To view the PDF file, sign up for a MySharenet subscription.

REUNERT LIMITED - Unaudited interim financial statements and cash dividend declaration for the six months ended 31 March 2019

Release Date: 27/05/2019 16:00
Code(s): RLO     PDF:  
Wrap Text
Unaudited interim financial statements and cash dividend declaration for the six months ended 31 March 2019

REUNERT LIMITED
Incorporated in the Republic of South Africa
Reg. No 1913/004355/06
Ordinary share code: RLO ISIN code: ZAE000057428
("Reunert" or "the group" or "the company")

UNAUDITED INTERIM  FINANCIAL STATEMENTS
2019
And cash dividend declaration for  the six months ended  31 March 2019

Group profile

Reunert comprises a diversified portfolio of businesses in the fields of electrical engineering, information communication technologies (ICT), and applied electronics. The group was
established in 1888, by Theodore Reunert and Otto Lenz, and has contributed to the South African economy in numerous ways. Reunert was listed on the JSE in 1948 and is included in the
industrial goods and services (electronic and electrical equipment) sector of the JSE. The group operates mainly in South Africa with minor operations in Australia, Lesotho, Mauritius,
the USA, Zambia and Zimbabwe. Reunert's offices are located in Woodmead, Johannesburg, South Africa.

Commentary

OVERVIEW
Revenue increased by 9%, from R4 841 million to R5 288 million, and operating profit increased by 8% from R567 million to R615 million. This was achieved despite a weak economic
environment in South Africa and continued subdued demand specifically in the electrical engineering segment. Profit after tax (PAT) declined by 16%, from R448 million to R377 million. The
decline in PAT was impacted by two non-recurring items:

i) During the prior period, the group successfully defended an action brought by the South African Revenue Service which allowed the group to release a R42 million tax
provision resulting in an abnormally low tax charge for that period of 21%; and
ii) In March 2019, the group disposed of its controlling shareholding in Prodoc Svenska AB (Prodoc),  the group's Swedish office automation business. The rationale for this
disposal was the consistent  low earnings from this business and the weakened strategic alignment of the business with the broader ICT segment strategy. This disposal realised a loss of
R44 million.

Adjusting PAT* for the above non-recurring items, resulted in an increase of 4% in the adjusted PAT (refer to table below), which is a more appropriate reflection of the core performance
of the group.
                                            6 Months to    6 Months to  % Change
                                          31 March 2019  31 March 2018
PAT as reported                                     377            448       (16)
Less: impact of release of tax provision              -            (42)        9
Add: loss on disposal of Prodoc                      44              -        10
Adjusted PAT*                                       421            406         4

Financial Results

Financial performance group results and  key earnings metrics  Units        6 Months to    6 Months to  % Change
                                                                          31 March 2019  31 March 2018
Revenue                                                        R million          5 288          4 841         9
Operating profit                                               R million            615            567         8
Operating margin                                               %                     12             12         -
Profit for the period                                          R million            377            448       (16)
Basic earnings per share                                       Cents                227            275       (17)
Headline earnings per share                                    Cents                253            275        (8)
Normalised headline earnings per share                         Cents                253            276        (8)

* This pro forma financial information has been prepared for illustrative purposes only in order to provide information on how the earnings adjustments highlighted have impacted on
the financial results of the group. Because of its nature, this pro forma financial information may not be a fair reflection of the group's results of operations and is not intended to
comply with the requirements of IFRS. The directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings
Requirements.

Segmental results

Electrical Engineering

Although depressed demand from key state institutions continued in the period under review, segment revenue increased by 14% from R2 431 million to R2 775 million with segment operating
income improving by 3% from R219 million to R225 million.

CBi-Electric African Cables continues to contend with low demand from Eskom and some municipalities. To counter this, this business continues to actively pursue other segments of the
cable market, although any such sales are generally at lower margins due to the type and length of cables produced.

The adverse liquidity environment in Zambia continued and limited progress was made in collecting overdue state debt by Zamefa, our Zambian power cable manufacturer. The business was
managed to preserve cash by limiting manufacturing output to cash received. Positively, the draft legislation for the new general sales tax has been published and is expected to be
promulgated this year which will result in the repeal of Value Added Tax (VAT). This should allow Zamefa to return to normal operating levels in 2020 as it should no longer be burdened by
the slow settlement of VAT refunds arising on manufacturing inputs.

Subsequent to 31 March 2019, the rapid depreciation of the Zambian Kwacha against the United States Dollar (the currency in which the majority of Zamefa's liabilities are denominated),
resulted in the technical insolvency of Zamefa. To remedy this, the group has subordinated its loan account of USD20 million in favour of Zamefa's other creditors.

Orders for copper and fibre optic telecommunication cables partially recovered from the levels experienced in 2018, which together with reduction in the base cost at CBi-electricTelecom, a
joint venture company, saw this business returning to profitability in the current reporting period.

Our circuit breaker business continued to make good progress in increasing export volumes to both Australia and the USA, thereby increasing factory throughput. The improved export
performance resulted in the company improving their year-on-year performance, notwithstanding weak local market conditions.

Information Communication Technologies

This segment increased revenue by 3% from R1 670 million to R1 722 million and operating profit by 11% from R317 million to R351 million.

The Nashua Office Automation cluster continued to progress its strategy of evolving to a 'total workspace provider' with new services forming an increasingly important part of its revenue
and profit mix. These revenues relieved some of the pressure on the lower sales of hardware units because of the prevailing economic conditions. Margins were maintained through a
combination of increased service revenue and cost control resulting in a solid performance for this business.

Our voice over internet business, Electronic Communications Network, gained a record number of new customers, which largely offset the decline in usage per customer due to the economic
environment and alternative technology offerings. To improve the operating efficiency of the business, we are migrating to a best-in-class industry standard software platform to manage the
network.

SkyWire's integration into the ICT segment is complete. Connection rates are not yet at the required rate. However, the cash generation of the business remains in line with the investment
case.

