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ALT
ALT
ALT - Allied Technologies Limited - Summarised consolidated unaudited interim
financial results for the six months ended 31 August 2011
Allied Technologies Limited
(Incorporated in the Republic of South Africa)
(Registration number 1946/020415/06)
Share code: ALT
ISIN: ZAE000015251
Summarised consolidated unaudited interim financial results
for the six months ended 31 August 2011
Highlights
- Revenue of R4,8 billion
- EBITDA before capital items of R456 million
- Strong balance sheet
- Focus on cost management
- Significant empowerment transactions concluded
SUMMARISED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2011 2010 2011
Figures in R million change (Unaudited) (Unaudited) (Audited)
Revenue 1 4 828 4 788 9 651
Earnings before interest, (10) 456 507 1 072
tax, depreciation,
amortisation and capital
items (EBITDA before
capital items)
Depreciation and (160) (146) (285)
amortisation
Operating profit before 296 361 787
capital items
Capital items (Note 1) (13) 1 (273)
Results from operating 283 362 514
activities
Finance income 5 36 35
Finance expenses (27) (44) (90)
Profit before taxation 261 354 459
Taxation (89) (89) (201)
STC (35) (33) (33)
Profit for the period 137 232 225
Other comprehensive loss
Foreign currency (115) (244) (281)
translation differences
in respect of foreign
operations
Other comprehensive loss (115) (244) (281)
for the period
Total comprehensive 22 (12) (56)
income/(loss) for the
period
Profit attributable to:
Non-controlling interest 1 30 15
Altech equity holders 136 202 210
Profit for the period 137 232 225
Total comprehensive
income/(loss)
attributable to:
Non-controlling interest (37) (71) (38)
Altech equity holders 59 59 (18)
Total comprehensive 22 (12) (56)
income/(loss) for the
period
Basic earnings per share (32) 141 207 216
(cents)
Diluted basic earnings (33) 137 205 213
per share (cents)
NOTES
Basis of preparation
The summarised consolidated unaudited interim financial results for the six
months ended 31 August 2011 have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards ("IFRS"), the AC 500 series of interpretations as issued by the
Accounting Practices Board or its successor, IAS34: Interim Financial Reporting
and in compliance with the requirements of the Companies Act, No. 71 of 2008 of
South Africa and the Listing Requirements of the JSE Limited.
The accounting policies applied are consistent with those used in the prior
year.
This report was compiled under the supervision of Dr John Carstens CA(SA), Chief
Financial Officer, and Mr Francois Verster CA(SA), Group Financial Manager.
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2011 2010 2011
Figures in R million change (Unaudited) (Unaudited) (Audited)
Headline earnings per (24) 156 206 488
share (cents)
Diluted headline earnings (25) 153 204 481
per share (cents)
Adjusted headline earnings (19) 181 224 529
per share (cents)
Diluted adjusted headline (20) 177 221 522
earnings per share (cents)
Figures in R million
1. Capital items
Impairment of goodwill (49) - (250)
Net profit on disposal of 36 1 2
property, plant and equipment
Impairment of property, plant and - - (14)
equipment
Impairment of intangible assets - - (11)
(13) 1 (273)
2. Reconciliation between earnings
and headline earnings
Earnings attributable to Altech 136 202 210
equity holders
Adjustments for capital items:
Impairment of goodwill 49 - 250
Other capital items (36) (1) 23
149 201 483
Tax effect of adjustments 3 - (3)
Non-controlling interest in - - (5)
adjustments
152 201 475
3. Reconciliation between headline
earnings and adjusted headline
earnings
Adjusted headline earnings have
been presentedto demonstrate the
impact of some once-offevents and
accounting charges on the headline
earnings of the Group. Headline
earnings are reconciled to
adjusted headline earnings as
follows:
Headline earnings 152 201 475
Adjustments for:
Amortisation of intangible assets 18 20 39
arising on business combination
B-BBEE transaction costs 6 - 4
IFRS 2 charge on B-BBEE 4 - 7
transactions
180 221 525
Tax effects of adjustments (4) (3) (10)
176 218 515
4. Dividends
It is Group policy for dividends
to be declared after the financial
year.
