Wrap Text
Unaudited Interim Financial Results
Allied Technologies Limited
(Incorporated in the Republic of South Africa)
Registration number: 1946/020415/06
Share code: ALT
ISIN: ZAE000015251
Highlights
Revenue increased by 6,8% to R5,2 billion
Annuity income maintained at 83% of revenue
· EBITDA before capital items of R372 million
· Statement of financial position remains strong
· Annualised return on shareholders' equity at 22,6%
Contents
Summarised consolidated statements of comprehensive income
Summarised consolidated statements of financial position
Summarised consolidated statements of changes in equity
Summarised consolidated statements of cash flows
Notes
Supplementary information
Segmental analysis
Corporate activities
Message to shareholders
Corporate information
Summarised consolidated statements of comprehensive income
Six Six
months months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
Figures in R million (Unaudited) (Unaudited) (Audited)
Revenue 5 157 4 828 9 972
Earnings before interest, tax,
depreciation, amortisation and capital
items (EBITDA before capital items) 372 456 919
Depreciation and amortisation (116) (160) (270)
Operating profit before capital items 256 296 649
Capital items (Note 1) (676) (13) (830)
Results from operating activities (420) 283 (181)
Finance income 9 5 15
Finance expenses (74) (27) (74)
(Loss)/profit before taxation (485) 261 (240)
Taxation (101) (89) (227)
STC (35) (35)
(Loss)/profit for the period (586) 137 (502)
Other comprehensive income/(loss)
Foreign currency translation differences
in respect of foreign operations 45 (115) 67
Other comprehensive income/(loss) for the
period 45 (115) 67
Total comprehensive (loss)/income for the
period (541) 22 (435)
(Loss)/profit attributable to:
Non-controlling interests (284) 1 (226)
Altech equity holders (302) 136 (276)
(Loss)/profit for the period (586) 137 (502)
Total comprehensive (loss)/income
attributable to:
Non-controlling interests (270) (37) (208)
Altech equity holders (271) 59 (227)
Total comprehensive (loss)/income for the
period (541) 22 (435)
Basic (loss)/earnings per share (cents) (309) 141 (283)
Diluted basic (loss)/earnings per share
(cents) (300) 137 (275)
Summarised consolidated statements of financial position
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
Figures in R million (Unaudited) (Unaudited) (Audited)
ASSETS
Non-current assets 1 268 2 320 1 732
Property, plant and equipment 621 967 886
Intangible assets, including goodwill 421 1 123 693
Non-current receivables, including loans
receivable 182 137 114
Deferred taxation 44 93 39
Current assets 2 385 2 087 2 222
Inventories 483 399 449
Trade and other receivables, including
derivatives 1 595 1 335 1 497
Cash and cash equivalents 307 353 276
Assets classified as held-for-sale 85 135
Total assets 3 738 4 407 4 089
EQUITY AND LIABILITIES
Total equity 654 1 883 1 433
Altech equity holders 1 095 1 879 1 600
Non-controlling interests (441) 4 (167)
Non-current liabilities 604 574 570
Loans payable 486 469 473
Deferred income 55 47 51
Deferred taxation 63 58 46
Current liabilities 2 395 1 950 2 019
Trade and other payables, including
derivatives 1 898 1 808 1 649
Warranty provisions 25 20 22
Bank overdrafts 423 80 292
Taxation payable 49 42 56
Liabilities classified as held-for-sale 85 67
Total equity and liabilities 3 738 4 407 4 089
Summarised consolidated statements of changes in equity
Attributable to Altech equity holders
Premium/
discount
Share on non-
capital controlling
and Treasury Other equity Retained
Figures in R million premium shares reserves transactions earnings Total
Balance at 1 March 2011 49 (292) (384) 259 2 505 2 137
Total comprehensive
income
Profit for the period 136 136
Other comprehensive
loss
Foreign currency
translation
differences
in respect of foreign
operations (77) (77)
Total other
comprehensive loss (77) (77)
Total comprehensive
(loss)/income
for the period (77) - 136 59
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions
to owners
Issue of share capital 1 1
Dividends to equity
holders (347) (347)
IFRS 2 charge on B-BBEE
transactions 4 4
Share-based payment
transactions 5 5
Total contributions by
and distributions to owners 1 9 (347) (337)
Changes in ownership
interests in subsidiaries
Buy-back of non-
controlling
interest 20 20
Total changes in
ownership
interests in
subsidiaries 20 20
Total transactions with
owners 1 9 20 (347) (317)
Balance at 31 August
2011 50 (292) (452) 279 2 294 1 879
Total comprehensive
loss
Loss for the period (412) (412)
Other comprehensive
income
Foreign currency
