Good morning, ladies and gentlemen, and welcome to Reunert's Half-Year Results Presentation for the period ended 31 March 2024. I'm Alan Dickson, the Group Chief Executive, and 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. We are pleased with Reunert's financial, operational, and strategic progress made during this six-month reporting period. This is especially the case given the local macroeconomic conditions in South Africa, which showed little improvement over the 2023 financial year. Specifically challenging were the logistics and port challenges at Transnet, which escalated rapidly in the first quarter of the financial year and persisted for most of the entire half.
They were a material damper on the country's economic activity and offset any benefit that may have realized from the improved load shedding experienced so far in 2024. The direct impact of the logistics challenges on Reunert was the incurrence of increased costs to secure and deliver raw materials and equipment that we needed to meet our customers' requirements, and an increased investment in working capital to protect the businesses against future unforeseen delays at the ports. Pleasingly, our management teams responded well under these circumstances, and aside from the impacts I've just described, the businesses were either able to meet or successfully renegotiate their customer expectations. Unfortunately, at the total workspace provider business under the Nashua brand, they were not able to overcome these logistics challenges within the half year, and this resulted in a noteworthy shortage of MFP product.
This has resulted in an inability to meet the market demand in the first half and led to a large reduction in operating profit at Nashua and weakened the ICT, ICT segments and group's financial results. In addition to the logistics and the port challenges, we had also provided guidance at our year-end results that the residential and small commercial battery storage market had become saturated. This continued throughout the first half of the year, and a reduction in both margin and volume ensued, and resulted in a much reduced period on period performance at the battery storage business. Despite the challenges at Nashua and the battery storage business, the group's investment case continued to deliver value for shareholders and produced a solid set of financial results.
Revenue grew by 7% to ZAR 6.6 billion, and operating profit increased by 9% to ZAR 674 million. The group's cash generation remained positive and resulted in a decrease in net interest paid despite the higher domestic interest rates, and assisted in an increase in profit for the period of 13% to ZAR 475 million. This flowed down and into the EPS metrics, where earnings per share increased by 12% and headline earnings per share increased by 8%. Complementing the solid financial performance, the group continued to execute its strategic imperatives. Key strategic achievements in the period under review included the announcement of the group's intention to merge the subsidiaries of +OneX and IQbusiness, both in the Solutions and Systems Integration cluster of the ICT segment, to form a leading digital integrator.
We have highlighted in previous results presentations, the synergy and complementarity between these two company skill sets, their market access and their service offerings, and we are confident that the merger will provide our clients with an enhanced offering that will drive market share growth. Within our renewable energy strategy, the market continues to liberalize, and several key legislative and regulatory developments were concluded in this half that enable the continued growth of the energy transmission and generation markets in South Africa and allow for private sector investment to increase. In this active market, our solar energy business accelerated their key strategy of solar energy asset ownership and have grown their pipeline as the commercial and industrial solar energy market remains positive.
Importantly, the financial performance of the solar energy asset portfolio we have already invested in improved in this period, as active management of the assets and lower load shedding increased the financial returns. Our international revenues continued their growth trajectory as both the defense and the electrical engineering businesses increased their non-South African revenues. Importantly, the order books that support these revenues have remained strong, which provides good midterm visibility to our expectation for the continued growth in these international revenue streams. And finally, we have launched a revitalized Reunert brand positioning and corporate identity. Reunert recognizes the need to continue to evolve, to ensure that we remain relevant in the investment market, and we support our businesses to attract and retain talent and grow their market shares.
These financial and strategic achievements continue to yield shareholder value, as the quality of our earnings, which we measure by our return on capital employed, improved to 16.3% in the first half of 2024. Importantly, our strong balance sheet and good cash flow generation continue to ensure that the group is able to fund all of our operational and strategic requirements while continuing to deliver good dividend growth. As such, the dividend increased by 8% to ZAR 0.90 per share, which is up on the ZAR 0.83 paid in the comparative, in the comparative period.... I'll now hand over to Nick, who will take us through the detailed financial results.
Good morning to all the webcast participants. It's a pleasure to be able to share these results for the six-month reporting period, ended thirty-first of March 2024, with you today. The results presented in these slides are summarized extracts from the unaudited, condensed, consolidated interim results, which are available in full on Reunert's website under the Investor Center tab. For context, these results must be viewed against expected real growth in the South African GDP of just 0.9% for calendar 2024. As would be expected in a growth environment of only 0.9%, there are sectors of the economy that are in full decline and sectors where performance is well above this level. In our internal reviews of operating performance, forecast SA GDP growth is a primary indicator of expected growth in our ICT segment.
Unfortunately, growth in gross domestic fixed investment, or GDFI, which we consider a good proxy for expected demand levels in the electrical engineering segment, is expected to decline to 3.2% for 2024, from the 4.2% in calendar 2023. More significantly, GDFI continues to hover at around 15% of GDP, which is well below the investment rate required to grow the country's infrastructure and also well below the 25% average for emerging markets, excluding China. Looking at those commodity prices which impact the group, particularly in the electrical engineering segment, aluminium and copper prices in the first six months of the 2024 financial year have remained in line with those of the prior year, despite increased global demand and some supply disruptions.
