Wrap Text
Preliminary summarised audited consolidated
financial statements for the year ended 28 February 2015
ALLIED ELECTRONICS
CORPORATION LIMITED
(Registration number 1947/024583/06)
(Incorporated in the Republic of South Africa)
Share Code: AEL ISIN: ZAE000191342
Share Code: AEN ISIN: ZAE000191359
ALTRON PRELIMINARY SUMMARISED
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2015
SUMMARISED CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
% 2015 2014*
R millions Change (Audited) (Audited)
CONTINUING OPERATIONS
Revenue (1) 22 086 22 345
Earnings before interest, tax, depreciation, amortisation and
capital items (EBITDA before capital items) (19) 1 255 1 553
Depreciation and amortisation (510) (422)
Operating profit before capital items (34) 745 1 131
Capital items (Note 1) (400) (38)
Result from operating activities (68) 345 1 093
Finance income 110 101
Finance expense (381) (313)
Share of profit of equity-accounted investees, net of taxation 15 14
Profit before taxation (90) 89 895
Taxation (115) (285)
(Loss)/profit for the year from continuing operations (104) (26) 610
DISCONTINUED OPERATIONS
Revenue 2 5 537 5 427
EBITDA before capital items (46) 128 235
Depreciation and amortisation (46) (24)
Operating profit before capital items (61) 82 211
Capital items (Note 1) – 43
Result from operating activities 82 254
Finance income 4 2
Finance expense (131) (50)
(Loss)/profit before taxation (122) (45) 206
Taxation 11 (41)
(Loss)/profit for the year from discontinued operations (121) (34) 165
(Loss)/profit for the year from total operations (60) 775
Other comprehensive income
Items that will never be reclassified to profit or loss
Remeasurement of net defined benefit asset – 192
Taxation on items that will never be reclassified to profit or loss – (3)
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences in respect of foreign operations (10) 164
Realisation of foreign currency translation reserve on disposal (3) –
Effective portion of changes in the fair value of cash flow hedges (3) –
Fair value adjustment on available-for-sale investments – 13
Other comprehensive income for the year, net of taxation (16) 366
Total comprehensive income for the year (76) 1 141
(Loss)/profit attributable to:
Non-controlling interests (51) 160
Altron equity holders (9) 615
Altron equity holders from continuing operations 25 450
Altron equity holders from discontinued operations (34) 165
(Loss)/profit for the year from total operations (60) 775
Total comprehensive income attributable to:
Non-controlling interests (51) 174
Altron equity holders (25) 967
Altron equity holders from continuing operations 9 802
Altron equity holders from discontinued operations (34) 165
Total comprehensive income for the year (76) 1 141
Basic earnings per share from continuing operations (cents) (95) 8 140
Diluted basic earnings per share from continuing operations (cents) (95) 7 138
Basic (loss)/earnings per share from discontinued operations (cents) (120) (10) 52
Diluted basic (loss)/earnings per share from discontinued operations (cents) (119) (10) 51
Basic (loss)/earnings per share from total operations (cents) (101) (3) 192
Diluted basic (loss)/earnings per share from total operations (cents) (101) (3) 188
Dividends per share declared (cents) (100) – 80
* Comparative information has been represented for the discontinued operations, refer to note 10.
NOTES
BASIS OF PREPARATION
The preliminary summarised consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for preliminary reports, and the requirements of the Companies Act applicable
to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance
with the framework concepts and the measurement and recognition requirements of International Financial Reporting
Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information
required by IAS 34 – Interim Financial Reporting.
The accounting policies applied in the preparation of the consolidated financial statements from which the preliminary
summarised financial statements were derived are in terms of International Financial Reporting Standards and are consistent
with those accounting policies applied in the preparation of the previous consolidated financial statements.
This report was compiled under the supervision of Mr Alex Smith CA, Chief Financial Officer.
REPORT OF THE INDEPENDENT AUDITORS
The unmodified audit reports of KPMG Inc., the independent auditors, on the financial statements and the preliminary
summarised financial statements contained herein for the year ended 28 February 2015, dated 12 May 2015, are available for
inspection at the registered office of the company.
The auditor's report does not necessarily report on all of the information contained in this announcement. Shareholders are
therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a
copy of the auditor's report together with the accompanying financial information from the issuer's registered office.
% 2015 2014
R millions Change (Audited) (Audited)
Headline earnings per share (cents) (50) 94 188
Normalised headline earnings per share (cents) (52) 100 206
Diluted headline earnings per share (cents) (50) 93 185
Normalised diluted headline earnings per share (cents) (51) 99 202
1. CAPITAL ITEMS
CONTINUING OPERATIONS
Net gain on disposal of property, plant and equipment – 38
Impairment of property, plant and equipment (18) (3)
Impairment of goodwill (343) (27)
Impairment of intangible assets (100) (6)
Profit on disposal of subsidiary and businesses 61 3
Impairment of investment – (43)
(400) (38)
DISCONTINUED OPERATIONS
Profit on disposal of discontinued operations – 43
– 43
Total (400) 5
EVENTS AND CIRCUMSTANCES LEADING TO THE RECOGNITION OF SIGNIFICANT IMPAIRMENT LOSSES
Goodwill
The total goodwill impairment resulted from external market conditions putting sustained pressure on operating results
and a corresponding decline in management's expectations of forecasted future cash flows due to the lower than anticipated
activity levels without an envisaged material improvement in the short to medium term.