translation
differences in respect
of foreign operations 126 126
Total other
comprehensive income 126 126
Total comprehensive
income/(loss)
for the period 126 (412) (286)
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions
to owners
IFRS 2 charge on B-BBEE
transactions 1 1
Share-based payment
transactions 6 6
Total contributions by
and distributions to owners 7 7
Total transactions with
owners 7 7
Balance at 29 February
2012 50 (292) (319) 279 1 882 1 600
Total comprehensive
loss
Loss for the period (302) (302)
Other comprehensive
income
Foreign currency
translation
differences in respect
of foreign operations 31 31
Total other
comprehensive income 31 31
Total comprehensive
income/(loss)
for the period 31 (302) (271)
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions
to owners
Issue of share capital 4 4
Dividends to equity
holders (242) (242)
Share-based payment
transactions 4 4
Total contributions by
and distributions to owners 4 4 (242) (234)
Total transactions with
owners 4 4 (242) (234)
Balance at 31 August
2012 54 (292) (284) 279 1 338 1 095
Summarised consolidated statements of changes in equity (continued)
Non-
controlling Total
Figures in R million interests equity
Balance at 1 March 2011 92 2 229
Total comprehensive income
Profit for the period 1 137
Other comprehensive loss
Foreign currency translation differences
in respect of foreign operations (38) (115)
Total other comprehensive loss (38) (115)
Total comprehensive (loss)/income
for the period (37) 22
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
Issue of share capital 1
Dividends to equity holders (12) (359)
IFRS 2 charge on B-BBEE transactions 4
Share-based payment transactions 5
Total contributions by and distributions to owners (12) (349)
Changes in ownership interests in subsidiaries
Buy-back of non-controlling interest (39) (19)
Total changes in ownership interests in subsidiaries (39) (19)
Total transactions with owners (51) (368)
Balance at 31 August 2011 4 1 883
Total comprehensive loss
Loss for the period (227) (639)
Other comprehensive income
Foreign currency translation differences
in respect of foreign operations 56 182
Total other comprehensive income 6 182
Total comprehensive income/(loss)
for the period (171) (457)
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
IFRS 2 charge on B-BBEE transactions 1
Share-based payment transactions 6
Total contributions by and distributions to owners 7
Total transactions with owners 7
Balance at 29 February 2012 (167) 1 433
Total comprehensive loss
Loss for the period 284) (586)
Other comprehensive income
Foreign currency translation differences
in respect of foreign operations 14 45
Total other comprehensive income 14 45
Total comprehensive income/(loss)
for the period (270) (541)
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
Issue of share capital 4
Dividends to equity holders (4) (246)
Share-based payment transactions 4
Total contributions by and distributions to owners 4) (238)
Total transactions with owners (4) (238)
Balance at 31 August 2012 (441) 654
Summarised consolidated statements of cash flows
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
Figures in R million (Unaudited) (Unaudited) (Audited)
Cash flows generated by/(utilised in)
operating activities 126 (270) (365)
Cash generated by operations before movements in
working capital 431 423 965
Movements in working capital 105 (90) (583)
Net finance expenses (65) (22) (59)
Taxation paid (99) (222) (329)
Cash available from/(utilised in) operating
activities 372 89 (6)
Dividends paid
Altech equity holders (242) (347) (347)
Non-controlling interests (4) (12) (12)
Cash flows utilised in investing activities (320) (137) (314)
Cash flows from financing activities 80 222 209
Decrease in net cash and cash equivalents (114) (185) (470)
Bank overdrafts on acquisition of
subsidiaries (16)
Cash and cash equivalents at the beginning
of the period (16) 458 458
Bank overdraft at the end of the period
classified as held-for-sale 14 12
Cash and cash equivalents at the end of the
period (116) 273 (16)
Notes
BASIS OF PREPARATION
The summarised consolidated unaudited interim financial results for the six months ended
31 August 2012 have been prepared in accordance with the recognition and measurement criteria
of International Financial Reporting Standards (IFRS), the AC 500 series of interpretations
as issued by the Accounting Practices Board, IAS 34: Interim Financial Reporting and the
requirements of the Companies Act, No 71 of 2008, as amended, of South Africa and the JSE
Listing Requirements.