Applied Electronics

Revenue in this segment increased by 16% from R863 million to R999 million with operating profit increasing by 39% from R61 million to R85 million.

The increase in both revenue and operating profit was mainly as a result of increased exports and the recovery in our mining radar business.

The Communications business' revenue and operating profit increased substantially over the prior period. The business continued to achieve higher throughput and improved its operational
efficiencies by optimising its production lines. The second tranche of the contract for the renewal of the South African National Defence Force's tactical communication system is
currently being executed and the business was successful in securing and delivering export orders for its new range of digital tactical radios.

The fuze factory's exports increased in the period under review, although the mix of fuzes sold had a lower margin than in the prior year.

Our solar energy business continued to accelerate growth as the volume of contracts secured increased. Margins have come under some pressure as market competition increases.

The rest of the business units in the Applied Electronics segment did not materially contribute to the profit, primarily due to timing of their export contracts.

Group Cash Resources

The group continued to generate positive operating cash flow and ended the period with R426 million in net liquid resources (30 September 2018: R572 million) after payment of the final
dividend of 2018 amounting to R606 million.

New accounting standards

The group adopted IFRS:15 Revenue from Contracts with Customers and IFRS: 9 Financial Instruments with effect from 1 October 2018. The new standards did not materially impact the results for the period under review and
the transitional adjustments are set out in Note 15: changes in accounting policy.

Directorate

There were no changes to the Board during the period under review.

Prospects*

The results from the national election and the anticipated improvements that are likely to ensue, should be positive for business confidence, foreign direct and local investment and
improved management of state owned entities and municipalities. All of these factors are positive for the Reunert investment case and should result in improved economic activity as the
changes are implemented.

The exact timing of this improvement in electrical infrastructure and investment remains uncertain and accordingly, the profitability of the Electrical Engineering segment in the second
half of the financial year is expected to remain at current levels.

The ICT segment is expected to continue positively for the balance of the financial year with stronger business confidence, post national elections, hopefully creating an improved
environment for asset investment by its customers.

The Applied Electronics segment commences the second half of the financial year with strong export orders and our solar energy business should continue its growth, which should result in a
strong segment performance in the second half of the financial year.

Despite the above, the group is unlikely to match the performance of the second half of the prior financial year. However with our strong balance sheet and operational focus, we remain
well positioned to benefit from any improvement in local economic conditions.

* Any forecast financial information is the responsibility of the directors and has not been reviewed or reported on by the group's auditors.

CASH DIVIDEND

Notice is hereby given that a gross interim cash dividend No 186 of 130,0 cents per ordinary share (2018: 125,0 cents per share) has been declared by the directors for the six months
ended 31 March 2019.

The dividend has been declared from retained earnings.

A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt from, or who do not qualify for a reduced rate of withholding tax. Accordingly, for those
shareholders subject to withholding tax, the net dividend amounts to 104,0 cents per share (2018: 100,0 cents per share).

The issued share capital at the declaration date is 184 659 796 ordinary shares.

In compliance with the requirements of Strate Proprietary Limited and the Listings Requirements of the JSE Limited, the following dates are applicable:

Last date to trade (cum dividend)          Tuesday, 18 June 2019
First date of trading (ex dividend)        Wednesday, 19 June 2019
Record date                                Friday, 21 June 2019
Payment date                               Monday, 24 June 2019

Shareholders may not dematerialise or rematerialise their shares between Wednesday, 19 June 2019 and Friday, 21 June 2019, both days inclusive.

On behalf of the board

Trevor Munday        Alan Dickson                   Nick Thomson
Chairman             Chief Executive Officer        Chief Financial Officer

Sandton, 24 May 2019

CONDENSED CONSOLIDATED STATEMENT  OF PROFIT OR LOSS
For the six months ended 31 March 2019
                                                               Six months ended 31 March
R million                                               Notes                       2019         2018       %    Year ended
                                                                             (Unaudited)  (Unaudited)  change  30 September
                                                                                                                       2018
                                                                                                                  (Audited)
Revenue                                                     2                      5 288        4 841       9        10 492
EBITDA*                                                                              698          636      10         1 699
Depreciation and amortisation                                                        (83)         (69)     20          (157)
Operating profit                                            3                        615          567       8         1 542
Net interest (expense)/income and dividends                 4                         (4)           8       -            11
Loss on disposal of subsidiary                             11                        (44)           -                     -
Empowerment transactions                                    5                          -           (2)                  (42)
Share of joint ventures' and associate's profit/(loss)                                 5           (6)                   (1)
Profit before taxation                                                               572          567       1         1 510
Taxation                                                                            (195)        (119)     64          (358)
Profit for the period                                                                377          448     (16)        1 152
Profit attributable to:
Non-controlling interests                                                             11            3     267            (6)
Equity holders of Reunert                                                            366          445     (18)        1 158
Cents
Basic earnings per share                                  6,7                        227          275     (17)          717
Diluted earnings per share                                6,7                        223          270     (17)          705

* Earnings before net interest income and dividends; taxation; depreciation and amortisation; loss on disposal of subsidiary, empowerment transactions and share of joint ventures'
and associate's profit/(loss).

