| Tue 10 Oct 2006, 8:00 | | Altron - Unaudited Interim Financial Results: six |
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ATN ATNP
ATN
Altron - Unaudited Interim Financial Results: six months
ended 31 August 2006
Allied Electronics Corporation Limited
(Registration number 1947/024583/06)
(Incorporated in the Republic of South Africa)
Share code: ATN
ISIN: ZAE000029658
Share code: ATNP
ISIN: ZAE000029666
Unaudited Consolidated Interim Financial Results for the six months ended
31 August 2006
HIGHLIGHTS FOR THE SIX MONTHS
* Revenue up 20%
* Operating profit up 42%
* HEPS up 52%
* Return on capital employed 31,4%
Income statements
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2006 2005 2006
Figures in R millions Change (Unaudited) (Unaudited) (Audited)
Revenue 20 8 339 6 954 13 969
Operating profit before 42 711 502 1 040
capital items
Finance income 66 49 112
Finance expense (23) (31) (53)
Share of profit from 2 29 32
associates
Capital items (Note 1) 6 9 (54)
Profit before taxation 762 558 1 077
Taxation (228) (170) (291)
STC (38) (31) (35)
Profit for the period 39 496 357 751
Attributable to minority 143 122 257
interest
Attributable to Altron 50 353 235 494
equity holders
Basic earnings per share 49 125 84 176
(cents)
Diluted basic earnings per 38 110 80 168
share (cents)
Notes
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2006 2005 2006
Figures in R million Change (Unaudited) (Unaudited) (Audited)
Headline earnings per 52 124 81 189
share (cents)
Diluted headline earnings 43 109 76 178
per share (cents)
Basis of preparation
The unaudited interim financial results have been prepared in accordance
with IAS 34 - Interim Financial Reporting. The accounting policies used
in the preparation of these interim results are consistent with those
used in the annual financial statements for the year ended 28 February
2006.
1. Capital items
Net gain on disposal of property, 2 4 7
plant and equipment
Net gain on disposal and closure 4 - 68
of businesses
Impairment losses - (3) (100)
Foreign currency translation - 8 9
reserve realised
Goodwill adjustment on - - (38)
utilisation of at acquisition
losses
6 9 (54)
2. Reconciliation between
attributable earnings and
headline earnings
Attributable to Altron equity 353 235 494
holders
Capital items - gross (6) (9) 54
Tax effect of above adjustments 1 2 9
Minority interest in adjustments 1 (1) (28)
Headline earnings 349 227 529
3. Reconciliation between
attributable earnings and diluted
earnings
Attributable to Altron equity 353 235 494
holders
Additional earnings attributable (44) (11) (28)
to BEE minorities in subsidiaries
Minority interest in adjustments 8 5 12
Dilution in earnings of (4) (2) (3)
subsidiary dilutive options
Diluted earnings 313 227 475
4. Reconciliation between
headline earnings and diluted
headline earnings
Headline earnings 349 227 529
Additional earnings attributable (44) (13) (38)
to BEE minorities in subsidiaries
Minority interest in adjustments 8 5 16
Dilution in earnings of (4) (2) (3)
subsidiary dilutive options
Diluted headline earnings 309 217 504
Fully diluted earnings and diluted headline earnings have been calculated
in accordance with IAS 33 - Earnings per share on the basis that:
- Kagiso Strategic Investments (Pty) Limited exercised its full option
on 22% of the shares in Bytes Technology Group South Africa (Pty) Limited
effective 1 March 2005 adjusted for the dilutive effect of the option
price at the BTG SA level.
- The recognition of the deferred sale of 30% interest of the Izingwe
Consortium in Aberdare Cables based on the assumption that a portion of
the purchase price will be settled in cash of R173 million. The effective
option was antidilutive in the prior periods and consequently no dilution
was calculated.
- The earnings effect of dilutive options at BTG Limited and Allied
Technologies Limited subsidiary level.