The accounting policies applied are consistent with those used in the prior year.
This report was compiled under the supervision of Dr John Carstens CA(SA), chief financial
officer, and Mr Francois Verster CA(SA), group financial manager.
Six months Six months Year
ended ended ended
31 August 31 August 29 February
% 2012 2011 2012
Figures in R million change (Unaudited) (Unaudited) (Audited)
Headline earnings per share (cents) (19) 127 156 347
Diluted headline earnings per share
(cents) (19) 123 153 337
Adjusted headline earnings per share
(cents) (23) 139 181 388
Diluted adjusted headline earnings per
share (cents) (24) 134 177 377
1. CAPITAL ITEMS
Impairment of property, plant and
equipment (308) (231)
Impairment of intangible assets (293) (300)
Impairment of held-for-sale disposal
group assets (62)
Impairment of goodwill (13) (49) (335)
Net profit on disposal of property,
plant and equipment 36 36
(676) (13) (830)
2. RECONCILIATION BETWEEN (LOSS)/EARNINGS
AND HEADLINE EARNINGS
(Loss)/earnings attributable to Altech
equity holders (302) 136 (276)
Impairment of property, plant and
equipment 308 231
Impairment of intangible assets 293 300
Impairment of held-for-sale disposal
group assets 62
Impairment of goodwill 13 49 335
Net profit on disposal of property,
plant and equipment (36) (36)
374 149 554
Tax effect of adjustments (1) 3 (11)
Non-controlling interest in adjustments (249) (205)
Headline earnings 124 152 338
3. RECONCILIATION BETWEEN HEADLINE EARNINGS
AND ADJUSTED HEADLINE EARNINGS
Adjusted headline earnings have been
presented to demonstrate the impact of
some once-off events and accounting
charges on the headline earnings
of the group.
Headline earnings are reconciled to
adjusted headline earnings as follows:
Headline earnings 124 152 338
Adjustments for:
Amortisation of intangible assets
arising on business combination 15 18 37
IFRS 2 charge on B-BBEE transactions 4 5
B-BBEE transaction costs 6 6
139 180 386
Tax effect of adjustments (4) (4) (8)
Adjusted headline earning 135 176 378
4. DIVIDENDS
It is group policy for dividends to be declared after the financial year.
Supplementary information
Six months Six months Year
ended ended ended
29 February
31 August 2012 31 August 2011 2012
Figures in R million (Unaudited) (Unaudited) (Audited)
Depreciation and amortisation 116 160 270
Capital expenditure 58 87 293
Initial direct costs 214 40 186
Capital commitments 46 32 10
Lease commitments 387 167 227
Payable within the next 12 months: 105 77 66
property 58 46 65
plant, equipment and vehicles 47 31 1
Payable thereafter: 282 90 161
property 266 64 155
plant, equipment and vehicles 16 26 6
Net foreign exchange profits/(losses) 21 (22) (26)
(including FEC fair value adjustment)
Ordinary shares in issue (million)
weighted average 97.549 97.479 97.479
diluted average 100.670 99.561 100.341
at the end of the period 97.588 97.488 97.488
Ratios
EBITDA to revenue (%) 7,2 9,4 9,2
Operating profit to revenue (%) 5,0 6,1 6,5
Return on shareholders' equity (%) 22,6* 15,4* 21,2
Return on capital employed (%) 58,4* 29,1* 29,6
Return on operating assets (%) 17,4* 21,9* 21,3
Current ratio 1,0 1,1 1,1
Acid test ratio 0,8 0,9 0,9
Net asset value per share (cents) 1 122 2 031 1 641
* Annualised
Segmental analysis
The segment information has been prepared in accordance with IFRS 8: Operating Segments
(IFRS 8) which defines the requirements for the disclosure of financial information
of an entity's operating segments.
The standard requires segmentation based on the group's internal organisation and reporting of
revenue and operating income based upon internal accounting presentation.
