Wrap Text
Summarised Audited Consolidated Financial Statements for the year ended 28 February 2013
ALLIED ELECTRONICS CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1947/024583/06)
Share code: ATN ISIN: ZAE000029658
Share code: ATNP ISIN: ZAE000029666
SUMMARISED AUDITED
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 28 February 2013
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
% 2013 2012
R millions change (Audited) (Audited)
CONTINUING OPERATIONS
Revenue 7 24 769 23 167
Earnings before interest, tax, depreciation, amortisation and capital items
(EBITDA before capital items) (12) 1 692 1 919
Depreciation and amortisation (461) (468)
Operating profit before capital items (15) 1 231 1 451
Capital items (Note 1) (78) (310)
Result from operating activities 1 1 153 1 141
Finance income 57 71
Finance expense (134) (125)
Share of profit/(loss) from associates 5 (1)
Profit before taxation 1 081 1 086
Taxation (374) (457)
Profit for the year from continuing operations 12 707 629
DISCONTINUED OPERATIONS
Revenue 280 396
Earnings before interest, tax, depreciation, amortisation and capital items
(EBITDA before capital items) (113) 27
Depreciation and amortisation (52) (94)
Operating loss before capital items (165) (67)
Capital items (Note 1) (1 371) (590)
Result from operating activities (1 536) (657)
Finance income 2
Finance expense (92) (31)
Loss before taxation (1 626) (688)
Taxation (10) (20)
Loss for the year from discontinued operations (1 636) (708)
Net loss for the year (929) (79)
Other comprehensive income
Foreign currency translation differences in respect of foreign operations 310 95
Realisation of negative foreign currency translation reserve on disposal 196
Fair value adjustment on available-for-sale investments (5)
Other comprehensive income for the year, net of taxation 501 95
Total comprehensive income for the year (428) 16
Loss attributable to:
Non-controlling interests (631) (253)
Altron equity holders (298) 174
Altron equity holders from continuing operations 498 472
Altron equity holders from discontinued operations 796 (298)
Loss for the year (929) (79)
Total comprehensive income attributable to:
Non-controlling interests (439) (212)
Altron equity holders 11 228
Altron equity holders from continuing operations 650 508
Altron equity holders from discontinued operations (639) (280)
Total comprehensive income for the year (428) 16
Basic earnings per share from continuing operations (cents) 6 158 149
Diluted basic earnings per share from continuing operations (cents) 5 153 146
Basic loss per share from discontinued operations (cents) (168) (252) (94)
Diluted basic loss per share from discontinued operations (cents) (163) (239) (91)
Basic (loss)/earnings per share from total operations (cents) (271) (94) 55
Diluted basic (loss)/earnings per share from total operations (cents) (256) (86) 55
Dividends per share declared (cents) (35) 60 92
NOTES
Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and presented in accordance with the minimum content, including disclosures, prescribed by IAS 34: Interim Financial Reporting applied to year-end reporting,
and the requirements of the Companies Act of South Africa and the JSE Listings Requirements.
The accounting policies applied in the preparation of the audited consolidated financial statements, from which the summarised consolidated financial
statements were derived, are in terms of International Financial Reporting Standards and are consistent with the accounting policies applied in the preparation
of the previous audited consolidated financial statements.
This report was compiled under the supervision of Mr Alex Smith CA, Chief Financial Officer, and Mr Arno Geldenhuys CA(SA), Group Financial Manager.
Report of the independent auditors
The unmodified audit reports of KPMG Inc., the independent auditors, on the annual financial statements and the summarised financial statements contained
herein for the year ended 28 February 2013, dated 7 May 2013, are available for inspection at the registered office of the company.
% 2013 2012
change (Audited) (Audited)
Headline earnings per share (cents) (29) 136 191
Diluted headline earnings per share (cents) (29) 133 187
2013 2012
R millions (Audited) (Audited)
1. Capital items
CONTINUING OPERATIONS
Net gain on disposal of property, plant and equipment 14 36
Impairment of property, plant and equipment (7) (4)
Impairment of goodwill (342)
Impairment of intangibles (9) (11)
Net (loss)/profit on disposal of businesses and investments (5) 14
Impairment of held-for-sale disposal group (29)
Loss on disposal of held-for-sale disposal group (42)
Impairment of investments (3)
(78) (310)
DISCONTINUED OPERATIONS
Loss on disposal of discontinued operations (730)
Impairment of property, plant and equipment (328) (231)
Impairment of intangible assets (300) (289)
Impairment of goodwill (13) (70)
(1 371) (590)
TOTAL (1 449) (900)
Events and circumstances leading to the recognition
of significant impairment losses:
Continuing operations
Impairment on the held-for-sale disposal group arose as a result of the
Altech West Africa subsidiary being disposed of for no consideration.
Discontinued operations
Impairment of intangible assets relates to the impairment of the Seacom
bandwith in Altech Data International and arose due to the significant
ongoing reductions of bandwith prices. These price decreases are a
direct result of an over-supply of international bandwith capacity,
especially along the East African coastline.
The impairment of the goodwill and the property, plant and equipment
resulted from a decline in operating results and a corresponding decline
in forecasted future cash flows due to lower than anticipated activity levels
without an envisaged material improvement in the short to medium term.