Other measures of earnings per share
                                                                                                                  Six months ended 31 March
Cents                                                                                                      Notes                       2019          2018       %    Year ended
                                                                                                                                (Unaudited)   (Unaudited)  change  30 September
                                                                                                                                                                           2018
                                                                                                                                                                       (Audited)
Headline earnings per share                                                                                 6, 7                        253           275      (8)          703
Diluted headline earnings  per share                                                                        6, 7                        248           270      (8)          691
Normalised headline earnings per share                                                                      6, 7                        253           276      (8)          687
Diluted normalised headline earnings per share                                                              6, 7                        248           271      (8)          675
Interim/total cash dividend per share                                                                                                   130           125       4           493
For the six months ended 31 March 2019


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2019
                                                                                       Six months ended 31 March
R million                                                                                                   2019                       2018    Year ended
                                                                                                     (Unaudited)                (Unaudited)  30 September
                                                                                                                                                     2018
                                                                                                                                                (Audited)
Profit for the period                                                                                        377                        448         1 152
Other comprehensive income, net of taxation:
Items that may be reclassified subsequently to  profit or loss                                                 5                        (62)          (65)
Gains/(losses) arising from translating the financial results of foreign subsidiaries                          2                        (40)          (23)
Translation gain/(loss) on net investment in subsidiary*                                                       3                        (22)          (42)

Total comprehensive income                                                                                   382                        386         1 087
Total comprehensive income attributable to:
Non-controlling interests                                                                                     11                         (2)           (9)
Share of profit for the period                                                                                11                          3            (6)
Share of other comprehensive income                                                                            -                         (5)           (3)
Equity holders of Reunert                                                                                    371                        388         1 096
Share of profit for the period                                                                               366                        445         1 158
Share of other comprehensive income                                                                            5                        (57)          (62)

* Translation gain/(loss) arising on the loan component of the group's net investment in a foreign subsidiary.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2019
                                                                                                                        Six months ended 31 March
R million                                                                                          Notes                       2019          2018  30 September
                                                                                                                         (Unaudited)   (Unaudited)         2018
                                                                                                                                                       (Audited)
Non-current assets
Property, plant and equipment, investment properties and intangible assets                                                    1 270         1 246         1 297
Goodwill                                                                                               8                        991         1 088         1 053
Investments and loans                                                                                                            55            61            56
Investment in joint ventures and associate                                                                                      169           153           158
Rental and finance lease receivables                                                                                          1 995         1 851         1 990
Deferred taxation                                                                                                               137           111           151
                                                                                                                              4 617         4 510         4 705
Current assets
Inventory                                                                                                                     1 567         1 372         1 461
Rental and finance lease receivables                                                                                            854           773           821
Accounts receivable and taxation                                                                                              2 401         2 256         2 694
Derivative assets                                                                                                                 4            16             7
Cash and cash equivalents                                                                                                       894         1 055           765
                                                                                                                              5 720         5 472         5 748
Total assets                                                                                                                 10 337         9 982        10 453
Equity attributable to equity holders of Reunert                                                                              7 125         6 896         7 438
Non-controlling interests                                                                                                        75            97            88
Total equity                                                                                                                  7 200         6 993         7 526
Non-current liabilities
Deferred taxation                                                                                                               141           112           156
Put option liability                                                                                   9                        125           125           120
Long-term borrowings                                                                                  10                         66            69            82
Share based payment liability                                                                                                    11             -            23
                                                                                                                                343           306           381
Current liabilities
Accounts payable, provisions and taxation                                                                                     2 314         2 095         2 270
Derivative liabilities                                                                                                           11            26            65
Bank overdrafts and short-term loans                                                                                            468           551           193
Current portion of long-term borrowings                                                               10                          1            11            18
                                                                                                                              2 794         2 683         2 546
Total equity and liabilities                                                                                                 10 337         9 982        10 453

CONDENSED CONSOLIDATED STATEMENT  OF CHANGES IN EQUITY
For the six months ended 31 March 2019
                                                                               Six months ended 31 March
R million                                                                                           2019                       2018  30 September
                                                                                              (Unaudited)                (Unaudited)         2018
                                                                                                                                         (Audited)
Share capital                                                                                        375                        365           374
Balance at the beginning of the period                                                               374                        359           359
Issue of shares                                                                                        1                          6            15
Share-based payment reserves                                                                         243                        198           256
Balance at the beginning of the period                                                               256                        176           176
Equity-settled share-based payments                                                                   26                         24            79
Shares acquired for incentive scheme                                                                 (74)                        (2)            -
Tax impact of cost of incentive shares charged to equity                                              12                          -             -
Transfer to deferred tax                                                                              (8)                         -             -
Transfer from retained earnings                                                                       31                          -             1
Equity transactions/put option with non-controlling shareholders                                    (110)                      (118)         (108)
Balance at the beginning of the period                                                              (108)                      (116)         (116)
Acquisition of businesses                                                                              -                         (2)           (3)
Partial disposal of subsidiaries                                                                      (2)                         -             -
Transfer to retained earnings                                                                          -                          -            11
Empowerment shares1                                                                                 (276)                      (276)         (276)
Treasury shares2                                                                                    (342)                      (312)         (342)
Balance at the beginning of the period                                                              (342)                      (227)         (227)
Shares bought back during the period                                                                   -                        (85)         (115)
Foreign currency translation reserves                                                                (11)                       (38)          (23)
Balance at the beginning of the period                                                               (23)                        (3)           (3)
Other comprehensive income                                                                             2                        (35)          (20)
Recycled to the statement of profit or loss on disposal of foreign subsidiary                         10                          -             -
Translation loss on net investment in foreign subsidiary                                             (39)                       (22)          (42)
Balance at the beginning of the period                                                               (42)                         -             -
Current period gain/(loss)                                                                             3                        (22)          (42)
Retained earnings                                                                                  7 285                      7 099         7 599
Balance at the beginning of the period                                                             7 599                      7 225         7 225
IFRS 9 and IFRS 15 transition                                                                        (56)                         -             -
Profit for the period attributable to equity holders  of Reunert                                     366                        445         1 158
Cash dividends declared and paid                                                                    (593)                      (571)         (772)
Transfer to reserves                                                                                 (31)                         -           (12)

Equity attributable to equity holders of Reunert                                                   7 125                      6 896         7 438

Non-controlling interests                                                                             75                         97            88
Balance at the beginning of the period                                                                88                        105           105
IFRS 9 and IFRS 15 transition                                                                         (9)                         -             -
Share of total comprehensive income                                                                   11                         (2)           (9)
Dividends declared and paid                                                                          (13)                        (5)           (9)
Net changes in non-controlling interests                                                              (2)                        (1)            1
Total equity at end of the period                                                                  7 200                      6 993         7 526

1 This is the cost of Reunert Limited shares held by Bargenel Investments Proprietary Limited (Bargenel), a company sold by Reunert to its empowerment partner in 2007. Until the
amount owing by the empowerment partner is repaid to Reunert, Bargenel is consolidated by the group as the significant risks and rewards of ownership of the equity have not passed to the
empowerment partner.
2 Reunert shares bought back in the market and held by a subsidiary: 4 997 698 (2018: 4 604 380)  (September 2018: 4 997 698).