SUMMARISED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
Figures in R million (Unaudited) (Unaudited) (Audited)
ASSETS
Non-current assets 2 320 2 812 2 449
Property, plant and equipment 967 1 084 1 027
Intangible assets, including 1 123 1 508 1 207
goodwill
Non-current receivables 137 130 133
Deferred taxation 93 90 82
Current assets 2 087 1 721 2 108
Inventories 399 380 366
Trade and other receivables, 1 335 1 023 1 251
including derivatives
Cash and cash equivalents 353 318 491
Total assets 4 407 4 533 4 557
EQUITY AND LIABILITIES
Total equity 1 883 2 258 2 229
Altech equity holders 1 980 1 854 2 137
Non-controlling interest (97) 404 92
Non-current liabilities 574 514 331
Loans payable 469 321 231
Finance lease liability - 3 -
Deferred income 47 96 46
Deferred taxation 58 94 54
Current liabilities 1 950 1 761 1 997
Trade and other payables, 1 808 1 653 1 813
including derivatives
Warranty provisions 20 13 17
Bank overdrafts 80 - 33
Taxation payable 42 95 134
Total equity and liabilities 4 407 4 533 4 557
SUMMARISED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
Figures in R million (Unaudited) (Unaudited) (Audited)
Cash flows (utilised in)/generated (270) 64 404
from operating activities
Cash generated by operations 423 504 1 072
before movements in working
capital
Movements in working capital (90) 35 (34)
Net financial expenses (22) (8) (55)
Taxation paid (222) (126) (239)
Cash available from operating 89 405 744
activities
Dividends paid
- Altech equity holders (347) (331) (330)
- Non-controlling interest (12) (10) (10)
Cash flows utilised in investing (137) (285) (434)
activities
Cash flows from/(used in) 222 (77) (133)
financing activities
Decrease in net cash and cash (185) (298) (163)
equivalents
Cash and cash equivalents on - - 5
acquisiton of subsidiaries
- at the beginning of the period 458 616 616
- at the end of the period 273 318 458
SUPPLEMENTARY INFORMATION
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
Figures in R million (Unaudited) (Unaudited) (Audited)
Depreciation and amortisation 160 146 285
Capital expenditure 87 169 264
Capital commitments 32 52 67
Lease commitments 167 160 238
Payable within the next 12 months: 77 91 95
- Property 46 53 50
- Plant, equipment and vehicles 31 38 45
Payable thereafter: 90 69 143
- Property 64 32 59
- Plant, equipment and vehicles 26 37 84
Net foreign exchange losses (22) (10) (3)
(including FEC fair value
adjustment)
Ordinary shares in issue (million)
- weighted average 97,479 97,374 97,389
- diluted average 99,561 98,668 98,677
- at end of the period 97,488 97,374 97,458
Ratios
EBITDA to revenue (%) 9,4 10,6 11,1
Operating profit to revenue (%) 6,1 7,5 8,2
Return on shareholders` equity (%) 15,4* 21,7* 22,2
Return on capital employed (%) 29,1* 31,3* 32,9
Return on operating assets (%) 21,9* 29,0* 29,8
Current ratio 1.1:1 1.0:1 1.1:1
Acid test ratio 0.9:1 0.8:1 0.9:1
Net asset value per share (cents) 2 031 1 904 2 193
* Annualised
Business combinations
Disposal
Disposal of 25% plus 1 share shareholding of the Group`s interest in Altech
Alcom Motomo (Pty) Limited, Altech Alcom Radio Distributors (Pty) Limited and
Altech Fleetcall (Pty) Limited
The Group entered into an empowerment transaction where Southern Palace Group of
Companies (Pty) Limited acquired a 25% plus 1 share shareholding in Altech Alcom
Motomo (Pty) Limited, Altech Alcom Radio Distributors (Pty) Limited and Altech
Fleetcall (Pty) Limited, effective 1 March 2011.
The empowerment consortium acquired its shareholding for a nominal
consideration.
Acquisition
Acquisition of 25% shareholding of Pamodzi Investments Holdings (Pty) Limited in
Altech Information Technologies (Pty) Limited
Effective 1 July 2011 the Group acquired the 25% shareholding of Pamodzi
Investments Holdings (Pty) Limited in Altech Information Technologies (Pty)
Limited, the holding company for the Group`s information technology sub-group,
for R 37,5 million in cash.
This transaction will be followed shortly by a further vendor-financed
empowerment transaction involving Altech IT and will include the recently
acquired Swisttech operation.
POST-BALANCE SHEET EVENTS
In March 2011 the Group signed agreements to sell 25% plus 1 share of its
interest in UEC`s African business to PowerMatla (Pty) Limited, Empower a
Thousand (Pty) Limited and Epiworx Investment (Pty) Limited. This transaction
became effective from 1 September 2011.
