| Wed 4 May 2005, 16:39 | | Financial Results For The Year Ended 28 Feb 05 |
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Altech - Audited Consolidated Annual Financial Results For The Year Ended 28
February 2005
Allied Technologies Limited
(Incorporated in the Republic of South Africa)
(Registration number 1946/020415/06)
Share code: ALT ISIN: ZAE000015251
(`Altech`)
AUDITED CONSOLIDATED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY
2005
Revenue Up by 34%
Operating Income Up by 48%
HEPS Growth of 12%
Dividend increase of 21%
INCOME STATEMENT
% 2005 2004
Figures in R milions Change (Audited) (Audited)
Revenue 34 5 552 4 143
Operating income before goodwill
amortisation and capital items 48 493 333
Investment income 49 129
Finance costs (4) (6)
Income from associates 12 -
Income before goodwill amortisation
and capital items 21 550 456
Goodwill amortisation (39) (10)
Capital items (Note 1) (12) 5
Income before taxation 11 499 451
Taxation (191) (131)
Income after taxation 308 320
Attributable to minority shareholders 15 8
Attributable to ordinary shareholders 293 312
308 320
Basic earnings per share (cents) 295 297
Headline earnings per share (cents) 12 339 302
Diluted basic earnings per share
(cents) 293 295
Diluted headline earnings per share (cents) 337 301
Dividends per share (cents) - paid 143.75 125
- declared 174 143.75
Weighted average number of ordinary shares
in issue (millions) 99 105
Diluted weighted average number of
shares (millions) 100 106
Notes:
1. Capital items
Net (loss)/gain on disposals (2) 5
Loss on discontinuance (10) -
(12) 5
2. Reconciliation between earnings and
headline earnings
Attributable to ordinary shareholders 293 312
Goodwill amortisation 39 10
Capital items - gross 12 (5)
Net (profit)/loss on disposal of property,
plant and equipment (1) 1
Tax effect of above adjustments (1) (2)
Outside shareholders` interest
of above adjustments (5) 2
Headline earnings 337 318
3. 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 29 February
2004, except for the following:
IAS 1 - PRESENTATION OF FINANCIAL STATEMENTS
Premiums and discounts arising on subsequent purchases from/or sales to minority
interests in subsidiaries
Following the consideration of minority interests as equity, any increases and
decreases in ownership interests in subsidiaries without a change in control are
recognised as equity transactions in the consolidated financial statements.
Accordingly, any premiums or discounts on subsequent purchases of equity
instruments from/or sales of equity instruments to minority interests are
recognised directly in the equity of the parent shareholder.
Previously any premiums or discounts on subsequent purchases of equity
instruments from minorities were taken to profit or loss as a capital item in
the income statement.
There is no effect on the financial statements in respect of this change.
Revised AC 140 - Business combinations, AC 128 - Impairment of assets and AC 129
- Intangible assets
The group has applied the requirements of the above revised accounting
statements on a prospective basis on business combinations with agreement dates
on or after 31 March 2004.
The accounting treatment applied to business combinations with agreement dates
prior to 31 March 2004 has been consistently applied in respect of the group`s
previous accounting policies in this regard.
AC 501 - ACCOUNTING FOR SECONDARY TAX ON COMPANIES (STC).
In terms of the statement a deferred tax asset should be recognised on the
unused STC credits when it is probable that such unused STC credits will be
utilised in the future.
There is no effect on the financial statements as a result of the adoption of
this accounting statement.
4. The Altech group`s auditors PKF (JHB) Inc. have audited these year-end
results. The unqualified audit report is available for inspection at the
company`s registered office during normal office hours.
