APPLIED ELECTRONICS

Reunert Investors’ Day

1

11 April 2017

AGENDA

10h00-10h10 Welcome and update on Reunert strategy Alan Dickson

10h10-10h20 Applied Electronics

10h20-10h40 Secure Communications Cluster

10h40-11h00 Reutech Communications Martin de Beer

11h00-11h20 Omnigo Rieel Schonfeldt

11h20-11h40 Nanoteq Gerrie Venter

11h40-12h00 Questions and answers

12h00-13h15 Factory visit

13h30-14h30 Light finger lunch

14h30 Shuttle departure back to airport

2

REUNERT OVERVIEWAlan Dickson, Group CEO

3

01

4

Revenue

R8,5bn

6 492Employees

Operating

profit

R1,3bn

Market

cap

R13bn*

*10 April 2017

All other numbers based on 30 Sep 2016

REUNERT OVERVIEW

Key Facts

• Established in 1888.

• Listed on the JSE on 1 January 1948.

• Included in the electronic and electrical

equipment sector.

• Corporate headquarters in Woodmead,

Sandton, South Africa.

• International operations in Australia,

Lesotho, Sweden, USA, Zambia and

Zimbabwe.

• Financial year-end 30 September.

7 Testing laboratories

9 Innovation centres

4 Data centres

14 Manufacturing plants

37 Nashua franchises

269Independent ECN

channel partners

5

37%

46%

17%

% Revenue

contribution 2016

ELECTRICAL ENGINEERING

CBI-electric: African Cables

CBI-electric: Zamefa

CBI-electric: Telecom Cables

CBI-electric: Low Voltage

New

SECURE COMMUNICATIONS

CLUSTER

APPLIED ELECTRONICS

Fuchs Electronics

Reutech Radar Systems

Reutech SolutionsReutech

Communications

Omnigo

Nanoteq

Terra Firma Solutions

Ryonic Robotics

New

New

New

New

ICT

Nashua

ECN

Quince Capital

Nashua Communications

PanSolutions

STRATEGY EXECUTION

84% of revenue*

Growing competition

Late life-cycle products

Margin pressures

Concentration

risk

Slow top-line

growth

* Based on FY-2014 reported revenue

OPTIMISATION OPTIMISATION

REUNERT FINANCIAL PERFORMANCE

7

8 5118 3007 774

7 247

20162013 20152014

Reunert revenue (Rm)

17%

60% 59%43% 37%

31% 32%45% 46%

12%9%9%

2016

100%

2014 20152013

Segmental revenue contribution (%)

Operating profit (Rm)

15% 14% 15% 23%

49% 53% 47%41%

38% 36% 42% 45%

-4%-3%-2% -9%

2013 20162014

100%

2015

ICT

Other

EE

AE

Segmental operating profit contribution (%)

1 315

1 167

1 0171 102

20152014 20162013

APPLIED ELECTRONICS

8

APPLIED ELECTRONICS’ STRATEGIC PRIORITIES

① Geographic diversification

─ Increase the group’s focus on export markets and securing long-term contracts.

─ Build and strengthen partnerships with OEMs and other defence companies to gain access to

new markets.

② Earnings diversification

─ Continue developing commercial applications using Reutech’s defence technologies, thereby

broadening its customer base.

③ Transformation

─ Continue driving improvement in transformation objectives to ensure that Reutech is aligned

with government’s objectives in this regard.

9

PROGRESS AGAINST THE STRATEGIC PRIORITIES

① Acquisition activity─ Omnigo: December 2015

─ Nanoteq: October 2016

─ Terra Firma Solutions (51%): March 2017

─ Ryonic Robotics (75%): March 2017

② Transformation─ Phase 1 of Reutech (Pty) Ltd BEE equity ownership transaction concluded in 2016.

─ SA Defence Industry Charter in process where after final equity position will be evaluated.

─ Improved BBBEE ratings

• Communications Level 1

• Radar Systems Level 2

• Solutions Level 2

• Omnigo Level 2

• Nanoteq Level 5

─ Good progress made on the appointment of employment equity candidates at senior level.

10

PROGRESS AGAINST THE STRATEGIC PRIORITIES

③ Earnings diversification

• Increased sustainability of the segment and establishing a

higher base

─ Doubled the production capacity for production of

new generation tactical radios.

