Good morning, ladies and gentlemen, and welcome to Reunert's half-year results presentation for the period ending 31st of March, 2023. My name is Alan Dickson, and together with Nick Thomson, our Chief Financial Officer, we will be delivering today's presentation. We are pleased to report that the H1 of 2023 reflected continued growth for the Group. An overview of our H1 performance reflects a strong improvement in our key financial metrics, progress on our strategic growth initiatives, and an increase in shareholder value. The Group's key financial metrics reflected a growth in revenue of 21% to ZAR 6.2 billion, while the segment operating profit, which we consider to be the best representation of the Group's underlying profit-generating capability, increased by 39% to ZAR 625 million.
The segment operating profit was driven specifically by strong performances from both the Electrical Engineering and the Applied Electronics segment, while the ICT segment delivered solid growth in a challenging environment. These segment performances yielded a growth in the Group's attributable earnings of 30% to ZAR 412 million, and the Group's earnings per share and headline earnings per share increased by 32 and 37%, respectively. Whilst investment into the Group's working capital was still required in the half, the free cash flow generated by the Group increased ZAR 298 million. The Group continued to execute its key strategic growth initiatives, which are our investment into renewable energy, the growth of our ICT segment through acquisition, and the internationalization of its Electrical Engineering and Applied Electronics segment income streams. In the H1, progress was made across all three initiatives.
Importantly, prior year actions in renewable energy have yielded good results, as evidenced by the renewable energy revenue increasing by a healthy 38% over the prior year. We continue to invest into our renewable energy businesses through the increased ownership of solar assets and into a suite of activities that enable the continued sustainable growth of the businesses in this high-growth environment. Investment in the ICT segment, which is focused on the Solutions and Systems Integration cluster or S&SI cluster, saw the completion of an acquisition to augment PlusOneX's offering by adding cybersecurity to their suite of services. In addition, the acquisition of a technology and management consulting company called IQbusiness has been concluded, subject to the normal suspensive conditions for a deal of this nature and the approval of the Competition Commission authorities.
The process is going quite smoothly, and we anticipate, all things being equal, that this will be completed to result in a 1st of July effective date. I'll spend a little bit more time discussing these renewable energy and ICT strategic initiatives later in the presentation. The improved key financial metrics and the progress made on the strategic initiatives have increased value for Reunert shareholders. The quality of the Group's earnings, as measured by ROCE, which we believe to be the best metric to evaluate this, increased to 15.5% and was supported by a pleasing 11% growth in dividend to ZAR 0.83 per share. The Group's operating profit results do include a ZAR 44 million payment that came in as a part payment of a COVID-19 insurance claim that has been lodged with the Group's insurers.
It also, however, includes the costs of the impact of the Group's efforts to offset the ravages of the country's load-shedding challenges. Unfortunately, the country's well-publicized load-shedding woes have escalated in the past six months. The Group's companies have had, for many years, well-tested plans that are in place, and these are able to withstand the operational challenges associated with load-shedding. During the past 6 months, the Group has been able to ensure that we have been able to serve our customer base, and the customers have not experienced any material impact. However, the costs of this have been significant, both in terms of ZAR value and additional planning that we have had to do, and several ZAR tens of millions of operational expense have been utilized by the Group so far, primarily on diesel, to offset the impact of load-shedding.
This severe electricity supply problem is symptomatic of the increasing challenges facing South African businesses and our customers today. Many of these challenges are, unfortunately, directly related to the state and the municipalities upon which we rely for basic services. We remain committed to working with our stakeholders, including the state organizations and the communities in which we operate, to alleviate these challenges. However, it would be remiss not to use this opportunity to urge the government to acknowledge its leadership responsibilities, apply meaningful direction, and undertake their role in the resolution of these challenges. As a country, we have little remaining time available for correction, and urgent and positive steps are required. I'll now hand over to Nick, who will take us through a detailed review of the financial numbers.
Good morning. It is a great pleasure to present another positive set of results, particularly given the current local and economic environment, which is becoming increasingly challenging. South Africa's expected 2023 growth in GDP and current GD FI levels reflect a country under severe economic pressure. largely due to a combination of policy uncertainty, load shedding, rising interest rates, stubborn inflation, and more recently, both currency weakness and volatility, all of which weigh on business confidence. Which is why it really is a pleasure to present results reflecting a 21% increase in group revenue and a 19% increase in segment revenue, which translate into a 47% increase in statutory operating profit before financial impairments, and a 39% increase in segment operating profit.
As we have shared in previous results, internally, we use segment revenue and segment operating profit, which excludes all non-trading items, to measure the performance and health of our various segments and their businesses. This first slide reflects the 19% increase in segment operating profit. The 2022 segment revenue includes revenue from CBI Telecom Cables, which entered into business rescue in early March 2022. No further revenue has been accounted for from this business since the date of commencement of business rescue, as the group no longer has significant influence over this business, as all decision-making resides with the business rescue practitioner. Accordingly, it is appropriate to exclude its revenue from the 2022 segment revenue, which, if adjusted for, would result in segment revenue increasing by 21%, which is in line with the growth in statutory revenue.
As you can see from the slide, there was good revenue growth generated by all three segments. Electrical Engineering's revenue increased by 11%, or ZAR 308 million. This increase all arose from the cable businesses. The 11% increase in segment revenue is therefore due to the strong growth in cable volumes, which Alan will touch on in the segment review. Revenue from the circuit breaker business was in line with that of the prior period, although the total volume of circuit breakers sold decreased slightly on the prior year. The ICT segment generated an 11% increase in revenue, or ZAR 141 million, despite the segment being the most exposed to South Africa's economic fundamentals.
Highlight of this segment's performance were the good growth in revenue from the total workspace provider business, as multifunction printers availability improved, and as a consequence of increasing market penetration, this cluster's other market offerings. PlusOneX continues to grow aggressively, albeit off a small base. The finance cluster performed in line with expectations in a rising interest rate environment, and the business was able to offset the impact of the ZAR 250 million book sale executed late in the 2022 and very early in the 2023 financial years. The communication cluster continues to attract new customers, but this customer growth was unable to offset the adverse impact of South Africa's load shedding, which resulted in low minutes being consumed by customers. As expected, the Applied Electronics segment performed well on the back of the substantial level of export orders received in 2022.
