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ALT
ALT
ALT - Allied Technologies - Unaudited Consolidated Interim Financial Results
For The Six Months Ended 31 August 2009
Allied Technologies Limited
(Incorporated in the Republic of South Africa)
(Registration number 1946/020415/06)
Share code: ALT
ISIN: ZAE000015251
UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 31 August 2009
- the power of technology3
- telecommunications + multi-media + information technology
HIGHLIGHTS
* Revenue increases
* Operating margin up to 10%
* Operating profit up by 17%
* Adjusted headline earnings per share up by 13%
* Balance sheet remains strong
* Significant growth in East Africa
Condensed consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2009 2008 2009
Figures in R Change (Unaudited) (Unaudited) (Audited)
million
Revenue 4 4 732 4 533 9 164
Operating profit 17 479 409 874
before capital
items
Capital items 2 1 (2)
(Note 1)
Results from 481 410 872
operating
activities
Finance income 14 24 68
Finance costs (21) (21) (70)
Profit before 15 474 413 870
taxation
Taxation (120) (102) (226)
STC (32) (28) (28)
Profit for the 14 322 283 616
period
Other comprehensive
income
Foreign currency (294) 59 (49)
translation
differences for
foreign operations
Effective portion 2 (4) -
of changes in fair
value of cash flow
hedges
Other comprehensive (292) 55 (49)
income for the
period, net of
income tax
Total comprehensive 30 338 567
income for the
period
Profit attributable
to:
Non-controlling 38 30 67
interest
Owners of the 284 253 549
Company
Profit for the 322 283 616
period
Total comprehensive
income attributable
to:
Non-controlling 4 42 47
interest
Owners of the 26 296 520
Company
Total comprehensive 30 338 567
income for the
period
Basic earnings per 12 294 262 569
share (cents)
Diluted basic 13 283 252 545
earnings per share
(cents)
Notes
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2009 2008 2009
Figures in R Change (Unaudited) (Unaudited) (Audited)
million
Headline earnings 12 292 261 571
per share (cents)
Diluted headline 12 281 251 547
earnings per share
(cents)
Adjusted headline 13 304 269 592
earnings per share
(cents)
Diluted adjusted 13 293 259 567
headline earnings
per share (cents)
Basis of preparation
The unaudited interim financial results have been prepared in accordance with
International Financial Reporting Standards (IFRS), and in terms of IAS 34.
The accounting policies used in the preparation of these interim results are
consistent with those used in the annual financial statements for the year
ended 28 February 2009.
Figures in R million
1. Capital items
Net profit/(loss) on 2 1 (2)
disposal of property, plant
and equipment
2. Reconciliation between
earnings and headline
earnings
Attributable earnings 284 253 549
Capital items - gross (2) (1) 2
Headline earnings 282 252 551
Dilutive earnings (3) (2) (6)
attributable to BBBEE
minorities in a subsidiary
Fully diluted headline 279 250 545
earnings
3. Reconciliation between
earnings and and fully
diluted earnings
Attributable earnings 284 253 549
Additional earnings (3) (2) (6)
attributable to BBBEE
minorities in a subsidiary
Fully diluted earnings 281 251 543
4. Reconciliation between
earnings and adjusted
headline earnings
Attributable earnings 284 253 549
Capital items - gross (2) (1) 2
Amortisation of intangible 14 9 25
assets arising on business
combination
Tax effect of adjustments (2) (1) (5)
Adjusted headline earnings 294 260 571
Additional earnings (3) (2) (6)
attributable to BBBEE
minorities in a subsidiary
Fully adjusted diluted 291 258 565
headline earnings
5. Dividends
It is group policy for dividends to be declared after the financial year.
