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ALT - Allied Technologies - Audited Abridged Consolidated Annual Financial
Results For The Year Ended 28 February 2010
Allied Technologies Limited
(Incorporated in the Republic of South Africa)
Registration number: 1946/020415/06
Share code: ALT
ISIN: ZAE000015251
20 April 2010
AUDITED ABRIDGED CONSOLIDATED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 28
FEBRUARY 2010
HIGHLIGHTS
- Revenue of R9,2 billion
- Operating profit up by 7% to R933 million
- Adjusted headline earnings per share grows to 605 cents
- Dividends increased by 5% to 339 cents per share
- Strong balance sheet
Condensed consolidated statement of comprehensive income
2010 2009
Figures in R million (Audited) (Audited)
Revenue 9 200 9 164
Operating profit before capital items 933 874
Capital items (Note 1) (42) (2)
Results from operating activities 891 872
Finance income 25 68
Finance costs (40) (70)
Profit before taxation 876 870
Taxation (259) (226)
STC (32) (28)
Profit for the year 585 616
Other comprehensive income
Foreign currency translation differences for (332) 10
foreign operations
Effective portion of changes in fair value of - (4)
cash flow hedges
Other comprehensive income for the period, net (332) 6
of income tax
Total comprehensive income for the year 253 622
Profit attributable to:
Non-controlling interest 65 67
Owners of the Company 520 549
Profit for the year 585 616
Total comprehensive income attributable to:
Non-controlling interest 19 59
Owners of the Company 234 563
Total comprehensive income for the year 253 622
Basic earnings per share (cents) 536 569
Diluted basic earnings per share (cents) 529 545
Notes
Figures in R million
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 2010 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
PKF (Jhb) 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.
% 2010 2009
Figures in R million Change (Audited) (Audited)
Headline earnings per share (cents) 0 571 571
Diluted headline earnings per share 3 562 547
(cents)
Adjusted headline earnings per share 2 605 592
(cents)
Diluted adjusted headline earnings per 5 596 567
share (cents)
2010 2009
Figures in R million (Audited) (Audited)
1. Capital items
Net loss on disposal of property, plant and - (2)
equipment
Net profit on disposal of bandwidth capacity 23 -
Impairment of intangible assets (65) -
(42) (2)
2. Reconciliation between earnings and
headline earnings
Attributable earnings 520 549
Capital items - gross 42 2
562 551
Tax effects of adjustments (18) -
Minority interest in adjustments 9 -
Headline earnings 553 551
Dilutive earnings attributable to BEE - (6)
minorities in a subsidiary
Fully diluted headline earnings 553 545
3. Reconciliation between earnings and fully
diluted earnings
Attributable earnings 520 549
Additional earnings attributable to BEE - (6)
minorities
Fully diluted earnings 520 543
4. Reconciliation between headline earnings
and adjusted headline earnings
Headline earnings 553 551
Adjustments for:
Amortisation of intangible assets arising on 40 25
business combinations
593 576
Tax effect of adjustments (7) (5)
Adjusted headline earnings 586 571
Additional earnings attributable to BEE - (6)
minorities
Fully adjusted diluted headline earnings 586 565
Balance sheets
2010 2009
Figures in R million (Audited) (Audited)
ASSETS
Non-current assets 2 866 2 071
Property, plant and equipment 1 051 837
Intangible assets, including goodwill 1 599 1 122
Loans 130 -
Deferred taxation 86 112
Current assets 2 204 2 885
Inventories 370 416
Trade and other receivables, including 1 218 1 248
derivatives
Cash and cash equivalents 616 1 221
Assets classified as held for sale - 107
TOTAL ASSETS 5 070 5 063
EQUITY AND LIABILITIES
Total equity 2 607 2 547
Altech equity holders 2 122 2 249
Minority interest 485 298
Non-current liabilities 544 188
Loans 342 115
Finance lease liability 11 -
Deferred income 96 -
Deferred taxation 95 73
Current liabilities 1 919 2 300
Trade and other payables, including 1 803 1 827
derivatives
Warranty provisions 15 18
Bank overdraft - 310
Taxation payable 101 145
Liabilities classified as held for sale - 28
TOTAL EQUITY AND LIABILITIES 5 070 5 063
Net asset value per share (cents) 2 179 2 328