5. Acquisitions
During the period the group made certain local complementary acquisitions
totalling R12 million in addition to acquiring a Xerox dealer in the UK,
Xclusive Solutions, for a total consideration, subject to certain "earn-
out" targets of GBP4,4 million.
In the six months to 31 August 2006 these acquisitions contributed R5,1
million to the consolidated profit before tax.
Recognised Fair value Carrying
values adjustments amount
Non-current assets 2 20 22
Current assets 23 - 23
Current liabilities (16) - (16)
Net identifiable assets and 9 20 29
liabilities
Goodwill on acquisition 31
Total consideration 60
6. Dividends
It is group policy for dividends to be declared after the end of the
financial year.
Operational contribution
Six months Six months Year
ended ended ended
31 August 31 August 28
February
2006 2005 2006
Figures in R millions (Unaudited) % (Unaudited) % (Audited) %
Revenue:
Altech 3 321 40 2 933 42 6 041 43
BTG 1 963 23 1 712 25 3 470 25
Powertech 3 046 37 2 305 33 4 467 32
Corporate, financial 9 - 4 - (9) -
services and
eliminations
8 339 100 6 954 100 13 969 100
Operating profit *
Altech 289 41 250 50 485 47
BTG 157 22 128 26 282 27
Powertech 272 38 127 25 280 27
Corporate and financial (7) (1) (3) (1) (7) (1)
services
711 100 502 100 1 040 100
% held
at
Headline 31
August
earnings: 2006
Altech 57,7 111 32 102 45 214 40
BTG 57,8 55 16 39 17 111 21
Powertech 100,0 170 48 72 32 170 32
Corporate and 100,0 13 4 14 6 34 7
financial
services
349 100 227 100 529 100
* Operating profit is stated before capital items
Balance sheets
31 August 31 August 28 February
2006 2005 2006
Figures in R millions (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets 2 181 2 615 2 114
Property, plant and equipment 912 901 905
Intangible assets 834 1 039 773
Associates and other 233 492 228
investments
Rental finance advances 70 89 90
Deferred taxation 132 94 118
Current assets 6 040 4 410 5 423
Inventories 1 681 1 231 1 295
Trade and other receivables 2 772 2 251 1 920
Rental finance advances 71 53 56
Cash and cash equivalents 1 516 875 2 152
Total assets 8 221 7 025 7 537
Equity and liabilities
Total equity 4 158 3 744 4 034
Equity holders of Altron 3 025 2 733 2 931
Minority interest 1 133 1 011 1 103
Non-current liabilities 366 575 343
Loans 147 322 124
Empowerment funding obligation 173 173 173
Provisions 25 30 25
Deferred taxation 21 50 21
Current liabilities 3 697 2 706 3 160
Loans 53 35 238
Trade and other payables 3 293 2 441 2 680
Provisions 88 73 55
Taxation payable 263 157 187
Total equity and liabilities 8 221 7 025 7 537
Net asset value per share 1 085 977 1 040
(cents)
Cash flow statements
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2006 2005 2006
Figures in R millions (Unaudited) (Unaudited) (Audited)
Cash flows from operating (212) (210) 819
activities
Cash generated by operations 874 611 1 198
Changes in working capital (602) (369) 214
Net investment income 74 19 39
Taxation paid (212) (185) (350)
Cash available from operating 134 76 1 101
activities
Dividends paid, including to (346) (286) (282)
minority shareholders
Cash flows from investing (258) (269) (62)
activities
Cash flows from financing (172) (166) (122)
activities
Net (decrease)/increase in cash (642) (645) 635
and cash equivalents
Cash and cash equivalents at the 2 152 1 520 1 520
beginning of the period
Effect of foreign exchange 6 - (3)
translation on cash balance
Cash and cash equivalents at the 1 516 875 2 152
end of the period
Segmental analysis
Six months Six months Year
ended ended ended
31 August 31 August 28
February
2006 2005 2006
Figures in R millions (Unaudited) % (Unaudited) % (Audited) %
Revenue:
Telecommunications 2 862 34 2 681 39 5 387 39
Power electronics and 3 254 39 2 178 31 4 402 31
multimedia
Information technology 2 260 27 2 120 30 4 270 31
Corporate, financial (37) - (25) - (90) (1)
services and
eliminations
8 339 100 6 954 100 13 969 100
Operating profit *
Telecommunications 265 37 191 38 449 43
