UNAUDITED INTERIM RESULTS For the six months ended 31 March 2018 - PowerPoint PPT Presentation

UNAUDITED INTERIM RESULTS For the six months ended 31 March 2018

AGENDA 01 Salient features 02 Financial performance 03 Strategy 04 Segmental performance 05 Business outlook and prospects 2 Reunert unaudited results for the six months ended 31 March 2018

SALIENT FEATURES Challenging Strategy Improved external environment cash returns execution yields negatively impacted new acquisitions for shareholders two segments ► Applied Electronics and Electrical ► Good progress in ICT segment ► Share buyback programme: Engineering segments impacted strategy execution ► 1,2 million shares acquired ► Rapid appreciation of ZAR against US$ ► Complementary revenue streams at R85,3 million gaining traction ► Negative impact on 30% of ► Dividend up 4% to 125 cents non-ZAR revenue ► SkyWire providing national ► Reflecting stronger expectations broadband connectivity ► Financial constraints of SOEs and key for H2 municipalities ► Other acquisition concluded ► Reunert remains well positioned ► Material reduction in orders ► Dopptech providing advanced for improved South African fuze technology economic growth ► Country liquidity constraints in Zambia 3 Reunert unaudited results for the six months ended 31 March 2018

EXTERNAL ENVIRONMENT RATE OF EXCHANGE ZAMBIAN LIQUIDITY CUSTOMER CONSTRAINTS ► 9,9% stronger ZAR:US$ ► Fiscal constraints within SOEs, including Eskom ► Reduced earnings from foreign subsidiaries EVENTS and Denel, and key municipalities on translation Increased country liquidity challenges impacting ► Materially lower order placement ► Lower export margins on stronger sales on Zesco and ZRA ► Telkom’s destocking resulted in low fibre and ► Losses on foreign debtor and cash balances ► copper cable orders ► Work-in-progress losses on copper Insufficient time to adjust cost base during Under utilisation of factory capacity IMPACTS ► ► Zamefa’s funding limits reached six month period ► ► African Cables change in product mix to offset ► Margin degradation in AE and EE reduced orders, resulted in lower margins ► Scaled backed production to prioritise cash flow R61m operating profit impact on group results ► ► Telecom Cables JV generated an operating loss OUTCOME Electrical Engineering’s Applied Electronics’ operating profit flat operating profit despite revenue being 33% down 25% up 4

FINANCIAL PERFORMANCE 10% 8% 0% 4% Revenue Operating profit HEPS Dividend per share R4 841m R567m 275 cents 125 cents 2017: R4 421m 2017: R616m 2017: 275 cents 2017: 120 cents Change 1H2018 1H2017 % SIX MONTHS ENDED 31 MARCH Revenue Rm 4 841 4 421 10 Operating profit Rm 616 (8) 567 Profit for the period attributable to Reunert shareholders Rm 445 452 (2) HEPS Cents 275 275 0 5 Reunert unaudited results for the six months ended 31 March 2018

FINANCIAL PERFORMANCE Nick Thomson

GROUP INCOME STATEMENT Net interest lower due to Change 1H2018 1H2017 ► Acquisitions: R468m Rm Rm % ► Working capital investment: R439m 4 421 10 Revenue 4 841 EBITDA 636 681 (7) ► Share buyback programme: R176m Depreciation & amortisation (69) (65) 6 ► Loan to Zamefa R262m Operating profit before interest 567 616 (8) Net interest income 44 ─ interest reversed on consolidation 8 (82) Profit before empowerment transactions 575 660 (13) Tax Empowerment transactions (2) (20) 90 (188) 37 Tax (119) ► Effective rate of taxation of 21% due to 454 452 0 Profit after tax release of R40m provision on the Share of JV profit (6) 17 successful outcome of NSN tax appeal Profit for the period 448 469 (4) Share of JV (17) (82) Minorities (3) Profit for the period attributable to RLO 445 452 (2) ► Impact of reduced Telkom demand Headline Earnings Adjustment 0 (2) Minorities 450 (1) Headline Earnings 445 Normalised Headline Earnings Adjustment 29 (93) ► Lower due to reduced profitability mainly 2 Normalised Headline Earnings 447 479 (7) at Prodoc and Zamefa EPS (Cents) 276 (0) 275 HEPS (Cents) 275 275 0 NHEPS (Cents) 276 292 (5) Reunert unaudited results for the six months ended 31 March 2018

