Good morning, ladies and gentlemen, welcome to Reunert's year-end results presentation for the period ending 30th September 2022. I'm Alan Dickson, the Group Chief Executive of Reunert, together with Nick Thomson, our Group CFO, we'll be presenting our results today. This is a pre-recorded webcast with a live Q&A session immediately after the webcast, where we will be taking your questions. 2022 was another year in which Reunert continued to create value for shareholders. This year, the Group delivered strong growth in our key financial metrics as we continued the recovery from the challenges created by the COVID-19 pandemic. Pleasingly, the Group's operating profit increased by 17% compared to the 2021 financial year. Importantly, the segment operating profit, which is the best measure against which to evaluate the Group's sustainable profitability and cash generation capability, improved for all three operating segments.
Our Electrical Engineering and Applied Electronics segments had material improvements in their operating profit as they grew by 17% and 64% respectively, while the ICT segment delivered an inflation-beating increase in segment operating profit of 6%. As we progress through the presentation, I trust it will become clear that the drivers behind these improved performances remain intact, and that continued earnings growth remains likely for Reunert into the future. Coupled to the strong growth in our key financial metrics, has been the enhancement of the strategic imperatives that will drive Reunert's capital growth into the future. Our key strategic efforts are focused in three particular areas. The first of those is the expansion of our geographic revenue streams, primarily through exports. Secondly is investing into the fast-growing renewable energy market. And finally, the expansion of our ICT businesses.
The strategic execution associated with these objectives continued into 2022. An investment into our renewable energy value offering resulted in an expansion in both its scale and an increased product offering. These new offerings will bolster our existing renewable energy investments in Terra Firma Solutions, or TFS, and BlueNova, which both benefited from the strong market fundamentals and grew revenue, profit, and investment into our own solar assets in 2022. I will provide more information in the strategy section on Reunert's renewable energy strategy. Our ICT strategy also progressed as +OneX continued with the acquisition of new service and solution capabilities. +OneX has grown its market share, and the rate of its growth and the contribution to the ICT segment continues to validate its relevance and the value to its clients.
The financial performance of the Group in 2022 resulted in an improvement in the Group's quality of earnings, as measured by ROCE, which increased quite significantly to 16%. The Group's cash generation enabled an increase in return to shareholders and continued our proud dividend record as we increased our dividend by 8% year-on-year. The 2022 financial year reflects a strong improvement in financial metrics with the expectation of further growth. Positive progress on our strategic initiatives that will create future capital growth and a reward for shareholders through both an improved quality of earnings and a strong increase in dividend. Reflected in numbers, the 2022 financial year delivered an increase in revenue of 16% to ZAR 11.1 billion, and a segment operating profit increase of 16% to ZAR 1.14 billion.
This 16% increase in segment operating profit follows on from last year's 14% improvement like for like, and confirms the strength of the Group's underlying assets and the ability of our teams to manage in challenging economic and complex supply chain environments. Our headline earnings per share increased by 9%, which is nominally in line with our increase of 8% of the final dividend to ZAR 2.24, and a full-year dividend of ZAR 2.99 per share. To unpack the year's financial numbers in more detail, I'll now hand over to Nick to take us through the financial performance of the year.
Good morning to all our participants on the webcast. We really appreciate your interest in the group. Borrowing from Charles Dickens famous start to A Tale of Two Cities, "It was the best of times, it was the worst of times." 2022 for Reunert was both a good year, but also a hard year. It was a good year due to the pleasing results we've achieved as we leave COVID-19 behind us. The resilience our management teams demonstrated to deliver this performance despite the obstacles they had to overcome. The recovery in our export order book. Finally, because of the solid progress we have made in delivering key aspects of our strategy. It was a hard year due to the metal industry's industrial action in Q1, which resulted in a lost quarter for the Electrical Engineering segment
Positively, the strike was successfully resolved and has resulted in a three-year agreement with labor. The ongoing and progressively worsening impact of load shedding, which as we will see impacts our communications cluster severely. The global supply chain disruptions, which impact on all of our businesses, either as customers of our suppliers or as suppliers to our customers, or both. The electronic component shortages, which increased lead times, in some cases, requiring product redesign to design an unavailable chip out of the product, and which raised the cost of components and necessitated an increase in the batch sizes ordered. On the international front, traveling to key markets was restricted at the start of the year due to COVID travel bans. Through hard work, by the end of the year, the group's export books were very firmly in positive territory, which is a green light for the year ahead.
Despite supply chain inflationary pressures, the group has largely been able to maintain its margins through a combination of efficiency programs and sensible price increases without adversely curtailing the demand for its products. Turning to this first slide on segmental revenue, as you can see, we have not started our financial analysis in our traditional manner with our statutory statement of profit or loss. We have rather started with our results at a segmental level, which are the best performance indicators of our sustainable earnings, and which are the prime building blocks from which our statutory results are derived. This slide reflects the revenue growth in the group's three operating segments. As you can see from the slide, Electrical Engineering's revenue, which represents 56% of the group's revenue, increased by 13% over that of the prior year.
The main drivers for this increase are: a 5% increase in annual throughput at the SA Power Cable factory despite the loss of Q1 due to the strike, an improved sales mix at all the power cable factories, the pass-through of increased metal prices, which on average were up 14% in rand terms for copper and by 37% for aluminum, continued high levels of demand for circuit breakers in both the local and international markets. The ICT segment's revenue increased by 4%, which at face value would seem somewhat pedestrian against the growth achieved in the two other segments. The achievement of the 4% reflects the significant resilience of our ICT management teams who produced this improved performance despite the many obstacles they had to overcome.
In the communications cluster, which is a targeted growth area for Reunert, the significant levels of load shedding South Africa experienced during 2022 on top of the broad infrastructure flood damage in KZN, which had a significant impact on this cluster's customers in this province, resulted in a year-on-year decrease of 11% in minutes serviced. However, the ongoing implementation of the strategy to develop complementary revenue streams in this cluster, such as business internet connections and virtual switchboards, largely offset the impact to the minute losses, and revenue ended in the year in line with that of the prior years, despite the substantial loss of minutes.
In the total workspace provider or Nashua, the continued shortage of MFPs and related office equipment resulting from the electronic chip shortages suffered by the OEM suppliers adversely impacted the ability of this business to grow from product sources from its traditional suppliers. To address this, Nashua introduced additional OEM brands into the channel during the year. Despite this, available supply was still below demand across the majority of our product lines. By the year-end, there was a significant backlog in order fulfillment across the Nashua channel caused by these product shortages. A relentless focus on alternative revenue streams enabled this business to grow its revenue over that of the prior year. The finance business's revenue, although benefiting from the increased interest rate environment, as 65% of the rental book is financed at rates linked to Prime, whilst the remaining 35% is at fixed interest rates.
This expanded the interest margin of the business as the majority of the rental book is financed from equity. The rental book both ended the year marginally down on the 2021 year, on an average was below the prior year's book, which has reflected the shortage of multifunction printers available to the Nashua channel. Revenue from this business was in line with that of the prior .ear. +OneX's revenue grew by 37% in the year under review. This driven in part by the new acquisitions made and integrated into its service offerings, and in part through its traction into the market, evidenced by the number of new clients onboarded. The Applied Electronics segment enjoyed a 27% growth in revenue, contributing 21% to the group's overall revenue. There are two main drivers of this group.
