I N T E R I M   R E S U L T S  -  2 0 0 0
Interim Report to shareholders for the six months ended 31 March 2000
  • Comparable headline earnings per share +28%
  • Turnover +10%
  • Operating profit +20%
REVIEW OF RESULTS

Reunert is pleased to announce very satisfactory results for the six months ended 31 March 2000. The strategic refocusing of the group completed during the 1999 financial year, which included the sale of Telephone Manufacturers of South Africa, electrical engineering company Alstom and the mechanical defence businesses, has materially changed the structure of the group. As a result, Reunert’s exposure to low-margin manufacturing businesses has been significantly reduced.

The income statement includes a pro forma comparison of current businesses with the same businesses one year ago.

Turnover grew by 10%, while operating profit improved from R104,1 million to R124,6 million. The operating margin improved from 7,7% to 8,3%. For comparative purposes 1999 interest has been reduced by R37,9 million which reflects the after-tax interest that was earned on cash held to pay the R568 million once-off special dividend (R2,50 per share) paid to shareholders in October 1999.

Attributable profit from ongoing operations increased by 29% to R128,6 million. Headline earnings per share increased by 28% to 63,0 cents per share.

Net attributable profits for the same six months last year of the businesses sold amounted to R10,4 million (5 cents per share). Proceeds from the sale of these operations were redeployed and enhanced earnings for the current period.
REVIEW OF OPERATIONS

Electronics
Nashua’s office automation and cellular operations continued to perform strongly. The recently announced intended merger of Nashua Cellular with Nedcor’s cellular business is expected to be completed later this year. It is not expected to have a material impact on earnings in the short term.

Defence electronics are doing well on the back of strong exports.

Grey imports have had a negative impact upon Panasonic’s earnings. This was partially offset by an improvement in the business systems activities.

As a result of lower interest rates the finance company produced good results.

Increased activity in wireless cellular communications, both locally and in other parts of Africa, enabled Sietel to produce good results despite a slowdown in Telkom purchases. Sietel’s dominance as a major supplier of telecommunications and business systems should ensure satisfactory future growth.

Electrical engineering and cables
ATC suffered as a result of a slowdown in orders from Telkom. This situation is not expected to improve in the short term.

Power cables remains an extremely competitive and oversupplied business. Gain in market share is expected to improve African Cable’s competitive position.

Circuit Breaker Industries performed well. Emphasis on exports continues and is expected to benefit profits in the medium term.

PROSPECTS

Headline earnings per share for the year ended 30 September 1999 were 136,8 cents. These earnings must be adjusted by 29,1 cents, being the after-tax interest on the cash held for the R586 million special dividend, giving comparable headline earnings per share of 107,7 cents.

Good growth in comparable headline earnings per share is forecast for the full financial year.
DIRECTORATE

The board is pleased to announce the appointment of Messrs S D Jagoe, K J Makwetla and C L Valkin as non-executive directors with effect from 20 April 2000. Their varied skills and experience will undoubtedly add value to the group.

Mr C C Schabort has retired from the board and, following the sale of Alstom South Africa, Mr M A E Wilson has resigned from the board. Their contribution over many years is much appreciated.
YEAR 2000 COMPLIANCE

The group did not experience any disruptions as a result of the advent of the year 2000 and does not expect any problem in the future.
DIVIDEND

Notice is hereby given that an interim dividend No 148 of 20 cents has been declared by the directors. The dividend is payable to ordinary shareholders registered in the books of the company on 2 June 2000. Payment will be made in South African currency on or about 23 June 2000. The transfer and share registers will be closed from 5 June to 15 June 2000, both days inclusive.