The measurement policies the group uses for segment reporting under IFRS 8 are the same as those
used in its financial statements, except that certain items are not included in arriving at the
earnings before interest, tax, depreciation and amortisation (EBITDA) (foreign exchange gains
and losses are excluded) and operating profit of the operating segments (amortisation of
intangibles arising on business combinations and foreign exchange gains and losses are
excluded).
Effective 1 March 2011 Altech Autopage Cellular (AAPC) purchased the business of Altech
Technology Concepts (ATC). AAPC's revenue, EBITDA and operating profit thus includes the results
of ATC.
AAPC's revenue, EBITDA and operating profit for the prior period was therefore restated.
The segment revenue, EBITDA before capital items and operating profit before capital items
generated by each of the group's reportable segments are summarised as follows:
Revenue
Six Six
months months Year
ended ended ended
31 Aug 31 Aug 29 Feb Growth
2012 2011 2012 Cur/Pyr
Rm Rm Rm %
Altech Autopage Cellular 3 032 3 024 6 069 0,3
Altech Netstar Group 518 498 1 008 4,0
Altech UEC Group 803 461 1 187 74,2
Converged Services International 140 173 396 (19,1)
Other Altech segments 715 727 1 464 (1,7)
5 208 4 883 10 124 6,7
Amortisation of intangibles
Net foreign exchange profits/(losses) for
the group
Corporate and inter-segment eliminations (51) (55) (152) (7,3)
Altech group 5 157 4 828 9 972 6,81
EBITDA
Six Six
months months Year
ended ended ended
31 Aug 31 Aug 29 Feb Growth
2012 EBITDA 2011 EBITDA 2012 EBITDA Cur/Pyr
Rm % Rm % Rm % %
Altech Autopage Cellular 122 4,0 118 3,9 266 4,4 3,4
Altech Netstar Group 160 30,9 191 38,4 335 33,2 (16,2)
Altech UEC Group 85 10,6 42 9,1 126 10,6 102,4
Converged Services
International (53) (37,9) 42 24,3 53 13,4 (226,2)
Other Altech segments 50 7,0 91 12,5 191 13,0 (45,1)
364 7,0 484 9,9 971 9,6 (24,8)
Amortisation of intangibles
Net foreign exchange profits/
(losses) for the group 21 (22) (26) 195,5
Corporate and inter-segment
eliminations (13) (6) (26) (116,7)
Altech group 372 7,2 456 9,4 919 9,2 (18,4)
Operating profit
Six Six
months months Year
ended ended ended
31 Aug 31 Aug 29 Feb Growth
2012 OM 2011 OM 2012 OM Cur/Pyr
Rm % Rm % Rm % %
Altech Autopage Cellular 112 3,7 108 3,6 244 4,0 3,7
Altech Netstar Group 149 28,8 150 30,1 311 30,9 (0,7)
Altech UEC Group 29 3,6 6 1,3 54 4,5 383,3
Converged Services
International (89) (63,6) 1 0,6 (41) (10,4) (9 000,0)
Other Altech segments 62 8,7 77 10,6 170 11,6 (19,5)
263 5,0 342 7,0 738 7,3 (23,1)
Amortisation of intangibles (15) (18) (37) 16,7
Net foreign exchange profits/
(losses) for the group 21 (22) (26) 195,5
Corporate and inter-segment
eliminations (13) (6) (26) (116,7)
Altech group 256 5,0 296 6,1 649 6,5 (13,5)
Corporate activities
BUSINESS COMBINATIONS
No corporate transactions were recorded during the period ended 31 August 2012.
EVENTS after the reporting date
There were no events after the reporting date.
ASSETS AND LIABILITIES CLASSIFIED AS HELD-FOR-SALE
On 14 February 2012 the decision was taken to sell Altech West Africa Limited and the operation
was subsequently classified as held-for-sale. As at the reporting date Altech West Africa
Limited was not yet sold. The requirements for classification as held-for-sale were still met
and Altech West Africa Limited was therefore still disclosed as held-for-sale.
The operation did not constitute a discontinued operation.
Message to shareholders
The directors present the Altech Group's results for the six month period ending 31 August 2012.
The results of the group for the interim period reflect the volatility and challenges presented
by the global and local economic environment which continues to affect many businesses
worldwide.
The group's revenue increased by 6,8% to R5,2 billion. Operating profit before capital items was
13,5% lower than that of the prior period, mainly due to losses incurred in Altech's operations
in East and West Africa.
