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ATN / ATNP - Allied Electronics Corporation - Abridged Audited Consolidated
Financial Statements for the Year Ended 28 February 2009
ALLIED ELECTRONICS CORPORATION LIMITED
(Registration number: 1947/024583/06)
(Incorporated in the Republic of South Africa)
Share code: ATN & ISIN: ZAE000029658
Share code: ATNP & ISIN: ZAE000029666
Abridged audited consolidated financial statements for the year ended 28
February 2009
Abridged income statement
% 2009 2008
R millions change (Audited) (Audited)
Revenue 16 24 768 21 431
Operating profit before capital (7) 1 799 1 937
items
Capital items (Note 1) (21) (90)
Result from operating activities 1 778 1 847
Finance income 184 182
Finance expense (292) (89)
Share of profit from associates 3 4
Profit before taxation 1 673 1 944
Taxation (524) (625)
Profit for the year (13) 1 149 1 319
Attributable to minority interest 314 300
Attributable to Altron equity 835 1 019
holders
Basic earnings per share (cents) (25) 266 357
Diluted basic earnings per share (20) 248 310
(cents)
Dividends per share paid (cents) 156 118
Dividends per share declared 119 156
(cents)
Notes
Basis of preparation
The abridged consolidated financial statements have been prepared in accordance
with the recognition and measurement criteria of International Financial
Reporting Standards (IFRS) and its interpretations adopted by the International
Accounting Standards Board (IASB) in issue and effective at 28 February 2009 and
the presentation and disclosure requirements of IAS 34, Interim Financial
Reporting and in compliance with the Listings Requirements of the JSE Limited.
The accounting policies followed are consistent with those used in the prior
year.
Auditor`s report
KPMG Inc`s unmodified auditor`s report included in the consolidated annual
financial statements and on the abridged consolidated annual financial
statements contained in this abridged report are available for inspection at the
company`s registered office.
% 2009 2008
R millions change (Audited) (Audited)
Headline earnings per share (27) 275 375
(cents)
Diluted headline earnings per (21) 257 327
share (cents)
Adjusted headline earnings per (24) 295 387
share (cents)
Adjusted diluted headline earnings (18) 277 339
per share (cents)
1. Capital items
Net gain on disposal of property, plant 23 2
and equipment
Impairment of property, plant and (12) -
equipment
Impairment of goodwill (90) (86)
Goodwill adjustment on reversal of at - 2
acquisition tax losses
Net gain/(loss) on disposal of businesses 58 (1)
and investments
Foreign currency translation reserve - (7)
released on disposal
(21) (90)
2. Reconciliation between earnings and
headline earnings
Attributable to Altron equity holders 835 1 019
Capital items - gross 21 90
Tax effect of capital items 8 -
Deferred tax assets reversed on at - 2
acquisition tax losses
Minority interest in capital items (3) (39)
Headline earnings 861 1 072
3. Reconciliation between attributable
earnings and diluted earnings
Attributable to Altron equity holders 835 1 019
Dilutive earnings attributable to BBBEE (44) (118)
minorities in subsidiaries
Dilutive earnings attributable to (17) (14)
dilutive options at subsidiary level
Minority interest in adjustments 8 7
Diluted earnings 782 894
4. Reconciliation between headline
earnings and diluted headline earnings
Headline earnings 861 1 072
Dilutive earnings attributable to BBBEE (41) (118)
minorities in subsidiaries
Minority interest in adjustments 8 8
Dilutive earnings attributable to (17) (17)
dilutive options at subsidiary level
Diluted headline earnings 811 945
5. Reconciliation between headline
earnings and adjusted headline earnings
Adjusted headline earnings have been
presented to demonstrate the impact of
some once off events and accounting
charges on the headline earnings of the
group. Headline earnings are reconciled
to adjusted headline earnings as follows:
Headline earnings 861 1 072
Amortisation of intangibles arising on 104 40
business combinations
IFRS 2 charge on BBBEE transactions - 3
Costs associated with proposed purchase - 13
of minorities in subsidiaries
Tax effect of adjustments (29) (14)
Minority interest in adjustments (12) (8)
Adjusted headline earnings 924 1 106
6. Reconciliation between diluted
headline earnings and adjusted diluted
headline earnings
Diluted headline earnings 811 945
Amortisation of intangibles arising on 104 40
business combinations
IFRS 2 charge on BBBEE transactions - 3
Costs associated with proposed purchase - 13
of minorities in subsidiaries
Tax effect of adjustments (29) (14)
Minority interest in adjustments (12) (8)
Adjusted diluted headline earnings 874 979
Fully diluted earnings, diluted headline earnings and adjusted diluted headline
earnings have been calculated in accordance with IAS 33 - Earnings per share on
the basis that:
- Kagiso Strategic Investments (Pty) Limited exercised its full option on 22% of
the shares in Bytes Technology Group South Africa (Pty) Limited adjusted for the
dilutive effect of the option price at the Bytes Technology SA level for the
four months prior to the exercise of the said option, effective 1 July 2008.
