Reunert half year profit halted by Covid-19 impact
Reunert on Thursday (18 June), reported a substantial decline in operating profit for the six months ended March 2020, lamenting that its results were adversely affected by impairments, arising from the predicted impact of the Covid-19 pandemic and the resulting highly uncertain future economic conditions.
The group said that despite these conditions, its ICT segment which includes Nashua, ECN and Skywire, delivered real growth in operating profit while the applied electronics (AE) segment performed in line with expectations.
However, the electrical engineering (EE) segment suffered material underperformance primarily as a result of a seven-week labour disruption at African Cables, significant foreign exchange losses at Zamefa in Zambia, and weak cable infrastructure investment demand across our key Southern African markets, it said.
Group revenue declined 22% to R4.1 billion, from R5.3 billion in 2019, while operating profit was down 39% to R374 million. Earnings before interest, taxes, depreciation, and amortisation dropped 29% to R493 million.
Reunert declared a dividend per share of 65 cents, down 50% from 130 cents in 2019.
ICT Segment
Reunert said that the ICT segment’s strong operational performance continued in H1FY20. Operating profit rose by 6% to R371 million, despite revenue decreasing by 13% to R1.5 billion.
The office automation cluster secured strong hardware sales as the company improved its market share.
The ‘Total Workspace Provider’ strategy continues to accelerate with the addition of Energy Solutions and PC-a-a-S revenues for the first time, which augmented existing revenue streams and resulted in an increase of 22% in complementary revenues over the corresponding period,” Reunert said.
It said that new fixed line voice sales continued to grow strongly with record new sales concluded in H1FY20.
“ECN’s diversified revenue streams of the cloud based Virtual PBX (VBX) and last mile broadband connectivity sales both continued to accelerate and augment the company’s core fixed-line voice income,” Reunert said.
Skywire’s last mile broadband connectivity sales continued to grow strongly as the investment into the network extended to 19 new urban geographies, the group said.
The electrical engineering segment’s revenue decreased by 37%, and incurred an operating loss of R42 million.
The applied electronics segment performed in line with expectations as revenue increased by 4% to R1.038 billion, while profit decreased by 9% to R77 million.
Looking ahead, the group said that the full impact of Covid-19 on the South African economy and key international export geographies remains uncertain, “but Reunert recognises that long- term socio-economic shifts to economies are likely”.
Reunert said it has pro-actively strengthened its resilience in the post Covid-19 economy by increasing its committed debt facilities to R1 billion and total debt capacity to R2.1 billion.
“The group will continue to focus on, and fund, the execution of our strategic initiatives, specifically targeting the businesses with the greatest potential to emerge strongly from the current Covid-19 crisis,” Reunert said.
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