| Tue 8 May 2012, 7:15 | | ATN/ATNP - Allied Electronics Corporation Limited - Summarised audited |
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ATN ATNP
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ATN/ATNP - Allied Electronics Corporation Limited - Summarised audited
consolidated financial statements for the year ended 29 February 2012
ALLIED ELECTRONICS CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1947/024583/06)
Share code: ATN ISIN: ZAE000029658
Share code: ATNP ISIN: ZAE000029666
SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 29 FEBRUARY 2012
Summarised consolidated statement of comprehensive income
% 2012 2011
R millions change (Audited) (Audited)
Revenue 3 23 563 22 810
EBITDA (7) 1 946 2 099
Depreciation and amortisation (562) (575)
Operating profit before capital items (9) 1 384 1 524
Capital items (Note 1) (900) (291)
Result from operating activities 484 1 233
Finance income 71 64
Finance expense (156) (163)
Share of (loss)/profit from associates (1) 2
Profit before taxation 398 1 136
Taxation (477) (437)
(Loss)/profit for the year (79) 699
Other comprehensive income/(loss)
Foreign currency translation differences 95 (312)
in respect of foreign operations
Effective portion of changes in the fair - 9
value of cash flow hedges
Income tax on other comprehensive income - (2)
Other comprehensive income/(loss) for 95 (305)
the year, net of taxation
Total comprehensive income for the year 16 394
(Loss)/profit attributable to:
Non-controlling interests (253) 157
Altron equity holders 174 542
(Loss)/profit for the year (79) 699
Total comprehensive income attributable
to:
Non-controlling interests (212) 13
Altron equity holders 228 381
Total comprehensive income for the year 16 394
Basic earnings per share (cents) (68) 55 172
Diluted basic earnings per share (cents) (68) 54 168
Dividends per share paid (cents) 108 90
Dividends per share declared (cents) (15) 92 108
Notes
Basis of preparation
The summarised consolidated financial statements have been prepared in
accordance with the recognition and measurement requirements of International
Financial Reporting Standards (IFRS), the presentation and disclosure
requirements of IAS 34 - Interim Financial Reporting, the AC 500 series issued
by the Accounting Practices Board, the JSE Listings Requirements and the South
African Companies Act.
The accounting policies used in the preparation of these results are consistent
with those used in the annual financial statements for the year ended 28
February 2011.
This report was compiled under supervision of Mr Alex Smith, CA, Chief Financial
Officer, and Mr Arno Geldenhuys, CA(SA), Group Financial Manager.
Report of the independent auditor
The unmodified audit reports of KPMG Inc., the independent auditor, on the
annual financial statements and the summarised financial statements contained
herein for the year ended 29 February 2012, dated 7 May 2012, are available for
inspection at the registered office of the company.
% 2012 2011
R millions change (Audited) (Audited)
Headline earnings per share (cents) (16) 191 228
Diluted headline earnings per share (16) 187 223
(cents)
Adjusted headline earnings per share (15) 210 248
(cents)
Adjusted diluted headline earnings per (15) 206 243
share (cents)
1. Capital items
Net gain on disposal of property, plant and 36 10
equipment
Impairment of property, plant and equipment (235) (14)
Impairment of goodwill (412) (276)
Impairment of intangibles (300) (11)
Profit on disposal of subsidiary 14 -
Impairment of investment (3) -
(900) (291)
2. Reconciliation between attributable earnings
and headline earnings
Attributable to Altron equity holders 174 542
Capital items - gross 900 291
Tax effect of capital items (10) -
Non-controlling interests in capital items (461) (114)
Headline earnings 603 719
3. Reconciliation between attributable earnings
and diluted earnings
Attributable to Altron equity holders 174 542
Dilutive earnings attributable to B-BBEE non- (4) (9)
controlling interests in subsidiaries
Dilutive earnings attributable to dilutive - (3)
options at subsidiary level
Non-controlling interests in adjustments - 1
Diluted earnings 170 531
4. Reconciliation between headline earnings and
diluted headline earnings
Headline earnings 603 719
Dilutive earnings attributable to B-BBEE non- (4) (9)
controlling interests in subsidiaries
Dilutive earnings attributable to dilutive (10) (6)
options at subsidiary level
Non-controlling interests in adjustments 4 2
Diluted headline earnings 593 706
5. Reconciliation between headline earnings and
adjusted headline earnings
Adjusted headline earnings have been presented to
demonstrate the impact of accounting charges on
the headline earnings of the group. Headline
earnings are reconciled to adjusted headline
earnings as follows:
Headline earnings 603 719
Amortisation of intangibles arising on business 94 102
combinations
Expenses associated with B-BBEE transactions 6 4
IFRS 2 charge on B-BBEE transactions 5 7
Tax effect of adjustments (24) (27)
Non-controlling interests in adjustments (20) (22)
664 783
6. Reconciliation between diluted headline
earnings and adjusted diluted headline earnings
Diluted headline earnings 593 706
Amortisation of intangibles arising on business 94 102
combinations
Expenses associated with B-BBEE transactions 6 4
IFRS 2 charge on B-BBEE transactions 5 7
Tax effect of adjustments (24) (27)
Non-controlling interests in adjustments (20) (22)
654 770
Fully diluted earnings, diluted headline earnings and adjusted diluted headline
earnings have been calculated in accordance with IAS 33 - Earnings per Share, on
the basis that:
- The recognition of the deferred sale of a 30% interest in Aberdare Cables
to the Izingwe Consortium based on the assumption that the outstanding
purchase price will be settled in cash for R71 million, adjusted for the
dilutive effect of the option price at the Aberdare Cables level and after
taking into account the 10% investment in the Izingwe Consortium by Power
Technologies (Pty) Limited.
- The earnings effect of dilutive options at Allied Technologies Limited
level.
7. Acquisitions of subsidiaries
Acquisitions of 100% interest in Security Partnership Limited and HealthOne
During the period the Bytes group acquired two operations, namely Security
Partnership Limited and HealthOne, for an aggregate consideration of R96
million, of which R25 million is deferred.