- 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 R106 million (comprising the empowerment
funding obligation net of excess cash deposits of R6 million), adjusted for the
dilutive effect of the option price at the Aberdare level and after taking into
account the 10% investment in the Izingwe Consortium by Power Technologies (Pty)
Limited.
- The recognition of the deferred sale of a 30% interest to Platina Venture
Holdings (Pty) Limited in Alcom Matomo based on the assumption that the
internally financed purchase price will be settled in cash of R13 million,
adjusted for the dilutive effect of the option at the Alcom Matomo level.
- The earnings effect of dilutive options at Allied Technologies Limited level.
7. Acquisitions of subsidiaries
Bytes Group
During the period the Bytes Group acquired a number of operations, namely
Planflow - 1 March 2008, Intelleca - 1 April 2008 and NOR Paper - 1 July 2008
for an aggregate consideration of R301 million, of which R49 million is
deferred.
In the year to 28 February 2009 these acquisitions contributed R329 million to
revenue and R15 million to the consolidated profit after tax. If the
acquisitions had occurred on 1 March 2008, group revenue and net profit after
tax before allocations would have increased by a further R117 million and R16
million respectively.
Recognised Fair value Carrying
values adjustments amount
Non-current assets 13 85 98
Current assets 149 - 149
Non-current liabilities (1) (26) (27)
Current liabilities (57) - (57)
Net identifiable assets and 104 59 163
liabilities
Goodwill arising on 138
acquisition
Total consideration 301
Less cash and cash (5)
equivalents in subsidiaries
acquired
Less deferred purchase (49)
consideration
Cash outflow from the group 247
on acquisitions
Powertech Group
On 1 April 2008 the Powertech Group acquired the remaining 50% of Powertech
Transformers (Pty) Limited that it had not previously owned for a consideration
of R320 million.
In the year to 28 February 2009 the acquisition of the remaining 50% contributed
R814 million to revenue and R44 million to the consolidated profit after tax. If
the acquisition had occurred on 1 March 2008, group revenue and net profit after
tax before allocations would have increased by a further R54 million and R4
million respectively.
Recognised Fair value Carrying
values adjustments amount
Non-current assets 110 166 276
Current assets 891 15 906
Non-current liabilities (2) (51) (53)
Current liabilities (562) - (562)
Net identifiable assets and 437 130 567
liabilities
Attributable to minorities (42) (23) (65)
Net identifiable assets and 395 107 502
liabilities
Goodwill arising on 69
acquisition
Total consideration 571
Less fair value of existing (251)
joint venture interest
applied to business
combination
Less cash and cash (71)
equivalents in subsidiaries
acquired
Cash outflow from the group 249
on acquisitions
Altech Group
On 1 March 2008, the Altech Group acquired from Sameer ICT Limited (Sameer) 51%
of the issued share capital of Kenya Data Networks Limited (KDN), Swift Global
(Kenya) Limited (Swift) and Infocom Limited (Infocom). The purchase price of
US$75 million was allocated as follows:
- US$68 million for the shares in KDN
- US$5 million for the shares in Swift
- US$2 million for the shares in Infocom
Of the total purchase price of US$75 million referred to above, an amount of
US$10 million has been held in escrow, to be released to the vendors of the
shares concerned against the achievement of an aggregated combined profit after
taxation of at least US$11.7 million for the 12 months ended 28 February 2009.
The warranted profits were achieved.
In addition the Altech Group and Sameer injected new capital of US$20 million
into the three companies acquired, of which 51% was provided by the Altech Group
and the remaining 49% was provided by Sameer. Therefore, the Altech Group`s
total investment was US$85.2 million, comprising the purchase price of US$75
million and the cash injection of US$10.2 million.
The goodwill arising is attributable to the market dominance of the businesses
in their regions and the human capital acquired.
On 1 March 2008 and 31 March 2008 the group acquired 100% of the Altech Netstar
franchises in Witbank and Bloemfontein respectively.