CONDENSED CONSOLIDATED STATEMENT  OF CASH FLOWS
For the six months ended 31 March 2019
                                                                    Six months ended 31 March
R million                                                    Notes                       2019         2018  30 September
                                                                                   (Unaudited)  (Unaudited)         2018
                                                                                                                (Audited)
EBITDA                                                                                    698          636         1 699
Decrease/(Increase) in net working capital                                                 93         (269)         (498)
Other net non-cash movements                                                               55           25           (79)
Cash generated from operations                                                            846          392         1 122
Net cash interest income and dividends                                                      1           12            20
Taxation paid                                                                            (205)        (210)         (445)
Dividends paid (including to non-controlling interests)                                  (606)        (576)         (781)
Net inflow/(outflow) from operating activities                                             36         (382)          (84)
Net outflow from investing activities                                                    (131)        (351)         (597)
Capital expenditure                                                                       (59)         (54)         (162)
Net inflow arising from disposal of businesses                                             15            -             -
Gross cash flows on acquisition of businesses                   11                          -         (227)         (228)
Increase in total rental and finance lease receivables                                    (82)        (195)         (375)
Net other investments and loans repaid/(granted)                                            1           (6)           (3)
Investments net of other capital proceeds1                                                 (6)         131           171
Net outflow from financing activities                                                     (52)         (88)          (85)
Shares issued                                                                               1            6            15
Investment in treasury shares                                                               -          (85)         (115)
Net long term borrowings raised/(repaid)                                                    9           (4)           20
Shares acquired in terms of the Conditional Share Plan                                    (74)          (2)           (2)
Net transactions with non-controlling interests                                            12           (3)           (2)
Exercise of Ryonic put option                                                               -            -            (1)

Decrease in net cash resources                                                           (147)        (821)         (766)
Net cash resources at the beginning of  the period                                        572        1 325         1 325
Net exchange translation adjustments to net cash resources2                                 1            -            13
Net cash resources at the end of the period                                               426          504           572
Cash and cash equivalents                                                                 894        1 055           765
Bank overdrafts                                                                          (175)        (344)         (126)
Short-term borrowings                                                                    (293)        (207)          (67)
Net cash resources at the end of the period                                               426          504           572

1 In the prior period, this includes a withdrawal from investments in long-dated money market instruments (September 2018: R130 million).
2 In March 2018, these effects were insignificant.

CONDENSED SEGMENTAL ANALYSIS
At 31 March 2019
                                                                                               Six months ended 31 March
R million                                                                                                           2019         %         2018         %       %    Year ended         %
                                                                                                             (Unaudited)  of total  (Unaudited)  of total  change  30 September  of total
                                                                                                                                                                           2018
                                                                                                                                                                      (Audited)
Revenue1
Electrical Engineering                                                                                             2 775        51        2 431        49      14         5 139        48
ICT                                                                                                                1 722        31        1 670        34       3         3 443        32
Applied Electronics                                                                                                  999        18          863        17      16         2 198        20
Other                                                                                                                (21)        -            5         -                    15         -
Total segment revenue                                                                                              5 475       100        4 969       100      10        10 795       100
Revenue from equity accounted joint venture  in Electrical Engineering segment                                      (170)                  (114)                           (271)
Revenue from equity accounted associate in ICT segment                                                               (14)                   (14)                            (29)
Revenue from equity accounted joint venture  in Other segment                                                         (3)                     -                              (3)
Revenue as reported                                                                                                5 288                  4 841                 9        10 492
Operating profit
Electrical Engineering                                                                                               225        36          219        39       3           440        29
ICT2                                                                                                                 351        56          317        57      11           792        51
Applied Electronics                                                                                                   85        14           61        11      39           380        25
Other                                                                                                                (38)       (6)         (38)       (7)      -           (73)       (5)
Total segment  operating profit                                                                                      623       100          559       100      11         1 539       100
Operating (profit)/loss from equity accounted joint venture in Electrical Engineering segment                         (4)                     9                               9
Operating profit from equity accounted associate in ICT segment                                                       (2)                    (1)                             (3)
Operating profit from equity accounted joint venture in Other segment                                                 (2)                     -                              (3)
Operating profit  as reported                                                                                        615                    567                 8         1 542

1 Inter-segment revenue is immaterial and has not been separately disclosed.
2 The net interest charged on group funding provided to the group's in-house finance operation has been eliminated in line with the consolidation principles of IFRS. This interest
amounted to R82 million  (March 2018: R70 million) (September 2018: R146 million). Should this operation be externally funded, this  would result in a reduction of ICT's operating profit
by the quantum of the interest paid.

                                Six months ended 31 March
R million                                            2019         %         2018         %    Year ended         %
                                              (Unaudited)  of total  (Unaudited)  of total  30 September  of total
                                                                                                    2018
                                                                                            (Audited)
Total assets
Electrical Engineering                              3 340        32        2 869        29         2 978        28
ICT                                                 4 592        45        4 490        45         4 662        45
Applied Electronics                                 2 054        20        1 970        20         2 443        23
Other1                                                351         3          653         6           370         4
Total assets as reported2                          10 337       100        9 982       100        10 453       100
Total liabilities
Electrical Engineering                              1 292        41          913        30         1 105        38
ICT                                                   767        24        1 034        35           845        29
Applied Electronics                                   840        27          736        25           807        27
Other                                                 238         8          306        10           170         6
Total liabilities as reported2                      3 137       100        2 989       100         2 927       100

1 In March 2019 and September 2018 this comprises mainly of properties. In March 2018 it comprised of both group treasury cash balances and properties.
2 Intercompany receivables, payables and loans have been eliminated in line with the consolidation principles of IFRS.

