Defence and allied electronics: Reutech

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OVERVIEW

Historically, Reutech engaged only in the development and supply of defence-related products. However, in recent years the revenue streams have been broadened and Reutech has, through the use of allied technologies, successfully launched a number of commercial products and services.
 

REVENUE CONTRIBUTION

 

OPERATING PROFIT CONTRIBUTION

 
 
2013 FOCUS AREAS PERFORMANCE 2014 FOCUS AREAS
Integrate SAAB Grintek and Natcom acquisitions into Reutech Communications.
Successfully completed. Expand market positions.

Investigate partnership possibilities.

Secure additional technology funding from the state.

Secure export fuze orders.

Secure production contracts for ground communications.

Continue to grow non-defence business.
Increase mining surveillance radar penetration.
In excess of 100 radars in 17 countries over 4 years.
Secure further orders for concentrated photovoltaic-tracker solution.
Final agreements awaited for the installation of trackers in USA.
Obtain orders and commence delivery of set-top box orders.
There have been continued delays by the Department of Communication in issuing the order for the manufacture of digital set-top boxes. The tender validity has been extended to January 2014.
Secure further export
orders
for Fuchs Electronics.
Partially completed.
 
For more on our products and services visit www.reutech.co.za
 
Reutech had a stellar year, increasing revenue by 27% from R806 million to over R1 billion. Significant export orders and a weaker rand boosted operating profits by 38% to R207 million. Overall operating margins strengthened to 20%.
 
Strategies to reduce dependence on single markets and exposure to cyclical defence contracts are starting to pay off. Income from commercial products and ventures was boosted by the continued success of the movement and surveillance radar (MSR) sold to the mining industry.

The expansion of Reutech’s product range and growing market share has positioned the segment for growth. Reutech has a base load of products in production and a strong order book for the 2014 financial year.

Continued research and development remains critical to the future of Reutech. A total of R70,7 million was spent in this area during the current financial year, of which R55,3 million was funded by customers, including continued capital support from the South African government. The obsolescence of electronic products and technologies is constantly monitored to ensure future sustainability.

Formal mentorship and shadow programmes are being implemented at the operations to ensure the transfer of technical skills and to help meet employment equity targets over the medium term.
 
 
 
R71m RESEARCH AND DEVELOPMENT

REUTECH RADAR

The uptake of Reutech Radar’s movement and surveillance radar by open cast mines worldwide contributed to a robust performance by the division. Commercial products comprised 74% of Reutech Radar’s reported revenue. Local defence business was sluggish and structural changes were made to right-size the business for the lower demand.
 
100 MSRs IN 17 COUNTRIES
More than 100 MSR units have been installed in 17 countries over the past four years, equating to a 30% annual growth rate. Further potential exists to sell our product to mining operations in other countries. Reutech Radar continues to enhance its products and extend its product range. At least 5% of turnover is re-invested in ongoing research and development of next-generation products.

The installation of 1 550 trackers at the Touws River concentrated photovoltaic power plant is progressing well. The strength and accuracy of the renewable energy tracker has led to further certification and acceptance agreements as Soitech’s tracker supplier of choice for photovoltaic-power installations worldwide.

The development of 3D ground-based dual-band radar (DBRXL) continued in partnership with the Department of Defence, CSIR, Denel and the Universities of Stellenbosch and Cape Town. It was recently successfully tested at the Overberg Test Range, but further development funding must be secured to ensure viability.

The first assessment for ISO 14001 certification was completed and further work to embed an environmental management system is in process. A final audit is expected in June 2014.

Reutech Radar participates in the Msakh’iSizwe bursary programme aimed at addressing skills shortages in the engineering and transport sectors in the Western Cape. A group of 12 learners completed on-the-job-training and worked under the supervision of a qualified technician in the production and test team. These learners will receive their SETA approved qualifications in January 2014. This programme will be extended to include a total of 20 learners in the new financial year. The intention is to provide employment for some of these students as they complete their studies as part of Reutech Radar’s’ transformation initiatives.

Reutech Radar also supported local schools supplying much needed teaching materials and provided bursaries to three black BSc students at the University of Stellenbosch. The company improved its BBBEE rating from level 6 to level 4.

REUTECH COMMUNICATIONS

Reutech Communications had a challenging but satisfying year in which the SAAB Grintek high frequency (HF) business, acquired in 2012, was successfully integrated with the traditional medium range (VHF/UHF) communications business; ending the year with a robust order book. The HF production lines were moved from Centurion to the New Germany premises in KwaZulu-Natal.
 
Production of the new generation radio products for the SANDF will commence in 2014, following a decade of technology and product development and investment in a world-class facility. Deliveries are expected to start in 2015 and will continue over the next five to ten years. This programme will ensure the survival of the technology base and production capability.

During the past year extensive marketing to export markets secured a number of HF orders. Despite initial delays in acquiring export permits, orders were received, radios produced and delivered by year-end, contributing to increased operating profit.

A number of export clients will test prototypes of a new generation airborne radio during 2014. This radio is lighter, more compact and versatile than its predecessor and should contribute to increased sales.