The empowerment consortium acquired its shareholding in UEC`s African business
for a nominal consideration.
Effective 1 September 2011 the Group acquired 100% of the issued share capital
of Eyenza Mobile Money (Pty) Limited ("Eyenza") for an nominal amount.
Eyenza is a wallet-based, mobile money payments system that is targeted to the
unbanked population of South Africa and Africa.
The Group signed agreements with SetOne GmbH in August 2011 to acquire 80% of
the shares in the company for a maximum purchase price of Euro3,96 million.
Euro2 million is payable in cash upon fulfilment of the conditions precedents,
which at reporting date were still outstanding, and the balance of Euro1,96
million is payable in terms of an earn-out over three years.
In addition, the Altech Board approved the exercise of a call option to purchase
the remaining 20% of the shares on the same basis as the initial 80%. The total
maximum purchase price for 100% of the shares in the company is Euro4,86
million.
SetOne specialises in the manufacturing, repair and servicing of digital video
broadcasting set-top box receivers. It has expertise and key skills in the
supply chain design phase and product management of these products. SetOne has
built partnerships, including licencing agreements, with key players in the
sector`s product and services value chain throughout Asia and Europe.
SUMMARISED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
ATTRIBUTABLE TO ALTECH EQUITY HOLDERS
Premium/discount
Share capital Treasury Other on non-controlling
Figures in R and premium shares reserves equity transactions
million
Balance at 1 March 45 (292) (170) (86)
2010
Total
comprehensive
income
Profit for the
period
Other
comprehensive loss
Foreign currency - - (143) -
translation
differences in
respect of foreign
operations
Total other - - (143) -
comprehensive loss
Total - - (143)
comprehensive
(loss)/income for
the period
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Dividends to
equity holders
Share-based - - 3 -
payment
transactions
Total - - 3 -
contributions by
and distributions
to owners
Total transactions - - 3 -
with owners
Balance at 31 45 (292) (310) (86)
August 2010
Total
comprehensive
income
Profit/(loss) for
the period
Other
comprehensive
(loss)/income
Foreign currency - - (85) -
translation
differences in
respect of foreign
operations
Total other - - (85) -
comprehensive
(loss)/income
Total - - (85) -
comprehensive
(loss)/income for
the period
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Issue of share 4
capital
IFRS 2 charge on B- - - 7 -
BBEE transactions
Share-based - - 4 -
payment
transactions
Total 4 - 11 -
contributions by
and distributions
to owners
Changes in
ownership
interests in
subsidiaries
Introduction of 345
non-controlling
interest
Total changes in - - - 345
ownership
interests in
subsidiaries
Total transactions 4 - 11 345
with owners
Balance at 28 49 (292) (384) 259
February 2011
Total
comprehensive
income
Profit for the
period
Other
comprehensive loss
Foreign currency - - (77) -
translation
differences in
respect of foreign
operations
Total other - - (77) -
comprehensive loss
Total - - (77) -
comprehensive
(loss)/income for
the period
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Issue of share 1
capital
Dividends to
equity holders
IFRS 2 charge on B- - - 4 -
BBEE transactions
Share-based - - 5 -
payment
transactions
Total 1 - 9 -
contributions by
and distributions
to owners
Changes in
ownership
interests in
subsidiaries
Introduction of 101
non-controlling
interest
Acquisition of non- 20
controlling
interest
Total changes in - - - 121
ownership
interests in
subsidiaries
Total transactions 1 - 9 121
with owners
Balance at 31 50 (292) (452) 380
August 2011
ATTRIBUTABLE TO ALTECH EQUITY HOLDERS
Retained Non-controlling Total
Figures in R earnings Total interest equity
million
Balance at 1 March 2 625 2 122 485 2 607
2010
Total
comprehensive
income
Profit for the 202 202 30 232
period
Other
comprehensive loss
Foreign currency - (143) (101) (244)
translation
differences in
respect of foreign
operations
Total other - (143) (101) (244)
comprehensive loss
Total 202 59 (71) (12)
comprehensive
(loss)/income for
the period
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Dividends to (330) (330) (10) (340)
equity holders
Share-based - 3 - 3
payment
transactions
Total (330) (327) (10) (337)
contributions by
and distributions
to owners
Total transactions (330) (327) (10) (337)
with owners
Balance at 31 2 497 1 854 404 2 258
August 2010
Total
comprehensive
income
Profit/(loss) for 8 8 (15) (7)
the period