Delivery into these orders resulted in the revenue for the segment increasing by 49%, with good performance in all of the defense export business lines. The only area of weakness in these defense businesses is where there is a high dependency on the local defense market, which continues to underperform due to the reduction in local defense spending as a consequence of budget cuts. This particularly affected the segment's radio business. The defense cluster's latest acquisition, Etion Create, contributed significantly to the segment's revenue growth. The new renewable energy cluster continues to benefit from the exciting developments in this market and secured good revenue growth.
The increase of 19% in segmental revenue translated into a 39% increase in segment operating profit, with the group delivering segment operating profit of ZAR 625 million for the H1 of 2023, as against the ZAR 449 million delivered in the prior comparative period. As can be seen from the slide, Electrical Engineering segment operating profit increased by ZAR 67 million, or 44%. ICT by ZAR 13 million or 4%, which is still well in excess of GDP growth, and Applied Electronics by ZAR 108 million or 196%.
These increases in Electrical Engineering and Applied Electronics were derived from a combination of the trading margins on the increased sales, as explained on the previous slide, better factory and production recoveries due to the higher throughput or positive operating leverage, and the beneficial results of the various efficiency programs being executed at the business units. The business units also benefited from reduced logistics and freight costs and some relief in component pricing as South Africa's supply chains started to normalize. In the prior period, segment operating profit was impacted, particularly in the in the ICT and Applied Electronics segments, by limited electronic chip availability, which resulted in higher component prices, delays in completing orders, and reduced availability for products resale. For example, multi-function printers.
In the current period under review, high volume, latest generation electronic chips became more readily available than in the prior financial year as new manufacturing capacity has been brought on stream. This improved the availability of products for sale in the ICT segment and eased applied electronic supply chain challenges. Some older generation chips used in Applied Electronics products are still in short supply, as production capacity for these chips is still constrained. Positively, electronic chip pricing and lead times has also started to reflect the liberalization in the market, which has improved margins.
In ICT, the financial impact of the reduced minutes in the business communication cluster is referred to in the explanations regarding segment revenue, together with the impact of Quince's segment operating profit being flat for the period under review, resulted in this segment's overall achievement of 4% growth in segment operating profit, despite the good segment operating profit growth enjoyed by the other clusters in this segment. The increased segment operating profit of 39% translated after the impairment of financial assets into an increase of statutory operating profit of 33%, which, combined with a relatively modest investment into the group's assets in the 6 months under review, has resulted in the group's return on capital employed increasing from 12.7% in 2022 to an annualized 15.5% for the period under review.
This next slide reflects the reconciliation of segment operating profit to statutory operating profit before the impairment of financial assets. The main features of this reconciliation are: the fair value remeasurements are derived from the application of the measurement re-requirements of IFRS 9 to the put and call option contracts in place, governing the sale of the group's residual 72% interest in the group's solar business, Terra Firma. To Lumika, which is the group's renewable energy joint venture with A.P. Møller Capital. These contracts are expected to result in a sale of the 72% interest that will be effective on the 1st of October 2023. The fair value remeasurement is driven by the current cost of capital for this business, which is applied to this business's expected future cash flows to derive Terra Firma's equity value. As the...
Secondly, as the purchase consideration is denominated in U.S. dollars, the rand value of this consideration has increased, as the rand has weakened against the dollar. The difference between the calculated equity value and the higher rand purchase price has resulted in a remeasurement gain of ZAR 28 million. The difference between the ZAR 28 million for the Terra Firma put and call option contracts and the ZAR 27 million in the reconciliation, results from other minor revaluations. The second material item on this reconciliation is in respect of an insurance gain. Since the commencement of the COVID-19 pandemic, we've been working with our brokers and the loss adjusters nominated by our insurers to submit a business interruption claim for loss of profitability and business closures that arose from the COVID-19 pandemic.
In the period under review, a preliminary agreement of loss was concluded, resulting in an insurance gain of ZAR 44 million, net of the costs incurred in the preparation of the claim. We are continuing to work with our loss adjusters to complete claims for all 3 of our segments. These claims are extremely complicated, due in part to there being no physical loss on which to base the claim, such as a fire or accident, and the fine line between COVID-specific losses and a general reduction in economic activity. All of the reconciling items reflected on the schedule result in the statutory operating profit before impairment of financial assets increasing by 47% when compared to that of the prior comparative period. The statutory statement of profit or loss brings together the 3 slides we have just discussed. Statutory revenue, up 21%.
Operating profit before impairment of financial assets, up 47%. This brings us to the line annotated as item one, being the impairment of financial assets, resulting from the group's calculation of expected credit losses. This is reflected in both the impairment for financial assets and in the interest expense, which we will discuss shortly. The impairment of financial assets relates to the expected credit losses held against both the group's trading receivables and the group's lease and loan receivables book. These impairments are calculated in accordance with the requirements of IFRS 9, Financial Instruments, which requires the use of historical experience as well as appropriate forward-looking information, to assess the potential future write-off of the current receivables, if the conditions assumed prevail into the future.
This forward-looking information is influenced by the expected deterioration in the economic environment, the current high interest rates, high inflation, and low growth environment, all of which impact the credit environment and the potential for future defaults by customers. This has required an increase in the ECL against the lease and loan receivables book of ZAR 25 million, bringing the ECL up to 5.2% of this book, as against the 4.2% as at 30th of September 2022. In the case of trade receivables, the ECL increased by ZAR 24 million, resulting in an overall ECL allowance of 7.2% against the trade receivables, which is consistent with the position as of the 30th of September 2022.