The acquired businesses contributed revenue of R66 million and net profit
after tax of R6 million to the group. If the acquisition had occurred on 1
March 2011, group revenue and net profit after tax would have increased by
R42 million and R4 million respectively. These amounts have been calculated
using the group`s accounting policies.
Security Partnership Limited is a UK-based IT security specialist providing
secure IT solutions and related managed services to corporate and public
sector organisations. The full issued share capital was acquired effective
1 August 2011. HealthOne is an interactive clinical record system that
improves practice efficiency and profitability and allows for smooth
interoperability and exchange of information within a secure, non-intrusive
environment. The operations of HealthOne were acquired effective 31 May
2011.
Recognised Fair value Carrying
values adjustments amount
The acquirees` balance sheets at
the date of acquisition were as
follows:
Intangible assets on acquisition - 29 29
Trade and other receivables 15 - 15
Trade and other payables (15) - (15)
Deferred tax - (7) (7)
Tax (1) - (1)
Cash and cash equivalents 16 - 16
Total net assets on acquisition 15 22 37
Goodwill arising on acquisition 59
Total purchase consideration 96
Less deferred purchase (25)
consideration
Consideration paid in cash 71
Less cash and cash equivalents in (16)
subsidiaries acquired
Net cash outflow on acquisitions 55
Acquisitions of 100% interest in Eyenza Mobile Money (Pty) Limited and SetOne
GmbH
Effective 1 September 2011 the Altech Group acquired 100% of the issued share
capital of Eyenza Mobile Money (Pty) Limited (Eyenza) for R4 million. Eyenza is
a wallet-based, mobile money payments system that is targeted at the unbanked
population of South Africa and Africa.
The Altech 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. 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 call option was exercised on 27 September 2011. The total maximum purchase
price for 100% of the shares in the company is Euro4,92 million (R45 million).
Euro2,52 million was payable in cash upon fulfilment of the conditions precedent
and the balance of Euro2,40 million is payable in terms of an earn-out over
three years.
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.
The maximum purchase price is Euro4,92 million, payable in cash. The purchase
price is payable as follows:
- first tranche: Euro2,52 million (paid in October 2011)
- second tranche: Euro0,13 million (payable October 2012)
- third tranche: Euro1,33 million (payable October 2013)
- fourth tranche: Euro0,94 million (payable October 2014)
The second, third and fourth tranches will be paid in terms of an earn-out
mechanism over three years based on after-tax profit targets for the financial
years ended/ending February 2012, 2013 and 2014 being achieved.
The acquired business contributed revenue of R83 million and net profit after
tax of R9 million to the group. If the acquisition had occurred on 1 March 2011,
group revenue and net profit after tax would have increased/(decreased) by R67
million and (R14 million) respectively.
These amounts have been calculated using the group`s accounting policies. A
purchase price allocation will be performed in the next financial year.
Recognised Fair value Carrying
values adjustments amount
The acquirees` balance sheets at
the date of acquisition were as
follows:
Property, plant and equipment 7 - 7
Intangible assets 8 - 8
Trade and other receivables 38 - 38
Non-current liabilities (5) - (5)
Trade and other payables (35) - (35)
Bank overdraft (16) - (16)
Total net assets on acquisition (3) - (3)
Goodwill arising on acquisition 56
Total purchase consideration 53
Bank overdraft acquired 16
Less deferred purchase (28)
consideration
Net cash outflow on acquisitions 41
8. Disposals
Disposal of 50.1% shareholding of the group`s interest in Battech (Pty)
Limited
In September 2011 the group signed agreements to sell 50.1% of its
industrial battery business incorporating Battery Technologies, Rentech and
Willard Industrial Division to EnerSys for R75 million.
The group now equity accounts for the investment as an investment in
associate.
9. Assets and liabilities classified as held-for-sale
On 14 February 2012 the decision was taken to sell Altech West Africa
Limited and the operation was subsequently classified as held-for-sale. The
net asset value of the operation amounted to R68 million and the operation
did not constitute a discontinued operation.
10. Post-balance sheet events
Effective 31 March 2012, Bytes Technology Group South Africa (Pty) Limited
acquired the entire issued share capital of Unisys Africa (Pty) Limited
("Unisys Africa") for a cash consideration of R77 million. Unisys Africa
provides IT services and technology offerings to customers in sub-Saharan
Africa and the net asset value acquired amounted to R55 million.
Identification and valuation of intangible assets arising from the business
combination will be performed during the first half of the 2013 financial
year.
Summarised consolidated balance sheet
2012 2011
R millions (Audited) (Audited)
Assets
Non-current assets 4 695 5 329
Property, plant and equipment 2 300 2 413
Intangible assets, including goodwill 1 732 2 274
Associates 74 10
Other investments 233 235
Rental finance advances 67 61
Loans receivable 150 134
Deferred taxation 139 202
Current assets 7 585 7 090
Inventories 2 475 2 336
Trade and other receivables, including 3 872 3 373
derivatives
Assets classified as held-for-sale 135 -
Cash and cash equivalents 1 103 1 381
Total assets 12 280 12 419
Equity and liabilities
Total equity 5 813 6 314
Non-current liabilities 936 1 020
Loans 707 758
Empowerment funding obligation 47 72
Provisions 20 23
Deferred income 51 46
Deferred taxation 111 121
Current liabilities 5 531 5 085
Loans 613 481
Empowerment funding obligation 24 17
Bank overdrafts 550 128
Trade and other payables, including 4 079 4 049
derivatives
Provisions 118 164
Liabilities classified as held-for-sale 67 -
Taxation payable 80 246
Total equity and liabilities 12 280 12 419
Net asset value per share (cents) 1 583 1 607
Segmental report
Segment analysis
The segment information has been prepared in accordance with IFRS 8 - Operating
Segments, which defines the requirements for the disclosure of financial
information of an entity`s operating segments.
