| Wed 28 Sep 2005, 15:45 | | Altech - Abridged consolidated interim financial |
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Altech - Abridged consolidated interim financial results for the six months
ended 31 August 2005
ALLIED TECHNOLOGIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1946/020415/06)
Share code: ALT
ISIN: ZAE000015251
ABRIDGED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2005
* Revenue up 11%
* HEPS up in excess of 15%
* Strong balance sheet
* Return on equity in excess of 23%
Income statements
Six months Six months Year
ended ended ended
31.08.05 31.08.04 28.02.05
% (IFRS (IFRS
Figures in R million Change (Unaudited) Restated) Restated)
Revenue 11 2 933 2 653 5 552
Operating income
before goodwill
impairment and
capital items 250 248 492
Investment income 21 28 49
Finance costs (5) (1) (4)
Income from associates 26 - 12
Goodwill impaired - (3) (9)
Capital items (Note 1) (1) - (12)
Income before taxation 291 272 528
Taxation 109 103 191
Income after taxation 182 169 337
Attributable to
minority shareholders 6 9 15
Attributable to
ordinary shareholders 176 160 322
182 169 337
Basic earnings
per share (cents) 16.1 180 155 324
Headline earnings
per share (cents) 15.3 181 157 338
Weighted average number
of ordinary shares
in issue (millions) 98 103 99
Notes:
1.Capital items
Net loss on disposals (1) - (2)
Loss on discontinuance - - (10)
(1) - (12)
2.Reconciliation between
earnings and
headline earnings
Attributable to
ordinary shareholders 176 160 322
Goodwill impaired - 3 9
Capital items - gross 1 - 12
Net profit on disposal of
property, plant
and equipment - - (1)
Tax effect of
above adjustments - - (1)
Outside shareholders"
interest of adjustments - (1) (5)
Headline earnings 177 162 336
3. Subsequent event
Subsequent to the results for the period ended 31 August 2005, Altech has
successfully concluded the sale of its fifty percent in Econet Wireless Global
Limited (EWG) effective 1 September 2005 for a consideration of US$87,5 million.
EWG"s contribution to headline earnings for the six month period ended 31 August
2005 is nil.
The net asset value of EWG, included in the balance sheet is R409 million which
comprises of the following assets and liabilities:
Non-current assets 465
Current assets 126
Total assets 591
Non-current liabilities 70
Current liabilities 112
Total liabilities 182
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 sheets
31.08.05 31.08.04 28.02.05
(IFRS (IFRS
Figures in R million (Unaudited) Restated) Restated)
Assets
Non-current assets 1 172 656 1 104
Property, plant and equipment 287 220 242
Goodwill 531 401 531
Intangible assets 37 6 37
Associates and other investments 310 - 284
Deferred taxation 7 29 10
Current assets 1 504 1 604 1 678
Inventories 315 309 285
Accounts receivable 625 573 581
Cash and cash equivalents 564 722 812
TOTAL ASSETS 2 676 2 260 2 782
Equity and liabilities
Total equity 1 630 1 413 1 607
Capital and reserves 1 492 1 322 1 485
Minority interest 138 91 122
Non-current liabilities 80 20 77
Long-term liabilities 70 - 70
Deferred taxation 10 20 7
Current liabilities 966 827 1 098
Trade and other payables 860 731 980
Provisions 11 - 11
Taxation payable 95 96 107
TOTAL EQUITY AND LIABILITIES 2 676 2 260 2 782
Net asset value per share (cents) 1 528 1 358 1 524
Ordinary shares in issue at
end of period (000) 98 97 97
Abridged cash flow statements
Six months Six months Year
ended ended ended
31.08.05 31.08.04 28.02.05
(IFRS (IFRS
Figures in R million (Unaudited) Restated) Restated)
Operating activities (175) 84 514
Cash generated by operations 293 266 579
Investment income 16 27 45
Changes in working capital (194) 6 179
Taxation paid (115) (64) (138)
Cash available from
operating activities - 235 665
Dividends paid to shareholders (175) (151) (151)
Investing activities (88) (834) (1 328)
Financing activities 15 (3) 151
Net funds utilised (248) (753) (663)
