Material issues and risks

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Senior management have identified Reunert’s material issues, which are discussed in this year’s report, following their consideration of:
 
feedback from
regular interactions
with our top 20
shareholders
strategic documents
prepared by our
business entities
topics discussed
by the
Reunert board
media coverage
on Reunert and its
businesses
feedback received
from employees,
customers and
suppliers.
 
Our material issues are closely aligned with our risks, which are described in more detail in our risk report. Strategies to address our material issues are customised for our different business units and are addressed in our operational review.
 
01
MATERIAL ISSUE
BUSINESS LANDSCAPE
   
Structural constraints in the local economy, volatile commodity prices, labour issues and unrest, together with delays in state-sponsored projects had a negative impact on Reunert’s performance in the past year.

The current trading environment is characterised by low selling price inflation, continuing cost increases, extended sales cycles and subdued customer spending.

Our businesses consequently need to develop strategies to manage resultant margin pressure and to provide sustainable growth.
 
02
MATERIAL ISSUE
SUSTAINABLE GROWTH STRATEGIES
   
A fast-changing environment, maturing industries and increased international competition demands that Reunert provides growth strategies that will ensure the sustainability of our businesses and maximise shareholder returns.

We continue to focus on aligning the business models of each of our operations to the challenges in their operating environments and competitive contexts.

Our ability to compete effectively depends on:
the pricing of our services;
adaptation to new technologies;
providing excellent customer service;
extending our offerings into new markets; and
providing more tangible solutions to our customers that complement our existing product ranges.
 
03
MATERIAL ISSUE
CASH UTILISATION
   
Our approach is to use available cash for organic growth and acquisitions that comprise complementary businesses or products within our existing industries. This will enhance earnings and value for our shareholders within acceptable risk tolerance levels.

Reunert generates cash in excess of its requirements to fund sustainability within its operations. Over the past decade we have returned R6,6 billion to shareholders via dividends and share buybacks.

Surplus cash of R1,7 billion is currently being used to fund the Quince finance book. In the year under review Quince secured an A+ credit rating from Global Credit Rating Co, which should allow for external funding of this rental book in future.
 
04
MATERIAL ISSUE
TRANSFORMATION
   
Failure to meet South Africa’s transformation objectives would have a negative impact on our growth opportunities and, with the advent of the new BBBEE codes of best practice, could result in significant penalties if targets are not achieved.

Transformation is a key strategic objective for the board and the group. We continue to drive the improvement of our employee equity profile and to invest in developing the skills of our employees.

Various strategies have been implemented to retain and mentor key staff and grow the pipeline of suitably skilled historically disadvantaged South African employees within the group. Transformation targets have been set for each operation within the group.