The standard requires segmentation based on the group`s internal organisation
and reporting of revenue and EBITDA based upon internal accounting presentation.
Effective 1 March 2011 Altech Autopage Cellular (APC) purchased the business of
Altech Technology Concepts (ATC). APC`s revenue and earnings before interest,
tax, depreciation and amortisation (EBITDA) thus includes the results of ATC.
APC`s revenue and EBITDA for the prior year have therefore been restated.
The segment revenue and EBITDA generated by each of the group`s reportable
segments are summarised as follows:
Revenue
Growth
R millions 2012 2011 Cur/Pyr %
Powertech Cables Group 4 364 3 904 12
Powertech Transformers Group 1 446 1 305 11
Other Powertech Segments 1 712 1 905 (10)
Powertech Group 7 522 7 114 6
Bytes Technology Group UK Software 1 168 1 664 (30)
Bytes Document Solutions Group 2 088 2 036 3
Other Bytes Segments 2 838 2 367 20
Bytes Group 6 094 6 067 -
Altech Autopage Cellular 6 069 5 903 3
Altech UEC Group 1 187 1 145 4
Altech Netstar Group 1 008 944 7
Altech Converged Services 396 426 (7)
(International)
Other Altech Segments 1 312 1 233 6
Altech Group 9 972 9 651 3
Corporate and financial services 32 46 (30)
Altron Group 23 563 22 810 3
EBITDA
Growth
R millions 2012 2011 Cur/Pyr %
Powertech Cables Group 104 162 (36)
Powertech Transformers Group 216 212 2
Other Powertech Segments 180 165 9
Powertech Group 500 539 (7)
Bytes Technology Group UK Software 37 47 (21)
Bytes Document Solutions Group 188 201 (6)
Other Bytes Segments 302 226 34
Bytes Group 527 474 11
Altech Autopage Cellular 266 294 (10)
Altech UEC Group 126 82 54
Altech Netstar Group 335 331 1
Altech Converged Services 27 131 (79)
(International)
Other Altech Segments 165 234 (29)
Altech Group 919 1 072 (14)
Corporate and financial services - 14 (100)
Inter-segment revenue
Altron Group 1 946 2 099 (7)
12 months to 12 months to
29 February 2012 28 February 2011
Segment EBITDA can be reconciled to
group operating profit before
capital items as follows:
Segment EBITDA 1 946 2 099
Reconciling items:
Depreciation (396) (385)
Amortisation (166) (190)
Group operating profit before 1 384 1 524
capital items
Summarised consolidated statement of cash flows
2012 2011
R millions (Audited) (Audited)
Cash flows from operating activities 1 1 077
Cash generated by operations 1 955 2 114
Net finance expense (86) (96)
Changes in working capital (725) (57)
Taxation paid (612) (419)
Cash available from operating activities 532 1 542
Dividends paid, including to non-controlling (531) (465)
interests
Cash flows utilised in investing activities (768) (686)
Cash flows from/(utilised in) financing 37 (307)
activities
Net (decrease)/increase in cash and cash (730) 84
equivalents
Net cash and cash equivalents at the beginning 1 253 1 174
of the year
Effect of exchange rate fluctuations on cash 19 (5)
held
Cash classified as held-for-sale 11 -
Net cash and cash equivalents at the end of 553 1 253
the year
Operational contribution
% 2012 % 2011 %
R millions change (Audited) (Audited)
Revenue
Altech 3 9 972 42 9 651 42
Bytes - 6 094 26 6 067 27
Powertech 6 7 522 32 7 114 31
Corporate, (25) - (22) -
financial
services and
eliminations
3 23 563 100 22 810 100
Operating
profit*
Altech (18) 649 47 787 52
Bytes 12 424 31 378 25
Powertech (10) 314 22 348 23
Corporate (3) - 11 -
and
financial
services
(9) 1 384 100 1 524 100
% held % held
at at
Attributable 29 Feb 28 Feb
headline 2012 2011
earnings:
Altech 61,5 61,5 (29) 208 34 292 41
Bytes 100,0 100,0 22 253 42 208 29
Powertech 100,0 100,0 (33) 125 21 187 26
Corporate 100,0 100,0 17 3 32 4
and
financial
services
(16) 603 100 719 100
* Operating profit is stated before capital items
Supplementary information
2012 2011
R millions (Audited) (Audited)
Borrowings 1 391 1 328
- interest bearing 1 076 970
- non-interest bearing 244 269
- B-BBEE funding obligation 71 89
Depreciation 396 385
Amortisation 166 190
Net foreign exchange losses 21 36
Capital expenditure 687 648
Capital commitments 161 163
Lease commitments 797 777
Payable within the next 12 months: 189 217
- property 169 156
- plant, equipment and vehicles 20 61
Payable thereafter: 608 560
- property 580 456
- plant, equipment and vehicles 28 104
Unlisted investments (including associates)
- Carrying amount 307 245
- Directors` valuation 307 246
Weighted average number of shares (millions) 316 316
- Ordinary shares 102 102
- Participating preference shares 214 214
Diluted average number of shares (millions) 318 317
Shares in issue at the end of the year 316 316
(millions)
- Ordinary shares 102 102
- Participating preference shares 214 214
Ratios
EBITDA margin (%) 8,3 9,2
ROCE (%) 19,2 19,9
ROE (%) 11,6 13,6
ROA (%) 13,2 14,6
RONA (%) 19,1 20,0
Borrowings ratio (%) 23,9 21,0
Current ratio 1.4:1 1.4:1
Acid test ratio 0.9:1 0.9:1
Summarised consolidated statement of changes in equity
Attributable to Altron equity holders
Share capital and Treasury Retained
R millions and premium shares Reserves earnings
Balance at 28 February 2 236 (299) (1 259) 4 067
2010 (audited)
Total comprehensive
income for the year
Profit for the year - - - 542
Other comprehensive
income
Foreign currency - - (168) -
translation
differences in respect
of foreign operations
Effective portion of - - 7 -
changes in the fair
value of cash flow
hedges
Total other - - (161) -
comprehensive income
Total comprehensive - - (161) 542
income for the year
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Dividends to equity - - - (284)
holders
Issue of share capital 5 - - -
Share-based payment - - 14 -
transactions
Total contributions by 5 - 14 (284)
and distributions to
owners
Changes in ownership
interests in
subsidiaries
Introduction of non- - - 214 -
controlling interests
Total changes in - - 214 -
ownership interests in
subsidiaries
Total transactions 5 - 228 (284)
with owners
Balance at 28 February 2 241 (299) (1 192) 4 325
2011 (audited)
Total comprehensive
income for the year
Profit for the year - - - 174
Other comprehensive
income
Foreign currency - - 54 -
translation
differences in respect