1 Basis of preparation

This unaudited interim financial report has been prepared in accordance with the framework concepts and the recognition and measurement requirements of International Financial Reporting
Standards (IFRS) in effect for the group at 1 October 2018, and further complies with the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committees and the
Financial Reporting pronouncements as issued by the Financial Reporting Standards Council. This interim financial report was prepared using the information as required by IAS 34 - Interim
Financial Reporting, and complies with the Listings Requirements of the JSE Limited and the requirements of the Companies Act, No 71 of 2008, of South Africa. This report was compiled
under the supervision of NA Thomson CA(SA) (chief financial officer).

The group's accounting policies applied for the six-month period ended 31 March 2019, were consistent with those applied in the prior financial year's audited consolidated annual
financial statements, except for the impact of the first time adoption of IFRS 15: Revenue from Contracts with Customers and IFRS 9: Financial Instruments, the impact of which is set out
in Note 15. These accounting policies comply with IFRS.

                                                           Six months ended 31 March
R million                                                                       2019         2018  30 September
                                                                         (Unaudited)  (Unaudited)          2018
                                                                                                      (Audited)
2  Revenue
   Revenue from contracts with customers
   Sale of goods                                                               4 467        3 680         8 243
   Services                                                                      465          726         1 488
   Contract revenue                                                              103          104           302
   Other
   Interest received on lease receivables                                        209          184           379
   Rental and other revenue                                                       44          147            80
   Total                                                                       5 288        4 841        10 492
   The Electrical Engineering segment earned the majority
   of its revenue in the sale of goods and services
   categories. The ICT segment earned revenue in each
   of the above categories. The

   Applied Electronics segment earned revenue in each
   category except for interest. Refer to the segmental
   analysis, for a disaggregation of the revenue contribution
   by each segment.
   On adoption of IFRS 15 Revenue from Contracts with
   Customers, the revenue recognition relating to contracts
   and services has changed. Refer to Note 15.

                                                              Six months ended 31 March
R million                                                                          2019         2018  30 September
                                                                            (Unaudited)  (Unaudited)          2018
                                                                                                         (Audited)
3  Operating profit
   Operating profit includes:
   - Cost of sales (excluding depreciation and amortisation)                3 653  3 323  6 999
   - Other expenses (excluding depreciation  and amortisation)                963    903  1 976
   - Other income                                                              26     21     82
   - Fair value gain on contingent consideration*                               -      -    100
   - Depreciation and amortisation**                                           83     69    157
   Included in other expenses above are:
   - Realised loss on foreign exchange and derivative instruments             (11)   (10)   (99)
   - Unrealised gain/(loss) on foreign exchange and derivative instruments     23    (11)    21
   - Auditors' remuneration                                                    14     13     25

* For March 2019 and 2018, these amounts have been
included in other income above due to their immateriality.
September 2018 includes routine movements of R23 million and a non
routine movement of R77 million arising from SkyWire.
** Depreciation and amortisation allocated to cost
of sales in gross margin calculations is R30 million  (2018: R27 million)
(September 2018: R51 million). Depreciation and
amortisation allocated to other  expenses is R53 million (2018: R42 million)
(September 2018: R106 million).

                                                  Six months ended 31 March
R million                                                              2019         2018  30 September
                                                                (Unaudited)  (Unaudited)          2018
                                                                                             (Audited)
4  Net interest income and dividends
   Interest income and dividends                                         23           31            60
   Interest expense                                                     (22)         (19)          (40)
   Interest on unwinding of put option liability                         (5)          (4)           (9)
   Total                                                                 (4)           8            11

                                                          Six months ended 31 March
R million                                                                      2019         2018  30 September
                                                                        (Unaudited)  (Unaudited)          2018
                                                                                                     (Audited)
5  Empowerment transactions
   IFRS 2 share-based payment cost of BBBEE transactions                          -            -            32
   Professional costs related to BBBEE transactions                               -            2            10
   Taxation thereon                                                               -            -             -
   Net empowerment transactions after taxation                                    -            2            42

6  Number of shares and earnings used to calculate earnings per share1
   Weighted average number of shares in issue, net of empowerment and treasury
   shares, used to determine basic earnings, headline earnings and normalised
   headline earnings per share
  (millions of shares)                                                          161          162           161
   Adjusted by the dilutive effect of unexercised share options granted
  (millions of shares)                                                            3            3             3
   Weighted average number of shares used to determine diluted basic,
headline and normalised headline earnings per share  (millions of shares)       164          165           164

1 The earnings used to determine earnings per share and diluted earnings per share
is the profit for the  period attributable to equity holders of Reunert, as per the statement of
profit or loss, of R366 million  (2018: R445 million) (September 2018: R1 158 million).
                                                                                                                                           Six months ended 31 March
R million                                                                                                                                      2019         2018  30 September
                                                                                                                                         (Unaudited)  (Unaudited)         2018
                                                                                                                                                                      (Audited)
7  Headline earnings
7.1  Headline earnings
     Profit attributable to equity holders of Reunert                                                                                           366          445         1 158
     Headline earnings are determined by eliminating the effect of the following items from  attributable earnings:
     Net loss on disposal of subsidiary (after a tax charge of Rnil) (2018 Rnil) (September 2018 charge of Rnil)                                 44            -             -
     Net gain on disposal of assets (after a tax  charge of R1 million and non-controlling interest (NCI) portion of Rnil)
    (2018: tax and NCI of Rnil) (September 2018: tax charge of R5 million
     and NCI of Rnil)                                                                                                                            (2)           -           (23)

     Headline earnings#                                                                                                                         408          445         1 135

