| Wed 12 May 2004, 16:14 | | FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2 |
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ATRON - CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2004
Allied Electronics Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1947/024583/06)
JSE Share code: ATN
ISIN: ZAE000029658
JSE Share code: ATNP
ISIN: ZAE000029666
("Altron")
CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2004
Adjusted HEPS up by 2%
NAV per share up by 8%
Cash balances at R2 billion
Dividend increased by 21%
Unprecedented BEE activities
INCOME STATEMENT
Figures in Rmillion % 2004 2003
Change (Reviewed) (Audited)
Revenue 10 045 11 397
- Continuing operations (9) 10 045 11 034
- Discontinued operations - 363
Operating income before goodwill 718 909
amortisation and capital items
- Continuing operations (11) 718 807
- Discontinued operations - 28
- Surplus from benefit fund - 74
Net interest income 93 79
Income from associates 9 19
Investment income 26 17
Income before goodwill 846 1 024
amortisation and capital items
Goodwill amortised and impaired (134) (105)
Capital items (Note 1) 34 247
Income before taxation 746 1 166
Taxation (252) (288)
Income after taxation 494 878
Attributable to outside (152) (414)
shareholders
Attributable earnings 342 464
Basic earnings per share (cents) 125 173
Headline earnings per share (7) 139 149
(cents)
Adjusted headline earnings per 2 139 137
share (cents)
Dividends per share (cents)
- paid 43 37
- proposed 21 52 43
Weighted average number of shares
in issue (millions)
- ordinary shares 94 94
- participating preference shares 179 175
Notes:
1. Capital items
Net gain on disposal of operations - 307
Net loss on disposal of investments - (20)
Impairment losses (10) (17)
Net gain/(loss) on partial disposal of 43 (25)
interest in subsidiaries
Net gain on disposal of property, plant and 1 2
equipment
34 247
2. Reconciliation between earnings and
headline earnings
Attributable earnings 342 464
Goodwill amortised and impaired 134 105
Capital items - gross (34) (247)
Share of associates goodwill amortised 1 2
Tax effect of above adjustments (1) (4)
Outside shareholders" interest of (63) 82
adjustments
Headline earnings 379 402
3. Reconciliation between headline earnings
and adjusted headline earnings
Headline earnings 379 402
Surplus on liquidation of group benefit - (74)
fund
Tax effect - 22
Outside shareholders" interest of - 18
adjustments
Adjusted headline earnings 379 368
The principles applied in determining adjusted headline earnings per share are
consistent with those applied in prior years. The directors are of the opinion
that the disclosure of adjusted headline earnings per share, which is in
addition to disclosure required by South African Statements of Generally
Accepted Accounting Practice, provides shareholders with a more meaningful
assessment of the sustainable earnings of the group.
4. Accounting Policies
The annual results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. The accounting
policies used in the preparation of the annual financial results are
consistent with those used in the annual financial statements for the year
ended 28 February 2003, except for the adoption of AC133-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 fair valued, resulting in a net decrease of R17
million to the group"s opening accumulated reserves. (See statement of
changes in equity).
5. Previously the 50% shareholding in ABBPowertech Transformers and Tridonic
SA were fully consolidated. Due to changes in circumstances the investments
are now proportionately consolidated with effect from 1 March 2003.
6. It is group policy for a dividend to be declared after the end of the
financial year.
7. 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.