BALANCE SHEET
Figures in R million 2005 2004
ASSETS
Non-current assets 1 072 150
Property, plant and equipment 242 120
Goodwill 501 7
Intangible assets 36 7
Associates and other investments 284 1
Deferred taxation 9 15
Current assets 1 678 2 123
Inventories 285 252
Accounts receivable 581 396
Cash and cash equivalents 812 1 475
Total assets 2 750 2 273
EQUITY AND LIABILITIES
Capital and reserves 1 456 1 561
Minority interest 122 44
Non-current liabilities 77 5
Long-term liabilities 70 -
Deferred taxation 7 5
Current liabilities 1 095 663
Trade and other payables 977 598
Provisions 11 -
Taxation payable 107 65
Total equity and liabilities 2 750 2 273
Net asset value per share (cents) 1 495 1 484
Ordinary shares in issue at end of period (000) 97 413 105 224
ABRIDGED CASH FLOW STATEMENT
Figures in R million 2005 2004
Operating activities 514 232
Cash generated by operations 582 327
Investment income 45 123
Changes in working capital 176 63
Taxation paid (138) (149)
Cash available from operating activities 665 364
Dividends paid to shareholders (151) (132)
Investing activities (1 328) 145
Financing activities 151 -
Net funds (utilised)/generated (663) 377
Cash and cash equivalents
- at beginning of year 1 475 1 098
- at end of year 812 1 475
ABRIDGED SEGMENTAL ANALYSIS
Figures in R million 2005 % 2004 %
Revenue:
Telecommunications division 3 912 70 3 142 76
Multi-Media and Electronics divisions 784 14 886 21
Information technology division 929 17 241 6
Inter group sales (73) (1) (126) (3)
5 552 100 4 143 100
Operating income:
Telecommunications division 333 68 241 72
Multi-Media and Electronics divisions 5 1 52 16
Information Technology division 151 31 31 9
Corporate net income 4 1 9 3
493 100 333 100
SUPPLEMENTARY INFORMATION
Figures in R million 2005 2004
Capital commitments 49 -
Depreciation and amortisation 79 33
Net foreign exchange gains/(losses) 14 (3)
Capital expenditure 108 48
Contingent liabilities 27 27
Operating lease commitments
Payable within the next 12 months:
- property 34 29
- plant, equipment and vehicles 17 14
Payable thereafter:
- property 81 57
- plant, equipment and vehicles 13 2
Directors` valuation of associates and investments 284 -
STATEMENT OF CHANGES IN EQUITY
Share
capital and Treasury Other Retained
Figures in R million premium shares reserves earnings
Balance at 28 February 2003 55 - 35 1 300
Changes in accounting policy - AC 133 - - - (10)
Restated balance 55 - 35 1 290
Attributable earnings - - - 312
Dividends - - - (132)
Change in minority interest - - - -
Balance at 29 February 2004 55 - 35 1 470
Transfer between reserves - - (35) 35
Treasury shares purchased - (257) - -
Foreign currency translation
differences - - - -
Attributable earnings - - - 293
Dividends - - - (151)
Issue of share capital 3 - - -
Change in minority interest - - - -
Other movements - - - 8
Balance at 28 February 2005 58 (257) - 1 655
STATEMENT OF CHANGES IN EQUITY continue
Ordinary
shareholders` Minority Total
Figures in R million equity interest equity
Balance at 28 February 2003 1 390 43 1 433
Changes in accounting policy - AC 133 (10) - (10)
Restated balance 1 380 43 1 423
Attributable earnings 312 - 312
Dividends (132) - (132)
Change in minority interest - 1 1
Balance at 29 February 2004 1 560 44 1 604
Transfer between reserves - - -
Treasury shares purchased (257) - (257)
Foreign currency translation
differences - - -
Attributable earnings 293 - 293
Dividends (151) - (151)
Issue of share capital 3 - 3
Change in minority interest - 78 78
Other movements 8 - 8
Balance at 28 February 2005 1 456 122 1 578
MESSAGE TO OUR SHAREHOLDERS
The Altech group once again delivered pleasing results for the year ended 28
February 2005. Outstanding performances were achieved by Autopage Cellular,
Netstar, NamITech, Isis, Alcom Matomo and Alcom Radio Distributors.
