Reunert reports year-end financial improvement

JSE-listed Reunert has reported growth in its earnings for the year ended September 30, despite a challenging macroeconomic environment in South Africa.

The group’s headline earnings a share increased by 10% to 665c apiece, while earnings a share increased 13% to 652c during the year under review.

“These financial results are underpinned by the acceleration in the execution of the group’s strategy which drives our growth trajectory and focuses on three key areas, namely digital integration in the information and communications technology (ICT) segment, renewable energy and the expansion of our international income streams,” said Reunert group CEO Alan Dickson.

Group operating profit during the year under review increased by 7% to R1.53-billion, and its attributable profit rose 8% to R1.03-billion, positively impacted by continued strong cash flow generation and working capital management that resulted in a reduced net interest expense of R49-million, a reduction on the R120-million reported in 2023.

“Over the last three years, we have generated free cash flow of R3.1-billion, raised R1.3-billion in debt and realised R229-million from the proceeds of the sale of property, plant and equipment, resulting in a total of R5-billion being available to the group,” added Reunert Group CFO Nick Thomson.

Reunert declared a total dividend a share of 366c, an increase of 10% on the prior year.

During the 12 months to September 30, Reunert reported a 5% uptick in revenue to R14.45-billion.

“Our internationalisation strategy, underpinned by Defence and Electrical Engineering revenues, provides a significant income stream to augment our South African revenues,” said Dickson.

According to the group’s financial results, highlights for the year included a strong growth in the Defence cluster, increased Zambian power cable performance, the successful integration of IQbusiness and the strong resilience of the group's businesses serving the South African market, which delivered good operational efficiencies and tight margin control.

This was offset by “lowlights” such as the battery storage business's performance, where commoditisation, over-supply and reduced loadshedding all resulted in a significant decrease in the residential and small commercial battery storage market, and an operational issue impacting production and inventory at the group's printed circuit board manufacturer, which has been successfully addressed.

During the 12 months to September 30, the Electrical Engineering segment, supported by strong growth in the circuit breaker and power cable businesses, reported a 7% increase in segment revenue to R7.68-billion and a 20% increase in segment operating profit to R665-million.

“The Zambian business increased volumes, improved margins, realised operational efficiencies and delivered most of the improvement in operating profit. In South Africa, the power cable business secured steady volumes, but suffered from reduced high voltage power cable contracts as projects were delayed by key customers,” Dickson pointed out.

The circuit breaker business’s volumes were stable in South Africa, while export volumes increased in the second half of the year, specifically into the key US market.

“The ICT segment’s digital integration strategy has been a significant success as they have unlocked growth across both public and private sector digitalisation projects. The successes are evidenced by several key wins. The business has consistently grown market share both through the addition of new, blue chip enterprise clients and, by driving cross-sell and upsell opportunities, thereby increasing wallet share in existing clients.”

The ICT segment, underpinned by the Solutions and System Integration cluster, the integration of IQbusiness and double-digit growth at +OneX, achieved revenue growth of 27% to R3.9-billion.

After interruptions in the supply chain, caused by challenges at the country’s ports, Nashua’s performance returned to normal and delivered a second half financial performance aligned to prior years when uninterrupted supply was experienced.

“Quince’s collections remained stable and yielded good financial returns despite South Africa’s weak economy and high interest rates.”

The Applied Electronics segment's revenue decreased 10% to R3.19-billion, with segment operating profit decreasing by 16% to R361-million.

In the Renewable Energy cluster, the solar energy business had a strong performance with a record build of new solar plants, and the business’ increased focus on deal management and execution yielded positive results as margins improved.

“The well-publicised commoditisation, over-stocking and reduction in demand in the residential and small commercial battery storage market, however, severely impacted the battery storage business.”

However, the Defence cluster delivered a good financial performance, with the defence businesses executing on its healthy order books successfully, and positive financial performances were achieved at the fuze, radar and logistics businesses.

The Defence cluster's order book increased to R2.7-billion at the financial year-end.