Other
comprehensive
(loss)/income
Foreign currency - (85) 48 (37)
translation
differences in
respect of foreign
operations
Total other - (85) 48 (37)
comprehensive
(loss)/income
Total 8 (77) 33 (44)
comprehensive
(loss)/income for
the period
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Issue of share 4 - 4
capital
IFRS 2 charge on B- - 7 - 7
BBEE transactions
Share-based - 4 - 4
payment
transactions
Total - 15 - 15
contributions by
and distributions
to owners
Changes in
ownership
interests in
subsidiaries
Introduction of 345 (345) -
non-controlling
interest
Total changes in - 345 (345) -
ownership
interests in
subsidiaries
Total transactions - 360 (345) 15
with owners
Balance at 28 2 505 2 137 92 2 229
February 2011
Total
comprehensive
income
Profit for the 136 136 1 137
period
Other
comprehensive loss
Foreign currency - (77) (38) (115)
translation
differences in
respect of foreign
operations
Total other - (77) (38) (115)
comprehensive loss
Total 136 59 (37) 22
comprehensive
(loss)/income for
the period
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Issue of share 1 - 1
capital
Dividends to (347) (347) (12) (359)
equity holders
IFRS 2 charge on B- - 4 - 4
BBEE transactions
Share-based - 5 - 5
payment
transactions
Total (347) (337) (12) (349)
contributions by
and distributions
to owners
Changes in
ownership
interests in
subsidiaries
Introduction of 101 (101) -
non-controlling
interest
Acquisition of non- 20 (39) (19)
controlling
interest
Total changes in - 121 (140) (19)
ownership
interests in
subsidiaries
Total transactions (347) (216) (152) (368)
with owners
Balance at 31 2 294 1 980 (97) 1 883
August 2011
SEGMENTAL 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.
The standard requires segmentation based on the Group`s internal organisation
and reporting of revenue and operating profit based upon internal accounting
presentation.
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 earnings before interest, tax, depreciation
and amortisation ("EBITDA") (foreign exchange gains and and losses are excluded)
and operating profit of the operating segments (amortisation of intangibles
arising on business combinations and foreign exchange gains and losses are
excluded). In the prior year, the foreign exchange gains and losses were
included in operating profit and the prior year`s operating profit of the
operating segments were therefore restated.
The segment revenue, EBITDA before capital items and operating profit before
capital items generated by each of the Group`s reportable segments are
summarised as follows:
Revenue
Six Six Year
months months
ended ended ended Growth
31 August 31 August 28 February Cur/Pyr
2011 2010 2011 %
Altech Autopage Cellular 2 997 2 819 5 855 6,3
Altech Netstar Group 498 473 944 5,3
Altech UEC Group 461 544 1 145 (15,3)
Converged Services 173 258 426 (32,9)
International
Other Altech segments 754 720 1 429 4,7
4 883 4 814 9 799 1,4
Amortisation of intangibles - - - -
Net foreign exchange losses - - - -
for the Group
Corporate and inter-segment (55) (26) (148) 111,5
eliminations
Altech Group 4 828 4 788 9 651 0,8
EBITDA
Six Six Year
months months
ended ended ended Growth
31 EBITDA 31 EBITDA 28 EBITDA Cur/Pyr
August August February
2011 % 2010 % 2011 % %
Altech Autopage 130 4,3 112 4,0 296 5,1 16,1
Cellular
Altech Netstar 191 38,4 163 34,5 331 35,1 17,2
Group
Altech UEC 42 9,1 45 8,3 83 7,2 (6,7)
Group
Converged 42 24,3 100 38,8 131 30,8 (58,0)
Services
International
Other Altech 79 10,5 100 13,9 215 15,0 (21,0)
segments
484 9,9 520 10,8 1 056 10,8 (6,9)
Amortisation of - - - - - - -
intangibles
Net foreign (22) - (10) - (3) - 120,0
exchange losses
for the Group
Corporate and (6) - (3) - 19 - 100,0
inter-segment
eliminations
Altech Group 456 9,4 507 10,6 1 072 11,1 (10,1)
Operating profit
Six Six Year
months months
ended ended ended Growth
31 August OM 31 OM 28 OM Cur/Pyr
August February
2011 % 2010 % 2011 % %
Altech Autopage 123 4,1 104 3,7 280 4,8 18,3
Cellular
Altech Netstar 150 30,1 137 29,0 303 32,1 9,5
Group
Altech UEC Group 6 1,3 (2) (0,4) 1 0,1 400,0
Converged 1 0,6 52 20,2 31 7,3 (98,1)
Services
International
Other Altech 62 8,2 103 14,3 195 13,6 (39,8)
segments
342 7,0 394 8,2 810 8,3 (13,2)
Amortisation of (18) - (20) - (39) - (10,0)
intangibles
Net foreign (22) - (10) - (3) - 120,0
exchange losses
for the Group
Corporate and (6) - (3) - 19 - 100,0
inter-segment
eliminations
Altech Group 296 6,1 361 7,5 787 8,2 (18,0)
Commentary
Message to shareholders
The directors hereby present the Altech Group results for the six-month period
ending 31 August 2011.