2013 2012
R millions (Audited) (Audited)
2. Reconciliation between attributable earnings and headline earnings
Attributable to Altron equity holders (298) 174
Capital items gross 1 449 900
Tax effect of capital items (10)
Non-controlling interest in capital items (720) (461)
Headline earnings 431 603
3. Reconciliation between attributable earnings and diluted earnings
Attributable to Altron equity holders (298) 174
Dilutive earnings attributable to B-BBEE non-controlling interest in subsidiaries (4)
Diluted earnings (298) 170
4. Reconciliation between headline earnings and diluted headline earnings
Headline earnings 431 603
Dilutive earnings attributable to B-BBEE non-controlling interest in subsidiaries (4)
Dilutive earnings attributable to dilutive options at subsidiary level (11) (10)
Non-controlling interest in adjustments 4 4
Diluted headline earnings 424 593
Fully diluted earnings and diluted headline earnings have been calculated in accordance with IAS 33: Earnings per Share, on the basis that:
The recognition of the deferred sale of a 30% interest in Aberdare Cables to the Izingwe Consortium based on the assumption that the
outstanding purchase price will be settled in cash for R46 million, adjusted for the dilutive effect of the option price at the Aberdare level and
after taking into account the 16.5% investment in the Izingwe Consortium by Power Technologies Proprietary Limited.
The earnings effect of dilutive options at Allied Technologies Limited level.
5. Acquisitions of subsidiaries
Acquisition of 100% interest in Unisys Africa Proprietary Limited ("Unisys Africa") and Alliance Business Solutions Proprietary Limited ("Alliance')
During the year the Bytes group acquired two operations, namely Unisys Africa and Alliance, for an aggregate consideration of R150 million, of which
R43 million is deferred.
The acquired businesses contributed revenues of R238 million and net profit after tax of R18 million to the group.
If the acquisitions had occurred on 1 March 2012, group revenue and net profit after tax would have increased by R329 million and R18 million,
respectively.
These amounts have been calculated using the group's accounting policies.
Unisys Africa provides IT services and technology offerings to customers in both the public and private sectors.
The full issued share capital was acquired effective 31 March 2012. Alliance provides Oracle end-to-end offerings and cloud-based solutions to
customers.
The operations of Alliance were acquired effective 1 October 2012.
Recognised Fair value Carrying
values adjustments amount
The acquirees' balance sheets at the date of acquisition were as follows:
Non-current assets 12 25 37
Current assets 223 223
Current liabilities (219) (12) 231
Total net assets on acquisitions 16 13 29
Goodwill on acquisition 121
Total consideration 150
Cash and cash equivalents in subsidiary acquired (35)
Less: Amounts due to vendors (43)
Net cash outflow on acquisitions 72
6. Disposals
Continuing operations
Disposal of 75% interest in Altech West Africa Limited, previously classified as held-for-sale
Effective 28 February 2013, the group indirectly disposed of its 75% interest in the issued share capital of Altech West Africa Limited (AWA) on a wholly
vendor-funded basis. On 14 February 2012, the decision was taken to dispose of AWA and the operation was classified as held-for-sale.
The operation did not constitute a discontinued operation.
The disposal value at the effective date amounted to R71 million and consequently a capital loss of R42 million was incurred after an impairment of assets
classified as held-for-sale of R29 million.
Net assets of subsidiary disposed:
R millions
Non-current assets 68
Current assets 73
Non-current liabilities (54)
Current liabilities (55)
Realisation of negative foreign currency translation reserve 30
Negative non-controlling interest 9
Disposal value 71
loss on disposal of net asset value (42)
impairment of assets classified as held-for-sale (29)
Cash flow on disposal
Discontinued operations
Disposal of Altech's Telecommunication Network interests in East Africa
Effective 28 February 2013, the Altech group disposed of the following effective interests in the issued share capital of its Telecommunication Network
interests in East Africa 60.8% in Altech Kenya Data Networks Limited (KDN), 60.8% in Africa Digital Networks Limited (ADN), 51% in
Altech Swift Global Limited (ASG), 51% in Altech Infocom Limited (Infocom), 64.7% in Altech Stream Rwanda Limited (ASR), 60.8% in
Altech Data International Limited (ADI) and 60.8% in Global Digital Trading Services Limited, to the purchaser Liquid Telecommunications
Holdings Limited.
The disposal value at the effective date amounted to R681 million, after funds advanced to subsidiaries for no consideration of R353 million,
and consequently a capital loss of R730 million was incurred, after accounting for the value (US$50 million, including a cash subscription of
US$16.5 million) of the investment received in Liquid Telecommunications Holdings Limited.
Net assets of subsidiaries disposed:
R millions
Non-current assets 403
Current assets 261
Non-current liabilities (199)
Current liabilities (183)
Realisation of negative foreign currency translation reserve 166
Negative non-controlling interests 233
Disposal value 681
Investment received in Liquid Telecommunications Holdings Limited ($33.5 million) (304)
Shortfall on disposal value 377
Loss on disposal of subsidiaries (730)
Cash flow on disposal funds advanced to subsidiaries for no consideration (353)
REPRESENTED COMPARATIVE INFORMATION
The disposals of Altech's Telecommunication Network interests in East Africa resulted in the operations being classified as discontinued operations in the
current financial year. The comparative consolidated statements of comprehensive income and cash flows have been represented.
7. Events after the reporting period
Acquisition of Brand New Technologies effective 1 March 2013
Effective 1 March 2013, Bytes Technology Group South Africa acquired the business of Brand New Technologies Proprietary Limited ("BNTech")
for a total estimated consideration of R63.3 million, of which R49 million is deferred and payable on the achievement of certain earn-outs over
the next three years. BNTech is a leading provider of identity management products and solutions, specialising in protecting, securing and
validating identities. The acquisition of BNTech complements existing Bytes offerings and allows the group to offer and provide a holistic identity
management solution on a turnkey basis, both in South Africa and into Africa.