Copper prices averaged 169,000 ZAR per ton in the current six months just ended, versus 159,000 for the comparative period, a relatively benign increase of 6%. Aluminum prices in rand terms moved up by only 1%. However, since the half-year period ended, there has been a marked uptick in copper prices, which, if sustained, is likely to affect the value of inventory, receivables, and trade payables, as well as margins in the power cable factories in the second half of the financial year. Lastly, looking at exchange rates, which are particularly important to the applied electronic segment, as the export contracts are routinely priced in U.S.
dollars, average exchange rates were 6% below those of the prior six-month period, and the period-end exchange rate was 7% below that of the comparative period, which is positive for the export revenue. Against these economic conditions, as can be seen from the statement of profit and loss, we are pleased to report that the group's revenue increased by 7% or by ZAR 439 million when compared to the 2023 half-year period. This increase was largely driven by two structural changes in the composition of revenue, as well as from various developments, which impacted the group's operational performance, both positively and negatively. Dealing firstly with the two structural changes.
Firstly, IQbusiness revenue now forms part of the group's revenue for the current six-month period, following the finalization of the acquisition of this business in the fourth quarter of the 2023 financial year. Secondly, the sale of Terra Firma Solutions, the group's solar energy business, to Lumika, which took place at the end of the last financial year, now means that no revenue from this business is included in group revenue, as Terra Firma is now part of the Lumika joint venture and accounted for as an associate rather than as a consolidated subsidiary, as it was in the prior period. These two structural changes result in a net increase in group revenue of approximately ZAR 300 million.
Turning to the impact of the developments in the group's operations on group revenue, the four material operational developments that impacted the group revenue were, one, firstly, the increase in the group's power cable business revenue on the back of improved volumes at both the South African and Zambian businesses, and an improvement in sales mix in favor of cables from copper rod in Zambia. Secondly, the demand, the strong demand for the group's defense products resulted in an increase in group revenue from this cluster as the group delivered into the related export contracts. Thirdly, the Transnet port congestion impacted the revenue of Nashua and thus the group, as Nashua struggled to get imported product to the franchises to meet sales demand. And then lastly, the reduced revenue from the battery storage business, which Alan covered in his introduction.
The group's operating profit increased by 9% or ZAR 54 million over that of the prior comparative period. The primary drivers of this increase were: the structural changes in the group, where IQbusiness's operating profit was incorporated from the beginning of the reporting period, and the previously consolidated results of Terra Firma were excluded. The benefit of the improvement in mix and volumes and factory efficiency at the power cable businesses, combined with the reduction in Forex losses at the Zambian operation, as net foreign liability balances were reduced through a combination of working capital management and reducing U.S. dollar funding in favor of local funding. The defense cluster's contribution to group operating profit before ECLs improved as the record defense order book was successfully executed again against in this period.
Unfortunately, these improvements were offset by the impact of the battery storage businesses, reduced demand for small enterprise and retail batteries, which reduced its contribution to group operating profit. And then lastly, Nashua was severely impacted by the port congestion, which resulted in a loss of approximately three months' operating profit contribution, due to Nashua having insufficient stock of imported multifunction printers to meet demand. The impact of this shortfall was greater than the difference in revenue between the current and prior period, as the shortage of stock made it impossible to meet the forecast level of sales on which Nashua's cost structure was predicated on.
Other factors that impacted the group, the group's operating profit were: total fair value remeasurements for the period were -ZAR 4 million, compared to the +ZAR 27 million fair value remeasurements in the prior comparative period, effectively reducing the group's operating profit by ZAR 31 million when compared to the prior period. The prior comparative period's fair value remeasurements arose mainly from the group's put and related Lumika call option for the balance of the 72% shareholding the group held in Terra Firma Solutions, which put was exercised at the end of the last financial year and fully settled. Accordingly, last year's benefit will not be repeated in the future. In the current period, the group was the beneficiary of the second and final payout from its prime insurers of a contractually agreed COVID-19 business interruption claim amounting to ZAR 78 million.
In the prior comparative period, the group received the first payout of ZAR 44 million, net of claim costs. This resulted in a net favorable increase of ZAR 34 million when compared to the prior period. This is again, a benefit which will not be repeated in the future. Considerable effort has gone into maintaining and, where possible, improving trade receivable collections across the group, and on managing the collections of rentals due from the end customers of the Nashua channels. The results of these efforts are that despite the tightening economic conditions, the needed increase in credit impairments amounted to only ZAR 8 million for the current period, as against the ZAR 53 million increase needed in the comparative period.