Although the first half of the financial year shows results below management
expectations, particularly from East Africa, nearly all of the other operations
performed to or above expectations. Adjusted headline earnings per share were
181 cents compared to 224 cents in the prior period. Net cash and cash
equivalents remain positive at half-year end at R273 million. Return on
shareholder`s equity and capital employed are at 15,4% and 29,1% respectively.
Operational reviews
Telecoms
Telecoms and Wireless Communications
Altech Autopage Cellular
Altech Autopage increased its revenue and profits over the prior period. This
increase has been largely attributed to the increase in Value Added Services and
prepaid voucher sales. Average Revenue per User (ARPU) for the financial period
including VAS, is slightly down on the prior period.
The ongoing dilution on Post-paid Airtime Revenue as illustrated by the ARPU
trend, is expected to continue as the Networks release new products at lower
price points as well as heavily discounted tariffs on data in an increasingly
competitive market.
The process to reduce the operating costs of the business has continued, with an
overall reduction in operating expenditure over the period. Ongoing operating
expense management remains a key activity within Altech Autopage with aggressive
management of costs to mitigate the margin erosion through the remainder of the
financial year.
Altech Autopage subscriber acquisition cost is slightly lower, with total
subscriber acquisitions at 92 730 gross and with net growth of 23 493 customers.
The active post and pre-paid subscriber bases closed on 912 621 and 97 216
subscribers respectively on all networks, resulting in a total base of 1 009 837
active subscribers.
Data revenue grew period-on-period with the broadband and data subscriber base
increasing, excluding prepaid data. The bulk of the broadband base relates to
3G/HSDPA customers on the Vodacom and MTN GSM networks and is expected to be
enhanced through the addition of Cell C data services.
Churn and debtors management remained under pressure during the review period
and will continue to be a major area of focus. Involuntary churn and churn
related to affordability continues to contribute materially to the churn within
Altech Autopage as customers find difficulty in servicing their debt.
As a result of this, specific plans to manage churn have been implemented
primarily through tighter credit scoring, affordability measures, increased
collection processes, and subscriber retention activities that focus on
increasing the current rate of retention. Within this process, the retention of
high ARPU customers is an area of focus.
However, towards the latter part of the period positive signs appeared as the
consumer activity in the various channels increased, but on-going ARPU erosion
as well as aggressive market relating to retail price reductions remain key
focus areas.
As the Networks seek to gain share of a diminishing market by competing
aggressively for data market penetration, we will see continued margin pressure
which will require an enhanced focus on convergence products, broader product
portfolios as well as tighter cost management.
Altech Netstar Group
Altech Netstar achieved its expectations for the period, showing profit growth
on the comparable period of the prior year, despite an overall low growth market
environment. The primary target market of new vehicles remains under pressure.
Competitor activity has increased, requiring Altech Netstar to strengthen its
sales presence and related activities. The period saw a lot of focus in
developing value added services around its fleet management offering, and the
launch of the insurance telematics service in association with the world leader
Octo.
Offshore growth remains a key objective, and various opportunities in Latin
America are under consideration. The opening of the new licensed operation in
the Ivory Coast underscores Altech Netstar`s commitment to developing a wide
footprint in Africa.
Altech Netstar Traffic was able to secure a supply contract for a large tender
that is expected to commence in the second half of the financial year, and
encouraging progress was made in testing the RDS traffic service with a number
of leading motor manufacturers.
This review period saw Altech Netstar Fleet Solutions performing exceptionally
well and exceeding profit expectations.
Altech Technology Concepts (ATC)
The tier-1 network that ATC designed and implemented became available to the
market in February 2011. This next-generation network was built firmly on the
tenets of quality, resilience and and back-up capacity. Since launching the
network, there has been zero downtime on core services and infrastructure. ATC
voice solutions, including VoIP and hosted PBX, have now been implemented,
tested and rolled out commercially to the market with very satisfying customer
feedback.