Power electronics and 302 43 134 27 276 27
multimedia
Information technology 152 21 185 37 321 31
Corporate and financial (8) (1) (8) (2) (6) (1)
services
711 100 502 100 1 040 100
* Operating profit is stated before capital items
Supplementary information
31 August 31 August 28 February
2006 2005 2006
Figures in R millions (Unaudited) (Unaudited) (Audited)
Borrowings 373 530 535
- interest bearing 198 355 358
- non interest bearing 2 2 4
- BEE funding obligation 173 173 173
Depreciation 111 98 202
Amortisation 6 2 11
Net foreign exchange gains 55 35 16
Capital expenditure 101 150 315
Contingent liabilities - 27 27
Capital commitments 82 79 77
Lease commitments 575 468 484
Payable within the next 12 112 108 117
months:
- property 88 81 84
- plant, equipment and 24 27 33
vehicles
Payable thereafter: 463 360 367
- property 440 332 348
- plant, equipment and 23 28 19
vehicles
Unlisted investments (including
Associates)
- Carrying amount 233 492 228
- Directors" valuation 245 677 237
Weighted average number of 281 279 280
shares (millions)
- Ordinary shares 94 94 94
- Participating preference 187 185 186
shares
Diluted average number of shares 284 284 283
(millions)
Shares in issue at end of period 279 280 282
(millions)
- Ordinary shares 94 94 94
- Participating preference 185 186 188
shares
Ratios
EBITDA 828 602 1 253
Operating margin (%) 8,5 7,2 7,4
ROCE (%) 31,4 23,5 22,8
ROE (%) 23,5 16,8 18,2
ROA (%) 22,4 18,0 20,6
RONA (%) 35,9 24,0 22,9
Borrowings ratio (%) 9,0 14,2 13,3
Current ratio 1,6:1 1,6:1 1,7:1
Acid test ratio 1,2:1 1,2:1 1,3:1
Statements of changes in equity
Share Treasury Reserves Retained
capital shares earnings
and
premium
Figures in R millions
Balance at 28 February 2005 806 (222) 56 2 039
(audited)
Issue of share capital 7 - - -
Profit for the period - - - 235
Dividends - - - (176)
Foreign currency translation - - 1 -
differences
Share based payments - - 1 -
Fair value of investments - - (4) -
Change in shareholding of - - (10) -
subsidiaries
Balance at 31 August 2005 813 (222) 44 2 098
(unaudited)
Issue of share capital 14 - - -
Profit for the period - - - 259
Dividends - - - -
Foreign currency translation - - (4) -
differences
Release of translation surpluses - - (9) -
Cash flow hedging reserve - - (3) -
Share based payments - - 1 -
Fair value of investments - - 12 -
Change in shareholding of - - (72) -
subsidiaries
Disposal of subsidiary - - - -
Balance at 28 February 2006 827 (222) (31) 2 357
(audited)
Issue of share capital 1 - - -
Profit for the period - - - 353
Dividends - - - (221)
Foreign currency translation - - 41 -
differences
Cash flow hedging reserve - - 2 -
Share based payments - - 4 -
Change in shareholding of - - (9) -
subsidiaries
Acquisition of treasury shares - (77) - -
Balance at 31 August 2006 828 (299) 7 2 489
(unaudited)
Statements of changes in equity
Equity
holders of Minority Total
Figures in R millions Altron interest equity
Balance at 28 February 2005 2 679 964 3 643
(audited)
Issue of share capital 7 - 7
Profit for the period 235 122 357
Dividends (176) (110) (286)
Foreign currency translation 1 - 1
differences
Share based payments 1 - 1
Fair value of investments (4) - (4)
Change in shareholding of (10) 35 25
subsidiaries
Balance at 31 August 2005 2 733 1 011 3 744
(unaudited)
Issue of share capital 14 - 14
Profit for the period 259 135 394
Dividends - 4 4
Foreign currency translation (4) (1) (5)
differences
Release of translation surpluses (9) - (9)
Cash flow hedging reserve (3) (1) (4)
Share based payments 1 - 1
Fair value of investments 12 - 12
Change in shareholding of (72) (35) (107)
subsidiaries
Disposal of subsidiary - (10) (10)
Balance at 28 February 2006 2 931 1 103 4 034
(audited)
Issue of share capital 1 - 1
Profit for the period 353 143 496
Dividends (221) (125) (346)
Foreign currency translation 41 8 49
differences
Cash flow hedging reserve 2 2 4
Share based payments 4 1 5
Change in shareholding of (9) 1 (8)
subsidiaries
Acquisition of treasury shares (77) - (77)