 7.2 Normalised headline earnings
     Normalised headline earnings are determined  by eliminating the effect of the following items from headline earnings:
     Empowerment Transactions                                                                                                                     -            2            42
     Once-off IFRS 2 share based payment cost of BBBEE transactions (tax and NCI of Rnil)  (March and September 2018: tax and NCI of Rnil)        -            -            32
     Professional fees for BBBEE transactions (tax and NCI of Rnil) (March and September 2018:  tax and NCI of Rnil)                              -            2            10
     Acquisition transactions                                                                                                                     -            -           (68)
     Recurring professional fees for acquisitions (tax and NCI of Rnil) (March and September 2018:  tax and NCI of Rnil)                          -            -             9
     Once-off contingent consideration fair value remeasurement (tax and NCI of Rnil) (March  and September 2018: tax and NCI of Rnil)*           -            -           (77)*

     Normalised headline earnings                                                                                                               408          447         1 109

# The pro forma financial information above has been prepared for illustrative
 purposes only to provide information on how the normalised earnings adjustments might have
impacted on the financial results of the group. Because of its nature, the pro forma financial
information may not be a fair reflection of the group's results of operations, financial
position, changes in equity or cash flows.

The pro forma financial effects have been prepared in a manner consistent in all respects with IFRS,
the accounting policies adopted by Reunert Limited as at 30 September 2018, the revised SAICA guide on pro forma 
financial information and the Listings Requirements of the JSE Limited.

There are no post balance sheet events that necessitate adjustment to the pro forma financial information.

The directors are responsible for compiling the pro forma financial information on the basis of the applicable
criteria specified in the JSE Listings Requirements.

*In respect of the SkyWire acquisition in 2018.
                                                                   Six months ended 31 March
                                                        R million                       2019        2018  30 September
                                                                                 (Unaudited)  (Unaudited)         2018
                                                                                                              (Audited)
8 Goodwill
  Carrying value at the beginning of the period                                       1 053          921           921
  Acquisition of businesses                                                               -          183           146
  Disposal of business (Note 11)                                                        (62)           -             -
  Exchange differences on consolidation of  foreign subsidiaries                          -          (16)          (14)
  Carrying value at the end of the period                                               991        1 088         1 053


                                                                       Six months ended 31 March
R million                                                                      2019         2018   30 September
                                                                         (Unaudited)  (Unaudited)          2018
                                                                                                       (Audited)
9  Put option liability
   As part of the Terra Firma and Ryonic acquisitions,
   the group granted put options in favour of the
   non-controlling shareholders for 25% of the issued share capital.
   A reconciliation of the closing balance is  as below:
   Balance at the beginning of the period                                       120          121           121
   Fair value remeasurements                                                      -            -            (9)
   Payment to option holder (Ryonic)                                              -            -            (1)
   Unwinding of discount                                                          5            4             9
   Balance at the end of the period                                             125          125           120

The obligations were classified as level 3 instruments in the fair value hierarchy.
The Terra Firma obligation represents the fair value of the put option liability which has been determined
using a discounted cash flow valuation technique based on the multiples
stipulated in the sales and purchase agreement. Significant unobservable inputs include:

- The 2020 forecast revenue and net profit after tax (NPAT) have been used. These forecasts are based on management's
  best estimate of the revenue and NPAT likely to be achieved in 2020.
- The earnings multiples are as stipulated in the sales and purchase agreement.
- The discount rate applied was 8.25%, being the average cost of borrowing.

If the key unobservable inputs to the valuation model being estimated were 1% higher/lower while all
the other variables were held constant, the carrying amount of the put option
liabilities would decrease/increase by R2 million respectively.

During the prior financial year the Ryonic put obligation was re-negotiated and settled.

                                                            Six months ended 31 March
R million                                                                        2019         2018  30 September
                                                                          (Unaudited)   (Unaudited)          2018
                                                                                                       (Audited)
10  Long-term borrowings
    Total long-term borrowings (including  finance leases)                         67           80           100
    Less: short-term portion (including  finance leases)                           (1)         (11)          (18)
                                                                                   66           69*            82

*Included in March 2018 is a share based payment liability of R15 million. From September 2018
this liability has been separately disclosed on the balance sheet.

R million                                                                                                       2019
                                                                                                          (Unaudited)
11  Disposal of business
    During the current period the group made the following disposal:
    Prodoc Svenska AB: With effect from 26 March 2019 the net assets and business of Prodoc Svenska AB,
    were sold at the fair value less cost to sell of R37 million.
    Net assets disposed:
    Property, plant and equipment and intangible assets                                                            4
    Goodwill                                                                                                      62
    Rental and finance lease receivables                                                                          26
    Inventory                                                                                                     32
    Deferred tax                                                                                                   2
    Trade and sundry receivables                                                                                  79
    Trade and sundry payables                                                                                   (102)
    Foreign currency translation reserve                                                                          10
    Non controlling interests                                                                                    (13)
    Long term borrowings                                                                                         (26)
    Short term portion of long term borrowings                                                                   (15)
    Book value of net assets disposed of                                                                          59
    Consideration received:                                                                                       15
    Cash received on sale                                                                                         37
    Less: cash on hand                                                                                           (22)
    Loss on sale of business (net of taxation of Rnil)                                                            44

2018
The group made no disposals in the prior period.


12 Unconsolidated subsidiary
   The financial results of Cafca Limited (Cafca), a 70% owned subsidiary of the company incorporated
   in Zimbabwe, have not been consolidated into the group results as the group does not
   exercise management control because it does not have the ability to affect its variable returns
   through its powers over Cafca. This is supported by:
   Reunert having not appointed a majority of the directors to the board of directors of Cafca and
   therefore does not control the board; and
   The difficult economic circumstances in Zimbabwe have resulted in an ongoing liquidity constraint
   which impairs Reunert's ability to repatriate the economic benefits from Cafca (eg
   dividends).

