Reunert has a solid history of delivering good returns, lots of cash, and reasonable growth. However, some voices are saying that the company is in too many low-growth industries, that its operations are all in mature industries that will not deliver real earnings growth into the future..CEO David Rawlinson admits in this interview that this is true, but, he says, the company is taking steps to change that through acquisitions that have synergy with existing operations, but better growth prospects. Growth through acquisition is a tried and true strategy, but it will be some time before we can tell whether Reunert's particular acquisitions are going to help it move from its current ex-growth industries into exciting new spaces. – FD.GUGULETHU MFUPHI: Moving onto another company that's published its numbers today: Reunert, which has a diversified portfolio of businesses in the fields of electrical engineering, information and communication technologies, and defence and allied technologies has announced an increase of three percent in its first-half headline earnings per share. The company also saw an increase in revenue during this period. Joining us on the line now, is David Rawlinson, Chief Executive of Reunert. Thanks for joining us, David. Perhaps we could kick off here with regard to the sale of Nashua Mobile; I understand that has affected your numbers quite negatively. In comparison to Altech Autopage who are looking to grow in this market, why don't you view things the same way with Nashua?.DAVID RAWLINSON: I've looked at what Autopage's views are and they are looking at investing into different areas of the business. We've already made some of those investments. They're housed in a different business and we think it's more appropriate to grow our Nashua communications and our voice network, so we're just taking a different view. We looked at the market. We've seen the saturation. We've seen the pressure the networks are under and we also see a significant number of reduction in call rates/MTR rates, so we're just taking a different view. We felt that the offer that was made to us by the networks, would add significant shareholder value..ALEC HOGG: Yes, it's a brave step Dave, given than it was a big part of your business. Interesting to see in your commentary to the results today…you talk about making synergistic acquisitions. What areas in particular are you targeting, and when might we get news on this?.DAVID RAWLINSON: Well, in the last nine or ten months we have made a couple of small, but synergistic investments. One we made in acquiring one of our franchises, which is the biggest franchise in the biggest area that it covers in the north of Johannesburg and Sandton. In addition, we bought an office automation business, which is very similar to ours, also distributing retail products in Sweden. A small operation there, but significant with a lot of good technology..ALEC HOGG: Sweden? You said Sweden. Do you speak Swedish?.DAVID RAWLINSON: No, I don't Alec, but very fortunately, they speak English extremely well..ALEC HOGG: No, we know the last guys from South Africa who went into Sweden… In fact, the last two got a hiding if you remember: Avis didn't exactly cover themselves in glory and Old Mutual with Skandia wasn't the greatest acquisition..DAVID RAWLINSON: If we can cover Avis… Obviously, we all originally came from Barlowe, so the relationships are very good. I had quite a number of meetings with Avis to understand exactly what happened there with Avis, the circumstances, what they did, and their acquisition methodology was very different to ours. However, we did take it into consideration and we did we did take a little bit of a breath. We wanted to try to diversify and try to take our very successful model that we have here, and they actually approached us because we're part of the same region for Wiko International..GUGULETHU MFUPHI: The pay-out of your dividend as well as still splashing out on acquisitions: do you believe that your balance sheet can withstand this pressure in the long term?.DAVID RAWLINSON: Obviously, historically we've had a lot of cash and we produced a lot of cash. Our cash is currently in our finance company, which is part of our business model, is very synergistic with Nashua company, and that has grown quite significantly over the last 18 months. That balance sheet can therefore actually stand on its own, but because we have surplus cash, we actually house it at retail rates in our finance company..ALEC HOGG: When we were talking earlier to Paul Whitburn, his view – and you should take this from the investment community – is that many of your operations are now ex-growth..DAVID RAWLINSON: Yes, I think we are in a mature industry and there are certain areas, which we are targeting growth. Take for example, investment in VoIP network. That business is growing quite nicely off a small base. Our electrical engineering businesses: we invested quite significantly in growing our solutions business because the product business – we are number one – with all our competitors, to grow it further is very difficult, so we're looking at new avenues. One of them is a solution in our electrical business and the turnover's growing quite nicely. We just have to get the profitability to follow that..GUGULETHU MFUPHI: Thanks so much, David. We have to leave it there due to time pressures. That was David Rawlinson, Reunert's Chief Executive.