Condensed consolidated statement of changes in equity
Attributable to Altech equity holders
Share
capital and Treasury Other Retained
Figures in R premium shares reserves minorities Total
million
Balance at 1 3 (292) 73 2 171 1 955
March 2008
Total
comprehensive
income for the
period
Profit for the - - - 549 549
year
Other
comprehensive
income
Effective portion (4) (4)
of changes in
fair value of
cash flow hedges
Foreign currency - - 18 - 18
translation
differences for
foreign
operations
Total other - - 14 - 18
comprehensive
income
Total - - 14 549 567
comprehensive
income for the
period
Transactions with
owners, recorded
directly in
equity
Contributions by
and distributions
to owners
Issue of share 4 4
capital
Dividends to - - - (278) (278)
equity holders
Share-based - - 5 - 5
payment
transactions
Total 4 - 5 (278) (273)
contributions 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 - 5 (278) (273)
ownership
interests in
subsidiaries
Total 8 - 10 (556) (546)
transactions with
owners
Balance at 28 7 (292) 92 2 442 2 249
February 2009
(audited)
Total
comprehensive
income for the
period
Profit for the - - - 520 520
year
Other
comprehensive
income
Foreign currency - - (286) - (286)
translation
differences for
foreign
operations
Effective portion - - - - -
of changes in
fair value of
cash flow hedges
Total other - - (286) - (286)
comprehensive
income
Total - - (286) 520 234
comprehensive
income for the
period
Transactions with
owners, recorded
directly in
equity
Contributions by
and distributions
to owners
Issue of share 38 - - - 38
capital
Dividends to (313) (313)
equity holders
Share-based - - 8 8
payment
transactions
Total 38 - 8 (313) (267)
contributions by
and distributions
to owners
Changes in
ownership
interests in
subsidiaries
Premium on - - (94) - (94)
minority
transactions
Total changes in - - (94) - (94)
ownership
interests in
subsidiaries
Total 38 - (86) (313) (361)
transactions with
owners
Balance at 28 45 (292) (280) 2 649 2 122
February 2010
(audited)
Non-con-
trolling Total
Figures in R million interest equity
Balance at 1 March 2008 72 2 027
Total comprehensive
income for the period
Profit for the year 67 616
Other comprehensive
income
Effective portion of - (4)
changes in fair value
of cash flow hedges
Foreign currency (8) 10
translation differences
for foreign operations
Total other (8) 10
comprehensive income
Total comprehensive 59 626
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to owners
Issue of share capital - 4
Dividends to equity (11) (289)
holders
Share-based payment - 5
transactions
Total contributions by (11) (284)
and distributions to
owners
Changes in ownership
interests in
subsidiaries
Capital subscription 79 79
received from minority
shareholders
Minority interest on 99 99
acquisition of
subsidiaries
Total changes in 178 178
ownership interests in
subsidiaries
Total transactions with 167 (106)
owners
Balance at 28 February 298 2 547
2009 (audited)
Total comprehensive
income for the period
Profit for the year 65 585
Other comprehensive
income
Foreign currency (46) (332)
translation differences
for foreign operations
Effective portion of - -
changes in fair value
of cash flow hedges
Total other (46) (332)
comprehensive income
Total comprehensive 19 253
income for the period
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to owners
Issue of share capital 38
Dividends to equity (13) (326)
holders
Share-based payment 8
transactions
Total contributions by (13) (280)
and distributions to
owners
Changes in ownership
interests in
subsidiaries
Premium on minority 181 87
transactions
Total changes in 181 87
ownership interests in
subsidiaries
Total transactions with 168 (193)
owners
Balance at 28 February 485 2 607
2010 (audited)
Abridged cash flow statements
Year ended Year ended
2010 2009
Figures in R million (Audited) (Audited)
Cash flows - operating activities 514 301
Cash generated by operations 1 164 1 050
Changes in working capital (4) (251)
Net financial expense (15) (2)
Taxation paid (305) (207)
Cash available - operating activities 840 590
Dividends paid
- to Altech equity holders (313) (278)
- to minority shareholders (13) (11)
Cash flows - utilised in investing (677) (1 026)
activities
Cash flows (applied in)/from financing (138) 45
activities