ATC has both invested in infrastructure and focused heavily on human capital
resourcing to manage capacity to demand and ensure its ability to service
current and future customers.
Having incurred significant costs on upgrading ATC`s facilities, its primary
focus is to now increase revenue and ATC is expanding its direct and indirect
distribution capacity to grow revenue over the next two years. The ATC partner
programme was launched in August 2011 to increase its indirect channels and key
provisioning and marketing tools have been implemented to make business uptake
simpler and more efficient. Empowering the ATC business partners will continue
to be a key focus over the next two years through training, pre- and post-sales
assistance and technical support.
Through commitment, flexibility and responsiveness, the business has positioned
itself to execute a converged voice and data service to its business partners,
SME`s and corporate customers.
Converged Services and Connectivity
Altech Alcom Matomo (AAM)
AAM provides a number of specialised mission-critical radio and telemetry
products and solutions. The company continues to meet expectations despite
adverse market conditions, and is experiencing positive customer growth in the
SADC region.
Revenue for the first half of the financial year was slightly below that of the
equivalent prior period although it improved during the latter part of the
period with actual revenue being slightly above expectations. The second half of
the financial year still presents challenges due to delays in tender
adjudications as well as uncertainty regarding local government`s new budget
allocations.
There are substantial prospects that are awaiting tender adjudication, which
include public sector opportunities.
Altech Alcom Radio Distributors (AARD)
AARD is a channel distributor for the Motorola product set and has regularly
featured among Motorola`s top distributors for Europe, Middle East and Africa.
Digital mobile radio sales continue to expand positively as the new technology
is being assimilated into the market. Software-based radio applications to
enhance the productivity of these digital systems are being explored and are
expected to support further expansion of the product range.
Unit sales exceeded the equivalent period of last year, largely driven by
improved pricing strategies and marketing initiatives.
Altech Fleetcall (AF)
AF is a national trunked radio network operator. It provides 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 primarily
serves customers operating fleets of vehicles and closed user groups.
Net billable connections continued to increase at a steady rate, by 8% year-on-
year (and by 5% since the previous financial year-end).
Altech Stream East Africa (ASEA)
Altech Converged Services International`s financial results for the period were
down on the prior period.
The business process normalisation activities have been largely completed, and
will now go through a process of embedding, continuous improvement and
refinement. Further improvements are in progress, and audits have shown a marked
improvement, especially in financial systems.
Financial performance in general has been well below expectations and a
concerted effort is being made to correct this under-performance. Kenya Data
Networks (KDN), specifically, is trading below expectations and was further
adversely impacted by foreign currency adjustments. The exposure to future forex
fluctuations has now been minimised. Costs are carefully scrutinised, with a
major focus on revenue growth.
Across the businesses a major effort is in place to enhance existing customer
relationships and to be more responsive to customer requirements. Given the
disappointing performance of the business, the turnaround of our East African
activities is clearly a top priority within the Group and is receiving
considerable management attention. New management has been appointed and while
there will be a strong focus on resolving the existing operational and financial
challenges, there will also be a number of actions to strategically strengthen
the positioning of the companies in the region. The opportunities for growth
remain; execution is now the clear imperative.
Altech Stream Rwanda (ASR)
Significant government demand for ASR services has been determined and tenders
have been submitted in respect thereof. The long-awaited Kampala-Kigali link is
now ready and should place ASR in a strong position for business. The two links
will not only provide a competitive advantage but also improve the quality of
service delivery by ASR.
Network expansion is a priority for ASR, and this expansion will allow ASR to
capitalise on key market opportunities in addition to meeting its regulatory
commitments.
Infocom Uganda (Infocom)
Infocom is also expanding its network with the implementation of the Kampala
metro network, and the introduction of new services and pricing. Infocom has
made positive inroads in the sale of bulk Seacom bandwidth, although this has
been offset by some loss of business due to the introduction of the EASSY marine
cable. The Kampala-Kigali fibre network across Uganda will have a positive
impact, through increased data traffic volumes.
Swift Global Kenya (Swift)
The retail/wholesale split has been successfully implemented, and Swift is now
focusing on the "platinum" customer programme. Revenue growth, a strong focus on
the business segments, is critical to improve the performance of the business.
Swift has been operating on a self-funded basis until now, but further expansion
requirements have now been defined which will allow it to further develop access
to customers, and hence leverage the applications products it has developed with
third party application OEMs. The new application products are currently being
rolled out in the Kenyan environment and it is likely that these will be
extended in due course, to the other operations in Uganda, Rwanda and Tanzania.