What is much more positive is that despite the deteriorating credit environment, as set out in note 6 to the unaudited, condensed, consolidated, interim financial statements, the actual credit impairment for the six months amounted to an actual write-off of ZAR 2 million against the lease and loan receivables book, or a credit loss of 0.1%, and ZAR 4 million against the group's trade receivables, or a credit loss of 0.2%. The group will continue to manage its credit exposures in order to minimize the actual credit write-offs against these ECL allowances.
Item two on the slide refers to the group's interest expense, which has increased both in line with increased use of its borrowing facilities, and a significant increase in interest rates, which on a period-on-period basis, have increased from 7.75% to 11.25%, an increase of 45% in interest rates. Actual bank interest amounts to ZAR 64 million of the ZAR 74 million, with the balance representing interest implicit in the right of use rental liabilities related to the group's rented property and network assets, such as rented space on high towers. Profit for the period reflects a very pleasing increase of 32% over the comparative period, which in turn has resulted in increase in earnings per share of the same percentage.
There's been an increase of ZAR 1.1 billion in the group's total assets from ZAR 10.9 billion at 30th of September 2022, to ZAR 12.1 billion at the end of the period under review. As can be seen from the table on the right-hand side of the slide, adjusting this increase in assets for the increased cash on hand, means that the group's productive assets have increased by ZAR 1.1 billion over the last six months. This has largely been in the area of working capital assets of ZAR 441 million, necessitated by the 21% growth in revenue and the lingering supply chain constraints affecting timeous inventory resupply. With a further ZAR 380 million invested into the group's assets by acquisitions, which was largely for Etion Create.
The other category is made up mostly of small items, except for the ZAR 139 million advanced to Lumika during the period. To fund these investments, the group has increased working capital liabilities, largely from trade creditors, by ZAR 172 million, acquired trade creditors and other liabilities totaling ZAR 186 million as part of the acquisition of Etion Create and other small acquisitions during the period, and raised debt to finance renewables of ZAR 226 million. The net cash position of the group is a ZAR 2 million net borrowing position, meaning on a net basis, the group is ungeared. The group has considerable short-term banking facilities, and together with a strong balance sheet, is well-positioned to weather any further deterioration in the economic environment, and to continue to implement its strategy.
This next slide explains the cash generation and the cash utilization by the group over the six-month period ended 31 March 2023. Starting on the right-hand side of the waterfall, the group realized operating cash flow of ZAR 889 million from its operations. Of this, ZAR 324 million was invested into working capital, comprising a ZAR 207 million increase in trade receivables, resulting from a substantial increase in revenue in the Q2 of the 2023 financial year. There were large investments made into inventory, these investments were largely matched by increased creditor funding and advanced payments from customers, resulting in a net outflow of ZAR 117 million related to inventory.
After income tax and replacement capital expenditure, the group's free cash flow amounted to ZAR 298 million, of which ZAR 132 million will be used in respect to the 2023 interim dividend. The group continues to invest prudently in its property, plant, and equipment, expanding on capital in line with depreciation. The group's investing activities amount to ZAR 350 million, and comprise largely of an investment into the funding of the Quince lease and loan receivable book of ZAR 72 million, the cash consideration for Etion Create of ZAR 175 million, and a shareholder loan to Lumika of ZAR 139 million to fund the activity of this business as it rolls out its renewable strategy.
The group's financing activities comprise the raising of various loans to fund the renewable program, amounting to ZAR 234 million, offset by CSP settlements of ZAR 13 million and IFRS 16 lease commitments amounting to ZAR 47 million. As can be seen from the waterfall on the left-hand side of the slide, the group commenced the period with net cash of ZAR 359 million, and after the settlement of the final dividend of ZAR 364 million for the 2022 financial year, finished the period in a net borrowing position of ZAR 2 million.
Cash generation for the group is historically biased in favor of the H2 of the year. With a high run rate of monthly sales having been achieved in the 2Q 2023, no further investment into working capital is expected in the H2. These two factors are expected to result in positive cash generation in the H2, before the settlement of the purchase consideration due for IQbusiness. The group has invested ZAR 150 million into capital expenditure in the H1 of the 2023 financial year, spread across all three segments. Two of the lines of expenditure are increased expenditure of ZAR 18 million on the business communications cluster's last mile broadband connectivity network, and ZAR 29 million on solar plants. Both of these lines are part of the group's growth initiatives.
The balance of the expenditure is aimed at ensuring the appropriateness and reliability of the Group's productive capacity. The ZAR 30 million on building lease rights was incurred to take ownership of the lease rights in the Nashua building in Woodmead from 50% to 100%. The Group is executing various strategic initiatives at the moment that will require a level of investment. These include the ongoing investments required to build a solar portfolio in Lumika, the purchase consideration for IQbusiness, and the continued investment into the Group's operations. Much of the cash required will come from cash generation from the Group's operations. The head office team is progressing with reaching terms with our banks on medium-term bank funding and creating borrowing capacity within Quince to enable the redeployment of Reunert capital from this business.
This will ensure that we have the financial means to meet the specific financial obligations that arise from these strategic initiatives, as well as providing the financial base for the continued execution of our strategy. In conclusion, the results to the 31st of March, 2022, represent a very positive step in our progress in the execution of the Group's strategy and operational plans. With that, I will hand you back to Alan to share with us the segmental commentary and the prospects.
Thanks, Nick. Whilst the revenue and operating profit numbers are reflected in each of the segment slides I'm about to cover, the details of these half-year numbers and their prior year comparators have already been dealt with by Nick in his presentation. I will therefore not repeat them and will focus on the reasons and the drivers of the financial performance in the H1, and provide comments on the prospects for each of the segments as we move forward. The electrical engineering segment continued its recent trend of financial results. This year, as the strong cables result bolstered the segment's performance. The financial performance was underpinned by increased cable volumes in both our primary markets of South Africa and Zambia.
