (1H2019: R36 million) +9% 59 8 ► All capital expenditure was funded from internal 54 resources 15 16 11 1H2020 11 16 Rm 33 Plant and equipment 26 23 Intangibles (including software) 18 24 Capital work in proress 21 Other 1 9 9 4 Total 66 1H2018 1H2019 1H2020 Electrical Engineering ICT Applied Electronics Other 12
SEGMENTAL PERFORMANCE
ICT Office Automation ► OPERATING PROFIT (Rm) +6% ● Good sales performance despite tough economic conditions 371 ● Hardware market share increase supported the positive results 351 317 ● Acceleration of Complementary product and service revenues 278 continued with additions of new offering ● Launch of PCs and Services with Remote Monitoring and Management Systems yielded positive results and creates new business opportunities 19% 17% 20% 25% Communications ► 1H2017 1H2018 1H2019 1H2020 ● Voice customer base grew strongly, with record sales, although voice minutes remain under pressure NUMBER OF VBX PORTS AND VOICE CUSTOMER SITES ● VBX growth, 20% in 1H2020, continues to be a significant 25 000 Voice VBX contributor 18 972 20 000 ● Skywire’s network expansion to key geographies accelerated the 19 414 15 786 segment’s broadband connections, delivering strong growth of 13 343 15 000 82% over the prior period 10 097 12 782 10 000 6 638 Finance ► ● The Quince book showed a consistent performance prior to 2 225 5 000 IFRS and abnormal item impairments - 1H2017 1H2018 1H2019 1H2020 Reunert unaudited results for the six months ended 31 March 2020 14
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