Good morning, ladies and gentlemen, and welcome to Reunert's 2024 Year-End Financial Results Presentation. I'm Alan Dickson, the Group Chief Executive, and together with Nick Thomson, our Group Chief Financial Officer, 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. I'll be taking us through the performance overview and the progress made on delivering our strategic imperatives before Nick will unpack the financials, and I'll return with a segmental review and provide some insight into what we're anticipating in the new financial year. I'm pleased to share that in 2024, Reunert delivered another solid growth in financial performance in what was a challenging macroeconomic environment in South Africa and delivered significant value to our shareholders.
In difficult local conditions, Reunert's South African-facing businesses showed the strength of their business models, the quality of their operations and their management, and significant resilience to secure good operational efficiencies and tight margin control to underpin their financial results and show year-on-year growth in operating profit. These performances were augmented by the successful integration of IQ Business into the ICT segment and a strong growth in international Defence Cluster's exports and African power cable sales. The results were, however, negatively impacted by the battery storage business's performance, where commoditization, oversupply, and reduced load shedding resulted in a significant decrease in residential and small commercial battery storage market and resulted in a notable loss at the business.
The combination of these performances delivered an increase in operating profit for the Group of 7% to ZAR 1.53 billion and an 8% growth in profit for the year to ZAR 1.04 billion. The improved profit performance flowed through the earnings per share metrics, and headline earnings per share increased to 665 cents per share, a pleasing increase of 10% over the prior year's HEPS. Importantly, the discipline in managing the Group's asset base while driving this increase in profitability remained, and the Group generated good free cash flows of just over ZAR 1.2 billion, which is in line with the Group's long-term EBITDA to free cash flow conversion of 65%. These results secured increased shareholder value as the good free cash flow enabled the total dividend to be increased by 10% to 366 cents per share.
The Group's quality of earnings, as measured by ROCE, increased to 17.7% in 2024, and total shareholder return for the year was 41%. This strong TSR growth is amplified by the fact that this upward trajectory has extended for several years, and the most recent three-year CAGR now reflects a strong 24% per annum growth. In 2020, the Group entered into an equity hedge to meet its obligations in terms of the Group's long-term incentive plan. The final tranche of the hedge transaction was completed during this financial year, and the Group took ownership of just over 2.3 million Reunert shares that were acquired at an average cost of around ZAR 33 per share. The Group has cancelled these shares, which will create further positive impact on shareholder value going forward, as the shares in issue have been reduced by 1.2%.
These financial results are underpinned by the acceleration in the execution of the Group's strategy, which drives our growth trajectory and focuses on three key areas, namely digital integration in the ICT segment, renewable energy, and the expansion of our international income streams. In ICT, the segment's strategic activities in 2024 focused upon the merger of +OneX and IQ Business, which was completed and the new entity launched with effect from the 1st of October 2024. By merging the two companies, the complementary nature of their value offerings, customer base, and skills has resulted in the creation of a market-leading digital integrator of considerable scale. The merged entity creates a business that provides a range of digital integration solutions across managed services, digital services, digital consulting, and technology and management consulting.
The ICT segment's digital integration strategy has been a significant success, as they have unlocked growth across both the public and private sector digitalization projects. The successes are evidenced by several key wins. The business has consistently grown market share, both through the addition of new blue-chip enterprise clients and by driving cross-sell and upsell opportunities, thereby increasing wallet share in existing clients. The strategy increasingly includes expanding beyond the company's traditional South African client base, and this year includes key wins in the South African public sector, with new digital integration contracts being awarded at the South African Revenue Service, Eskom, and the South African Reserve Bank. While internationally, they have been appointed as a BPO innovation hub for a Swiss-based multinational and have several consumer insight contracts in both Australia and Sub-Saharan Africa.
Importantly, the merged IQ Business has over 1,500 skilled employees and offers a great opportunity and investment for top talent in a South African environment that is skill scarce. The merged company is well positioned to deliver good growth, as the large digital integration market is expected to grow at nearly 10% per annum over the medium term. In renewable energy, the South African market conditions for the liberalisation of generation and transmission of electricity continue to accelerate. In 2024, the enabling legislation, the updated Electricity Regulation Act, or ERA, was signed into law. The ERA enables accelerated private power producer access to the electricity generation market and establishes an open market platform that allows traders to wheel and trade electricity directly. The ERA also enables the unbundling of the transmission grid from Eskom into an independent entity called the National Transmission Company of South Africa.
This company will create an independent transmission system operator and will drive the expansion of South Africa's transmission grid. These factors underpin the country's objective of connecting 18 gigawatts of new renewable energy by 2030 and a further 26 gigawatts of renewable energy by 2040. While insufficient access to the grid and an evolving regulatory environment do present operational challenges at ebb and flow as we go along this journey, the long-term growth in the solar energy market in South Africa is beyond doubt. Reunert owns solar energy, battery storage, and electricity wheeling assets that participate across several sectors of the renewable energy value chain and provide both growth in each individual market and diversification across this rapidly evolving market. The target market for our solar energy and battery storage businesses is the commercial and industrial market, or C&I market, which has much better longevity than the residential renewable market.