Decrease in net cash and cash (301) (680)
equivalents
Cash at acquisitions 6 -
- at beginning of period 911 1 591
- at end of period 616 911
Supplementary information
2010 2009
Figures in R million (Audited) (Audited)
Depreciation and amortisation 232 191
Capital expenditure 483 385
Capital commitments 137 280
Lease commitments 235 214
Payable within the next 12 months 93 78
- property 50 43
- plant, equipment and vehicles 43 35
Payable thereafter: 142 136
- property 73 98
- plant, equipment and vehicles 69 38
Net foreign exchange losses (23) (5)
Weighted average number of shares 96,933 96,530
(million)
Diluted average number of shares 98,342 99,572
(million)
Shares in issue at end of period 97,374 96,610
(million)
Ratios
EBITDA 1 165 1 133
Operating margin (%) 10,1 9,5
ROCE (%) 35,2 34,2
ROE (%) 26,1 24,3
ROA (%) 35,3 33,5
Current ratio 1,1 1,3
Acid test ratio 1,0 1,1
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.
In identifying its operating segments, management generally follows the Group`s
product and service lines.
Each of these operating segments is managed separately as each of these service
lines requires different technologies and other resources as well as marketing
approaches.
In the previous annual and interim financial statements, segments were
identified by reference to the dominant source and nature of the Group`s risks
and returns with results reported based on the IFRS accounting policies used in
the financial statements.
The measurement policies the Group uses for segment reporting under IFRS 8 are
the same as those used in its financial statements, except that certain items
are not included in arriving at the operating profit of the operating segments
(amortisation of intangibles).
The requirements of IFRS 8 have been applied retrospectively and comparative
figures restated.
The Group operates a number of different operating segments primarily within the
Telecommunications, Multi-media & Electronics and Information Technology
sectors.
The segment revenues, and operating profit generated by each of the Group`s
reportable segments are summarised as follows:
Revenue Operating profit
12 12 12 12
months months months months
to to to to
28 Feb 28 Feb Growth 28 Feb 28 Feb Growth
2010 2009 Cur/Pyr 2010 OM 2009 OM Cur/Pyr
Rm Rm % Rm % Rm % %
Altech 5 597 5 264 6,3 296 5,3 296 5,6 0,0
Autopage
Cellular
Altech UEC 1 079 1 324 (18,5) 5 0,5 33 2,5 (84,8)
Group
Altech 880 829 6,2 269 30,6 250 30,2 7,6
Netstar
Group
Kenya Data 401 334 20,1 158 39,4 158 47,3 0,0
Networks
Other 1 414 1 539 (8,1) 247 17,5 152 9,9 62,5
Altech
Segments
Altech 9 371 9 290 0,9 975 10,4 889 9,6 9,7
Group
Amortisatio - - - (40) - (25,0) - 60,0
n of
intangibles
Corporate (2) 10,0
Inter (171) (126) 35,7 - 0,0 - 0,0 -
segment
revenue
Altech 9 200 9 164 0,4 933 10,1 874 9,5 6,8
Group
Revenues and operating profit 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.
Business combinations
Acquisitions
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; and
- Second tranche: R27 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 R59 million and net profit after
tax of R17 million to the Group.
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 2009, together with the
consequential tax effects.
Fleetcall is the largest trunk two-way radio operator in South Africa.
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. The
purchase price is payable as follows:
- Initial payment of R7,5 million; and
- 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.
The acquired business contributed revenues of R34 million and net profit after
tax of R3 million to the Group.
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 2009, together with the
consequential tax effects.
Technology Concepts is an established internet technology services business and
corporate internet service provider.
Acquisition of 50% 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 R74 million and net profit after
tax before allocation of R6 million to the Group.
If the acquisition had occurred on 1 March 2009, group revenue and net profit
after tax before allocations would have increased by R99 million and R8 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
2009, together with the consequential tax effects.
