| Wed 19 Apr 2006, 16:20 | | Altech - Audited Abridged Consolidated Annual Fin |
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ALT
ALT
Altech - Audited Abridged Consolidated Annual Financial Results For The Year
Ended 28 February 2006 And Renewal Of Cautionary Announcement
ALLIED TECHNOLOGIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1946/020415/06)
Share code: ALT
ISIN: ZAE000015251
AUDITED ABRIDGED CONSOLIDATED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED
28 FEBRUARY 2006 AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
* HEPS up 12%
* Revenue exceeds R6 bn
* Operating income from continuing operations exceeds R500 million
* Strong balance sheet with cash at R1.5 bn
* Dividend increased by 20.1%
* Abridged income statements
2005
% 2006 (Audited and
Figures in R million Change (Audited) IFRS restated)
Revenue 9 6 041 5 552
Operating income before goodwill
impairment and
capital items 485 491
Investment income 54 49
Finance costs (5) (4)
Income from associates 26 12
Goodwill impaired (82) (9)
Capital items (Note 1) 74 (12)
Income before taxation 552 527
Taxation 183 191
Income after taxation 10 369 336
Attributable to minority
shareholders 5 17
Attributable to ordinary
shareholders 364 319
369 336
Basic earnings per share (cents) 16 373 321
Weighted average number of
ordinary shares in issue (millions) 97 591 99 344
Headline earnings per share
(cents) 12 379 338
Notes:
1.Capital items
Net loss on disposals (1) (2)
Divisional closure costs (54) (10)
Profit on disposal of Econet
Wireless Global Limited 129 -
74 (12)
2.Reconciliation between
earnings and headline earnings
Attributable to ordinary
shareholders 364 319
Goodwill impaired 82 9
Capital items - gross (74) 12
Net profit on disposal of
property, plant and equipment - (1)
Tax effect of above adjustments 4 (2)
Minority interest (6) (1)
Headline earnings 370 336
3. 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.
4. The Altech group"s auditors, PKF (Jhb) Inc., have audited these year-end
results. Their unqualified audit report is available for inspection at the
company"s registered office during normal office hours.
* Abridged balance sheets
2005
2006 (Audited and
Figures in R million (Audited) IFRS restated)
Assets
Non-current assets 650 1 103
Property, plant and equipment 279 242
Goodwill 332 531
Intangible assets 9 37
Associate and investment - 284
Deferred taxation 30 9
Current assets 2 326 1 678
Inventories 290 285
Trade and other receivables 538 581
Cash and cash equivalents 1 498 812
TOTAL ASSETS 2 976 2 781
Equity and liabilities
Total equity 1 770 1 574
Capital and reserves 1 681 1 480
Minority interest 89 94
Non-current liabilities 39 107
Long-term liabilities - 70
Minority shareholders" loan 30 31
Deferred taxation 9 6
Current liabilities 1 167 1 100
Trade and other payables 1 066 982
Warranty provisions 7 11
Taxation payable 94 107
TOTAL EQUITY AND LIABILITIES 2 976 2 781
Net asset value per share (cents) 1 721 1 519
Ordinary shares in issue at end of year ("000) 97 699 97 413
* Abridged cash flow statements
2005
2006 (Audited and
Figures in R million (Audited) IFRS restated)
Operating activities 414 514
Cash generated by operations 581 577
Investment income 49 45
Changes in working capital 181 181
Taxation paid (222) (138)
Cash available from operating activities 589 665
Dividends paid (175) (151)
Investing activities 264 (1 328)
Financing activities 8 151
Net funds generated/(utilised) 686 (663)