Balance at 31 August 2006 3 025 1 133 4 158
(unaudited)
Message to shareholders
Your directors are pleased to report that the Altron group has posted
excellent results for the six month interim period ended 31 August 2006.
Business environment
Conditions in the South African economy remain buoyant and despite recent
interest rate increases, business confidence remains positive and
consumer demand strong. Government"s announced infrastructure spend,
aimed at stimulating GDP growth, is creating an environment conducive to
demand for group products, particularly within Powertech. Recent exchange
rate declines have assisted in alleviating to some degree the threat of
import competition, although imports from India, China and Brazil remain
competitively priced even with the weaker exchange rates.
The increased demand for power infrastructure products from local
government and parastatals has been beneficial to Altron"s Powertech
businesses in its Power Electronics and Multi-Media sector. Current
indications are that these conditions will continue over the medium term.
This increased spend, combined with good growth levels in the building
and construction industry as well as accelerated infrastructure
investment for the Soccer World Cup 2010 and the Gautrain project, has
created a positive growth environment within the power electronics
sector. The international success of Altech UEC Multi-media Technologies"
recently launched Personal Video Recorder (PVR) has also enhanced the
contribution to the group from this sector.
The landscape of the local Telecommunications sector is expected to
change significantly as a result of the Electronic Communications Act,
the ICASA Amendment Act and the implementation of number portability
which is expected during the latter part of this financial year. The
establishment of the Second Network Operator as well as the convergence
that is taking place throughout the entire telecommunications spectrum,
will provide new business opportunities in this sector. The continued
expansion in the mobile arena, particularly in Africa, provides
opportunities for our mobile infrastructure focused companies in the
Powertech group as well as for the supply of SIM cards and vouchers in
the Altech group.
Local spend in the Information Technology sector has increased as current
levels of company profitability provide funds for IT development. The
slower than expected adoption of the Europay/Mastercard/Visa (EMV)
standard in the local banking environment has negatively impacted on the
demand for secure cards, which should be implemented in the first half of
2007. Internationally, significant progress has been made in building a
meaningful operation within this sector through two acquisitions in the
UK and the expansion of territorial rights for Xerox and Alcatel products
in Africa.
Financial overview
The Altron group"s interim results for the six months ended 31 August
2006 have shown exceptional growth with a 52% increase in headline
earnings per share.
Revenue increased by 20% from R7,0 billion for the prior period to R8,3
billion, with operating profit increasing by 42% from R502 million to
R711 million, which reflects a substantial operating margin improvement
to 8,5% from 7,2% in the prior period with Altech, BTG and Powertech all
improving operating margins. This margin improvement was primarily led by
the performance of the Powertech operations, which have benefited from
the increase in infrastructure spend as well as the continued strength of
the building and construction industry. This improvement was assisted by
operating efficiencies and cost reductions, which have been a focus over
the last twelve months, combined with the closure of the Aberdare loss
making telecoms cable operation in the prior period. During the period
under review, Altron spent R101 million in capacity expansion, mainly
focused in the power electronics sector. Taxation, including STC, has
decreased marginally from 36,0% to 34,9%.
