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ALTRON - Abridged consolidated financial results for the half-year ended 31
August 2003
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
HEADLINE EARNINGS PER SHARE UP 10.1%
WORKING CAPITAL IMPROVED
CASH RESOURCES OF R1.6 BILLION
ACQUISITION OPPORTUNITIES BEING PURSUED
Abridged consolidated financial results for the half-year ended 31 August 2003
Income statement
Six months Six months Year
ended ended ended
% 31.8.03 31.8.02 28.2.03
Figures in R000 Change (Unaudited) (Unaudited) (Audited)
Revenue (18.3) 5 064 038 6 200 361 11 397 337
- Continuing (14.1) 5 064 038 5 894 192 11 034 657
operations
- Discontinued - 306 169 362 680
operations
Operating income (18.9) 330 069 406 920 911 621
- Continuing (14.5) 330 069 386 236 883 686
operations
- Discontinued - 20 684 27 935
operations
Net interest 50 989 43 812 79 163
income
Income from 4 357 464 18 864
associates
Investment income 16 636 3 369 17 481
Income before
goodwill
amortisation
and exceptional (11.6) 402 051 454 565 1 027 129
items
Goodwill amortised (68 413) (31 687) (104 951)
Exceptional items 37 198 301 941 244 217
(Note 1)
Income before 370 836 724 819 1 166 395
taxation
Taxation (121 655) (145 582) (288 091)
Income after 249 181 579 237 878 304
taxation
Attributable to (79 381) (270 401) (413 950)
outside
shareholders
Attributable 169 800 308 836 464 354
earnings
Basic earnings per 62.5 114.9 172.5
share (cents)
Headline earnings 10.1 64.1 58.2 149.4
per share (cents)
- Continuing 12.3 64.1 57.1 147.9
operations
- Discontinued - 1.1 1.5
operations
Weighted average
number of shares
in issue (000)
- ordinary shares 93 928 93 914 93 920
- participating 177 664 174 925 175 291
preference shares
Notes:
1. Exceptional
items
Net surplus on 2 661 322 329 306 927
disposal of
operations
Net surplus/(loss) 33 379 (20 264) (20 264)
on disposal of
investments
Impairment losses - - (17 412)
Net profit/(loss) 1 158 (124) (25 034)
arising on
disposals and
closures
37 198 301 941 244 217
2. Reconciliation
between
attributable
earnings and
headline earnings
Attributable 169 800 308 836 464 354
earnings
Goodwill amortised 65 221 28 495 98 562
Goodwill amortised 3 192 3 192 6 389
on investment in
associate
Share of 517 - 1 767
associates"
exceptional items
and goodwill
Exceptional items (37 198) (301 941) (244 217)
- gross
Surplus on (749) (3 181) (2 509)
disposal of
property, plant
and equipment
200 783 35 401 324 346
Tax effect of 624 865 (4 024)
above adjustments
Outside (27 217) 120 300 81 805
shareholders"
interest
Headline earnings 174 190 156 566 402 127
3. Accounting policies
The unaudited interim financial results have been prepared in accordance with
South African Statements of Generally Accepted Accounting Practice. The
accounting policies used in the preparation of the unaudited interim financial
results are consistent with those used in the annual financial statements for
the year ended 28 February 2003, except for the following:
* The adoption of AC133 on Financial Instruments. In terms of the statement
comparative years have not been restated. However the closing balances of
financial instruments from the previous year have been revalued, resulting in a
decrease of R17 million to the group"s opening accumulated reserves. (See
statement of changes in equity).
* Previously the 50% shareholding in ABB Powertech Transformers and Tridonic SA
were fully consolidated. Due to changes in circumstances the investments are now
proportionately consolidated with effect 1 March 2003.
4. Diluted earnings per share and diluted headline earnings per share are not
materially different from basic earnings per share and headline earnings per
share respectively.
5. It is group policy for a dividend to be declared after the end of the
financial year.