of foreign operations
Total other - - 54 -
comprehensive income
Total comprehensive - - 54 174
income for the year
Transactions with
owners recorded
directly in equity
Contributions by and
distributions to
owners
Issue of share capital 3 - - -
Dividends to equity - - - (341)
holders
Share-based payment - - 27 -
transactions
Total contributions by 3 - 27 (341)
and distributions to
owners
Changes in ownership
interests in
subsidiaries
Buy-back of non- - - 11 -
controlling interests
Disposal of subsidiary - - - -
Total changes in - - 11 -
ownership interests in
subsidiaries
Total transactions 3 - 38 (341)
with owners
Balance at 29 February 2 244 (299) (1 100) 4 158
2012 (Audited)
Attributable to Altron
equity holders
Non-controlling Total
R millions Total interests equity
Balance at 28 February 4 745 1 610 6 355
2010 (audited)
Total comprehensive
income for the year
Profit for the year 542 157 699
Other comprehensive
income
Foreign currency (168) (144) (312)
translation
differences in respect
of foreign operations
Effective portion of 7 - 7
changes in the fair
value of cash flow
hedges
Total other (161) (144) (305)
comprehensive income
Total comprehensive 381 13 394
income for the year
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to
owners
Dividends to equity (284) (181) (465)
holders
Issue of share capital 5 4 9
Share-based payment 14 7 21
transactions
Total contributions by (265) (170) (435)
and distributions to
owners
Changes in ownership
interests in
subsidiaries
Introduction of non- 214 (214) -
controlling interests
Total changes in 214 (214) -
ownership interests in
subsidiaries
Total transactions (51) (384) (435)
with owners
Balance at 28 February 5 075 1 239 6 314
2011 (audited)
Total comprehensive
income for the year
Profit for the year 174 (253) (79)
Other comprehensive
income
Foreign currency 54 41 95
translation
differences in respect
of foreign operations
Total other 54 41 95
comprehensive income
Total comprehensive 228 (212) 16
income for the year
Transactions with
owners recorded
directly in equity
Contributions by and
distributions to
owners
Issue of share capital 3 - 3
Dividends to equity (341) (190) (531)
holders
Share-based payment 27 6 33
transactions
Total contributions by (311) (184) (495)
and distributions to
owners
Changes in ownership
interests in
subsidiaries
Buy-back of non- 11 (30) (19)
controlling interests
Disposal of subsidiary - (3) (3)
Total changes in 11 (33) (22)
ownership interests in
subsidiaries
Total transactions (300) (217) (517)
with owners
Balance at 29 February 5 003 810 5 813
2012 (Audited)
Message to shareholders
The Altron financial results for the year ended 29 February 2012 are reported in
an integrated manner in accordance with the G3 Guidelines of the Global
Reporting Initiative (GRI) as recommended by King III, reflecting those issues
that are applicable and which materially affect or contribute to the sustainable
development of Altron in terms of its financial and non-financial performance.
The majority of the group`s businesses performed satisfactorily during the year
under review. However, the overall results were negatively impacted by three
underperforming businesses namely Altech`s operations in East and West Africa,
and Powertech`s international cable businesses located in Spain and Portugal
(Iberia).
Altron`s revenue increased by 3% to R23.6 billion when compared to the prior
year. Earnings before interest, tax, depreciation and amortisation (EBITDA)
declined by 7% to R1,946 million, while operating profit before capital items
was 9% lower. Within the group, Bytes again delivered a strong performance with
most of its operations achieving good revenue and profit growth. Altech`s
results were dominated by poor performances in its East and West African
operations with significant impairments impacting earnings. However, most of
Altech`s other businesses performed satisfactorily. The Powertech businesses,
with the exception of the Cables group, performed well. The Cables group was
negatively influenced by a poor performance at Aberdare International, caused by
very difficult economic conditions in Iberia, while the local cable business
also fell short of expectations albeit recording a much improved performance in
the second half of the year. Consequently, Altron reported a 15% decline in
adjusted diluted headline earnings per share for the financial year under
review.
External factors
While the South African economy has grown during the past financial year, much
of this growth has occurred in the retail sector with more muted growth evident
in many other sectors. The effects of the Eurozone-crisis cannot be ignored,
particularly the resulting market volatility that was evident in the last
quarter of 2011. This resulted in commodity prices and emerging market
currencies weakening, but we saw a recovery in January and February 2012 to the
levels that existed at the half-year. The stronger currency and commodity prices
have had a negative influence on South Africa`s export competitiveness.
Despite interest rates remaining relatively low during the period under review,
the building and construction sector continued to show no real signs of
recovery. Residential property seems to have bottomed out, while the rate of
decline in the commercial property sector appears to have slowed with sporadic
signs of recovery. However, demand in the electrical infrastructure market
remained relatively strong, led by spending by Eskom and certain municipalities.
Parastatals in particular are providing encouraging support to locally-based
manufacturing operations.
In the telecommunications sector, voice continues to play an important role,
though competition is fierce and the Average Revenue per User (ARPU) is
declining as a result of lower interconnect fees and a more cost conscious
consumer. The real growth area remains the data market although margins
have been under pressure over the last year with rapid declines in data
package pricing in both the mobile and ISP spaces, locally as well as in
the rest of sub-Saharan Africa.