─ Entering new export markets.

─ Commercialising radar technologies (mining

surveillance and sub-surface profiler).

─ Increase commercial portfolio through recent

acquisitions of Terra Firma Solutions and Ryonic

Robotics.

11

38%51% 50% 41%

62%49% 50% 59%

1 000 1 081100%

2016

1 505

2014 20152013

1 020

LocalExports

Revenue (Rm) split (%)

0

1

2

3

4

5

6

7

8

9

R&D as % of revenue

12

AE │RESEARCH AND DEVELOPMENT

59

79%

2012

+22%

21%

20%

86

54%

2014

74

2016

127

46%

80%

2015

64%

2013

70

36%

76%

49

2011

58%

24% 42%

Self-funded Externally funded

Total R&D spend

in Rm

APPLIED ELECTRONICS │FINANCIAL PERFORMANCE

13

1 505

1 0811 0001 020

0

200

400

600

800

1 000

1 200

1 400

1 600

201620142013 2015

Revenue (Rm)

305

181170207

0

50

100

150

200

250

300

350

2014 20152013 2016

Operating Profit (Rm)

Sustainability improved and less

lumpy earnings over the longer term

• Geographic diversification.

• Product diversification

─ Earlier life cycle products and services.

─ Increase commercial portfolio.

• Focused effort on progressing transformation.

• Continued investment into R&D.

OUTLOOK AND TRENDS

14

MINING SECTOR TRENDS

• Miners are adapting to an environment where reduced demand will lead to lower commodity prices for the foreseeable future.

• Increasing percentage of reduced capex budget allocated towards technologies that will enable greater efficiencies:

─ Automation (e.g. continuous mining, autonomous vehicles).

─ Productivity (e.g. Sensors to assess geotechnical environment, usage of equipment and location of work-force).

─ Digitisation of operations (e.g. remote monitoring centres; robotics and drones).

─ Perimeter protection and monitoring.

• Technologies deployed need to operate in remote, harsh environments, integrated into a single view of the environment.

15

Globally, 69% of mining companies

are looking at remote operation and

monitoring centres, 29% at robotics

and 27% at unmanned drones.

Source: Deloitte, Tracking the Trends 2017

0

10

20

30

40

50

60

70

80

50

55

60

65

70

75

80

85

90

95

100

105

2015 20162013 20142012

% Operating cash flow (RHS)SA mining capex

South African Mining Industry

Capital Expenditure (Rbn)

CHANGING DEFENCE MARKETS

• The defence market is becoming increasingly global.

• Defence spending is shifting from USA and European dominance to new

regions.

• Asia-Pacific and Middle East-North Africa regions are expected to become the

largest, most attractive and enduring markets growing at an annual rate of 5%

for next decade.

• Opportunities exist for niche, smaller enterprises to enter into partnerships and

collaborate with large players.

• Technology and knowledge transfer are opening up new markets.

16

ARMS IMPORTER MARKETS

17

• Major arms export

markets located in the

so-called “Golden

Crescent” from Middle

East to South East

Asia.

• Reutech companies

are already active in

many of the large

arms-importer

territories.

• Opportunities exist to

expand regionally to

adjacent countries.

SECURE COMMUNICATIONS CLUSTER

18

CREATING A SECURE COMMUNICATIONS CLUSTER

• The Omnigo and Nanoteq acquisitions have created a vertically integrated

provider of next generation tactical communication products.

• The cluster is well positioned to supply into existing long-term contracts and

complementary offshore geographies.

• These acquisitions should double earnings from this cluster in FY2017.

• R90+ million investment into a new state-of-the-art facility doubling the

capacity to supply into the multi-year Radiate contract and international

markets.

THE STRATEGIC RATIONALE

① Geographic diversification

─ Omnigo: long-term, hard currency contracts.

─ Nanoteq: world class encryption technology in demand by non-aligned states.

─ All the companies operate in complementary geographies which open new sales opportunities

and offer sales synergies.

② Complete secure communications system

─ High specification electronic sub systems.

─ Vertical integration through both Omnigo and Nanoteq.

─ Complete suite of products

• Military specification tactical communications for land, sea and air.

• Encryption technology.

20

REUTECH COMMUNICATIONS

Martin de Beer

21

02

COMPANY OVERVIEW

• A South African OEM company, established 1968 to support the need for military radio communications within the SANDF.