Firstly, the group's ability to return to our export markets as COVID travel restrictions were finally ended, and the excellent success we had in securing new export orders. This resulted in large revenue increases in our radar, fuse, and logistics businesses. Secondly, the continuing liberalization of energy markets leading to significant growth in our renewable energy businesses, aided by the impact of load shedding, making business cases for renewable energy even more attractive. Although the segment's revenue is up 27%, the positive drivers of this growth were somewhat constrained by, firstly, the electronic chip and other component shortages, which impacted the timing of completion of orders, particularly in our encryption and printed circuit board business.
A softer than anticipated local defense market, which led to delays in the receipt of some key local orders, impacting in particular our tactical communication business, which now expects to receive the next significant order for its latest generation radios during 2023. This business had to undertake a further restructuring during the year as a consequence of the delay in its order book. The combination of all these factors across the three segments led to the group's segment revenue increasing by 13% overall. What is also important to note is that this increase in impact is impacted by the fact that in 2021, the segmental revenue for Electrical Engineering included the group's half share of the full year's revenue in CBi Telecom Cables, the group's telecommunication and optical fiber JV with Altron.
During 2022, this business was put into business rescue, which resulted in the group losing significant influence. Consequently, the results of this business were no longer equity accounted for from February 2022. Meaning that whereas in 2021 there was a full year's revenue, in the current year, the revenue was only included for five months. Excluding CBi Telecoms revenue from both years would result in an increase in like-for-like revenue of 16%, which corresponds with the increase in statutory revenue. Turning now to segment operating profit. This next slide reflects an extremely pleasing 16% growth in segment operating profit, which returns Reunert's operating profit to being once again over the ZAR 1.1 billion mark.
If one considers the economic indicators with which Reunert's performance generally aligns, being gross domestic fixed investment in the Electrical Engineering and Applied Electronics segments and GDP growth in the Information, Communication, and Technology segment, it demonstrates the strength of the year's performance as all segments grew by significantly more than their economic benchmarks. Electrical Engineering was able to convert the benefits of the increased throughput and better sales mix at the power cable factories into a 17% increase in segmental operating profit, despite the impact of the losses incurred in quarter one due to the metal industry strike. Equally importantly, though, through judicious price increases in the second half of the year, the circuit breaker business was able to restore margins without losing customers, a tribute to this team's close relationship it has with its customer base.
ZAMEFA operated in the context of an improving local economy in Zambia. This was more than offset by a shortage of copper cathode that developed regularly in the Zambian market, resulting in lower sales. This, combined with a much more stable currency, resulted in a small loss for the year as against the profits made in the prior year, which largely resulted from the substantial Forex gains made on the strengthening of the kwacha against the U.S. dollar after the elections in 2021. The ICT segment's operating profit improved by 6%, partly due to the benefit of the margins on the additional complementary products sold at Nashua, which, combined with the cost savings, allowed Nashua to deliver an 8% growth in operating profit.
The increased revenue at +OneX resulted in a corresponding increase in its operating profit, the finance cluster's contribution to operating profit was consistent with that of the prior year on the back of an improved credit environment, allowing for both a ZAR 11 million release from the allowance for expected credit losses, the broadening of its interest margin as interest rates rose, together with lowering the benefit of lower operating costs incurred, offset by the impact of a lower average rental book for the year. The communications cluster's contribution to segment operating profit was essentially flat due to the lost margin on the 11% reduction in minutes sold, mitigated by the positive impact of the margins on the alternative product offerings. The Applied Electronics segment operating profit increased by 64% to ZAR 164 million.
This increase is largely due to the significant export order book enjoyed by the segment's export businesses, which started to be delivered into in the second half of the financial year. The contribution from renewable energy also increased substantially on the back of the excellent sales performance. The group's joint venture with A.P. Møller Capital, Lumika, has an exciting pipeline of opportunities which, due to the size of the related projects, take a longer period of time to move from project identification through to financial close than would be the case for our traditional projects in Terra Firma. After financial close, the building phase commences, which again, due to the project sizes, typically lasts between nine and 18 months before the project is finally brought into operation. The JV is currently incurring start-up losses, which will continue to be the case until sufficient projects reach closure.
Taken together, all these factors across the segments resulted in the increase in the group's segmental operating profit of 16% and the increase in the return on capital employed from 14.5% to 16.1%. The increase in return on capital employed is driven by the increased revenue and profitability, slightly reduced by the increased working capital, which we will discuss shortly. On this next slide is the reconciliation of the segment operating profit to statutory operating profit.
The primary reconciling items between the 16% increase in segment operating profit and the 17% increase in statutory operating profit are: fair value remeasurements, profit or losses on the disposal of fixed assets, the removal of the results from equity accounted investments from segment operating profit, as they are reported after profit after tax in the statutory Statement of Profit or Loss. Financial impairments, which are typically the expected credit loss allowance, the movements in the credit loss allowance or the actual credit losses against financial assets. In the current year, the most material of these reconciling items is the fair value remeasurements. This has a number of components.
The main two being, firstly, arising from Lumika's right to purchase the group's 72% direct investment in Terra Firma and the group's right to put this investment to Lumika for a fixed consideration priced in U.S. dollars. This results in this put and call being treated as derivative instruments, requiring remeasurement at each reporting date. In the current year, due to the strength of the U.S. dollar, this remeasurement resulted in a net positive fair value gain of ZAR 75 million for the group and a corresponding loss to Lumika. This compares with the net fair value loss of ZAR 51 million expensed by the group in the prior year. Secondly, the sale of shares in CAFCA, the Zimbabwean power cable factory made during 2021, required the group to remeasure its investment in the business. Historically, for various reasons, this investment was carried at fair value of nil.
The remeasurement concluded in the prior year resulted in a fair value gain of ZAR 103 million. A further tranche of CAFCA shares was sold in the current year at a price in line with the prior year's valuation. The group's residual investment of 29% was then remeasured at the year-end, resulting in a fair value gain of ZAR 6 million for the year. These two items make up substantially most of the fair value gain of ZAR 85 million compared to ZAR 65 million of the prior year. This leads us to the statutory statement of profit or loss. At point one on the slide, as we have discussed, the group's revenue is up 16% on the prior year and group operating profit before the impairment of financial assets is very pleasingly up by 17%.
The group's operating margin is consistent with that achieved in the prior year at approximately 11%. This is important as it reflects the group's ability to pass appropriate price increases onto the market, manage costs through efficiency programs, thereby ensuring that margins are maintained despite the pressure caused by high input prices at the factory gate. This is reflected by the current levels of producer price inflation of 16.9% as against the more modest increase in CPI of 7.7%. At the second point, the group continues to benefit from a generally improving credit environment, which, together with the actions of the management teams to collect debt, has resulted in a net write-back of ECL allowances against both trade receivables and loan and lease receivables of ZAR 5 million.
