JSE-listed ICT and technology firm Reunert is reaping the benefits of load-shedding, with the company witnessing increased demand for its renewable energy products.
This emerged when the technology group yesterday announced its financial performance for the six months ended 31 March (H1FY23).
With a market capitalisation of over R10 billion, Reunert is an industrial group with a portfolio of 20 businesses in its electrical engineering, ICT and applied electronics segments.
In the reporting period, the company’s revenue increased 21% to R6.2 billion (H1FY22: R5.1 billion).
Segmental operating profit was up 39% to R625 million (H1FY22: R449 million); attributable earnings rose by 30% to R412 million (H1FY22: R316 million); headline earnings per share (HEPS) jumped 37% to 267c (H1FY22: 195c); and the interim dividend per share is up 11% to 83c (H1FY22: 75c).
According to the firm, Reunert’s three operating segments performed well and the earnings growth resulted from the electrical engineering and applied electronics segments delivering excellent operational performances on the back of improved demand for their products and services, and the ICT segment delivering in line with expectations.
The applied electronics segment posted a strong H1 FY23 financial performance, resulting in revenue increasing 49% to R1.6 billion (H1 FY22: R1.1 billion) and segment operating profit increasing 196% to R163 million (H1 FY22: R55 million).
Load-shedding intensity
Reunert notes growth in the applied electronics segment was driven by strong exports and the demand for its renewable energy products.
As SA experiences critical energy shortages, with Eskom implementing intensifying rolling power blackouts, businesses and households have been investing in renewable energy solutions to wean themselves from the ailing power utility.
Reunert confirms the demand for the renewable energy cluster’s products and services accelerated, particularly with the private sector seeking alternate energy sources, including storage (batteries from Blue Nova Energy) and solar PV (from TerraFirma Solutions).
“The group continues to execute its key strategic growth initiatives of investment into renewable energy, the growth of our ICT segment through acquisition, and the internationalisation of our electrical engineering and applied electronics segment income streams,” says Reunert group CEO Alan Dickson.
“In the first half, progress was made across all three initiatives. Importantly, prior year actions in renewable energy have yielded good results, as evidenced by the renewable energy revenue increasing by a healthy 38% over the prior period.
“The group finds itself well-positioned for sustained growth into the medium-term and anticipates an improved year-on-year financial result for FY23.”
Reunert adds the electrical engineering segment continued its recent growth trajectory, with a strong performance in H1 FY23 as revenue increased by 11% to R3.2 billion (H1 FY22: R2.9 billion), while operating profit increased by 44% to R218 million (H1 FY22: R151 million).
It notes the power cable businesses increased production volumes, with improved business conditions being experienced in both key markets of SA and Zambia.
Operational efficiencies delivered further reductions in unit costs and were augmented by an improved product mix, resulting in higher margins, the company explains.
The circuit breaker business increased its local market share, but its exports to the US decreased due to a combination of delays in project execution from American customers and these customers de-stocking as their supply chains recover. Margins improved and the business delivered an equivalent financial performance to the prior comparative period.
The ICT segment’s results were in line with expectations, as revenue increased by 11% to R1.4 billion (H1 FY22: R1.3 billion), while segment operating profit increased by 4% to R318 million (H1 FY22: R305 million).
The increase in segment operating profit was adversely impacted by the sale of R250 million of Quince’s lease and loan receivables book, which was deployed to acquire Etion Create, which offset an otherwise pleasing performance from the remainder of the ICT segment companies, the company explains.
Multiple brand strategy
The total workspace provider business, under the Nashua brand, benefited from its multiple brand strategy and an easing of the supply chain challenges experienced in the prior financial year, Reunert says.
These improvements enabled the business to service robust demand from its key SME customer base and product volumes improved compared to the prior comparative period.
The solutions and systems integration cluster also delivered strong period-on-period growth in operating profit, reflecting the positive progress the business continues to make, it comments.
The group is in the process of acquiring IQbusiness, subject to suspensive conditions and approval from the Competition Commission.
Reunert notes the addition of IQbusiness to the solutions and integration cluster will add technology and management consulting capability, research and insight analytics.
Together with +OneX, the businesses will enhance Reunert ICT’s position as a technology innovator in the rapidly-growing South African ICT market, it says.
Group CFO Nick Thomson says: “It is a great pleasure to present another positive set of results, particularly given the current local economic environment, which is becoming increasingly challenging. The results represent a very positive step in our progress in the execution of the group’s strategy and operational plans.”
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