Recognised Fair value Carrying
values adjustments amount
Non-current assets 317 159 476
Current assets (including 268 - 268
capital subscription
proceeds)
Non-current liabilities (190) (42) (232)
Current liabilities (132) - (132)
Net identifiable assets and 263 117 380
liabilities
Attributable to minorities (129) (49) (177)
Net identifiable assets and 134 68 203
liabilities
Goodwill arising on 499
acquisition
Total consideration 702
Less deferred purchase (82)
consideration
Consideration paid in cash 620
Less amount paid for (82)
subscription shares and
received by subsidiary
companies
Less cash and cash (3)
equivalents in subsidiaries
acquired
Cash outflow from the group 535
on acquisitions
In the year to 28 February 2009 these acquisitions contributed R449 million to
revenue and R101 million to the consolidated profit after tax. If the
Bloemfontein acquisition had occurred on 1 March 2008, group revenue and net
profit after tax before allocations would have increased by a further R1 million
and R0.2 million respectively. These amounts have been calculated using the
group`s accounting policies and by adjusting the results of the subsidiaries to
reflect amortisation on the fair value adjustments to intangible assets from 1
March 2008, together with consequential tax effects.
8. Post balance sheet acquisitions
Acquisition of 100% interest in Fleetcall (Pty) Limited (Fleetcall)
Altech has signed agreements to acquire 100% of the issued share capital of
Fleetcall on 1 March 2009.
The maximum purchase price is R75 million which is payable as follows in cash:
- First tranche: R40 million
- Second tranche: R35 million payable on achievement of warranted profits.
Fleetcall is the only trunked two-way radio operator in South Africa.
Acquisition of 100% interest in Lateral Technology Concepts (Pty) Limited
(Technology Concepts)
Altech has signed agreements to acquire 100% of the issued share capital of
Technology Concepts on 1 April 2009.
The maximum purchase price is R45 million which is payable as follows in cash:
- Initial payment of R7.5 million
- The remaining maximum amount of R37.5 million to be paid in terms of an earn-
out mechanism over two years based on after tax profit targets for the years
ending February 2010 and February 2011 being achieved.
Technology Concepts is an established internet technology services business and
corporate internet service provider. This acquisition enhances Altech Autopage
Cellular`s ability to provide data services to its voice cellular subscribers,
recognising the developing convergence of voice and data in the telecoms arena
and the increasing demand for bundled services.
The purchase price allocations for each of these acquisitions will be performed
during the 2010 financial year, which will identify any recognisable intangible
assets and determine the quantum of any goodwill.
The acquirees` balance sheets for both acquisitions at the date of the
acquisitions are as follows:
Carrying
amount
Non-current assets 11
Current assets 14
Non-current liabilities -
Current liabilities (10)
Net identifiable assets and liabilities 15
Abridged balance sheet
2009 2008
R millions (Audited) (Audited)
Assets
Non-current assets 5 239 3 362
Property, plant and equipment 2 221 1 264
Intangible assets, including goodwill 2 437 1 502
Associates 11 20
Other investments 267 294
Rental finance advances 73 86
Deferred taxation 230 196
Current assets 8 342 7 617
Inventories 2 364 2 130
Trade and other receivables 3 763 3 371
Assets classified as held-for-sale 107 -
Cash and cash equivalents 2 108 2 116
Total assets 13 581 10 979
Equity and liabilities
Total equity 6 300 5 346
Non-current liabilities 1 346 1 047
Loans 1 056 784
Empowerment funding obligation 101 156
Provisions 25 24
Deferred taxation 164 83
Current liabilities 5 935 4 586
Loans 404 213
Empowerment funding obligation 11 16
Bank overdraft 928 33
Trade and other payables 4 138 3 903
Provisions 160 81
Liabilities classified as held-for-sale 28 -
Taxation payable 266 340
Total equity and liabilities 13 581 10 979
Net asset value per share (cents) 1 550 1 431
Abridged cash flow statement
2009 2008
R millions (Audited) (Audited)
Cash flows from operating activities 646 1 304
Cash generated by operations 2 278 2 224
Net finance (expense)/income (89) 116
Changes in working capital (232) (4)
Taxation paid (666) (537)
Cash available from operating activities 1 291 1 799
Dividends paid, including to minority (645) (495)
shareholders
Cash flows applied in investing activities (1 904) (1 532)
Cash flows from financing activities 345 704
Net (decrease)/increase in cash and cash (913) 476
equivalents
Net cash and cash equivalents at the 2 083 1 589
beginning of the year
Translation differences on foreign cash 10 18
Net cash and cash equivalents at the end of 1 180 2 083
the year
Segmental analysis
% 2009 2008
R millions change (Audited) % (Audited) %
Revenue
Telecommunications 10 8 205 33 7 462 35
Power electronics and 22 9 920 40 8 159 38
multimedia
Information technology 15 6 796 27 5 917 27
Corporate, financial (153) - (107) -
services and
eliminations
16 24 768 100 21 431 100
Operating profit*
Telecommunications 32 847 47 641 33
Power electronics and (42) 516 29 887 46
multimedia
Information technology 5 438 24 418 22
Corporate, financial (2) - (9) (1)
services and
eliminations
(7) 1 799 100 1 937 100
* Operating profit is stated before capital items and after amortisation of
intangibles arising on business combinations.