The annuity income-based businesses continued their strong cash generation
which, coupled with the successful integration of recent acquisitions, resulted
in the Altech group`s Telecommunications, Multi-Media and Information Technology
(TMT) convergence and global expansion strategy remaining an on-going and
dynamic success story.
The group`s revenue increased by 34 percent to R5.552 billion, with operating
income increasing by 48 percent to R493 million. This resulted in headline
earnings per share of 339 cents, which represents a 12 percent increase. Return
on shareholder`s equity remains in excess of 20 percent, with cash on hand of
R812 million after investments in acquisitions in excess of R960 million and the
share buy-back of R248 million. Dividends have increased by 21 percent to 174
cents per share.
GROUP HIGHLIGHTS
CORPORATE FINANCE ACTIVITIES
During the latter part of the financial year, Altech successfully implemented
the previously announced transaction in respect of Econet Wireless Global (EWG).
Altech is now a substantial shareholder and joint controlling partner in EWG, a
holding company for mobile and satellite-based telecommunications networks based
primarily in Africa. Altech invested US$70 million in EWG, of which US$30
million is held in escrow, with the interest thereon accruing to Altech, pending
agreement on the optimal deployment of these funds.
As part of the Econet transaction and subsequent to Altech`s investment into
EWG, EWG acquired a 14 percent interest in Mascom Wireless Botswana (Pty)
Limited (MWB) from Econet Wireless Holdings Limited of Zimbabwe and a 20 percent
interest in MWB from Citizen Investments (Pty) Limited of Botswana, for a total
consideration of US$45 million. This results in an effective 40 percent interest
in MWB being held by EWG and a local Botswana investment consortium.
Altech has, through its secure technology business NamITech Holdings Limited,
established a 75 percent held manufacturing subsidiary, NamITech West Africa
Limited, based in Lagos, Nigeria. This operation, intended to service the
telecommunications and banking markets of West Africa, is partially owned by
prominent Nigerian-based investors, thereby enhancing the envisaged prospects as
well as safeguarding the investment.
During the financial year, Altech also concluded the following transactions
which were referred to in the previous annual and/or interim reports:
* an indirect repurchase of 8 048 242 of its own ordinary shares at a
price of 3180 cents per share (plus acquisition and holding costs of
32 cents per share) from Altech`s listed holding company, Allied
Electronics Corporation Limited. This purchase represents 7.6 percent
of the issued share capital of Altech and is currently held as
treasury stock;
* the finalisation on 5 March 2004 of the R552 million acquisition by
Altech of a controlling shareholding in NamITech, following the
approval of the Competition Tribunal of South Africa. NamITech`s full
year results have been included with those of Altech for the year
under review;
* two of Altech`s key operating subsidiaries, namely NamITech and Altech
Data (Pty) Limited (Altech Data), completed strategic Black Economic
Empowerment (BEE) transactions with Pamodzi Investment Holdings (Pty)
Limited (Pamodzi). Pamodzi acquired a 28 percent interest in NamITech
and a 25.01 percent interest in Altech Data. These transactions,
together with the prior year acquisition by the Motoma ICT Group of a
30 percent shareholding in Alcom Matomo (Pty) Limited, as previously
reported, ensure that Altech is well positioned with respect to the
BEE requirements of the ICT Charter.
TELECOMMUNICATIONS DIVISION
Wireless Communications
Autopage Cellular has performed well ahead of expectations in a market which
continues to provide good growth, but which is starting to show signs of
maturity. For the year, Autopage Cellular showed a healthy increase of more than
74 800 net post-paid subscribers, which is a significantly better performance
than expected. The company`s total subscriber base now exceeds 617 000 and the
average revenue per user (ARPU) is still increasing.
The South African telecommunications market is becoming increasingly de-
regulated. The opening of the market for voice-over-internet-protocols (VoIP),
as well as other concessions, has created excellent opportunities for Autopage
Cellular to leverage its significant subscriber base into a broader
communications market.
Fifty percent of Econet Wireless Global (EWG) was acquired by Altech during
December 2004. EWG is a diversified telecommunications company with operations
in the core areas of mobile cellular, satellite, internet and VoIP.