Balance sheets
31 August 31 August 28 February
2009 2008 2009
Figures in R million (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 2 147 1 694 2 071
Property, plant and 940 628 837
equipment
Intangible assets, 1 123 962 1 122
including goodwill
Deferred taxation 84 104 112
Current assets 2 114 2 253 2 885
Inventories 410 402 416
Trade and other 1 244 1 256 1 248
receivables, including
derivatives
Cash and cash equivalents 460 595 1 221
Assets classified as held- - - 107
for-sale
TOTAL ASSETS 4 261 3 947 5 063
Equity and liabilities
Total equity 2 279 2 103 2 547
Altech equity holders 1 945 1 905 2 249
Minority interest 334 198 298
Non-current liabilities 201 132 188
Interest-bearing loans 150 107 115
Deferred taxation 51 25 73
Current liabilities 1 781 1 712 2 300
Trade and other payables, 1 620 1 573 1 827
including derivatives
Warranty provisions 14 18 18
Bank overdraft - - 310
Taxation payable 147 121 145
Liability classified as - - 28
held-for-sale
TOTAL EQUITY AND 4 261 3 947 5 063
LIABILITIES
Abridged cash flow statements
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2009 2008 2009
Figures in R million (Unaudited) (Unaudited) (Audited)
Cash flows - operating (115) (197) 301
activities
Cash generated by 575 444 1 050
operations
Changes in working capital (204) (246) (251)
Net financial (7) 3 (2)
(expense)/income
Taxation paid (153) (109) (207)
Cash available - operating 211 92 590
activities
Dividends paid
- to Altech equity holders (313) (278) (278)
- to minority interest (13) (11) (11)
Cash flows - utilised in (351) (747) (1 026)
investing activities
Cash flows from/(applied 15 (52) 45
in) financing activities
Decrease in net cash and (451) (996) (680)
cash equivalents
- at beginning of period 911 1 591 1 591
- at end of period 460 595 911
Supplementary information
31 August 31 August 28 February
2009 2008 2009
Figures in R million (Unaudited) (Unaudited) (Audited)
Depreciation and 97 77 191
amortisation
Capital expenditure 272 139 385
(excluding SEACOM see note
Post-Balance sheet events)
Capital commitments 432 2 280
Lease commitments 200 176 214
Payable within the next 12 85 72 78
months:
- property 51 42 43
- plant, equipment and 34 30 35
vehicles
Payable thereafter: 115 104 136
- property 85 102 98
- plant, equipment and 30 2 38
vehicles
Net foreign exchange (36) 16 (6)
(losses)/gains
Weighted average number of 96,725 96,495 96,530
shares (million)
Diluted average number of 99,171 99,763 99,572
shares (million)
Shares in issue at end of 96,753 96,497 96,610
period (million)
Ratios
EBITDA 578 487 1 063
Operating margin 10,1% 9,0% 9,5%
ROCE 41,2%* 39,4%* 34,2%
ROE 29,2%* 26,4%* 24,3%
ROA 36,8%* 36,2%* 33,5%
Current ratio 1,2 1,3 1,3
Acid test ratio 1,0 1,1 1,1
NAV (cps) 2 008 1 974 2 328
* Annualised
Condensed consolidated statement of changes in equity
Attributable to Altech equity holders
Share capital Treasury Reserves Retained
Figures in R million and premium shares earnings
Balance at 29 3 (292) 73 2 171
February 2008
(audited)
Total comprehensive
income for the period
Profit for the period - - - 253
Other comprehensive
income
Foreign currency - - (29) -
translation
differences for
foreign operations
Total other - - (29) -
comprehensive income
Total comprehensive - - (29) 253
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Dividends to equity - - - (278)
holders
Share-based payment - - 4 -
transactions
Total contributions - - 4 (278)
by and distributions
to owners
Changes in ownership
interests in
subsidiaries
Capital subscription - - -
received from
minority shareholders
Minority interest on - - - -
acquisition of
subsidiaries
Total changes in - - 4 (278)
ownership interests
in subsidiaries
Total transactions - - 8 (556)
with owners
Balance at 31 August 3 (292) 48 2 146
2008 (unaudited)
Total comprehensive
income for the period
Profit for the period - - - 296
Other comprehensive
income
Foreign currency - - 47 -
translation
differences for
foreign operations
Effective portion of - - (4) -
changes in fair value
of cash flow hedges
Total other - - 43 -
comprehensive income
Total comprehensive - - 43 296
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Issue of share 4 - - -
capital
Share-based payment - - 1 -
transactions
Total contributions 4 - 1 -
by and distributions
to owners
Changes in ownership
interests in
subsidiaries
Minority interest on - - - -
acquisition of
subsidiaries
Total changes in - - - -
ownership interests
in subsidiaries
Total transactions 4 - 1 -
with owners
Balance at 28 7 (292) 92 2 442
February 2009
(audited)
Total comprehensive
income for the period
Profit for the period - - - 284
Other comprehensive
income
Foreign currency - - (260) -
translation
differences for
foreign operations
Effective portion of - - 2 -