In South Africa, there was an uninterrupted factory performance, where last year we nominally lost a full month's production in the H1 due to the industry-wide wage negotiation strike. This uninterrupted performance, coupled to improved local market conditions, resulted in an increase in the South African cable tonnage manufactured of 25%. In Zambia, the improved business environment that has developed since the last national elections has resulted in increased economic activity. This half year, several new cable contracts were concluded, which resulted in the Zambian operation increasing their cable volumes by 59%. The Circuit Breaker company's overall production volume decreased slightly in the H1. They benefited from improved local South African market share, and they increased their sales into Europe and Australia. The U.S. market sales suffered as projects were delayed and less stock orders were placed by their channel partners.
On the manufacturing side, the segment's operational efficiencies improved across all three manufacturing facilities. There were three factors that led to this. Firstly, the COVID-19 supply chain issues continued to improve, and whilst they are not yet back to pre-COVID efficiencies, they yielded an improved raw material availability and lower freight costs at both the cable and the circuit breaker factories. Secondly, the increased volumes at the cable factories led to improved fixed cost recoveries and efficiencies at those factories. Finally, the Lean Six Sigma initiatives delivered further operational gains as the overconsumption of material was reduced. Together, these three factors resulted in positive operational leverage. Importantly, the segment's margins also improved due to the realization of the prior year circuit breaker price increases and a better cable product mix. The segment remains well-positioned, as stable cable volumes are anticipated for the rest of this financial year.
There are healthy order books at both the cable factories, and an increasing number of new renewable energy projects in South Africa are reaching financial close. The circuit breaker factory is expecting improved order receipts from both the U.S. and the European markets as new projects begin to be released and the American channel partners begin replacing stock. The South African circuit breaker demand projections remain solid, underpinned by the increased market share and an improving and accelerating renewable energy market. For many years, the factory's well-developed operational efficiency programs have delivered progress, and we expect this to continue to deliver sustained manufacturing improvements. These will be supported by good production volumes and stable labor relations. The ICT segment delivered a solid performance despite initial signs of stress emerging in its key SME market segment as the macroeconomic conditions in South Africa start to tighten.
Importantly, there was good growth in the segment's core markets, with good period-on-period improvements in segment operating profit from the total workspace provider business under the Nashua brand and the Solutions and Systems Integration cluster. The finance cluster maintained its half-year profit despite the ZAR 250 million sale of the book earlier in the financial year. The business communications cluster's growth continues to be tempered by load shedding, as Nick has described. Pleasingly, the minutes sold over the network remained stable in the H1 of this year when compared to the H2 of last year, despite much greater average load shedding occurring in the H1 of this year. Although the key SME customers that are served by the ICT segment are showing some signs of strain, the segment is expected to continue its current growth trajectory.
The market for Nashua's products and their complementary services remain robust, and the continued strong growth of PlusOneX, with new acquisitions coming on board and a strong forward order load, should yield positive ICT segment revenue growth for the rest of the financial year. As Nick has described, these businesses are supported by the Quince loan book, which remains healthy, and the ECLs that factor over this loan book have been bolstered now to represent 5.2% of the gross book value and leave it well-positioned. The segment's diversification strategy, which augments its traditional service offerings with new, rapidly growing revenues from complementary products and services, continues to yield good results across the segment. The total workspace provider and business communications clusters continue to grow their complementary revenues at accelerated levels.
Nashua, in the past year, grew theirs by 23%, which has resulted in a 4-year CAGR of 22% for these complementary revenues. They now constitute ZAR 305 million worth of revenue that is sold by the franchises to the end customer, and importantly, from which Nashua earns franchise fees. Our S&SI cluster continues growth strongly, with PlusOneX delivering a 25% period-on-period increase, which has bolstered the segment's operating profit growth. The S&SI value offering continued to be expanded, and in the H1, the acquisition of a cybersecurity capability was completed. This cybersecurity capability is a critical element for clients' digital transformation requirements, and the PlusOneX offering now nearly includes all of the capabilities required by our target market.
PlusOneX continues to secure new enterprise customers and contracts, which confirms their relevance in the market, it has increased their market share, and it underpins their growth going forward. The segment, with new acquisitions and a good market share at PlusOneX, robust traditional product and service demand, and strong complementary product and service growth, the segment is expected to continue its growth at the current recent trajectories. The Applied Electronics segment had a strong performance in the H1 of the 2023 financial year, as the demand, both in our export-focused defense businesses and renewable energy, remained positive. The primary driver of the segment's performance was the execution of the strong export order books that had been built up in the prior year.
This led to much improved performances, as all of the defense businesses were able to operate at higher capacity levels, and strong period-on-period increases were delivered at our radar, secure communications, and logistics businesses, while the Fuchs business delivered another strong performance. The higher volume of production generated positive operating leverage for the defense businesses as better cost recoveries were achieved in the factories. In addition, global supply chain challenges, specifically in the cost and availability of electronic chips, continued to ease, and the segment benefited from a stable and slightly weaker exchange rate. Etion Create was included in the segment's results for the first time. The acquisition became effective on the first of October, and a full six-month trading results are reflected in this half's financial numbers.
The integration of Etion Create into the segment has gone very well. The Etion Create leadership team have delivered an excellent performance. The company's order book remains positive, with further growth opportunities. Their performance was well ahead of the investment case. Importantly, our projections for the global geopolitical environment, which is a key demand driver for our defense businesses, continues to indicate medium-term support for the current market activity. In the H1, the segment's order book increased despite the positive sales execution. The total order book grew to ZAR 2.7 billion, compared to the closing order book at the end of last year of ZAR 2.4 billion.
This scale of order book provides significant order coverage for the segment, and in an environment in which the global supply chain no longer presents a material impediment, enables the segment to successfully execute this order book. Importantly, the segment has made good progress in diversifying its earnings by increasing the spread of the orders across a broader range of geographic, customer base, and products. This reduces our historic concentration on key customers and provides the resilience of the segment's earnings into the medium term. In the renewable energy space, the demand for the segment's renewable energy products and services, specifically solar generation through Terra Firma Solutions and storage through Blue Nova Energy, benefited from a rapidly growing demand. The storage breeze business specifically contributed meaningfully to this growth, and the volume of sales increased by 77%, as measured by the quantity of megawatt hours sold.