The significant annual increases in electricity costs, grid stability, and weak municipal infrastructure remain material concerns for South African businesses, and solar energy and battery storage give business independence from municipal infrastructure while providing both genuine cost savings and ESG benefits. We are experiencing the private sector in South Africa continuing to actively invest in renewable energy solutions to ensure that they have the reliable services upon which they can execute their core businesses, and our solar and storage companies benefit from this demand. The Group's wheeling energy business, Apollo Africa, secured an electricity trading license shortly after year-end on the 29th of October 2024. This is one of only a handful awarded in the country to date and enables the company to conclude power purchase agreements between, on the one hand, independent power producers and corporate customers to wheel electricity across Eskom's transmission infrastructure.
This will create a new revenue stream for the Group once electricity from these IPPs is generated in about 18 months' time. Unfortunately, post the license award, Eskom has indicated that it will take the NERSA granting of these licenses on review to the High Court. We view this to be a deeply regressive action and opposite to the general direction the country is moving in this liberalisation, indeed. It's too early to determine whether this action will, in fact, delay some of the timing of Apollo's revenue streams. The broader investment into renewable energy also includes the country constructing over 14,000 kilometers of new transmission lines over the next 10 years to carry all of this new renewable energy. This is a multi-billion ZAR investment and will benefit the Group's power cable manufacturing companies. Importantly, the initial bids for the first five-year supply contracts have already been submitted.
The Group's internationalization strategy delivered a record performance in 2024. The Group's non-South African revenues grew to nearly ZAR 4.9 billion, up 21% on the previous record levels achieved in 2023. These non-South African revenues have grown at a CAGR of 20% over the past four years, with sustained progress in our key targeted geographies of Africa, Asia, Europe, and America, with only Australia not growing at the desired rate that we were looking for. Strong defence revenues and excellent African power cable performance and a healthy double-digit growth in circuit breaker export volumes all contributed to this performance in 2024. To continue these trends, the Group has expanded its Middle East presence with the opening of a new office in the Kingdom of Saudi Arabia.
In 2024, large new Defence orders were received from this growing market and contributed to significant steps being taken in securing a long-term presence in this market. In the Electrical Engineering segment, they strengthened their USA market capabilities in 2024 and achieved accreditation for a new product that opens the large North American residential market, which is presently not being serviced by the Group and positions a segment for an acceleration in this geography. The execution of the Group's strategic growth initiatives is accelerating, and an increase in financial contribution is expected in the years ahead. I'll now hand over to Nick, who will take us through the detailed analysis of this year's financial performance.
Good morning to all the webcast participants. We are pleased to be able to share these positive results for the year-ended 30th of September 2024.
These results are on the back of the significant growth Reunert enjoyed in 2023 and which are, despite a persistently tough South African macroeconomic backdrop caused by the combination of load shedding in the first six months of the financial year, logistical bottlenecks at the ports, high interest rates, and ongoing global uncertainty. With Trump's re-election and with the protectionist policies he is likely to introduce, combined with the conflicts in Ukraine and the Middle East, this uncertainty is likely to be a key element of the global economic environment for some time to come and which will impact the local economy and business confidence. Positively, however, business confidence in South Africa is slowly improving, albeit off a low level, as the GNU beds down and workable solutions are found to key issues like load shedding and the country's logistics channels.
The results presented in these slides are summarized extracts from the 2024 group-audited annual financial statements, which are available in full from Reunert's website under the Investor Center tab. The Group's new auditors, KPMG, have issued an unmodified audit opinion on these financial statements. For context, these results must be measured against the expected growth in the South African GDP of 1% for the 2024 calendar year and, unfortunately, the contraction of minus 1.3% in gross domestic fixed investment, despite being off a very low base. GDFI, which we consider to be a good proxy for expected demand in the Electrical Engineering segment, is still 14% lower in real terms than in 2017. Recent economic analysis published by Econometrix reflects that, despite inventory levels increasing back to levels reflective of pre-COVID activity and supply chain disruptions having largely subsided, South African manufacturing output is at roughly 93% of pre-COVID levels.
To help listeners determine the impact of metal prices on revenue growth in the Electrical Engineering segment, average copper prices in 2024 were ZAR 165,000 per tonne as against ZAR 153,000 per tonne in 2023, an 8% increase. The increase in revenue in the Electrical Engineering segment is therefore from a combination of an increase in volumes, improved sales mix, and because of the pass-through of these metal price increases. Against these background factors, we are pleased to report that Group revenue continued its growth trajectory since COVID, with revenue increasing by 5%, or ZAR 665 million for the year, as can be seen from note one on the statement of profit or loss. There were two structural changes which affected the Group's revenue growth for the year.