In the current period, the aging of the lease and loan book, and the forward-looking requirements of IFRS 9 have resulted in the expected credit loss allowance against Quince's lease and loan receivables book, needing to be increased by ZAR 4 million, thereby increasing the allowance for expected credit losses to ZAR 135 million or 5.4% of the book, with the comparable expected credit loss allowances standing at 5.2% at the end of the comparative period, against 5.3% at the end of 30 September 2023. However, very positively, it should also be noted that actual credit loss or actual bad debt experience of Quince amounted to less than ZAR 1 million for the period under review.
Further, the group has realized credit impairments of ZAR 15 million from its ECL against its trade receivables and written off credit-impaired debtors of ZAR 19 million directly to the statement of profit or loss. This has resulted in a net charge of ZAR 4 million in the statement of profit or loss for the impairment of trade receivables. The period end ECL against trade receivables amounted to ZAR 123 million, after taking into account this ZAR 15 million rand release and a ZAR 5 million write-off of trade receivables against the ECL allowance and an exchange difference movement of ZAR 12 million. The resulting ZAR 123 million ECL allowance required compares favorably with the ZAR 177 million balance, 31 March 2023, and the ZAR 155 million balance required at the end of September 2023.
The group's net interest expense decreased from ZAR 48 million in the 2023 half-year period to ZAR 33 million in the six months to March 2024. This is due to continued good cash management. The 13% increase in profit for the period has resulted in a 12% increase in basic earnings per share after the allocation of minorities, of profit to the minorities, and an 8% increase in headline earnings per share. The difference between the growth in headline earnings per share of 8% and basic earnings per share of 12% is due to the add-back of non-financial impairments made in the prior period, in that period's calculation of headline earnings. The group's fully diluted shareholder returns reflect the expected share dilution that may arise from the group's main empowerment vehicle.
Currently, at the average share price for the last six months, only some 19 million of the 24 million Reunert shares held by this entity will need to be returned to Reunert as treasury shares in settlement of the funding mechanism. This potentially leaves some 5 million shares for the benefit of the ESOP beneficiaries and the Reunert Educational Trust. The potential dilution is in addition to the normal dilution from the conditional share plan of approximately 2 million shares. These two factors together result in the 7% increase in diluted earnings per share versus the increase in basic earnings per share of 12%. This next slide reflects the group's statement of financial position. Comparing the current statement of financial position to that of thirtieth of September 2023, the following are the non-working capital related movements.
To facilitate the growth in Lumika, the group's renewable energy joint venture with A.P. Moller Capital, both shareholders have subscribed for ZAR 50 million in shares in cash and also capitalized their funding loans into Lumika's equity. These loans essentially fund Terra Firma Solutions' working capital and the equity contribution to Terra Firma Solutions build, own and operate solar energy portfolio. This has resulted in an increase in the joint venture investment to ZAR 189 million, and the reduction in loans to the joint venture of ZAR 139 million. The group's lease and loan receivables book has remained in line with that of the prior period, at 2.3 billion, compared to 2.3 billion at the thirtieth of September, 2023. It resources to meet dividends, operational requirements, and fund the group's strategic initiatives. This slide with the period under review.
This represents a free cash generation of 100% of profit after tax, against the 71% generated, and the conversion of 56% of EBITDA, as against the 37% achieved in the first half of 2023. The first blue bar on the right-hand side of the ZAR 900 million in cash from operations. This was up 3% on the cash generation of the prior comparative period. From the cash generated from operations, ZAR 201 million was invested into working capital due to growth in revenue and to meet the needs to increase stock to address the port congestion. It also reflects that the group has had to pay for some inventory trapped at the Durban port, which is still not available to meet sales.
Going forward, the group and ZAR 50 million from the drawdown of the ZAR 550 million from Quince's long-term financing after the repayment of all its revolving credit facility of ZAR 400 million. This net inflow of ZAR 150 million was used to meet the cash requirements of the maturing CSPs of ZAR 33 million, and secondly, to discharge the external rental obligations of ZAR 50 million, leaving surplus cash of ZAR 58 million. These movements resulted in net cash generation for the period of ZAR 563 million.
Turning to the graph on the left-hand side of the slide, the group started the year with net cash of ZAR 1.2 billion, and after the cash paid out for dividends of ZAR 406 million for the final 2023 dividend, adding in the net cash generated for the year of ZAR 563 million, the group ended the period with net cash on hand of ZAR 1.3 billion. The group has continued to invest in its asset base in line with the strategic objectives of renewable energy investments, which will no longer be direct investments onto the balance sheet, but instead will be made indirectly through Lumika. This means that these assets will no longer form part of the group's property, plant, and equipment, but will be reflected as an increase in the group's investment in the Lumika joint venture.
Growing its communication cluster infrastructure network investments, and maintaining the fabric of the group's core assets, including the entire the IT environment, as well as creating capacity expansions in the South African power cables, circuit breaker, and the fuse businesses, where volumes have increased and prospects remain positive. Accordingly, as can be seen from the slide, the group invested a total of ZAR 84 million into capital assets in the six-month period to 31st of March 2024. With the group's strong balance sheet, the significant banking facilities, the continued positive cash generation capacity, and the new ability to return new Reunert funds from Quince to reinvest into higher-yielding assets, we believe that Reunert is well positioned to execute on its strategy and to continue generating positive cash returns for shareholders.