Operational contribution
% 2009 2008
R millions change (Audited) % (Audited) %
Revenue
Altech 11 9 164 37 8 242 38
Bytes 16 6 038 24 5 186 24
Powertech 20 9 593 39 8 016 38
Corporate, financial services (27) - (13) -
and eliminations
16 24 768 100 21 431 100
Operating profit*
Altech 32 874 49 664 34
Bytes (4) 351 19 365 19
Powertech (38) 570 32 914 47
Corporate, financial services 4 - (6) -
and eliminations
(7) 1 799 100 1 937 100
% held % held
at at
Attribut- 28 29
able February February
headline 2009 2008
earnings
Altech 62.0 62.0 19 342 40 288 27
Bytes 100.0 100.0 22 207 24 170 16
Powertech 100.0 100.0 (54) 266 31 577 54
Corporate, 100.0 100.0 46 5 37 3
financial
services and
eliminations
(20) 861 100 1 072 100
* Operating profit is stated before capital items and after amortisation of
intangibles arising on business combinations.
Supplementary information
2009 2008
R millions (Audited) (Audited)
Borrowings 1 572 1 169
- interest bearing 1 434 983
- non-interest bearing 26 14
- BBBEE funding obligation 112 172
Depreciation 298 232
Amortisation 140 40
Net foreign exchange gains 53 64
Capital expenditure 1 008 479
Contingent liabilities - -
Capital commitments 515 111
Lease commitments 609 625
Payable within the next 12 months: 171 171
- property 123 117
- plant, equipment and vehicles 48 54
Payable thereafter: 438 454
- property 380 428
- plant, equipment and vehicles 58 26
Unlisted investments (including
Associates)
- Carrying amount 278 314
- Directors` valuation 279 317
Weighted average number of shares 314 286
(millions)
- Ordinary shares 102 95
- Participating preference shares 212 191
Diluted average number of shares 316 289
(millions)
Shares in issue at end of period 314 312
(millions)
- Ordinary shares 102 102
- Participating preference shares 212 210
Ratios
EBITA 1 939 1 977
EBITDA 2 237 2 209
EBITDA margin (%) 9.0 10.3
ROCE (%) 22.9 29.7
ROE (%) 18.3 24.7
ROA (%) 16.6 23.2
RONA (%) 23.0 30.3
Borrowings ratio (%) 25.0 21.9
Current ratio 1.4:1 1.7:1
Acid test ratio 1:1 1.2:1
Abridged statement of changes in equity
R millions Attributable to Altron equity
holders
Share Treasury
capital
and premium shares Reserves
Balance at 28 February 2007 835 (299) 46
(Audited)
Recognised income and expense
Profit for the year - - -
Foreign currency translation - - 106
differences
Release of translation - - 4
differences on disposal
Cash flow hedging reserve - - (1)
Fair value adjustments on - - 8
available-for-sale investments
Transactions with shareholders
Issue of share capital 1 375 - -
Dividends - - -
Share-based payments - - 23
Change in shareholding of - - (1 262)
subsidiaries
Balance at 29 February 2008 2 210 (299) (1 076)
(Audited)
Recognised income and expense
Profit for the year - - -
Foreign currency translation - - 33
differences
Fair value adjustment of joint - - 54
venture on step acquisition
Statutory reserves of foreign - - 59
subsidiaries
Cash flow hedging reserve - - (14)
Fair value adjustments on - - (18)
available-for-sale investments
Transactions with shareholders
Issue of share capital 18 - -
Dividends - - -
Share-based payments - - 14
Subscription by minority - - -
shareholders on acquisition of
subsidiary
Minority interest on - - -
acquisition of subsidiaries
Net subscription for 22% - - -
minority in Bytes SA
Change in shareholding of - - (28)
subsidiaries
Balance at 28 February 2009 2 228 (299) (976)
(Audited)
R millions Attributable to Altron
equity holders
Retained
earnings Total
Balance at 28 February 2007 (Audited) 2 946 3 528
Recognised income and expense
Profit for the year 1 019 1 019
Foreign currency translation - 106
differences
Release of translation differences on - 4
disposal
Cash flow hedging reserve - (1)
Fair value adjustments on available-for- - 8
sale investments
Transactions with shareholders
Issue of share capital - 1 375
Dividends (331) (331)
Share-based payments - 23
Change in shareholding of subsidiaries - (1 262)
Balance at 29 February 2008 (Audited) 3 634 4 469
Recognised income and expense