New vehicle sales growth rates continued at strong levels through 2011, but are
expected to moderate over the 2012 year. The insurance industry`s new focus on
telematics (monitoring driver behaviour) is likely to drive a new impetus in
the vehicle tracking market.
The set-top box industry expects to benefit from the digital migration in South
Africa and the rest of Africa with over 30 million set-top boxes needed on the
continent. In addition, there are other global opportunities regarding the
switch from analogue to digital broadcasting, particularly in Australia and the
wider European market.
The information technology sector continued to show good growth, particularly
in the retail and financial services markets, with these continuing their
significant technology refresh programmes. This is presenting significant
business opportunities, although the competition in these markets is intense.
IT is becoming an increasingly important business enabler and the robust
demand seen can be attributed partly to the strength of the rand (it is a
good opportunity to purchase `hard currency` priced products) and partly to
the fact that no business can afford to delay IT spend for too long.
Financial overview
Income
While Altron`s revenue increased by 3% to R23.6 billion from R22.8 billion,
EBITDA declined by 7% to R1,946 million from R2,099 million reflecting an
EBITDA margin of 8.3%, down from the previous 9.2%. Headline earnings per
share declined by 16% to 191 cents, while adjusted diluted headline earnings
per share declined by 15% to 206 cents.
Net finance expenses declined to R85 million from R99 million in the prior
year as a result of lower average borrowings throughout the year and the
benefit of lower interest rates. Capital items increased significantly due to
the impairment of goodwill at Altech East and West Africa and the impairment
of a substantial portion of the operating asset base in Altech East Africa.
The net effect of the aforementioned resulted in the consolidated profit
before tax declining by 65% to R398 million.
Due to the substantial impairments, the group incurred a loss after tax of R79
million. This was also impacted by a significant increase in the effective tax
rate as a result of non-recognition of various deferred tax assets on losses in
the underperforming operations and an increased STC charge on the higher
dividends paid.
Adjusted diluted headline earnings per share decreased by 15% with the
difference between this measure and headline earnings per share being
attributable to various once-off transaction costs and the reduced dilutive
effect of the B-BBEE structure at Aberdare Cables.
Cash management
Cash generated by operations of R1,955 million is slightly lower than in the
prior year as a result of the reduced profitability levels, while we have also
seen an increase in working capital of R725 million due to higher levels of
receivables, partly due to strong last quarter sales, as well as increased
inventory levels at a number of operations. Cash outflows on taxation were
considerably higher than in previous years as a result of timing differences on
the payment of tax, resulting in three payments as opposed to the usual two.
Investing activities, which principally related to capital expenditure, were up
on the prior year at R768 million. Since 1 March 2011, Altech, predominantly in
its East African operations, incurred capital expenditure of R365 million
(including intangibles), while there was a further R223 million of capital
expenditure within the Powertech group related to the rationalisation of the
Aberdare Cables operations as well as the capital expenditure programme at
Powertech Transformers.
The R37 million of cash derived from financing activities is predominantly due
to the new local financing in Altech East Africa, partially offset by repayments
of borrowings in the Bytes and Powertech groups.
Subsidiary review
Subsidiary income and growth
Altech revenue increased by 3% to R9.97 billion from prior year levels while
EBITDA declined by 14% to R919 million with the EBITDA margin reducing from
11.1% to 9.2%. Headline earnings per share declined by 29%, while diluted
adjusted headline earnings per share declined by 28%. The disappointing
performances in the Altech East African and West African operations were offset
to an extent by the majority of the remaining business units performing
satisfactorily.
Altech Autopage Cellular increased revenue by 3%, but saw a 10% decrease in
EBITDA compared to the prior year, which was mainly due to the losses made by
Altech Technology Concepts which was merged with the Altech Autopage operations
during the year under review. The business has seen ARPUs decline over the last
year as a result of price deflation in a highly competitive environment. At 29
February 2012, the subscriber base was 1 031 995, with 91% being post-paid.
Mobile and fixed data customer growth increased by 60% and 44% respectively
compared to the previous year. The merger of Altech Technology Concepts and
Altech Autopage Cellular will enable the entity to offer bundled services, eg
converged voice and data to its large client base in the future.
The Altech Netstar group achieved revenue growth of 7%, primarily due to an
impressive increase in the subscriber base at its fleet management business
while EBITDA increased by 1% over the prior year. The stolen vehicle recovery
business continued to perform well and has expanded its product range into
insurance telematics through its partnership with Octo Telematics. International
expansion and partnerships remain key strategic objectives for Altech Netstar.
Altech UEC`s revenue increased marginally, by 4%, while EBITDA increased by a
pleasing 54%. This significant improvement in profitability can be attributed to
an improved performance out of the manufacturing operation following its move to
new premises, the increased focus on software development for broadcasters, as
well as the successful conclusion of the SetOne GmbH acquisition in Germany.
Prospects for the business look favourable with the benefits of digital
terrestrial television still to be realised and a continued focus on moving into
the higher value-adding areas of the industry.
Arrow Altech Distribution continued to perform well, increasing revenue by 20%
and EBITDA by 13%. It has been able to grow volumes further, notwithstanding the
substantial increase achieved last year. This volume growth has primarily been
achieved through its entry into the military and aerospace markets.
The Altech IT group improved revenue by 10% but EBITDA declined by 18% primarily
as a result of the underperformance of its West African business which was
affected by low margins on paper pre-paid recharge vouchers as well as a delay
in orders for the supply of plastic chip card products to financial
institutions. A decision has been made to dispose of this operation after
impairing its goodwill amounting to R243 million. Altech Isis performed
satisfactorily, and much focus is going into further diversifying its customer
base. Altech Card Solutions continues to perform well on the back of good EFTPOS
terminal sales, as well as good progress on the e-Security product ranges.
Altech Swisttech, a recent acquisition, performed adequately, although it
experienced margin pressures and the cancellation of a major project.