With that, I will hand back to Alan to take us through the segment review, the strategy update, and the group prospects for 2024.
Thanks, Nick. I'll now unpack the segment results and also provide some input on how we see the remainder of the year unfolding. The electrical engineering segment continued its strong performance, as revenue increased by 7% to ZAR 3.4 billion, while segment operating profit increased by a pleasing 12% to ZAR 244 million. This performance was delivered as improved volumes, increased operational efficiencies, lower Forex losses in Zambia, and better margins all contributed to the strong financial result. The power cable businesses, both in South Africa and Zambia, delivered increased volumes. The continued improvement in the business environment and enhanced liquidity drove the electrical infrastructure in Zambia, while private renewable energy investment and a relatively stable gross domestic fixed investment underpinned the South African cable volume growth.
Volumes at the circuit breaker business remained largely stable as market share in South Africa remained steady. Importantly, there were improvements in the USA export volumes as orders increased, and these offset a weaker Australian economic performance. The segment's improved volumes supported ongoing operational efficiency gains at the factories, as the lean manufacturing programs continued to yield successes, and the higher volumes enabled improved cost recoveries. Finally, increased profit margins were achieved as the product mix in both Zambia and the circuit breaker business improved in the half. This margin improvement was achieved despite the anticipated order of large cable contracts in South Africa being delayed. Looking into the second half, the segment remains well-positioned, as product volume expectations remain solid. Our circuit breaker business has secured a healthy export order book, specifically to the USA and Europe, where increased investment is occurring as global inflation has eased.
While the power cable business in Zambia specifically has a good order book with long-term contracts in place, and the ongoing investment in renewable energy should support the South African cable volumes, it's worth noting, however, that the general electrical investment in South Africa remains under some pressure, and several of the large cable contracts still need to be awarded in the second half of the year... The segment's margins are expected to be also stable, as Zambia has secured kwacha debt on its own balance sheet, which will continue to assist in reducing Forex movements, while in South Africa, the large cable contracts expected in the first half should, if awarded in time, realize in the second half and provide margin support.
Finally, raw material movements, specifically copper, which has increased significantly in price over the last three months, are largely protected through contracts. But the negotiations have progressed in a manner that it is expected that they will be concluded without material factory disruption this year. Negative impact at Nashua, which I described in the overview, weakened an otherwise solid performance by the segment, as last mile broadband connectivity at Skywire, +OneX, and the asset-based finance company all delivered good results. In the solutions and systems integration cluster, which is the key growth engine of this segment, they performed well, with operating profit continuing to grow strongly. This growth came from a 39% period-on-period increase in operating profit at +OneX and the successful integration of IQbusiness.
The lease and loan receivables book performed well, as collections in the channel remained in line with expectations, and the book is adequately provisioned for the economic environment. The size of the book was impacted by the lack of MFP sales at Nashua, but is expected to increase in the second half as MFP sales normalize and complementary products and services continue their growth trajectory. The South African macroeconomic trading environment that the ICT segment will participate in is expected to largely remain unchanged in the second half of the financial year. The segment is, however, expected to deliver an improved performance compared to the second half of the prior financial year. This is expected to be delivered through an improved performance at Nashua, where a normalization in MFP sales is anticipated, as logistics challenges are now largely eased and stock levels have returned to normal.
In addition, their renewable energy sales continue positively, which supports the franchise fees. The solutions and systems integration cluster should continue their growth in a market that remains robust for digital integration solutions, and the leveraging of skills and service offerings between +OneX and IQbusiness enables increased access to the market. In the applied electronics segment, the completion of the put and call options over Terra Firma Solutions, our solar energy business in financial year 2023, results in the group now owning 50% of the company, and hence only 50% of the solar energy business's revenue and operating profit were accounted for in the applied electronics segment's results in this current reporting period.
This change, and the reduction in the revenue and operating profit at the battery storage business, which I described in the overview, resulted in segment revenue decreasing by 10% to ZAR 1.5 billion, despite the strong financial and operational performances of the defense cluster and the solar energy business. These two strong performances maintained segment operating profit, largely stable at ZAR 160 million. The solar energy business had a good first half. Their build rates improved, and importantly, so did their margins, as despite an active and competitive market, their project selection and execution ensured enhanced margins. The strategic imperative of owning solar energy assets continued, and the effective interest in BOO assets that are operational or near completion increased to 65 MW in the half, compared to 36 MW in the comparative period.