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.
Revenue and profit after tax attributable to these acquisitions are not
material.
Acquisition of Components and System Design cc (CSD)
During the period under review the Group acquired 100% of CSD a component
distributor.
Revenue and profit after tax attributable to these acquisitions are not
material.
Carrying Fair value Recognised
amount adjustments values
The acquiree`s balance sheets at
the date of acquisition are as
follows:
Property, plant and equipment 35,0 - 35,0
Intangible assets on acquisition - 62,0 62,0
Inventories 2,0 - 2,0
Fair value of net assets acquired 2,0 2,0
Trade and other receivables 18,0 - 18,0
Trade and other payables (17,0) - (17,0)
Deferred tax (11,0) (10,0) (21,0)
Tax (4,0) (4,0)
Cash and cash equivalents 7,0 7,0
Total net assets on acquisition 32,0 52,0 84,0
Attributable to minorities (1,5)
Goodwill on acquisition 109,0
Total consideration 191,5
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 to Gemalto.
The net assets were shown as held for sale at 28 February 2009.
Post-balance sheet events
The Group has signed agreements to sell 25% plus 1 share of its` interest in
Altech Netstar Group to Thebe Investment Corporation (Proprietary) Limited and
Identity Capital Partners (Proprietary) Limited effective 1 March 2010.
The empowerment consortium acquired its shareholding in Altech Netstar Group for
a nominal consideration.
Commentary
Message to shareholders
The directors are pleased to report on positive Altech group results for the
year ended 28 February 2010, despite the slow global economic recovery. Adjusted
headline earnings per share improved to 605 cents per share. Operating income
increased by 7% to R933 million reflecting an operating margin of 10,1% (2009:
9,5%) on revenue of R9,2 billion. Net asset value per share was 2 179 cents.
Return on shareholders` equity improved to 26,1%. Cash at year end was R616
million. A dividend of 339 cents which represents a 5% increase on prior year
has been declared.
Operational reviews
Telecoms
TELECOMS AND WIRELESS COMMUNICATIONS
ALTECH AUTOPAGE CELLULAR
Despite difficult trading conditions during the financial year, revenues
increased by 6,3% compared to the prior year largely due to an increase in
airtime revenue, value added services and pre-paid voucher sales. Operating
income remained under pressure for the trading period, recording a marginal
decline in operating margin from the prior year.
The three GSM Operators agreed to a reduction in the Mobile Termination Rate
from 1 March 2010. Further reductions to mobile retail tariffs are expected
during the first six months of 2010, which could have an adverse impact on
operating margins for the financial year ending February 2011. Actions to
mitigate this impact have already been taken.
The acquisition of Altech Technology Concepts has provided a platform to develop
and market converged voice/data services, on an enhanced basis.
In November 2009 Altech Autopage Cellular commenced a process to achieve
significant reductions in overall operating expenditure. The first phase
organisational restructure was concluded by January 2010. This process will
continue until July 2010 to achieve the planned savings.
The company has shown strong growth of 190 247 gross connections acquired for
the period; however, it should be noted that a high percentage of the additional
growth was achieved in the low to mid-tier tariff packages. The total Altech
Autopage Cellular customer base now stands close to 1 million active
subscribers.
Altech Netstar Stolen Vehicle Recovery (SVR)
SVR reached a total of over 409 000 billable subscriber vehicles, an increase of
4,1% for the year, despite the significant reduction in new vehicle sales in
South Africa. However, new vehicle sales appear to be improving.
Progress is being made across Africa and the Middle East with a number of
licensed operators being established as well as large multinational corporations
being signed up as customers. Ongoing discussions are taking place regarding
significant opportunities in Brazil.
Altech Netstar Fleet Solutions (ANFS)
ANFS achieved a 9,9% growth in billable subscribers to close the year with a
base of in excess of 60 000 subscriber vehicles. Operating income for the year
exceeded budget by 5,1%.
Continued strong growth is expected for ANFS for the 2011 financial year.
Altech Netstar Traffic
The company managed to achieve a profit, largely due to a major pilot project
awarded to it.