Profit for the year 835 835
Foreign currency translation - 33
differences
Fair value adjustment of joint venture - 54
on step acquisition
Statutory reserves of foreign (59) -
subsidiaries
Cash flow hedging reserve - (14)
Fair value adjustments on available-for- - (18)
sale investments
Transactions with shareholders
Issue of share capital - 18
Dividends (490) (490)
Share-based payments - 14
Subscription by minority shareholders - -
on acquisition of subsidiary
Minority interest on acquisition of - -
subsidiaries
Net subscription for 22% minority in - -
Bytes SA
Change in shareholding of subsidiaries - (28)
Balance at 28 February 2009 (Audited) 3 920 4 873
R millions
Minority Total
interest equity
Balance at 28 February 2007 (Audited) 1 218 4 746
Recognised income and expense
Profit for the year 300 1 319
Foreign currency translation 27 133
differences
Release of translation differences on 3 7
disposal
Cash flow hedging reserve - (1)
Fair value adjustments on available-for- - 8
sale investments
Transactions with shareholders
Issue of share capital - 1 375
Dividends (164) (495)
Share-based payments 5 28
Change in shareholding of subsidiaries (512) (1 774)
Balance at 29 February 2008 (Audited) 877 5 346
Recognised income and expense
Profit for the year 314 1 149
Foreign currency translation 5 38
differences
Fair value adjustment of joint venture - 54
on step acquisition
Statutory reserves of foreign - -
subsidiaries
Cash flow hedging reserve (1) (15)
Fair value adjustments on available-for- - (18)
sale investments
Transactions with shareholders
Issue of share capital 1 19
Dividends (155) (645)
Share-based payments 3 17
Subscription by minority shareholders 79 79
on acquisition of subsidiary
Minority interest on acquisition of 142 142
subsidiaries
Net subscription for 22% minority in 155 155
Bytes SA
Change in shareholding of subsidiaries 7 (21)
Balance at 28 February 2009 (Audited) 1 427 6 300
Message to shareholders
The Altron financial results for the year ended 28 February 2009 closely reflect
the board`s expected financial performance as outlined in the trading statement
issued in February this year.
Despite challenging market conditions, revenue increased by 16% to R24.8 billion
on the back of strong sales from all three of our subsidiary companies - Altech,
Bytes and Powertech. However, primarily as a result of the downturn in the
building and construction industry and the unprecedented decrease in the copper
price during the latter part of the year under review, margins and volumes in
our energy cables business within Powertech were impacted resulting in the
group`s EBITDA increasing by 1% from R2.21 billion in the prior year to R2.24
billion. After taking into account the additional shares in issue resulting from
the purchase of the Bytes minorities in January 2008 and finance charges
relating to recent acquisitions, Altron reported an 18% reduction in adjusted
diluted headline earnings per share. The adjustment to earnings excludes the
effect of the amortisation of intangibles arising out of recent acquisitions,
since management considers this to be the measure most representative of the
group`s operational performance. The group maintained its dividend cover at 2.5
times based on adjusted headline earnings per share, declaring a dividend of 119
cents per share.
Business environment
The recent global credit environment has negatively impacted the economic
situation resulting in a significant decline of stock market valuations and
commodity prices, worldwide recessionary conditions, and a global liquidity
crisis.
The fall in commodity prices has negatively affected mining companies` spend,
primarily through the deferral of projects, while the global recession has led
to tougher operating conditions in the Iberian and UK markets which we serve. At
the same time, the financial crisis affected local financial institutions` spend
on IT related products which resulted in large projects being either deferred or
cancelled.