Altron"s annualised return on equity improved to 23,5% with return on net
assets and return on capital employed improving to 35,9% and 31,4%
respectively. The balance sheet remains strong with cash at R1,5
billion.
Altech delivered a sound set of results for the financial half year ended
31 August 2006, reporting improved headline earnings per share of 197
cents, an increase of 9%. This was driven by better than expected
performances from most of its operating companies including Altech Arrow
Altech Distribution, Altech Autopage Cellular, Altech Netstar, the Altech
Alcom businesses, Altech UEC Multi-media Technologies and Altech Isis
Information Systems. Revenue increased by 13% to R3,3 billion from R2,9
billion in the prior corresponding period, with operating profit up 16%
at R289 million.
The continuing low interest rate environment has positively impacted
consumer demand which continues to stimulate growth at Altech Autopage
Cellular. Increased consumer demand has also manifested itself in high
motor vehicle sales benefiting our vehicle tracking business, Altech
Netstar.
Altech UEC Multi-media Technologies completed its successful turnaround,
increasing revenue by 64% and improving operating margin from break-even
to 11% compared to the corresponding period in the prior year. This is
primarily as a result of the international success of the PVR product as
well as expansion into export markets. Altech NamITech continued to under
perform with an operating loss being incurred by its South African
operations. This business has repositioned itself through a restructuring
programme, the benefits of which should be realised in the second six
months of this financial year. NamITech West Africa performed above
expectations.
Altech"s balance sheet remains strong with a net asset value of 1 708
cents per share and cash of R1,3 billion. Altech declared a special
dividend of R1,00 per Altech ordinary share payable to shareholders on
Monday, 6 November 2006. Cash has been utilised in the current period in
the funding of working capital as well as the payment of dividends.
Return on shareholder"s equity is currently 22,7%.
BTG performed above expectations with revenue increasing 15% to R2
billion. Revenue growth was particularly strong from the international
operations, helped to some extent by the weakening of the rand, but also
by the impact of the newly acquired Xerox business in the UK, Xclusive
Solutions which is performing above expectations. Operating profit
improved by 23% from R128 million to R157 million when compared to the
prior period, with the operating margin improving from 7,5% to 8,0%. This
margin improvement was mainly driven through cost efficiencies achieved
by the South African operations.
Headline earnings per share improved by 25% to 58 cents per share. BTG
moved from a net cash position of R77 million at financial year end to a
total net debt of R83 million at 31 August 2006 due to investing
activities of R112 million, the payment of a dividend of R75 million, tax
payments and an investment in working capital.
Powertech reported an excellent increase in revenue of 32% to R3 billion
as a result of the significant increase in power infrastructure spend as
well as bullish conditions in the building and construction industry.
Operating profit increased by 114% to R272 million from R127 million in
the prior corresponding period, largely as a result of these factors
combined with the benefits of restructuring exercises. The buoyant
trading conditions coupled with management"s stringent cost cutting
exercises have allowed Powertech to increase operating margins from 5,5%
to 8,9%. The improvement in operating margin was partly due to the
closure of the telecom cables manufacturing operation last September,
which had incurred losses in the comparative period, but is predominantly
due to improved trading conditions and cost efficiencies.
Altron"s finance operations continue to run down following the sale of
Fintech (Pty) Limited in the prior financial year and the amortisation of
Fintech Receivables 1, Altron"s securitised interest in the financing
book. Nevertheless, results have continued to exceed expectations as a
result of sustained high levels of secondary rental income. The TAR
warehouse owned by BTG continues to grow in line with expectations.