At point three, the group's increase in interest paid is reflective of the increase in the interest rate environment with the Reserve Bank's repo rate having increased from 3.5% to 6.25% over the financial year. The increase in interest paid due to the rising interest rates was also impacted by the investment of a further ZAR 334 million into working capital. These movements resulted in a 19% increase in profit after tax, which increased from ZAR 743 million in 2021 to ZAR 886 million for the current year. Below profit after tax, there is a significant loss from equity, as you can see in point four, from equity accounted investees of ZAR 42 million, as against the profit in the prior year of ZAR 24 million. This change again has several components.
The major contributor being Reunert's half share of the net loss in Lumika arising from the remeasurement of the put and call for TFS, combined with the group's share of the Lumika trading losses after tax, which was limited to a total loss of ZAR 36 million. This explains the majority of the ZAR 42 million loss from equity accounted investees. The impact of the group's share of losses from equity accounted investees was to reduce the the increase in the group's profit for the year to 10% from the 19% percentage increase achieved in profit after tax.
The group's attributable earnings were further impacted by the allocation of profit to the non-controlling interests of ZAR 17 million in the current year, as against the minorities' sharing in losses amounting to ZAR 10 million in the prior year, which had the positive impact of increasing Reunert's shareholders' attributable earnings above the profit, reported profit for the last year. These together resulted in an 8% increase in both basic and diluted earnings per share. The highlights from the statement of financial position are, at point one, in 2022, there was no requirement to impair any item of property, plant, and equipment or goodwill that resulted from the annual impairment tests required by International Accounting Standard 36. The increase in goodwill of ZAR 26 million that you can see on the balance sheet relates to the acquisitions made in +OneX.
At point two, as the first phase in Reunert's strategy to reduce its investment in the group's rental book was implemented, ZAR 200 million of this book was sold to a financial institution immediately prior to the year-end, and a further ZAR 50 million was sold during November of this new financial year. This generated sufficient cash to settle the ZAR 202 million purchase consideration for Etion Create. The acquisition of which was concluded on the 1st of October 2022 after Competition Commission approval was received in September 2022. As can be seen from the statement of financial position, there was a large but very, very necessary buildup in working capital of ZAR 334 million, which we'll discuss in more detail on the next slide.
At point four, the swing in the remeasurement of the Lumika put and core valuation for Terra Firma reduced the derivative financial liability from ZAR 92 million in 2021 to ZAR 33 million in the current year, increased the derivative financial asset from ZAR 41 million last year to ZAR 57 million in the current year. Lastly, at point five, as can be seen from the slide, the group continues to have a very strong balance sheet with no gearing on a net basis and 5% gearing on a gross interest-bearing liability basis. The group continues to have substantial borrowing capacity, which, together with the plans to address funding in Quince, the group's rental and loan book provides sufficient resources to deliver on the group's strategy .
The group's strong cash generation and cash conversion capability remains in place, which although impacted by the need to increase working capital in 2022, remains robust and supports the ability of the group to provide an 8% dividend increase to shareholders. This next slide deals with the ZAR 334 million invested into working capital during the year. As you can see from the slide, the primary drivers for this increase in working capital are the significant growth of 16% in revenue over the year and more particularly, the 24% increase in revenue in the last quarter.
This increase naturally results in higher receivables, which is exactly what is reflected on the table on the slide, where receivables in the Applied Electronics segment, being where the significant increase in revenue in the last quarter largely occurred, increased by ZAR 365 million over the prior year. The AE segment has also increased buffer and holding stock levels to address both supply chain disruptions and the electronic chip and other component shortages. These items are now bought in larger quantities when they can be sourced, with the lead times often being greater than 12 months. Until the full bill of materials for a product is received and in stock, manufacturing of these items being built cannot commence.
This has resulted in an increase of ZAR 196 million in the inventory in the Applied Electronics segment due to the significantly increased order book and as a supply of components which are sourced from a multiple number of suppliers are received at very different lead times, resulting in a buildup in inventory. The higher metal prices I previously referred to is reflected in the increased inventory value in the Electrical Engineering segment. The group has, through careful management of the trade payables, covered the increase in inventories by the increase in trade payables, thereby essentially leaving the increase in working capital coming entirely from the increase in trade receivables. There are early signs of an improvement in electronic component availability and a reduction in supply chain disruptions. The group will reduce inventory as these factors are reflected in the day-to-day reality.
The high receivables from the high quarter four sales will also convert to cash in the first half of 2023. Turning now to cash flow. The group's cash flow is set out in our normal waterfall slide being projected now. Again, the key highlights are cash generated from operations before working capital is up 14%, 14.6% on the cash generated in the prior year. The working capital increase of ZAR 334 million, together with the tax settled of ZAR 234 million, resulted in free cash flow generation of ZAR 671 million, up 11% on the ZAR 606 million generated in the prior year.
The group continued to invest in its core operations, spending a near identical amount on CapEx as in the prior year of approximately ZAR 230 million, comprising both expansionary and replacement capital. The group's investing activities were more than covered by the sale of ZAR 200 million of the Quince Rental book and the proceeds of the sale of the 16% of CAFCA. The group's finance activities were centered around funding build, own and operate assets, the settlement of lease liabilities for externally rented property, and the purchase of various minority shareholdings in both Terra Firma and from Bargenel as part of the group's BEE transaction. This all resulted in total cash generation of ZAR 515 million for the year, up 25% on the cash generated in the prior year.
Turning to the left-hand side of the graph, both the free cash flow at ZAR 671 million and the total cash generation of ZAR 515 million comfortably covered dividends paid to shareholders during the year of ZAR 454 million. Resulting in the net-net cash of the group increasing from ZAR 291 million in 2021 to ZAR 359 million at the end of 2022. My last slide is in respect of capital expenditure for the year, which again is very much in line with the prior year's expenditure. With the exception of Build-Own-Operate solar assets developed in Terra Firma, all asset additions were financed through internally generated resources.
As the table on the slide reflects, a significant portion of the group's capital expenditure in the year was directly in line with the group's strategic focus on investments into renewable energy BOOs, which represented ZAR 72 million. The balance of the energy ecosystem, where ZAR 30 million was spent, and into the ICT segment, where ZAR 26 million was spent. In addition to these strategic investments, the group invested a further ZAR 34 million in development expenditure to maintain the relevancy of its product offerings and ZAR 70 million into the ongoing renewable of the group's core asset base. In conclusion, the group had a very successful year, as evidenced by the increase in both revenue and segment operating profit. Its cash conversion capacity remains intact, allowing it to increase dividends to shareholders by 8%. It has sufficient uncommitted financial resources to execute its strategy.
On that note, I will hand you back to Alan.
Thanks, Nick. To conclude the review of this year's performance, we will now unpack each of the segments, the reasons for their performance, and provide some insight into the sustainability of their earnings into the 2023 financial year. The Electrical Engineering segment continued the recent strong growth in financial performance as both the power cable and the circuit breaker businesses delivered good results. The management actions at the cable business over the past two years have yielded the desired impact and underpinned their strong profit recovery. While circuit breakers' successful strategic expansion of their geographic presence continued to be the core that improved their performance. The strong performances were delivered despite the loss of three weeks of production in the first quarter due to the industry-wide industrial action associated with the three-year wage negotiations.