Importantly, the financial performance of these solar energy assets improved by 10% over the comparative period, as improved plant maintenance and lower load shedding enabled higher revenues as energy generation increased. The battery storage business expects its residential and small commercial market to remain challenging, but they have restructured and increased focus on their large battery sto... Our renewable energy businesses and increasing our international revenue, specifically in the defense and the electrical engineering businesses. The successful integration of IQbusiness into the ICT segment has been completed, and the synergy between IQbusiness and +OneX's skills base and service offerings are clear.
This is important as the market for ICT services and software remains robust and is expected to grow to over ZAR 200 billion by 2027, with digital integration solutions, cloud computing, security, and software all experiencing strong growth as enterprise clients continue to invest into their operations. The group has announced its intent to merge +OneX and IQbusiness to create a leading digital integrator with the capacity to scale client solutions. The merged entity will leverage both businesses' key talent, their service offerings, and will accelerate their digital transformation offerings to gain market share, both locally and internationally. Importantly, several combined value offerings have already been successful at clients, and this provides validation to the merged entity's market relevance.
In the renewable energy business, our target market is the commercial and industrial market vertical, and it continues to accelerate and suffers none of the saturation being experienced in some of the residential and smaller markets. This market growth is being entrenched as the liberalization of the generation and transmission markets continues in South Africa. Both legislative, in the form of the promulgation of the new Energy Regulation Act, and regulatory, in NERSA's improved ability to issue licenses, are important steps that have been completed in the first half that entrench the liberalization of the industry and enable material private participation and investment into these markets.
In addition, the creation of the National Transmission Company South Africa, which is due to commence its operations in July this year, and the commencement of the execution of Eskom's Transmission Development Plan, will enable the alleviation of grid constraints necessary to bring more renewable energy onto the grid. While overall, the pace remains slower than desired, the movement is clear and unambiguous, and in our view, enhances renewable energy prospects, both for solar energy and large-scale battery storage, as a primary source of electricity generation for the foreseeable future. In this growing market, our project pipeline remains positive. We now own 96 plants with an effective capacity of 65 MW, which are either in operation or near completion. The investment into these 96 plants represents ZAR 373 million, and these plants deliver industrial-grade IRRs, and we expect them to grow steadily in the years ahead.
The actions necessary to support the growth of our international revenues continued to accelerate in the past period, and this resulted in a 16% increase in international revenues over the prior comparative period, to now be ZAR 2.1 billion. We continue to invest in our in-country presences in Australia, the USA, Southern Asia, and in the Middle East, where we hold competitive advantages, and in many cases, our offerings are often of strategic importance to our customers. In our defense business, the visibility on the sustained export performance is underpinned by the size of the order book, which is a healthy ZAR 2.7 billion. In this half, the export portion of that order book increased by 22% over the comparative period.
While absolute percentages will vary from period to period, to give an indication of the strength of the export order book, the export portion of that ZAR 2.7 billion worth of order book at half year was close to 80%, and that just reflects the activity and success the teams are having in our international markets. In our electrical engineering segment, both our cables and circuit breaker businesses' international revenues are increasing. The circuit breaker business's export order book has recovered, specifically in the USA, and that will continue to support their export growth. The positive political environment in Zambia is yielding greater investment, including in their copper mining infrastructure, and that supports our international revenues will continue to grow strongly. Reunert has decided to revitalize our brand positioning and corporate identity, the physical effects of which you can see in the presentation today.
Our analysis revealed that while Reunert has a proud history of strong governance, good management, and responsible corporate social investment, and is a trusted company, there was a need to revitalize the brand positioning to align to our strategic aspirations. Reunert's revitalization includes a new corporate image, but more importantly, a new purpose, vision, and mission, and an enhanced investor profile. These actions are threefold and intended to, firstly, enhance shareholder value by increasing Reunert's visibility in the local and international investor community and ensuring our investment case is clearly understood. Secondly, to create a compelling purpose that aligns Reunert's employees and clarifies the role we play in society. And thirdly, to support our businesses' success by improving their ability to retain and attract top talent in a tight labor market, and increasing Reunert's support in their pursuit of market growth.
In conclusion, and under prospects, the macroeconomic environment in South Africa remains constrained, with low levels of GDP and subdued investment, both in the private and public sectors generally. This is augmented currently by uncertainty surrounding the outcome of the upcoming national elections and the potential political configuration once the elections are complete. In this environment, Reunert continues to expect that an improved financial result in 2024 will be delivered. While the pressure on the South African-facing businesses has increased over the 2023 year-end position, the group's results are anticipated to be positively supported by the incorporation of IQbusiness's results for a full 12 months, the positive defense order book, and solid electrical engineering growth. Ladies and gentlemen, thank you for your interest and attention this morning. We will now move into the live Q&A session. Thank you.
Wonderful. Good morning, ladies and gentlemen, and a warm welcome to Reunert's half year results presentation for half year 2024. Myself and Nick are on the live portion of the webcast Q&A today. Just a reminder for everybody, if you do have any questions, please pop them into the question box, and we will pick them up as we go along. We've got several at the moment. I'll start out by the first question, which is from Jacobus Cilliers at All Weather Capital. Jacobus has asked we're on the port congestion challenges, what portion of sales for Nashua are just delayed, and what portion of the sales would be considered lost due to the delay? In responding to that, Jacobus, we expect normal MFP volumes in the second half.