ABRIDGED BALANCE SHEET
Figures in Rmillion 2004 2003
(Reviewed) (Audited)
Assets
Non-current assets 1 604 1 723
Property, plant, equipment and intangible 678 666
assets
Net goodwill 455 471
Rental finance advances 189 286
Associates and other investments 183 185
Deferred taxation 99 115
Current assets 4 451 4 453
Inventories 905 1 077
Accounts receivable 1 542 1 866
Net cash and cash equivalents 2 004 1 510
Total assets 6 055 6 176
Equity and liabilities
Ordinary shareholders" interest 2 475 2 267
Share capital, premium and reserves 2 713 2 505
Own shares acquired (238) (238)
Outside shareholders" interest 1 082 1 291
Non-current liabilities 287 368
Deferred taxation 31 33
Current liabilities 2 180 2 217
Total equity and liabilities 6 055 6 176
Net asset value per share (cents) 901 837
Shares in issue at end of period
(millions)
- ordinary shares 94 94
- participating preference shares 180 177
SUPPLEMENTARY INFORMATION
Figures in Rmillion 2004 2003
(Reviewed) (Audited)
Borrowings 524 475
- Interest bearing 521 445
- Non-interest bearing 3 30
Capital commitments 80 32
Capital expenditure 220 202
Contingent liabilities 27 15
Depreciation 129 162
Lease commitments 292 268
Unlisted investments
- Carrying amount 183 185
- Directors" valuation 287 185
STATEMENT OF CHANGES IN EQUITY
Non-
Figures in Share distributable Distributable
Rmillion capital reserves reserves Total
Balance at 758 260 1 165 2 183
28 February 2002
(audited)
Attributable 464 464
earnings
Dividend paid (99) (99)
Net (65) 10 (55)
(losses)/gains
not recognised in
the income
statement
Issue of shares 12 - 12
Transfer between - 26 (26) -
reserves
Balance at 770 221 1 514 2 505
28 February 2003
(audited)
Adoption of AC133 (17) (17)
(note 4)
Attributable 342 342
earnings
Dividend paid (117) (117)
Net losses not (18) - (18)
recognised in the
income statement
Issue of shares 19 19
Transfer between (40) 40 -
reserves
Cash flow hedging (1) - (1)
reserve
Balance at 789 162 1 762 2 713
29 February 2004
(reviewed)
ABRIDGED CASH FLOW STATEMENT
Figures in Rmillion 2004 2003
(Reviewed) (Audited)
Operating activities 778 710
Cash generated by operations 778 1 056
Net investment income 106 87
Changes in working capital 387 (7)
Taxation paid (295) (202)
Cash available from operating activities 976 934
Dividends paid, including to outside (198) (224)
shareholders
Investing activities (310) (27)
Financing activities 68 (582)
Net cash generated 536 101
Cash and cash equivalents - beginning of 1 510 1 444
year
Translation of foreign cash (4) (35)
Effect on cash of adopting proportionate (38) -
consolidation
Cash and cash equivalents - end of year 2 004 1 510
ABRIDGED SEGMENTAL ANALYSIS
2004 2003
Figures in Rmillion (Reviewed) % (Audited) %
Revenue:
Telecommunications 3 756 37 3 859 34
Electronics and Multimedia 3 604 36 4 155 36
Information technology 2 848 28 3 320 29
Corporate, financial
services
and eliminations (163) (1) 63 1
10 045 100 11 397 100
Operating income*:
Telecommunications 253 35 227 25
Electronics and Multimedia 229 32 371 41
Information technology 216 30 217 24
Corporate and financial 20 3 94 10
services
718 100 909 100
OPERATIONAL CONTRIBUTION
Figures in Rmillion 2004 2003
(Reviewed) % (Audited) %
Revenue:
Altech 4 143 41 4 056 36
Powertech 3 332 33 4 117 36
BTG 2 607 26 3 035 27
Corporate and (37) - 189 1
financial services
10 045 100 11 397 100
Operating income*:
Altech 333 46 407 45
Powertech 207 29 267 29
BTG 185 26 183 20
Corporate and (7) (1) 52 6
financial services
718 100 909 100
% held at
Headline earnings: 2004
Altech 53.4 170 45 192 48
Powertech** 100.0 146 38 127 31
BTG 54.6 56 15 60 15
Corporate and
financial
services 100.0 7 2 23 6
379 100 402 100
Notes:
* Operating income is stated before goodwill amortisation and capital items.
** Prior year comparative includes 59.2% of Powertech for four months, wholly-
owned thereafter.
MESSAGE TO OUR SHAREHOLDERS
Financial Overview
The Altron Group posted a satisfactory set of results for the year ended 29
February 2004 despite challenging conditions in some of its market sectors, the
continuing effects of a strong rand environment and the ongoing stagnation of
the global telecommunications industry. The group"s balance sheet remains solid
with cash and cash equivalents increasing from R1.5 billion to break through the
R2 billion-mark for the first time, enabling the group to take advantage of
further acquisition opportunities. This was largely achieved on the back of
strong operating cash generation coupled with significant improvements in
working capital management.