Identification and valuation of intangible assets arising from the business combination will be performed during the first half of the 2014 financial year.
SUMMARISED CONSOLIDATED STATEMENT OF BALANCE SHEET
2013 2012
R millions (Audited) (Audited)
Assets
Non-current assets 4 757 4 695
Property, plant and equipment 1 822 2 300
Intangible assets, including goodwill 1 613 1 732
Associates 80 74
Other investments 673 233
Rental finance advances 45 67
Non-current receivables and other assets 414 150
Deferred taxation 110 139
Current assets 8 210 7 585
Inventories 2 653 2 475
Trade and other receivables, including derivatives 4 255 3 872
Assets classified as held-for-sale 135
Cash and cash equivalents 1 302 1 103
Total assets 12 967 12 280
Equity and liabilities
Total equity 5 220 5 813
Non-current liabilities 787 936
Loans 609 707
Empowerment funding obligation 17 47
Provisions 25 20
Deferred income 51
Deferred taxation 136 111
Current liabilities 6 960 5 531
Loans 1 308 613
Empowerment funding obligation 29 24
Bank overdraft 385 550
Trade and other payables, including derivatives 5 105 4 079
Provisions 100 118
Liabilities classified as held-for-sale 67
Taxation payable 33 80
Total equity and liabilities 12 967 12 280
Net asset value per share (cents) 1 498 1 583
SEGMENTAL REPORT
The segment information has been prepared in accordance with IFRS 8: Operating Segments, 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 EBITDA based upon internal accounting
presentation.
The segment revenues and earnings before interest, tax, depreciation and amortisation (EBITDA) generated by each of the group's reportable segments are
summarised as follows:
Revenue EBITDA
Growth Growth
R millions 2013 2012 Cur/Pyr % 2013 2012 Cur/Pyr %
Powertech Cables Group 4 756 4 534 5 55 118 (53)
Powertech Transformers Group 1 459 1 446 1 138 216 (36)
Powertech Battery Group 680 816 (17) 82 109 (25)
Powertech Services Group 752 790 (5) 43 78 (45)
Other Powertech segments (6) (64) 91 (30) (21) (43)
Powertech Group 7 641 7 522 2 288 500 (42)
Bytes Technology Group UK Software 1 541 1 168 32 45 37 22
Bytes Document Solutions Group 2 216 2 088 6 142 188 (24)
Bytes Managed Solutions 1 043 1 000 4 128 126 2
Bytes Systems Integration 979 937 4 62 65 (5)
Other Bytes segments 1 225 901 36 154 111 39
Bytes Group 7 004 6 094 15 531 527 1
Altech Autopage Cellular 6 027 6 069 (1) 253 266 (5)
Altech UEC Group 1 802 1 187 52 180 126 43
Altech Netstar Group 1 045 1 008 4 291 335 (13)
Altech Converged Services
(International)* 280 396 (29) (125) 27 (563)
Other Altech segments 1 287 1 312 (2) 166 165 1
Altech Group 10 441 9 972 5 765 919 (17)
Corporate and financial services 18 32 (44) (5)
Intersegment revenue (55) (57)
Altron Group 25 049 23 563 6 1 579 1 946 (19)
* The majority of this segment formed the discontinued operations
Segment EBITDA can be reconciled
to group operating profit before
capital items as follows:
R millions 2013 2012
Segment EBITDA 1 579 1 946
Reconciling items:
Depreciation (353) (396)
Amortisation (160) (166)
Group operating profit before
capital items 1 066 1 384
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
2013 2012
R millions (Audited) (Audited)
Continuing operations
Cash flows from operating activities 1 150 298
Cash generated by operations 1 878 2 023
Net finance expense (94) (55)
Changes in working capital 174 (540)
Taxation paid (375) (599)
Cash available from operating activities 1 583 829
Dividends paid, including to non-controlling interests (433) (531)
Cash flows utilised in investing activities (1 137) (680)
Cash flows from/(utilised in) financing activities 1 005 (326)
Discontinued operations
Cash flows utilised in operating activities (90) (160)
Cash flows utilised in investing activities (22) (225)
Cash flows (utilised in)/from financing activities (146) 363
Cash flows on disposal of discontinued operations (429)
(687) (22)
Net increase/(decrease) in cash and cash equivalents 331 (730)
Net cash and cash equivalents at the beginning of the year 553 1 253
Effect of exchange rate fluctuations on cash held 33 19
Cash classified as held-for-sale 11
Net cash and cash equivalents at the end of the year 917 553
Continuing operations 917 557
Discontinued operations (4)
Note:
For the year ended 29 February 2012, R137 million has been reclassified from cash flows from operating activities (movements in working capital) to cash flows
utilised in investing activities. This represents investments made during the prior financial year by operating entities in respect of additions to contract fulfillment
costs. Management believes that this better represents the nature of the cash flows being of an investing rather than an operating nature.