Altech Technology Concepts (ATC)
ATC showed significant growth during the financial year despite connectivity
pricing continuing to drop. This drop in pricing is as a result of the
additional undersea capacity into South Africa and increased competition.
ATC has invested significantly in additional sales and technical resources to
drive additional growth into 2010/2011. A plan to move ATC from a second tier
into a first tier ISP has been finalised. This will allow ATC to provision and
run its own network allowing for increased innovation and new product
development. The intention is to be operational by June 2010.
ATC is extending its range of services with a focus on managed services. The
most recent product/service additions include Mail Marshal anti-spam and anti-
virus, FortiGate firewalls, and a VMware, Dell and Xiotech infrastructure,
allowing ATC to provision virtual servers for customers.
CONVERGED SERVICES AND CONNECTIVITY
Altech Alcom Matomo
Altech Alcom Matomo provides a number of specialised mission-critical radio and
telemetry products and solutions for various customers. The company again
recorded a solid performance, despite the adverse market environment,
experiencing positive customer growth in the SADC region with key projects for
police services in Angola and Botswana now completed. The confirmed order book
had increased to R40 million at year end.
The final stage of the R540-million project for the South African Police
Services (SAPS) in Gauteng has been completed. Successful mission-critical radio
communications support for the Confederations Cup has also resulted in the award
of similar work for the 2010 World Cup Stadium communications. The company has
further organised itself to operate in a smaller projects environment and is now
implementing a range of projects for police services in neighbouring countries
and significantly upgrading the City of Cape Town`s communications network, as
well as fulfilling orders for the national power utility and certain
municipalities.
Altech Alcom Radio Distributors
Altech Alcom Radio Distributions recorded a positive performance and was again
amongst Motorola`s top distributors for Europe, Middle East and Africa,
notwithstanding challenging trading conditions.
Digital mobile radio sales expanded positively as the new technology is being
assimilated by the market. Software-based radio applications to enhance the
productivity of these digital systems are being explored, and these are expected
to support further expansion of the product range.
Altech Fleetcall
Altech Fleetcall is a national trunked radio operator, providing airtime
services for wireless voice and data communication for telemetry, dispatching,
alarm monitoring, fleet management, security and many more voice and data
applications. It has its own national network infrastructure and serves mainly
customers operating vehicle fleets. The company was recently selected by Bombela
to provide seamless and instantaneous radio communication services for the
Gautrain Rapid Rail Link and has continued to grow its subscriber base over the
last financial year, resulting in exceptional year-end results.
Altech Stream East Africa
Significant restructuring took place in the portfolio managed by Altech Stream
East Africa through further injection of capital into Kenya Data Networks (KDN)
and the acquisition of Altech Stream Rwanda by KDN. Altech now owns 60,8% of
KDN, which in turn now owns 90% of Altech Stream Rwanda.
Altech Data International was established in Mauritius to house Altech`s Seacom
capacity purchase. This is owned 60,8% by Altech and 39,2% by the Sameer Group.
We are proud to report that despite challenges and subsequent project delays,
the East African Group plus the new entity in Mauritius have exceeded their
budgets.
Kenya Data Networks (KDN) produced good results for the period, mostly
attributable to strong growth in the East African ICT sector and further
developments in the East African fibre network. This growth is expected to
continue, supported by KDN`s strengthened position as the infrastructure
provider of choice in Kenya and its expanding network in the neighbouring
regions, notably Uganda and Rwanda.
The Seacom undersea data cable went live in the second half of 2009. The Group`s
East African businesses have benefited from the last quarter of 2009, in excess
of the capacities purchased being utilised. KDN also owns 11% in the Kenyan
government-led TEAMS undersea fibre cable project. This has gone live and
provides additional landing points as network redundancy. KDN is currently
building a high security Data Centre in Nairobi, Kenya and this will be
operational towards the end of this calendar year.
It has been a year of consolidation and rationalisation for Swift Global
(Kenya), across its products and services. The company`s technical platforms
have been integrated into the KDN infrastructure framework.
Infocom Uganda is the leading internet service provider (ISP) brand in Uganda
and is recognised as a technologically strong services entity. It also holds
very attractive telecommunications infrastructure and service licensing rights
within Uganda.