Cash and cash equivalents
- at beginning of year 812 1 475
- at end of year 1 498 812
* Supplementary information
2005
2006 (Audited and
Figures in R million (Audited) IFRS restated)
Capital commitments 1 49
Depreciation and impairment 97 78
Net foreign exchange (losses)/gains (5) 14
Capital expenditure 142 108
Contingent liabilities 27 27
Operating lease commitments
Payable within the next 12 months
- property 35 34
- plant, equipment and vehicles 16 17
Payable thereafter:
- property 83 81
- plant, equipment and vehicles 1 13
* Statements of changes in equity
Share
Group capital and Treasury Other
Figures in R million premium shares reserves Revaluation
Balance at 29
February 2004 55 - 1 35
Transfer between
reserves - - - (35)
Treasury shares
purchased - (257) - -
Foreign currency
translation
differences - - (1) -
Attributable earnings - - - -
Acquisition of joint
venture - - - -
Acquisition of
subsidairy - - - -
Capital introduced - - - -
Dividends - - - -
Issue of share capital 3 - - -
Minority
shareholders" loan
reclassified - - - -
Other movements - - - -
Balance at 28
February 2005 (IFRS
restated) 58 (257) - -
Share-based payments - - - -
Foreign currency
translation
differences - - 1 -
Attributable earnings - - - -
Capital introduced - - - -
Disposal of joint
venture - - - -
Dividends - - - -
Issue of share capital 4 - - -
Balance at 28
February 2006
(Audited) 62 (257) 1 -
Ordinary
Group Retained shareholders Minority Total
Figures in R million earnings equity interest equity
Balance at 29 February
2004 1 470 1 561 44 1 605
Transfer between reserves 35 - - -
Treasury shares purchased - (257) - (257)
Foreign currency
translation differences - (1) - (1)
Attributable earnings 319 319 17 336
Acquisition of joint
venture - - 9 9
Acquisition of subsidairy - - 46 46
Capital introduced - - 26 26
Dividends (151) (151) - (151)
Issue of share capital - 3 - 3
Minority shareholders"
loan reclassified - - (48) (48)
Other movements 6 6 - 6
Balance at 28 February
2005 (IFRS restated) 1 679 1 480 94 1 574
Share-based payments 2 2 - 2
Foreign currency
translation differences - 1 - 1
Attributable earnings 364 364 5 369
Capital introduced - - 5 5
Disposal of joint venture - - (10) (10)
Dividends (170) (170) (5) (175)
Issue of share capital - 4 - 4
Balance at 28 February
2006 (Audited) 1 875 1 681 89 1 770
* Abridged segmental analysis
2005
2006 (Audited and
Figures in R million (Audited) % IFRS restated) %
Revenue:
Telecommunications division 4 521 75 3 912 70
Multi-Media and Electronics
divisions 801 13 784 14
Information Technology division 800 13 929 17
Inter-group sales (81) (1) (73) (1)
6 041 100 5 552 100
Operating income:
Telecommunications division 430 89 333 68
Multi-Media and Electronics
divisions 21 4 5 1
Information Technology division 40 8 151 31
Corporate net (loss)/income (6) (1) 2 -
485 100 491 100
* Adoption of International Financial Reporting Standards
Basis of preparation
The group has adopted International Financial Reporting Standards (IFRS) for
the year ended 28 February 2006.
The financial statements for the year ended 28 February 2006 is the group"s
first consolidated IFRS-compliant financial statements and hence IFRS 1 First
time adoption of IFRS has been applied.
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.
Straight-lining 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 when paid, was based on an
interpretation that was generally accepted in South African financial reports.