We anticipate that our renewable energy target market will continue to grow strongly, as intensified load shedding has resulted in a fundamental acceleration by many companies in the private sector to seek material alternative energy solutions and decouple their reliance on the national grid, both in terms of alternative energy, primarily solar, and appropriate storage. This increase in demand, however, has led to an increase in competition. Whilst demand still outstrips supply, it has led to some pressure on product margins, the availability of components, and human talent. The renewable energy strategy, which includes owning a suite of solar assets that will provide long-term security through annuity revenue, continued in the half, and the build, own, and operate portfolio, or BOO portfolio, grew to 36 megawatts.
A key focus of the segment in this H1 was to ensure that these companies can flourish in the rapidly growing markets that they participate in, and to ensure they are positioned for sustainable growth over the longer term. This has necessitated investment into facilities, human resources, and business processes to manage this expansion. The investment has, however, resulted in additional costs, with some associated margin implications into the half's result, but we are confident that the investment will ensure the long-term growth for these companies as demand for renewable energy services in South Africa continues to expand. This half year, the strategy update will focus specifically on the actions in the ICT segment and the renewable energy components of our business. During the half, Reunert ICT concluded the acquisition of IQbusiness, subject to the conditions I mentioned earlier.
The segment's strategy is to augment its strong traditional businesses of total workspace provision, business communications, and finance through the development of the solutions and systems integrations cluster, whose strategic intent is to provide digital transformation services to enterprise clients. We have built PlusOneX's value offering over the past three years. As was shown earlier, this is now a very positive position. We now augment it with the acquisition of IQbusiness, which adds technology and management consulting capabilities to our service offering. IQbusiness is the country's leading independent technology and management consulting company, with revenues in excess of ZAR 1 billion. They have a strong brand. They have been in existence and have an excellent 25-year track record and are led by a talented and experienced team.
This acquisition brings together IQbusiness's strategic client value of determining their value transformation service needs with PlusOneX's end-to-end service offering. This expands the Solutions and Systems Integration cluster's value offering and provides a notable increase in client access in both the enterprise and the SME segments. The acquistion enhances the Reunert ICT segment's ability to participate in South Africa's digital transformation service requirements, specifically in the technology and management consulting area, and the rapidly growing services of cloud, cybersecurity, and software development. Within our renewable energy businesses, as mentioned, we expect our target market to continue to grow. Our view remains that the renewable energy's growth drivers, which are primarily constrained electricity supply, poor grid reliability, and increasing electricity prices, remain fully in place, and that the market activity that we see at the moment is expected to continue into the medium and longer term.
Specifically, we do not anticipate that the private sector's decision to invest in renewable energy is likely to reverse, even if there is an improvement in Eskon supply in the medium term. As well as a rapidly growing market, the market demand is evolving as clients' expectations change to address their requirements. Key trends that were envisaged some time ago are now increasingly becoming evident. The first of these is the acceleration of the large-scale storage market. Unlike most of the recent growth in storage solutions, which was primarily directed towards small-scale load shedding prevention, the market for larger-scale storage solutions is accelerating as the private sector seek more holistic load shedding protection, which cannot be achieved by solar alone, and the benefits of arbitrage. We are also experiencing that the average size of projects are increasing as customers seek much greater independence from the grid.
These projects are increasingly including the convergence of solar generation with large-scale backup storage and other forms of energy generation, typically diesel. Finally, wheeling is becoming an increasingly interesting option for customers who are either unable to fully generate their own requirements or wish to augment their generation with alternate sources. In this rapidly growing market, the segment has invested to remain abreast of this growth, which actually, in the last 12 months, has probably grown faster than many of us had anticipated. This required investment has been into the acquiring and retention of skilled talent, and generally, there is insufficient skills across the segment to support the full growth. It has been investment into new business systems, which enable us to manage the scale of the projects that we are now involved in.
It is investment into the IP associated with the evolution of the technology to meet customer demands. Finally, there's been investment into new facilities. Specifically, we have recently commissioned Blue Nova's new building, which brings all operations under a single roof and has the capacity to meet the market's growing demands. Importantly, the Reunert renewable energy ecosystem that we've described in last year's year-end results presentation enables us to actively address these changing market's needs, and the recent investments that we've made will ensure that we retain our leading position in the C&I market vertical, which is evidenced through a number of increasing firsts that have been secured by the businesses. These include the largest combined solar, PV, and battery system in South Africa that was commissioned in the Q1 of this year, and a suite of innovative financial solutions to meet diverse customer expectations.
Finally, ladies and gentlemen, Reunert is pleased with our progress, and the group finds itself well-positioned for sustained growth into the medium term. We anticipate an improved year-on-year financial result for the 2023 financial year. It should be noted, however, that the rate of growth seen in the H1 in percentage terms is unlikely to be repeated in percentage terms in the H2, due to the good H2 performance of last year. This projection of an improved full-year performance is underpinned by three key factors. Firstly, our strong order books in both the cable businesses and in our defense companies. Secondly, the continued growth of our renewable energy companies, specifically the solar and the storage companies, in a market that is expanding rapidly. Finally, the steady growth of the ICT segment.
The group's cash flow remains a key focus area and is expected to support the execution of both the group's operational and strategic initiatives, and enable an increased return to shareholders. Ladies and gentlemen, thank you for your attention, and we'll now move across to the questions. Thank you. Good morning, ladies and gentlemen, and thank you for your time this morning to attend the Reunert's half year presentation. Nick and I are on the call now, and just a reminder to everybody, if you do wish to ask a question, please pop it into the text box, and Nick and I will go through it. I'm going to read out the questions.
In some cases just to sort of, I'll sort of paraphrase it a touch, and then either Nick or I will answer it depending on where it sits. We've had three questions on the IQbusiness acquisition that's in process. One from Charles Gost, from Bateleur Capital, one from Kobus Cilliers, from All-Weather Capital, and one from David Fraser, from Peregrine Capital. The questions that have been asked, first of all, is through a request to provide profitability guidance on the IQbusiness itself. The second question is around what is the price that we will be paying for the acquisition? The third question is whether there's any seasonality in the results or in the business. The final one is a question around the sporadic nature, potentially, of IQbusiness. I'm going to answer those four.
