Reunert Year-end Results

12 months ended 30 September 2009

1

Salient features

Strong balance sheet

Businesses resized

Product offering rationalised

Bolt-on acquisitions

2

Salient features

Revenue R10,3 billion (6% )

Operating profit R1,1 billion (28%)

EBITDA as % of revenue from 15,2% to 12%

Cash position R1,6 billion at 30 Sep 09

Interest and dividend income up 79% to R108 million

Normalised HEPS 499,9 cents per share (21% )

Final cash dividend 188 cents per share

Total cash dividend 253 cents per share (21% )

3

Group Structure

4

InvestmentsNashua ReutechCBI-electric

Energy cables

Telecom cables

Low voltage

Medium voltage

Office automation

Mobile services

Telecommunications

Communications

Electronic fuses

Radar systems

Solutions

NSN (40%)

Business systems

Finance

Income statement

5

R Millions 2009 2008%

Change

TURNOVER 10 271 10 921 (6)

EBITDA 1 237 1 661 (26)

Depreciation (96) (87) 11

Operating Profit 1 141 1 574 (28)

Interest & Dividends 108 60 79

Profit before abnormal items 1 249 1 634 (24)

Abnormal items 299 -

Profit before taxation 1 548 1 634 (5)

Taxation (374) (487) (23)

Profit after taxation 1 174 1 148 2

Associates - 16 (100)

Minorities (9) (7) 26.76

Headline earnings adjustments 3 3 -

Headline earnings 1 168 1 160 1

Headline EPS (cents) 652 652 0

Normalised Headline EPS (cents) 500 630 (21)

EBITDA % (Before NSN commission) 12 15 (21)

Tax rate %* 27 30 (9)

Summarised balance sheet

6

R Millions 2009 2008

EMPLOYMENT OF CAPITAL

Fixed Assets 588 591

Goodwill & Investments 1 314 1 281

R C & C Finance debtors 994 1 275

Current Assets 3 072 3 620

Stock 696 980

Accounts receivable 1 666 1 935

RC&C Accounts receivable 710 682

Other Debit Balances 23

Gross Assets 5 968 6 767

Net Current Liabilities (1 770) (1 881)

Net operating Assets 4 198 4 886

CAPITAL EMPLOYED

Shareholders' Funds (4 061) (3 696)

Deferred tax liabilities (111) (176)

Long-term borrowings (14) (14)

Net Cash 1 603 782

Net R C & C Finance Borrowings (1 615) (1 782)

(4 198) (4 886)

Summarised cash flow statement

7

2009 2008

(excl movements relating to Finco receivables and borrowings) Rm Rm

EBITDA 1 237 1 661

Dividend and interest income 108 147

1 345 1 808

Decrease in inventory 293 (49)

Decrease in accounts receivable 284 (193)

Decrease in accounts payable (63) (54)

Taxation paid (478) (411)

Dividend paid (550) (569)

Capital expenditure (87) (117)

Net cash flow 744 415

Other 1 (6)

Increase in net cash and cash equivalents 745 409

% contribution to group

Revenue

R10,2 billion (FY08: R10,9 billion)

29%

62%

9%

2009

Operating profit

R1,1 billion (FY08: R1,6 billion)

36%

44%

20%

2009

8

36%58%

6%2008

46%45%

9%2008

CBI-electric

Nashua

Reutech

Seven-year performance

9

6 67

8

10

1110

0

2

4

6

8

10

122

00

3

20

04

20

05

20

06

20

07

20

08

20

09

R b

illio

n

Revenue

608

701

917

12731319

1573

1140

0

200

400

600

800

1000

1200

1400

1600

20

03

20

04

20

05

20

06

20

07

20

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09

R m

illio

n

Operating Profit

Cash generation

485 451

784

969

531

795

1 603

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2003 2004 2005 2006 2007 2008 2009

R m

illio

n

Cash on hand (excl finco)

10

Normalised HEPS

184

278

380

495

570 630

500

0

100

200

300

400

500

600

700

20

03

20

04

20

05

20

06

20

07

20

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20

09

cen

ts

Normalised headline earnings per share

2009 2008

Headline earnings 1 163.1 1 159.8

Less

NSN fair value (299.2) 0.0

Taxation effect 37.4 0.0

BEE share of headline

earnings adjustments 0.3 (0.4)

901.6 1 159.4

Net economic interest due to

BEE partners (10.0) (38.5)

Normalised headline earnings 891.6 1 120.9

11

Acquisitions

Siemens Enterprise Communications

• Acquired remaining 60% stake from Siemens Limited South Africa

• Competition Commission & Tribunal approval 29 Oct 2009

• Annual sales of about R450 million

Blue Lake Investments

• Least-cost routing

Nashua Central

• Nashua Holdings bought 60% in Nashua Central

• Major franchise

12

Nokia Siemens Networks

Commission income on comparable basis

• R97 million (31% ) from R139 million

Market share

• More competition

• Delayed benefits of merger

Reduced spending by networks

Prospects

• Unlikely to make significant progress in short term

• Further weakness likely

13

Restructuring Nashua Electronics

Panasonic

• Exited consumer electronics

• Focus on

Telecommunications

Business systems

14

CBI-electric

3 315

3 952

2 952

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2007 2008 2009

R m

illio

n

Revenue

554

675

393

0

100

200

300

400

500

600

700

800

2007 2008 2009

R m

illio

n

Operating Profit

16

Market conditions

17

Volume decrease• Reduction in residential and commercial activity

-100

-80

-60

-40

-20

0

20

40

60

80

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2002 2003 2004 2005 2006 2007 2008 2009