The power cable volumes increased modestly in 2022 as South Africa's infrastructure investment slowly started to show some signs of life. While the investment into lean manufacturing at the factories delivered notable operational efficiencies. Pleasingly, circuit breakers grew their market share as new product launches gained traction and the excellent performances in the U.S.A and Australia increased the contribution of export profits to record levels. After some margin degradation in the first half due to supply chain cost absorption, the segment worked hard to recover the cost increases and improve its margins. This was secured through a combination of price increases to pass on the supply chain costs, improved operational efficiencies, which led to better recoveries and lower material consumption, and a better mix of cables due to the re-receipt of several large cable contracts.
Importantly, the segment is poised to continue the growth of the past two years in 2023 as the market conditions for our products remains largely stable. There are some early signs of improvement in South Africa's infrastructure investment, as evidenced by the large cable contracts received last year and into the first quarter of this year. This will be supported by the new investments into renewable energy, both in the government-led REIPPP program as well as by private companies. We do remain cognizant of the risk of global recessionary pressures, specifically at circuit breaker business, where much of their product is exported, but believe that at that company, their increased market share gained through their new products, their expanded international customer base, and the launch of CBi: Energy will bolster their prospects into FY 2023.
Finally, the labor relations environment remains stable, with no expectation of a repeat of the wage negotiation-related labor unrest that we experienced in 2022 being repeated in either 2023 or 2024. The ICT segment faced considerable headwinds from load shedding this year. Load shedding negatively impacted the segment's core SME customer base, both from an economic point of view, which weakens the demand for our products and services, as well as the direct impact of load shedding on the business communications company, which for the reasons that Nick has already described, placed significant pressure on the minute volume, and the minutes decreased by 11% on the year.
Despite this, the segment's core markets continued to recover with improved performances from the total workspace provision and the solutions and systems integration clusters, which led to an increase in segment operating profit despite the challenges that load shedding presented. The market demand for the companies in the ICT segment continues to strengthen. The office equipment market remains robust, which underpins both Nashua and the finance cluster's profitability. The last-mile broadband connectivity's investment into their geographic expansion over the last number of years continues to yield positive profit growth at good returns, and +OneX's increased market share provides a larger base into which they can sell their increased portfolio of offerings. We are also experiencing improved supply chains with better hardware deliveries both at Nashua and in our last-mile broadband connectivity business, which will support the improved market demand that we are experiencing.
The segment's performance is supported by the continued growth of the complementary products and service revenue, which are cross-sold and upsold across the segment and have recorded a strong increase over the past six years. The importance of these revenues cannot be overstated. It takes time to build up sufficient contribution from these complementary revenues to support the traditional core business activities. After six years of effort, the ICT segment's revenues from these products and services is now reaching a scale that it is material to the financial results. Our total workspace provider's core print market is recovering well, and Nashua's successful dual brand strategy de-risks the supply into these opportunities.
The Nashua team has done well to launch these new brands and to ensure that the requisite training and after-sale support is in place, and we believe it is unlikely that we will experience the same disruption where we have been unable to fully meet customer demand over the past two financial years in 2023. Core to Nashua's growth is their expansion into a broad range of complementary products and services that make up their Total Workspace Provider suite of capabilities. The key competitive advantage that Nashua's franchise model possesses is reflected in the success of this strategy and is evidenced by the acceleration of this revenue, which, as shown on the graph, has delivered a 17% CAGR over the last five years and is now in excess of half a billion rand and upon which franchise fees are collected.
This year, Nashua celebrates its 50th-year anniversary. It is attributed to the innovation, agility, and hard work of the management teams that ensure that the company continues to grow, deliver remarkable service, and retain its enormous brand strength, which is as relevant today as when the company started. The finance book continued to strengthen through the year. Collections improved despite the tough trading conditions of our cut-customers. Pleasingly, the investment into the control environment has yielded positive results. The credit loss ratio decreased from 0.33% in the prior year to 0.125% on our 50% recourse book. This improved collection environment contributed to the ZAR 11 million release in Group ECLs in 2022. The book remains adequately protected through the residual ECLs which remain in the company.
The size of the group's loan book decreased at year-end as a result of the sale of ZAR 200 million of the book to fund the Etion Create acquisition. Shareholders should take cognizance of this in their analysis for the year ahead. The challenges at Business Communications have already been described. Their complementary strategy, which offsets some of the lost voice minutes, continues strongly. The rate of this growth, where both their VBX and data exceed 30% per annum, place the business in a position that once the load shedding eases, they will be able to recover strongly. Importantly, their last-mile broadband connectivity business continues to grow strongly. Off their already large base, they were able to continue to grow their annuity income and increase it by 13% over the prior year.
The solutions and systems integration cluster expanded its service offering through acquisition this year and has increased the offering that they can take to their growing enterprise customer base. Their revenue contribution to the segment grew, which is supported by a much better order book, which increased to a coverage of 63% for the 2023 year compared to 42% a year ago. The Applied Electronics segment recovered strongly after a difficult 2021. The large defense export order book enabled a much improved level of sales, the demand for renewable energy continued to increase. Material increase in operating profit was primarily driven by the fuse business, the radar business, and the logistics business. These performances were strong enough to offset the secure communications business' challenging year. The local radio order was not placed, the export orders were insufficient to cover the gap.
This company restructured its cost base, and the cost of doing so was fully accounted for in 2022. Despite the global electronic chip shortages, margins improved as overall the factory utilization increased and improved recoveries were achieved across the segment. In addition, the rand weakened by 7% in 2022, which bolstered the USD-priced export sales. The continued liberalization of the electricity generation market in South Africa accelerated in 2022. The cap on embedded generation was lifted to 100 MW, and the tenders for the REIPPP Window 5 and 6 programs were issued. TFS benefited from the increase in embedded generation, and both their build rate and revenue increased. They also continued to invest in their own build own, or BOO assets, and their asset ownership now exceeds more than 30 MW.
BlueNova invested heavily into systems and human resources to enable scale production, which resulted in record revenue and operating profit in the year. The growth of the renewable business is reflected by their revenue contributing 39% of the segment revenue, which is up by 34% on the prior year. The Applied Electronics segment's outlook also remains positive as the export order intake accelerated in 2022, which led to a record order on hand level of ZAR 2.4 billion, which will be executed over both 2023 and 2024. Importantly, 76% of our sales budget for the 2023 financial year is already covered by orders on hand. The demand for our products is high, and our customer base is expanding both in existing and new geographies served by the segment.
Our fuse business is already at full capacity and will remain so for the entire of the 2023 financial year. In addition, the operational constraints that dogged the segment throughout 2022 have also eased somewhat. Electronic chip supply chain is showing some early signs of easing, and the investment that we made into strategic stock in 2022 will reduce the risk of the order book execution and lead to some release of working capital in 2023. This, together with the improvement in issuing of export permits, should result in a lower risk execution environment. The renewable energy businesses are also expected to continue to accelerate their performance in good market conditions next year.