In addition to its existing WiFi and WiMax network business, Infocom is starting
to generate strong revenue from distributing undersea data cable capacity to
Uganda. This also provides the vital link between KDN and Altech Stream Rwanda
which has outperformed expectations.
Altech Stream Rwanda is a start-up broadband network and internet service
provider (ISP), which was granted the necessary internet and gateway licences in
June 2007. By the 2009/2010 financial year end, the business had completed the
rollout of an outdoor WiFi network for consumers and a WiMax network for
corporate customers, both covering most of Kigali, the capital city. The company
is well positioned to achieve market leadership in Rwanda through the
distribution of undersea bandwidth capacity and interconnect facilities.
Multi-media and electronics
Altech UEC (AUEC)
Despite the global economic slow-down, AUEC has seen the benefits of investment
in developing technologies and products for the Digital Pay TV industry. Local
demand for set-top-boxes (STB`s) remains firm while exports to Africa,
Australia, Middle East, Europe and India are growing steadily.
Additional investments have been made in local manufacturing plant and equipment
and a total of 2 million STB units were produced in the last 12 months.
Ahead of the South African Digital Migration (DTT) programme, AUEC has developed
a terrestrial STB and has been participating in trials with all the potential
operators. Coupled with this opportunity AUEC has developed the MediaGate
concept which allows movies to be played via an internet protocol STB in the
home. This concept will open a new market in the Telco arena, as converged
technologies increasingly become a customer requirement in the future.
The Australian Digital Migration project has commenced, and UEC Australia has
been contracted to participate and has already supplied 60 000 STB`s into this
market.
Arrow Altech Distribution
Due to global recession and weak demand the local electronics industry
underperformed during 2009. A number of key customers in the electronics
manufacturing sector cut back on production and relied on inventories to meet
immediate orders.
Recovery of the market is likely to be patchy and relatively weak over the next
year, with potentially only one major project envisaged for the 2010 calendar
year, namely the DTT rollout.
Management`s pro-active response to the difficult economic conditions, coupled
with consistent performance from all the company`s technology groups resulted in
solid operational results for the year.
Technology (Information technology)
Altech ISIS
This operation stabilised and strengthened its position at existing customers
and is well positioned to generate strong revenue and income growth going
forward, with its innovative real-time converged customer care and billing
solution offering. To support this expansion drive it has added substantial
investment into its project management, business analysis and systems
integration capacity to support its position as a reputable supplier of turnkey
business support systems.
Altech West Africa
Located in Lagos, Nigeria, the company predominantly manufactures prepaid
cellular vouchers for all five major telecommunications operators in the country
and is currently producing over 100 million prepaid air time vouchers per month.
During 2009 the company`s product lines have been expanded by adding the
capability to supply initialised and personalised chip-card products to
telecommunications network operators and financial service providers. Capability
and professional services capacity have been added to the company to enable the
supply, implementation and support of the Altech group`s e-Security range of
products in Nigeria, including supply and support of the Verisign range of
products.
Altech Card Solutions
Continuing the trend of recent years, Altech Card Solutions has increased the
delivery of Point-of-sale and PIN-pad end-to-end solutions for leading financial
service providers and retailers. Growth has surpassed expectations in the supply
of electronic security product either as a turnkey project or as a hosted
managed service from its fully PCI and EMV compliant seven tier security
operation centre. The card personalisation solutions and integrated financial
transaction services activities performed better than in the prior financial
year.
Altech NuPay
This 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.
Corporate finance transactions
Salient transactions during the financial year under review were 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) shareholding 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.
Other transactions
- 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.
- Effective 1 March 2009, Altech acquired 100% of the issued capital in
Fleetcall (Pty) Limited (Fleetcall). Fleetcall is a national trunked radio
operator based in Centurion. The total maximum purchase price was R75 million,
of which R35 million is held in escrow to be released to the vendors of
Fleetcall on 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, an internet services provider for
small and medium enterprises, 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.
- Effective 1 November 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.