The amounts involved are not material to the group's results. At 31 March 2019, Cafca's share capital
and reserves amounted to USD17 million (March 2018: USD17 million).
                                 
13  Related party transactions
    R million                                                                                              Relationship               Sales  Purchases     Lease   Treasury  Amount
    Counterparty                                                                                                                                        payments     shares owed to
                                                                                                                                                                            related
                                                                                                                                                                            parties
   All related-party transactions, trading account and loan balances are on the same terms and conditions
   as those with non-related parties.
   March 2019
   CBi-electricTelecom  Cables Proprietary Limited                                                         A joint venture                1         30         -         -        7
   Oxirostax Proprietary Limited (Nashua Winelands)                                                        An associate                   8          -         -         -        1
   Bargenel Investments Proprietary Limited                                                                Owns 18,5m Reunert shares      -          -         -       276        -
   Lexshell 661 Investment Proprietary Limited                                                             A joint venture                -          -         5         -        7
   March 2018
   CBi-electricTelecom  Cables Proprietary Limited                                                         A joint venture                -          1         -         -        -
   Oxirostax Proprietary Limited (Nashua Winelands)                                                        An associate                   8          5         -         -        -
   Bargenel Investments Proprietary Limited                                                                Owns 18,5m Reunert shares      -          -         -       276        -
   Lexshell 661 Investment Proprietary Limited                                                             A joint venture                -          -         -         -        -

   September 2018
   CBi-electricTelecom  Cables Proprietary Limited                                                         A joint venture                2          5         -         -        -
   Oxirostax Proprietary Limited (Nashua Winelands)                                                        An associate                  16          2         -         -        -
   Bargenel Investments Proprietary Limited                                                                Owns 18,5m Reunert shares      -          -         -       276        -
   Lexshell 661 Investment Proprietary Limited                                                             A joint venture                -          -         5         -        4

14 Contingent purchase considerations
   As part of the acquisitions of SkyWire and Dopptech undertaken in the prior year, the group recognised
   contingent purchase considerations on these acquisitions as follows:

                                                                           Six months ended 31 March
  R million                                                                        2019         2018  30 September
                                                                             (Unaudited)  (Unaudited)         2018
                                                                                                          (Audited)
  Balance at the beginning of the period                                             37            -             -
  Transfer in from provisions1                                                        -           27            27
  Raised at acquisition at fair value (SkyWire and Dopptech)                          -          111           110
  Fair value remeasurements                                                          (2)         (11)         (100)
  Balance at the end of the period2                                                  35          127            37

1 In 2018, the Omnigo purchase consideration was transferred from provisions to the contingent consideration category under trade and other payables. The acquisition of SkyWire and
Dopptech in 2018 resulted in additional contingent consideration. Due to the nature of the amounts on acquisition of these businesses, all contingent considerations are now separately
disclosed.

2 The balance of the contingent purchase consideration have been included in 'Accounts payable, provisions and taxation' on the balance sheet.
The balance of the contingent purchase consideration relates to R17 million for Dopptech, R16 million for SkyWire and R2 million for Omnigo.

These were classified as level 3 instruments in the fair value hierarchy based on the following unobservable inputs:

For Omnigo, the fair value of the contingent purchase consideration is determined using a cash flow valuation technique and is based on earnings multiples stipulated in the purchase
agreement.

The contingent purchase consideration for Omnigo was determined as 40% of the expected excess of profit before interest and tax (PBIT) exceeding a 25% return on expected average capital
employed during the period.

The amount is assessed on an annual basis using forecasted average capital employed and PBIT.

The discount rate used is 9,1% (Jibar plus 2%).

For SkyWire, the contingent consideration is based on a defined business plan according to which the company has to achieve certain predefined strategic tasks and objectives within 12
months of the acquisition date.

The discount rate used is 9,1% (Jibar plus 2%).

For Dopptech, the contingent consideration is fixed and stipulated within the purchase agreement.

15 Change in accounting policy

IFRS 15 replaces both IAS 11 and IAS 18 as well as SIC 31, IFRIC 13, IFRIC 15 and IFRIC 18 and establishes a comprehensive framework for recognition of revenue from contracts with
customers. Revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control - at a point in time or over time - requires a
certain level of judgement.

On application of IFRS 15, the following material changes and considerations have been made:

Revenue category                                Nature of material considerations and changes in accounting policy
Contract revenue                                Due to the change in considerations for the recognition of revenue under IFRS 15, 
                                                revenue relating to certain contracts have been recognised taking into consideration an
                                                appropriate allocation of revenue to multiple performance obligations.

Service revenue                                 The adjustment includes consideration relating to time value of money, and changes in the measure of progress.
IFRS 9 - Financial Instruments

IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items.

This standard replaces IAS 39: Financial Instruments: Recognition and Measurement.

Classification and measurement of financial assets
IFRS 9 has reduced the number of categories required for classification and measurement however the adoption of IFRS 9 has not had a material impact on the group's accounting policies
related to the classification and measurement of financial assets, financial liabilities and derivative financial instruments.

Impairment of financial assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' (ECL) model. The group has 2 types of financial assets that are subject to the new ECL model:

- trade receivables; and
- rental and finance lease receivables.

The group was required to revise its impairment methodology under IFRS 9 for each of these classes of assets. The impact of the change in impairment methodology on the group's retained
earnings is disclosed below.

Trade receivables

The group applies the IFRS 9 simplified approach to measuring ECL which uses a lifetime expected loss model for all trade receivables. ECLs are calculated by applying a loss ratio to the
age analysis of trade receivables at each reporting date. The loss ratio is calculated according to the ageing/payment profile of sales by applying historic write-offs to the payment
profile of the sales population.

Trade receivable balances have been grouped so that the ECL calculation is performed on groups of receivables with similar risk characteristics and ability to pay. The historic loss ratio
is then adjusted for forward looking information to determine the ECL for the portfolio of trade receivables at the reporting date.