A precursor to it, however, is that, as mentioned, both in all of the releases and the webcast this morning, is that this is an acquisition that still requires Competition Commission approval and the final meeting of several suspensive conditions. We understand that the process is going relatively smoothly, we anticipate that the acquisition will be complete with a closing date or a date at which they come into the Reunert fold of the 1st of July 2023. Based on that, it's not possible for us to give additional disclosure at this stage. It just wouldn't be correct in that we have not yet actually acquired the business, although we are expectant that we will do so. In order to provide the answers around the profitability question, we are unfortunately not able to provide any guidance on those numbers at this stage.
We have, however, indicated in that the revenues are in excess of ZAR 1 billion, and again, we can share that with you. The second question relates to the cash flow or the cash outflow or the potential purchase price. We have already disclosed this. In the structure that we have put together, we have set a cap in the share purchase agreement. The cap or the maximum cash outflow that we would be paying is ZAR 550 million. We anticipate that's required in order to do that from a JSE's listing requirements point of view, so we have set that as a maximum. We expect to pay a portion less than that, but the final calculated number will be done once the deal closes. The third question is centered around the seasonability.
I think there is seasonability in this business, it's typical to what we see in South Africa generally, quite similar to what plays out in Reunert itself, in fact. The business has a different financial year to ourselves. They run from 1 July to the end of June, in their world, the H1 of the year, so that's the July to December period, is typically slightly better than the January to June period. There is some seasonality in that. The final question talks about the sporadic nature of the profitability or question around that. IQbusiness over the past number of years has made several acquisitions, there are normally three components to the business.
The first is the historical management and technology consulting, the second is a managed services business, and the third is a new age analysis or analytics and research component. Two of those three, particularly the managed services and the analytics and research, are actually much stronger in nature and quite annuity-based in terms of that, they give a much stronger underpin. David, your question around the sporadic profitability, I think that may have been more applicable to the old IQbusiness. The new acquisitions go quite a long way to remove it from that sporadic nature. Perhaps finally, We are having a capital markets day at the end of June, where, subject to the deal having closed, we will be giving some more color on IQbusiness.
We're hopeful that it will be completed by that stage, and we will be then including some greater unpacking of IQbusiness at that stage. We then have a few questions from Itumeleng, from the EPPF. The first question is centers around Etion and asking what the operating profit for Etion was, and sales in the Applied Electronics segment. We are required to disclose that. The disclosure is in note 12, and So 12.1 of the booklet that had to be put out. We have covered both the revenue and the profit after tax that is applicable to Etion in this H1.
I'm pleased that it is, just to give an add-on to that, it's been a really successful acquisition, both from an integration point of view, they fitted very well into the Reunert folk. We've been very pleased with the management team and the manner in which they conduct their business. The business has actually delivered well in excess of the original investment case that we put together. We're particularly pleased with the Etion case, and looking forward, they have good orders, and we anticipate that this level of performance can continue into the future. Also then from Itumeleng, there is a question around a Tiger Brands renewable opportunity. Itumeleng, I'm not sure which Tiger Brands opportunity it is, so I don't have that data with me.
We can try and dig out and find how many megawatts it is and the like, but I'm unable to answer the specifics around that particular contract or opportunity at the moment. There's then a follow-up question from Itumeleng on the impact of load shedding on our operating expenditure for this period. How much did we spend on diesel? As mentioned in the webcast itself, we have well-developed load shedding mitigation actions and plans around the group, and we're largely able to manage the impact of load shedding and ensure that we're able to meet the customer requirements that we have.
Many of those backup plans involve diesel generation at this stage. The primary impact is diesel itself, and it's several ZAR tens of millions that have gone into this operating costs of this year. In addition to that, we have extra shifts that we have to run because we have to bring people back in to execute in terms of that. We haven't quantified that cost this year. In these numbers here, there are several ZAR tens of millions of operating expense that are attributed to the cost of load shedding and ensuring that we keep our operations going. We have a question from Kobus Cilliers, from All Weather Capital. On the...
I'll just read it out, "On the renewable energy cluster inside Applied Electronics, would it be possible to get more disclosure on the revenue and the operating profit for this specific segment in the future?" Kobus, we've given, so just I can First of all, yes, there is. Again, we've indicated that by the end of this financial year, we will be giving additional guidance on and disclosure on specifically the renewable energy cluster, which will give us better sight from the revenue and the profitability of that segment. By the end of this year, financial year, we'll be in that position. In terms of the revenue, if you look at, if you look at the full year presentation and you look at this half year's presentation, we've given disclosure around the revenue number.
You'll be able to work out what the revenue coming out of the renewable energy cluster is, both at the end of last year and at this half. Irnest Kaplan from Kaplan Equity Analysts: "How have things been over the past two months, post-March period end?" I think perhaps the best way to answer that, Irnest, is on a reflection on the prospects statement. The progress that we have made during April and May, primarily driven by the Electrical Engineering and the Applied Electronics segment, has continued to be positive, and it's that positivity that gives us the confidence to indicate to the market that the full year result is likely to be a positive financial performance for the group.
It's really predicated on the large order books that we have, primarily in the Electrical Engineering segment, in cables, and in the defense businesses in the Applied Electronics. The state of those order books remains similar to what it was at the time that we closed at the end of March, and our prospects statement, and the... Let's call it, the performance in April and May, are sufficient and adequate to support the prospects that we have put forward. We still remain of the view that the full year performance for Reunert will be a positive year-on-year growth. Dumisani from Coronation. "Can we unpack Applied Electronics' organic performance half-on-half after adjusting for Etion Create?" Not on this call. We're good, but I'm not sure we're gonna be able to quite unpack it that way.