Building confidence: Growth in building activityResidential and non-residential contractors

Source: BER

Impact of copper price

Significant volatility during the period

R52 million in copper losses

18

20 000

24 000

28 000

32 000

36 000

40 000

44 000

48 000

52 000

56 000

60 000

64 000

68 000

72 000

76 000

80 000

84 000

88 000

Oc

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er

20

07

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20

07

Ja

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20

08

Fe

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R-v

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ton

RCP Current

Average

Energy cables

19

Total market historically R5-6 billion

Offer a complete product range

• HV, MV, LV, ACSR & special cables

• No house wire

Services

• Installation & service of MV & HV cables

Consistent improvement in market share (both sector and product)

• LV products – purchase and consolidation of Rosslyn Cables

• ACSR market share grow from zero to >20%

• Utility and industrial sectors

• Current market share in excess of 30%

Market conditions

Margin pressure

• Over capacity in manufacturing across all product groups

• Consistent import activity under favourable trade agreements and a strong rand

• Rand-copper price alignment

20

Outstanding order book

0

100

200

300

400

500

600

700

800

Sep

-08

Oct

-08

No

v-0

8

Dec

-08

Jan

-09

Feb

-09

Mar

-09

Ap

r-0

9

May

-09

Jun

-09

Jul-

09

Au

g-0

9

Sep

-09

R m

illio

n

Local order book declined by 64%• Impact of copper price

• General market decreased by 61% vs rest of sectors around 35%

• Reduction in stock holding within general market

21

Energy cables

Our response

• Reduced working capital

• Company resized for market demand to improve efficiencies

• Investment in key operational areas

– Mains

– XLPE

– Extrusion control

22

Energy cables prospects

Volumes expected to be nominally the same as the past year except for

• Improved transmission business volumes

• Increased HV & MV service offering

• Exports

• Eskom’s power station requirements

Lower cost base and improved efficiencies will improve profitability

23

Low-voltage product range

24

Market Segment M

inia

ture

cir

cuit

b

reak

ers

Eart

h le

akag

e

pro

tect

ion

Ele

ctri

city

met

eri

ng

Cir

cuit

bre

ake

rs fo

r e

qu

ipm

en

t

Surg

e p

rote

ctio

n

dev

ice

s

Mo

uld

ed

cas

e c

ircu

it

bre

ake

rs

Wir

ing

acce

sso

rie

s

Au

tom

atio

n

eq

uip

me

nt

Mo

tor

con

tro

l

Residential

Commercial

Mining

Utilities

Industrial

Original EquipmentManufacturer

Manufactured Traded

Product

Low voltage

Revenue down 15%

Volumes down by 48%

Working capital down 38%

Headcount reduced by 30%

Position in residential market strengthened

Australia contributed positively during the second semester

25

Low voltage

Weak local demand

Increased presence of low-cost products in certain markets

Effect of commodity prices on industrial projects

Leading to pressure on volumes and margins

Low voltage restructured to face challenges

Signs of stability in our more important market segments

Well positioned to return acceptable results

26

Low-voltage revenue contributions

Residential25%

Commercial15%

Industrial10%

Mining12%

Industrial Controls

11%

Other2%

Export25%

Revenue by market segment

27

North America

13%

Europe24%

Africa32%

Other3%

Australia10%

Far East18%

Export revenue by region

Low-voltage volume declinesVolumes (poles per day)

2009 2008 % Change 2010

Local

Residential & commercial property 11 970 18 782 (36%)

Mining 487 657 (26%)

Industrial 793 1 863 (57%)

Retail 4 484 6 991 (36%)

Local total (37%)

Export

Residential & commercial property 2 226 3 881 (43%)

Mining 47 44 7%

Industrial 5 889 17 476 (66%)

Retail 77 57 35%

Export total (62%)