Black Economic Empowerment ("BEE")
The Altron Transformation process is progressing well and a revised
Altron Transformation Vision 2010 implementation guidelines document is
currently being compiled under the direction of the newly appointed Group
Executive: Corporate Affairs, Douglas Ramaphosa. The guidelines will be
in accordance with the dti BEE Codes of Good Practice which are expected
to be finalised during the second half of this financial year and will
serve to assist the transformation process at operational level.
Through its anchor partnerships with leading empowerment firms Pamodzi,
Kagiso and Izingwe Capital, Altron continues to meet its Transformation
Vision 2010 targets on the broader BEE indicators as have been confirmed
by the positive ratings received for many of our group companies from
rating agency, Empowerdex. Agreement in principle was reached during the
period for black economic empowerment parties to acquire an aggregate 30%
interest in Altech Netstar"s fleet management division. The black
empowerment consortium will comprise a private empowerment company and a
trust to be formed by Altech that will be for the planned benefit of
previously disadvantaged Altech employees.
Motoma"s 20% stake in Rentech and 30% stake in Altech Alcom Matomo were
acquired by Powertech and Altech respectively. These equity stakes have
been reserved for the introduction of new empowerment partners in due
course. Motoma also exited their 6% investment in Aberdare Cables of
which 3% was effectively re-acquired by Powertech bringing their
shareholding to 73%, with Izingwe purchasing the balance.
Corporate activity
During the period under review, the following transactions and
developments took place:
* With effect from 1 March 2006 BTG acquired Xclusive Solutions, a
leading provider of document and print solutions and Xerox partner
in the United Kingdom, for an initial consideration of GBP3,2
million that could increase to a maximum of GBP4,4 million depending
on future profit performance.
* Altron Finance concluded the repurchase of 3,4 million Altron
participating preference shares at a cost of R77 million.
* Altron increased its investment in BTG by purchasing 787 243 shares
at a cost of R8,6 million.
* Altech"s acquisition of MobiMaster in France has been fully
implemented and is unconditional.
* BTG made a number of other acquisitions including:
- Zenith Systems, an online e-learning software provider, for R7
million;
- TMS 2000, a telephone management system, for R2,6 million; and
- Xerox distribution rights for Kenya, for R2 million.
* Subsequent to the half year, BTG acquired Vantage Business Systems
in the UK, a Xerox dealer, for an effective amount of GBP1,5
million.
Outlook
Your directors remain positive about the group"s sustained growth during
the second half of this financial year. This outlook is based primarily
on continuing infrastructural spend and buoyancy in the building and
construction industry which have translated into significant orders for
the group"s Powertech businesses. The benefits of certain supply chain
initiatives will further assist improved operational performances. The
deregulation and growth opportunities in the local telecoms industry as
well as improved business conditions in the ICT sector are expected to
further position the group to achieve growth. Given a stable macro-
economic environment, the board anticipates posting strong growth for the
full financial year, although possibly not at the same rate as that
reported for the first half.
Directorate
On 31 July 2006, Adv Dali Mpofu, a non-executive director of Altron
resigned from the board of the company due to other commitments. The
board wishes to record its appreciation to Dali for his valuable
contribution over the past few years and wishes him well for the future.
On behalf of the board
Dr Bill Venter Robert Venter Diane Radley
Chairman Chief Executive Chief Financial Officer
10 October 2006
Board of directors
Independent non-executive
Mr MJ Lamberti, Mr MJ Leeming, Dr PM Maduna, Mr JRD Modise, Mr PL Wilmot
Non-executive
Mr MC Berzack
Executive
Dr WP Venter (Chairman), Mr RE Venter (Chief Executive), Mr N Claussen,
Mr PMO Curle*, Ms DC Radley, Mr PD Redshaw*, Dr HA Serebro (Alternate: Mr
DM Ramaphosa), Mr CG Venter * British
Secretaries
Altron Management Services (Pty) Limited - AG Johnston (Group Company
Secretary)
Sponsor
Nedbank Capital
The annual financial results are also available on the internet at
www.altron.co.za
Date: 10/10/2006 08:00:17 AM Produced by the JSE SENS Department