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 Notes 28-Feb-05 1-Mar-04
Equity previously reported under SA GAAP 1 578 1 605
Adjustment upon adoption of IFRS 24 (1)
Minority shareholders" interest (28) (4)
Equity reported under IFRS 1 574 1 600
Equity adjustments
Retained earnings:
Reversal of goodwill amortised 1 30 -
Expensing of share based payments 2 1 -
Property, plant, equipment and intangible
assets 3 1 -
Operating leases 4 (4) (1)
Attributable to minority shareholders (3) -
Share based payment reserve (1) -
24 (1)
Minority shareholders" loan (28) (4)
(4) (5)
In R million Notes 28-Feb-05 1-Mar-04
Assets and liabilities adjustments
Property, plant, equipment and intangible
assets 3 1 -
Goodwill 1 30 -
Deferred tax 1 -
Minority shareholders" interest (31) (4)
Accounts payable (5) (1)
(4) (5)
Reconciliation of profit for the year ended 28 February 2005
As reported IFRS
previously Effect of Restated
Figures in R million Notes (Audited) IFRS (Audited)
Operating income
before goodwill
amortisation and
capital items 2,3 493 (2) 491
Investment income 49 - 49
Finance costs (4) - (4)
Income from associates 12 - 12
Goodwill amortised
and impaired 1 (39) 30 (9)
Capital items (12) - (12)
Income before taxation 499 28 527
Taxation (191) - (191)
Income for year 308 28 336
Attributable to:
Altech shareholders 293 26 319
Minority shareholders 15 2 17
308 28 336
Earnings per share 295 26 321
Headline earnings per
share 339 (1) 338
Notes to the IFRS adjustments
The effect of the changes is as
follows: Restated For the
at year ended At
28-Feb-05 28-Feb-05 1-Mar-04
1. Goodwill 531 501 7
Reversal of goodwill amortised 30 - -
Intangible assets 9 37 7
Retained earnings 1 679 1 655 1 506
Minority shareholders" interest 94 122 44
2. Share-based payments 1 - -
3. Property, plant and equipment 1 - -
4. Straight-lining of operating
leases (4) - -
* Message to our shareholders
The directors are pleased to report that the Altech group has again produced
satisfactory results for the full year ended 28 February 2006, improving
headline earnings per share by 12% to 379 cents. Revenue increased by 9% to R6
billion, with operating income of R485 million.
Altech"s balance sheet remains strong with a net asset value of 1 721 cents per
share and cash of R1,5 billion.
OPERATIONAL REVIEWS
Telecommunications division
Wireless Communications
Altech Autopage Cellular (Altech Autopage) remains the largest independent
cellular service provider in South Africa and has performed well ahead of
expectations. The market for cellular services has continued to evolve,
resulting in increasing volumes of post-paid and hybrid (post- paid/pre-paid)
consumer connections.
High-end connections through corporate and fixed cellular enabled Altech
Autopage to maintain the average revenue per user (ARPU) achieved last year.
Altech Autopage increased its subscriber base by more than 67 900 net
connections for the year. The company"s total subscriber base now exceeds
700 000.
Notable key achievements for the year were the signing of five-year agreements
for service provision with both Vodacom and MTN, acknowledging the vital role
played by independent service providers in the cellular industry in South
Africa.
Sales of electronic pre-paid vouchers continued to perform above expectations,
particularly through ABSA ATM"s and Autopage Direct franchised partners.
The South African telecommunications market is moving rapidly towards
deregulation through a number of regulatory initiatives, including mobile
number portability (expected in July 2006), handset subsidies investigation,
the Electronic Communications Bill and the award of the second network operator
licence.
Looking forward, Altech Autopage remains focused on further entrenching itself
as a broad-based communications company, providing unique and creative
solutions to communication users, both in South Africa and internationally.
Altech Netstar maintained its impressive market position in the stolen vehicle
tracking and recovery (SVR) market. Profit growth has been well ahead of
expectations with exceptional cash generation.
On the back of a buoyant new vehicle market, strong growth in Altech Netstar"s
subscriber base continued during the year. The company now manages a subscriber
base of over 362 000 vehicles for SVR services. Altech Netstar"s extensive
ground and air recovery teams respond to around 600 incidents per month
throughout Southern Africa. Subscriber growth is expected to continue for the
foreseeable future, based on current penetration of a growing insured vehicle
market in South Africa.
Altech Netstar has retained its unique ability to develop and introduce
technologies that enhance and improve its services to subscribers. In addition
to continuous developments of the Altech Netstar system, a new low-cost
GSM-based product "Cyber Sleuth", has been introduced to provide positioning
and SVR capabilities for commercial fleets and vehicles. Altech Netstar"s fleet
management system, Vigil, successfully commenced operations during the financial
year under review. Altech Netstar aims to achieve significant market penetration
in this sector of its activities.
The Malaysian business is growing steadily with over 32 800 vehicles on the
Altech Netstar system. Plans are well advanced to establish Altech Netstar in a
major African market, as well as targeting other international expansion
opportunities.