OPERATIONAL CONTRIBUTION
% 2013 % 2012 %
R millions change (Audited) (Audited)
Revenue
Altech 5 10 441 42 9 972 42
Bytes 15 7 004 28 6 094 26
Powertech 2 7 641 30 7 522 32
Corporate and eliminations (37) (25)
6 25 049 100 23 563 100
Operating profit*
Altech (16) 548 51 649 47
Bytes 423 40 424 31
Powertech (66) 107 10 314 23
Corporate and eliminations (12) (1) (3) (1)
(23) 1 066 100 1 384 100
% held at % held at
28 February 29 February
Attributable headline earnings 2013 2012
Altech 61.4 61.5 (23) 160 37 208 34
Bytes 100.0 100.0 253 59 253 42
Powertech 100.0 100.0 (99) 1 125 21
Corporate and eliminations 100.0 100.0 17 4 17 3
(29) 431 100 603 100
* Operating profit is stated before capital items
SUPPLEMENTARY INFORMATION
2013 2012
R millions (Audited) (Audited)
Borrowings 1 963 1 391
interest-bearing 1 917 1 076
non-interest-bearing 244
B-BBEE funding obligation 46 71
Depreciation 353 396
Amortisation 160 166
Net foreign exchange (gains)/losses (18) 21
Capital expenditure (including intangibles) 675 687
Additions to contract fulfilment costs 430 137
Capital commitments 126 161
Lease commitments 953 797
Payable within the next 12 months: 232 189
property 208 169
plant, equipment and vehicles 24 20
Payable thereafter: 721 608
property 697 580
plant, equipment and vehicles 24 28
Unlisted investments (including associates)
Carrying amount 753 307
Directors' valuation 757 307
Weighted average number of shares (millions) 316 316
Ordinary shares 102 102
Participating preference shares 214 214
Diluted average number of shares (millions) 319 318
Shares in issue at the end of the year (millions) 317 316
ordinary shares 102 102
participating preference shares 215 214
Ratios
EBITDA margin (%) 6.3 8.3
ROCE (%) 14.8 19.2
ROE (%) 9.4 11.6
ROA (%) 10.3 13.2
RONA (%) 14.9 19.1
Borrowings ratio (%) 37.6 24.0%
Current ratio 1.2:1 1.4:1
Acid test ratio 0.8:1 0.9:1
Definitions:
Contract fulfilment costs
Contract fulfilment costs include hardware, fitment, commissions and other costs directly attributable to the negotiation and conclusion of customer service
contracts. These costs are expensed over the expected period of the customer service contract.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to Altron equity holders
Share
capital Non-
and Treasury Retained controlling Total
R millions premium shares Reserves earnings Total interests equity
Balance at 28 February 2011 (Audited) 2 241 (299) (1 192) 4 325 5 075 1 239 6 314
Total comprehensive income for the year
Profit for the year 174 174 (253) (79)
Other comprehensive income
Foreign currency translation differences
in respect of foreign operations 54 54 41 95
Total other comprehensive income 54 54 41 95
Total comprehensive income for the year 54 174 228 (212) 16
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Dividends to equity holders (341) (341) (190) (531)
Issue of share capital 3 3 3
Share-based payment transactions 27 27 6 33
Total contributions by and distributions to owners 3 27 (341) (311) (184) (495)
Changes in ownership interests in subsidiaries
Buy back of non-controlling interests 11 11 (30) (19)
Disposal of subsidiary (3) (3)
Total changes in ownership interests in subsidiaries 11 11 (33) (22)
Total transactions with owners 3 38 (341) (300) (217) (517)
Balance at 29 February 2012 (Audited) 2 244 (299) (1 100) 4 158 5 003 810 5 813
Total comprehensive income for the year
Loss for the year (298) (298) (631) (929)
Other comprehensive income
Foreign currency translation differences
in respect of foreign operations 192 192 118 310
Realisation of negative foreign currency translation
reserve on disposal 120 120 76 196
Fair value adjustment on available-for-sale investments (3) (3) (2) (5)
Total other comprehensive income 309 309 192 501
Total comprehensive income for the year 309 (298) 11 (439) (428)
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Issue of share capital 10 (10)
Dividends to equity holders (290) (290) (143) (433)
Share-based payment transactions 17 17 6 23
Total contributions by and distributions to owners 10 7 (290) (273) (137) (410)
Changes in ownership interests in subsidiaries
Introduction of non-controlling interests 3 3
Disposal of operations 242 242
Total changes in ownership interests in subsidiaries 245 245
Total transactions with owners 10 7 (290) (273) 108 (165)
Balance at 28 February 2013 (Audited) 2 254 (299) (784) 3 570 4 741 479 5 220
MESSAGE TO SHAREHOLDERS
The Altron financial results for the year ended 28 February 2013 are reported in an integrated manner in accordance with the G3 Guidelines of the Global
Reporting Initiative (GRI) as recommended by King III, reflecting those issues that are applicable and which materially affect or contribute to the sustainable
development of Altron in terms of its financial and non-financial performance.
The group has achieved revenue growth, but has experienced margin pressure across most operations. Powertech experienced revenue growth primarily
out of the cables group on higher copper prices. Bytes continued to perform in line with expectations, with the UK businesses contributing significantly,
and positive inroads being made into African markets. Altech's overall results were negatively impacted by impairments, a loss on disposal and operating
losses of its East and West African operations. The group is encouraged that the significant operating losses of R205 million incurred by these disposed
operations will not recur. Altech's remaining businesses performed in line with expectations.
External factors
The macro-economic environment remains challenging and highly volatile. While there is growth in the local economy, there remains uncertainty around
the future, due to a combination of global factors as well as the policy uncertainties in the local environment. Emerging market currencies, particularly
the Rand, weakened and this will assist exports and provide some protection against direct foreign imports.
Despite interest rates remaining low during the period under review, the building and construction sector continued to show no real signs of recovery.