On behalf of the board

D E Cooper G Pretorius
Chairman Chief Executive
Sandton
19 April 2000
GROUP INCOME STATEMENT

The results for the six months ended 31 March 2000 are set out below:

Notes

Six months ended

Six months ended

% change

Six months ended

Year ended

31 March 2000
R million (Unaudited)

31 March 1999
R million (Pro forma)

31 March 1999
R million (Unaudited)

30 Sept 1999
R million (Audited)

Revenue

1 496.7

1 354.8

10

2 358.1

4 565.5

-continuing operations

1 496.7

1 354.8

1 354.8

2 648.6

-operations sold and discontinued

1 003.3

1 916.9

Operating Profit

1

124.6

104.1

20

158.2

307.7

-continuing operations

124.6

104.1

104.1

199.7

-operations sold and discontinued

54.1

108.0

Net interest earned

17.9

1.3

39.2

84.6

-normal

17.9

1.3

1.3

1.3

-on cash held for special dividend

6

37.9

83.3

Profit before abnormal items

142.5

105.4

35

197.4

392.3

Abnormal items

2

89.2

77.0

88.6

Profit before taxation

231.7

105.4

274.4

480.9

Taxation

45.4

38.4

(18)

69.7

147.6

Profit after taxation

186.3

67.0

204.7

333.3

Share of associate companies' profits

31.8

35.5

(10)

35.5

79.5

Profit after tax including associate companies

218.1

102.5

240.2

412.8

Earnings attributable to outside shareholders in subsidiaries

0.3

3.0

36.4

53.6

Earnings attributable to ordinary shareholders in Reunert Limited

217.8

99.5

203.8

359.2

-continuing operations

128.6

99.5

29

116.4

224.9

-operations sold and discontinued

10.4

46.4

-abnormal items

89.2

77.0

87.9

Earnings per share (cents)

4

106.9

101.7

179.2

Headline earnings per share (cents)

5

63.0

62.6

136.8

Pro forma headline earnings per share (cents)

6

63.0

49.4

28

107.7

Dividend per ordinary share -normal

20.0

18.0

11

18.0

58.0

-special

-

-

-

250.0

Taxation rate excluding abnormal items (%)

31.9

36.4

35.3

37.6

Operating profit for continuing operations as a % of turnover

8.3

7.7

7.7

7.5

Note 1
Operating profit
Operating profit is stated after charging:
-cost of sales

1 121.0

1 835.5

3 578.5

-depreciation

15.5

35.3

70.1

-dividends received, other than from associate companies

14.6

-

11.1

Note 2
Abnormal items
Capital profit on disposal of business

89.2

77.0

87.6

Other

-

-

1.0

Gross abnormal items

89.2

77.0

88.6

Taxation

-

-

(0.2)

Minorities

-

-

(0.5)

Net abnormal items

89.2

77.0

87.9

Note 3
Accounting policy changes
The accounting policies relating to deferred tax and foreign exchange differ compared to those used in the previous annual financial statements. The new generally accepted accounting practice statements relating to tax and foreign exchange have now been adopted and the comparative figures for 1999 have been restated to reflect the new bases of accounting.

Had the new policies been used in 1998 the cumulative effect to 30 September 1998 would have been to increase/(decrease):

Operating profit

(2.4)

(2.4)

Deferred tax charge

(87.3)

(87.3)

Earnings attributable to outside shareholders in subsidiaries

23.7

23.7

Prior year adjustment
-increase in opening retained income

61.2

61.2

The effect of the change in policies has been to increase/(decrease) the following:
Income statement
Abnormal items - capital profit on disposal of businesses

-

(3.5)

(7.3)

Taxation - deferred taxation

-

5.4

16.8

Earnings attributable to outside shareholders in subsidiaries

-

(2.1)

(4.6)

Earnings attributable to ordinary shareholders in Reunert Ltd

-

(6.8)

(19.5)

Earnings per share

-

(3.4)

(9.7)

Headline earnings per share

-

(1.6)

(6.1)

Balance sheet
Retained income

-

54.4

41.7

Interest of outside shareholders in subsidiaries

-

15.8

13.9

Deferred tax liabilities

-

(0.8)

(0.8)

Deferred tax assets

-

71.0

29.2

Current tax liabilities

-

-

(28.0)

Accounts payable and provisions

-

1.6

2.4

Note 4
Earnings per share and diluted earnings per share
Diluted earnings per share

106.9

101.7

179.2

The earnings used to determine both earnings per share and diluted earnings per share are the earnings attributable to ordinary shareholders in Reunert Limited