Cash and cash equivalents
- at beginning of period 812 1 475 1 475
- at end of period 564 722 812
Supplementary information
Six months Six months Year
ended ended ended
31.08.05 31.08.04 28.02.05
(IFRS (IFRS
Figures in R million (Unaudited) Restated) Restated)
Capital commitments 9 9 49
Depreciation and amortisation 43 38 79
Net foreign exchange gains/(losses) 9 (6) 14
Capital expenditure 89 49 108
Contingent liabilities 27 27 27
Operating lease commitments
Payable within the next 12 months:
- property 29 22 34
- plant, equipment and vehicles 8 8 17
Payable thereafter
- property 84 42 81
- plant, equipment and vehicles 15 2 13
Directors" valuation of
associates and investments 450 - 284
Statement of changes in equity
Share
capital and Treasury Other Retained
Figures in R million premium shares reserves earnings
Balance at 29 February
2004 (IFRS restated) 55 36 1 470
Transfer between reserves (35) 35
Attributable earnings 160
Dividends (151)
Treasury shares purchased (257)
Issue of share capital 1
Change in minority
interest
Other movements 8
Balance at 31 August
2004 (IFRS restated) 56 (257) 1 1 522
Foreign currency
translation differences (1)
Attributable earnings 162
Issue of share capital 2
Change in minority
interest
Balance at 28 February
2005 (IFRS restated) 58 (257) - 1 684
Foreign currency
translation differences 3
Dividends (175)
Attributable earnings 176
Issue of share capital 3
Change in minority
interest
Balance at 31
August 2005 (unaudited) 61 (257) 3 1 685
Ordinary
shareholders Minority Total
Figures in R million equity interest equity
Balance at 29 February
2004 (IFRS restated) 1 561 44 1 605
Transfer between reserves - -
Attributable earnings 160 160
Dividends (151) (151)
Treasury shares purchased (257) (257)
Issue of share capital 1 1
Change in minority interest - 47 47
Other movements 8 8
Balance at 31 August
2004 (IFRS restated) 1 322 91 1 413
Foreign currency
translation differences (1) (1)
Attributable earnings 162 162
Issue of share capital 2 2
Change in minority interest - 31 31
Balance at 28 February
2005 (IFRS restated) 1 485 122 1 607
Foreign currency
translation differences 3 3
Dividends (175) (175)
Attributable earnings 176 176
Issue of share capital 3 3
Change in minority interest - 16 16
Balance at 31
August 2005 (unaudited) 1 492 138 1 630
Abridged Segmental Analysis
Six months Six months
ended ended
31.08.05 31.08.04
(IFRS
Figures in R million (Unaudited) % Restated)
Revenue:
Telecommunications division 2 224 76 1 792
Multi-Media and Electronics divisions 330 11 454
Information Technology division 408 14 458
Inter group sales (29) (1) (51)
2 933 100 2 653
Operating income:
Telecommunications division 191 76 152
Multi-Media and Electronics divisions 7 3 11
Information Technology division 57 23 88
Corporate net income (5) (2) (3)
250 100 248
Year
ended
28.02.05
(IFRS
Figures in R million % Restated) %
Revenue:
Telecommunications division 68 3 912 70
Multi-Media and Electronics divisions 17 784 14
Information Technology division 17 929 17
Inter group sales (2) (73) (1)
100 5 552 100
Operating income:
Telecommunications division 61 333 68
Multi-Media and Electronics divisions 4 5 1
Information Technology division 35 151 31
Corporate net income (1) 3 1
100 492 100
Adoption of International Financial Reporting Standards
Basis of preparation
The group has adopted International Financial Reporting Standards (IFRS) for the
year ending 28 February 2006. The interim results have been prepared and
presented in accordance with IAS 34 - Interim financial reporting.
The financial statements for the year ending 28 February 2006 will be the
group"s first consolidated IFRS- compliant financial statements and hence IFRS 1
First time adoption of IFRS has been applied in preparing this interim report.
An explanation of how the transition to IFRS has affected the previously
reported financial position and performance of the group is provided below.