Adjusted headline earnings per share increased by 2% rising from 137 cents to
139 cents after excluding the once-off gain from the distribution from the
Altron Group Benefit Fund in the previous year. Revenue from continuing
operations declined by 9% from R11 billion to R10 billion due to the
proportional consolidation of our jointly managed operations for the first time,
together with the effect of the strong rand with operating income from
continuing operations declining by 11% from R807 million to R718 million.
Operating margins were maintained at levels compared to last year of 7.1%. Net
asset value per share rose by 8% to 901 cents from 837 cents, notwithstanding
substantial goodwill amortisation during the year. The dividends have been
increased by 21% to 52 cents per share from 43 cents per share.
Altech"s operations continued to deliver good financial results, with some
excellent individual performances, offset by the effect of the appreciating Rand
on the performance of UEC. Altech"s revenue from continuing operations increased
by 11% to R4.1 billion with an operating income of R333 million. This resulted
in adjusted headline earnings per share of 302 cents, a reduction of 6% when
compared to the prior year. Strong cash generation enabled Altech to build its
cash and cash equivalents to R1.5 billion as at 29 February 2004. Altech
increased its dividend by 15% to 143.75 cents per share.
The acquisition by Altech of a controlling shareholding in NamITech Holdings
Limited (NamITech) for approximately R526 million, announced on 6 May 2003, was
approved by the Competition Tribunal at end February 2004. This enabled
completion and payment of the NamITech transaction to take place on 5 March
2004. Subsequent to year end Pamodzi Investment Holdings ("Pamodzi") has
acquired a 25.01% effective shareholding interest in Altech Data (Pty) Limited
(Altech Data), the holding company for Altech"s other information technology
businesses.
BTG reported a good performance, particularly from local operations, reflecting
growth in adjusted headline earnings per share of 27% to 67.9 cents with its
board expressing confidence for the year ahead. Effective June 2003, BTG
acquired the 50% of Xerox SA that it did not own for a consideration of R235
million. On 1 March 2004 BTG welcomed on board an empowerment partner by
announcing its agreement with Kagiso Trust Investments (KTI) whereby it acquires
a 27% holding in Bytes SA for R228 million. BTG declared an increased dividend
of 37% amounting to 22 cents per share.
Altron"s wholly-owned subsidiary, Powertech, posted satisfactory results despite
the continued downturn in the telecommunications sector and the strong rand.
The Power Electronics businesses continued to perform and make a significant
contribution to Powertech"s results. Financial Services reported broadly neutral
results when compared to the prior year which was in line with expectations.
Black Economic Empowerment
One of the key building blocks of Altron"s strategy is the group"s strong
commitment to the national imperatives of transformation and black economic
empowerment. This is clearly reflected through the group"s involvement in the
development of the ICT Charter, where the Working Group is chaired by Altron
Executive Director of Corporate Affairs, Adv. Dali Mpofu. During the year under
review, our internal BEE Charter, entitled the Altron Transformation Vision
2010, was approved and adopted by the Altech, BTG, Powertech and Altron boards.
Further black economic empowerment partnerships were formed during the year,
including the acquisition by the Motoma ICT Group of a 30% stake of Alcom
Systems to form a strong business partnership. The black economic empowerment
transactions announced subsequent to year end include:
* Pamodzi acquiring a 25.01% effective shareholding interest in Altech Data,
the holding company for Altech"s other information technology businesses.
Pamodzi also acquired an effective 28% shareholding interest in NamITech
associated with the Altech acquisition of NamITech.
* Kagiso acquiring a 27% holding in Bytes SA for R228 million. This includes
the operations of Bytes Documents Solutions (Xerox); Bytes Specialised
Solutions (previously known as National Data Systems); Bytes Communication
Systems; Bytes Technology Networks; Bytes Business Solutions and Bytes
Software, which will all be housed in a new subsidiary, Bytes Technology
Group South Africa (Bytes SA).