217.8

203.8

359.2

Weighted average number of shares in issue used to determine the earnings per share, headline earnings per share and comparable headline earnings per share

203.7

200.4

200.4

Adjusted by the dilutive effect of unexercised share options available to executives employed in the group

-

0.1

-

Weighted average number of shares used to determine diluted earnings per share

203.7

200.5

200.4

Note 5
Headline earnings
Headline earnings are determined by eliminating the effect of capital items in attributable earnings as follows:
Earnings attributable to ordinary shareholders

217.8

203.8

359.2

Capital profit on disposal of subsidiary

(89.2)

(77.0)

(87.6)

Other (net)

(0.2)

(1.4)

2.6

Headline earnings

128.4

125.4

274.2

Note 6
Pro forma headline earnings
The ordinary shareholders of Reunert Limited received a special dividend of R2,50 per share on 29 October 1999. This payment has had a major distorting effect on the comparability of the results of the current and prior periods. Had this dividend been paid on 29 October 1998, the effect, calculated using an average interest rate of 16%, would have been to reduce earnings as follows:
Interest received

(37.9)

(83.3)

Taxation

11.4

25.0

Earnings attributable to Reunert shareholders

(26.5)

(58.3)

Headline earnings before this adjustment (see note 5)

125.4

274.2

Pro forma headline earnings

98.9

215.9

GROUP BALANCE SHEET

The consolidated balance sheet at 31 March 2000 is set out below:

31 March 2000
R million (Unaudited)

31 March 1999
R million (Unaudited)

30 Sept 1999
R million (Audited)

Shareholders' funds
Ordinary

876.4

1 137.7

673.7

Preference

0.7

0.7

0.7

Outside

81.7

206.9

217.8

958.8

1 345.3

892.2

Interest-bearing debt
Long-term liabilities

-

4.9

4.5

Short-term loans and bank overdrafts

-

0.5

19.1

-

5.4

23.6

Deferred taxation liabilities

6.8

5.1

5.8

Total capital employed

965.6

1 355.8

921.6

Fixed assets

171.4

322.5

236.5

Investments at cost and directors' valuation

179.0

166.0

135.4

Deferred taxation assets

-

71.0

29.2

Current assets

1 469.4

1 936.5

2 218.3

Inventory and contracts in progress

366.4

575.7

471.8

Accounts receivable

490.3

724.6

788.5

Bank balances and funds on call

612.7

636.2

958.0

Total assets

1 819.8

2 496.0

2 619.4

Current liabilities

854.2

1 140.2

1 697.8

Accounts payable, provisions, taxation and shareholders for normal dividend

854.2

1 140.2

1 129.6

Special dividend and related tax

-

-

568.2

Net operating assets

965.6

1 355.8

921.6

GROUP CASH FLOW INFORMATION

The abridged cash flow statement for the six months ended 31 March 2000 is set out below:

Six months ended 31 March 2000
R million (Unaudited)

Six months ended 31 March 1999
R million (Unaudited)

Year ended 30 Sept 1999
R million (Audited)

Operating cash flows before working capital changes

123.5

191.1

369.8

Reduction in working capital

64.7

8.8

3.0

Cash generated from operations

188.2

199.9

372.8

Net interest and dividends received (Including associates)

38.2

63.2

190.5

Taxation paid

(53.3)

(73.0)

(79.6)

Dividends paid

(86.6)

(72.3)

(110.2)

Net cash inflow from operating activities

86.5

117.8

373.5

Net fixed asset additions and other acquisitions

(4.5)

(33.1)

(22.4)

Other (net)

5.4

(6.8)

21.0

Net cash flow from continuing operations

87.4

77.9

372.1

Net proceeds on disposal of non-core operations, other assets and related working capital

154.6

70.2

79.2

Special dividend and related taxation*

-

-

(568.2)

Net increase/(decrease) in cash and cash equivalents

242.0

148.1

(116.9)