Headline earnings per share decreased by 19% to 127 cents, from 156 cents for the prior period.
Apart from East and West Africa, the operations within Altech performed to expectations, with
Altech UEC returning to a more acceptable profit level.
Taking into account the continued losses in East and West Africa, the Board has decided to
further impair the goodwill and carrying values of certain property, plant and equipment and
intangible assets within its East and West African operations. Principally due to these
impairments, there was a loss before tax of R485 million.
The attention of shareholders is drawn to the accompanying announcement regarding the disposal
of Altech's interest in Altech West Africa Limited (AWA) and to the fact that Altech's shares
are currently trading under a cautionary announcement which was published on 19 September 2012.
OPERATIONAL REVIEWS
Telecoms
Telecoms and Wireless Communications
Altech Autopage Cellular (AAPC)
Altech Autopage Cellular's operating profit increased by 3,7% compared to the prior period.
Revenue increased only marginally by 0,3%, over the prior period. The slow revenue growth is
primarily due to the contraction of Global System for Mobile communications (GSM) airtime
revenue and slower than expected Internet Service Provider (ISP) revenue growth. This has
however, been mitigated by increased prepaid and Value Added Services (VAS) revenues.
Average Revenue Per User (ARPU) for the financial period, including VAS, is down on the prior
year by 12,5%. The decrease has been largely as a result of the acquisition of customers on
hybrid tariffs, lower spend due to additional value in network price plans, and general consumer
pressure.
The on-going dilution on post-paid airtime revenue as illustrated by the ARPU trend is expected
to continue as the networks release new products at lower price points and heavily discounted
tariffs on data in an increasingly competitive market.
GSM data remains strong with 26% subscriber growth on the previous period due to the aggressive
data pricing propositions in the market, with ARPU on data at R233.
GSM customer churn improved to single digits in the reporting period due to tighter credit
management, improved customer service and retention, and a focus on consumer growth in higher
value channels.
Expense management within the operations received intense focus, with the integration of Altech
Technology Concepts (ATC) into AAPC allowing for further opportunities to realise efficiencies
and cost savings in the second half of the year to mitigate the pressure on gross margin.
AAPC subscriber acquisition for the period was 89 715 gross connections with net growth of
38 930 customers. The active prepaid subscriber base closed on 84 968 subscribers on all networks,
resulting in a total AAPC subscriber base of 1 064 614 active subscribers.
The successful integration of ATC into AAPC was completed during the reporting period and all
back office and customer-facing touch points have been fully integrated. This will allow for
further converged product launches across AAPC distribution channels to the consumer and
business customers in the second half of the year. The launch of Consumer ADSL services to the
Altech Netstar Group
Altech Netstar grew revenue by 4,0% compared to the prior period. A net growth in subscribers of
14,222 was achieved, bringing the active base in South Africa to 538,838 vehicles.
Potential joint venture partnerships in Africa, initially in Mozambique and Nigeria, have been
identified and management is optimistic that these businesses can commence in the second half of
the financial year. Further inroads into Africa have been made with the signing of two global
customers with respective operations in Burkina Faso and Guinea. Altech Netstar has now expanded
its customer base to 21 countries in Africa.
Good growth has been achieved in the government market, with public bodies such as Potchefstroom
Municipality, Ladysmith Municipality, the Gauteng Department of Agriculture, and the Tugela
Water Board awarding business to Altech Netstar.
The implementation of a tender with a roads agency has commenced whereby Altech Netstar will be
a supplier of traffic data to the main contractor.
The first agreement with a motor manufacturer to deploy Altech Netstar's traffic information in
their vehicle navigation systems was signed. Further motor manufacturers are likely to follow
over the next twelve months.
A licence to a television traffic broadcasting platform was acquired and a leading breakfast
television station will launch Altech Netstar's traffic system during September 2012.
A new low-cost GSM/GPS tracking product was released to protect against potential churn in a
specific target market segment.
Within the fleet management portfolio a number of new applications and services have been
launched or are ready for launch. This includes a new fleet management software application that
was completed for testing and will be made available to customers in the second half of the
year. The application is the result of a substantial development project which has delivered
an application that is comparable, if not superior, to any other fleet management system
currently available in South Africa.
Furthermore, an in-house bureau service business was launched during the period and will add to
Altech Netstar's wide range of fleet management services.
