Reunert thumbs nose at macroeconomy

It has become something of a rarity for a JSE-listed company in 2023 to report solid financial results. But Reunert’s latest numbers show it’s been able to grow despite the state of South Africa’s economy.

The group’s revenue increased by nearly a quarter (24%) to R13.8-billion in the year ended 30 September 2023. Profit for the year was R959-million, up by 14%, while headline earnings per share – a financial metric popular with South African investors – increased by 16% from R5.19 in 2022 to R6.02. It hiked its dividend from R2.24 to R2.49/share.

At the results webcast on Thursday, chief financial officer Nick Thomson said the group was pleased with its performance this year and remains well positioned both operationally and strategically, despite the challenges associated with the general South African macroeconomic environment. These include a tightening in the credit environment due to higher-than-normal inflation, low growth and high interest rates, all compounded by load shedding.

In terms of segment operating profit, ICT contributed 45%; 38% was from electrical engineering; and 29% came from the applied electronics segment. Load shedding had a negative impact on Reunert’s ICT segment, which resulted in limited profit growth of 2% to R660-million, despite the segment’s revenue increasing by 18% to R3.1-billion. Power blackouts disrupted the small and medium business client base, contributing to a 17% decline in voice minutes and increased operating costs across the segment.

A once-off loss due to the Post Office being placed into business rescue was registered and the sale of R250-million Quince book to fund the acquisition of Etion Create also reduced earnings and interest income – although Etion’s success improved returns in the electrical engineering sector.

Despite the macroeconomic challenges being unlikely to improve soon, Reunert CEO Alan Dickson said the segment was well positioned in tight market conditions.

Diversification

He said the diversification strategy was well developed and yielding good results, with Nashua well placed to continue with growth in it complementary IT services and energy solutions. IT integrator +OneX, founded by former EOH group executive Rob Godlonton, accelerated its digital integration solutions income and connectivity solutions business SkyWire leveraged its national broadband connectivity network to deliver year-on-year operating profit improvement.

Dickson said: “Reunert’s three key strategic growth initiatives are the expansion of our ICT segment’s capabilities, investment in our renewable energy ecosystem and the increase in non-South African revenue streams. All of them proceeded on track this year.”

TCS | Alan Dickson on why Reunert is thriving

In the renewable energy division, Reunert’s revenues grew by 24% to reach R1.1-billion, largely driven by the record levels of load shedding boosting the sales of residual and small commercial batteries, as well as the private sector’s investment in solar energy. Blue Nova Energy’s expanded facility allowed for a doubling of production, a large portion of its growth accruing from homeowners’ looking for backup storage and small batteries in the wake of increased load shedding. “But the commoditisation of this market is very sensitive to load shedding and we do not expect to see the same levels of small battery sales next year,” Dickson said.

Reunert said it is well positioned to supply Eskom’s transmission development plan with more than 14 000km of new lines of aluminium conductor steel reinforced cable to enable the country’s 50GW renewable energy investment target. “This in turn will be beneficial for the group’s cable operation as it will be produced locally,” said Dickson.

The applied electronics segment’s revenue increased 51% to R3.6-billion as a result of strong execution of orders, year-on-year profit growth in the Radar, Fuze and Encryption businesses, and the successful integration of Etion Create. Europe’s contribution and the recovery of the South African defence market also contributed. The group predicts there will be continuing global demand due to increased defence spending in light of current geopolitical uncertainty in the world.

In terms of offshore business, Reunert has subsidiaries in Australia, the US, India and Dubai. International revenues increased by 21% in 2023, providing a significant revenue stream to augment the South African operations.  – © 2023 NewsCentral Media

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