• Secure tactical communications is a strategic capability.

─ World class technology is sustained through continued investment in technology and product enhancement by DOD.

• Export success is derived from long-term acquisition and support to SANDF (30yrs) and established partnerships with DOD and International OEMs.

• Capabilities include design, development, manufacture and support of new technologies and products.

• Product range offers solutions for

─ Airborne, naval and land based environments.

─ Secure interoperability across all armed forces with backwards compatibility with legacy equipment.

─ Tactical, mobile and static secure radio communication systems.

• Level 1 BBBEE scorecard rating.

Regions

Southern Africa

North Africa

West/Central Africa

Northern Asia

South-Central Asia

South East Asia

Middle East

South America

MARKET PENETRATION

PRODUCT TIMELINE – 50 YEARS

• Licensed

Manufacture & ToT

of Radios

• A52, A53;A55

Manpack & B56

Appliqué

• A72 & B76 Gnd – Air

• Local development,

production and support of

ground /airborne comms

• A42 handheld, A43

Manpack, B46 vehicle

• Artillery Comms System

• ToT of MRV3,4 for

SAAF

• Dev ACR430 for

local Mirage III

• Dev, production of

ACR500 / TR2800

for SDP’s

• ACR510 new

generation

• Technology

establishment

• Product

development

• CNR system

production

1st Gen 2nd Gen 3rd Gen Airborne

1960 / 70s 1980 / 90s 2000 to date 1985 to date

CNR PRODUCT OFFERING

NEW GENERATION CNR FEATURES

Common HMI

─ Ease of operation

─ Ease of training

Common Interfaces

─ H/W & S/W

─ Ease of system integration

Common Battery pack

─ HF/VHF/UHF Manpacks

─ Built-in charger

─ Ease of support

Common Maintenance Philosophy

─ Ease of support

Software Defined Radios

─ Ease of upgrade

Built-in Link-ZA functionality

─ Ease of data integration

Customisable cryptographic module (QCMR)

─ Tamper resistant, compact flash II with total autonomy

BBBEE SCORES : 2012 – 2016

2012 Level 4

2013 Level 3

2014 Level 3

2015 Level 2

2016 Level 1

Our progress in transforming the business in South Africa is measured against the BBBEE

codes of Good Practice

• Going beyond compliance

• Committed leadership

• Partnership with all key stakeholders

• 145 Direct production staff

• 6 disabled learners

• 24 unemployed leaners, all have been absorbed

TRANSFORMATION – RADIATE Workforce

Diversity

72%

28%

MaleFemale

63%

36%

1%Black

White

Foreign

Workforce split

EMPLOYMENT EQUITY

Operators, Testers and Technicians

37%

Trainee Operator

31%

Trainee Technicians

10%

Technicians trained14%

Trained Semi-skilled Operators

8%

SUBCONTRACTING TO SMMES

BLACK OWNED SUBCONTRACTORS

11%

SUPPLIER DEVELOPMENT TO

CREATE B/F OWNED SUBCONTRACTOR

5%

REUTECH OWNED SUBCONTRACTORS

7%

OTHER SUBCONTRACTORS

13%

SPLIT OF 36% SUBCONTRACTING

TRANSFORMATION – ED ENTERPRISE DEVELOPMENT

• ED agreement with start up Black owned company

Commercial Editt.

• Provide portable network & training solution to assist teachers

and learners in rural schools.

• Reutech Communications engineers assisted in the design

development of charging trolley for these tablet PCs.

• Commercial Editt is finalising agreements with Department of

Education to do roll out in 50 x rural schools.

• Initiative between Philangethemba Trust and RC in the

Molweni valley (~ 6km from Reutech).

• It is situated at the Tholulwazi High School and has

been in operation since 2013.

• Dramatic improvement in Matric results.

• Assist learners on maths and science studies.

• Additional Centre opened at Lamula Primary School in

September 2016.

TRANSFORMATION – SED SOCIAL ECONOMIC DEVELOPMENT

OMNIGORieel Schonfeldt

32

04

BACKGROUND

• We started out as a micro enterprise (Factum Electronics) in the 1980’s.

Omnigo was founded in 1999 as a joint venture between Grintek and Factum.