Lastly, two new fleet management products were developed and prepared for integration. These are
a remote locking mechanism (for secure cargo transportation) and an in-vehicle video solution,
complete with Wi-Fi download capabilities. These products will be rolled out to the Altech
Netstar customer base in the second half of the year.
Converged Services and Connectivity
Altech Alcom Matomo (AAM)
AAM's first six months' revenue trails the figures for the previous comparable period,
attributable mainly to extended delays in the awarding of contracts. Improved operating profit
was experienced during the period as a result of the approved completion of certain key
projects.
Successfully ensuring knowledge of, and access to, leading-edge technology provides a strong
platform for maintaining a leading market position. Current prospects include both traditional
and emerging market solutions in both the public and private sector.
Altech Alcom Radio Distributors (AARD)
Revenue compared to the prior period remained flat, largely as a result of difficult trading
conditions and an increase in competition in the sector. Coupled with this is the fact that
customers continue to prolong the life of their legacy analogue assets due to the challenging
economic climate, making it difficult to convince customers of the need to migrate to new
digital solutions. Profit margins remain under pressure as analogue solutions continue to be commoditised.
AARD is actively driving to appoint higher tier channel partners in an effort to break into new
vertical markets and will continue to focus on digital system sales as this is where significant
revenue growth for the future is anticipated.
Altech Fleetcall (AF)
Revenue increased by 8,6% year-on-year for the financial period under review in spite of adverse
market conditions experienced in several of the core verticals served, such as freight and
logistics, mining and infrastructural projects.
Net billable connections increased despite these factors, caused by price wars in adjacent
technologies such as GSM.
Altech Stream East Africa (ASEA)
The network operations in East Africa continue to be challenged; however, there have been some
positive improvements with regard to network stability and data centre performance over this
period. This has had a material impact on key customer retention and acquisition in Kenya and
across the region.
Redeployment of resources across the region continues in order to maximise our skills set and
coverage in key parts of the regional operations. The close collaboration between Altech's
regional operations continues to have a positive impact, both from a technical and sales
perspective. A concerted effort is in place to enhance existing customer relationships and be
more responsive to customer requirements.
Altech Stream Rwanda (ASR)
Service on the Kampala-Kigali optical fibre network link, although operational since 1 March
2012, has been below expectations. Fibre breaks on this link, due mainly to road construction on
the route, have seriously impacted customer service. The alternative route via Tanzania is
functioning well.
ASR continues to generate small pre-tax profits, primarily due to ASR's ability to keep
operating costs down while maximising revenue opportunities within both the private and
government sectors.
Altech Infocom (Infocom)
Infocom remains under pressure to grow revenue. Infocom continues to be network constrained as
the mobile operators in the region are rolling out LTE (4G) offerings to their customers for
voice and data connectivity at reduced prices and additional capacity.
Infocom has benefited from the improved availability on the Altech Kenya Data Networks (KDN)
network. Infocom has signed the first agreement to supply dark fibre to Warid Telecom in Kampala
to connect seven key mobile network sites. This is expected to lead to more requests for
additional sites in Kampala and beyond.
Altech Swift Global (ASG)
The improvement in the reliability of the KDN network over the past few months has had a
positive impact on the services provided by ASG. This will reduce churn and enable new sales
opportunities.
The ASG business has a clearly defined retail focused strategy around vertical market
penetration and enhanced service delivery. ASG is also looking to partner with other service
providers in order to maximise market potential across key corporate customers. This strategy is
starting to show positive signs of growth within the business.
Altech Kenya Data Networks (KDN)
External market conditions and internal operational challenges within KDN continue to impact
negatively on the performance of the operation resulting in it performing below budget and
incurring losses. The major focus going forward is to grow the revenue line while reducing
customer churn and managing expenditure.
Stability on the KDN Network has improved substantially over the last few months. The network
has been running at an uptime level of over 97,5% during this period.
The Altech Sameer East Africa Data Centre has been operational since the beginning of the year.
The first floor of the data centre is sold out and customers are requesting additional capacity
when available.
The Democratic Republic of Congo (DRC) operation (ADN) is still under review as to its viability
and importance in the region as further funding is required to address both operational and
licence issues.
Altech has initiated discussions concerning the introduction of partners into the group's East
African operations and will advise shareholders of progress in this regard, in due course.