The carrying amount of the Powertech System Integrators, SetOne and NOR Paper cash-generating units were determined
to be higher than their recoverable amounts, based on value in use. Impairment losses of R235 million, R67 million and
R15 million respectively were recognised and allocated to goodwill. The impairments are included in the Powertech System
Integrators, Multi-media and Document Solutions operating segments respectively.
Other intangible assets
The R95 million impairment of development costs capitalised related to insufficient forecasted contributory cash flows of the
underlying products to support the carrying values of these intangible assets. During the year brand names amounting to
R2 million and customer contracts of R3 million were fully impaired.
Impairment of goodwill in joint venture
During the year R52 million of goodwill was impaired in CBi Electric Aberdare ATC Telecom Cables. The group's equity
accounted share of the impairment amounted to R26 million and was transferred from income from equity accounted
investees to capital items.
2015 2014
R millions (Audited) (Audited)
2. RECONCILIATION BETWEEN ATTRIBUTABLE EARNINGS AND
HEADLINE EARNINGS
Attributable to Altron equity holders (9) 615
Capital items – gross 400 (5)
Tax effect of capital items (9) (2)
Non-controlling interests in capital items (70) (5)
Headline earnings 312 603
3. RECONCILIATION BETWEEN ATTRIBUTABLE EARNINGS AND DILUTED
EARNINGS
Attributable to Altron equity holders (9) 615
Dilutive earnings attributable to B-BBEE non-controlling interest in subsidiaries – (3)
Diluted earnings (9) 612
4. RECONCILIATION BETWEEN HEADLINE EARNINGS AND DILUTED
HEADLINE EARNINGS
Headline earnings 312 603
Dilutive earnings attributable to B-BBEE non-controlling interest in subsidiaries – (2)
Diluted headline earnings 312 601
5. RECONCILIATION BETWEEN HEADLINE EARNINGS AND NORMALISED
HEADLINE EARNINGS
Normalised headline earnings have been presented to demonstrate the impact of
material, non-operational once-off costs associated with accessing benefits that will
only be realised in subsequent reporting periods, as well as certain restructuring
costs,on the headline earnings of the group.
The presentation of normalised headline earnings is not an IFRS requirement.
Headline earnings 312 603
Foreign currency losses on transaction funding – 40
Breakage costs on transaction funding – 5
Restructuring costs 33 39
Tax effect of adjustments (8) (7)
Non-controlling interests in adjustments (5) (20)
332 660
6. RECONCILIATION BETWEEN DILUTED HEADLINE EARNINGS AND
NORMALISED DILUTED HEADLINE EARNINGS
Diluted headline earnings 312 601
Foreign currency losses on transaction funding – 40
Breakage costs on transaction funding – 5
Restructuring costs 33 39
Tax effect of adjustments (8) (7)
Non-controlling interests in adjustments (5) (20)
332 658
7. ACQUISITION OF SUBSIDIARIES AND BUSINESS
ACQUISITION OF WEBROY PROPRIETARY LIMITED
Effective 1 March 2014, the Powertech Group acquired the business of Webroy Proprietary Limited ("Webroy") for a total
estimated consideration of R3 million, all of which was deferred and payable on the achievement of certain earn-out
targets over three years. Webroy is a manufacturer of various products supplied into the automotive industry.
ACQUISITION OF FLEETPRO AND CELTRAC
Effective 1 September 2014, Altech Netstar acquired the entire issued share capital of Fleetpro Proprietary Limited for a
purchase price of R15 million and the assets of Celtrac Proprietary Limited for a purchase price of R6 million.
Fleetpro has several sophisticated platforms that will assist Netstar to expand its services to its fleet management
customers. The acquisition of Celtrac's customer base is seen as an efficient mechanism to grow market share.
The acquired businesses contributed revenue of R29 million and a net loss after tax of R2 million to the group. If the
acquisitions had occurred on 1 March 2014, group revenue would have increased by R2 million.
Recognised Fair value Carrying
R millions values adjustments amount
The acquired balances at the effective dates were as follows:
Non-current assets 9 21 30
Current assets 6 – 6
Non-current liabilities (4) (6) (10)
Current liabilities (3) – (3)
Total net assets on acquisition 8 15 23
Goodwill on acquisition 1
Total consideration 24
Cash and cash equivalents in subsidiary acquired (1)
Less: Amounts due to vendors (9)
Net cash outflow on acquisition 14
8. TRANSACTIONS WITH NON-CONTROLLING INTERESTS
REPURCHASE OF NON-CONTROLLING INTEREST IN BYTES SA PROPRIETARY LIMITED
On 9 May 2014 the group entered into an agreement to acquire the 27% of Bytes SA that it does not already own from
the Kagiso Tiso Holdings group of companies for R669 million. The shares were repurchased effective 30 June 2014.
