Reunert’s ICT segment has helped the JSE-listed group report a strong performance for the year to September 2021, with revenue up 19% and headline earnings per share (Heps) up 316%.

At the same time, the group has announced a major overhaul of its BEE deal, which, due to poorer than expected performance by the group since it was originally created, has left the empowerment investors underwater.

“The group benefited from the restructuring and productivity improvement actions implemented in 2020, which created the base for this year’s performance,” Reunert told investors on Tuesday. “The group’s companies generally managed the complex and volatile market environment extremely well to deliver solid operating performances, specifically in the ICT and Electrical Engineering segments…”

All the businesses in the ICT segment met or beat expectations, while the Electrical Engineering segment’s recovery was led by a strong performance from the circuit breaker business, which included strong export growth and improved market share in South Africa.

Group revenue was R9.6-billion, from R8-billion previously, while Heps was R4.48, up from R1.15.

In ICT, all its subsidiary businesses did well, Reunert said.

“Nashua Office Automation leveraged its strong market position and customer relationships to significantly recover in its traditional print business as well as continue its strong growth in new, complementary products and services. The Communications cluster continued to grow strongly as growth in the broadband connectivity accelerated and the general economic activity improved.”

Acquisitions

During the year, Reunert’s IT systems integration business, +OneX – founded by former EOH Holdings executive Rob Godlonton – completed two acquisitions, one in cloud hosting and the other in digital media, which “expanded its service offering alongside the existing managed services and unified communications capabilities”.

ICT segment revenue was “nominally flat” at R2.5-billion. Operating profit increased slightly to R608-million (2020: R604-million).

“Reunert expects South African macroeconomic conditions to continue to steadily improve during 2022. Accordingly, the Electrical Engineering and ICT segments should experience moderately improved market demand on the back of accelerating renewable energy infrastructure investment and the improvement in the South African economy,” it said of the group’s prospects. “The strength of the underlying businesses in these two segments position them well to continue to grow in such economic environments.”

The Peotona parties, which hold an effective indirect 3% of Reunert, will not take part in the new BEE transaction

Reunert declared a final gross cash dividend of R2.07/share, up from R1.92/share in 2020. This brings the total dividend for the year to R2.77/share, it said.

Meanwhile, Reunert announced plans to restructure and expand its black economic empowerment scheme and introduce an employee share ownership programme after the previous deal, announced in 2007, left its empowerment shareholders underwater.

Due to weaker than expected growth by Reunert, the original BEE shareholders were unable to finance the deal through dividends and share price appreciation, it explained. It blamed factors such as lower-than-expected economic growth, a “significant reduction” by government in investment in electrical infrastructure and the impact of Covid-19. “The envisaged value in relation to the original BEE transaction has not materialised,” it said.

Reunert told shareholders on Tuesday that the new transaction will see Bargenel Investments, Rebatona Investment Holdings, Julopro and the Rebatona Educational Trust participating in a restructured BEE deal.

The group implemented its original BEE transaction in 2007, which resulted in 9.5% of the then-issued Reunert ordinary shares being indirectly held by the Bahedile Trust, the Cache Trust, the Neapaugra Trust and the Selemo Trust (collectively, the “Peotona parties”). These trusts were established for the benefit of Noluthando Orleyn, Cheryl Carolus, Wendy Lucas-Bull and the late Dolly Mokgatle and their respective families. The Rebatona Trust was also part of that deal.

The Peotona parties and the Rebatona Trust hold their interests in Reunert through Rebatona, which holds all the ordinary shares in Bargenel, which in turn holds the Reunert shares. Bargenel’s today holds about 10% of Reunert shares in issue.

The Peotona parties, which hold an effective indirect 3% of Reunert, will not take part in the new BEE transaction, citing “personal reasons”. Rebatona will, prior to the implementation of the new BEE deal, repurchase all the Rebatona shares held by the Peotona parties for R9.6-million, funded by Reunert.