changes in fair value
of cash flow hedges
Total other - - (258) -
comprehensive income
Total comprehensive - - (258) 284
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Issue of share 5 - - -
capital
Dividends to equity (313)
holders
Share-based payment - - 1
transactions
Total contributions 5 - 1 (313)
by and distributions
to owners
Changes in ownership
interests in
subsidiaries
Transactions with - - (23) -
minorities
Total changes in - - (23) -
ownership interests
in subsidiaries
Total transactions 5 - (22) (313)
with owners
Balance at 31 August 12 (292) (188) 2 413
2009 (unaudited)
Attributable to
Altech equity
holders
Non- Total
controlling
Figures in R million Total interest equity
Balance at 29 1 955 72 2 027
February 2008
(audited)
Total comprehensive
income for the period
Profit for the period 253 30 283
Other comprehensive
income
Foreign currency (29) (20) (49)
translation
differences for
foreign operations
Total other (29) (20) (49)
comprehensive income
Total comprehensive 224 10 234
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Dividends to equity (278) (11) (289)
holders
Share-based payment 4 - 4
transactions
Total contributions (274) (11) (285)
by and distributions
to owners
Changes in ownership
interests in
subsidiaries
Capital subscription - 79 79
received from
minority shareholders
Minority interest on - 48 48
acquisition of
subsidiaries
Total changes in (274) 127 127
ownership interests
in subsidiaries
Total transactions (548) 116 (158)
with owners
Balance at 31 August 1 905 198 2 103
2008 (unaudited)
Total comprehensive
income for the period
Profit for the period 296 37 333
Other comprehensive
income
Foreign currency 47 12 59
translation
differences for
foreign operations
Effective portion of (4) - (4)
changes in fair value
of cash flow hedges
Total other 43 12 55
comprehensive income
Total comprehensive 339 49 388
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Issue of share 4 4
capital
Share-based payment 1 1
transactions
Total contributions 5 - 5
by and distributions
to owners
Changes in ownership
interests in
subsidiaries
Minority interest on - 51 51
acquisition of
subsidiaries
Total changes in - 51 51
ownership interests
in subsidiaries
Total transactions 5 51 56
with owners
Balance at 28 2 249 298 2 547
February 2009
(audited)
Total comprehensive
income for the period
Profit for the period 284 38 322
Other comprehensive
income
Foreign currency (260) (34) (294)
translation
differences for
foreign operations
Effective portion of 2 - 2
changes in fair value
of cash flow hedges
Total other (258) (34) (292)
comprehensive income
Total comprehensive 26 4 30
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Issue of share 5 5
capital
Dividends to equity (313) (13) (326)
holders
Share-based payment 1 1
transactions
Total contributions (307) (13) (320)
by and distributions
to owners
Changes in ownership
interests in
subsidiaries
Transactions with (23) 45 22
minorities
Total changes in (23) 45 22
ownership interests
in subsidiaries
Total transactions (330) 32 (298)
with owners
Balance at 31 August 1 945 334 2 279
2009 (unaudited)
Segment analysis
The segment information has been prepared in accordance with IFRS 8 -
Operating Segments (IFRS 8) which defines the requirements for the disclosure
of financial information of an entity`s operating segments.
IFRS 8 replaces IAS14 - Segment Reporting. The standard requires segmentation
based on the group`s internal organisation and reporting of revenue and
operating income based upon internal accounting presentation.
The segment revenues, operating profit generated by and total assets of each
of the group`s reportable segments are summarised as follows:
Revenue
Six months to Six months to 12 months to
31 August 31 August 28 February
Figures in R 2009 2008 2009
million
Altech Autopage 2 796 2 573 5 264
Cellular
Altech UEC Group 597 696 1 324
Altech Netstar 434 410 829
Group
Kenya Data 215 131 334
Networks
Other Altech 728 773 1 539
Segments
Altech group 4 770 4 583 9 290
Corporate and (38) (50) (126)
Intersegment
eliminations
Altech group 4 732 4 533 9 164
Operating profit
Six months to Six months to 12 months to
31 August 31 August 28 February
Figures in R 2009 2008 2009
million
Altech Autopage 145 136 296
Cellular
Altech UEC Group 18 33 33
Altech Netstar 132 116 241
Group
Kenya Data 97 52 158
Networks
Other Altech 102 67 152
Segments
Altech group 494 403 880
Corporate and (15) 6 (6,0)
Intersegment
eliminations
Altech group 479 409 874
Revenues/operating profit/total assets from segments below the quantitative
thresholds are attributable to smaller operating segments of the Altech group.
None of those segments has met any of the quantitative thresholds for
determining reportable segments for the reportable periods.