Firstly, IQ Business's revenue was included in revenue for the full 12 months of 2024 as against only three months in the prior year. This acquisition was effective from the start of the fourth quarter of the 2023 financial year. Secondly, the sale of Terra Firma, the Group's solar energy business, to Lumika, the Group's 50/50 joint venture with A.P. Moller Capital, was completed at the end of the last financial year. This sale resulted in there being no solar energy revenue included in the Group's revenue for the statement of profit or loss in 2024, as we do not consolidate Lumika. This is in contrast to 2023, where 100% of Terra Firma's revenue was consolidated. The balance of the growth in revenue can be explained through the growth in segmental revenue.
For those listeners looking for more detail in the makeup of revenue, full details of the segment revenue are set out in note one to the annual financial statements and in the segmental analysis towards the back end of the annual financial statements. The increase in revenue is driven by a 7%, or ZAR 523 million, increase to ZAR 7.7 billion in the segment revenue of the Electrical Engineering segment due to consistent performance at the South African power cable business, good performance at the Zambian power cable business, and modest growth in revenue at the circuit breaker business as its export market improved.
ICT segment revenue increased by 27%, or ZAR 833 million, to ZAR 3.9 billion, which was largely due to the inclusion of IQ Business into the Solutions and Systems cluster, as revenue growth in all other clusters in the segment came under pressure due to load shedding and the port congestion in the first half, which resulted in the loss of sales Total Workspace Provider Cluster, which was not recovered in the second half, and the loss of minutes across the network in the Business Communications Cluster, which is in line with the reported results on the impact of load shedding on the results of major mobile operators. The Applied Electronics segment, after a stellar growth of 51%, or ZAR 1.2 billion, to ZAR 3.6 billion in 2023, suffered a reduction in segment revenue of 10%, or ZAR 367 million, down to ZAR 3.2 billion in the current year.
This decrease was despite the growth in revenue from the segment's delivery into the substantial defence export orders and was due to the combination of the structural impact of the deconsolidation of Terra Firma and the significant decline in the demand for residential and small commercial batteries, which two items reduced segment revenue by around ZAR 581 million, or 16% collectively, and group revenue by ZAR 908 million. These segmental performances have resulted in 53% of group revenue being earned from the EE segment, 27% from the ICT segment, and 20% from the AE segment, as against 52%, 22%, and 26% in the prior year. However, more importantly, non-South African revenue has increased by 21% to ZAR 4,889 million. From a Group perspective, this is an improved revenue mix well aligned to our growth strategy. Operating profit improved by 7% to ZAR 1,531 million.
To help listeners follow the build-up of the numbers used in our explanation of the growth in operating profit, we have augmented the IFRS numbers to include additional analysis. The statement of profit and loss on the slide is accordingly not meant to be IFRS format compliant, but all the numbers disclosed have been extracted from the Group annual financial statements. Total segment operating profit increased by 5%, or ZAR 74 million, to ZAR 1,536 million. This increase is in line with the overall revenue increase of 5%, reflecting the Group's recovery of its increased operating costs. The Electrical Engineering segment's operating profit increased by 20%, or ZAR 113 million, to ZAR 665 million due to the improved throughput and sales mix at the Zambian power cable business and improved profitability at the circuit breaker business as its exports recovered.
The South African power cable business maintained its profitability despite the lower volume of high-voltage power cable sold in the current financial year, as expected orders moved into the 2025 financial year and beyond. The ICT segment achieved an overall growth in segment operating profit of seven%, or ZAR 46 million, to ZAR 706 million.
As will be seen from the segment review that Alan will shortly take us through, this segment's performance was adversely affected by the loss of minutes caused by the impact of load shedding in the first half of the year, a continuation of what happened in the year before, the lost sales from the Total Workspace Provider due to the port logistics issues, the higher interest rate environment, which contributed to low gross domestic product growth and reduced business confidence for the majority of the year, which led to low sales to our smaller customers, and finally, delays in the commitment to major ICT initiatives by our larger clients. Applied electronics segment operating profit decreased by 16%, or ZAR 71 million, to ZAR 361 million.
This was due to the increased levels Defence Cluster as the record Defence orders were successfully executed, which partially offset the impact of the substantial loss of the battery storage business and the impact of the quality production fault at the printed circuit board business. Items more of a once-off nature included in the statutory operating profit, but below segmental operating profit are downward fair value remeasurements together with the profit on disposal of the Group's investment in the franchise and the Nashua Group, which combined to a negative ZAR six million in the current year, compared to a ZAR 31 million gain from the combination of fair value movements and the profit on disposal of Terra Firma in the prior year.
In the current year, there was also the benefit of the final COVID insurance receipt of ZAR 83 million, compared to the interim receipt of ZAR 44 million in the prior year. In the current year, in accordance with the requirements of IFRS 36, impairment of assets, the Group impaired the goodwill and intangible assets attributable to the battery storage business in the amount of ZAR 57 million on the back of the substantial loss in the current year and the uncertain timing of the expected improvements in this business, which has pivoted to service the demand for larger scale battery storage solutions. In the prior year, the write-off of an intangible asset amounted to ZAR nine million only. The results were bolstered by a substantial improvement in the credit performance of the Group's various receivables.