Dumisani, that's probably a question that we can get back to you on an email point of view. I don't think we got. I'm not fast enough, and I'm gonna be able to work out, remember exactly what we did last year and sort of adjust out for Etion Create. I think what I would like to leave you with, which we have disclosed on, and I'm familiar enough with these numbers, is that. This is quite, actually, if I look about Reunert generally, what's been very pleasing when Nick and I look at the results, is that a good portion of the year-on-year growth and the performance that we've seen has come out of, if I can call it, Reunert traditional. That's pre the acquisition of Etion, correct?
Without the PlusOneX and renewable energy input into it, the core of Reunert has actually experienced very good growth. Within that Applied Electronics segment, we have disclosed there have been good period-on-period improvements for Reutech, for the secure communications cluster, for our radar business, and our logistics business. Fuchs has had a pretty much a very similar performance, but a good performance year-on-year. So that core and the growth of that Applied Electronics segment is as much due to Reunert Core as it is to the acquisition of Etion Create. From Pamela Nkuna, from Mergence Investment Managers: "Do you expect the Electrical Engineering margins to recover closer to the average prior to 2019?
Apart from infrastructure expenditure, has there been a structural change in the division as margins are still relatively low despite restructuring the division? I'll have a go at that, Nick, and you can perhaps come in afterwards. I think what's important to understand is the methodology of pricing that takes place, particularly in the cables business. The cables business has a pass-through pricing methodology, and it passes through the cost of the raw materials. As raw material prices go up, so does your revenue, but your gross profit in ZAR terms does not go up by the commensurate amount.
The impact of that is that in high raw material environments, which is what we're in at the moment, your margins in percentage terms tend to thin, despite the fact that you could have good operating profit and ZAR terms point of view. The first element, or the first part of that answer, is when comparing it back to 2019, is you have to have a go at adjusting this for the raw material prices that were in place back in 2019 to where they are now. Certainly, these raw material prices are higher. You will have a margin depression no matter what, just because of the fact that the raw material prices are higher now than they were back in 2019.
Despite that, however, the supply and demand nature of the business is not, still not back to the period that it was, call it, pre-2019. So even if you normalize for that, we would still be at slightly thinner margins than we are now than we were back in those days, just because of the fact that as we went through COVID, as we went through those bad periods, the supply and demand period has gone slightly out, and there was some pricing pressure to that. So whilst we're on our way back to sort of the type of margins that we saw back in normalized 2019, I'm not sure that we're back at those numbers just yet, and I think it will still be a little while before we get back to, back to those.
There is an element of margin, what appears to be margin pressure, that is actually a result of the raw material prices rather than an underlying profitability of the business. Nick, do you want to add anything into that?
Yeah, I think the only thing I can add into what Alan's already said is that back in 2019, throughput through the main cable factory would have been around 30,000 tons a year. We have recovered, you know, if you go back a couple of years, we dropped as low as 20. We're now in the sort of mid-20s, so there's still quite a lot of volume that can go through the factory to get us back to 2019 levels. Obviously, increasing volume will improve your factory throughput, which will also add to your margin because you're recovering your overheads over a greater volume.
Thanks, Nick. Muneer Ahmed from Denker Capital: "Has the recovery in cables included high-margin cables usually sold to municipalities, or does that part of the margin remain an issue?" Some of the better mix that we describe is related to the high-margin, larger cables that are typically sold to municipalities. We had a better year or better half than we had in the prior year half. Similar to what Nick has already described, if we compare that to the peak periods in the mid 2015, 2016, 2017, we're not quite back at those levels yet, but they are much improved over where they were through 2020, 2021, and 2022.
We would like more, and have the capacity to make more, but it is better than where it has been for the last couple of years. Next question comes from Viwe, from Prescient Securities: "Where are the cable orders in South Africa coming from? Are these orders coming from Eskom or municipalities?" This is his first question. Nick, do you want to have a go at that? Then I'll.
Yeah, certainly.
Give it to you.
What we often do to answer these questions, we say sort of generically, where are the orders coming from in terms of the market, in terms of general categories of demand. This year, the general market is 67% of our demand, whereas last year it was 50% of demand. That's not to say that it's not the municipalities placing orders on the distributors, but there's been a change in the way that cables are distributed into the market, and that very often the cable orders are delivered into the municipalities by smaller contractors. That means that they would buy their cable from distributors, and we would sell to the distributors.
We've had a very positive period in terms of demand from the general market, so-called general market, which is the distributors, and as I said, that's gone from 50% of our throughput last year to 67% this year. Utilities direct buys have remained at about 16%.
Thanks, Nick. The second question from Viwe was wheeling. Slide 22 mentions wheeling becoming attractive for some customers. "Are the regulations keeping pace with the rapid developments in the market?... and how far are we seeing from wheeling being able to be completed to municipal customers?" First part is wheeling. At this stage, the regulations are in place, and wheeling is able to be done from Eskom to Eskom. Across the Eskom grid to an Eskom supplied customer, the regulations are already in place, and wheeling is able to be done. At least at that level, call it the first part of the wheeling regulations have remained abreast. As Viwe indicated, the next and more material one from a Reunert point of view, is to have wheeling from either one municipality to another or from Eskom to a municipality.
That is still some time away. The regulations are in place, in the process of being executed, we anticipate that's probably about 18 months away yet. It's moving not as fast as we'd like it to be, but there is certainly movement in it, we would hope that municipal wheeling would be in place somewhere during the course of the 2024 calendar year. Addington from Fidelity International Investments has asked: Can we provide some guidance on expected trajectory for PBIT or EBITDA margins at a group level into H2 or FY23? We don't typically provide margin guidance. The prospects that we've given, that's the manner in which we provide the forward guidance to it.
I don't think it would be appropriate to try and put out a profit margin that we would anticipate to be doing for the group. Again, maybe just to reiterate that from a year-on-year point of view, we anticipate an improved financial performance. The type of trajectory that we're seeing in the first 6 months, we think we can continue towards the end of the year. Bomaleba from Mergence Investment Managers has asked, and there's a couple of questions here, again, about further disclosure on the renewable energy, but can we give an indication of margins on renewable energy, and when do we expect to classify renewable energy as a cluster?