The Altech Converged Services International group reported extremely
disappointing results with revenue declining by 7% and EBITDA by 79%. As a
result it was necessary to impair the remaining goodwill, the intangibles and a
portion of the property, plant and equipment amounting in total to R589 million
(2011: R250 million). The investment is undergoing a period of consolidation and
there will be significant challenges in improving its performance, particularly
in the short term. A new management team has been appointed to resolve the
existing operational and financial difficulties while there is increasing focus
on network reliability, client requirements and relationships. Several key
projects, notably the Nairobi data centre and the Kampala-Kigali fibre link,
have recently been completed and are now generating revenue. Unfortunately these
achievements have been offset by the recent loss of a key customer. A key
objective and focus of management is to significantly increase revenue-
generating traffic on the network.
Altech`s return on equity declined to 21.2% as a result of the additional
investments into the East African businesses as well as the reduced
profitability of the group. Return on capital employed increased to 29.6% during
the year under review.
The group`s prospects will be greatly influenced by its ability to improve the
results out of East Africa, which is viewed as a medium-term process, and the
disposal of the West African operation. Nevertheless, the South African
businesses remain strong and are well positioned to continue to deliver positive
results.
Bytes reported good results and although revenue was flat at R6.1 billion,
EBITDA grew impressively by 11% to R527 million with the EBITDA margin improving
from 7.8% to 8.6%. Headline earnings for the Bytes group improved by a pleasing
22% to R253 million with the majority of operations performing commendably.
The one exception was Bytes Document Solutions` South African operations which
reported no growth in revenue and EBITDA down by 11%. While the core Xerox
business performed satisfactorily, both LaserCom and NOR Paper recorded
disappointing performances. The closure of certain non-performing areas of the
business as well as management changes will help reposition these businesses,
and should see them produce more acceptable returns in the coming year.
Bytes Managed Solutions again produced an exceptional performance with
significantly higher NCR equipment sales positively influencing revenue and
EBITDA, which increased by 18% and 19% respectively. The business has been
extremely successful in the last few years in both the retail and financial
services markets, recently winning a key contract to refresh all of ABSA`s ATMs
over the next three years.
Bytes Systems Integration produced record results, with its African operations
contributing substantially to the improvement in overall profits. Revenue
increased by 19% and EBITDA by 27%. This business` outlook is promising and
acquisition opportunities to enhance current offerings are being evaluated.
Bytes People Solutions performed well with revenue and EBITDA increasing at 15%
and 17% respectively. The business won two key awards, namely the Best Sun
Trainer for Oracle SA Award and the Best Overall Partner for Oracle in South
Africa Award and has become a reliable supplier of `learnerships` to corporate
South Africa.
Bytes Connect saw a significant improvement in its EBITDA margins during the
past year as it realised the benefits of the rationalisation of three operations
into one. Revenue remained flat while EBITDA increased by an exceptional 128%.
The outsourcing and networking businesses performed in line with expectations
and the I-Contact business (previously Intelleca) delivered a pleasing
contribution with a much reduced cost base after securing a number of new
accounts.
Bytes Healthcare Solutions increased revenue by 5% and EBITDA by 10% which is
pleasing considering it is already the industry`s largest player. This was
achieved through strong cost control and the business is in the process of
repositioning itself through various new initiatives.
The Bytes UK operations delivered good results. While they experienced a 21%
decline in revenue, EBITDA increased by 12%. This decline in revenue was
attributable to the non-recurrence of some GBP57 million of revenue for
Microsoft licenses from the UK`s National Health Service (NHS). Excluding the
NHS contribution in the prior year, revenue in the underlying business
increased. The increase in profitability was due to an excellent contribution
from the Document Solutions side of the business which was recognised by Xerox
as the leading reseller in the UK and which more than doubled its EBITDA.
Profitability was also assisted by the newly acquired Security Partnerships
Limited, a business that distributes and provides services in the security
software area. The acquisition is performing well against expectations and
operates at attractive margins in a strong growth area within the IT sector.
Bytes has significantly improved its returns in the last 12 months due to strong
cost control and an improved performance across its entire portfolio of
businesses. ROE improved from 20.3% to 22.0%, while ROCE moved from 23.8% to
25.5%.
Bytes` prospects are viewed as positive as it builds on the momentum created
over the last two years and its position as the largest South African-owned IT
group. A new government sales team has been created which, together with the
acquisition of Unisys Africa, an active participant in the public sector, hope
to assist Bytes in penetrating this market in the medium term. Bytes is also
actively pursuing various potential acquisition opportunities that will
complement its current businesses.
Powertech revenue increased by 6% to R7.5 billion, while its EBITDA reduced by
7% to R500 million with the EBITDA margin declining from 7.6% to 6.7%. Headline
earnings for the Powertech group declined by 33% due to a significantly higher
effective tax rate as a result of non-recognition of various deferred tax assets
on losses in underperforming operations as well as the non-recurrence of a large
tax overprovision in the prior year. The majority of Powertech`s businesses
performed well during the year. The decline in profitability is mainly due to
the weak demand in the Iberian segment of the Cables group. Excluding the Cables
group, Powertech`s EBITDA increased by 5%.
The Powertech Cables group experienced a 12% increase in revenue with revenue
growth of around 17% in the South African operations offset by an 8% decline in
the international operations. EBITDA declined by 36% as a result of the Iberian
operations incurring significant losses. Both the Portuguese and Spanish
economies are experiencing extremely difficult times, particularly given the
focus on austerity measures in those countries. Aberdare Cables` operations in
these territories are in the process of reviewing their business models and
expanding their customer bases, focusing on export markets. The local operations
growth in revenue principally came from a higher copper price and improved
aluminium sales. The 5% decline in EBITDA levels was mainly driven by its poor
performance in the first six months, which included the impact of the labour
strikes in July. The business had an improved second half of the year with more
consistent levels of revenue and gross profit.