The integration of activities within the new Econet Wireless group has
progressed satisfactorily, with the focus being on structure, process and
corporate governance. A positive (earnings enhancing) contribution for the first
3 month trading period was achieved and all deadlines required by Altech at year
end were met.
The legal dispute regarding Econet`s pre-emptive right to increase its
shareholding in Econet Wireless Nigeria and other procedural matters is
currently before an international arbitration panel. The arbitral process was
completed during March 2005 and the ruling is expected shortly. The proposed
investment by EWG in Telikom Papua New Guinea was not approved by that
government and EWG has since taken legal advice and has reserved its rights in
regard to the matter.
Altech`s investment in EWG is a significant development in the future of the
company. It fulfils Altech`s long-term strategy of becoming a global
telecommunications player with particular focus on the African continent where
there is still demand and potential for telecommunications services and
solutions.
Netstar maintained its impressive market share in stolen vehicle tracking and
recovery (SVR) in southern Africa. Profit growth is ahead of expectations and
the company has exceeded cash flow targets.
The strong growth in Netstar`s operations continued during the year and the
company now has a subscriber base of close to 400 000 vehicles. Based on the
current penetration of the insured vehicle market in South Africa, the
subscriber growth rate is expected to continue for several years.
The Malaysian operation is growing steadily with in excess of 21 400 vehicles on
the system. Targeted African and international expansion markets are being
actively pursued as a part of the company`s long-term growth plans.
Alcom Matomo exceeded profitability and cash flow targets for the year. The
company is fully involved in activities generated by the award in February 2004
of the R500 million Gauteng South African Police Services` digital Terrestrial
Trunked Radio (TETRA) network. Work on the project is progressing well with key
equipment being procured and tested. High site planning and preparation is well
advanced with site work already underway. A number of further tenders have been
submitted to various customers in southern Africa for TETRA systems.
Following on the renewal of the distribution agreement with Motorola, which was
signed during the year, Alcom Matomo continued to actively pursue a number of
opportunities in southern Africa.
Alcom Radio Distributors (ARD) exceeded its financial budget for the year as it
continues to distribute Motorola two-way radio products to the southern African
market through its network of authorised dealers. The renewed distribution
agreement with Motorola has opened up southern African markets for ARD and the
company is successfully pursuing these new opportunities.
MULTI-MEDIA AND ELECTRONICS DIVISION
With all non-South African customers requiring dollar denominated pricing, the
volatility and gradual strengthening of the rand created pressure on the results
of UEC Multi-Media (UEC). This was despite an eight percent increase in unit
volumes compared to the previous year. While the company remains profitable at a
trading level in its core business, it was recognised early in the year that a
focused efficiency optimisation program, across the entire company, would be
required to re-position and defend it from a strengthening rand in future.
To this end, a disciplined and focused company-wide re-engineering and process
redesign has been undertaken. This included top-down redesign and implementation
across all functional areas of the company, including production, research and
development, product management, sales and marketing, finance and
industrialisation. Implementation of this project began in the fourth quarter of
the year and immediate benefits have been felt at all levels of the company.
During the year, UEC also formed a commercial relationship with MIC, India, in
terms of which UEC will supply core technology to their manufacturing plant in
Hyderabad. These units, which satisfy the low-cost end of the market, will be
marketed and sold under an exclusive royalty agreement with UEC. MIC will also
perform a marketing function in the region, which is one of the fastest growing
Set -Top - Box (STB) markets in the world.
Overall, UEC continues to develop, manufacture and deploy innovative and
internationally advanced STB products and associated software. While the company
has felt competitive pressure at the low-end of the market, mainly from Asian
manufacturers, its fundamentals remain strong as it looks forward to an exciting
year of new product development and new market penetration.
Arrow Altech Distribution (AAD) remains a well managed and profitable business.
The company is optimistic about its future and believes that certain technology
sectors of the market have the potential to show growth. AAD is well positioned
in its offering of broad-based solutions to customers.