Significant changes to the group"s accounting policies as a result of the
adoption of IFRS
Goodwill
All business combinations are accounted for by applying the "purchase method".
Goodwill represents amounts arising on acquisition of subsidiaries and
associates. In respect of business combinations that have occurred since the
IFRS transition date, 1 March 2004, goodwill represents the difference between
the cost of the acquisition and the fair value of the net identifiable assets
and contingent liabilities acquired.
The group has made an election in terms of IFRS 1 that IFRS 3 will only be
applied from 1 March 2004. In respect of acquisitions prior to this date,
goodwill is included as at 1 March 2004 at the amount previously recorded under
SA GAAP. The classification and accounting treatment of business combinations
that occurred prior to 1 March 2004 has not been reconsidered in preparing the
group"s opening IFRS balance sheet at 1 March 2004.
From 1 March 2004, goodwill is stated at cost less accumulated impairment
losses. Goodwill is allocated to cash-generating units and is no longer
amortised but tested annually for impairment.
Previously, goodwill arising on each acquisition was amortised over its useful
life on a straight-line basis and subjected to annual impairment testing.
Share-based payment transactions
The fair value of share options and deferred delivery shares granted to
employees is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured at grant date and expensed over the period
during which the employee becomes unconditionally entitled to the equity
instruments. The fair value of the instruments granted is measured using
generally accepted valuation techniques, taking into account the terms and
conditions upon which the instruments are granted. This accounting policy has
been applied to all equity instruments granted after 7 November 2002 that had
not yet vested at 1 January 2005, the date of transition to IFRS. The fair value
of share-based payments was not recognised under the group"s previous accounting
policies.
The Group continues to account for the BEE transaction in Namitech with Pamodzi
on the same basis as disclosed in the 2005 annual financial statements, pending
the finalisation of the accounting standards relating to these transactions.
On the assumption that Pamodzi had required their full economic interest in
Namitech in 2005, an amount of R114 million would have been reflected as their
minority interest in the company.
Straightlining of operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Past practice, whereby operating
lease payments were expensed on a payments basis, was based on an interpretation
that was generally accepted in the South African community. This interpretation
considered the contractual payments basis as being most representative of the
time pattern of the entity"s benefit obtained from the leased property. The
global spotlight has led to the view that the entity is obliged to adopt the
straight-line basis of accounting for fixed escalation lease payments. The
required adjustment has been made as required by IAS 8 with the necessary
restatement of comparative figures.
Reconciliation of equity
In R million 28.02.05 31.08.04 29.02.04
Equity previously reported under SA GAAP 1 456 1 308 1 561
Adjustment upon adoption of IFRS 29 6 (1)
Equity reported under IFRS 1 485 1 314 1 560
Equity adjustments
Retained earnings:
Reversal of goodwill amortisation 30 15 -
Expensing of share based payments 1 - -
Property, Plant, Equipment
and intangible assets 1 - -
Operating leases (2) (1) (1)
Share-based payment reserve (1) - -
Treasury shares - (8) -
29 6 (1)
Assets and liabilities adjustments
Intangible assets 1 - -
Goodwill 30 15 -
Deferred tax 1 - -
Equity - (8) -
Accounts payable (3) (1) -
29 6 -
Reconciliation of profit for the year ended 28 February 2005
As reported Effect of IFRS
previously IFRS Restated
In R million (Audited)
Operating income before goodwill
amortisation and capital items 493 (1) 492
Investment income 49 - 49
Finance costs (4) - (4)
Income from associates 12 - 12
Goodwill amortised and impaired (39) 30 (9)
Capital items (12) - (12)
Income before taxation 499 29 528
Taxation (191) - (191)
Income for the period 308 29 337
Attributable to:
Altech shareholders 293 29 322
Minority shareholders 15 - 15
308 29 337
Reconciliation of profit for the six months ended 31 August 2004
As reported Effect of IFRS
previously IFRS Restated
In R million (Unaudited)
Operating income before goodwill
amortisation and capital items 249 (1) 248
Investment income 28 - 28
Finance costs (1) - (1)
Goodwill amortised and impaired (18) 15 (3)
Capital items 8 (8) -
Income before taxation 266 6 272
Taxation (103) - (103)
Income for the period 163 6 169
Attributable to:
Altech shareholders 154 6 160
Minority shareholders 9 - 9
163 6 169
Message To Our Shareholders
The Directors are pleased to report that Altech has produced good results for
the half-year ended August 2005, improving headline earnings per share by 15.3
percent to 181 cents per share.