A new range of radio frequency-identification (RFID) products has been developed for commercial and military customers. The new range includes both bar-code and RFID readers for inventory management and asset tracking systems. These systems integrate seamlessly with existing SAP solutions and other similar enterprise resource planning platforms. Beta testing of pilot projects are already in process and will be rolled out to a number of customers next year.

Reutech Communications retained its level 4 BBBEE rating and is aiming to improve to level 3 in the next year.

A fully-equipped computer training centre is being built in partnership with the Philangethemba Trust at the Tholulwazi Secondary School – close to the Reutech Communications premises. Pupils will enjoy the benefits of the centre during the school day while the broader community will have access to the centre in the afternoons and evenings.

Further skills development programmes are already in place to recruit young black people. This initiative will help to grow the number of operators and technicians required as production increases in the coming years.
 
NEW GENERATION RADIO
PRODUCTION TO START IN
2014
  NEW
RFID

PRODUCTS DEVELOPED

REUTECH SOLUTIONS

Reutech Solutions performed satisfactorily and started implementing its strategy to grow its customer base from primarily defence-related logistics to offering a variety of services to state-owned entities.
 
Reutech Solutions has been providing Newbridge voice and data time division multiplexer (TDM) equipment to Eskom for many years and is favourably placed to secure a contract to migrate Eskom’s existing TDM network to a new generation IP/MPLS platform when Eskom goes ahead with the upgrade. During the past year, the Network Solutions division was appointed as a channel partner for Alcatel-Lucent and Coriant, entering into strategic partnerships with leading brands such as RAD and LOOP.

In addition, the award of the Telkom contract to supply services for both Domain 3 – Indoor Service Provider (ISP) and Domain 4 – DC Power will ensure revenue growth over the forthcoming year. The envisaged expansion of the defence force’s static strategic communications network support contract should provide further revenue growth opportunities.

Production commenced on an export contract for 54 Rogue stabilised weapon platform systems, with the first delivery scheduled for early 2014. A number of European shipyards indicated that Reutech Solutions is their preferred supplier of such stabilised weapon systems for integration on their vessels. We are optimistic that this could result in additional sales orders in the near future. Reutech Solutions’ strategic focus involves various ICT solution rollouts, in partnership with world-class international partners, for the bus rapid transport system throughout South Africa.

During the past year, a 75 kilowatt peak (kWp) renewable solar energy plant was installed at the new Noordwyk Secondary School in Midrand. Further potential exists to support the Gauteng Department of Education’s initiative for green energy at all newly built schools. Reutech Solutions aims to target concentrated photovoltaic (CPV) solar energy installations, up to 28 kWp in addition to its single axis PV tracker offer.

Reutech Solutions has seen consistent improvement in its BBBEE rating and has been granted level 2 status this year. Major emphasis on social expenditure and enterprise development, which included financial assistance to subcontractors, has contributed to the current rating. In the coming year, the focus will be on skills development for own employees, trainee and learnership programmes for matriculants and newly qualified artisans, technicians and graduates.

Reutech Solutions attained OSHAS 18001: 2007 certification in the past year and has launched an initiative to complete its ISO 14001: 2004 Environmental Management Systems by September 2015.
 
75kWp
SOLAR PLANT INSTALLED
  OSHAS 18001
ATTAINED
  TELKOM
SERVICES CONTRACT AWARDED

FUCHS ELECTRONICS

Profitability remained strong during the past year as Fuchs executed existing orders at favourable exchange rates and received additional short-term orders towards year end. The prospects for significant export orders early in the new financial year are good.
 
STRONG SALES TO EUROPE
Fuchs is one of a handful of electronic fuze developers in the world and owns the intellectual property on all products produced. A wide variety of rocket, mortar and artillery fuzes were produced during the year, including some new designs. Limited-duration contract labour, which averaged 173 employees per month or 70% of the total workforce, was used over the past year to assist with the variable workload.

Current research and development includes customer-funded projects and is concentrated on new applications for the company’s technologies. A new environmental testing facility for compliance testing of products will be commissioned in 2014. Further industrialisation of products and processes will be undertaken to improve manufacturing efficiencies.

The feasibility of building a water recycling and treatment plant to significantly reduce the volume of ground water used is also being explored.

Fuchs holds a level 6 BBBEE rating.

RC&C MANUFACTURING

The RC&C Manufacturing operation made a small loss in the current year largely due to continued delays by the Department of Communication in issuing the order for the manufacture of digital set-top boxes. These boxes will form part of South Africa’s domestic terrestrial television migration from analogue to digital. The tender validity has been extended to January 2014.
 
The manufacture of set-top boxes is expected to become a significant part of the company’s manufacturing portfolio, but in the interim the factory continued assembling LCD monitors, television sets and Electrolux products. Additional work is also undertaken for Reunert partners, CBI-electric: Low Voltage and Fuchs Electronics.

Should the set-top box bid be successful, the partnership with Divitech will move to the next level where contracting and subcontracting will occur. The factory, based in Parow Cape Town, has the capacity to manufacture at least one million boxes a year.
 
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