The demand for renewable energy generation is increasing and assisting both TFS and BlueNova in their traditional core businesses, while the launch of CBi: Energy and Apollo Africa will bolster the broader offering. As an introduction into our strategy review for this year, I thought it worthwhile to reflect on Reunert's value to shareholders and potential investors. Reunert's investment case is underpinned by a diverse group of assets in the fields of Electrical Engineering, ICT, and Applied Electronics, which includes renewable energy and has a demonstrable track record of consistent earnings, often resilient in very challenging market conditions. Our capital requirements are moderate for these traditional businesses, which enable strong cash flow generation, which is then used to drive our new growth opportunities.
Our investments in growth are enabled by our ungeared balance sheet and strong cash flows, which typically generate free cash flows in excess of 65% of EBITDA and allows Reunert to reward shareholders with a good and reliable dividend, which remains a core element of our investment case. Our shareholder value creation looking forward is being driven by the improving financial performances of both the Applied Electronics and Electrical Engineering segments as they return to their historic levels with an acceleration in earnings coming from our investments into renewable energy and ICT, which is evidenced by our capital allocation into these areas over the past few years. Finally, we have strong ESG credentials, and whilst they have not traditionally formed a core part of our shareholder communication, will increasingly do so moving forward. The renewable energy market continues to grow significantly.
The cap lifted on embedded generation to 100 MW has resulted in the market size increasing rapidly. One recent estimation reflected a 35% per annum growth in the commercial and industrial market over the next five years. Importantly, this market expansion is exactly the traditional target market of our renewable energy businesses of TFS and BlueNova. They both hold leading market positions in this space. It has, however, also resulted in increased local and international interest and has led to higher competition. This is specifically evident in the solar energy market, where increased competition and increasingly knowledgeable customers are resulting in some margin pressure. Within this rapidly growing market, the supporting regulatory environment is at an early development stage. This leads to a rapidly changing market demand as expectations evolve and mature.
Within this rapidly growing and evolving renewable energy ecosystem, we believe that a comprehensive offering that offers multiple access points to the renewable energy value chain reduces the market risks. In reviewing our offering this year, we expanded our offering by firstly launching CBi- Energy. CBi- Energy leverages off our very successful IoT Astute Range by adding a broader energy management capability to commercial and industrial customers. This offering enables significant energy savings and forms an integral part of the energy optimization requirements of South Africa's corporate companies. Secondly, we launched Apollo Africa. As new generation sources proliferate around the country, the capability to wheel this energy across the country's transmission and distribution grids becomes a key enabler to the expansion of the country's clean energy aspirations. Apollo Africa provides this wheeling capability for our customers.
We have now built a comprehensive value offering that is housed within a single point of customer contact and enables the realization of a customer's renewable energy expectations. Our comprehensive offering now constitutes a fully mature and market-leading embedded generation supplier in Terra Firma Solutions, a market-leading, fully developed on-site storage capability in BlueNova, a market-leading load control for South African environments with embedded devices and integrated energy control in CBi- Energy, and the ability to wheel energy across the grid in Apollo Africa , which is being developed. We believe that this is the best model to provide a unique and compelling offering to both customers and investors alike. Our investment into the ICT segment continued in 2022 as complementary bolt-on acquisitions were added to the +OneX suite of solutions. They added software and application development and end user computing capabilities this year.
The software and application development capability has been fully integrated. The ability to scale these businesses within the +OneX environment was again proven. The software and application development growth has been significant and exceeded its investment case. +OneX's solution offering now includes managed services, unified communications and collaboration, cloud, digital media, application and software development, and end user computing. There remains a few key areas to be acquired. The company has made considerable progress in the build-out of its new age ICT service and value offering. The success of +OneX is evidenced by the impact they have made in the market, where their brand has grown significantly. They continue to onboard enterprise customers at a consistent rate and are growing market share.
This validates the value offering. We expect the company to continue to grow on top of the 37% revenue growth delivered this year. We are pleased to conclude the acquisition of Etion Create, which will add significant impetus to the Applied Electronics segment. Etion Create is a well-established business with high-quality leadership and skills. They are an original design manufacturer with a portfolio of products that service customers in the mining, defense, and industrial market verticals. There are strong synergies between Etion Create and the existing portfolio of the Applied Electronics segment. Etion Create enhances the segment's design capability while offering complementary export market access that expands our current geographic footprint. Importantly, they have an excellent multi-year export order book and are fully loaded for 2023. We are confident that together with Reunert, they will continue to grow from strength to strength.
Finally, Reunert implemented its five-pillar sustainability strategy in 2018, with dual guiding principles of operating responsible businesses and pursuing shared value solutions. In the past few years, we have advanced our strategic objectives and focused on increasing our environmental reporting. We understand the importance of ESG for sustainable businesses, and in our pursuit of continually improving our ESG targets, the sustainability function has now been escalated to an executive director level. ESG disclosures aligned to the relevant frameworks is a key focus area for 2023. To this end, we have also included ESG as a non-financial KPI in our short-term incentive scheme to drive the progress in this respect.
As we look forward into 2023, we remain cognizant of the macro environment in with which we operate, both here in South Africa, which is likely to reflect muted GDP growth next year, as well as globally, where recessionary pressures are increasing. However, our core defense and renewable energy businesses in the Applied Electronics segment are not materially impacted by these macro factors. Our Electrical Engineering segment is poised to benefit from improved gross domestic fixed investment here in South Africa. These factors, together with our diversified nature of our businesses, our strong and ungeared balance sheet, and strong cash generating capacity, position the company well to withstand the macro environment. We remain positive to deliver another improved financial result in 2023, underpinned firstly by the Applied Electronics segment growth, which is supported by their record order books and their continued demand for the products.
The addition of Etion Create, which will be in our numbers for a full 12 months, and the renewable energy market growth. Secondly, the continued upward trajectory of the Electrical Engineering segment. We retain our strategic efforts on our investments into renewable energy, the expansion of our ICT segment, primarily through acquisitions, and the release of our loan funding from Quince, which will then be redeployed into these higher yielding strategic investments and the improvement of our capital structure. Ladies and gentlemen, thank you for your interest and attention this morning, and we'll now move into the live Q&A session. Thank you.
Good morning, ladies and gentlemen, thank you very much for joining Reunert's result presentation. Nick Thomson and myself are on the call today and will be answering your questions. We've got sort of half a dozen questions so far, you're welcome to continue to add some as we start to answer the questions that we've got. I'm going to just read out the question first and then respond to the question. The first question comes from Muneer Ahmed from Denker Capital. He has asked, although dividends grew on last year, the base was very low. Pre-COVID, the dividend was more than ZAR 5 a share. Why the conservative payout despite a solid cash performance with more to come from the working capital unwind?
Muneer, the real logic on that, just there's a couple of elements that we look at in deciding on the final dividend payout that we're going to make. Just to go through a couple of them. First of all, the ZAR 5 was paid on a higher earnings number than we are at the moment. Whilst we've recovered nicely from COVID, we are not quite back yet at COVID levels. That's the first element is that the earnings were still not quite at the level that they were pre-COVID. Secondly, whilst the supply chain is certainly easing, it's nowhere near normal and certainly nowhere near pre-COVID.