• Omnigo is now a wholly owned Reutech company.

• Omnigo currently employs 200+ people.

• Based in Pretoria in a 4 500m2 facility.

• Our focus is on the manufacturing of Printed Circuit board assemblies and sub-

assemblies for the Aerospace & Defence and industrial industries.

PRODUCTS AND SERVICES

• Omnigo provides a complete Turnkey Electronic Manufacturing service to

Customer’s design, which entails:

─ Procurement of components, the manufacture / population, test, stress screening of PCA’s and

sub-assemblies.

• Other services include product industrialisation and environmental

qualification.

PRODUCT APPLICATION

• We allow Customers to focus on their core business

• Our assemblies form a core part of the electronics of a variety of different

products.

OUR TECHNOLOGY

• Surface-Mount Technology (SMT) lines.

• Selective Solder and Wave Solder lines.

• AOI and X-ray Inspection.

• Refined production process with over 30 years of experience.

CAPABILITIES

• Placements as small as 1 005 packages.

• Total capacity of 236 000 components per hour.

• Average of 50 000 PCB assemblies per month.

• Value added capabilities

─ Test Facility.

─ Industrialisation.

─ Coil Winding.

─ Reworks.

MARKETS AND CAPACITY

• Business operates within the Low Volume-High Mix environment ideally suited for Aerospace and Defence sector.

• Turnover 50% direct export, with 30% of local sales indirectly destined for export.

• EMS industry resolves around a trust relationship with customers.

• New markets and strong growth in local defence exporters contributed to strong growth over past 2 years which is expected to continue into the foreseeable future.

MARKETS AND CAPACITY

• Growth opportunities exists in non-traditional developed world regions and the

developed world through SA counterparts.

• Untapped potential in SA (new customers & expanded service offering).

• Significant investment in capacity and throughput speed has been made to

ensure business can capitalise on these opportunities.

ACCREDITATIONS

• IPC Manufacturing standards USA

• Armscor

• ISO 9001: 2008 Dekra

• BBBEE Level 2 Compliant

NANOTEQGerrie Venter

41

05

Welcome to the World of

Strategic Crypto Products

and Technologies

NANOTEQ THEN...

• Established in 1988.

• Private company focused on cryptographic product development.

• Initial major technology projects:

─ World-first remote control code hopping solution (Keeloq).

─ Secure pay-television solution designed (MNET).

NANOTEQ TODAY…

• Part of the JSE listed Reunert group.

• 100% South African company.

• 28 years in Strategic Information Security.

• Focused on development of cryptographic products and

solutions.

• Strategic partner to the SANDF.

• Has a product range that;

─ Offers true high-grade cryptographic solutions.

─ Allows the client to achieve full cryptographic autonomy with the least

effort.

WHAT DO WE DO?

Voice

Fax

GSM

Wi Fi

Radio

Satellite

Stored data Information in transit

HDD

Laptop

File server

Tablet

E-mail

Prevent rather than investigate

“Provide products that ensure secrets remain secret!”

PRODUCT SUITES

Voice (GSM, VoIP)

Voice/Fax (PSTN)

Links (Layer 2)

Desktop

Network (Layer 3)

Tactical Level

• State of the art Cryptographic

module suite.

• Common architecture for Central

On-line management.

• Cryptographic autonomy compliant.

• FIPS 140-2 Level C compliant.

SUPPORT OFFERING

• Cryptographic component Management System (MS)

The MS is used for the management of the various cryptographic products.

• Custom development

Through propagation of our cryptographic autonomy principal, Nanoteq is geared to engage in custom development projects our willingness to be involved in knowledge transfer and joint development projects.

• Consultation

Ensure our client’s requirements and expectations are met through seamless integration of technical architecture and solutions with operational requirements and constraints.

• Compliancy monitoring

Using a standards-based methodology, Nanoteq provides services addressing the complete security management lifecycle.

47

IN CONCLUSION: WHY NANOTEQ?

• Achievable Crypto autonomy offering

─ Solution driven based on Crypto autonomy friendly products

• Trust

─ RSA politically neutral in target markets

• Agile

─ Quick response to market changes

• Track record

─ Long-term relationship establishment

• Workforce

─ Battle proven and driven to be the best!

QUESTIONS

49

01

02

03

04

05

06

07

6

FACTORY TOUR

50