R211 million of the purchase price was settled via the issue of Altron N ordinary shares by way of a vendor placement,
with the balance being settled from cash resources.
REPURCHASE OF NON-CONTROLLING INTEREST IN NUPAY PROPRIETARY LIMITED
Effective 1 May 2014 Altech acquired the remaining 50% less one share equity interest in Altech NuPay Proprietary
Limited, which Altech did not already own for a purchase price of R80 million. The purchase price was settled via the
issue of Altron N ordinary shares by way of a vendor placement.
9. DISPOSAL OF SUBSIDIARY AND BUSINESSES
DISPOSAL OF 100% INTEREST IN LASERCOM
LaserCom was sold effective 1 December 2014 for R59 million being the book value of all LaserCom tangible net assets
and goodwill as at the effective date. Accordingly, no accounting profit or loss was recognised on the transaction.
The operation did not constitute a discontinued operation.
DISPOSAL OF 100% INTEREST IN BDS UK, PREVIOUSLY CLASSIFIED AS HELD-FOR-SALE
Effective 1 May 2014, Bytes UK disposed of 100% of its equity interest in the Bytes Document Solutions operation in
the UK. The operation did not constitute a discontinued operation.
2015
The net assets of the above entities disposed is: (Audited)
Non-current assets 91
Current assets 142
Current liabilities (91)
Disposal value 142
Release of foreign currency translation surplus on disposal 3
Profit on disposal of subsidiary 5
Proceeds on disposal 150
DISPOSAL OF RETAIL ATM OPERATION, PREVIOUSLY CLASSIFIED AS HELD-FOR-SALE
With effect from 1 August 2014, Bytes Managed Solutions disposed of a substantial portion of its retail ATM base for
a purchase consideration of R98 million and a profit of R56 million. The operation did not constitute a discontinued
operation.
10. DISCONTINUED OPERATIONS
During the financial year, the decision was taken to dispose of the majority of the Altech Autopage operation and, as a
result, this business has been classified as a discontinued operation.
Management has committed to a plan to sell this operation in the 2016 financial year, following a strategic decision
to focus the group in certain areas where the board believes the group has the resources, competence and skills to
leverage a competitive advantage.
The Altech Autopage business was not previously classified as held-for-sale or as a discontinued operation.
Net assets of business held-for-sale:
R millions 2015
Assets classified as held-for-sale
Non-current assets 1 051
Current assets 98
Liabilities classified as held-for-sale
Current liabilities (608)
541
R millions 2015 2014
Cash flows utilised in discontinued operation:
Net cash generated from operating activities 341 168
Net cash utilised in investing activities (385) (381)
Net cash (utilised in)/generated from financing activities (3) 129
Net cash flow for the year (47) (84)
RE-PRESENTED COMPARATIVE INFORMATION
The Autopage Cellular operations have been classified as discontinued operations in the current financial year. The
comparative consolidated statement of comprehensive income has been re-presented.
11. POST-BALANCE SHEET EVENTS
11.1 HEALTH-SOFT
On 1 March 2015, Med-E-Mass, part of the Altron TMT group of companies, acquired Health-Soft, a provider
of ground breaking technology services to the South African healthcare industry, for a purchase price not
exceeding R10 million.
11.2 PINPOINT COMMUNICATIONS
Effective 1 March 2015, Altech Netstar acquired Pinpoint Communications in Australia, a provider of fleet and
asset management solutions, for a maximum purchase price of Australian Dollars 8.3 million.
11.3 INTER-ACTIVE TECHNOLOGIES
Effective 3 March 2015, the Competition Tribunal approved the acquisition by Bytes People Solutions, a division of
Bytes Technology Group, of Inter-Active Technologies, a specialist customer interaction management business
for a nominal consideration.
The purchase price allocations for the above mentioned acquisitions have not been finalised at the time of issue
of these financial statements.
12. RELATED PARTY TRANSACTIONS
The group entered into various sale and purchase transactions with related parties in the ordinary course of business,
on an arm's length basis.
The nature of related party transactions is consistent with those reported previously.
13. FINANCIAL INSTRUMENTS AT FAIR VALUE
The group measures a preference share investment, its derivative foreign exchange contracts used for hedging and
contingent purchase considerations at fair value.
The preference share investment and contingent purchase considerations are disclosed as a Level 3 financial asset/
liabilities in terms of the fair value hierarchy with fair valuation inputs which are not based on observable market data
(unobservable inputs). A discounted cash flow valuation model is used to determine fair value.
The derivative foreign exchange contracts used for hedging are disclosed as Level 2 financial instruments in terms of
the fair value hierarchy with fair valuation inputs (other than quoted prices) that are observable either directly (i.e as
prices) or indirectly (i.e derived from prices). A market comparison technique is used to determine fair value.