Local economic conditions were characterised by high inflation and interest
rates which impacted on market sentiment and consumer confidence. The result of
the interest rate cycle is reflected in declining property prices, a
significantly lower level of residential building plans being passed and a
consequent slow-down in the building and construction industry. The easing of
interest rates in recent months is encouraging, but is likely to have a positive
impact on market conditions only in the latter part of the current financial
year.
Financial overview
The Altron group`s results for the year ended 28 February 2009 reflected an
increase in revenue of 16% from R21.4 billion in the prior year to R24.8
billion. EBITDA increased by only 1% from R2.21 billion to R2.24 billion with
the EBITDA margin declining from 10.3% in the prior year to 9.0%. This decline
was predominantly due to the challenges faced by the energy cables business
within Powertech, which resulted in Powertech`s EBITDA margin declining from
12.8% to a disappointing 7.7%. The remainder of the Powertech operations
produced satisfactory results showing growth on the prior year. Bytes also
experienced a drop in EBITDA margin, as its local operations faced margin
pressure. Bytes generates a substantial portion of its revenue from the
financial and retail sectors, both of which are pressurising its suppliers,
thereby reducing margins in a very competitive space. However, Altech
significantly enhanced its EBITDA margins from 9.2% to 11.6% as a result of the
high profitability in the newly acquired East African operations, as well as
good margin performances from its larger operations, namely Altech Netstar and
Altech Autopage Cellular.
The group`s investment in working capital increased by R232 million, primarily
as a result of the higher activity levels. Our overall net working capital days
moved out from 17 to 21 days. Our cash position improved strongly in the second
half to R1.2 billion, although this is some R913 million down on last year as a
result of the R1.9 billion invested into the future growth of the group through
acquisitions and capital expenditure. Group balance sheet ratios declined as a
result of the lower profitability of the group, with return on equity at 18.3%
and return on capital employed at 22.9%.
Subsidiary review
Altech delivered a strong set of results for the financial year ended 28
February 2009, with adjusted headline earnings per share growing by 15% to 592
cents per share. Revenue increased by 11% to R9.2 billion from R8.2 billion in
the prior year. Operating profit improved by 32% to R874 million with a
significantly improved operating margin of 9.5%. Net asset value per share
increased by 15% from 2 026 cents to 2 328 cents while return on shareholders`
equity remained strong at 24%. A dividend of 323 cents per share was declared,
representing an increase of 12%.
Annuity revenue increased to 79% of the total revenue in 2009 and foreign and
export revenue increased by 56% from R1 billion in 2008 to R1.6 billion. Altech
concluded the year with a strong balance sheet reflecting net cash of R911
million, notwithstanding substantial acquisition and investing activity
totalling in excess of R1 billion.
Altech Autopage Cellular produced higher than expected margin levels and good
revenue growth. Although consumer demand is still evident at Altech Autopage
Cellular, it is showing signs of maturation and focus has been directed towards
the growth of the data side of the business where subscribers have increased to
74,000 out of a total base that now exceeds one million subscribers.
Altech Netstar Fleet Management and ComTech are performing well ahead of
expectations both in terms of revenue growth and profitability. Although Altech
Netstar Stolen Vehicle Recovery (SVR) has been impacted by the dramatic decline
in new car sales and the potential credit risk of its consumer customer base,
the SVR business is performing satisfactorily under tough conditions and showed
growth on the prior year.
Altech UEC experienced revenue growth, however margins came under pressure,
predominantly due to a change in the mix towards lower margin products.
Significant progress has been made in penetrating new markets, particularly
India.
Focus on the further development of broadband technologies and the adoption
thereof by consumers, will open up new opportunities for Altech. Broadband
opportunities are being reviewed by Altech to enhance its convergence efforts.
The investment by Altech Stream East Africa in the Sameer ICT businesses in East
Africa is performing above expectations with good profit margins enhancing
Altech`s overall profitability and offering a number of exciting opportunities
for future growth. Among others, Altech is looking at investment opportunities
in international undersea bandwidth cables that will service the East Coast of
Africa and will substantially reduce the cost of international connectivity of
businesses in this region.
Bytes` results came under pressure, particularly due to the impact of the
international financial crisis on its financial services and retail customers.
Although revenue grew by 16% to R6 billion, EBITDA showed growth of only 3% to
R427 million reflecting the current pricing environment in the IT market.
Adjusted diluted headline earnings were in line with those reported last year,
however, at headline earnings and attributable profit level the contribution
from Bytes SA to Altron has reduced following the exercise of Kagiso`s option to
acquire a further 22% equity interest in that business with effect from 1 July
2008.