That, together with the high raw material prices that we are still experiencing, does still leave us in a position where our working capital is going to get better but not fully normalized. The final thing that we look at is the strategic investments that we're making at the moment, we continue with those. On the balance of the consideration of those, the rationale has largely been that the dividend is in line with our headline earnings per share, which is that 8% number that we've lifted by. To put that into numbers and to give you a sense of the actual payout ratio that we've done, we've paid out dividends of ZAR 475 million on a free cash flow of ZAR 671 million.
We've paid out about 70% of free cash flow. I trust that on that balance, that will give you a bit of insight into how we decided at the 8% dividend. Then just to remind shareholders that the other lever that we do have and that we have communicated and utilized last year was our principle of total cash return to shareholders, which is a combination both of the dividend and share buybacks if there is excess cash that is not required in either our operational or strategic requirements. This year, we needed that cash for both our strategic and our operational requirements. Going forward, to the extent there is excess cash, share buybacks remain an option for us to utilize in order to improve or increase the total cash returned to shareholders.
The second question comes from Catherine Blersch from Granate Asset Management . She has requested, Can you please provide a breakdown of the revenue and operating profit contribution of each of the clusters within ICT? Unfortunately, Catherine, we don't provide cluster-level breakdowns. We only provide the analysis down to segment level. What I can share with you, though, is that we find that in terms of order of materiality, the Nashua and the finance cluster are the two biggest clusters, and they're pretty much similar in size. And both about double the size of the business communications cluster, which is then a little bit bigger than the solutions and systems integration cluster, which is the most recent cluster that we have built, but it's that cluster that's growing the fastest.
It's, it's probably better to try and unpack that a little bit further, perhaps in a, in a one-on-one, but that's the, the level at which we are able to provide insight into at a cluster level at the moment. We then have two questions on renewable energy, one from Lauren Rowan from Malachite Research and then also from Catherine again, from Granate Asset Management . I'm gonna read both questions, but I think I can answer them with a single answer. Rowan's question is: Can you give any detail on the margin on renewable energy revenue and expected future trends? Catherine's question is: You gave some color on the renewable energy contribution to revenue in Applied Electronics segment. What was the contribution to operating profit, and what kind of operating profit do you hope to achieve in renewables? The renewables is...
The makeup of the renewable margins is broken normally into two. We've got two components that drive the operating profit margin. The first of those is what we would call a product sale. Now, in the case of Terra Firma Solutions, their product is that they build a plant on the customer's balance sheet. They will do the design, they do the construction, they then hand it over to the customer. There's some O&M after that, but that's not of their product, and we take the revenue and the income and the cash into that financial period. In BlueNova, they would make a battery sale irrespective. Whether a small battery or a large battery doesn't really matter, but we would make the battery on that, and then we conclude that as a product sale. For that portion of our business, you can draw...
It's quite a close assimilation to what we see in our manufacturing businesses. It's fairly similar to that, and those would typically come in at an operating profit level in the high single digits, low double-digit type level. Quite similar to what we would see in our manufacturing businesses. The second part of our renewable energy business is the assets that we then invest into. In Terra Firma and Lumika, we own or invest into those assets. We call them BOOs. We invest into a solar project, and then we sell energy to a customer on a long-term power purchase agreement. Instead of it being a product sale, it's actually a almost a project sale, where we take the revenue and the income over the life of that PPA.
The nature of that revenue and income is you can draw an assimilation to a project, a typical project income that you would got. That has the characteristics of, it has good EBITDAs throughout. It has low operating profit during the life of the loan period, where the interest repayments, are, well, are needing to be made. Then there's a strong return post that interest period, and a typical sort of life cycle that you see of a project. It has good industrial quality IRRs for each of those projects. Hopefully, that will give a little bit of color.
We did start to unpack it a little bit more in our capital market day at the end of June. We'll be doing again so early next year, where we'll be continuing to give additional disclosure and color on the renewable energy margins as we go going forward. In terms of the expected future trends, we expect the buildup of our build-own-operate assets to continue to grow. There will be continued investment into those. We also do expect both the product sales at BlueNova and Terra Firma to continue to accelerate. At a revenue level, we think that will continue to grow strongly. The profit will be split depending on the ratio between the product sales and the asset investments that we make in our renewable businesses over the next period of time.
Overall, we expect that renewable energy business, both at a profit level and a revenue level, to continue to contribute strongly to the Applied Electronics segment. The next question is from Seipati Rakgoale from Fairtree Capital. He has asked two questions. The first of those was to provide some color on the renewable energy profit, which I've just done, and the second one is how sustainable is the double digit top-line growth for the next three years? For that one, the double-digit top-line growth this year was a pleasing result. Some of it was due to underlying activity, but some of it was also supported by high raw material prices. In the Electrical Engineering, we have a pass-through methodology where we pass those higher raw material costs on to our customers.
In the case of Applied Electronics, we have some weakening in the rand, which enabled our export sales when we book those to get those at slightly higher levels. I think to continue at that level is. It's hard to say. In our prospects, we've indicated that we are quite positive. If I just break it down per segment. In the Electrical Engineering, like for like, that's largely driven by volume growth. Our view would be a further 10% volume growth next year. That's probably not that likely. We think there'll be good volume growth next year, but double digit, perhaps not. In the ICT, they did 5% this year. We think they will do better than that next year. Again, a 10% for them is probably unlikely.
In the Applied Electronics, we would definitely see, expect, double-digit growth rates next year. We still believe that there is good revenue growth, like for like, in Reunert next year. Quite whether it'll get to double digit or not, we'll just have to see just how strong, particularly the Electrical Engineering infrastructure expenditure in South Africa is. We do expect strong revenues coming from Applied Electronics. One caveat to that is that the raw material prices that are passed through and the exchange rate will have an impact on the underlying like for like numbers to see ultimately where we end up at a revenue level. I think in summary, revenue growth next year would be expected. The next question we have is from Bruce Williamson, from Integral Asset Management.
Bruce has asked, if we were to suddenly generate, say, 20% of extra business, do you have sufficient in-house skills, or alternatively, are such skills available in the local market? Reunert is quite diverse. Without knowing exactly which business Bruce is referring to, I'm gonna try and unpack it a little bit. If I look in our manufacturing businesses, a 20% increase there, in most of our factories, and the cable factory specifically, we have plenty of excess machine capacity. It will only take us about six months to bring in some new people, train them up to be able to run that. In our circuit breaker factory, as you can see in the CapEx slides that Nick has taken us through, we've put quite a bit of investment into that.
There, a 20% increase is a non-issue. In that Electrical Engineering segment, 20% additional volume for us is largely a non-issue. We'd be able to cater for that without a particular challenge. In the ICT segment, again, that's really a skills issue. Those are people businesses. Again, depending slightly on the vertical, in our finance, total workspace provider and business communications clusters, in each of those, we believe that would be sustainable. I think the... It's only really in +OneX, particularly in software development, that there is a bit of a skills crunch at the moment. That would be the one business within our ICT, where trying to catch up to 20% would take a little bit of effort because of the... There's some skills tightness in that.