Again, I would refer to my earlier answer, which is there will be additional disclosure that will be given by the end of this financial year, which will assist shareholders and potential investors to better understand the impact, the quantity, and the contribution of renewable energy to the broader group. Charles Willis from Ashburton has asked: Given that your blue renewable financial model isn't significantly earnings accretive in the early years of the contract period, given the rate of current sales and future order book outlook, please talk to our sense of when these new sales and potential order book sales start meaningfully contributing to the group earnings. The, the renewable energy, it's a very rapidly growing business. It's an exciting business to it.
Again, as I sort of mentioned earlier, the, by far, the biggest portion of the growth this year came from the Reunert traditional businesses. I think that's particularly pleasing, because then the full impact of the ICT acquisitions and the renewable energy is still to come into the future. We are working hard at clarifying the extent to which it's going to contribute to the growth in providing further clarity, both in the capital markets day at the end of June and in the disclosure that we'll give at the end of the year, which will help answer the questions that you've described or you've put there, Charles. Charles, first this time from Bateleur Capital: How should we think about the balance sheet and the dividend going forward?
Over the past two years, Reunert moved from a substantial net cash position to a neutral currently, and with the potential of the IQbusiness payments still to come. Nick, do you want to start with that, and then I'll wrap up if we don't get where we want?
Excellent. Thanks, Alan. I think I'll deal with the IQbusiness transaction and how we're going to fund that, and then Alan will deal with the dividend outlook going forward. I think that the key issue is that we've got to find, as Alan's already said, with a maximum cap of about ZAR 550 million in terms of the purchase consideration for IQbusiness. We will be doing that, in essence, by drawing cash out of our Quince funding. We will be taking some external debts within Quince, and we will be taking that cash to be able to fund the IQbusiness. Obviously, the expectation is that IQbusiness will continue to generate profits well in excess of the funding cost, so it will be positive after funding.
That, in turn, should mean that going forward, the dividend should, or the cash for the dividend shouldn't be too badly affected. Overall, yes, we have gone from having sort of fairly substantial cash balances, to being, I guess, at this stage, almost cash neutral, but with the combination of a fairly large overdraft and a fairly large cash balances on hand. Looking forward in terms of the cash flow, we expect that ratio to improve.
Strategically, as Nick has described, we are looking to remove some of our investment into Quince and to deploy it into higher-yielding assets. That's the strategic intent that we have described and shared with shareholders. The shape of our balance sheet and the cash generating capability of the business is such that we can achieve our strategic objectives, the operational requirements of our business, and continue to deliver dividends to shareholders and increase the return that they get. We believe that whilst we are in a cash neutral position at the moment, one, the capital that we have invested in Quince, the cash generating capability and our access to outside facilities enable us to achieve those objectives.
We're very sensitive about the dividend, and we do believe that the dividend and the growth of the dividend is supported by the group's strategy and the actions that we've got at the moment. We don't anticipate that there would be a reduction in the dividend looking forward. We are quite sensitive about our working capital at the moment. It has been a little bit stickier than we would have liked in terms of its unwind. We do still believe that we are in a position at which there is at least a neutral working capital position looking forward, and that there shouldn't be too much cash that we need to go into working capital to support our growth.
The final question we have at the moment, now there's two more, is first of all, from Viwe, again, from Prescient Securities: "What is the contribution of storage to the renewables revenue?" We don't give business units guidance, and don't share business unit-specific numbers in that regard. What I can share with you, though, is that the storage contribution to the renewable energy business is meaningful. It has grown very significantly. You can see there, what we did share was in terms of the actual, call it, units sold. There was a 77% growth in those units. It doesn't quite reflect in terms of revenue growth that way, but it is a very meaningful revenue growth in the business, and that business is now and contributes meaningfully and materially to that renewable energy trust.
It's not quite as big as the solar business yet, but it's certainly a very meaningful number that goes into that renewable revenue. We've got Zen from Investec: "How exposed are we to non-payment from government, and how concentrated is the customer base?" It depends, Zen. It's probably best to answer this per segment, and I'll start with the easy ones first. In the ICT segment, we have some 30,000 customers. It's in that sort of order, and the primary customer base in that ICT segment is the SME base. It's pretty diverse, very little, call it, government concentration in that, although we do have some large government accounts that watch very carefully.
In our Applied Electronics business, relatively low, we do have the South African National Defence Force as a customer, but they are good payers typically. Whilst there is some exposure there, in the total number that you see in that Applied Electronics, it's quite small. Therefore, the concentration from the SANDF is quite low in that number. Probably the biggest exposure we have is in the Electrical Engineering segment, not in circuit breakers. There they have, again, a very diverse business, quite a large international base, and therefore there's very little government exposure in that. The primary exposure that we have would be in our cables business. Generally, and in this period specifically, we have seen a weakening in the payment from government, not non-payment, but slower payment.
We have seen an increase in our aging from government entities, but not non-payment. We haven't had any bad debt from them, but it is just taking them slightly longer to pay. I think, I mean, I don't have the number on the top of my head, out of the ZAR 6 billion, how much would have come from the government, but it's relatively small across the group, with the biggest concentration being in Electrical Engineering. Ladies and gentlemen, that brings us to the end of the questions. I'll maybe just give a minute or two just to see if there's any final questions that pop through. Yeah. It doesn't look like there's anything else, so ladies and gents, thank you very much for, again, your time today. Again, it's quite, sometimes quite difficult to answer these questions on the webcast.
To the extent I haven't got or Nick hasn't got to the answer that you were looking for, or you need some more detail on it, please drop us a, an email to Karen Smith. You can find her details on the website, and we'll make good at getting back to them. We're on our roadshow, so to the extent, we'll probably catch up with many of you over the next week or so, and we can also expand on some of the answers that we've given at those, at those sessions. Thank you once again. Thank you for your time, and thank you for your support, and look forward to seeing you soon. Thank you.