There were no transfers between Levels 1, 2 or 3 of the fair value hierarchy for the year ended 28 February 2015.
SUMMARISED CONSOLIDATED BALANCE SHEET
2015 2014
R millions (Audited) (Audited)
ASSETS
Non-current assets 4 496 5 496
Property, plant and equipment 1 888 2 028
Intangible assets, including goodwill 1 405 1 725
Equity-accounted investments 229 243
Other investments 183 181
Rental finance advances 93 68
Non current receivables and other assets 303 921
Defined benefit asset 190 180
Deferred taxation 205 150
Current assets 10 686 10 620
Inventories 2 920 3 116
Trade and other receivables, including derivatives 5 222 5 805
Assets classified as held-for-sale 1 149 214
Taxation receivable 54 74
Cash and cash equivalents 1 341 1 411
Total assets 15 182 16 116
EQUITY AND LIABILITIES
Total equity 3 762 4 514
Non-current liabilities 3 260 495
Loans 3 191 283
Provisions 29 36
Deferred taxation 40 176
Current liabilities 8 160 11 107
Loans 634 2 649
Empowerment funding obligation – 17
Bank overdraft 1 050 1 777
Trade and other payables, including derivatives 5 638 6 374
Provisions 51 59
Liabilities classified as held-for-sale 608 84
Taxation payable 179 147
Total equity and liabilities 15 182 16 116
Net asset value per share (cents) 1 080 1 311
SUMMARISED SEGMENTAL REPORT
SEGMENT ANALYSIS
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.
During the year the Altron TMT Group implemented a business rationalisation programme and divisionalised a number of
subsidiaries in order to align business offerings.
The Altech Group now represents the telecommunications and multi-media divisions of Altron TMT and consists mainly of the
previous Altech businesses plus Bytes Systems Integration. The IT assets (Altech Isis, Altech NuPay and most of Altech Card
Solutions) formerly within Altech have been moved to Bytes.
The Bytes Group now represents the technology division of Altron TMT and consists mainly of the previous Bytes businesses
(other than Bytes Systems Integration) and the IT assets that were previously within Altech. Bytes Universal Systems now
includes Altech Isis and comprises all of the software development businesses. Bytes Secure Transaction Solutions includes
Bytes Healthcare Solutions, Altech NuPay and parts of Altech Card Solutions.
The business management oversight responsibilities were transferred on 1 March 2014.
Crabtree was moved from the Powertech Cables Group during the period under review and now reports under Other
Powertech Segments.
Revenue and EBITDA for the prior periods have been restated to reflect the changes mentioned above.
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
Feb Feb % Growth Feb Feb % Growth
R millions 2015 2014 Cur/Pyr 2015 2014 Cur/Pyr
Altech Autopage Group* 5 650 5 541 2 137 264 (48)
Altech Multi-media Group 1 821 2 674 (32) 61 169 (64)
Altech Netstar Group 1 121 1 079 4 310 317 (2)
Systems Integration Group 1 680 1 644 2 134 110 22
Other Altech Segments 883 648 36 (70) (45) (56)
Altech Group 11 155 11 586 (4) 572 815 (30)
Bytes Technology Group UK Software 2 644 2 066 28 106 76 39
Bytes Document Solutions Group 2 212 2 169 2 115 113 2
Bytes Managed Solutions 1 520 1 630 (7) 136 175 (22)
Bytes Secure Transaction Solutions 695 747 (7) 157 141 11
Bytes Universal Systems 856 641 34 107 99 8
Other Bytes Segments 399 692 (42) (7) (4) (75)
Bytes Group 8 326 7 945 5 614 600 2
Inter-segment revenue (125) (75)
Altron TMT 19 356 19 456 (1) 1 186 1 415 (16)
Powertech Cables Group 5 117 5 232 (2) 202 116 74
Powertech Transformers Group 1 330 1 609 (17) (66) 160 (141)
Powertech Battery Group 899 775 16 76 82 (7)
Powertech System Integrators 820 845 (3) 3 18 (83)
Other Powertech Segments 122 (82) 5 10 50
Powertech Group 8 288 8 379 (1) 220 386 (43)
Corporate and financial services 4 6 (23) (13)
Inter-segment revenue (25) (69)
Altron Group 27 623 27 772 (1) 1 383 1 788 (23)
* The majority of this segment formed the discontinued operations.