Considerable effort has gone into maintaining and, where possible, improving trade receivable collections across the Group and on the collection of rentals due through the Total Workspace Provider channels. The results of these efforts are that, despite the tightening economic conditions, there is an increase in actual credit write-offs of only ZAR nine million for the year, resulting in total credit write-offs of ZAR 30 million for the current year as against the ZAR 21 million in the prior year. Positively, the actual credit loss experienced at Quince against the rental and loan book remained low at ZAR nine million for the year. The write-offs relating to the trade receivables was ZAR 21 million. The combination of these two write-offs totals to the ZAR 30 million write-off for the year per the statement of profit and loss.
Turning to the movements on the allowance for expected credit losses, in the current year, the forward-looking requirements of IFRS 9 have resulted in the expected credit loss allowance against Quince's lease and loan receivables book reducing by ZAR 12 million for the year, resulting in the allowance for expected credit losses reducing to ZAR 110 million, or 4.6% of the book. In 2023, it was 5.2%. The required allowance for expected credit losses and trade receivables was reduced by ZAR 9 million due to the collection of certain previously outstanding receivables. This decrease in required ECLs totaled ZAR 21 million. The combination of the credit write-offs of ZAR 30 million and the reduction in the required ECL of ZAR 21 million resulted in the final net ZAR 9 million in the statement of profit or loss compared to the ZAR 91 million charged in 2023.
We have discussed the main drivers of the 5% increase in revenue, the 5% increase in segment operating profit, and how this translates to a 7% increase in operating profit after impairment of financial assets. In note three, the prime driver of increase in profit before tax to 11% from the 7% increase in operating profit is due to the continued positive cash management during the year-end review. Net interest for the year amounted to ZAR 71 million compared to ZAR 120 million in 2023. This is despite the necessary increases in working capital, which amounted to ZAR 201 million at half year, driven largely by the need to increase inventory levels due to the port congestion, and ZAR 184 million at year-end due to the reduction in inventory as supply chains stabilized, offset by the substantial increase in receivables resulting from the record export sales in the last quarter.
Note four deals with the increase in the effective rate of tax of approximately 2%. This has resulted from the non-tax deductible status of the ZAR 57 million impairment of goodwill and intangible assets of the battery storage business, and because the large tax loss from its trading losses has not been raised as part of the Group's deferred tax assets due to the uncertainty of its utilization. As you can see from note five, the impact of all the items highlighted is an 8% increase in profit for the year, which translates into a 13% increase in earnings per share due to the allocation of the attributable earnings between Reunert shareholders and the minority shareholders. 49% of the after-tax loss attributable to the battery storage business has been borne by the minority.
This results in a 10% increase in headline earnings per share after the exclusion of those amounts of income and expenditure as prescribed by South African Institute of Chartered Accountants Circular one of 2023. The next slide is a summarized Group statement of financial position, which highlights the Group's ongoing financial strength. Comparing the current statement of financial position to that of 30th 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, both shareholders have subscribed for ZAR 50 million in new equity and capitalized ZAR 139 million of their funding loans into Lumika's equity. This capital injection funds Terra Firma's working capital requirement and its equity contribution to Terra Firma's build, own, and operate solar asset portfolio.
This capital contribution has resulted in the increase in the Group's investment in the joint venture to ZAR 189 million and the corresponding reduction in loans to the joint venture of ZAR 139 million. The Group's lease and loan receivables book remains in line with that of the prior year at ZAR 2.2 billion, compared to ZAR 2.3 billion due in part to the low sales Total Workspace Provider Cluster because of the port congestion and in part due to the low growth environment in South Africa. The Group has increased its total long-term borrowings from ZAR 1.1 billion to ZAR 1.3 billion. This was through the drawdown of ZAR 550 million of Quince's new facilities in the first half of the year and the repayment of the Group's ZAR 400 million revolving credit facility.
The residual ZAR 150 million difference was in part absorbed into the Group's cash balance and in part used to finance the ZAR 50 million share investment into Lumika. The revolving credit facility of ZAR 400 million is still available for the Group to draw down on in need. The other movements relate to the working capital and related cash flow movements, which we will cover in a few slides' time. The key message from the financial position is that working capital remains well managed. There has been no deterioration in the Group's cash flow generation capacity. Gearing is still well under the allowed levels in terms of the Group's banking covenants, being it on a gross basis just under 13% compared with 12% at the end of the prior year, and there continues to be no gearing on a net of cash on hand basis.
The Group continues to have significant undrawn banking facilities available to it, which together with the cash on hand means the Group has adequate resources to meet dividends, operational requirements, and to fund the Group's strategic initiatives. This slide depicts an analysis of the Group's cash flows for the year and reflects a healthy free cash flow generation of ZAR 1.2 billion. This is free cash flow generation at the level of 118% of profit after tax and a cash conversion rate of 65% of EBITDA, both of which are in line with the Group's internal targets. Starting at the first blue bar on the right-hand side of the graph, the Group generated just over ZAR 2 billion in cash from operations. ZAR 184 million cash was invested into working capital during the year.
