Reunert (RLO) H2 2024 earnings summary

Executive summary

• Delivered strong financial growth in 2024 despite challenging South African macroeconomic conditions, with operating profit up 7% to ZAR 1.53 billion and profit for the year up 8% to ZAR 1.04 billion, underpinned by operational efficiencies and margin control.

• Integration of IQ Business into ICT, robust international Defence Cluster exports, and African power cable sales drove performance, offset by significant losses in the battery storage business due to market contraction and oversupply.

• Strategic focus on digital integration, renewable energy, and international expansion accelerated, with notable wins in public and private sector digitalization and renewable energy licensing.

• Three-year total shareholder return CAGR of 24%; share buyback of 2.3 million shares (1.2% of issue).

Financial highlights

• Revenue increased 5% year-over-year to ZAR 14.45 billion, driven by acquisitions and improved operational performance.

• Operating profit increased by 7% to ZAR 1.53 billion; profit before tax up 11% to ZAR 1.31 billion.

• Headline earnings per share rose 10% to 665 cents; total dividend increased by 10% to 366 cents per share, with a 4.5% yield.

• Free cash flow of just over ZAR 1.22 billion, maintaining a 65% EBITDA to free cash flow conversion and covering total dividend 2.1 times.

• Cash and cash equivalents increased to ZAR 1.83 billion; net cash position maintained.

Outlook and guidance

• Growth in 2025 expected, with challenges in the first half and stronger performance anticipated in the second half due to phasing of Defence contracts, high-voltage orders, and infrastructure spend.

• Battery storage business expected to return to profitability in H2 2025; normalization of supply chains and port operations factored into outlook.

• Solar energy business expected to sustain profitability; battery storage faces continued headwinds.

• Defence Cluster has 75% of 2025 target order book already secured, with strong prospects to close the gap early in the year.