Quantitative thresholds have been calculated based on totals for the Altech
group.
Six Six months 12 months
months to to to
31 August 31 August 28 February
Figures in R million 2009 2008 2009
Segment operating profit can
be reconciled to
Group profit before taxation
as follows:
Segment operating profit 493 418 899
Reconciling items:
Amortisation of intangibles (14) (9) (25)
raised on acquisitions
Group operating profit 479 409 874
Message to our shareholders
The directors of Allied Technologies Limited (Altech) are pleased to report
that the group has recorded another successful half-year for the six months
ended 31 August 2009, with revenue of R4,7 billion, operating profit up 17% to
R479 million, and adjusted headline earnings per share up 13% to 304 cents.
The strong balance sheet underpins the group`s expansion strategy, with
notable progress in several areas during the half-year, particularly in
Africa, as detailed under group highlights.
GROUP HIGHLIGHTS
CORPORATE FINANCE
Salient transactions and arrangements involving the Altech group during the
six month period are as follows:
Investments into East Africa:
Altech`s current major priority growth area is within the East African
telecommunications sector. Significant focus has been given to Altech`s East
African subsidiaries, particularly in terms of capital injection for the roll-
out of additional fibre and obtaining access to undersea cable bandwidth.
Altech`s subsidiary Kenya Data Networks Limited (KDN) is the leading data
network infrastructure operator in Kenya, with a nationwide fibre optic
network. It is extending its coverage to neighbouring landlocked states, such
as Uganda and Rwanda, and it is ideally positioned to link the new undersea
cables landing at Mombasa, Kenya, to these and other states in the interior of
East and Central Africa.
Accordingly, KDN has an extensive roll-out plan over the next few years in
order to capitalise on the explosive growth opportunity offered by the
expansion of data carrier demand in the region.
To this end, Altech has concluded the following deals:
* Altech has increased its economic stake in KDN by investing a further
USD39,5 million into the company. The capital injection will be used to roll
out the KDN network, further establishing KDN as the key provider of broadband
in East Africa. The additional equity shares in KDN to be subscribed for by
Altech will be non-voting, thus preserving the strong minority shareholder
local influence in KDN through our strategic partners, the Sameer Group.
* In addition, Altech has acquired a further 1,8% (voting) equity holding
share in KDN from a KDN minority shareholder, for approximately USD3,3
million. 50% of the shares will be paid for in cash over two years on the
achievement of profit targets. The remaining 50% will be paid in Altech shares
which are subject to a phased release process over three years. The
combination of this transaction and the equity injection referred to above has
increased Altech`s economic interest in KDN from 51% to 60,8%.
* Altech has acquired significant bandwidth capacity on the SEACOM undersea
cable system. The agreement sees Altech procuring two STM-16s from SEACOM
(equivalent to 5 Gbps), with the option to upgrade, within three years, to
double this capacity, to an STM-64. SEACOM has, in turn, purchased in excess
of USD20 million of capacity on the East Africa terrestrial backbone network
owned by KDN.
* Altech, through its subsidiary KDN, acquired an 8,5 % overall (10% of Kenya
share) stake in The East Africa Marine System Limited (TEAMS) for an amount of
USD11 million. This shareholding gives KDN 10,2 Gbps of bandwidth on the TEAMS
undersea cable.
* Altech has established an international office in Mauritius to hold, co-
ordinate and manage certain of its international assets. This is due to the
increasing importance of the Altech group`s international activities, in
particular its African activities.
A further Altech deal concluded in the last six months was:
* Altech acquired 50% plus one share in NuPayment Solutions (Pty) Limited
(NuPay) with effect from 1 June 2009. NuPay is a payments processing company
focused on the automation of electronic debit orders, providing authenticated
and non-authenticated managed transactions within the card-based and
electronic funds transfer environments. The purchase consideration was R53,5
million in cash.
The following proposed transactions referred to in the 2009 annual report have
been completed during the period under review:
* Effective 1 March 2009, Altech acquired 100% of the issued capital in
Fleetcall (Pty) Limited (Fleetcall). The total maximum purchase price was R75
million, of which R35 million is held in escrow to be released to the vendors
on Fleetcall achieving profit warranties, with a reduced payout if these
warranties are not met.
* Altech acquired, through its Altech Netstar subsidiary the Netstar
franchisees` businesses in Nelspruit (effective 1 April 2009) and Polokwane
(effective 1 May 2009), as going concerns, for an aggregate maximum purchase
consideration of approximately R7,8 million and R15,9 million, respectively.