Revenue increased by 11 percent to R2.933 billion, with operating income of R250
million. Altech"s balance sheet remains strong with a net asset value of 1528
cents per share and cash of R564 million. Cash has been utilised in the current
period in the funding of working capital on a temporary basis.
Group Summary
Telecommunications Division
Wireless Communications
Autopage Cellular continues to perform above expectations in the post-paid
cellular market, which still provides good growth. Autopage Cellular has
increased its post-paid subscriber base by approximately 28 000 subscribers.
The company"s total subscriber base, including pre-paid, now exceeds 667 000
subscribers.Average revenue per user (ARPU) has been maintained at the levels
previously reported.
The South African telecommunications market is becoming increasingly de-
regulated and liberalised. The opening of the market for voice-over-internet-
protocols (VOIP), followed by increasing pressures from government to reduce
tariff pricing through further competition, has created opportunities for
Autopage Cellular to leverage its significant subscriber base, expertise and
experience into a broader communications market.
Autopage Cellular is exceptionally confident of its long-term future with all of
the cellular network operators in South Africa, and signature of agreements with
both Vodacom and MTN is imminent. This will complement the existing agreement
with Cell C.
Netstar maintained its leadership in stolen vehicle tracking and recovery in
Southern Africa. Profit growth is significantly ahead of expectations and the
company has exceeded cash flow targets.
The strong growth in Netstar"s operations continued during the period and the
company now has a subscriber base of approximately 360 000 users. Based on the
current penetration of the insured vehicle market in South Africa and Netstar"s
expansion strategy, the subscriber growth rate is expected to continue.
The Malaysian market is growing steadily with more than 40 000 vehicles on the
Netstar system. Targeted African and international expansion markets are being
actively pursued as part of the company"s growth plans. The company is due to
launch its services into the Nigerian market in the near future.
Alcom Matomo exceeded profitability and cash flow targets for the period under
review. 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 all targets being met. A number of further tenders have been
submitted to various customers in Southern Africa for TETRA two-way radio
systems and prospects are good for additional revenues to be generated from this
leading Motorola technology.
Alcom Radio Distributors continues to produce good results through its
distribution of Motorola two-way radio products in the Southern African market
via a network of authorised dealers. Significant export opportunities exist into
Southern African markets and elsewhere.
Multi-Media and Electronics Division
UEC Multi-Media (UEC)
UEC continued its turnaround during the period and has returned to sustainable
profitability.
Sales were particularly strong to our primary customer, MultiChoice. Other
international relationships are strong, including "Euskatel" in Spain, "Yes" in
Israel, and the securing of a new Personal Video Recorder contract with
"Showtime" in Dubai.
Factory and process efficiencies at UEC continue to show improvements, producing
the results that were expected from the company-wide re-engineering and process
redesign which began in March of 2004.
Improvements in inventory control, supply chain management, quality and
financial controls have been achieved and are on-going.
Product gross margins have returned to acceptable levels and are expected to
show further improvement as efficiency initiatives continue.
Global Decoder Logistics (GDL), with support and logistics operating units in
Australia and South Africa, has shown impressive operational and financial
improvement with good revenue and profits being realised.
Arrow Altech Distribution (AAD)
AAD reported positive results for the period under review, driven by an increase
in margins and supported by further growth in revenue from new sales
initiatives.
AAD"s positive trading figures reflect the benefit of past restructuring
strategies designed to reduce operating costs, improve operating procedures and
the focus on value added operating segments that offer better opportunities.
Information Technology Division
Effective 1 March 2005, Pamodzi Investment Holdings (Pty) Limited (Pamodzi)
acquired a 25.01 percent equity holding in Altech Data (Pty) Limited, which
incorporates the operations of Isis and Altech Card Solutions.