If we move across to the Applied Electronics, again, the defense businesses, largely unconstrained. We have plenty of, of capacity there to match what the market needs and the people in order to do that. So a pickup in our defense businesses, we could almost double that type of thing. There would be... We're largely uninhibited there. The renewable energy, however, there is some skills concentration there, or some restriction there. So there, you know, there's a lot of interest around, there's a lot of projects around at the moment, and there is a lot of attention in sucking up skills. So that would probably be the one area where we need to manage it carefully.
Broadly, Bruce, I think we can manage it throughout with some specific areas in software development and in renewable energy that we would probably need to have a look at. I'm going to move on to... there's now another couple have popped up. These I'm taking on the fly, so I might pop the difficult ones to Nick. We'll see how they go. The next one is from Paul Bosman, from Granate Asset Management. His question is, it's been almost five years since Reunert acquired SkyWire. Could you please give us more detail as to how successful this acquisition has been? How much profit does SkyWire make now, and how much has it grown? Paul, the...
SkyWire was the first sort of ICT business that we took that was relatively light on capital, and as a result of that, it has a high purchase price accounting treatment that is applied to it. What you see in SkyWire is only reported operating profit level. As we've spoken about on our capital day, there's probably a need in some of these to give greater disclosure at an EBITDA level. SkyWire. We do two things. At EBITDA level, SkyWire has been a huge success. It would be double or triple the size that it was when we acquired it. Operating profit level because of the amortization of that, of the purchase price accounting associated with it. At an operating profit level, it doesn't contribute as much as that.
Most of that gets lost through the depreciation line in the income statement. We measure that also at C4 just to see a quality earnings. We are very comfortable that's at 20% plus at a C4 level from Skywire. We are very pleased with the growth of it. It's been a successful acquisition, and the quality of the earnings that flow from that will be we're very pleased with. As we go forward, there will be increased disclosure at both the ICT segment level and the renewable energy level and EBITDA level to give a estimation or to give a much better clarity on the growth of those. That will come through more strongly for Skywire in the future. Next one is Siphelele Mdudu from Matrix Fund Managers.
His question is, you mentioned that the group expects to see the cash flow benefits of reducing working capital requirements. How should we think about the unwind of this inventory versus receivables? This definitely is a Nick domain, so I'm gonna hand this one over to Nick.
Thanks, Alan. Good morning, everybody. Just to say that the answer is really on slide 12, which we went through this morning, and the presentation will be put onto our website today. So you should be able to get it from that. Just to answer the question specifically, there's two elements. There's obviously inventory. Inventory will start to reduce as supply chains and as electronic component stock starts to become more readily available. That we see as improving during 2023, but we don't see it reverting back to normalized levels of, say, 2019 or before then, in terms of supply until all of the issues in the supply chain are being worked through. The real issue is for us is receivables.
The reason I say that is that the increase in inventory has been more or less offset by an increase in payables. As the inventory is normalized, the payables will correspondingly come down. There shouldn't be too much of a release back into working capital or out of working capital. Receivables, where we had a very high sales in the last quarter, those receivables should start to be paid in cash during the first half of 2023. Against that, as Alan said in the prospects, we've got a full order book on Applied Electronics.
That will mean that not all of the, you know, the receivables from the very high sales level relative to 2021 will necessarily come out in cash because we'll still be funding the new sales, and which will go into receivables in the 2023 year. We are expecting some up, but it will be coming out of receivables.
Thanks, Nick. The next question is from Paul Bosman, from Granate Asset Management. The question is, can you please speak to the cable factory utilization rates? The two cable factories that we have are both power cable factories. The first of those is in Zambia at ZAMEFA, and the second is in South Africa, called African Cables. ZAMEFA, we're normally running it for cash and have been for the last couple of years. That runs at about 50% of capacity. Very pleasingly in Zambia, You would have heard us talk about it. We, there was a change in political, not in, not leadership, political party, about a year ago, just over a year ago, I think it was August last year.
That has come with a broad and sweeping change to the state-owned entity environment, as well as to the regulatory environment. We found it a lot more stable. They paid back 50% of the money that they owed us. Importantly, their local utility, their equivalent of Eskom, has started to place large orders, of which ZAMEFA is the beneficiary of some of those. We can see an improved year for ZAMEFA going forward. They have plenty of capacity, call it. Again, they could double, without any great challenge in their business and pick up significantly. The last time they ran at those levels, I think, was 2017, or if I remember correctly, 2017 or 2019.
I think in our disclosure then, you'll get a sense of how big the difference is between where we are now and where they could be. At African Cables. African Cables, although broadly, we're indicating that the infrastructure environment is a little bit better, relative to where we were back in 2008, 2009. We're probably still 25% down on machine capacity to what that factory can manage. When we went through COVID, we restructured that business at the back end of 2020, and some of the challenges rolled into 2021, in which we have reduced, and that factory now works only a four-day week. It's 24 hours for four days. That would give you a sense of just how...
Although the utilization is very good at the moment for the market size that we've got, and that's where some of these additional recoveries have come from, and the improved operational efficiencies have all come out of those sort of actions. It's very nicely loaded and quite highly loaded based on the market conditions we see at the moment. If you look at what's available, there would comfortably be another 25% in that factory. I hope that answers that question. We've got Viwe Kupiso from Prescient Securities. His question is, how is Reunert dealing with the approvals from NERSA for its embedded generation projects? Peers have mentioned delays in receiving approvals from the regulator. Has Reunert experienced any delays in getting approvals? Our projects are typically 10 MW and below.
Most of these NERSA delays at the moment are above 10 MW projects. We are largely uninhibited in our activities by the NERSA regulatory approvals. I think as we go into bigger and bigger projects, that may become more of an issue for us at the moment, but it has not been an inhibitor or largely, it hasn't been a material inhibitor to our business so far. Dumisani has, he hasn't got the company name. The first of those is just some color on how deep the startup losses are in the A.P. Møller JV. An indication on the size and the length of the expected J-curve. Maybe we'll do it one by one.
Nick, do you wanna have a go at the A.P. Møller startup and the J-curve, and then I'll come in on the next one?
Certainly. As we discussed in the presentation, the startup losses will remain until we've got sufficient projects on board which are generating revenue, which will then sort of meet the running costs of the business, which includes the business development costs. And to give you an indication, in the current year, the losses were less than ZAR 15 million, of which our half share was less than ZAR 7.5 million. That sort of gives you an indication of what we've incurred during the current year.
Thanks, Nick. The next question comes from Siphelele Mdudu, again, from Matrix Fund Managers. Sorry. The second question from Dumisani. His question is: How are you thinking about ZAMEFA going forward? Is it no longer under strategic review? At this point all in, has it destroyed value or enhanced value since its acquisition? You'll have heard me talk a little bit about it already when I was describing the previous cable environment. We've kind of put it on hold for now. We are watching very carefully to see how this year performs. We certainly are a lot more comfortable with the environment, the business environment in Zambia.