* Effective 1 April 2009, Altech disposed of the Altech NamiTech South Africa
and Altech Cardtronics businesses to Gemalto NV for a net consideration of
R82,2 million (an increase of R3,7 million on the previously reported amount,
based on closing audited adjustments). These businesses comprised all
activities relating to the commercialisation, manufacturing and
personalisation of secure and non-secure, chip and chipless, cards for the
telecommunications, financial services, government, utility, security, and
retail markets; recharge vouchers as well as related packaging and fulfillment
services.
* Effective 1 March 2009, Altech acquired all the issued share capital of
Lateral Technology Concepts (Pty) Limited, for a maximum total consideration
of R45 million. R7,5 million was paid upfront and R37,5 million is held in
escrow to be released to the vendors on achieving various profit warranties,
with a reduced payout if these warranties are not met.
The following deal was concluded post the interim balance sheet date:
* In September 2009, Arrow Altech Distribution acquired 100% of the assets of
the business of Components and System Design cc (CSD), for a cash purchase
price of R2,2 million. CSD is a value-added distributor of electronic
components, with in-depth expertise in the development of embedded
microcontroller/processors and radio frequency designs.
TELECOMMUNICATIONS
Altech Autopage Cellular remains the largest independent service provider in
South Africa in a telecommunications market that continues to evolve. During
the period, the company performed well in the current market conditions and
met expectations.
Altech Autopage Cellular connected 105 376 new contract subscribers during the
first six months of the year, taking its total post-paid subscriber base to
850 433. The pre-paid subscriber base decreased on a net basis by 56 000
subscribers due to the Networks removing non-calling subscribers from their
networks.
ARPU (Average Revenue Per User) has increased from February 2009, but has
reduced slightly year-on-year. The above has been mitigated by increased data
connections and growth in Value-Added Services.
Sales of electronic ATM pre-paid airtime showed continued growth during the
period.
As previously indicated, Autopage had entered into a formal agreement with
Neotel. To date Altech Autopage has shown good growth on behalf of Neotel,
which comprises approximately 10% of Neotel`s activated base.
Revenues from the sales of mobile data services through add-on data bundles
and cellular data connections continue to grow on a monthly basis. The active
broadband and data subscriber base is 82 500, a growth of 11% for the six
months.
Altech Autopage Cellular maintains a base of approximately 150 retail stores.
These stores are supported by an Autopage regional presence in Durban, Cape
Town, Port Elizabeth, Bloemfontein and by the premium service provider, Altech
Supercall. These channels are supplemented by third-party call centres and
distributors of data products.
Altech Autopage Cellular`s strategy to increase distribution through the
outbound call centre operations has resulted in a call centre distribution
channel of approximately 450 seats, connecting in excess of 50 417 connections
year-to-date.
Altech Netstar delivered strong trading results for the period, managing to
meet budget expectations despite the continued weak economic conditions and a
decline in motor vehicle sales.
Altech Netstar has remained at the forefront of technology, by successfully
launching the Cyber Sleuth Supreme, a new generation tracking device that
combines RF and GSM/GPRS/GPS technologies, during the period. This product
detects GSM jamming signals and automatically sends RF emergency signals,
making it the first of its kind.
Internationally, testing of the Netstar GSM platform in Malaysia has proved
successful, and roll-out is planned to start during the second half of the
year.
The Altech Netstar Group now manages a base in excess of 470 000 vehicles with
an estimated value of R6 billion.
Altech Netstar Fleet Solutions (AFNS) continues to deliver strong results. The
comprehensive array of products, at attractive pricing levels, has ensured
that ANFS continues to expand in a high growth market.
Altech Netstar Traffic is committed to launching its traffic information
product and solutions imminently. After extensive testing of the technical
data and systems, including the securing of key partnerships and alliances,
Altech Netstar Traffic has the ability to become a strong revenue and profit
driver for the Altech Netstar Group.
Altech Fleetcall performed exceptionally well under the period of review, as
the leading commercial ICASA-licensed Radio Trunking Network operator in South
Africa. The company provides comprehensive voice and data communication for
telemetry, dispatching, alarm monitoring, fleet management, security and many
more voice and data applications. Fleetcall has an impressive Blue Chip client
base, and was recently selected by Bombela to provide seamless and
instantaneous radio communication services for the Gautrain Rapid Rail Link.