Kenya Data Networks (KDN)
KDN, a network operator, adds to Altech`s annuity income stream via long-term
optical fibre broadband leasing contracts. There has been a strong focus on
managing the funding requirements of the business, with a 2,8 billion Kenyan
shilling loan being received at the end of April. Altech bridging loans have
been repaid and certain foreign currency denominated long-term vendor financing,
incurred prior to the acquisition of KDN by Altech, has also been repaid. As
projects reach completion, revenue is increasing, which has resulted in KDN
breaking even at PBIT level in August.
A customer agreement for the provision of 500 3G sites by KDN for Bharti Airtel
was signed and the first 100 sites have been completed. A further agreement was
signed to provide a regional ring and this will be operational by the end of
September.
There is a renewed focus on improving service quality requirements for our
customers. Network configurations are being standardised, which will result in
enhanced stability. While the number of fibre cuts is still an issue, KDN was
instrumental in pushing for legislation which prescribes severe punishment for
anybody caught vandalising infrastructure.
The DRC operation has been successfully normalised, with the regulatory and
contractual frameworks being addressed after the capital injection. The business
is expected to break even by the end of the financial year.
Altech Sameer East Africa Data Centre
The Data Centre is now ready for customer service and a major customer has
already commenced installation. It is expected that the majority of the space
will be occupied by year-end.
MULTIMEDIA AND ELECTRONICS
Altech UEC (UEC)
Ahead of the implementation of the South African Digital Migration (DTT)
programme, Altech Multimedia`s UEC business continues to deliver DTT set-top
boxes (STBs) into the African and Australian markets. UEC Australia has already
delivered 70,000 STBs to the Australian market for its Digital Migration.
Altech has agreed to acquire SetOne GmbH, a German-based distribution,
logistics, STB repair and service business focused on the DVB free-to-air retail
business in the German-speaking central European markets of Germany, Switzerland
and Austria for DTT and Freesat services. The acquisition of SetOne allows
penetration of new technology including retail products for satellite operators
into international markets. Accordingly, SetOne will expand Altech Multimedia`s
reach into international markets.
UEC`s core business continues to expand, especially focused around emerging
countries in Africa. Additionally the Altech Mediaverge business has expanded
its range of services and products to reach new markets and strengthen existing
relationships. 300 Software engineers provide Altech UEC with an ongoing
pipeline for new products for digital migration markets for STBs.
Arrow Altech Distribution (AAD)
AAD has delivered a commendable performance during the reporting period. The
company anticipates market conditions to remain slow and inconsistent over the
next six months. Its strategic thrust remains to grow faster than the market by
gaining additional market share.
INFORMATION TECHNOLOGY
Altech ISIS
The division strengthened its position with existing customers and has managed
to procure additional customers during the reporting period. Capitalising on its
innovative, real-time converged customer care and billing solutions as well as
business analysis and system integration skills, the business has expanded into
market segments other than telecommunications.
Altech West Africa
Located in Lagos, Nigeria, the division manufactures prepaid cellular vouchers
for major telecommunications operators in the country and remains the
predominant supplier of prepaid air time vouchers. The business has under-
performed due to margin pressures in the voucher and scratch card businesses;
delayed deliveries and a temporary overstocked position at a key customer. To
compensate for the erosion of these margins, the division`s product lines have
been expanded to supply initialised and personalised chip-card products to
Nigerian telecommunications network operators and financial service providers.
Despite underperforming as compared to the comparative period of the prior
financial year, the division is expected to assist in the Nigerian government`s
drive to transition the banking and retailing market segments from a cash-based
transacting model to a card-based model. This model will be fully integrated and
compliant with international chip-card based payment standards. Professional
services have also been added to enable the supply, implementation and support
of the Altech Group`s e-Security range of products in Nigeria, including supply
of and support for the Verisign and Symantec range of products.
Altech Card Solutions (ACS)
The growth trend of recent years continues as the division has secured further
orders across its product range from financial service providers, retailers and
IT solutions providers, resulting in increased profit and revenue. Growth has
surpassed expectations in the card personalisation solutions division, whilst
all other divisions have met expectations.
The recent acquisition of Eyenza, a mobile money transacting technology
platform, will broaden the division`s financial transacting product offering to
its customer base. The Eyenza solution is bank and mobile operator agnostic and
can hence be offered to the entire population when deployed into any specific
country. It is the intention to expand to other territories once the solution
has been implemented in South Africa.