This was due to the substantial increase in the Group's receivables of ZAR 862 million due to the record sales in the last quarter, offset by the release of ZAR 160 million from inventory and the increase in funding from payables of ZAR 518 million. This resulted in the free cash flow of ZAR 1.2 billion. All investing activities were matched by appropriate financing activities, resulting in net cash generation of just under ZAR 1.3 billion for the year.
Turning to the graph on the left-hand side of the slide, the Group started the year with net cash of just under ZAR 1.2 billion, and after the cash paid out for dividends of ZAR 552 million being the final 2023 dividend and the interim 2024 dividend, and adding in the net cash generated for the year of ZAR 1.3 billion, the Group ended the year with net cash on hand of just over ZAR 1.8 billion.
The dividends for the year are covered 2.1 times by the Group's free cash flow for the year. To give a three-year picture of how the Group's capital has been allocated, we have put together this new slide. At the start of the 2022 financial year, Reunert had ZAR 291 million net cash on hand. Over the last three years, we have generated free cash flow of ZAR 3.1 billion. After investing ZAR 525 million in working capital against the revenue increase of ZAR 4.9 billion, or an investment rate of 11% of revenue against the Group's benchmark of 18%, paying income tax of ZAR 1.1 billion and investing ZAR 259 million in replacement assets, as well as servicing all of the Group's debt costs, which amounted to ZAR 237 million.
In addition, we have raised ZAR 1.3 billion in debt through our long-term funding program and realized some ZAR 229 million from the proceeds on the sale of property, plant, and equipment together with the effective 50% sale of Terra Firma. This all resulted in a total of ZAR 5 billion being available to the Group over the last three years. What we have done with these funds is to execute acquisitions and to buy out minorities to the value of ZAR 816 million in pursuit of the Group's strategy. The largest acquisition being the purchase of the controlling interest in IQ Business, which has significantly enhanced our digital offering in the ICT segment. We've also invested ZAR 500 million into core assets to ensure the Group has sufficient reliable capacity to meet demand and invested ZAR 189 million into the Group's renewable energy business, Lumika.
Finally, we have rewarded our shareholders with approximately 50% of our free cash flow by paying out dividends to our shareholders ZAR 1.5 billion. After this allocation of capital, the Group has ended the three-year period with a closing cash balance of ZAR 1.8 billion, which is available to meet the final dividend for 2024 of ZAR 433 million, as well as provide the resources to continue the pursuit of our strategic initiatives. Positively, the deployment of this capital has resulted in the Group's return on capital employed improving from 14.5% in 2021 to 17.7% in 2024. With our strong balance sheet, our significant unutilized banking facilities, our continued positive cash generation, and our ability to return funds from Quince to reinvest into higher yielding opportunities, the Group stays well positioned to continue to execute its strategy and to generate positive cash returns for our shareholders.
With that, I will hand back to Alan to take us through the segmental review, the Group strategy, and the Group's prospects for 2025.
Thanks, Nick. This year's segment operating profit growth can be characterized by an excellent Electrical Engineering growth, solid performances by Defence Cluster, and the solar energy business, but was offset by a significant loss at the battery storage business and an operational issue at the printed circuit board company . I'll unpack these segment results, provide the drivers for the 2024 performances, and give insight into the new year. The Electrical Engineering segment delivered an excellent set of results as both the circuit breaker and power cable businesses delivered good growth. The segment's manufacturing performance was characterized by stable South African volumes for both power cables and circuit breakers.
In South Africa, the local conditions remained challenging as the investment into local infrastructure remained constrained. The power cable business did well to secure similar low and medium voltage power cable volumes as the prior year, but the anticipated high voltage power cable contracts were delayed by key municipal and provincial customers. Importantly, a strong increase in non-South African volumes was achieved. In Zambia, the business environment since the 2021 election continues to improve. While liquidity remains tight, improved procurement processes at the state-owned entities, a renewed electrification drive, and investment into the region's copper infrastructure have all created an environment in which Zamefa benefits from improved power cable volumes. At the circuit breaker company, export volumes increased by 20%, driven by the company's success in the important USA market and a number of new projects that were secured.
The businesses all have well-developed lean manufacturing programs, and these, again, delivered strong efficiencies as value engineering and cost management enabled the efficient execution of the orders and enhanced the financial performance. Pleasingly, the segment's margins also improved positively in 2024. In South Africa, the power cable business delivered a steady performance despite the delay in those high-voltage orders, while Zambia provided much of the improvement in the power cable margin. In Zambia, the management reduced working capital and secured kwacha-based debt on the company's own balance sheet, which has reduced the historic net foreign liability that has been a challenge and therefore also reduced the associated exposure to the forex movements. This, together with the improved volumes, the better cable mix, and the manufacturing efficiencies, led to a much improved power cable performance.
The circuit breaker business's investment into its new products over the past number of years is steadily leading to improved export margins as their legacy products are increasingly replaced by newer products with better margins. The electrical infrastructure and investment is expected to improve. The continued investment into renewable energy, the impending expansion of the transmission grid, and a general improvement in business confidence are all expected to steadily yield improved volumes. We do, however, remain cautious about the rate of increase in South Africa's electrical infrastructure investment, and given the tenders that we currently have in place and the activity we actively see on the ground, we expect any increase to be towards the end of the 2025 year, and the first half of the year, particularly for power cables, we expect to be quite challenging.