2015 2014
Segment EBITDA can be reconciled to group operating profit before capital items as follows:
EBITDA 1 383 1 788
Reconciling items:
Depreciation (377) (326)
Amortisation (179) (120)
Group operating profit before capital items 827 1 342
SUMMARISED CONSOLIDATED STATEMENT
OF CASH FLOWS
2015 2014
R millions (Audited) (Audited)
Cash flows from operating activities 1 169 762
Cash generated by operations 1 703 2 019
Net finance expense (335) (242)
Changes in working capital 330 (513)
Taxation paid (253) (270)
Cash available from operating activities 1 445 994
Dividends paid, including to non-controlling interests (276) (232)
Cash flows utilised in investing activities (1 018) (1 283)
Cash flows from/(utilised in) financing activities 453 (657)
Net increase/(decrease) in cash and cash equivalents 604 (1 178)
Net cash and cash equivalents at the beginning of the year (314) 840
Cash and cash equivalents at the beginning of the year (366) 840
Cash previously classified as held-for-sale 52 –
Effect of exchange rate fluctuations on cash held 1 24
Cash classified as held-for-sale – (52)
Net cash and cash equivalents at the end of the year 291 (366)
OPERATIONAL CONTRIBUTION FROM
TOTAL OPERATIONS
% 2015 2014
R millions Change (Audited) % (Audited) %
Revenue
Altech (4) 11 155 40 11 586 41
Bytes 5 8 326 30 7 945 29
TMT corporate and eliminations (125) – (75) –
Altron TMT (1) 19 356 19 456
Powertech (1) 8 288 30 8 379 30
Corporate and eliminations (21) – (63) –
Altron (1) 27 623 100 27 772 100
Normalised EBITDA*
Altech (34) 582 42 885 47
Bytes – 615 43 615 33
Altron TMT (20) 1 197 1 500
Powertech (37) 243 17 386 21
Corporate and eliminations (23) (2) (14) (1)
Altron (24) 1 417 100 1 872 100
Normalised headline earnings**
Altech (67) 90 27 271 41
Bytes 17 391 118 335 51
TMT corporate and eliminations (13) (4) 3 –
Altron TMT 468 609
Powertech (95) 4 1 77 12
Corporate and eliminations (140) (42) (26) (4)
Altron (50) 332 100 660 100
* Normalised EBITDA is stated for total operations before capital items and non-operational once-off costs relating to foreign exchange
losses and breakage costs on transaction funding as well as certain restructuring costs.
** Normalised headline earnings is stated for total operations and before non-operational once-off costs relating to foreign exchange
losses and breakage costs on transaction funding as well as certain restructuring costs.
SUPPLEMENTARY INFORMATION (TOTAL OPERATIONS)
2015 2014
R millions (Audited) (Audited)
Depreciation 377 326
Amortisation 179 120
Net foreign exchange (losses)/profits (64) 3
Cash flow movements
Capital expenditure (including intangible assets) 650 759
Net additions to contract fulfilment costs 148 186
Additions to contract fulfilment costs 486 478
Net expensing of contract fulfilment costs during the year (327) (266)
Terminations of contract fulfilment costs (11) (26)
Capital commitments 71 109
Lease commitments 927 878
Payable within the next 12 months 244 256
Payable thereafter 683 622
Weighted average number of shares (millions) 333 321
Diluted average number of shares (millions) 337 325
Shares in issue at the end of the year (millions) 337 325
Ratios
EBITDA margin 5.0% 6.4%
Normalised EBITDA margin 5.1% 6.7%
ROCE 10.9% 17.1%
ROE 9.3% 15.2%
ROA 6.4% 9.8%
RONA 9.9% 17.2%
Current ratio 1,3:1 1:1
Acid test ratio 1:1 0,7:1
Net debt/EBITDA 2.6 1.9
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 2013 (Audited) 2 254 (299) (770) 3 555 4 740 489 5 229
Total comprehensive income for the year
Profit for the year – – – 615 615 160 775
Other comprehensive income
Foreign currency translation differences in
respect of foreign operations – – 163 – 163 1 164
Fair value adjustment on available-for-sale
investments – – – – – 13 13
Remeasurement of net defined benefit asset/
obligation – – 189 – 189 – 189
Total other comprehensive income – – 352 – 352 14 366
Total comprehensive income for the year – – 352 615 967 174 1 141
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Dividends to equity holders – – – (190) (190) (42) (232)
Issue of share capital 15 – (15) – – – –
Share-based payment transactions – – 30 – 30 3 33
Total contributions by and distributions to owners 15 – 15 (190) (160) (39) (199)
Changes in ownership interests in subsidiaries
Buy-back of non-controlling interest 158 – (1 449) – (1 291) (355) (1 646)
Disposal of subsidiaries – – – – – (11) (11)
Total changes in ownership interests in
subsidiaries 158 – (1 449) – (1 291) (366) (1 657)
Total transactions with owners 173 – (1 434) (190) (1 451) (405) (1 856)
Balance at 28 February 2014 (Audited) 2 427 (299) (1 852) 3 980 4 256 258 4 514
Total comprehensive income for the year
Loss for the year – – – (9) (9) (51) (60)
Other comprehensive income
Foreign currency translation differences in
respect of foreign operations – – (10) – (10) – (10)
Realisation of foreign currency translation reserve
on disposal – – (3) – (3) – (3)
Effective portion of changes in the fair value of
cash flow hedges – – (3) – (3) – (3)
Total other comprehensive income – – (16) – (16) – (16)
Total comprehensive income for the year – – (16) (9) (25) (51) (76)
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Issue of share capital 17 – (17) – – – –
Dividends to equity holders – – – (263) (263) (13) (276)
Share-based payment transactions – – 34 – 34 1 35
Total contributions by and distributions to owners 17 – 17 (263) (229) (12) (241)
Changes in ownership interests in subsidiaries
Buy-back of non-controlling interests 291 – (393) – (102) (356) (458)
Introduction of non-controlling interest – – (261) – (261) 284 23
Total changes in ownership interests in
subsidiaries 291 – (654) – (363) (72) (435)
Total transactions with owners 308 – (637) (263) (592) (84) (676)
Balance at 28 February 2015 (Audited) 2 735 (299) (2 505) 3 708 3 639 123 3 762
MESSAGE TO SHAREHOLDERS
The Altron financial results for the year ended 28 February 2015 are reported in an integrated manner in accordance with
the G4 Guidelines prepared by the Global Reporting Initiative (GRI) and the recently published Integrated Reporting <IR>
Framework (Version 1) developed by the International Integrated Reporting Council (IIRC), 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.