Demand in the electrical infrastructure market was strong in the first half of the year, led by spending from Eskom and certain of the larger municipalities,
but we saw a notable decline in the second half, particularly in the electric cables business. However, parastatals have generally provided encouraging
support to locally-based manufacturing operations.
The telecommunications sector is seeing price deflation, particularly on the voice side, as various operators seek to grow or protect market share. The main
growth area remains the data market, although margins have been under pressure with rapid declines in data package pricing in both the mobile and Internet
Service Provider (ISP) spaces. Data volumes are increasingly being driven by the rapid uptake of smartphones and the inadequacies of the fixed line network.
The migration to digital terrestrial television in South Africa continues to progress at a very slow pace. Nevertheless it is on an inevitable path and, as TV set-top
boxes have been classified as designated products, local manufacturers should benefit.
The South African information technology (IT) market has shown good growth as businesses continue to invest in new technologies. However, margins are
under pressure due to the highly competitive nature of the sector, deflationary forces and the increasing commoditisation of IT products. Cloud computing
is becoming an increasingly important feature of the IT sector, which will present both opportunities and some risks to the Altron group.
Financial overview
Income
While Altron's revenue increased by 6% to R25 billion from R23.6 billion in the comparative period, EBITDA declined by 19% from R1.9 billion to
R1.6 billion, reflecting an EBITDA margin of 6.3%, down from the previous 8.3%. Headline earnings per share was down by 29% at 136 cents.
The statement of comprehensive income has been split into continuing and discontinued operations in the current period, with the East African
operations classified as discontinued. It should be noted that the West African operations are included in continuing operations in accordance
with accounting standards.
Continuing operations
The group's revenue from continuing operations increased by 7% in the current year to R24.8 billion, though EBITDA declined to R1.7 billion, a 12% decrease
and representing a 6.8% EBITDA margin, as against the 8.3% in the prior year.
Capital items were significantly reduced to R78 million, of which R71 million related to Altech West Africa. This, combined with an increased finance expense
on higher borrowing levels, resulted in profit before taxation being consistent with the prior year. The reduction in the tax charge primarily reflects the lower
STC expense, though the effective tax rate, after STC and capital items actually increased from 29.2% to 30.9%. These factors resulted in a 12% increase
in profit for the year from continuing operations.
Discontinued operations
The operating results for the year showed the continued decline of the East African businesses, while the significant increase in capital items reflects the
further impairments and ultimate loss that was taken on the disposal of these businesses.
Cash management
The cash flow statement has also been aligned with the split between continuing and discontinued operations, with the cash cost to the group of the
East African business being a net outflow of R687 million.
In the continuing operations, cash generated by operations of R1.9 billion is down around 7% on the prior year, while we have seen some R174 million
released from working capital. There has been considerable focus on improving working capital levels, and working capital days are lower across the group
at year-end. Cash outflows on taxation have normalised after the additional payment in the comparative period, and cash was positively influenced by reduced
dividends, though some of this has been offset by the near doubling of the finance cost.
Investing activities increased to R1.1 billion. A significant portion of the increase was due to capitalised subscriber acquisition costs of R430 million
in the Altech group, which are recovered over the term of their contracts. Capital expenditure in continuing operations was also higher in both property,
plant and equipment and capitalised research and developments costs, the latter reflecting the group's focus on generating its own intellectual property.
Powertech incurred R280 million of capital expenditure primarily in the transformers and cables operations.
The R1 billion of cash derived from financing activities was predominantly due to new borrowings in Altech to fund the operating losses in East Africa
as well as to meet some funding obligations associated with the disposal of its East and West African operations.
Subsidiary review
Subsidiary income and growth
Altech increased revenue by 5% to R10.4 billion from prior year levels, while EBITDA declined by 17% to R765 million with the EBITDA margin reducing
from 9.2% to 7.3%. Headline earnings per share declined by 23%. Altech experienced higher finance charges and substantial capital items referred
to earlier as well as an inflated effective tax rate of 56.8%, primarily as a result of the non-recognition of deferred tax assets on the losses in its East and
West African operations. These operations were disposed of effective 28 February 2013, with East Africa being treated as a discontinued operation.
The remaining continuing operations all performed satisfactorily, with Altech UEC generating particularly good results.
Revenue at Altech Autopage Cellular was marginally down as a result of deflation in the voice environment, and the business suffered a 4% decrease in
EBITDA. This was driven primarily by lower than expected Global System for Mobile communications (GSM) airtime and ISP revenue growth mitigated to
a degree by good sales in prepaid airtime and value added services. A focus on service levels and customer retention has seen churn rates significantly
improve and is helping to increase the subscriber base which now stands at close to 1.1 million. The integration of the business with Altech Technology
Concepts has been completed and has produced cost benefits as well as a more cohesive approach to the market.
The Altech Netstar group achieved revenue growth of 4% with subscriber bases increasing for both Stolen Vehicle Recovery (SVR) and Fleet Management.
However, EBITDA declined by 13% with margins under pressure due to a competitive environment and resultant lower monthly Average Revenue per
Vehicle (ARPV) significant focus is being directed to cost controls to mitigate against this factor. Comprehensive plans have been formulated and
implemented to grow sales, introduce value-add consumer services and invest in the fleet management offering. International expansion and partnerships
remain key strategic objectives for Altech Netstar in the medium term.