Altech Alcom Matomo managed to meet the expected trading targets for the
period. The company`s leadership in the field of private radio communication
networks for both voice and data, and recognised expertise in SCADA, place it
in a strong position to ensure growth. The stable first half results are
expected to continue through until year end.
Altech Alcom Radio Distributors (ARD) remains the exclusive Motorola
distributor of two-way radio products for South and Southern Africa. Trading
profits for the first half of the year were in line with budget,
notwithstanding a slight reduction in sales revenue. ARD received the Motorola
"Biggest European Middle East and Africa (EMEA) Distributor" award, for the
fourth time. Notwithstanding the current economic downturn, results for the
first half reflect sales and profits in line with expectations.
Altech Stream East Africa (ASEA) The East African operations have shown
explosive growth for the period under review. The restructuring of the
Internet Service Provider (ISP) entities in light of the arrival of submarine
capacity into Converged Services Entities is nearing completion, while Kenya
Data Networks (KDN) has managed to connect submarine capacity from Mombasa
(Kenya) to Kampala (Uganda) and into Kigali (Rwanda) through its extensive 4
000 km terrestrial fibre network. Altech East Africa is seeing an explosion of
demand, and the group is on track to achieve its targets for the year.
The group has received a full Network Operator licence for the DRC, and is
currently examining several business cases to determine how to extract the
maximum value in line with the overall Converged Services Strategy.
Through KDN, Altech currently provides the majority of backhaul capacity for
the largest GSM operators in East Africa, namely Safaricom, Zain and Essar.
KDN`s interest in the TEAMS undersea cable and Altech`s SEACOM bandwidth
capacity acquisition, positions the Altech Group as arguably the second
largest bandwidth holder on the African Continent.
Altech Technology Concepts, the internet technology solutions and broad-based
IT company, has exceeded its profit targets for the first half of this
financial year. It has seen a dramatic growth in its business, spearheaded by
its flagship product TC Channel Bonding. This offering contributed
substantially to a 50% increase in Internet traffic and a 43% increase in
headcount over the last six months. This growth reflects the significant
uptake of new business and the increasing number of clients choosing bonded
ADSL Internet access over other more costly high-speed connectivity options.
The company will continue to grow its infrastructure and resource base, in
order to support the accelerated growth anticipated in the next six month
period.
MULTI-MEDIA AND ELECTRONICS
Altech UEC recorded satisfactory results in the review period, reflecting
continued strong demand for the advanced Set-Top Box (STB) decoder products
and associated software it develops and manufactures. Realising the benefits
from a period of intense R&D activity in the development of new products and
technologies, Altech UEC has recently concluded a number of new contracts with
Broadcasters in Eastern Europe, the Middle East and Africa, and is well
positioned to capitalise on the opportunities presented by the South African
Digital Terrestrial Television (DTT) migration programme. In order to meet
additional demand for its products, Altech UEC has invested in manufacturing
capacity in its Durban STB facility, as well as in additional manufacturing
capacity in the Far East
Altech Media Verge continues to contribute strongly and has developed a range
of value-added Commercial and e-Government products and services that will
leverage off the South African DTT platform. Of particular interest, is the
patented Media-kiosk concept that is a revolutionary solution to the problem
of the secure distribution of media in emerging markets. The Media-kiosk
allows for the download of any media, including video and audio files,
documentation and presentations, from a hard drive in the kiosk onto a
portable flash memory drive, for later replay in the home via a low cost set-
top box. The solution addresses the security concerns of media owners through
the application of secure Digital Rights Management and Content Management
tools. Both local and international media distribution companies have
expressed enthusiasm for the new market opportunities enabled by this locally-
developed UEC product.
Altech Global Decoder Logistics` operating entities in Australia and South
Africa, performed well during the period under review, delivering vital after
sales product support and logistic solutions.
Arrow Altech Distribution maintained its market leadership position and
delivered solid operational performance for the interim six months. Good
growth was achieved in the mid-tier market, with a forward order book at
acceptable levels.
Good working capital management, coupled with stringent cost control and
improved profit margins has resulted in a strong balance sheet and sustained
profitability. The company will continue its focus in offering value-added
supply chain services and customised solutions to its broad base of customers
in the Consumer, Automotive, Industrial, Contract Manufacturing,
Telecommunications, Security, Mining, Metering and Military market segments.
TECHNOLOGY
Altech Information Technologies
With effect from 1 January 2008, all the Information Technology businesses
within the Altech group were consolidated under one company, namely, Altech
Technology Holdings. This company comprises the following divisions: Altech
Isis, Altech West Africa and Altech Card Solutions.