The Powertech Transformers group produced a pleasing 11% increase in revenue and
a 2% growth in EBITDA compared to the prior year. The Power division performed
extremely well during the year off the back of increased capital expenditure by
Eskom and the award of certain municipal tenders. The Distribution division
performed satisfactorily, particularly when taking into account its exposure to
the local building and construction industry. A new division for switchgear was
established during the year and the first sales of these new products were
recognised in the fourth quarter.
The Powertech Batteries group delivered a good performance despite an overall
decline in revenue of 8%. This decline was largely attributable to 50.1% of the
industrial side of the business being sold to Enersys in October 2011 and
results in this part of the business now being equity accounted. The remaining
automotive business had an excellent year. Overall EBITDA increased by 27%,
reflecting continuing efficiency improvements in the manufacturing operations
and a strong sales performance.
The Powertech Industrial group has now been restructured, with Strike moving to
the Services group and Calidus to the Transformers group. Furthermore, the
Crabtree sales operations have been combined with Aberdare in the Cables group.
The remaining businesses performed in line with expectations.
Powertech System Integrators experienced a 7% increase in revenue over the prior
year and a 30% increase in EBITDA, reflecting an upturn in the performance of
Powertech IST. IST Data benefited from the continued delivery of a large
Mobility contract and Otokon and the IST Energy division also exceeded
expectations. Challenges remain in the Industrial and Telecoms business units as
a result of project delays.
Powertech recently created an Africa division which is focused on providing an
integrated power technologies solution into Africa. Powertech has, through its
individual operations, been servicing African markets for many years, but it is
believed that a consolidated approach will differentiate its product and
services offering and increase competitiveness. The division is able to supply
the full spectrum of products and services required in an infrastructure
development project, from design to manufacturing and project management.
Powertech`s ROE and ROCE continue to depress the group`s overall return levels,
primarily as a result of the under-performance of the Cables group. ROE declined
to 4.9% while ROCE was 9.8%.
Powertech`s prospects appear reasonable considering that there is continued
emphasis on infrastructure spend in the country and good support from state-
owned entities for local manufacturing operations. A key focus will be on
improving the performance of its Iberian operations.
Corporate activity
The following transactions were concluded during the year under review:
- With effect from 1 March 2011, Altech entered into an agreement with a
broad-based black economic empowerment group in terms of which the Southern
Palace Group of Companies acquired an effective 25% plus one share equity
holding in Altech Radio Holdings which had acquired the South African
operations of Altech Alcom Matomo, Altech Alcom Radio Distributors and
Altech Fleetcall. The vendor financed value of the assets concerned
amounted to R405 million.
- Altech 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 for R37,5 million.
- Altech 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 included the
investment by 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.
- With effect from 1 August 2011, Bytes UK acquired 100% of the issued share
capital of Security Partnership Limited, a company involved in the
distribution of security software, for an upfront payment of GBP5 million,
with the balance of up to GBP2 million being paid on achievement of certain
earn-outs over the next two years.
- Altech acquired 100% of the equity in Eyenza Mobile Money (Pty) Limited, an
e-wallet based payments system, for a nominal amount. The transaction was
effective 1 September 2011.
- With effect from 1 September 2011, Altech entered into an agreement with a
broad-based black economic empowerment group whereby a consortium led by
Power Matla acquired an effective 25% plus one share equity holding in
Altech UEC`s African operations. The total value of the assets involved in
this transaction was R509 million. Altech UEC`s international business,
outside of Africa, and its intellectual property rights have been retained
by Altech.
- Powertech entered into a Joint Venture with EnerSys, by selling 50.1% of
its industrial battery business incorporating Battery Technologies, Rentech
and Willard Industrial division to EnerSys. The transaction was effective
from 3 October 2011
- Altech acquired 100% of SetOne GmbH, a German supplier of digital video
broadcasting (DVB)-based products and solutions company. 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. This transaction was effective from 1 October 2011.
Corporate activity after the year-end
With effect from 1 April 2012, Bytes South Africa acquired 100% of the issued
share capital of Unisys Africa, from Unisys Corporation and a local empowerment
company, CyberKnowledge Systems Investments, for a purchase price of R77
million. The acquisition will provide the possibility for synergies and
economies of scale between Unisys Africa`s operations and the greater Bytes
group.
Transformation
Altron`s progress in terms of its broad-based black economic empowerment targets
is ahead of schedule with the Altron group having achieved its Transformation
Vision 2012 targets a year ahead of schedule. The most recent verifications
provided by rating agencies confirmed Bytes as a level 2contributor and both
Powertech and Altech as level 3 contributors. The group`s strategy in terms of
transformation beyond 2012 is currently being formulated, with the focus being
on the development, empowerment and retention of employees.
The environment
Altron continued to expand and build on its various environmental and
sustainability initiatives during the year. An in-house data monitoring system
was rolled out in October 2011 to improve the accuracy, reliability and
consistency of environmental data. As part of the monitoring exercise, Altron
will also be setting water and waste reduction targets in 2012 and considering
the impact of the proposed new carbon tax.
The group participated in the Carbon Disclosure Programme (CDP) and was one of
only five South African operations that voluntarily participated in the 2011
Water CDP project.
An extensive, internal and external stakeholder engagement process was initiated
in September 2011 as part of an update to the group`s sustainable business
strategy. This overall review has led to a more simplified and consolidated
strategy for the group going forward.
Corporate governance
The Altron group continues to enhance its governance structures and processes
in accordance with international best practice and the recommendations set out
in King III. During the year under review, Altron again achieved platinum status
as awarded by Corporate Governance Accreditation in recognition of its corporate
governance practices and procedures implemented throughout the company. Aside
from having a non-executive chairman and lead independent director, 11 of the
16 directors on the Altron board are non-executive directors of which eight
are classified as independent directors. Further to our SENS announcement
published in May 2010, we continue to co-operate with the Competition
Authorities regarding their investigations into alleged prohibited practices
by Aberdare Cables and other competitors in the power cable market.
Outlook
As has been the case for the past 18 months, the focus of the group remains on
profitable revenue growth, which is proving challenging in the current economic
environment. At the same time, the necessary attention will continue to be
focused on cost control as well as improving working capital management.