Grand total 25 973 49 751 (48%)28

Low-voltage prospects

Market share likely to grow where base is low

• Automation

• Motor control

• Australia

Low cost products will help residential sales

• Required in some cases

Profitability of exports may increase

• Exchange rate sensitive

Lower cost base will improve profitability

29

Medium voltage

Grown three-fold past year

• Sales >R36 million

Supplied 16 power transformers

Delivered first medium-voltage switchgear panels

Strong momentum should be maintained

30

Telecom cables

50% JV with Aberdare

Estimated SA market R1,5bn - R1,7bn

Market share >50%

Customers • Telkom: copper & fibre

• MTN, Neotel: fibre

• Industry & mines: copper & fibre

Products

• 69% Copper

• 24% Fibre

• 7% Accessories

• Duct: Capex +R8 million

Telkom

43

%

Ind

ust

rial

39

%

Export18%

Revenue by market

31

Copper telecom

47%

Industrial copper

30%

Acc

esso

ries

3%

Optic fibre cable20%

Revenue by product

Accessories3%

Telecom cables prospects

Telephone copper cable demand declining

Fibre margins under constant pressure

Growing demand for projects

• Installation of fibre cables

• First installation done

Related products needed

• Ducts – manufacturing capacity added

• Received a 2-year contract from Neotel for micro-duct

• Accessories

Instrumentation cable demand related to industrial pick-up

2010 not expected to be as strong as 2009

32

Nashua

5 816

6 445

6 365

5 500

5 600

5 700

5 800

5 900

6 000

6 100

6 200

6 300

6 400

6 500

2007 2008 2009

R m

illio

n

Revenue

675 654

481

0

100

200

300

400

500

600

700

800

2007 2008 2009

R m

illio

n

Operating Profit

34

Nashua

Office automation

Telecommunications

Mobile services

Business systems

Finance

Electronics

35

Office automation

Nashua office products

• Multifunctional copiers/printers

• Storage retrieval and tracking software

• Consumables (toner, ink and paper)

• PABX

Aggressive marketing philosophy – Nashua a household name

61 outlets in Southern Africa

Franchises bought back:

• Eastern Cape, Tshwane, West Rand & Central

• 40% of total sales via own outlets

Mostly corporate customers

36

Office automation prospects

Market expected to be weak

Competitive offering

Financing to remain difficult (deals declined)

Printer sales off a low base

Channel well positioned to take more share & benefit from any uptick

Colour as % of revenue grew from 15% to 22%

37

Finance company

Asset-backed finance

Providing a service to

• Nashua

• Panasonic

• Siemens

• Other

Funding

• R700m securitisation funding (amortisation commences in 2012)

• Initially commercial paper

• Followed by matching bonds

Bad debts

• The worst is over

38

90% of lending book

Nashua Mobile

Independent Service provider

• > 700 000 subscribers

• > 80 000 broad band users

• 155 outlets

High ARPU base

Prospects

• Battle for revenues – more churn, bigger corporate discounts

• Operational efficiencies and services

• Growth may be difficult to achieve

39

Nashua Mobile

2009 2008 % Change

Contract connections for year 136 362 132 210 3.1

3G/HSDPA connections 23 198 28 782 (19.4)

Total connections 159 560 160 992 (0.9)

Closing company base 722 638 663 787 8.8

ARPU 488 472 3.4

Churn % 13.6 12.8 (6.2)

Net bad debts % turnover 1.24 1.34 7.5

Number of retail outlets 155 152 2

40

Nashua Electronics

Restructured

• Exited consumer electronics

• Cost R60 million

• R70 million cash released due to reduction in working capital

Future focus on

• Office automation and telecommunications

• Online-shop

• Estimated sales of R400 million

• The aim: 10% operating margin

41

Reutech

491

622

874

0

100

200

300

400

500

600

700

800

900

1000

2007 2008 2009

R m

illio

n

Revenue

109

137

212

0

50

100

150

200

250

2007 2008 2009

R m

illio

n

Operating profit

43

Total exports 49% of revenue

Reutech Radar Systems

• Military Radars

Local 50%

Exports 50%

• Mining surveillance radars

SA, Australia, other

Orders received from Anglo, Billiton, others

Local 10%

Exports 90%

• Set-top box developments

Design and initial testing concluded

Waiting

44

Reutech Communications

Military communications systems

Multi-mode airborne VHF/UHF radios

• Mostly exported (90%)

Ground-based VHF/UHF radios

• Exclusive to SANDF (100%)

45

Fuchs Electronics

Electronic fuses

• Land

• Naval

• Air

95% export sales

46

Reutech Solutions

Systems engineering and logistic support

• SANDF

• Telecommunications operators

• Mining industry

South Africa and rest or Africa

47

Reutech prospects

Local business will gradually increase and build up over next 3 years

Exports of airborne radios

• Stable

Exports of fuses

• Timing uncertain

48

49

Going forward

Prospects

50

Looking forward, it is our view that the economy has stabilised, although we do not expect any meaningful recovery in the short term. Actions taken to adjust to the lower volumes of the past year should have a positive impact on earnings.

The forecast financial information has not been reviewed or reported on by Reunert’s auditors.

0

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99

20

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Ce

nts

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Special

Final

Interim

Cash dividends per share

51

Statement of intent

52

Reunert will manage businesses in the services, electronics and electrical engineering sectors, supplying value added products, solutions and systems to local and international markets. Each of these businesses will remain capable of meeting the group’s objectives for sustainable growth and earnings.

We will consider investing in businesses that operate outside our historic business areas, provided that all our criteria for investment returns and growth are met.

Contact detailsCarina de Klerk

Reunert Investor Relations

carina@reunert.co.za

+27 (0)83 631 5743

+27 (0)11 517 9000

53