The international volumes, importantly, are more likely to materialize as U.S. export volumes and an increase in market penetration in Europe and Asia bode well for the circuit breaker business, while in Zambia, the ongoing investment into new copper mining infrastructure and electrification in the region will support their volumes. We do expect growth in 2025, but the segment is unlikely to be able to match the 20% CAGR delivered over the pass-through years off this high base. The ICT segment had a solid financial performance as the revenue increase was driven primarily by the successful integration of IQ Business, the strong growth at +OneX , and the last-mile broadband connectivity businesses, which offset the impacts of an otherwise low-growth economic environment and the interruptions that we had at the ports at Nashua in H1.
Solutions and Systems Integration 00:37:54 proper nouns Current Solutions and Systems Integration Cluster Suggested fix Solutions and Systems Integration Cluster 00:16:02 proper nouns Current Total Workspace Provider Cluster Suggested fix Total Workspace Provider Cluster 00:16:02 proper nouns Current Business Communications Cluster Suggested fix Business Communications Cluster 00:36:54 proper nouns Current Rental-based Finance Cluster Suggested fix Rental-based Finance Cluster 00:19:52 proper nouns Current Defense Cluster Suggested fix Defence Cluster 00:42:38 proper nouns Current Renewable Energy Cluster Suggested fix Renewable Energy Cluster value offerings delivered strongly as new clients were onboarded, and increased wallet share in key clients once again validated their competitive position and secured market share gains in the enterprise market.
At +OneX , record performances by software development, cloud services, and digital and data services delivered much of the growth at that business unit. Total Workspace Provider Cluster under the Nashua brand, the second half delivered a much improved performance as the first half supply chain challenges were resolved.
Nashua delivered a second six-month financial performance in line with prior years where uninterrupted supply existed, and the core strategy of increasing complementary products and services to augment traditional print continued to deliver a good contribution from franchise fees. Rental-based Finance Cluster delivered a solid performance in 2024. In the low GDP and high interest rate environment, they continued investing into their credit control systems and effectively managed their customer base. Importantly, the collections remained of a high quality, and the actual credit losses decreased year on year and remained well below the benchmark of 0.5% of the book. Although the total book decreased slightly to ZAR 2.4 billion on the back of the slower sales at Nashua that I described earlier, the company remains well positioned and, importantly, well provisioned to deliver in 2025.
Reunert's ICT segment has a large exposure to the South African market, and the predicted improvement in local economic conditions will positively impact this segment. The predicted higher GDP, lower interest rates, and improved confidence all bode well for the Total Workspace Provider, the rental finance, and the Business Communications clusters, which historically perform well in improving Solutions and Systems Integration 00:37:54 proper nouns Current Solutions and Systems Integration Cluster Suggested fix Solutions and Systems Integration Cluster 00:16:02 proper nouns Current Total Workspace Provider Cluster Suggested fix Total Workspace Provider Cluster 00:16:02 proper nouns Current Business Communications Cluster Suggested fix Business Communications Cluster 00:36:54 proper nouns Current Rental-based Finance Cluster Suggested fix Rental-based Finance Cluster 00:19:52 proper nouns Current Defense Cluster Suggested fix Defence Cluster 00:42:38 proper nouns Current Renewable Energy Cluster Suggested fix Renewable Energy Cluster cluster, where their new merged IQ Business operates, is also expected to deliver well in 2025. IQ Business's value offering is expected to continue to deliver growth, and their strong positioning in IT consulting, AI solutions, cybersecurity, and cloud ecosystems are all areas of the market growth that will enhance their financial performance in 2025.
The decline of the Applied Electronics segment's Defence Cluster performance, was caused by two specific issues, one structural and the other operational. The structural change is the prior year's execution of the put and call at the solar energy business, which resulted in only 50% of the business's revenue and operating profit being accounted for in the Applied Electronics segment in 2024 as compared to 100% in 2023. While operationally, in last year's year-end presentation and again in the 2024 interim results, we described how the residential and small commercial battery storage market had collapsed due to a combination of overstocking, commoditization, and lack of load shedding. This market has not recovered and remains at about 25% of the pre-crash volume.
This has led to a material decrease in the revenue in the industry, and the group's battery storage business was similarly impacted as revenue more than halved in the year. Importantly, most of the stock on hand has been sold in the year, but despite a restructure and being repositioned for larger battery storage sales, these large deals that were received were not enough to offset the challenges and a significant loss was suffered in the year. The Defence Cluster had a strong year. The cluster entered the year with a healthy order book, and execution was vital to meet customer expectations and deliver the associated financial performance. The business unit management teams did an excellent job as they efficiently executed the large volumes and increased the revenue of the cluster.