Net cash and cash equivalents at beginning of period

370.7

487.6

487.6

Net cash and cash equivalents at end of period

612.7

635.7

370.7

*To give users a better understanding of comparable cash flows, the special dividend and related taxation, which was paid in October and November 1999 has been shown as a payment during the year ended 30 September 1999 and the opening cash and cash equivalent balances have been reduced by this amount.
SUPPLEMENTARY INFORMATION

31 March 2000
R million (Unaudited)

31 March 1999
R million (Unaudited)

30 Sept 1999
R million (Audited)

Net asset value per share (cents)

430

568

336

Current ratio (:1)

1.7

1.7

1.3

Number of ordinary shares in issue (million)

204.0

200.4

200.5

Capital expenditure

22.6

43.2

34.4

-expansion

18.1

23.9

12.2

-replacement

4.5

19.3

22.2

Capital commitments

10.8

12.7

14.1

-contracted

6.0

4.4

7.1

-authorised not yet contracted

4.8

8.3

7.0

Commitments in respect of operating leases

48.8

86.5

66.0

Contingent liabilities of continuing operations

10.1

5.5

-guarantees on behalf of third parties

8.2

4.8

-other

1.9

0.9

GROUP STATEMENT OF CHANGES IN EQUITY

The consolidated statement of changes in equity at 31 March 2000 is set out below:

Six months ended 31 March 2000
R million (Unaudited)

Year ended 30 Sept 1999
R million (Audited)

Balance at beginning of period as previously reported

674.4

938.7

Prior year adjustment (note 3)

-

61.2

Net profit for the period

217.8

359.2

Dividends declared

(44.9)

(681.8)

Goodwill written off

-

(3.3)

Shares issued

29.8

0.4

Balance at end of period

877.1

674.4

SEGMENTAL ANALYSIS

Six months  ended 2000 R million (Unaudited)

%

Six months ended 31 March 1999
R  million
(Pro forma)

%

% Change

Six months ended 31 March 1999
R million (Unaudited)

%

Year ended 30 Sept 1999
R million (Audited)

%

Revenue including associate companies
Segment
Electronics

1 597.1

78

1 543.4

77

3

1 543.4

51

2 611.7

48

Electrical engineering and cables

371.2

18

379.9

19

(2)

379.9

13

733.6

13

Financial services

82.8

4

93.2

4

(11)

93.2

3

193.6

4

Operations sold and discontinued*

1 003.3

33

1 916.9

35

Revenue including associate companies

2 051.1

100

2 016.5

100

2

3 019.8

100

5 455.8

100

Less: Reunert's attributable portion of associate companies' revenue

(554.4)

(661.7)

(661.7)

(890.3)

Revenue as reported

1 496.7

1 354.8

2 358.1

4 565.5

Operating profit including associate companies
Segment
Electronics

104.1

67

89.6

64

16

89.6

46

185.8

48

Electrical engineering and cables

36.0

23

38.2

27

(6)

38.2

20

66.6

17

Financial services

16.3

10

11.8

9

38

11.8

6

26.8

7

Operations sold and discontinued*

54.1

28

108.0

28

Operating profit including associate companies

156.4

100

139.6

100

12

193.7

100

387.2

100

Less: Reunert's attributable portion of associate companies' profits

(31.8)

(35.5)

(35.5)

(79.5)

Operating profit as reported

124.6

104.1

158.2

307.7

*The comparative amounts have been restated to include the operations sold and discontinued during 2000.

REUNERT LIMITED

Incorporated in the Republic of South Africa (Reg No 1913/004355/06)

Directors:
D E Cooper (Chairman)*, G Pretorius (Chief Executive), B P Connellan*, P T W Curtis*, B P Gallagher, G J Oosthuizen, D J Rawlinson, Dr J C van der Horst*     *(non-executive)

Registered office:
Lincoln Wood Office Park, 6 – 10 Woodlands Drive, Woodmead, Sandton
PO Box 784391, Sandton, 2146, Telephone (011) 804-5888

Transfer office:
Mercantile Registrars Limited, 11 Diagonal Street, Johannesburg, 2001
PO Box 1053, Johannesburg, 2000

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