We're very pleased that this has also translated into much better contracts that are coming into that country, and the performance that we've seen at ZAMEFA is improving. This is an important year for the company. We could probably still call it under strategic review, but this year will be important before we pull the trigger on it. We're not actively making any movements on it just at the moment. Net, net, I would say it's still behind the curve in terms of the investment. We have yet to get back. We had those two very good years right at the beginning. We've had a difficult three or four years until that.
If it comes out now and performs like it did before, I think we will get back ahead. I would say net, net, as we find ourselves at the moment, it would not have delivered on the investment expectations that we would have had for it. The third question is: How accurate are your renewable energy market share estimations? Have you grown, held, or lost share with the onset of competition in the last year? Look, I think all market share estimations, that's exactly what they are, is an estimation. So I would say it's our best effort of understanding where we are because there are no published figures. It's based normally on our build rate against what we believe the market has built. I would argue that it depends how you define the market.
If you look at the entire renewable energy embedded generation market, into that, there have been some very large projects that have come into that, particularly in the mining space and those areas where people are coming in with, you know, 50, 100 MW projects. Those, in our minds, are gonna primarily be serviced by the international players, and we've seen it Anglo assigned with EDF. We, we anticipate that that top end, above 50 MW and above, will be very difficult for our businesses to compete with because of the cost of finance that the international players are bringing with them. If you take that entire embedded generation market, which goes up to the 100 MW cap limit, I would argue that we have lost market share because of this top end that we're not easily able to access.
If you look at our traditional market, which is, call it, up to 20 MW, I would argue that we've held our own in that space. I think it's a little bit dependent on definition. Certainly in our traditional market, which has also grown very quickly, I would say we would've held our market share in that space. Those are all of Dumisani's questions. As I said, Siphelele Mdudu from Matrix has asked: In Electrical Engineering, we report an 87.1% EBIT margin, including labor unrest in this period. What needs to happen to get to double-digit margins last achieved in 2017? Just a couple of opening comments on that.
Because of the pass-through nature of the contracts in the Electrical Engineering segment, at escalated renewable, at escalated raw material prices, where we find ourselves at the moment, you end up with reduced operating profit margins in percentage terms. Although the gross profit in rand per meter remains normally the same, at elevated raw material prices, you tend to get a natural suppression of the operating profit margins. That's just something to bear in mind. I think the bigger part of your... Or the bigger, more material part or answer to your question, back in 2017, and Nick may know the number, we probably still put through the plant, Nick, do you have a percentage of more than what we do today.
Yeah. so basically we were doing 31,000 tons before, and today we're doing 25,000 tons.
We're still, call it, the guts of 20% below the tonnage that we did in 2017. The single biggest factor that would take us back to double-digit would be the return of that 20,000 tons or 20% worth of tonnage through the plant, and that would take us back and much closer to the double-digit numbers on that. The next question is from Irnest Kaplan, from Kaplan Equity Analysts. Irnest has asked: You mentioned that the tough economic climate locally, the EE segment, Electrical Engineering segment, should benefit from increased infrastructure spend. Can we please just explain that a little bit further? Where is that spend coming from? In South Africa, we are not expecting great strokes, either from Eskom or the municipalities.
What we have found this year is a number of new large cable contracts that were signed by the municipalities. That has continued into the 2023 year. As Nick has sort of already said, that's still quite a lot below where we were, but it's a definite improvement of over 2020 and 2021. What we are seeing is a small return from those municipalities. Typically, what it happens is when they conclude those large contracts, those are the large core infrastructure that goes in, and then typically there's a whole lot of distribution that flows after that.
Within that municipal environment, we do not expect it back to those 2017, 2018 levels, but because of these large contracts have come in and continue, that's really the thread that allows for slightly better municipal spend over the next couple of years. That's the first element that comes into it. The second big element that we believe will be supportive of the cable factories specifically is the REIPPP projects. Those are the utility scale renewable energy projects, the wind and the big solar farms. Those are typically around about 100 MW in nature, and those are led by government. There's been 6 or 7 GW of those that have been issued. Window 5, they have started to sign financial close on those.
There's half a dozen projects of those that have now closed, those should start to hit the market in about 12 months time. Window 6 is out to contender at the moment. Each of those are cable factories have been historically done very nicely in those spaces, and we expect that to be a kicker. Those we have had none of those for the last three, four, five years. Together with slightly better expenditure in the municipal environment and those big REIPPP projects pulling through, those are really the two key drivers that are likely to improve the volume going into the renewable energy. I mean, sorry, the power cable businesses that feed into that Electrical Engineering segment. I hope that answers that infrastructure expenditure.
The final question that I have in front of me is again, from Bruce Williamson, from Integral Asset Management, who's asking, In respect of the renewable energy equipment, parts, et cetera, are we over-reliant on China or are there other sources? There are other sources, so we have a dual supply. Despite that, let me actually start with the panels first of all. There's no doubt that China dominates the panel environment. We do have dual panel suppliers from other Asian countries, so we have some duality in that. I would say we're probably 75% of our panels come from China. Our inverters typically do not come from China, so we have very little reliance on China for our inverters.
We have a very high reliance in our battery business. The cells from which we build our battery range all come from China. We've got multiple suppliers in China. So we don't have a single source concern, but all of those sources are in China. We would have a, call it a country concentration, not a supplier concentration in terms of that. Ladies and gents, those are all of the questions that have come in. I hope we have answered them successfully for you to the extent that we haven't, or you have any other questions that you'd like to make. We go on our roadshow now for sort of the next week.
If you are on one of the calls or one of the meetings, we can expand on any of the questions that you've got. To the extent you have other questions or would like to have a session with us, please just send us an email and we'll set something up with you so that we can come and meet you and answer any other questions that you may have. Ladies and gents... There's one that snuck in right at the end. Siphelele Mdudu has come in again just to ask, We acquired Etion Create via selling part of the Quince book. How did we value the 205 part of the book that we sold? Which Nick will answer.
What were the deal metrics for Etion, for the ZAR 202 consideration pays? Nick, do you wanna have a go at the Quince? I'll come in on the acquisition.
We sold the book at its present value. In other words, you take the future cash flows and you discount it at the implicit rate of interest in the agreement. That gives you the ZAR 205 million value. It's exactly how we value the book for ourselves. There was no profit or loss on the disposal. It was simply just a sale of a portion of the book to a financial institution for the amount of money that it was in our books at.
Non-recourse then?
Non-recourse, yes.
No recourse to the group. On Etion. Etion, it was a little bit more than net asset value, but the core of the valuation was net asset value. We paid a little bit more net asset value, but not much more than that. In our view, it's been a very good acquisition, and we expect it to do very well for us. We're very pleased with the cost of the acquisition valuation to us. We've been very pleased with the manner in which the business has operated since we closed until the effective date. We've been very pleased since they've been part of us. The culture is very good and quality of the management is excellent.
The performance of the business is very good, and we believe this will be a very good investment for Reunert and will be very synergistic into that Applied Electronics segment and help them quite a lot. I think that is it now, folks. Thank you all. We appreciate your time and your interest in Reunert. We thank you for your questions today and your attendance at this session, and we look forward to seeing you again in the future. From Nick and myself, thank you very much and have a good rest of the day. Thanks, folks. Bye-bye.
Thanks, everyone.