The efficient execution enabled improved recoveries, and together with good cost management at a slightly weaker exchange rate, delivered improved margins for the cluster. Unfortunately, a production fault at the PCB business resulted in the temporary loss of an export customer, and the costs associated with the rectification of the problem and the resolution of the associated stock losses dampened Defence Cluster has continued to drive its international expansion. In 2024, they took receipt of several long-term strategic co-development contracts in key geographies. They also successfully localized tactical navigation sales into the Kingdom of Saudi Arabia. These initiatives, together with traditional product sales, delivered increased revenues in all three of our key geographies of Europe, Southern Asia, and Defence Cluster's order intake continued positively, and the order book grew by 1% despite the strong revenues in the year.
The order book stood at over ZAR 2.7 billion at the end of the year, of which over 80% comes from export markets, and the export order book grew by 27% year on year. Looking forward, the Defence Cluster's positive momentum through the 2025 financial year and into the medium term. The cluster already has a 75% coverage of its 2025 target, and there are clear prospects to close the gap in the first half of the year. Importantly, the progress in the international successes made in 2024 has strengthened the cluster's long-term prospects. The strategic co-development projects the cluster is executing will increase its market access in these targeted geographies, and once these co-development projects are completed, indigenous production is expected to follow, which the cluster will participate in.
The global instability this year is expected to continue into Europe, the Middle East, and Asia, and this continues to create an environment that is conducive to the ongoing Defence Cluster's design and manufacturing capabilities. In the Renewable Energy Cluster, the group's solar energy business delivered a strong increase in operating profit as a record build of megawatts was completed in 2024. An increased focus on deal management, execution, and O&M resulted in improved margins and profitability for the business. The business's core strategy remains the ownership of build, own, operate, or BOO assets. In 2024, however, customers had a propensity to build new solar energy plants on their own balance sheet, and the year-on-year increase in BOO ownership grew by a positive 37%, although this was somewhat lower than we would have liked it to have been.
The business now owns 78 megawatts of in operation, under construction, and near-financial close BOO assets, and the EBITDA generated by these plants increased by a pleasing 38% over the prior year. As described earlier in the strategy section, the market for the C&I renewable energy remains positive, and we expect continued solid performances from our solar energy and battery storage companies, although the battery storage business is only expected to return to profitability in the second half of 2025. Looking forward from a group point of view, Reunert is encouraged by the political developments in South Africa since the elections in May. We believe that load shedding will remain at manageable levels, and we are confident that should the government enable increased private participation in the economy, an uplift in key economic indicators will follow.
Reunert has delivered strong financial performances in a low-growth environment on the back of good business models, strong operational performances, and the group's growth initiatives. Improvements in South African GDP, GDFI, and business confidence will support Reunert's growth, and on the back of that, we will deliver positive operating leverage. However, we do remain cautious on the extent and the timing of the expected rate of these improvements in these indices, as there are many subsequent decisions that the country must still make. On the back of that, Reunert is once again well positioned to deliver a growth in year-on-year financial performance in 2025.
The first half of the financial year is expected to remain challenging as similar market conditions as 2024 continue to exist, but the phasing of the group's export Defence contracts, high-voltage orders, and the expected increase in infrastructure expenditure bias the group's growth towards the second half. Ladies and gentlemen, thank you for your time this morning, and we will now move across to the Q&A session. Thank you.
Good morning, ladies and gentlemen, and welcome to the Q&A session, which is a live session with myself and Nick after the main presentation that you've just watched, and thank you for taking time to join us today. Both Nick and I will be answering the questions just depending on who's best suited to deal with the matter that's been raised. So I'll move straight into the first question, which is from Charl Gous from Bateleur Capital.Charl
Charl, I'll read the question out and then answer it. So can you please discuss and put some numbers to the base effects that could support earnings growth into the 2025 financial year? For example, natural normalization, batteries business expected profit recovery, financial impact of the circuit breaker business, and the delayed high-voltage orders and the quantum of the orders expected. Thanks. Thank you, Charl. Charl, it's a good question, but one that's complicated for us to answer because we can't give detailed guidance looking forward in terms of actual numbers that we can attach to the question that you've got. And similarly, we do not give business units information down at the level that you have requested.
I thought the best way to answer it would be to try and highlight, in our view, the key base effects and how you could consider updating those in your own models and best help you in that manner. So there are four key base effects or four factors that we think are important in terms of it. The first of those is you have picked up as a natural normalization. So we're anticipating a full year of normal supply. The supply chain into the Nashua business is largely under control, and we think also that the ports will probably stay more or less at the level of efficiency that they are at the moment, given the engagement with business or the involvement of business.
Now, roughly in the first half of the year, around about three months' worth of lost revenue is what took place as a result of that impact that we had at Nashua, and that's something which you can factor into your model for the new year. The second element that is important is the high-voltage orders. We do expect those to flow in the second half of the year. There are a number of bids out at the moment, and we anticipate that those should close and should end up in the second half of the year in the Electrical Engineering segment. The third really good area to look at from an effect point of view is the Defence orders. We've given an indication, as you would have heard in the webcast, that the current order book is a little over ZAR 2.7 billion.