- Effective 1 March 2010, the Altech Netstar sub-group concluded an empowerment
deal for 25% plus one share. The deal includes the businesses of ComTech and
Altech Netstar Fleet Solutions (ANFS), and further the 50% shareholding in
Altech Netstar Traffic. Thebe Corporation and Identity Capital Partners were the
two empowerment groupings that acquired the stake, with a strong focus on
synergies between the various parties.
In order to facilitate the empowerment transaction, Altech disposed all of the
shares in Altech Netstar (Pty) Limited to another wholly owned subsidiary,
Altech Netstar Group (Pty) Limited, in return for preference shares in that
company. The businesses of ComTech and ANFS were sold into Altech Netstar in
return for a loan. This resulted in an effective nil net asset value for Altech
Netstar Group. The empowerment consortium was thereby enabled to acquire its
shareholding in Altech Netstar Group for a nominal consideration. The total
value of this overall empowerment transaction was in excess of R1,5 billion. The
international business and intellectual property of the Altech Netstar Group has
been retained, wholly owned by Altech.
- On 4 January 2010, Altech acquired a further 25,11% shareholding in its
subsidiary Altech Alcom Matomo (Pty) Limited (AAM) from Platina Venture Holdings
R15,2 million. AAM is now a wholly-owned subsidiary of Altech. This transaction
is a precursor to a proposed broader empowerment transaction which will involve
both AAM and its sister subsidiary, Altech Alcom Radio Distributors.
Directorate
Dr HA Serebro resigned as a non-executive director to the Altech board with
effect from 31 July 2009. The board appreciates his valuable contribution to the
Group as a director.
Altech transformation
The Altech Group is committed to transformation and empowerment through skills
enhancement, representative shareholding and widespread development of
disadvantaged communities by focusing on areas with the maximum long-term
benefit. The Altron`s transformation Vision 2012 sets the guidelines for
developing our people and the communities around us through education, training
and skills development, health, social welfare and job creation. Altech is proud
to confirm that the Group and its operations have all achieved the targets for
2010 as set out in the guidelines of Vision 2012.
The way forward
We believe real growth in the coming year will be achieved through:
- Capitalising on convergence.
- Continued diversification of Altech`s income base within the TMT sector
through globalisation, M&A activity and convergence opportunities.
- Evaluate the expansion of the Altech Data Centre strategy across Africa.
- Continuing the transformation of Altech Technology Concepts up the value
chain.
- Focusing and expanding the strong presence that we have in East Africa.
- Continued expansion of annuity revenue businesses (currently 82%).
- Strong focus on margins, cost, working capital and cash flow.
- Participation in the South African and Australian digital migration
programmes.
Declaration of ordinary dividend No 67
Ordinary dividend number 67 of 339 cents per share (2009: 323 cents) for the
year ended 28 February 2010 is declared payable to ordinary shareholders
recorded in the register at the close of business on 28 May 2010. The timetable
for the payment of the dividend is as follows:
Last day to trade cum dividend Friday, 21 May 2010
Trading ex dividend commences Monday, 24 May 2010
Record date Friday, 28 May 2010
Payment date Monday, 31 May 2010
Share certificates may not be dematerialised or rematerialised between Monday 24
May 2010 and Friday 28 May 2010 both days inclusive. The certificated register
will be closed for this period.
Annual general meeting
The company`s 64th annual general meeting will be held in the Boardroom, Altech
Corporate Offices, 79 Central Street, Houghton on Wednesday, 7 July 2010 at
15h00. Further details on the company`s annual general meeting will be included
in Altech`s annual report to be posted to shareholders on or before 31 May 2010.
By order of the board
Dr Hilton Davies Craig Venter Dr John Carstens
(Non-executive (Chief Executive (Chief Financial
Chairman) Officer) Officer)
19 April 2010
Corporate information
Directors
Dr HK Davies (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#
* British
# Non-executive
Secretaries
Altech Management Services (Pty) Limited
Sponsor
Investec Bank Limited
Altech
(Incorporated in the Republic of South Africa)
Registration number: 1946/020415/06
Share code: ALT
ISIN: ZAE000015251
Date: 20/04/2010 08:00:04 Produced by the JSE SENS Department.
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