Altech Isis` trading for the period has been satisfactory. The company is
experiencing a significant increase in the supply of systems integration
services to the telecommunications market. The addition of Kenya Data Networks
(KDN) as a customer during the trading period has contributed positively, and
will continue to do so in the following trading period. The company is making
new in-roads with its real-time converged "Customer Care and Billing" product,
supported by its systems integration and 24x7 support services.
Altech Card Solutions recorded an exceptional performance for the half-year.
The sale of EFTPOS terminals and software solutions has been better than
anticipated. The transaction switching business has experienced good growth,
due to the addition of new customers during the trading period. The switching
division is working on strategic projects that should make a substantial
contribution in the second half of the year. The E-security business division
performed better than expected, and is trading ahead of budget due to the
increased business development initiatives in South Africa, West and East
Africa.
Altech West Africa`s pre-paid cellular voucher manufacturing facility in
Lagos, Nigeria continues to maintain its position as the leading supplier of
secure paper-based products. Increased regional business development
initiatives have resulted in export orders for the trading period and further
growth is expected.
Altech NuPay, the transaction service provider and switching company, acquired
by Altech in June 2009, has managed to exceed its profit targets despite the
global economic downturn. Exciting projects are underway to launch new
reconciliation facilities to a broad market sector, as well as to individuals.
This will open up a whole new dimension to the business. This product will
also help other entities to assist their clients with better services and
reconciliation mechanisms.
BUSINESS COMBINATIONS
Acquisition of 100% interest in Fleetcall (Proprietary) Limited
The group acquired 100% of the issued share capital of Fleetcall (Proprietary)
Limited on 1 March 2009. The maximum purchase price is R75 million, payable in
cash. The purchase price is payable as follows:
- First tranche: R48 million
- Second tranche: R24 million
The second tranche will be paid in terms of an earn-out mechanism over one
year based on after tax profit targets for the year ending February 2010 being
achieved.
The acquired business contributed revenues of R28 million and net profit after
tax of R8 million to the group for the period 1 March 2009 - 31 August 2009.
These amounts have been calculated using the group`s accounting policies.
Fleetcall is the largest Trunked Two-way Radio Operator in South Africa.
The acquiree`s balance sheet at the date of acquisition is as follows:
Carrying amount
R`000
Property, plant and equipment 28
Inventories 1
Trade and other receivables 10
Trade and other payables (11)
Deferred tax (4)
Tax (3)
Cash and cash equivalents 4
Net identifiable assets and liabilities 25
Goodwill on acquisition 45
Total consideration 70
The amount reflected above as goodwill on acquisition will be finally
allocated between intangibles and goodwill prior to year-end.
Acquisition of 100% interest in Lateral Technology Concepts (Proprietary)
Limited (Technology Concepts)
The group acquired 100% of the issued share capital of Technology Concepts on
1 March 2009. The maximum purchase price is R45 million, payable in cash as
follows:
- Initial payment: R7,5 million
- The remaining maximum payments of R37,5 million will be paid in terms of an
earn out mechanism over two years based on after tax profit targets for the
year ending February 2010 and 2011 being achieved.
Technology Concepts is an established Information Technology business and
corporate Internet Service Provider.
The acquired business contributed revenues of R14 million and net profit after
tax of R2 million to the group for the period 1 March 2009 - 31 August 2009.
These amounts have been calculated using the group`s accounting policies.
The acquiree`s balance sheet at the date of acquisition is as follows:
Carrying amount
R`000
Property, plant and equipment 2
Inventories 1
Trade and other receivables 3
Trade and other payables (2)
Cash and cash equivalents -
Net identifiable assets and liabilities 4
Goodwill on acquisition 36
Total consideration 40
The amount reflected above as goodwill on acquisition will be finally
allocated between intangibles and goodwill prior to year-end.
Acquisition of 50% plus one share interest in NuPay (Proprietary) Limited
(NuPay)
The group acquired 50% plus 1 share of the issued share capital of NuPay on 1
June 2009 for a consideration of R53,5 million.
The acquired business contributed revenues of R24 million and net profit after
tax of R2,5 million to the group for the period 1 June 2009 - 31 August 2009.
If the acquisition had occurred on 1 March 2009, group revenue and net profit
after tax before allocations would have increased by R48 million and R5
million respectively.
These amounts have been calculated using the group`s accounting policies.