And of that order book, those that fall into and will be executed in this financial year covers around 75% of the target for that business. So that's really good coverage, and we have really strong possibilities to close the remaining 25% in the first half of the year. So those Defence businesses broadly should run at full capacity for the 2025 financial year. The last area that we think is important is the batteries. This first six months of the FY 25, we anticipate to be very similar to the last six months that we had in FY 24, and there really isn't much that has changed there.
To the extent that you've factored into your model for that tough six months should be carried forward into the first six months of the new year, and we're hoping to deliver marginal profitability in the second half of the year. But a base effect that will not be repeated in that business specifically, which we have disclosed, is the write-off of the impairment that we took through the income statement of around about ZAR 56 million in this year's numbers, and that would not be repeated in next year's results. So I hope that helps you put that together.
The second question comes from David Fraser from Peregrine Capital. David has asked, how affected is your Zambian operation with the recent power disruptions in that country? And Nick will provide the answer on that one.
Good morning, everybody again. Zambia is pretty dependent on. Sorry, can you hear me? It's now come back. Okay. They're dependent on hydroelectric power, and with the severe droughts, the dams have dried up, and obviously the output of the hydroelectric power stations is significantly below what you would expect it to be, and that is causing sort of energy supply disruption across the country, and in the case of our Zambian operation, we've been very fortunate. We haven't been too adversely impacted at all in terms of the load shedding that they've had to impose because of the shortage of hydroelectric power, and secondly, we're able to, if needed and if the situation was to get worse, we're able to buy and pay for imported energy, which is obviously at a much higher tariff than the normal local tariff, but at least it would allow us to continue with seamless production.
The issue there up till now, certainly in the 2024 financial year, we didn't have any major costs related to that. But obviously, if we have to rely heavily on that channel, it is significantly more expensive and will have an impact on our operating costs if it's necessary for us to pursue that route. Perhaps the more serious issue is that ZESCO, which is the power utility, because they're not selling as much revenue and they're having to buy in, sorry, selling as much power, they're not getting as much revenue, and also they're having to supplement their energy supply by imported cost, and that's having an impact on their profitability.
The natural consequence of that is that it impacts their cash flow, and we're continuing to sell to them, but we're watching what we sell to them to make sure that whatever they buy from us, they're able to pay for. So that's probably the more serious impact.
Thanks, Alan. Thanks, Nick. The next question is from Rowan Goeller from Chronux Research. He was asked how the pivot to larger batteries, how can we achieve that with the existing facilities, and is this a relatively seamless switch?
Rowan, so the existing, the traditional, those residential and small commercial batteries were large volume batteries, but relatively small, and hence we had a large need for storage space, and so there were large warehouse requirements to it, and the route to market was probably through a distribution channel more so than where we believe the large market, the large batteries will be. So the pivot, we have made an investment into engineering capability and business development capability because the larger batteries are a more complicated sale and through a different channel. So there has been an investment that has been made into those skills already, and we are able to and have been selling these larger batteries for a number of periods already. So that is well established, and we've invested more into that.
What we have done on the other side is we have right-sized the business to take out the hire or the labor that was involved in the high volume, and we've reduced the warehousing costs and removed one of the facilities that we were utilizing at the time in order to right-size the cost base as much as we can as well to position ourselves for the new batteries. So it's relatively seamless, it is relatively seamless to do. We've done it all already, and we're now fully positioned and right-sized in order to do that. And it's really now around how fast do these new large batteries come on stream and at the rate at which we can do them.
We have a very large pipeline, but it's a complex sale, and that conversion is taking some time, which is why we see similar in the first half and it picked up increasingly into the second half of the year. The fourth question is from Kobus Cilliers from All Weather Capital. He's asked, what is our current experience at the port? It's a first part. Second, what does our inventory look like for the workplace, for our workspace solution, and how do we see that evolving? Kobus, there has been the performance at the ports is stable. It's stabilized at a level well below optimum throughput, but it's been relatively stable. So we are in a position now where we can manage it as long as it stays at this level, and we have adjusted to this type of performance.
Our view is that through the engagement between government and business, we expect that to largely remain stable. The rectification of this long term will take a little bit more time back to where it should be, but at current operations, it's good enough for us to be kind of uninterrupted. We had indicated over half year that we had put a little bit of inventory into our system, not only in the workspace solution provider, but also across the business where we had input, whether it be raw materials or semi-finished products that we need to deliver, and we've bolstered that. So our view would be that that is already in the numbers that you see at the end of this year.
And given that stability, we're not anticipating that those stock levels will have to increase in order to manage, or to deal with the port environment that we see at the moment. So I think it's already in the numbers, and hopefully it remains at the stability and doesn't get any worse than that, which we're not anticipating it would be. Those are the four questions that we have at the moment. I'm going to sort of give maybe 10 or 15 seconds just to see if there's any last minute questions that anybody may have not been able to type into yet. So ladies and gents, there's nothing more that has come through. So thank you for your attention today. To the extent we didn't get to your questions or you weren't able to get it in fast enough, please just drop us an email.
We're on roadshows now for the next sort of week, and we will get back to you through that period with any questions that we may not have answered for you today. So thank you for your attention. Thank you for your support, and keep well. Goodbye.