Effectively, the bulk of the logistical challenges have now been resolved, and we've got normal stock levels back into Nashua itself. But in terms of looking at that return to normal, that does imply that there will be a fair portion of what was missed in the first half of the year that won't be recovered. So we do expect a normal second half, but it's unlikely that we will catch all of the losses, all of the lost sales that we didn't pick up in the first half. The second question is from Rowan Goeller at Chronux Research. It's a two-part question. The first part of the question relates to capacity utilization in the power cable businesses, which Nick will answer for us, and then I'll come back in on a renewable energy question.
So over to Nick on the capacity utilization of the power cable businesses.
Thanks, Alan. Obviously, we have two factories in the power cable business, one in Zambia and one in South Africa. The South African factory, which is African Cables, will be running at around 75%-80% of throughput capacity. But one has to understand that that capacity is deliberately limited to the current volumes that we have, or by the current volumes that we have, and it's... The way we limit it is by the shift pattern that our workers at the factory will work. And at the moment, we are working a 2 times 12-hour shift pattern for 4 days of the week. So what that means is that there is 3 additional days of capacity available, should market demand pick up.
And probably what's of more interest to you is that there was about a 5% increase in throughput volume, when you compare the current period that we're going through to the end of March 2024 with that of March 2023. So a 5% increase in volumes at African Cables. At ZAMEFA, there was a 4% increase in volume, and there we have considerable extra capacity. And I'm just going to look at my pack. If one looks at page or slide 11, when it's up on the website of the results presentation, you'll see that the factory capacity utilization is declared on that slide.
Perfect. Thanks, Nick. Then also, now, as I said, with Rowan Goeller from Chronux Research, there's three renewable energy questions. So I'm gonna answer them one by one. The first question is: what is the expected demand growth from the renewable energy sector? That's a little bit of a complicated question because it's a large market, and I'm therefore going to answer that question in Reunert's targeted market. Now, Reunert's targeted market in the renewable energy, energy sector is the C&I space, the commercial and industrial space, and that's a space normally between 1 MW and about 30 MW worth of solar energy, and that's where we focus our primary solar energy business and also where our large battery solutions go into that. And that market is expected to continue to grow quite strongly. I made reference in the webcast to, in my view, the...
or our view, that, that both the regulatory and the legislative changes this year that enable greater public participation and public investment into that, and that's really what underpins it. And then the numbers that we're talking about in that C&I space, that embedded generation space that we target, looks somewhere between 1.8-2 gigawatts worth of solar energy that will be built in that sector per annum, over the next four or five years. And roughly, roughly, you're looking at about ZAR 10 million a megawatt, to give you a sense of what the size of that market is. And then we've also given some guidance in the webcast in that large battery space that's predicted to grow at somewhere between 25%-35% per annum over the next seven years.
So that gives us an indication of the growth in that, in that market. The second question that Rowan has asked is: Are we gaining market share in the BOOs solar plant? Again, it's a relatively challenging question because there are not definitive market stats for exactly how much solar is being built at a, at a moment in time. But what I can share with you is that we are very pleased with the increase in our build rates. From 2022 to 2023, our build rates were only marginally up. We're quite materially up this year in terms of the build rates that we have built in our solar energy business. And that's evidenced, first of all, you can see it by the increase in BOOs that we've had, where we've grown in this half from roughly 36 MW to around 65 MW.
We've nearly doubled the number of MW that we have under ownership or near completion in that space, and also our build rates in our EPCs have been very healthy this year. So we're expecting to have a much higher number of MW built in 2024 compared to 2023, and we expect that to continue to grow into next year. The third and final question from Rowan relates to: How competitive is the C&I market relative to the residential and small commercial solar sector? There is strong competition. Obviously, it's a market that's growing very fast. It's received a great deal of attention in South Africa, so there is a lot of activity in it. Two key drivers to it.
First of all, Load Shedding decreased quite materially in the last quarter of the 2023 calendar year, the first quarter of our financial year, and then on top of that, there was a proliferation of other product in that. So roughly in our battery business, the revenue dropped by about 50% in total, and in that, we had some large battery sales, which would have boosted that. So the drop, probably in volume of those small and residential batteries, was probably about 60% from the equivalent period in H1 2023. And together with that, we've also seen a decrease in prices and obviously margin as we've tried to all move the stock.
The next question comes from Addington at FIL, who's asked if we could give some color on the EBIT margin outlook for the ICT division. His question is: Should we expect margin to move back to the 23% level? Again, Addington, we think our margins are. We do not expect significant declines in our margins, but with the inclusion of IQbusiness, their margins are slightly thinner than the 23% that you talk about in the history that we've had in other, over the years. So we wouldn't anticipate that we'd move back above 23%, but we do anticipate that we've got, again, margin stability in that segment.
