Reunert Limited

For the first half of 2026, group revenue increased marginally by 1%. Electrical Engineering revenue increased 1.5%, Applied Electronics revenue increased 5%, and ICT revenue fell 5%. Operating profit declined 23%; HEPS was 22% down at ZAR 0.53 per share, and EPS was 24% down at ZAR 0.58 per share. Electrical Engineering revenue rose to ZAR 3.5 billion, but operating profit declined 40% to ZAR 138 million. ICT operating profit increased to ZAR 321 million, while defense revenue increased to ZAR 1 billion and operating profit increased 41% to ZAR 110 million. The group generated ZAR 214 million of positive free cash flow, invested ZAR 197 million in working capital, spent ZAR 69 million on capex, and remained in a net cash, ungeared position after paying a ZAR 468 million final dividend. Management did not provide formal full-year earnings guidance, but said the second half should be more encouraging, with continued circuit breaker exports into the U.S., improved orders in Zambia after renegotiated contracts, and expectations that South African transmission-related orders will ramp up over the next couple of years; they also said Apollo Africa's first GPPA could unlock first revenues in the second half of 2026.

Anthonie de Beer said the first half was plainly disappointing, but stressed that Reunert has enough quality assets and growth options to support a stronger medium-term story. He emphasized strategic continuity, sharper execution, disciplined capital allocation, and a longer-term focus on three structural growth cycles: energy transition, AI/digitalization, and defense. His tone was candid and constructive, with repeated emphasis on realism about current weakness and confidence in the portfolio’s longer-term potential.

Mark Kathan framed the results against a weak macro backdrop in South Africa, higher copper prices, and geopolitical disruption. He pointed to modest revenue growth, a 23% operating profit decline, and HEPS/EPS of ZAR 0.53 and ZAR 0.58, while noting the non-cash share-based payment remeasurement added a ZAR 52 million income statement movement. He said the balance sheet remains strong and ungeared, free cash flow was ZAR 214 million, working capital absorbed ZAR 197 million due to copper and inventory build, and capex was kept disciplined at ZAR 69 million.

Analysts asked about defense bottlenecks, the mix of revenue from IP versus product, the defense order book duration, whether the new Europe JV could displace South African orders, the timing of electrical engineering orders, Zamefa’s pass-through of copper costs, tariff impacts in the U.S., and Quince’s competition with banks in SME funding. Management said capital is not the constraint in defense, but approvals and regulation can slow contract conversion; Alan Dickson estimated defense revenue is roughly 90% product and 10% IP, though IP is strategically critical. On electrical engineering, he said Eskom TDP orders have started and should ramp over the next couple of years, while ITP bids are likely 12 months behind. He also said Zamefa passes through copper on rod business 100% and roughly 75% of U.S. tariffs were passed on, with remaining pressure on margins, while Quince remains a strategic asset tied to Nashua’s SME base.