During the year, Altron's profitability was adversely affected by strike action in its manufacturing businesses, a marked decline
in orders from Eskom and challenging market conditions in the telecommunications sector. Besides the strike, the multi-media
businesses were also affected by lower international orders as a result of a delay in African Digital Terrestrial Television Migration
(DTT). Profitability was also impacted by the launch of and a lower than expected take up of the Altech Node entertainment
and home automation system by the retail channel. Altron TMT is well advanced in exploring alternative opportunities and
routes to market for the Altech Node. The IT assets, however, continued to perform well, exceeding expectations. From a total
operations perspective, Altron's revenue decreased by 1% to R27.6 billion and earnings before interest, tax, depreciation and
amortisation (EBITDA) by 23% to R1.4 billion. Basic earnings per share (EPS) was 101% lower than the prior year, with the
company posting a loss of 3 cents. Headline earnings per share (HEPS) declined by 50% to 94 cents.
FINANCIAL OVERVIEW
INCOME
During the financial year, a decision was taken to dispose of Altech Autopage's GSM subscriber bases and consequently this
business has been classified as a discontinued operation. As indicated in the renewal of cautionary announcement released
on SENS on 12 May 2015, negotiations are at an advanced stage regarding its potential disposal and further information will be
shared with shareholders in due course. In certain cases reference is made to normalised results which exclude the once-off
non-operational forex and breakage costs of R45 million associated with the repatriation of the East Africa loan in the prior
year as well as various restructuring costs incurred in each year.
Continuing operations
Revenue decreased by 1% to R22.1 billion from R22.3 billion in the prior year, while EBITDA declined by 19% from R1.55 billion
to R1.25 billion. The EBITDA margin was 5.7% compared to the prior year's 7.0%.
Capital items have increased significantly from the prior year primarily due to R343 million of goodwill impairments and
R100 million of impairments of intangible assets, partially offset by the profit on disposal of our document solutions business
in the UK and the retail ATM assets. Depreciation and amortisation has increased, reflecting the investments made in previous
years. This resulted in a profit of R345 million from operating activities, 68% lower than last year's R1 093 million. Net finance
costs have increased from R212 million to R271 million as average borrowings have increased due to the additional debt taken
on to acquire the non-controlling interest in Altech during August 2013, as well as a higher average borrowing cost following
the refinance of the group's debt into longer term borrowings and the rise in the repo rate.
The effective tax rate has declined to 23.5% from 30.5% in the prior year after adjusting for the effects of capital items. This
reflects the recognition of various deferred tax assets relating to prior year losses.
Discontinued operations
The results of the discontinued operation, namely Altech Autopage, reduced significantly due to the impacts of the ongoing
Mobile Termination Rate reductions, as well as continued industry and consumer deflationary pressures plus a new funding
arrangement which significantly increased the finance costs of the business.
CASH MANAGEMENT
Total operations
Cash generated by operations of R1 703 million was 16% down on the prior year, while R330 million was released from working
capital, which was a significant improvement on the R513 million absorption in the prior year. A reduction in tax paid was offset
by last year's increased dividend, while net finance charges increased as discussed above. The combined effect was a 53%
increase in cash flows from operating activities.
Investing activities reduced to R1 018 million. Capital expenditure relating to property, plant and equipment as well as intangible
assets amounted to R650 million, which was down some 14% on the prior year.
Cash flows from financing activities of R453 million represents the raising of approximately R291 million from the issue of
shares and R887 million of loan funding raised following the completion of the refinance in early March 2014 (R780 million of
which was in overdrafts at the prior year-end). This was offset by R749 million utilised in the acquisition of the non-controlling
interests in Bytes South Africa and Altech NuPay.
SUBSIDIARY REVIEW
SUBSIDIARY INCOME AND GROWTH
The following commentary is provided on a total operations basis.