* Kagiso acquiring a 25.1% interest in Powertech"s subsidiary, Battery
Technologies.
* The purchase by the Izingwe Consortium, headed by Sipho Pityana, of a 30%
equity holding in Aberdare Cables in a transaction valued at R165 million.
Business Activities
Telecommunications
Altron"s telecommunications interests represented 35% of total group operating
income at R253 million for the year under review compared to 25% at R227 million
the previous year. Revenue contribution was at R3.8 billion which formed 37% of
the group"s total revenue compared to 34% for the prior year.
Autopage Cellular, one of the largest independent cellular service providers in
South Africa, reported an excellent performance. The subscriber base increased
to over 560 000 and showed a substantial increase in high-value contract
subscribers. Autopage Cellular has ensured that the majority of its airtime
profit margin levels are protected going forward after successfully negotiating
agreements with South African cellular operators for the renewal of long-term
service provider arrangements. These will provide Altech with an appropriate
exit mechanism for parts of its business in what could become a potentially
challenging cellular market at that time.
Netstar recorded another year of significant growth and maintained its position
as the leader in vehicle tracking and recovery in South Africa. New products and
service developments are expected to broaden Netstar"s penetration in the local
market. Alcom Matomo (formerly Alcom Systems) experienced a successful year with
the highlight being receipt of the award of the contract for the R506 million
digital 2-way TETRA-radio project for the South African Police Services in
Gauteng.
The continued stagnation in the global telecommunications market impacted
Powertech"s telecommunications activities. Aberdare Telecom Networks underwent
further rationalisation in order to meet the protracted lower demand from local
and international markets. Lambda Cables recorded a satisfactory performance
while Aberdare Cables" offshore operations, Cables de Comunicaciones, Zaragoza
and Alcobre continued to experience difficult market conditions.
Battery Technologies enjoyed success during the year under review and exceeded
its profit expectations. An important development for Battery Technologies was
the conclusion of an empowerment transaction which resulted in Kagiso Ventures
Limited acquiring 20% of Battery Technologies" equity. Post year end this was
increased to 25.1%. Rentech, our solar-systems business, benefited from greater
focus on exports into sub-Saharan Africa through participation in a number of
new projects in Gambia, Tanzania, Botswana and Lesotho.
Power Electronics And Multi-Media
Altron"s power electronics and multi-media sector has reported a contribution of
36% or R3.6 billion to total revenue for the year under review compared to 36%
last year. During the year under review, this sector contributed R229 million or
32% to the group"s total operating income compared to the 41% for the previous
year. Although there was no impact on headline earnings, the reported sales and
operating income at ABB Powertech Transformers and Tridonic SA have been
impacted by the move to proportionately consolidate these operations. The
impact of the strong rand environment also had a negative effect on UEC Multi-
Media (UEC).
Aberdare Power Cables reported a strong performance in a competitive market.
Continued focus on customer service levels and high-quality products have paid
dividends, while business alliances have been further cemented and expanded into
Eskom, municipalities, major industries and the mining sector.
The domestic market for power transformers has seen a promising upward trend
mainly in the small to medium transformer sector, whilst large transformers
produced satisfactory results. Although ABB Powertech Transformers experienced
an upswing in orders, there is little doubt that the electrical infrastructure
within municipalities is suffering as a result of a lack of maintenance and
refurbishment as well as curtailed expansion. Looking forward, this should
create an environment for new opportunities. The power distribution transformer
business, Desta Power Matla, performed well with local demand remaining buoyant.
Powertech"s Industrial Group continued to perform satisfactorily during the
period under review with Crabtree Electrical Accessories SA, in particular,
reporting good results due to a healthy construction industry benefiting from
recent interest rate cuts.
Yelland Control, which specialises in the automation of manufacturing processes,
experienced somewhat difficult trading conditions. Whiteley"s, a supplier of
insulation materials to the power and distribution transformer markets, reported
good results due to increased electrification demands. Tridonic SA again
reported reasonable results despite an extremely competitive environment.
