Revenue and operating profit grew by 8% and 9% respectively despite Reunert’s interest in the telecom cable business reducing from 100% to 50% from 1 February 2007.

The low-voltage business had a good start to the new financial year although the move of the assembly operations from Qwa-Qwa to Lesotho resulted in disruptions to supply of products. The costs associated with the move were fully absorbed in the review period. Local and international demand remains strong.

CBI-electric’s product range was further enhanced by the acquisition of Moeller South Africa. The acquisition was effective 1 April 2008 and it is expected to add 10% to revenue of the low-voltage business on a full year basis.

Energy cables continues to benefit from buoyant market conditions. The full benefit of the market environment was somewhat diluted by the disruptions from ongoing upgrading capacity and continuing labour unrest which was finally resolved in February. Efficiencies were not at the desired levels and should improve shortly. Working capital is expected reduce as efficiencies improve.

The telecommunications cable JV suffered from a collapse in demand for copper cable from Telkom. To a certain extent this was offset by strong demand for the instrumentation/data and fibre cable from other customers. Neotel and the cellular operators, in particular MTN, are beginning to buy significant quantities of fibre cable.

Going forward, CBI-electric is well positioned to benefit from expected continued strong demand for its products. Operations have been stabilised and further capital will be invested to ensure adequate capacity.

Revenue increased by 10%. On a like-for-like basis, operating income increased by 12%. However, a significant non-recurring income received by RC&C Finance in the previous period increased the base and resulted in operating income decreasing by 5%.

The office systems business experienced good growth in both revenue and operating profit. Close to 50% of revenue is now generated by our majority owned franchise outlets which positions us better to deal with competitive issues. The increase in revenue can, in the main, be attributed to that strategy.

Nashua Mobile went from strength to strength. A wide footprint, giving access to customers, resulted in growth in subscriber numbers. The sales of data products in particular were very good. Bad debts are rising and the tighter credit criteria being imposed as a result thereof will slow future growth in subscriber numbers.

Nashua Electronics, the distributor of Panasonic products in Southern Africa, held its own in a very difficult market with the consumer products division remaining marginally profitable. Business systems, on the other hand, grew at an acceptable rate from both revenue and operating profit perspective.

On a like-for-like basis, Nashua Finance, soon to be wholly owned by Reunert again, managed to achieve good growth in revenue and profit. Funding is a challenge and receives ongoing attention. The debtors book, approaching R2 billion, is of good quality and partly (R700 million) securitised. It is expected that final funding arrangements will be in place by calendar year end.

The Nashua businesses are very strong and are expected to produce real growth despite difficult prevailing economic conditions.

Increased export sales and healthy margins led to a very pleasing result from our defence businesses with revenue increasing by 40% and operating profit growing by 396% to R65 million.

Ongoing investment in new products should ensure a higher level of contribution from these businesses than in the past. Local sales are expected to increase steadily providing a welcome base which should reduce volatility in earnings from Reutech.

NSN South Africa continues to be the dominant supplier of telecommunication infrastructure equipment in South Africa. Demand from key customers, Vodacom and Telkom, is strong with Neotel beginning to add significant volumes.

Due to a change in the shareholders agreement, Reunert now earns commission on sales. Future commissions are expected to replace dividend flows. Reunert has an option to exit this investment exercisable after December 2010.

The South African economy and sentiment have been adversely affected by a decline in consumer demand, higher inflation, Eskom power outages and interest rate and fuel price increases. The sub-prime crisis has affected markets internationally which have impacted local markets negatively. On the other hand the continued high commodity prices and a weaker rand have improved export prospects. Spend on infrastructure, particularly from government and parastatals, have benefited a number of Reunert’s market sectors.
For the full year we should achieve real earnings growth.