Altron TMT
During the year, the Altron TMT division (telecommunications, multi-media and IT businesses) experienced a decline in profit
levels notwithstanding the pleasing performance of the IT businesses which was insufficient to offset the deterioration in the
telecommunications and multi-media businesses.
The integration process of Altech and Bytes continues, with good progress achieved on cost savings and cross selling during
the financial year ended 28 February 2015. The integration project as currently defined is expected to be completed by the end
of the 2016 financial year.
On a consolidated total operations level, Altron TMT revenue remained stable at R19.4 billion but EBITDA declined by 16% from
R1.4 billion to R1.2 billion. The EBITDA margin declined from 7.3% to 6.1%. Headline earnings declined by 19% to R461 million.
Telecommunications
Altech Autopage experienced a decline in ARPUs as well as profitability as a result of continued industry and consumer
deflationary pressures, as well as the impacts of the ongoing Mobile Termination Rate reductions. As indicated previously,
negotiations are at an advanced stage in respect of its potential disposal.
Altech Netstar reported 4% revenue growth and a marginal decline in EBITDA. Nevertheless, the business made good
progress with the launch of a number of new products and impressive growth in the fleet management business. Several
small acquisitions were concluded during the year which should enhance the results going forward.
Bytes Systems Integration saw limited revenue growth, but excellent EBITDA growth, with a shift towards more margin rich
sales, particularly in the biometrics space. The international business, primarily located in Africa, improved significantly,
assisted by the weakening of the Rand.
Altech Radio Holdings performed well off the back of the Gauteng Broadband Network project which is running on schedule
with the scope being enhanced in the process. There are some encouraging and significant projects in the pipeline.
Altron TMT is well advanced in terms of exploring alternative opportunities and routes to market for its new entertainment
and home automation system, Altech Node, which was launched in September 2014 but has experienced a disappointing
consumer uptake to date.
Multi-media
Altech Multi-media was significantly impacted by reduced order intake in its core set top box business in Africa as a result of
delays in African DTT programmes, the loss of the Samsung TV assembly contract and the impact of the NUMSA strike in July
2014. The business which has already undergone significant cost reductions, has seen its order book improve in recent months
and has an encouraging pipeline of local and international prospects including the South African DTT programme where it has
been appointed as a Tier 1 supplier.
Technology (IT)
Bytes UK had an exceptional year, growing revenue and improving margins. While the results were enhanced by the depreciation
of the Rand, the local currency results exceeded expectations as the business expanded its higher margin operations.
The core Xerox business of Bytes Document Solutions showed a good recovery in the second half as some of the effects of
the weaker Rand were mitigated and new business was won. Unfortunately the related paper business experienced challenges
and is being restructured. The LaserCom business was disposed of in December 2014.
Bytes Managed Solutions performed well despite a reduction in revenue and EBITDA as the business was affected by foreign
exchange losses and the disposal of the retail ATM business in August 2014.
Bytes Secure Transaction Solutions saw a decline in revenue as a result of reduced sales of POS terminals out of Altech Card
Solutions, but strong performances out of Bytes Healthcare Solutions and Altech NuPay resulted in a pleasing increase in
EBITDA.
Bytes Universal Systems produced strong revenue growth during the year, although margins declined. This was driven by
revenue gains from a large public sector contract, with a high proportion of lower margin product sales. This contract finished
towards the end of the financial year.
Altron Power
Altron Power's revenue remained flat at R8.3 billion, while EBITDA declined by 43% to R220 million. Headline earnings for
Altron Power declined from R77 million in the prior year to a loss of R9 million. Most of the businesses were affected by
challenging macroeconomic conditions, namely the four-week NUMSA strike in July, weak economic growth and the various
challenges created by Eskom's current position.
The Powertech Cables group achieved a good recovery during the year (both locally and internationally) despite the effects of
the strike and a lack of Eskom orders, significantly increasing EBITDA, though margins remain at historically low levels. While
revenue declined marginally compared to the prior year, new territories were entered and local market share was gained in the
informal sector with improved margins. The turnaround of the international operations was particularly pleasing with signs of
an increase in infrastructure spending throughout Europe.
The Powertech Transformers group experienced an extremely disappointing year. While revenue declined notably, the business
moved into an EBITDA loss position. This was caused by poor order inflows from its largest customer, Eskom, particularly
in the larger high voltage transformers. Other factors were the disruption caused by the NUMSA strike accentuated by poor
productivity levels as well as the non-recurring costs incurred to close its Johannesburg (Booysens) manufacturing facility. The
imminent recognition of transformers as a Designated Product by the dti should assist performance going forward, provided
Eskom returns to more usual buying patterns.
Powertech Batteries performed satisfactorily given that margins were under pressure due to an increasing lead price as well
as ongoing competition from imports despite the weak Rand.
Powertech System Integrators' performance was disappointing as it struggled with delays in the start of various previously
awarded projects coupled with weak order inflow. However, Powertech Quadpro, the turn-key substation business, made good
inroads into Africa and in particular Zambia.