Trading conditions remained difficult for South African exporters over the past
year and, as a major exporter, UEC was also affected by the volatile strong
rand. While manufacturing volumes were 39% up over the previous year, rand
revenues remained flat and margins were impacted. UEC has been restructured to
enhance efficiencies and to ensure that it remains competitive in the current
strong rand environment. Arrow Altech Distribution met its growth and profit
targets despite the lowering of its prices throughout the past financial year in
line with the strong Rand.
Information Technology
Information technology (IT) contributed 28% of Altron"s total revenue, compared
to 29% for the prior reporting period. This sector contributed 30% to total
operating income or R216 million compared to 24% the prior year. Local
operations produced significantly improved results. The United Kingdom business
environment has shown some improvement, resulting in the BTG UK operations
returning to profitability, but much work remains to raise this to acceptable
levels.
Significant operational efficiencies have been achieved across a broad front
during the year, with most operations realising rationalisation and synergistic
savings.
As a result of the conclusion of the NamITech transaction, the IT Division of
Altech should now record revenue in excess of R1 billion per annum. In parallel
with this process, the existing Information Technology Division of Altech was
restructured. The acquisition positions Altech at the forefront of the
Europay/MasterCard/Visa (EMV) banking transformation process in Africa while
enhancing the group"s investment in the telecommunications industry via its
offerings of pre-paid voucher solutions, cellular (SIM) cards and secure mobile
banking solutions.
Financial Services And Corporate
Fintech Receivables 1, the asset-based financing securitisation vehicle, has
continued to perform in line with expectations and met all performance
parameters set for the structure. The level of new capital financed was 6% lower
than the prior year due to the generally lower levels of new business activity.
The lower landed cost of imported equipment as a result of the strong rand and
the convergence of technology whereby fewer units of lower values are financed,
also impacted overall levels of new capital financed. New credit control systems
have improved the overall ageing of the leases under management by Fintech.
OUTLOOK
The directors remain confident about the prospects of the group"s various
businesses. The strength of our group"s balance sheet positions us favourably to
take advantage of further investment opportunities that may arise. The South
African economy remains strong and the medium-term outlook is positive, which is
reflected in increased orders on hand as we enter the new year. Earnings
improvement is foreseen during the next financial year.
Independent Audit Review
The results for the year ended 29 February 2004 have been reviewed by the
independent auditors, KPMG. Their review report dated 12 May 2004 is available
for inspection at the registered office, Altron House, 4 Sherborne Road,
Parktown.
DIVIDENDS
The following dividends are declared in respect of the year ended 29 February
2004:
* ordinary dividend No. 56 of 52.0 cents per share (2003: 43.0 cents); and
* participating preference dividend No. 10 of 52.0 cents per share (2003:
43.0 cents).
The above dividends are payable as follows:
2004
Last day for trading to qualify for and
participate in the dividend (cum dividend) Friday 25 June
Trading ex dividend commences Monday 28 June
Record Date Friday 2 July
Dividend payment date (electronic and
certificated register) Monday 5 July
Shareholders who have dematerialised their share certificates will have their
accounts at their CSDP or broker, credited on Monday 5 July 2004. Dividend
cheques in payment of these dividends to certificated shareholders will be
posted to shareholders on or about Monday 5 July 2004.
In the case of certificated shareholders, notice of any change of address of
shareholders must reach the transfer secretaries, Computershare Limited, PO BOx
61051, Marshalltown 2107, on or before Friday 25 June 2004. Share certificates
may not be dematerialised or rematerialised from Monday 28 June 2004 to Friday
2 July 2004, both days inclusive.
On behalf of the board
Dr Bill Venter Robert Venter Diane Radley
Chairman Chief Executive Chief Financial Officer
12 May 2004
Directorate:
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 CG Venter PL Wilmot+
*British +Independent Non-Executive Director #Non-Executive Director
Secretaries:
Altron Management Services (Pty) Limited
Ms SF Linford (Group Secretary)
These annual financial results are also available on the Internet at
www.altron.co.za
Date: 12/05/2004 04:05:19 PM Produced by the JSE SENS Department