Bytes Document Solutions (BDS) performed particularly well over the past year
reflecting not only increased machine placements, but also the improving level
of added value document services which now constitutes the major part of its
business. The acquisition of NOR Paper, which has produced excellent results,
augurs well for the coming year.
Despite the impact of delayed projects in the financial sector on a number of
Bytes` local businesses, Bytes Managed Services, Outsource Services and Health
Services all delivered good results. The pressure was most acutely felt in the
Systems Integration and Specialised Solutions divisions. The newly acquired
Intelleca business had a difficult year due to similar factors, producing a
break-even performance which occasioned a R50 million impairment of the goodwill
in this business. As the economy improves, we anticipate that this investment
will meet expectations.
In the UK, the Bytes software business performed exceptionally well, despite the
tough economic conditions in that market. The Xerox businesses in the UK under
performed due to both the deterioration of the UK economy and internal
management issues which have now been rectified. It has also been negatively
impacted by the credit crisis, which has limited many of their customers`
ability to finance hardware. We are currently consolidating the back office
functions of the various Xerox businesses to optimise cost efficiency.
Powertech produced disappointing results, predominantly due to the challenges
experienced by its major contributor, Aberdare Cables. While most of the
remaining Powertech businesses continued to perform well, the impact on Aberdare
Cables of the significant slow down in the building and construction industry as
a whole, coupled with the sudden fall in copper prices during the second half
led to a significant drop in EBITDA at Powertech. Revenue grew strongly by 20%
to R9.6 billion from R8 billion in the prior year. However, EBITDA declined by
28% from R1 029 million to R738 million. EBITDA margins reduced to 7.7% from the
12.8% achieved last year, partly as a result of once-off non-recurring charges
relating to inventory write downs due to the dramatic fall in copper prices, and
restructuring costs.
Although Aberdare Cables experienced a strong first half of the year, the fall
in demand that we anticipated in our interim outlook statement was more severe
than expected. In effect, Aberdare Cables` energy cables business was struck by
a confluence of three negative factors. Firstly, there was a significant
contraction in the building and construction industry, which comprises
approximately 50% of Aberdare Cables` revenue. Secondly, there was a destocking
of the electrical wholesaler distribution channel, which further restricted
demand. Thirdly, the unprecedented fall in the copper price from around $9,000
per ton to $3,000 per ton compounded the first two factors as well as leading to
inventory write downs on our stock holdings. Each of these factors negatively
impacted gross margins, but the business also suffered from lower production
volumes, resulting in factory under recoveries, negatively impacting the
operating margins. This resulted in Aberdare Cables taking drastic action in
order to right size the business for the new demand environment. These included
a reduction in production time, extended shut downs over holiday periods and
rationalisation of the operations. Our focus over the last six months has been
on reducing working capital and controlling costs and we believe that we are now
well positioned to take advantage of an upturn in demand and business
opportunities as they arise.
Powertech Transformers and Desta Power Matla performed above expectations.
Government`s focus on infrastructure spend to create GDP growth and employment
as well as deliver on election promises, continues to create an environment
conducive to demand for Powertech products. This is expected to remain robust in
the medium term. The knock-on effect of job creation should contribute to
consumer demand, though this will be tempered by the current economic
environment.
Powertech Batteries experienced an exceptional year with good revenue growth and
enhanced profitability following recent capital expenditure. It continues to
benefit from the expanded pool of vehicles created by the previous years`
increased car sales. Battery Technologies has established a presence in both
Nigeria and Tanzania and has signed a framework agreement with a major telecoms
operator for standby power solutions across Africa.
Powertech IST continues to perform broadly in line with expectations, with over-
performance in the Industrial, Data and Energy divisions being offset by a
disappointing performance from the Telecoms division. This has resulted in a R40
million goodwill impairment in respect of the IST Telecoms division although if
the goodwill impairment assessment had been done at an IST group level, there
would have been no impairment required. Powertech Industrial Group improved its
performance and benefitted from a large standby power project recently completed
for a major mining industry customer.