Multi-media and Electronics
Altech Multimedia
Altech Multimedia, which includes Altech UEC South Africa, Altech UEC Australia and Altech
Multimedia Europe (including Altech SetOne), performed satisfactorily and continues to make
rapid progress in transforming the business from a manufacturing-focused one, to a solutions-
based business with profitability now reaching best-in-class industry benchmark levels. The
focus is around four lines of business: Devices, Support, Services and Solutions, operating
across Africa, Australia and Europe.
Driven by the rapid development of fixed-line and wireless broadband in its key markets
globally, the business is experiencing rapid convergence of digital media distribution across
multiple devices, including mobile smartphones, tablets (e.g. iPad) and advanced set-top boxes
(STBs). Altech Multimedia's services capabilities, now well established in the African, European
and Australian markets for major broadcast customers, include project management, systems
integration, advanced software development and managed services for the outsourcing of broadcast
operations, including broadcast monitoring and portal management in the OTT area (Over The Top
IP-delivered content).
Ahead of the implementation of the South African digital migration (DTT) programme, Altech
Multimedia's device business continues to deliver DTT/Free-to-Air STBs into the Australian and
European markets. Altech UEC Australia has now delivered 141 000 STBs to the Australian market
for digital migration. Altech SetOne, a German-based distribution, logistics, STB repair and
service business has now deployed more than 1,2 million Free-to-Air STBs ahead of the European
analogue switch-off. In Turkey, the business with Digiturk continues to strengthen, with over
200 000 HD-PVRs deployed and the next generation HD-Zapper/PVR-Ready project awarded to Altech
SetOne.
Altech Multimedia's core device business continues to expand with the growth of the MultiChoice
Dstv and new GoTV DVB-T2 terrestrial services across Africa. Altech Multimedia continues
strengthening its foundation for product and intellectual property development with teams in
South Africa and further teams in Australia and India. Supply chain capability has been enhanced
with the opening of a sourcing centre in Shenzhen, southern China, using the existing Hong Kong
entity for the procurement of products for the sales and marketing businesses in Europe, Africa
and Australia.
Arrow Altech Distribution (AAD)
This company has delivered a commendable performance in meeting its key objectives in very
difficult market conditions.
AAD has maintained its market share (30%) in a very competitive environment, impacted by
volatile exchange rate fluctuations.
AAD's entry into the defence and aerospace markets with interconnect and harness accessory
products is gaining momentum, with good growth prospects over the next twelve months. AAD has
concluded a distribution agreement with Microsoft Windows Embedded for the industrial Original
Equipment Manufacturer (OEM) market.
AAD expects the market to remain slow and inconsistent over the next six to twelve months and
will continue to focus on its demand creation strategy to ensure positive and sustainable market
share growth.
Information Technology
Altech ISIS (AI)
AI again delivered a solid performance. Operating profit was slightly down compared to the prior
period due to a number of large projects not commencing as anticipated during the reporting
period. Capitalising on its innovative, real-time converged customer care and billing solutions,
and business analysis and system integration skills, AI has expanded into market segments beyond
its traditional telecommunications sector client base. Trading growth is expected to improve
based on the solid business development pipeline that has been created during the reporting
period.
Altech West Africa (AWA)
After several years of satisfactory profits and growth, the company has underperformed due to
margin pressures in the voucher and scratch card businesses and a shift in demand to the
extremely low-cost PIN product in the clear non-secure paper voucher business. The operation's
product lines have been expanded to supply initialised and personalised chip-card products to
Nigerian telecommunications network operators and financial service providers.
As AWA's product area is non-core to the Altech group, Altech has decided to dispose of its 75%
interest in AWA, as indicated in the accompanying announcement.
Altech Card Solutions (ACS)
ACS has again achieved excellent operating results for the reporting period. All product lines
have performed as expected with growth experienced in the sale of EFTPOS terminals and central
and instant issuance card personalisation solutions. The roll out of Altech Eyenza Mobile Money
(Eyenza), the mobile payment transaction platform, is progressing as planned with the expected
corporate launch towards the fourth quarter of 2012.
Altech NuPay (NuPay)
NuPay has once again exceeded its key objectives for the reporting period. The NuCard product, a
prepaid PIN-based product, has surpassed all growth targets and should provide similar growth
for the following reporting period. It is envisaged to supplement this product with the addition
of a mobile payment channel through Eyenza during the next financial year.