BALANCE SHEET
31.8.03 31.8.02 28.2.03
Figures in R000 (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 1 650 680 2 269 464 1 723 092
Property, plant and 628 224 673 902 665 874
equipment
Net goodwill 514 359 238 500 470 935
Advances to rental finance 216 372 1 103 644 285 969
customers
Investments and loans 200 047 142 048 184 820
Deferred taxation 91 678 111 370 115 494
Current assets 4 410 639 4 996 746 4 453 262
Inventories 1 005 101 1 167 434 1 077 405
Accounts receivable 1 768 892 2 590 157 1 866 347
Cash and cash equivalents 1 636 646 1 239 155 1 509 510
Total assets 6 061 319 7 266 210 6 176 354
Equity and liabilities
Ordinary shareholders" 2 299 370 2 213 157 2 266 999
interest
- Share capital, premium and 2 537 657 2 451 444 2 505 286
reserves
- Own shares acquired (238 287) (238 287) (238 287)
Outside shareholders" 1 038 015 1 197 839 1 290 677
interest
Non-current liabilities 289 949 1 030 650 368 331
Deferred taxation 20 661 54 169 32 682
Current liabilities 2 413 324 2 770 395 2 217 665
Total equity and liabilities 6 061 319 7 266 210 6 176 354
Net asset value per share 839.7 820.4 837.0
(cents)
Shares in issue at end of
period (000)
- ordinary shares 93 928 93 928 93 928
- participating preference 179 892 175 844 176 933
shares
SUPPLEMENTARY INFORMATION
Six months Six months Year
ended ended ended
31.8.03 31.8.02 28.2.03
Figures in R000 (Unaudited) (Unaudited) (Audited)
Borrowings 218 402 922 650 281 120
- interest bearing 212 818 916 404 275 656
- non-interest bearing 5 584 6 246 5 464
Capital commitments 49 341 38 562 32 235
Capital expenditure 62 511 79 961 200 175
Contingent liabilities - 5 081 15 000
Depreciation 63 236 70 756 161 816
Net foreign exchange losses (10 059) (7 041) (38 186)
Lease commitments 242 972 320 776 267 669
Unlisted investments
- carrying amount 200 047 142 048 184 820
- directors" valuation 200 047 142 048 184 820
CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31.8.03 31.8.02 28.2.03
Figures in R000 (Unaudited) (Unaudited) (Audited)
Operating activities 336 816 64 099 709 883
Cash generated by operations 368 172 465 799 1 055 522
Net investment income 63 501 45 349 87 037
Changes in working capital 194 120 (178 787) (7 451)
Taxation paid (95 653) (71 084) (201 689)
Cash available from 530 140 261 277 933 419
operating activities
Dividends paid, including to (193 324) (197 178) (223 536)
outside shareholders
Investing activities (195 842) (283 648) (16 981)
Financing activities 35 728 14 458 (592 680)
Net funds 176 702 (205 091) 100 222
generated/(utilised)
Cash and cash equivalents - 1 509 510 1 444 246 1 444 246
beginning of period
Translation of foreign cash (38 128) - (34 958)
Proportionately consolidated (11 438) - -
cash
Cash and cash equivalents - 1 636 646 1 239 155 1 509 510
end of period
STATEMENT OF CHANGES IN EQUITY
Non- Accumu-
Share distributable lated
Figures in R000 capital reserves reserves Total
Balance at 28 757 887 259 992 1 165 483 2 183 362
February 2002
(audited)
Profit 308 836 308 836
attributable to
shareholders
Dividend paid (99 659) (99 659)
Net gains not 51 882 51 882
recognised in the
income statement
Issue of share 7 023 7 023
capital
Transfer between (49) 49 -
reserves
Balance at 31 764 910 311 825 1 374 709 2 451 444
August 2002
(unaudited)
Profit 155 518 155 518
attributable to
shareholders
Net (losses)/gains
not recognised
in the income (117 265) 10 084 (107 181)
statement
Issue of share 5 505 5 505
capital
Transfer between 26 045 (26 045) -
reserves
Balance at 28 770 415 220 605 1 514 266 2 505 286
February 2003
(audited)
Adjustment to (17 133) (17 133)
opening
accumulated
reserves due to
adoption of AC133
(see note 3)
Profit 169 800 169 800
attributable to
shareholders
Dividend paid (117 357) (117 357)
Net losses not (16 801) (16 801)
recognised in the
income statement
Issue of share 13 862 13 862
capital
Balance at 31 784 277 203 804 1 549 576 2 537 657
August 2003
(unaudited)
OPERATIONAL CONTRIBUTION
Six months Six months Year
ended ended ended
Figures 31.8.03 % 31.8.02 % 28.2.03 %
in R000 (Unaudited) (Unaudited) (Audited)
Revenue:
Altech 1 960 759 38.7 2 113 124 34.1 4 056 081 35.6
Powertech 1 763 537 34.8 2 212 113 35.7 4 116 627 36.1
BTG 1 322 532 26.1 1 767 738 28.5 3 035 128 26.6
Corporate 17 210 0.4 107 386 1.7 189 501 1.7
and
Financial
Services
5 064 038 100.0 6 200 361 100.0 11 397 100.0
337
Operating
income:
Altech 159 541 48.3 170 651 41.9 406 778 44.6
Powertech 100 185 30.4 120 980 29.7 266 962 29.3
BTG 77 146 23.4 79 026 19.4 183 180 20.1
Corporate (6 803) (2.1) 36 263 9.0 54 701 6.0
and
Financial
Services
330 069 100.0 406 920 100.0 911 621 100.0
% held
at
31.8.03
Headline
earnings:
Altech 53.4 80 869 46.4 76 637 48.9 192 272 47.8
Powertech 100.0 73 055 41.9 46 936 30.0 126 424 31.4
BTG 54.9 20 610 11.8 19 504 12.5 60 306 15.0
Corporate 100.0 (344) (0.1) 13 489 8.6 23 125 5.8
and
Financial
Services
174 190 100.0 156 566 100.0 402 127 100.0
SEGMENTAL ANALYSIS
Six months Six months Year