Corporate activity
The following significant transactions and corporate developments have taken
place:
During the year under review:
- The acquisition by Altech of a 51% controlling interest in certain digital
network operations of the Sameer ICT group in Kenya for a maximum consideration
of US$75 million, effective 1 March 2008;
- The acquisition by Powertech of the 50% equity interest it did not already own
in ABB Powertech Transformers from ABB for R320 million, effective 1 April 2008;
- The disposal by Powertech of Yelland Control to Omron Europe B.V. for R75
million, effective 1 April 2008;
- The acquisition by Bytes of Intelleca for up to R120 million, effective 1
April 2008;
- The acquisition by Bytes of NOR Paper for up to R164 million, effective 1 July
2008; and
- The sale to Kagiso of a further 22% equity interest in Bytes SA for an amount
of R198 million, effective 1 July 2008.
Post year end:
- The acquisition by Altech of Fleetcall, effective 1 March 2009 for R40 million
which could increase to a maximum of R75 million depending on the achievement of
future profit targets;
- The disposal by Altech of Altech NamITech`s South African operations to
Gemalto for approximately R79 million, with an effective date of 1 April 2009;
and
- The acquisition by Altech of Technology Concepts for an amount of R7.5 million
which could increase to a maximum of R45 million subject to certain earn outs
being achieved.
Outlook
The challenging economic environment is expected to continue over the short to
medium term as market confidence remains weak and uncertainty continues. These
times call for a period of consolidation, focus on cash flow generation, strict
working capital management as well as internal cost efficiencies. Various
opportunities for growth in East Africa, coupled with continued demand for
infrastructure, and our strong base of annuity income is expected to drive an
improved performance in the year ahead. Conditions for the first half of the new
financial year will be challenging, especially given the high base of the
comparative period in the prior year. However, the board is confident that the
Altron group is well positioned to take advantage of any improvement in the
current economic environment given the remedial actions that have been put in
place.
Acknowledgements
The board would like to express its appreciation to all of its customers, staff,
business partners, shareholders and other stakeholders for their support during
an extremely difficult period and for their continued belief in the future
sustainability of the group and its strong underlying businesses.
Directorate
Shareholders are referred to the SENS announcement published by Altron on 4
November 2008 advising that Ms Dawn Mokhobo and Mr Norman Adami had been
appointed as independent non-executive directors to the board of the company,
with effect from 3 November 2008.
Dividend
The following dividends are hereby declared for the year ended 28 February 2009:
- ordinary dividend No. 61 of 119 cents per share (2008: 156 cents)
- participating preference dividend No. 15 of 119 cents per share (2008: 156
cents).
The above dividends are payable as follows:
Last day of trading to qualify for and Friday, 26 June 2009
participate in the dividend (cum dividend)
Trading ex dividend commences Monday, 29 June 2009
Record date Friday, 3 July 2009
Dividend payment date (electronic and Monday, 6 July 2009
certificated)
Dividend cheques in payment of these dividends to certificated shareholders will
be posted to shareholders on or about Monday, 6 July 2009. Electronic payment to
certificated shareholders will be undertaken simultaneously.
Shareholders who have dematerialised their share certificates will have their
accounts at their central securities depository participant or broker credited
on Monday, 6 July 2009.
In the case of certificated shareholders, notice of any change of address of
shareholders must reach the transfer secretaries, Computershare Investor
Services (Pty) Limited, on or before Friday, 26 June 2009. Share certificates
may not be dematerialised or rematerialised from Monday, 29 June 2009 to Friday,
3 July 2009, both days inclusive.
Annual General Meeting
Altron`s 63rd annual general meeting will be held in the Altron Boardroom, 5
Winchester Road, Parktown, Johannesburg on Tuesday, 14 July 2009 at 09:30.
Further details on the company`s annual general meeting will be contained in
Altron`s annual report to be posted to shareholders on or about 31 May 2009.
On behalf of the board
Dr Bill Venter Robert Venter Alex Smith
Chairman Chief Executive Chief Financial Officer
4 May 2009
Board of directors
Independent non-executive:
Mr NJ Adami, Mr MJ Leeming, Dr PM Maduna, Ms BJM Masekela
Ms DNM Mokhobo, Mr JRD Modise, Mr PL Wilmot
Non-executive:
Dr WP Venter (Chairman), Mr MC Berzack
Executive:
Mr RE Venter (Chief Executive), Mr N Claussen, Mr PMO Curle*
Mr PD Redshaw*, Dr HA Serebro, Mr AMR Smith*, Mr CG Venter
* British
Secretaries:
Altron Management Services (Pty) Limited
AG Johnston (Group Company Secretary)
Sponsor:
Investec Bank
The preliminary financial results are also available on the internet at
www.altron.com
Date: 05/05/2009 08:00:08 Produced by the JSE SENS Department.
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