HUMAN CAPITAL
Altron has been rated as a Level 2 Broad-Based Black Economic Empowerment contributor for the 2015/2016 financial
year. This has been as a result of a well-executed strategic intent to transcend from a compliance-driven process to a more
transformative process.
Training of Altron group employees is a priority and is managed through the Bill Venter Academy.
SUSTAINABILITY
Altron's sustainable business strategy remains the driving force in terms of achieving its targets and objectives. The four
key value drivers for sustainable development remain Financial Capital, Human Capital, Products and Services and External
Relationships.
CORPORATE GOVERNANCE
The Altron group continues to embrace and implement the recommendations of the King Report on Governance for
South Africa, 2009, as well as the King Code of Governance Principles for South Africa 2009 (the Code) and the board has
satisfied itself that Altron has complied throughout the period in all material respects with the Code and the Listings
Requirements of the JSE.
OUTLOOK
Altron's board has undertaken a fundamental review of the group's business strategy. As part of this process, it has been
decided that the company will commence transitioning from a family managed business to an independent management
structure. The board will make further announcements in this regard in due course. This has resulted in the development
of a plan to focus the group in certain areas where the board believes the group has the resources, competence and skills
to leverage a competitive advantage. In the process certain material non-core assets have been identified for disposal
and the group is exploring strategic equity and technology partnerships with global industry players in other areas of the
business. Furthermore, particular emphasis is being placed on the need to significantly reduce central costs by creating a
leaner management structure and continuing to implement shared services. The group is currently addressing each of these
initiatives, which are at different stages of completion. Further announcements will be made at the appropriate time.
In the short term, conditions are expected to remain challenging as some of the macro-economic factors that impacted
the group in the prior financial year remain in place, namely low economic growth and limited purchasing from Eskom.
Nevertheless the actions being taken in respect of Altech Autopage and Altech Node are expected to address some of the
areas in which the group has recently encountered challenges.
Looking further out, Altron Power stands to benefit from the eventual refurbishment of South Africa's electrical infrastructure,
designated product status of transformers and cables and potential orders from phase 3 and 4 of the REIPP renewable energy
projects. Continued focus will be placed on new markets, particularly sub-Saharan Africa.
The benefits of the integration of businesses in Altron TMT will continue during the course of the new financial year and
be enhanced by some of the initiatives identified above. The remaining businesses in the telecommunications division are
expected to continue their good progress of the last year, while an improved performance from the multi-media business is
expected, particularly if the South African DTT project commences this year. Demand in the IT sector is expected to remain
stable.
DIVIDENDS
Notice is hereby given that on Tuesday, 12 May 2015, Altron declared a gross A ordinary dividend (number 67) of 31 cents per
A ordinary share (2014: 80 cents) and a gross N ordinary dividend (number 21) of 31 cents per N ordinary share (2014: 80 cents)
for the period 1 March 2014 to 28 February 2015, payable on Monday, 6 July 2015 to holders of the A ordinary and N ordinary
shares recorded in the books of the company at close of business on Friday, 3 July 2015.
The dividends have been declared out of income reserves and will be subject to dividends tax. The local dividends tax rate
is 15%.
Accordingly, the net local dividend amount is 26.35 cents per A ordinary and N ordinary shares for shareholders liable to pay
dividends tax and 31.00 cents per A ordinary and N ordinary shares for shareholders exempt from paying 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 Participant (previously 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 A ordinary shares and 262 311 667 N ordinary 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, 26 June 2015
Trading ex-dividend commences Monday, 29 June 2015
Record date Friday, 3 July 2015
Dividend payment date (electronic and certificated) Monday, 6 July 2015
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 on or about Monday, 6 July 2015. Electronic payment to
certificated shareholders will be undertaken simultaneously.
Shareholders who have dematerialised their share certificates will have their accounts at their Participant (previously CSDP)
or broker credited on Monday, 6 July 2015.
Share certificates may not be dematerialised or rematerialised from Monday, 29 June 2015 to Friday, 3 July 2015, 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 A ordinary or N ordinary 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 69th annual general meeting will be held in The Altron Boardroom, 5 Winchester Road, Parktown, Johannesburg on
Monday, 20 July 2015 at 09:30. Further details of the company's annual general meeting will be contained in Altron's annual
statutory report to be posted to shareholders on or about Monday, 1 June 2015.
On behalf of the board
Dr Bill Venter Robert Venter Alex Smith
Non-Executive Chairman Chief Executive Chief Financial Officer
12 May 2015
COMPANY INFORMATION
BOARD OF DIRECTORS
INDEPENDENT NON-EXECUTIVE
Mr NJ Adami
Mr GG Gelink
Mr MJ Leeming
Ms SN Mabaso-Koyana
Dr PM Maduna
Ms DNM Mokhobo
Mr JRD Modise
Mr RS Ntuli
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
www.altron.com
Date: 13/05/2015 07:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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