Rental and finance lease receivables

The group applies the IFRS 9 general approach to measuring expected credit losses which uses a 12-month expected loss allowance. This is calculated by applying a loss ratio to the balance
at each reporting date.

The loss ratio for the rental and finance lease receivables is calculated according to the ageing/payment profile by applying historic write-offs to the payment profile of the population.

The historic loss ratio is then adjusted for forward looking information to determine the ECL at the reporting date to the extent that there is a strong correlation between the forward
looking information and the ECL.

Critical accounting judgements and assumptions

The ECL for financial assets is based on assumptions about risk of default and expected loss rates. The group uses judgement in making these assumptions and selecting the input to the
impairment calculation, based on the group's past history, existing market conditions, as well as forward looking estimates at the end of each reporting period.

IFRS 15 and IFRS 9 transition

The group has applied both IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers using the modified retrospective approach, by recognising the cumulative
effect of initially applying IFRS 9 and IFRS 15 as an adjustment to the opening balance of equity at 1 October 2018.

Therefore the comparative information on the unaudited condensed group statement of financial position and unaudited condensed group statement of comprehensive income has not been
restated for the adoption of these new standards and continues to be reported under the previously applied standards.

The following table shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included.

The effect of the IFRS 9 and 15 transition on the statement of financial position is as follows:

  R million                                                     IFRS 9      IFRS 15
                                                           adjustments  adjustments
  Condensed consolidated statement  of financial position
  Non-current assets
  Rental and finance lease receivables                             (19)           -
  Deferred taxation                                                  9           13
  Current assets
  Accounts receivable and taxation                                 (20)         (20)
  Equity
  Retained earnings                                                (27)         (29)
  Non-controlling interests                                         (3)          (6)
  Current liabilities
  Accounts payable, provisions  and taxation                         -           28

During the current period the impact of IFRS 9 on the statement of profit or loss and other comprehensive income was a R16 million increase in the profit for period (R12 million net
of taxation).

16 Litigation

There is no material litigation being undertaken against or by the group. The group has made adequate provision against any cases where the group considers there are reasonable prospects
for the litigation to succeed. The group has adequate resources and good grounds to defend any litigation it is aware of. 

17 Events after reporting date

Subsequent to 31 March 2019, Zamefa, the group's Zambian energy cable manufacturer, became technically insolvent due to the rapid depreciation of the Zambian Kwacha against the United
States Dollar (the currency in which a significant portion of Zamefa's liabilities are denominated). The group continues to support Zamefa and has subordinated such portion of its USD 20m
loan to Zamefa as is required to restore the technical solvency of Zamefa in favour of Zamefa's other creditors.

ADDITIONAL INFORMATION
                                                                 Six months ended 31 March
R million (unless otherwise stated)                                                   2019         2018    Year ended
                                                                               (Unaudited)  (Unaudited)  30 September
                                                                                                                 2018
                                                                                                            (Audited)
Current ratio (:1)                                                                     2,0          2,0           2,3
Quick ratio (:1)                                                                       1,5          1,5           1,7
Dividend Yield (%)*                                                                    7,0          6,4           6,5
Return on capital employed (%)                                                        16,3         15,5          19,5
Net number of ordinary shares in issue (million)                                       161          161           161
Number of ordinary shares in issue (million)                                           185          185           185
Less: Empowerment shares (million)                                                     (19)         (19)          (19)
Less: Treasury shares (million)                                                         (5)          (5)           (5)
Capital expenditure                                                                     59           54           162
- expansion                                                                             36           32           106
- replacement                                                                           23           22            56
Capital commitments in respect of property, plant and equipment                         75           64            83
- contracted                                                                            42           43            35
- authorised not yet contracted                                                         33           21            48
Commitments in respect of operating leases                                             214          231           252
Contingent liabilities**                                                                 -            -             -

* Calculated as the total dividend (interim 130 cents per share and prior year final 368 cents per share) (2018: 125 cents and 354 cents per share) (September 2018: 125 cents and 368
cents per share) divided by a Reunert share price of 7 100 cents (2018: 7 448 cents) (September 2018: 7 600 cents), being the closing market price on 29 March 2019.
** The directors are confident that Reunert Limited and its subsidiaries have no exposure arising from the guarantees and sureties in issue, beyond the liabilities recognised in the
condensed consolidated statement of financial position at 31 March 2019.

Definitions of ratios and other financial terms are the same as those incorporated in the 2018 Integrated Report.

Administration

Directors: TS Munday (chairman)*,T Abdool-Samad*, AE Dickson (chief executive officer), JP Hulley*, SD Jagoe*, S Martin*, M Moodley, Adv NDB Orleyn**, SG Pretorius*, T Matshoba-
Ramuedzisi*, MAR Taylor, NA Thomson (chief financial officer), R Van Rooyen*
* Independent non-executive ** Non-executive

Registered office
Nashua Building
Woodmead North Office Park
54 Maxwell Drive
Woodmead, Sandton
PO Box 784391
Sandton, 2146
Telephone +27 11 517 9000

Income taxation reference number 9100/101/71/7P

Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
PO Box 61051
Marshalltown, 2107

Sponsor
One Capital Sponsor Services Proprietary Limited

Registered auditors
Deloitte & Touche

Secretaries' certification
In terms of section 88(2)(e) of the Companies Act, 71 of 2008, I, Karen Louw, duly authorised on behalf of the company secretary, Reunert Management Services Proprietary Limited
(Registration number 1980/007949/07) certify that, to the best of my knowledge and belief, the company has lodged with the Companies and Intellectual Property Commission for the six-month
period ended 31 March 2019 all such returns and notices as are required in terms of the aforesaid Act and that all such returns and notices are true and correct.

Karen Louw
for Reunert Management Services Proprietary Limited
Group Company Secretaries

Investor enquiries
Karen Smith +27 11 517 9000 or e-mail invest@reunert.co.za.

For additional information log on to the Reunert website at http://www.reunert.com.

27 May 2019 (publication date)


Date: 27/05/2019 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story