Altech Multimedia had a very pleasing year, with revenue increasing by 52%, and EBITDA by 44%. This significant improvement in performance can be
attributed to a greater emphasis on the provision of services and a good manufacturing performance. The continued international diversification of the
customer base has led to an improvement in the product mix and the business is now involved in contract manufacturing for Samsung, which has increased
recoveries in the manufacturing facilities.
Altech Information Technology group's revenue remained flat and EBITDA declined by 14%, primarily as a result of the underperformance of the West African
operation which has now been disposed of effective 28 February 2013. The remainder of the Altech Information Technology group performed satisfactorily,
though margins were generally under pressure.
The Altech Converged Services International group (Altech East Africa) reported extremely disappointing results with revenue declining by 29% and an
EBITDA loss of R125 million. The East African operations were disposed of to Liquid Telecommunications Holdings Limited (Liquid) and Altech became
a strategic minority shareholder in Liquid, holding 8.6% of Liquid's issued share capital. For more information on the transaction, shareholders are referred
to the SENS announcement released by Altech on 28 January 2013.
Altech's return on equity was 31,5% despite the reduced profitability of the group due to the significant impairments and losses incurred on the disposal
of its East and West African operations. Their return on capital employed was 28.2%.
Following the disposal of the loss making East and West African operations, Altech will now focus on maximising the returns from its remaining businesses
and developing some of the new organic strategic initiatives that it has previously highlighted.
Bytes reported a pleasing 15% increase in revenue to R7 billion although the EBITDA increase was limited to 1% (R531 million) as margins came under
pressure. The EBITDA margin declined from 8.6% to 7.6%. Headline earnings for the Bytes group remained flat at R253 million.
Bytes Document Solutions (South Africa and UK) reported a 6% increase in revenue but a decrease of 24% in EBITDA. While the Bytes Document Solutions
business in the UK performed in line with expectations, improving revenue and margins slightly, the Bytes Document Solutions SA business experienced
difficult market conditions, accentuated by the volatility in the Rand exchange rate. Both Lasercom and Nor Paper recovered from their poor performances
of the previous period. The Bytes Document Solutions businesses will focus on improving their successful managed print services businesses which,
are higher margin annuity-based offerings.
Bytes Managed Solutions achieved a better than expected 4% increase in revenue and 1% increase in EBITDA. The prior year produced a record
performance with substantial NCR equipment sales into the retail sector that were unlikely to be repeated, so the organic growth in this business was
pleasing and well above the reported levels. The core services business continues to perform well. Bytes Managed Solutions is introducing new solutions
to the financial sector such as Financial Kiosks, Teller Cash Recyclers and enabling Software Solutions.
Bytes Systems Integration achieved 4% revenue growth and a decline in EBITDA of 4%. The business has continued to deliver significant new business,
particularly in the financial services sector. The acquisition of Alliance Business Solutions, an Oracle Software implementation consultancy, in October 2012
contributed positively to the business.
Bytes Healthcare Solutions performed well, increasing revenue by 9% and EBITDA by 5% which was well ahead of expectations given that its market
strength constrains growth opportunities and it has been investing in some new business initiatives.
Bytes Universal Systems, a new division formed in April 2012 as a result of the acquisition of Unisys Africa, contributed revenue of R231 million and
EBITDA of R18 million towards the group over 11 months. The business has performed particularly well in the petroleum and public sectors.
Bytes People Solutions produced particularly pleasing results, increasing revenue by 11% and EBITDA by 15%, as it continues to develop its portfolio
of training solutions.
The Bytes International operations returned excellent results, increasing revenue by 37% and EBITDA by 42% in Rand terms. The UK Software Services side
of the business performed well, increasing revenues by 32% although margins are under pressure since the change in the Microsoft rebate structure.
The overall profitability of the International businesses was significantly assisted by the inclusion of a full year of Security Partnerships Limited which was
acquired on 1 August 2011 and performed ahead of expectations.
Bytes' return on equity was 20%, while return on capital employed was 21.5%.
Bytes' prospects are viewed as positive as it builds on the momentum created over the last few years and consolidates its position as the largest South
African-owned IT group. However, margin pressure is expected to continue. Bytes continues to look for cross-sell opportunities within the Altron group,
and expansion into Africa, together with some of its current clients. Bytes South Africa is currently undergoing a realignment of its business units as well
as the creation of a shared services centre with a view to further enhancing customer service, market reach and reducing administration costs.
Powertech has experienced an extremely challenging year, mainly in the second half, and while revenue increased by 2% to R7.6 billion, EBITDA reduced
by 42% to R288 million and the EBITDA margin declined from 6.7% to 3.8%. Headline earnings for the Powertech group decreased by 99% to R1 million.
Although the Powertech Cables group increased revenue by 5%, reduced margins resulted in a 54% decline in EBITDA. Revenue growth was attributable
to higher and more stable demand for product in the first six months of the year as well as a higher average copper price through the year. However, in the
second half it experienced significantly reduced demand from the formal sector and, while much of the revenue was replaced with informal sector business,
this was at significantly lower margins, particularly in the last quarter. The decreased profitability was exacerbated by the transport strike in
September 2012, which had a ripple effect on the entire supply chain. In view of these developments, the local cables operation has entered into
an exercise to further reduce its fixed cost base. The formal sector demand is expected to pick up after the award of certain tenders and
significant opportunities exist in the renewables and rail sectors, where we have already seen some success. The international cables operations in
Iberia are operating in a depressed economic environment, but progress is being made in addressing these issues. Spain, which is now focusing
on export markets, saw an improvement in the second half of the year, though it is still generating losses. The Portuguese operation,
which delivered a profit in the first half, has since undergone a restructuring that should enhance its profitability going forward.