ended ended ended
31.8.03 % 31.8.02 % 28.2.03 %
Figures in R000 (Unaudited) (Unaudited) (Audited)
Revenue:
Telecommunications 1 782 076 35.2 1 957 378 31.6 3 858 582 33.9
Electronics and 1 825 044 36.0 2 299 911 37.1 4 155 472 36.4
Multimedia
Information 1 442 147 28.5 1 912 532 30.8 3 320 426 29.1
Technology
Corporate and 14 771 0.3 30 540 0.5 62 857 0.6
Financial Services
5 064 038 100.0 6 200 361 100.0 11 397 100.0
337
Operating income:
Telecommunications 99 490 30.1 96 360 23.7 226 987 24.9
Electronics and 151 707 46.0 178 239 43.8 373 804 41.0
Multimedia
Information 85 761 26.0 93 321 22.9 216 446 23.7
Technology
Corporate and (6 889) (2.1) 39 000 9.6 94 384 10.4
Financial Services
330 069 100.0 406 920 100.0 911 621 100.0
FINANCIAL OVERVIEW
The Altron Group has recorded satisfactory results for the six months ended 31
August 2003 despite difficult trading conditions which saw our international
competitiveness impacted by the strengthening of the rand and local high
interest rates constraining growth.
Headline earnings per share increased by 10.1% to 64.1 cents with revenue 18.3%
down from R6.2 billion to R5 billion largely due to the disposal of Alcatel
Altech Telecoms, the securitisation of the Fintech assets as well as accounting
changes in some of our jointly managed operations that has resulted in formerly
fully consolidated operations being partially consolidated for the first time.
These changes, together with the effect of the strengthening rand were partially
offset by the implementation of AC133 resulting in a decline in operating income
of 18.9% from R407 million to R330 million. If the above factors were excluded
from the prior year, to provide a meaningful comparison, revenue and operating
income decreased by 9.3% and 9.8% respectively.
The effect of high interest rates and rand strength has been felt throughout the
economy and Altron"s operations have not escaped their impact. Altron"s revenues
from exports and foreign operations have consequently declined from 31% to 16%
of total revenues. This has been partially compensated for through aggressive
expansion into local markets.
The group"s balance sheet remains strong with cash and cash equivalents
increasing from R1.2 billion to R1.6 billion with strong cash generation in all
operations coupled with pleasing improvements in working capital management. The
reduction in non-current liabilities and assets is principally due to the
securitisation of R680 million of the Fintech asset based financing book which
resulted in a corresponding reduction in its related liabilities.
BUSINESS ACTIVITIES
TELECOMMUNICATIONS
Global telecommunication markets remained under pressure and Altron"s
telecommunications interests, representing 30.1% of total group operating income
at R99 million for the six months under review continued to experience difficult
trading conditions with revenue at 35.2% or R1.8 billion of the group"s total
revenue compared with the 31.6% contribution for the prior period. Powertech"s
telecommunications cable businesses in Spain and South Africa, which were
impacted by the deterioration of global and local markets resulted in capacity
being reduced to achieve an approximate break-even result. The Battery Group
recorded an improved performance compared to the prior period which was largely
due to increased demand from GSM operators and accelerated exports into Africa.
Autopage Cellular, in the Altech group, has again performed ahead of
expectations in an increasingly competitive environment and reported a healthy
increase of more than 11 500 net subscribers. The total subscriber base of
Autopage Cellular now exceeds 465 000. The focus remains on acquiring
subscribers with high airtime revenues per subscriber (ARPU) and the churn
management projects have resulted in lower churn percentages being achieved both
at Autopage Cellular and Supercall Cellular.
Netstar, also in the Altech group and a leader in stolen vehicle tracking and
recovery in southern Africa, maintained its strong market share and recorded
good growth in its subscriber base during the reporting period. The company now
services a total of 264 000 vehicles valued at in excess of R31 billion. The
Malaysian operation is growing satisfactorily with in excess of 6 000 vehicles
on the system and 100 recoveries after the first year of operation.
Looking ahead, the focus for growth will be on Africa and in broadening the
spectrum of communication services on offer. The local telecommunications market
is becoming increasingly deregulated and continues to provide opportunities for
service providers such as Autopage Cellular to leverage its significant
subscriber penetration towards the broader communications market. The
infrastructural telecommunications sector is expected to remain difficult during
the second half with some improvement expected during the course of the next
financial year when the benefit of a recovery in global markets is expected to
filter through.