Next question comes from Tayla Ginsburg, from Mtontha Wealth , who has asked: Why did we see it beneficial to sell our solar business to an associate rather than keeping it as a subsidiary? Thaila, that really relates back to the original strategy that we had and the partners that we've chosen. So the partners that we've chosen are called A.P. Moller Capital. They've got two strategic strengths. First of all, they had deep access into African markets, which at the time that we created Lumika, we were very eager to move into the broader African market, and they had access to those markets that we did not have. And secondly, they do have access to some capital that we felt was going to be beneficial to us, and, and sources of capital that we didn't necessarily have access to.
As the South African market has grown, we have focused our business specifically now on South Africa rather than going into Africa. We think it's a better fully from that strategic opportunity that we had, but it still exists. That's really the reason to it. They have access to African markets that we don't have access to, and they have access to capital and sources of capital that we think would be advantageous. That was really the reason why we brought in a partner a few years ago. We then move to Jacobus Cilliers from All Weather Capital, who's asked: With the challenges at Denel, is there any chance to invest via a JV or buy a few assets from Denel? Potentially there is, but it's not something we're actively pursuing at the moment. It's...
Denel remains held by the government and the extraction of those assets from Denel is complicated, and it's not something that we have seen any material movement on over the last period of time. So while I think the opportunity exists, it's not something that is very live for us, just at the moment, and I'm not sure it will happen in the near term. A second question from Kobus Cilliers, again, from All Weather Capital, which is on the African Cables business and in Zambia, so both in the South African and Zambia business: How does the maintenance scheduling look like? Is there a shutdown required on regular intervals, and how long do these shuts usually take? Kobus, there we have two types of maintenance. We have preventative maintenance or ongoing maintenance.
So that maintenance would take place during the course of the year. As Nick has indicated, maintenance will be done during those three days that we're not working, so that it doesn't interrupt production. And then we have large maintenance projects that are done. And we have an annual shutdown every year over the Christmas break. It's between three and four weeks, depending on just what the loading is in the factory. Somewhere around about the sixteenth of December till around about the tenth of January is typically what we see, and during that period, all the long-term maintenance is done. So there we will take large important machines out and refurbish those.
So in effect, what you would normally see is, is the run rate maintenance that goes on, and that we do outside of normal operating hours, and then the big one is done at the annual shutdown. We have no other shutdowns during the course of the year that we would take large portions of the factory out for maintenance purposes. Next question comes from Charles Hotz. There's two questions from Bateleur Capital . First question relates to: Could we please provide an update on the progress of the Eskom transmission business and split, and the potential need for investment and how that impacts cable demand? Yes, I can. The latest information that we have is that the Eskom transmission business will be operational in July.
So they have completed, the board is in place, it's been spun out, they've got their licenses from NERSA, and we're anticipating that they will be operational from July of this year. In terms of the investment, the best place to look at for that, Charles, is there is an Eskom Transmission Development Programme, TDP, that has been published, and that relates... and I gave some guidance on that. I think it was in the November, where I gave some specific numbers, but I can share a couple of them now. But that's the indication that we need 14,000 kilometers of new transmission lines be built around the grid. That we will probably do over a 10-year period, or the country will do over a 10-year period, and that's quite a significant demand to it.
We've got this as a standard answer, and somebody from the investor relations team will drop you a note with just what that expected cable demand will be. But it's a nice demand that flows through and over a 10-year period, we expect. The next question comes from Bruce Williamson at Integral Asset Management. He asked, given the increased tension in the South China Sea region, he was expecting increased defense orders. Do we have capacity to meet increased orders of ±25%, and are we competitive in this space? So, Bruce, we have three key geographical tensions that are going on. One is in the Middle East, one is in Europe, and one is in, call it Southeast Asia, you described.
And we all three of those are creating demand for us, and you can see that in the increased pickup in activity and the increased pickup in our order book. We have already put the largest demand for all of those is in our fuse business, and we've already deployed capital into that, in which we're seeing the benefit of that. So we would believe we have the capacity to have increased orders of 25%, without having, you know, hundreds of millions of ZAR of CapEx that need to go into that environment, so we would be able to meet increased orders to it. Most of our factories in the defense space only work on day shifts at the moment, so in any out of that plant. So we certainly have the capacity to have increased orders.
The second question is, are we competitive, competitive in that space? On our product range, yes, we are. And again, you can see, a little bit of a breakup in that internationalization slide, where you can see where we grow in various areas, and you can see how those orders have flowed in. But in all three of those key markets, into the Middle East, into Europe, and into Southeast Asia, we remain competitive. We're now back to Ruan from MIBFA with two further questions. Both of these, I think are good ones for Nick. The first is: what is the steady state requirement for annual CapEx? So maybe, Nick, you can have a go at that one first, and then-
Thank you.
I'll come on to the next one.