Altech Alcom Matomo exceeded profitability and cash flow targets for the year.
The company is fully involved in activities resulting from the award in 2004,
of the R500-million Gauteng South African Police Services" digital Trunked
Radio (TETRA) network. Work on the project including high site installations is
progressing in line with expectations. A number of further tenders has been
submitted to various customers in Southern Africa for TETRA systems and
prospects are encouraging that these tenders will be successful.
Altech Alcom Radio Distributors exceeded its financial targets for the year and
continues to distribute leading Motorola two-way radio products to the Southern
African market through its network of authorised dealers.
Multi-Media and Electronics divisions
Altech UEC Multi-Media (Altech UEC), develops, manufactures and deploys
innovative and advanced set-top-box (STB) products and associated software.
Turnaround activities in Altech UEC are complete and the company is reaping the
benefits, especially as it is now able to manufacture competitively at the
current strong rand exchange rate. Altech UEC reported strong earnings
growth and now contributes positively to the earnings of the group.
The acceleration of converging technologies in the multi-media sector continues
to provide opportunities for specialist companies such as Altech UEC.
This is demonstrated by the highly-successful launch of the MultiChoice
dual-view PVR decoder in November 2005 which contributed over R70 million of
revenue in just one quarter. This product is also attractive to offshore pay TV
operators and has already resulted in orders emanating from Greece and Dubai.
The strength of the rand supported strong consumer demand for local pay
television this year which resulted in record quantities of STB units being
sold to MultiChoice South Africa. Sales were also increased into other regions
of Africa, including Nigeria, which has shown strong demand over the past two
years and has resulted in the Altech UEC order book exceeding R421 million
worldwide at the year end.
The after-sales service division, Global Decoder Logistics, earned good profits
during the year under review. Having established a new facility in Sydney in
2004, this division has rapidly matured into a centre of excellence in
Australia and is poised to attract new customers throughout the region.
The deployment of satellite television services in India during the third
quarter has significantly increased demand for pay television products across
that country. Through its robust technology, ability to bring products to
market rapidly and its established presence in India, Altech UEC is well-
positioned to exploit the strong growth this region is experiencing.
Altech Arrow Altech Distribution (AAD) reported improved results for the year,
driven by increased 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 and improve operational
procedures.
Information Technology division
Altech NamITech is a leading player in Africa for cellular SIM cards, pre-paid
vouchers and magnetic stripe bank cards.
The continued strength of the rand, pricing pressures and management issues had
a severe adverse impact on the South African operation which significantly
underperformed against its prior results. As a result of this underperformance
and the closure of certain operations, goodwill impairment of
R82 million has been recorded in the current year. A re-engineering process and
a cost-reduction exercise are under way to reposition Altech NamITech as a
strong contributor to the earnings of the group.
The impending roll-out of Europay/MasterCard/Visa (EMV) compliant smart cards
in South Africa will be a major contributor to Altech NamITech"s financial
success in future, based on existing contracts with a number of the major local
banks to supply these cards.
In line with its pan-African strategy, Altech NamITech"s new pre-paid cellular
voucher manufacturing facility in Lagos, Nigeria, which is now profitable and
producing more than one million vouchers per day, has entrenched the company as
a dominant player in that country.
Altech NamITech has made significant progress in the development of secure
payment solutions (especially in the banking and public sector segments of its
business) and this should add to future growth.
Altech Card Solutions
The continued migration to the Europay/MasterCard/Visa (EMV) payment standard
had a positive impact on the results of Altech Card Solutions (ACS) for the
year. The ongoing deployment of "Electronic Funds Transfer at Point Of Sale"
(EFTPOS) terminals, as well as banks preparing to issue EMV smart cards, has
led to substantial investment in infrastructure from which ACS has benefited.
With ongoing personalisation infrastructure upgrades by card issuers and
outsource bureaus, the DataCard division has again achieved outstanding growth
for the year. Equipment sales and the resulting maintenance agreements will
generate annuity income in future.