Altech Swisttech
Altech Swisttech grew revenue by 15,0% compared to the prior period, while there was a 10,6%
increase in operating profit. The operation is however experiencing margin pressure. Its
strategy to expand into providing mobile applications (e.g. lifestyle, gaming, communication
solutions and bespoke client applications) has resulted in the award of contracts that are
currently being executed. This initiative is expected to contribute substantially going forward
with further growth expected from its existing product offering.
ALTECH TRANSFORMATION
The Altech Group remains committed to transformation and empowerment through skills enhancement,
representative shareholding, and widespread development of disadvantaged communities by focusing
on areas with maximum long-term benefit. Altron's Transformation Beyond 2012 strategy sets the
strategic guidelines for developing its people and the communities around it through education,
training and skills development, health, social welfare and job creation. Altech is proud to
confirm that the group and its operations have achieved the targets for 2012 as set out in the
guidelines of Vision 2012 and has been verified as a level 3 contributor at 84.75 points,
totalling a year-on-year improvement of 2.73 points.
CORPORATE ACTIVITY
Subsequent to the period under review, Altech has entered into a binding agreement to dispose of
its 75% interest in AWA. The effective date will be the first day of the month following the
fulfillment of the conditions precedent.
THE WAY FORWARD
Altech has entered into a Value Added Partner (VAP) agreement with Huawei, a leading
global information and communications technology (ICT) company. Under the agreement,
Altech will provide Huawei Enterprise products and services to customers and offer
post-sales professional services and support in countries across Southern and East Africa.
This is expected to contribute well to Altech in the future.
The group's increased emphasis is on profitable growth of the top line. Cost control, cost
reductions and capital management remain key focus areas.
Altech remains confident that it will resolve the operational challenges in East Africa and
return to its normal pattern of growth and profitability. Altech will continue to pursue
acquisition opportunities both locally and internationally.
Altech has entered into a Value Added Partner (VAP) agreement with Huawei, a leading global
information and communications technology (ICT) company. Under the agreement, Altech will
provide Huawei Enterprise products and services to customers and offer post-sales professional
services and support in countries across Southern and East Africa.This is expected to
contribute well to Altech in the future
This outlook has not been reviewed or reported on by Altech's external auditors.
On behalf of the board
Moss Leoka
(Non-executive chairman)
Craig Venter
(Chief executive officer)
Dr John Carstens
(Chief financial officer)
25 September 2012
Directors:
M Leoka (Chairman)#, CG Venter (Chief executive officer),
Dr JEW Carstens (Chief financial officer), PMO Curle*#, AD Dixon#, R Naidoo#, SR Ntuli#,
Dr HA Serebro#, M Sindane#, AMR Smith*#, RE Venter#, Dr WP Venter#
* British #Non-executive
Secretaries:
Altech Management Services (Pty) Limited
Sponsor:
Investec Bank Limited
Corporate information
DIRECTORS
M Leoka (Chairman)#
CG Venter (Chief executive officer)
Dr JEW Carstens (Chief financial officer)
PMO Curle*#
AD Dixon#
R Naidoo#
SR Ntuli#
Dr HA Serebro#
M Sindane#
ZJ Sithole (passed away 18 August 2012)#
AMR Smith*#
RE Venter#
Dr WP Venter#
* British
# Non-executive
Corporate and business office
79 Central Street
Houghton 2198
Telephone: +27 (0) 11 715 9000 Telefax: +27 (0) 11 715 9048
Website: http://www.altech.com
Secretaries and registered office
Altech Management Services (Pty) Limited
79 Central Street
Houghton 2198
PO Box 153, Bergvlei 2012, South Africa
Telephone: +27 (0) 11 715 9000 Telefax: +27 (0) 11 715 9048
Website: http://www.altech.com
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg 2001
PO Box 1053, Johannesburg 2000, South Africa Telephone:+27 (0) 11 370 5000
Auditors
KPMG Inc.
85 Empire Road, Parktown 2193
Telephone: +27 (0) 11 647 7111
Bankers
Absa Bank Limited
Nedbank, a division of Nedcor Bank Limited
Sponsor
Investec Bank Limited
www.altech.com
Date: 26/09/2012 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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