The steady state for annual CapEx is something that Alan and I discuss regularly because it's obviously it's a it's a critical allocation of the capital of the business. As guidance, what we would typically say is that the minimum investment we would require in terms of replacement assets would be in line with the depreciation that we put through the books. The half year breakdown of depreciation is we had ZAR 171 million of total depreciation and amortization at the half year. But of that, around ZAR 64 million related to true depreciation of plant and ZAR 54 million related to amortization of intangibles, which obviously relates to the acquisitions that we make.
And then the last ZAR 53 million was related to our right of use assets, where we have a building lease, and we have to capitalize it and amortize it over the period. So you could say that the replacement capital would at least be in line with the 64 million for the half year. And you can if you look at the slide that we shared with you, we spent ZAR 84 million in the first half of the year. But obviously, if one looks at last year, we spent about 350 odd million, of which 100 odd million related to BOO assets, which left us with about ZAR 250 million of ongoing and replacement and refurbishment capital.
I would expect that a good indicator of that would be around ZAR 250 million, including the expansionary capital that we might put in back into plants. Or, for example, last year there was quite a lot of money that went into our fuse factory and a fair amount of money which went into African Cables from a perspective of renewing some of the plant. So I think you could probably look at about ZAR 250 million as a realistic number going forward, assuming that there is some level of expansionary capital.
Thanks, Nick. Second question, also from Ruran at MIBFA, was: we mentioned a return of growth to the loan book. Over again, Nick will deal with that.
Yeah. I think we always use growth and gross domestic fixed investment to look at what's going to grow, or GDP, as growth in the ICT segment. So growth there would be around 2-3%, hopefully going forward. I think it's forecast to 1.9% for next year, so that's 2%. And then you've got your inflation on top of that, and then you've got some exchange rate difference. So we would expect the book to grow in line with the growth at Nashua, and our expectations of revenue growth would be somewhere between 8%-10%.
Thanks, Nick. Richard Simpson from Obsidian Capital. How material is solutions and systems to the ICT segment, and what is their contribution to operating profits in the ICT division? Richard, so when we talk, we have a sort of a rule of thumb, if I can call it that, that we try not to have a cluster that's any smaller than ZAR 100 million worth of operating profit. And that, solutions and systems integration now meets that requirement. In fact, it exceeds it quite healthily. In terms of then looking at those four clusters in the ICT segment, it would be among the biggest.
While historically, Nashua and the finance book would have been similar in size, and then we have business communications that was smaller and then, solutions systems integration, smaller again. What we find now is a much better balance across those four segments now, and certainly the Nashua finance book and systems, solutions and systems integration are all pretty much of a similar size. So it is definitely material to that ICT division, and we do anticipate that that would continue to grow.
The best way to get a sense of what the IQb usiness acquisitions fully and annualized number is, is if you look in our annual report, or integrated report, and the appendices at the end of last year, the FY 2023 numbers, you'll actually see the acquisition accounting, which will give you an indication of what the 12-month performance would be for IQb usiness, which you can use for some modeling if you'd like. Then the last question I think that I have is from... No, there's a couple more. Addington, again, from FIL Investments, has asked: Should we expect ICT revenue growth to get back to positive year-on-year growth in H2?
H1 was positive, so we had quite a nice growth in revenue in the first half, and we would expect again there to be positive growth in revenue in the ICT segment, H2 to H2, as well as the full effect of IQbusiness comes into those numbers. In last year's numbers, IQbusiness was in the second half of the ICT segment for July, August, and September, the last quarter. This year, obviously, we'll have them in for the full six months of the second half. So again, we should get some base effects of the IQbusiness revenues flowing through into... Last question from Addington, also from Fidelity International (FIL): please give an overview of the largest shareholder, Bargenel Investments.
It's a very important question because that explains why the diluted earnings per share are so much lower than the ordinary earnings per share. Bargenel is our empowerment vehicle. It owns approximately 25 million Reunert shares. It's been funded via a structure from Reunert, and in the current moment, about 19 million of the shares that it hold would have to be repaid to Reunert in settlement of the financing arrangements that are there. It'd be for value, and the two shareholders of Bargenel are essentially the ESOP scheme, which is the staff of Reunert. And then secondly is the Reunert Educational Trust, which looks after and educates you know people who are associated with Reunert. So that's who the beneficiaries of those two trusts of the Bargenel shareholding is.
But the essential issue is that it holds 24 million shares, of which approximately 5 million are in the money at the moment.
Thank you, Nick. Ladies and gents, there's no further questions. That's all of the questions that you have put to us, and it is just after 10, so I'm sure many of you have other scheduled meetings. So from Nick and myself, thank you very much for your attention and interest today. We appreciate you having attended the session and the Q&A. If we haven't got to your answer or you'd like any further answers, please drop our investor relations manager an email, and we'll either get on a call or answer you via email in terms of any further questions that you may have. Ladies and gents, thank you very much. We appreciate your attendance and look forward to seeing you again. Thank you and goodbye.