SUMMARISED FINANCIAL POSITION ► Non-current assets higher due to impact of March 2018 March 2017 Sept 2017 acquisitions and increase in the Rental and Rm Rm Rm Finance Lease receivables in Quince PPE, investment properties and intangible assets 1 246 1 066 1 095 Goodwill 1 088 925 921 SkyWire Dopptech Other long term assets 1 879 2 001 2 176 Rm Rm Non-current assets 4 510 3 870 4 017 Goodwill 146 37 Inventory 1 430 1 439 1 372 Intangibles 113 - Receivables 2 677 2 981 3 045 PPE 69 1 Cash and cash equivalents 1 055 1 832 1 652 Stock 2 1 Current assets 5 472 5 939 6 072 Deferred tax (32) 1 Total assets 9 982 9 809 10 089 298 40 Cash paid Equity 6 993 6 956 7 243 205 20 Borrowings - 2 Deferred taxation 112 96 112 Contingent Long-term borrowings and liabilities 194 42 194 purchase consid. 93 18 Non-current liabilities 306 138 306 298 40 Payables 2 121 2 113 2 332 ► Increase in bank overdraft and short-term Current portion of long-term borrowings 11 203 11 loans primarily due to purchase of SkyWire Bank overdraft 399 197 551 from short-term borrowings (R205m) Current liabilities 2 683 2 715 2 540 Total equity and liabilities 9 982 9 809 10 089 8

CASH FLOW AT 31 MARCH 2018 MOVEMENT IN CASH FLOW (Rm) 661 1 455 12 (269) (210) (576) (22) 172 (32) (375) 504 (427) (88) (375) Cash Working Interest, Taxation Capital Free cash Capital Investing Financing Total cash Opening Dividends Total cash Closing generated capital dividends paid expenditure flow expenditure activities activities utilised balance paid utilised balance from changes and other replacement - expansion operations Investing activities ► OB CB ► Mainly related to movement in rentals and finance lease receivables (R195m) and Cash resources 1 522 1 055 acquisitions (R227m) Long dated (>3 months) 130 - Financing activities ► 1 652 1 055 ► Mainly consists of repayment of external loans (R4m) and share buyback programme (R85m) Bank overdraft (197) (551) Total 1 455 504 Seasonality and ongoing working capital actions will lead to improved cash generation in H2 ► 9 Reunert unaudited results for the six months ended 31 March 2018

WORKING CAPITAL CAPITAL EXPENDITURE WORKING CAPITAL MOVEMENT (Rm) 1H2018 FY2017 Decrease/(increase) in inventory 60 (144) 74 Rm Decrease/(increase) in receivables (98) (284) (Decrease)/increase in payables 258 (269) 15 (Decrease)/increase in advance payments 38 (55) 54 Net (outflow)/inflow (269) (225) 49 17 11 Inventory decreased mainly due to ► 8 Focused programme of stock reduction in EE and ICT ► 11 Offset by build of raw material in AE for fuze orders and 10 ► solar installations Accounts receivable increases are mainly due to ► 35 23 Increase in EE trade debtors due to liquidity issues in Zambia ► 29 10% growth in revenue ► ► Accounts payable decreases are mainly due to 9 7 Reduction of activity and reduction of payment terms in Zambia ► 2 from copper suppliers 1H2016 1H2017 1H2018 Electrical Engineering ICT Applied Electronics Other Reunert unaudited results for the six months ended 31 March 2018

STRATEGY Alan Dickson Reunert unaudited results for the six months ended 31 March 2018

STRATEGY │SKYWIRE ACQUISITION 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 36 55 000 customers with only a 20% cross sell ► Successful strategy execution is resulting in financial performance gaining momentum ► 68 65 55 COMMUNICATIONS ► The cluster now provides vertically integrated communications and connectivity 2014 2017 Target solutions to the ICT segment Office Automation Communications Finance Voice: ECN is the largest independent VoIP provider in the country. The customer base ► grew by 500 customers per month OFFICE AUTOMATION Data/Internet: The ECN network upgrade now allows for the provision of broadband ► REVENUE COMPOSITION (%) internet connectivity over fibre, wireless and copper Broadband connectivity: SkyWire acquisition now provides a national footprint with an ► excellent overlap with our 300 dealers and 37 franchise partners 46 52 54 Microwave licensed and unlicensed spectrum: provides a backhaul for integrated ► voice and data offerings 26 33 OFFICE AUTOMATION 46 28 ► Material improvement in evolving to a total office provider 13 2 New annuity revenue streams launched over the last 24 months now comprise ► 2014 2017 Target 13% of Office Automation revenue Services Hardware Annuity Reunert unaudited results for the six months ended 31 March 2018

SEGMENTAL PERFORMANCE

OPERATING PROFIT ANALYSIS MOVEMENT IN OPERATING PROFIT (Rm) 616 (8%) YOY 32 567 (12) 39 (0) 46% YOY (108) (33%) YOY 14% YOY 1H2017 Electrical Engineering ICT Applied Electronics Other JV and associates 1H2018 eliminated OPERATING PROFIT SEGMENTAL CONTRIBUTION (%) (7%) 10%(4%) 11% Electrical Engineering 39% ICT 51% 1H2017 1H2018 Applied Electronics 43% Other 57% 14 Reunert unaudited results for the six months ended 31 March 2018