The Powertech Transformers group improved revenue by 1% while EBITDA decreased by 36%. The decline in profitability was due to a combination of margin
pressure, product mix, less favourable contract price adjustments and operational challenges at the distribution transformer facility in Johannesburg and the
power transformer factory in Pretoria West, which are being addressed. However, the distribution transformer factory in Cape Town performed well. To date,
demand for distribution transformers has remained low in the building and construction industry but new municipal spend is resulting in steady growth in the
small to medium distribution market. The power transformer market is still receiving steady demand from Eskom, while the new Switchgear division contributed
positively towards the Transformers group.
Revenue decreased by 17% in the Powertech Batteries group while EBITDA declined by 25%, with most of these declines attributable to the disposal of the
industrial battery business in November 2011. The automotive business performed well in the first half of the year, but in the second half experienced tighter
margins due to pricing pressure from competitors. Battery sales into Africa increased significantly, though these are still relatively small in absolute terms.
Powertech System Integrators has seen revenue decline by 5% over the prior period and a 45% decrease in EBITDA levels. Strike Technologies has been the
standout performer of the group as it delivered on the Demand Side Management projects it was involved in with Powertech IST Otokon. Powertech IST has not
delivered results according to expectations and the group has been subject to a restructure which involved the closure of some loss making divisions in order
to drive better performance out of this asset. Powertech System Integrators should be boosted going forward by the recent acquisition of QuadPro, a business
focused on turnkey sub-station solutions, which brings a strong order book and significant experience to the electrical sub-station industry.
Powertech's return on equity was 0% while return on capital employed was 3.2%.
Following a disappointing second half at Powertech, various restructuring projects have been undertaken to reduce costs and refocus various businesses. These
are expected to improve results in the short term. Powertech's prospects appear positive considering that there is continued emphasis on infrastructure spend
in the country and support from State-owned entities for local manufacturing operations. New opportunities exist in the service and supply of renewable energy
solutions as well as the increased demand from the transport sector. A number of initiatives are underway to balance the group's exposure to the building and
construction sector, expand sales into Africa and reduce reliance on pure manufacturing operations.
Corporate activity
The following transactions were concluded during the period under review:
- With effect from 31 March 2012, Bytes South Africa acquired 100% of the issued share capital of Unisys Africa, from Unisys Corporation and a local
empowerment company CyberKnowledge Systems Investments, for a purchase price of R89 million. Unisys has been merged into the existing operations
of the Bytes group and has increased its exposure to the public sector.
- Bytes, through Bytes Systems Integration, acquired Alliance Business Solutions, a leader in the South African ERP space and an Oracle Platinum Partner
with effect from 1 October 2012 for an estimated purchase price of R61 million, subject to certain earn outs. The acquisition seeks to leverage synergistic
Oracle capabilities and cloud-based solutions to the combined customer base.
- With effect from 1 November 2012, Powertech acquired a 51% stake in QuadPro a turnkey solutions provider specialising in electrical sub-stations for
R9 million. This business has been combined with a similar division in Powertech System Integrators which will be synergistic and provide critical
mass to the electrical sub-station industry.
- Altech has disposed of its 75% equity stake in Altech West Africa, a secure recharge voucher and plastic card manufacturer. This transaction was effective
on 28 February 2013.
- On 28 February 2013, Altech disposed of its East African operations to Liquid Telecommunications Holdings Limited (Liquid) and Altech became a strategic
minority shareholder in Liquid, holding 8.6% of Liquid's issued share capital, with shareholder voting rights amounting to 10% and representation on the
board of Liquid.
The following transaction was concluded post the balance sheet date:
- Effective 1 March 2013, Bytes Technology Group South Africa acquired Brand New Technologies Proprietary Limited ("BNTech") for a total estimated
consideration of R63.3 million of which R49 million is deferred and payable on the achievement of certain earn-outs over the next three years.
BNTech is a leading provider of identity management products and solutions, specialising in protecting, securing and validating identities.
The acquisition of BNTech complements existing Bytes offerings and allows the group to offer and provide a holistic identity management
solution on a turnkey basis, both in South Africa and into Africa.
Human capital
Altron has maintained its Level 3 rating in respect Broad-Based Black Economic Empowerment. Bytes has been rated at Level 2, while Altech and
Powertech were both rated at Level 3. Bytes and Altech will in future be rated in accordance with the newly-gazetted ICT Charter. Altron has commenced
with the implementation of its Human Capital Strategy "Beyond 2012" that was adopted in July 2012.
In April 2013, Altron was ranked number 24 in the Most Empowered Companies in South Africa survey. Altech was ranked number 23 in the
same national survey.
Sustainability
In January 2013, Altron formally launched its group sustainability strategy, together with a sustainability manual. This strategy is in line with
the group's four core themes and objectives identified in 2012. Altron's objectives remain to: improve profitable revenue growth, invest in its people,
lead through innovation and build and maintain strategic alliances. To monitor the core themes and objectives, 12 material focus areas were identified
in 2013. As part of its ongoing commitment towards the environment, Altron revised its environmental baseline data in 2012 and will provide feedback
in this regard in the 2013 integrated annual report. At the same time, Altron will report on progress made towards achieving its three-year environmental impact
reduction targets. These targets are monitored on an ongoing basis using the updated electronic data capturing system rolled out in 2012.
During 2013, Altron will again participate in the Carbon Disclosure Programme (CDP) as well as the Water CDP project.