Together with its 28 percent holding in NamITech, this confirms Pamodzi"s
standing as Altech"s Black Economic Empowerment partner in the group"s
Information Technology Division. This also ensures Altech"s compliance with the
majority of the requirements of the ICT Charter.
Isis Information Systems (Isis)
Isis performed well over the period under review, exceeding all expectations.
Relationships with Vodacom SA, Vodacom DRC, Vodacom Tanzania, V-Mobile Nigeria
and Telkom, have ensured strong and dependable cash flow and profits.
Isis has begun strengthening the marketing relationship previously established
with Hewlett Packard"s global organisation (HP), with respect to Isis" iCAP
product offering.
Altech Card Solutions (ACS)
ACS performed well over the period and exceeded profit expectations.
Strong performances were experienced across the operating units of ACS,
especially Cardtronics (plastic cards) and Data Personalisation Solutions (the
Datacard agency), both of which experienced record sales and profits. Smart Card
Solutions (the EFTPOS terminal unit) performed well against a background of
continued EMV implementation.
Integrated Transaction Services, the transaction switching division within ACS,
was consolidated by expansion and is expected to increase its contribution by
year end.
NamITech
NamITech, while profitable, did not perform as expected over the period.
A number of simultaneous factors contributed to the shortfall, including the
failure of a new Flexopress printer to perform to its design specifications.
These printers, ordered from an independent supplier for both the South African
and Nigerian plants, caused production delays and a consequent negative
financial impact at both facilities.
The problem has now been resolved and NamITech should return to full production
capacity and consequently recoup some of the shortfall experienced in the first
half of the financial year.
The recently established NamITech West African facility in Lagos, Nigeria will
be operating to full production levels early in the second half of the year.
The facility is already producing over 15 million pre-paid cellular vouchers per
month and volumes will increase to an expected monthly output of over 30 million
vouchers by year end.
The facility now employs over 150 Nigerian nationals and is one of the most
sophisticated prepaid voucher plants in the world.
NamITech is well positioned to tender for the National ID Project, which is
expected to be released by government in October 2005.
Corporate Finance Activities
As previously advised, Altech"s acquisition of a joint controlling interest in
Econet Wireless Global Limited (EWG), a Botswana holding company with interests
in international cellular network activities, for US$70 million, was effective
from 1 December 2004.
The joint venture with the other shareholders of EWG (the TSMI shareholders)
broke down irretrievably during the current period, and was accordingly
dissolved, with Altech selling its interest to the TSMI shareholders, effective
1 September 2005, for a consideration of US$87.5 million, plus interest. The
sale consideration plus interest was received by Altech on 20 September 2005,
resulting in a profit on this investment of R155 million or 34 percent.
As part of the transaction, Altech is released from any restraint undertakings
given in favour of EWG and is free to pursue other cellular network
opportunities in Africa and elsewhere, as part of its overall acquisition
strategy. Having regard to its substantially increased cash resources and its
strong balance sheet, Altech is well-positioned to pursue such acquisitions in
the future. Altech is currently evaluating a number of these potential
acquisitions.
Outlook
With an increased order book, the growing annuity income expected to be derived
from the Autopage Cellular and Netstar operations, as well as opportunities in
an increasingly liberalised and deregulated telecoms market, complemented by
acquisitions, the directors remain confident of continued real growth in the
second half of the financial year.
On behalf of the board
Dr Hilton Davies Craig Venter Dr John Carstens
(Non Executive Chairman) Chief Executive Officer Financial Director
28 September 2005
Directors:
Dr H K Davies (Non-Executive Chairman),
CG Venter (Chief Executive Officer),Dr J E W Carstens, P M O Curle*,
M L Leoka#, R Naidoo#, D C Radley#,Dr H A Serebro#, R E Venter#,
Dr W P Venter#, P L Wilmot#
* British # Non-Executive
Secretaries:
Altech Management
Services (Pty) Limited
A member of the Altron Group
Date: 28/09/2005 03:45:38 PM Produced by the JSE SENS Department