Altech NuPay
The division has maintained its market position during the reporting period,
showing an improved performance on the comparable prior year period. Proposals
have been submitted to large corporates for the supply of the division`s
financial transaction switching products. Exciting projects have been completed
and launched, adding new reconciliation facilities to a broad market sector,
thereby opening up a whole new dimension for the business. The company is
delivering on its expectations and the launch of the division`s NuCard pre-paid
PIN-based product has surpassed all expectations and should provide good growth
for the future.
Altech Swisttech
This company has met pre-acquisition profit expectations. It specialises in
providing innovative business applications and business intelligence solutions
that allow clients to create marketing initiatives tailored to their customer
behaviour, usage and procurement patterns.
The company has expanded its product lines to include the development of mobile
applications (e.g. lifestyle, gaming, communication solutions and bespoke client
applications) to strengthen and sustain its position in the market. A strong
internal focus on improving productivity and efficiencies has ensured that the
division can compete in this highly competitive market segment.
ALTECH TRANSFORMATION
The Altech Group remains committed to transformation and empowerment through
skills enhancement, representative shareholding and widespread development of
disadvantaged communities by focusing on areas with maximum long-term benefit.
Altron`s Transformation Vision 2012 sets the guidelines for developing its
people and the communities around it through all aspects of BBBEE targets,
including 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 2011 as set out in the guidelines of Vision 2012
and has been verified as a Level 3 contributor.
CORPORATE ACTIVITY
Salient transactions and arrangements involving the Altech Group during the six-
month period are as follows:
Empowerment transactions
- A consortium of BEE partners led by PowerMatla (Pty) Limited has acquired an
effective 25% plus one share equity stake of UEC sub-group`s African operations,
effective from 1 September 2011. The international business of UEC outside of
Africa and its intellectual property have been retained, wholly-owned by Altech.
- Southern Palace Group of Companies (Pty) Limited acquired an effective 25%
plus one share equity holding in the sub-group consisting of AAM, AARD and AF,
via a new holding company which has been incorporated for this purpose, with
effect from 1 March 2011. The international business of this sub-group and its
intellectual property has been retained, wholly-owned by Altech.
- Both of the above transactions were vendor-financed by Altech and facilitated
by restructurings of the sub-groups concerned, enabling the empowerment
consortia to acquire their interests for a nominal consideration.
- Altech has acquired the 25% equity interest of Pamodzi Investment Holdings
(Pty) Limited in Altech Information Technologies (Pty) Limited, the holding
company for Altech`s information technology sub-group, effective 1 July 2011.
The purchase price for the interest concerned was R37,5 million, payable in cash
and the shares were acquired ex the dividend for the last financial year.
Negotiations are currently underway for a further vendor-financed empowerment
transaction, for this sub-group.
Other transactions
- As approved by Altech shareholders in a general meeting in July 2011, Altech
has entered into a strategic collaboration with Intel Capital to accelerate the
adoption of broadband services in Africa in the telecommunications, multimedia
and IT sectors. The transaction includes the investment of Intel Capital of US$5
million by way of a convertible loan at a fixed interest rate, convertible into
Altech ordinary shares, at Intel Capital`s election, after the first anniversary
thereof.
- The acquisition of Eyenza Mobile Money, referred to under the IT division
report above, has taken place, with effect from 1 September 2011.
- The acquisition of SetOne GmbH (SetOne) by UEC, referred to in the Multimedia
division report above, is expected to be unconditional and to take effect from 1
October 2011. The acquisition involves an immediate cash outlay of approximately
Euro2,52 million, followed by three annual payments totalling a maximum of
approximately Euro2,34 million, linked to the achievement of specified profit
levels by SetOne.
THE WAY FORWARD
The Group believes that certain of the adverse factors which affected the
results of the first six months will not recur in the second half of the
financial year. There will be a continued strong focus on improving the
performance in East Africa and capitalising on acquisitions and convergence
opportunities.
On behalf of the board
Moss Leoka Craig Venter Dr John Carstens
(Non-Executive (Chief Executive (Chief Financial
Chairman) Officer) Officer)
28 September 2011
Directors:
M Leoka (Chairman)#
CG Venter (Chief Executive Officer)
Dr JEW Carstens (Chief Financial Officer)
JA Hedberg**
PMO Curle*#
AD Dixon#
R Naidoo#
SR Ntuli#
Dr HA Serebro
M Sindane#
ZJ Sithole#
AMR Smith*#
RE Venter#
Dr WP Venter#
*British
*US citizen
#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: 28/09/2011 07:24:27 Produced by the JSE SENS Department.
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