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Diversification pays off for Reunert

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The Reunert Group’s diversified portfolio across different ICT operations, has helped the company deliver an improved performance for the half-year ended 31 March 2012.

Reunert released interim results yesterday which revealed a 10% increase in group revenue to R5,7-billion for the period.

This was mainly driven by the performance of subsidiary, CBI-electric, which posted a 15% increase in revenue.

“In line with a trading statement released in early May, the group’s earnings per share were 35% down, from the same period last year,” says Frost & Sullivan information and communication technologies analyst Lehlohonolo Mokenela. “However, as this resulted from an abnormal gain in 2011 from the sale of Reunert’s investment in Nokia Siemens Networks, the group’s headline earnings per share were 16% higher at 302 cents.”

Nashua, whose revenue was up 7% for the period, despite a tough competitive environment, contributed 63% to group revenues compared to 65% the year before. While the office automation unit reported higher revenue, the subsidiary’s performance was slightly dampened by a more modest growth of Nashua Mobile and Nashua Communications.

Mokenela notes that, as with other mobile operators in South Africa, Nashua Mobile is facing declining termination rates in what is becoming a fairly saturated market.

CBI-electric, however, recorded another period of double-digit growth, contributing 42% to group operating profit, despite accounting for only 30% of group revenue. Reutech also posted improved revenue and profit numbers; however, a delay in the receipt of an export order from the same period, in 2011, accounts for the magnitude of the growth in performance.

The newly-acquired ECN Telecoms, now operating as Nashua ECN, reported higher monthly VoIP traffic to 60-million minutes. In March, Reunert opened legal proceedings against the unit’s former CEO to reinforce a restraint of trade agreement upon his departure from the group. ECN was acquired for R171-million, of which R108-million accounted for goodwill. The move is expected to be an important step towards protecting that portion of Reunert’s investment in ECN.

“ECN’s expertise formed a significant portion of the payment made for the company, and Reunert will be keen to retain it,” says Mokenela.

In the long-term, Reunert can expect to leverage ECN’s expertise in converged services in order to become a major player in this market.

Reunert also declared an interim dividend of 95 cents per share.