Corporate governance
The Altron group continues to embrace the recommendations of King III and strives to ensure that all disclosures to shareholders are timely, accurate, balanced
and relevant.
Further to our SENS announcement published in May 2010, we continue to co-operate with the Competition Authorities regarding their investigations into
alleged prohibited practices by Aberdare Cables and other competitors in the power cable market.
In these tough and challenging market conditions, the group has pursued an aggressive training strategy of re-enforcing ethical business practices and
leadership throughout the group, which was recently recognised by Altron being rated the top company in South in the South African Business Ethics Survey run
under the auspices of the Ethics Institute of South Africa.
Outlook
The disposal of Altech's East and West African operations will remove a significant cash and earnings drain on the group. As indicated above, there are
a number of initiatives underway that will deliver a lower cost base and improve the group's ability to service growing areas of the market. Altron expects
to see the benefits of these factors start to realise in the coming financial year.
Nevertheless, the current business environment is not an easy one in which to operate, particularly given the ongoing policy uncertainties and threat of labour
unrest. Altron intends continuing to focus on the basics of rigorous cost control, working capital management and extracting efficiencies from its businesses.
Margin erosion will be countered by expanding the group's product portfolio, implementing shared services and lowering its cost base.
Notwithstanding the aforesaid challenges, Altron believes that significant opportunities exist for:
- Altech in the convergence space;
- Bytes to build on its strong performance of the last few years and expand its products and services as well as its presence in the public sector; and
- Powertech within the electrical services, transport and renewable energy sectors.
Acknowledgements
The board would like to once again express its appreciation to all of its customers, staff, business partners, shareholders and other stakeholders for their support
during the past year and for their continued belief in the future sustainability of the group and its strong underlying businesses.
Dividend
Notice is hereby given that on Tuesday, 7 May 2013, Altron declared a gross ordinary dividend (number 65) of 60.0 cents per ordinary share (2012: 92.0 cents)
and a gross participating preference dividend (number 19) of 60.0 cents per participating preference share (2012: 92.0 cents) for the period 1 March 2012
to 28 February 2013, payable on Monday, 1 July 2013 to holders of the ordinary and participating preference shares recorded in the books of the company at
close of business on Friday, 28 June 2013.
The dividends have been declared out of income reserves and will be subject to dividends tax. The local dividends tax rate is 15%. The company has no
secondary tax on companies' credits available.
Accordingly, the net local dividend amount is 51.0 cents per ordinary and participating preference shares for shareholders liable to pay the new dividends
tax and 60.0 cents per ordinary and participating preference shares for shareholders exempt from paying the new dividends tax.
In terms of the dividends tax legislation, the dividends tax amount due will be withheld and paid over to the South African Revenue Service ("SARS")
by a nominee company, stockbroker or Central Security Depository Participant ("CSDP") (collectively "Regulated Intermediary") on behalf of shareholders.
However, all shareholders should declare their status to their Regulated Intermediary, as they may qualify for a reduced dividends tax rate or they may
even be exempt from dividends tax.
Altron's issued share capital at the declaration date is 105 669 131 ordinary shares and 241 848 047 participating preference shares.
Altron's tax reference number is 9725/149/71/1.
In compliance with the requirements of STRATE, the following dates are applicable:
Last day of trading to qualify for and participate in the dividend (cum dividend) Friday, 21 June 2013
Trading ex-dividend commences Monday, 24 June 2013
Record date Friday, 28 June 2013
Dividend payment date (electronic and certificated) Monday, 1 July 2013
Dividend cheques in payment of these dividends are no longer, as a result of increasing fraud, posted to certificated shareholders, but may instead be collected
from the office of the transfer secretaries from Monday, 1 July 2013. Electronic payment to certificated shareholders will be made simultaneously.
Shareholders who have dematerialised their share certificates will have their accounts at their Central Securities Depository Participant or broker credited on
Monday, 1 July 2013.
Share certificates may not be dematerialised or rematerialised from Monday, 24 June 2013 to Friday, 28 June 2013, both days inclusive.
In accordance with the company's memorandum of incorporation, dividends amounting to R30.00 or less due to any one holder of the company's ordinary
or participating preference shares, held in certificated form, will not be paid, unless otherwise requested in writing, but will be aggregated with other
such amounts and be donated to a charity nominated by the directors.
Annual General Meeting
Altron's 67th annual general meeting will be held in The Altron Boardroom, 5 Winchester Road, Parktown, Johannesburg on Monday, 22 July 2013 at 09:30.
Further details of the company's annual general meeting will be contained in Altron's integrated annual report to be posted to shareholders on or about
1 June 2013.
On behalf of the board
Dr Bill Venter Robert Venter Alex Smith
Chairman Chief Executive Chief Financial Officer
7 May 2013
CORPORATE INFORMATION
BOARD OF DIRECTORS
Independent non-executive:
Mr NJ Adami
Mr GG Gelink
Mr MJ Leeming
Dr PM Maduna
Ms DNM Mokhobo
Mr JRD Modise
Mr SN Susman
Non-executive:
Dr WP Venter (Chairman)
Mr MC Berzack
Executive:
Mr RE Venter (Chief Executive)
Mr RJ Abraham
Mr AMR Smith*
Mr CG Venter
* British
Secretaries:
Altron Management Services Proprietary Limited Mr AG Johnston
(Group Company Secretary)
Sponsor:
Investec Bank
The summarised audited consolidated financial statements are available at www.altron.com
Date: 08/05/2013 07:55:00 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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