Reunert earnings could drop by as much as 81.3%
DURBAN - REUNERT expects its earnings to decline by as much as 81.3 percent in the year to the end of September, hurt by the outbreak of Covid-19, impairments and under-performance in its electrical engineering segment.
As a result, the group said in a trading update on Wednesday yesterday that it expected its headline earnings per share (Heps) to decline by between 78.5 percent and 81.3 percent, to between 107 cents and 123c a share, down from last year’s Heps of 573c. Its earnings per share (Eps) were likely to decline by between 93.7 percent and 94.5 percent, to between 27c and 31c, down from 490c last year.
“The primary event is the Covid-19 pandemic. Covid-19 disrupted the company’s operations during the national lockdown and this, together with the predicted future impact of Covid-19 on the group’s businesses, gave rise to the need to raise provisions for impairments and expected credit losses in terms of the forward-looking requirements of international financial reporting standards,” Reunert said.
The group also had to contend with under-performance from the electrical engineering segment, which was primarily due to a seven-week labour disruption at African Cables in the first quarter of the 2020 financial year.
Reunert also experienced significant foreign exchange losses at Zamefa in Zambia due to the deterioration in the exchange rate of the kwacha against the dollar and weak infrastructure investment demand across the group’s key Southern African markets.
“There was a once-off abnormal credit write-off due to an external fraud perpetrated against Quince, the group’s in-house rental finance provider,” the group said.
Reunert operates three business segments: electrical engineering, applied electronics, and information and communications technology.
Reunert expected itsa core operating profit of between R824 million and R910m, which would reflect a decline of between 33.9 percent and 40.1 percent from last year’s core operating profit of R1.38 billion. The group said the core operating profit is management’s estimation of the operating profit of the group excluding the impact of items considered to be once-off in nature. “In the 2020 financial year, the core operating profit represents the segment operating profit, before the impact of the credit write-off, expected credit losses, impairments and the loss on the sale of a subsidiary,” it said.
Despite the challenges presented by Covid-19 and the lockdown measures, Reunert saw a positive turnaround in the fourth quarter, with all segments profitable during the quarter.
“The operational and financial performance of the group for the fourth quarter after the Covid-19 lockdown allowed Reunert to re-commence actions to normalise operations and has been more positive than originally anticipated,” the group said.
In the fourth quarter, the group achieved 90 percent of the core operating profit earned in the comparative quarter of the 2019 financial year.