POWER ELECTRONICS AND MULTI-MEDIA
Altron"s power electronics and multi-media sector has recorded a contribution of
36% to total revenue, down from R2.3 billion to R1.8 billion for the six months
under review due to the impact of the stronger rand on export sales and
consequent increased international competition in selected market segments.
During the past six months, this sector contributed R151 million or 46% to the
group"s total operating income compared to the 43.8% for the previous comparable
period.
Power Electronics
Powertech"s power electronics businesses, particularly Aberdare Power Cables,
ABB Powertech Transformers and the Industrial Group have recorded strong
performances despite less buoyant sales of low voltage products due to high
interest rates which have impacted activity in the building and construction
sector. The demand for medium voltage products remains positive, especially in
the mining sector.
The automotive and industrial interests within the Battery Group recorded a
satisfactory performance. Demand within the local power infrastructural markets
is expected to remain strong for the remainder of the financial year.
Multi-Media
UEC Technologies (UEC), in the Altech group, posted acceptable results for the
first six months notwithstanding tough economic conditions and the negative
effect of the strong rand on exports. Prospects for the second six months of
this financial year look positive for UEC with major orders received from Foxtel
in Australia, RCN in the USA, Euskatel in Spain, Sky Brazil and Sky Mexico.
Arrow Altech Distribution, also in the Altech Group, exceeded expectations in
managing its working capital during the period and achieved good results despite
the globally depressed conditions in the electronics industry.
INFORMATION TECHNOLOGY
Information technology (IT) contributed 28.5% of Altron"s total revenue,
reflecting a decrease from R1,9 billion for the prior reporting period to R1,4
billion. This was due to significantly reduced revenues from BTG"s UK based
businesses as a result of lower revenue generation as well as changes in the
accounting for Microsoft licensing revenues. This sector contributed 26% to
total operating income which declined from R93 million to R86 million when
compared to the prior year. In respect of the South African and other African
businesses, a better than predicted performance was achieved with broadly based
improvements being recorded by most operations. To ensure continued growth in
profitability, operational improvements are being implemented, both locally and
overseas.
It is BTG"s strategic intent to introduce a major black empowerment partner with
a meaningful equity holding.
Altech Card Solutions maintained its well established position within its sector
despite the competitive market conditions in which it operates. Keops Altech
received several contracts during the period under review, including two large
aluminium smelter upgrade projects for Mozal and Hillside Aluminium. It is
expected that, notwithstanding the lack-lustre conditions in the IT industry,
Altron"s IT operations will be achieving earnings growth for the full year.
Altech"s proposed acquisition of a majority holding in the share capital of
NamITech, which was announced on 6 May 2003 is proceeding to the Competition
Tribunal after a negative recommendation by the Competition Commission.
FINANCIAL SERVICES AND CORPORATE
Fintech
The office automation leasing market remains sluggish and has impacted the level
of new capital financed which is 20% lower compared to the corresponding levels
achieved in the prior year. Despite the adverse conditions, Fintech Receivables
1, the asset-based financing securitisation vehicle, performed impressively and
met the performance parameters set for the structure and the rating accorded to
the notes in issue. Additional structures are currently being established to
address future growth and should be in place shortly increasing overall
financing capacity by R820 million.
TRANSFORMATION/BLACK ECONOMIC EMPOWERMENT
Altron is keeping in close contact with and is directly participating in
developments regarding transformation in the ICT sector. The group is currently
finalising internal policy in this regard. Various negotiations are currently
under way to introduce meaningful black economic empowerment across the group.
OUTLOOK
The corrective action taken in rightsizing certain operations, particularly
those in the infrastructural telecommunications sector, are expected to show
benefit in the second half of the year. In addition, order books are at a
satisfactory level which is encouraging, and coupled with good progress in the
penetration of new markets, it is anticipated that for the year ending February
2004, group earnings will be at similar levels to that of the previous year.
On behalf of the board
Dr Bill Venter Robert Venter Diane Radley
Chairman Chief Executive Chief Financial Officer
13 October 2003
Directors: Dr WP Venter (Chairman) RE Venter (Chief Executive) IM Ayob MC
Berzack PMO Curle* DA Hawton MJ Leeming JRD Modise DC Mpofu DC Radley PD
Redshaw* Dr HA Serebro LC van Vught CG Venter PL Wilmot *British
Secretaries: Altron Management Services (Pty) Limited - Ms SF Linford (Group
Secretary)
The interim financial results are also available on the Internet at
www.altron.co.za
Date: 13/10/2003 02:00:14 PM Produced by the JSE SENS Department
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