In the past year most of Altron`s local businesses continued to perform well,
while many of its international operations (excluding the UK operations)
significantly underperformed. As a result, Altron`s renewed focus will be on
turning these businesses around, particularly Altech`s East African and
Powertech`s Iberian cable operations.
There are however some significant business opportunities on the horizon
including the convergence of various technologies, Bytes` acquisition strategy
and the recovery of the building and construction sectors.
Directorate
On 19 May 2012, Mr Peter Curle will be retiring as a non-executive director of
the company after 18 years of service on the board. Notwithstanding Peter`s
retirement from the Altron board, he will continue serving as a non-executive
director on the Allied Technologies Limited (Altech) board and will consult to
the wider Altron group on corporate finance-related matters.
Following 16 years of loyal service to the Altron group, seven of which was as
an executive director of Altron, Mr Norbert Claussen, Chief Executive Officer of
Powertech, resigned from his position at Powertech and as an executive director
of Altron with effect from 30 June 2012 to take up an opportunity to become a
shareholder in a business unrelated to Altron.
Mr Peter Wilmot will be retiring from the Altron board effective 20 July 2012.
Mr Wilmot joined the Altron board in 2001 in the capacity of independent, non-
executive director. He served as Chairman of the company`s audit committee as
well as a member of the remuneration committee and the risk management
committee.
On 1 June 2012, Mr Grant Gelink will join the Altron board as an
independent non-executive director. Grant is the current Chief Executive
of Deloitte & Touche Southern Africa, from where he will be retiring on
31 May 2012. In addition to serving on the Altron risk management committee,
Grant will be appointed as the Chairman of the Altron audit committee with
effect from 21 July 2012.
The board wishes to express its gratitude to Messrs Curle, Claussen and Wilmot
for their many years of devoted service and commitment towards the Altron group
and welcomes Mr Gelink to the board.
Acknowledgements
The board would like to express its appreciation to all of its customers, staff,
business partners, shareholders and other stakeholders for their support during
the past year and for their continued belief in the future sustainability of the
group and its strong underlying businesses.
Dividends
Notice is hereby given that on Monday, 7 May 2012, Altron declared an ordinary
dividend (number 64) of 92 cents per ordinary share (2011: 108 cents) and a
participating preference dividend (number 18) of 92 cents per participating
preference share (2011: 108 cents) for the period 1 March 2011 to 29 February
2012, payable on Monday, 2 July 2012 to holders of the ordinary and
participating preference shares recorded in the share register of the company at
close of business on Friday, 29 June 2012.
The dividends have been declared out of income reserves and will be subject to
dividends tax. The local dividends tax rate is 15%. The company has no secondary
tax credits available.
Accordingly, the net local dividend amount is 78 cents per ordinary and
participating preference shares for shareholders liable to pay the new dividends
tax and 92 cents per ordinary and participating preference shares for
shareholders exempt from paying the new dividends tax.
In terms of the dividends tax legislation, the dividends tax amount due will be
withheld and paid over to the South African Revenue Service (SARS) by a nominee
company, stockbroker or Central Security Depository Participant (CSDP)
(collectively "Regulated Intermediary") on behalf of shareholders. However, all
shareholders should declare their status to their Regulated Intermediary, as
they may qualify for a reduced dividends tax rate or they may even be exempt
from dividends tax.
Altron`s issued share capital at the declaration date is 105 669 131 ordinary
shares and 241 456 241 participating preference shares. Altron`s tax reference
number is 9725/149/71/1.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last day of trading to qualify for and Friday, 22 June 2012
participate in the dividend (cum dividend)
Trading ex dividend commences Monday, 25 June 2012
Record date Friday, 29 June 2012
Dividend payment date (electronic and Monday, 2 July 2012
certificated)
Dividend cheques in payment of these dividends to certificated shareholders will
be posted to shareholders on or about Monday, 2 July 2012. Electronic payment to
certificated shareholders will be undertaken simultaneously.
Shareholders who have dematerialised their share certificates will have their
accounts at their CSDP or broker credited on Monday, 2 July 2012.
In the case of certificated shareholders, notice of any change of address of
shareholders must reach the transfer secretaries, Computershare Investor
Services (Pty) Limited, on or before Friday, 22 June 2012. Share certificates
may not be dematerialised or rematerialised from Monday, 25 June 2012 to Friday,
29 June 2012, both days inclusive.
In accordance with the company`s memorandum of incorporation, dividends
amounting to R30.00 or less due to any one holder of the company`s ordinary or
participating preference shares, held in certificated form, will not be paid,
unless otherwise requested in writing, but will be aggregated with other such
amounts and be donated to a charity nominated by the directors.
Annual general meeting
Altron`s 66th annual general meeting will be held in The Altron Boardroom, 5
Winchester Road, Parktown, Johannesburg on Friday, 20 July 2012 at 09:30.
Further details on the company`s annual general meeting will be contained in
Altron`s annual and statutory report to be posted to shareholders on or about 1
June 2012.
On behalf of the board
Dr Bill Venter Robert Venter Alex Smith
Chairman Chief Executive Chief Financial Officer
8 May 2012
Board of directors
Independent non-executive:
Mr NJ Adami
Mr MJ Leeming
Dr PM Maduna
Ms BJM Masekela
Ms DNM Mokhobo
Mr JRD Modise
Mr SN Susman
Mr PL Wilmot
Non-executive:
Dr WP Venter (Chairman)
Mr MC Berzack
Mr PMO Curle*
Executive:
Mr RE Venter (Chief Executive)
Mr RJ Abraham
Mr N Claussen
Mr AMR Smith*
Mr CG Venter
* British
Secretaries:
Altron Management Services (Pty) Limited -
Mr AG Johnston (Group Company Secretary)
Sponsor:
Investec Bank
The unaudited consolidated interim results are also available on the internet at
www.altron.com
Date: 08/05/2012 07:15:00 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