INFORMATION TECHNOLOGY DIVISION
The IT Division posted record results, underpinned by strong performances from
the newly acquired and integrated NamITech, and from Isis, which operated in its
first full year as a focused telecoms software company after the unbundling of
Isis Information Systems.
NamITech was successfully integrated into the group structure and comfortably
reached its growth targets. NamITech has achieved market leader positions in
numerous areas of its business, including cellular cards (SIM`s), cellular pre-
paid vouchers, Europay/MasterCard/Visa (EMV) credit/debit cards and cheque
printing. NamITech plants have been upgraded and recapitalised in expectation of
increased volumes of banking and mobile products during the coming year.
In other areas of NamITech`s business, including solutions and security, strong
foundations were laid for further growth in the coming year.
Finally, responding to explosive cellular growth on the continent, NamITech has
initiated the building of a pre-paid cellular voucher plant in Nigeria, along
with carefully selected Nigerian partners. The plant is due to be opened soon
and commitments have been received for the total volume output for its first six
months. This facility is scheduled to commence operation during the middle of
May 2005.
Isis, which provides both real-time provisioning and service configuration
software to mobile and fixed line operators, had an exceptionally strong year as
it solidified its relationships with Telkom and Vodacom SA while expanding its
customer base to wireless operators across Africa. In addition, Isis signed a
deal with the global giant, Hewlett Packard, to jointly market the iCaps system
to operators around the world. This was launched at the GSM World Congress in
Cannes during February 2005.
Altech Card Systems produced acceptable revenues and profits and retained its
leading position in the Electronic Funds Transfer at Point-of-Sale (EFTPOS)
terminal market. It also saw excellent performances from its Datacard printer
and Cardtronic card business units. The Integrated Transaction Services (ITS)
switch, representing a new business unit, developed its infrastructure and
software proposition during the year, with an expectation of moving into profit
during the coming financial year.
It was determined that Altech Informatics, operating in the Manufacturing
Execution Systems (MES) and technology consulting space, was no longer core to
the Altech TMT strategy and was sold to Bytes Technology Group at the end of the
year.
EXPORTS
During the year, Altech increased its export sales from R334 million to a record
R713 million, with an increase in destinations from 31 countries to 52.
Significant contributors were UEC R371 million (2004: R288 m), Alcom Radio
Distributors R65 million (2004: R32 m) and NamITech R265 million (first year as
an Altech subsidiary).
OUTLOOK
Altech, with the successful integration of recent major acquisitions, its strong
cash resources, combined with its revenue generating annuity income businesses
and its focused TMT strategy, remains confident of continuing to create
shareholder value and again showing real growth in the year ahead.
DECLARATION OF ORDINARY DIVIDEND NO 62
Dividend number 62 of 174 cents per share (2004: 143.75 cents) in respect of the
year ended 28 February 2005, is declared payable on Monday 6 June 2005 to
ordinary shareholders recorded in the register at the close of business on
Friday 3 June 2005. The timetable relating to the payment of the dividend is as
follows:
Last day to trade cum dividend Friday 27 May 2005
Trading ex dividend commences Monday 30 May 2005
Record date Friday 3 June 2005
Payment date Monday 6 June 2005
Share certificates may not be dematerialised or rematerialised between Monday 30
May 2005 and Friday 3 June 2005, both days inclusive. The certificated register
will be closed for this period.
On behalf of the board
Dr Hilton Davies Mr Craig Venter Dr John Carstens
Independent Chief Executive Financial Director
non-executive Chairman Officer
4 May 2005
Directors:
Dr H K Davies* (Independent non-executive Chairman)
C G Venter (Chief Executive Officer)
Dr J E W Carstens, P M O Curle#, M L Leoka*, R Naidoo*, D C Radley*,
Dr HA Serebro* R E Venter*, Dr W P Venter* (Alternate: D C Mpofu),
P L Wilmot* #British *Non-executive
Secretaries: Altech Management Services (Pty) Limited
The financial results are also available on the internet at www.altech.co.za and
the JSE News Service - SENS