The acquiree`s balance sheet at the date of acquisition is as follows:
Carrying amount
R`000
Property, plant and equipment 5
Trade and other receivables 6
Trade and other payables (10)
Cash and cash equivalents 3
Tax (1)
Net identifiable assets and liabilities 3
Attributable to minorities (1,5)
Goodwill on acquisition 52,0
Total consideration 53,5
The amount reflected above as goodwill on acquisition will be finally
allocated between intangibles and goodwill prior to year-end.
Acquisition of the Altech Netstar franchisees in Nelspruit and Polokwane
During the period under review the group acquired 100% of the Altech Netstar
franchisees in Nelspruit and Polokwane with effect from 1 April 2009 and 1 May
2009 respectively.
The acquired business contributed revenues of R6,5 million and net profit
after tax of R0,9 million to the group for the period ended 31 August 2009.
If the acquisition had occurred on 1 March 2009, group revenue and net profit
after tax before allocations would have increased by R11,4 million and R1,3
million respectively. These amounts have been calculated using the group`s
policies and by adjusting the results of the subsidiaries to reflect
amortisation on the fair value adjustments to intangible assets from 1 March
2009, together with the consequential tax effects.
The acquirees` combined balance sheets at the date of acquisition were as
follows:
Rm
Total consideration 24
Fair value of net assets acquired 1
Intangible assets 23
Disposal of Namitech South Africa, a division of Altech Information
Technologies (Proprietary) Limited
On 1 April 2009 the group disposed of the net assets of Namitech South Africa
division for R82,2 million (an increase of R3,7 million on the previously
reported amount, based on closing audited adjustments) to Gemalto. The net
assets were shown as held for sale at 28 February 2009.
Post balance sheet events
Altech together with its partner, Sameer has acquired significant bandwidth
capacity on the SEACOM undersea cable system. Altech/Sameer has procured two
STM-16s from SEACOM (equivalent to 5 Gbps), for USD69,3 million payable by
Altech and Sameer according to their 60%, 40% shareholding over a number of
years with the option to upgrade within three years to double this capacity.
SEACOM, in return has invested in excess of USD20 million in capacity on the
terrestrial fibre network of Kenya Data Networks (KDN).
DIRECTORATE
Dr HA Serebro retired as a non-executive director of Altech with effect from
31 July 2009 following his retirement as an executive director from the Altron
group. The board thanks Dr Serebro for his significant contribution over the
years.
BLACK ECONOMIC EMPOWERMENT
Through the implementation of the Altron Transformation Vision 2012, Altech is
committed to empowerment through skills enhancement, representative
shareholding for and widespread development of disadvantaged communities by
focusing on areas with maximum long-term benefit.
A formal strategy has been implemented with measurable indicators, which will
assist the Altech group to continue to achieve success in this area.
PROSPECTS
Our acquisitions, during the latter part of the last financial year, and the
first half of this financial year, are all performing well, and individually
and collectively promise to add significantly to our future trading
performance.
As mentioned, our investment into East Africa has proven to be a resounding
success and will undoubtedly be one of the future growth engines of the Altech
group. Furthermore, our strategic alliance with SEACOM and TEAMS for marine
bandwidth, place the Altech group in an extremely positive position, which
bodes well for the future.
Our focus on expense reduction has placed us in an enviable position, has
assisted in bolstering our performance, and has contributed positively to our
Operating Margins. This will continue to support our drive for superior long-
term group financial performance.
Our efforts to build special relationships, with customers and staff, have
paid early dividends and will help to drive our results positively in the
future.
With a strong order book and growing annuity revenue, the growth in East
Africa, the liberalisation and deregulation of the telecommunications sector,
Altech is well positioned for continued growth in its businesses for the
remainder of the financial year.
By order of the board
Dr Hilton Davies Craig Venter Dr John Carstens
Non-executive Chief Executive Chief Financial
Chairman Officer Officer
Directors
Dr HK Davies (Non-executive Chairman)#
CG Venter (Chief Executive Officer)
Dr JEW Carstens (Chief Financial Officer)
PMO Curle*
ML Leoka#
R Naidoo#
M Sindane#
ZJ Sithole#
AMR Smith#*
RE Venter#
Dr WP Venter#
# Non-executive
* British
Secretaries
Altech Management Services (Pty) Limited
Sponsor
Investec Bank Limited
Altech
Registration number: 1946/020415/06
Share code: ALT
ISIN: ZAE000015251
The interim financial results are also available on the internet at
www.altech.co.za
Date: 29/09/2009 07:05:02 Produced by the JSE SENS Department.
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