Reunert increases debt to weather Covid-19
The electronics group has opted to pay an interim dividend, albeit at a reduced level due to Covid-19 uncertainty
Reunert has increased its debt facilities to R1bn to cushion the impact of Covid-19 on operations.
The company expects a decline in revenues as the coronavirus pandemic hits some of its businesses, especially its electrical engineering unit, which has experienced a decline in business activities.
On Tuesday, Reunert said it has “proactively strengthened its resilience in the post-coronavirus economy” by increasing its committed debt facilities to R1bn and total debt capacity to R2.1bn. Debt capacity is a measure of how much borrowing a business can realistically take on and pay back within a given timeframe.
Reunert said it is uncertain what the full damage of Covid-19 will be to its operations but in preparation it increased its debt facilities to ensure it has money on hand to weather the months ahead. Reunert had bank overdrafts and short-term borrowing facilities worth R323m at the year ended September 2019.
The group operations include the design and manufacturing of a comprehensive range of electrical conductors, cables and accessories, as well as ICT-related services for businesses.
Reunert swung into a loss of R327m for the six months to March, from profit of R377m previously, amid writedowns, including those arising from the predicted impact of the coronavirus and highly uncertain future economic conditions. It has impaired its assets by more than R50m. The group said it expects a decline in its electrical engineering business in the second half of the year.
Beyond the pandemic, the group anticipates volumes for its infrastructure operations to remain under pressures as the government’s budgets are re-allocated to fight the effect of the virus, while the private sector remains cautious with their investment plans.
Reunert, which is more than 130 years old, says the rest of its businesses, particularly its renewable energy, ICT and applied electronics units have robust business models and are serving markets that are anticipated to offer good structural growth and opportunities.
The group also said it has opted to pay an interim dividend of 65c, down from 130c in the previous period. The group cited its free cash flow-generating capacity as the reason it could pay a dividend, but at a reduced level.
Reunert’s share price was down 2.76% to R36.98 in afternoon trade on Thursday, giving the group a market capitalisation of R6.8bn. The group’s share price has fallen 49.06% so far in 2020.
With Karl Gernetzky
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