The introduction of new payment initiatives thoughout Africa creates
potential for the EFTPOS division.
Cardtronic had a satisfactory financial year and has completed its
recapitalisation project. This has enabled Cardtronic to compete more
effectively in the higher volume business segment. Good future growth is
expected in the coming year.
The integration of the switching business, purchased during 2004, is complete
and switching volume is growing. The business launched a card- based gift
voucher programme during December 2005 which was a major success.
Altech ISIS recorded exceptional financial and organic growth during the year
strengthening its position as a supplier of end-to-end operational support
systems (OSS) solutions in South Africa and Africa. The company employs 150
highly skilled individuals, specialising in the Telecoms OSS sector.
Altech ISIS has further entrenched its position in this market through the
purchase (subject to the fulfilment of certain conditions precedent) of
MobiMaster, which owns and develops billing systems. MobiMaster"s billing
systems are capable of billing pre- and post-paid, voice and data and are fully
prepared for content billing. This acquisition combined with its extensive
knowledge on the provision of fraud management and revenue assurance solutions
and services through its partnership with Hewlett Packard bodes well for the
future of Altech Isis.
Corporate Finance Activities
During the second half of the year, Altech disposed of its joint controlling
shareholding in Econet Wireless Global Limited(EWG), a Botswana holding company
with interests in international cellular network activities. Altech"s interest
in EWG was acquired in 2004 and the disposal was due to the breakdown
of the relationship with EWG"s other shareholders. The proceeds on this
disposal amounted to US$87.5 million (R561 million) with a profit of
US$17.5 million (R141 million) for Altech, which upon consolidation amounted
to R129 million.
As reported above, the Altech Isis division of Altech Data reached agreement
on the acquisition of the MobiMaster division of Linedata Services in France,
subject to the fulfilment of certain conditions precedent.
Altech has substantial cash resources as well as other resources to fund future
acquisitions. A number of acquisition opportunities are currently under
investigation.
Outlook
A number of factors are contributing to a confident outlook for real growth in
the coming year.These include:
* Increased order books and growing annuity revenue at Altech
Autopage and Altech Netstar;
* A strong order pipeline at Altech UEC;
* Continued liberalisation and deregulation in the telecoms environment;
* Ongoing acquisition activity; and
* Turnaround expectations at Altech NamITech.
The above underscore a solid foundation for Altech"s performance over the
next twelve months.
Directorate
Dr E N Banda was appointed as an independent non-executive director to the
Altech board on 1 February 2006. He is highly regarded and experienced in South
Africa with a career that spans banking, business and the legal profession.
Declaration of Ordinary Dividend no 63
Ordinary dividend number 63 of 209 cents (2005:174 cents) per share for the
year ended 28 February 2006 is declared payable on Monday 5 June 2006 to
ordinary shareholders recorded in the register at the close of business on
Friday 2 June 2006. The timetable for the payment of the dividend is as follows:
Last day to trade cum dividend Friday 26 May 2006
Trading ex dividend commences Monday 29 May 2006
Record date Friday 2 June 2006
Payment date Monday 5 June 2006
Share certificates may not be dematerialised or rematerialised between Monday
29 May 2006 and Friday 2 June 2006, both days inclusive. The certificated
register will be closed for this period.
Further cautionary announcement
Further to the cautionary announcement dated 10 March 2006, shareholders are
advised that Altech continues to be involved in discussions which, should they
develop, may have a material affect on the price of the company"s ordinary
shares. Accordingly, shareholders are advised to continue to exercise caution
when dealing in the company"s ordinary shares until a further announcement is
made.
On behalf of the board
Dr Hilton Davies Craig Venter Dr John Carstens
Non-executive Chairman Chief Executive Officer Chief Financial Officer
19 April 2006
Directors: Dr H K Davies (Chairman)#,
C G Venter (Chief Executive Officer),
Dr E N Banda#, 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
Sponsor: Investec Bank Limited
The financial results are also available on the internet at www.altech.co.za
and the JSE News Service - SENS
Date: 19/04/2006 04:21:18 PM Produced by the JSE SENS Department
