summarised audited consolidated financial statements - Altron

SUMMARISED AUDITED 

CONSOLIDATED FINANCIAL 

STATEMENTS 

For the year ended 28 February 

2013

Altron Summarised Audited Consolidated Financial Statements for the year ended 28 February 2013 

INDEX 

23 

OUR 

NUMBERS 

Summarised consolidated statement of 

comprehensive income 24 

Notes 25 

Summarised consolidated 

balance sheet 28 

Segment report 29 


statement of cash flows 30 

Operational contribution 31 

Supplementary information 32 


statement of changes in equity 33 

ALLIED ELECTRONICS CORPORATION LIMITED 

(Incorporated in the Republic of South Africa) 

(Registration number 1947/024583/06) 

Share code: ATN ISIN: ZAE000029658 

Share code: ATNP ISIN: ZAE000029666 

34 

MESSAGE TO 

SHAREHOLDERS 

SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 2013


SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 

% 2013 2012 

R millions change (Audited) (Audited) 

CONTINUING OPERATIONS 

Revenue 7 24 769 23 167 

Earnings before interest, tax, depreciation, amortisation and capital items 

(EBITDA before capital items) (12) 1 692 1 919 

Depreciation and amortisation (461) (468) 

Operating profit before capital items (15) 1 231 1 451 

Capital items (Note 1) (78) (310) 

Result from operating activities 1 1 153 1 141 

Finance income 57 71 

Finance expense (134) (125) 

Share of profit/(loss) from associates 5 (1) 

Profit before taxation 1 081 1 086 

Taxation (374) (457) 

Profit for the year from continuing operations 12 707 629 

DISCONTINUED OPERATIONS 

Revenue 280 396 

Earnings before interest, tax, depreciation, amortisation and capital items 

(EBITDA before capital items) (113) 27 

Depreciation and amortisation (52) (94) 

Operating loss before capital items (165) (67) 

Capital items (Note 1) (1 371) (590) 

Result from operating activities (1 536) (657) 

Finance income 2 – 

Finance expense (92) (31) 

Loss before taxation (1 626) (688) 

Taxation (10) (20) 

Loss for the year from discontinued operations (1 636) (708) 

Net loss for the year (929) (79) 

24 

Other comprehensive income 

Foreign currency translation differences in respect of foreign operations 310 95 

Realisation of negative foreign currency translation reserve on disposal 196 – 

Fair value adjustment on available-for-sale investments (5) – 

Other comprehensive income for the year, net of taxation 501 95 

Total comprehensive income for the year (428) 16 

Loss attributable to: 

Non-controlling interests (631) (253) 

Altron equity holders (298) 174 

Altron equity holders from continuing operations 498 472 

Altron equity holders from discontinued operations 796 (298) 

Loss for the year (929) (79) 

Total comprehensive income attributable to: 

Non-controlling interests (439) (212) 

Altron equity holders 11 228 

Altron equity holders from continuing operations 650 508 

Altron equity holders from discontinued operations (639) (280) 

Total comprehensive income for the year (428) 16 

Basic earnings per share from continuing operations (cents) 6 158 149 

Diluted basic earnings per share from continuing operations (cents) 5 153 146 

Basic loss per share from discontinued operations (cents) (168) (252) (94) 

Diluted basic loss per share from discontinued operations (cents) (163) (239) (91) 

Basic (loss)/earnings per share from total operations (cents) (271) (94) 55 

Diluted basic (loss)/earnings per share from total operations (cents) (256) (86) 55 

Dividends per share declared (cents) (35) 60 92


NOTES 

Basis of preparation 

The summarised consolidated financial statements are prepared in accordance with the framework concepts and the measurement and recognition 

requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee 

and presented in accordance with the minimum content, including disclosures, prescribed by IAS 34: Interim Financial Reporting applied to year-end reporting, 

and the requirements of the Companies Act of South Africa and the JSE Listings Requirements. 

The accounting policies applied in the preparation of the audited consolidated financial statements, from which the summarised consolidated financial 

statements were derived, are in terms of International Financial Reporting Standards and are consistent with the accounting policies applied in the preparation 

of the previous audited consolidated financial statements. 

This report was compiled under the supervision of Mr Alex Smith CA, Chief Financial Officer, and Mr Arno Geldenhuys CA(SA), Group Financial Manager. 

Report of the independent auditors 

The unmodified audit reports of KPMG Inc., the independent auditors, on the annual financial statements and the summarised financial statements contained 

herein for the year ended 28 February 2013, dated 7 May 2013, are available for inspection at the registered office of the company. 

% 2013 2012 

change (Audited) (Audited) 

Headline earnings per share (cents) (29) 136 191 

Diluted headline earnings per share (cents) (29) 133 187 

2013 2012 

R millions (Audited) (Audited) 

1. Capital items 

CONTINUING OPERATIONS 

Net gain on disposal of property, plant and equipment 14 36 

Impairment of property, plant and equipment (7) (4) 

Impairment of goodwill – (342) 

Impairment of intangibles (9) (11) 

Net (loss)/profit on disposal of businesses and investments (5) 14 

Impairment of held-for-sale disposal group (29) – 

Loss on disposal of held-for-sale disposal group (42) – 

Impairment of investments – (3) 

(78) (310) 

DISCONTINUED OPERATIONS 

Loss on disposal of discontinued operations (730) – 

Impairment of property, plant and equipment (328) (231) 

Impairment of intangible assets (300) (289) 

Impairment of goodwill (13) (70) 

(1 371) (590) 

TOTAL (1 449) (900) 

Events and circumstances leading to the recognition 

of significant impairment losses: 

Continuing operations 

Impairment on the held-for-sale disposal group arose as a result of the 

Altech West Africa subsidiary being disposed of for no consideration. 

Discontinued operations 

Impairment of intangible assets relates to the impairment of the Seacom 

bandwith in Altech Data International and arose due to the significant 

on-going reductions of bandwith prices. These price decreases are a 

direct result of an over-supply of international bandwith capacity, 

especially along the East African coastline. 

The impairment of the goodwill and the property, plant and equipment 

resulted from a decline in operating results and a corresponding decline 

in forecasted future cash flows due to lower than anticipated activity levels 

without an envisaged material improvement in the short to medium term. 

25


NOTES continued 

2013 2012 


2. Reconciliation between attributable earnings and headline earnings 

Attributable to Altron equity holders (298) 174 

Capital items – gross 1 449 900 

Tax effect of capital items – (10) 

Non-controlling interest in capital items (720) (461) 

Headline earnings 431 603 

3. Reconciliation between attributable earnings and diluted earnings 

Attributable to Altron equity holders (298) 174 

Dilutive earnings attributable to B-BBEE non-controlling interest in subsidiaries – (4) 

Diluted earnings (298) 170 

4. Reconciliation between headline earnings and diluted headline earnings 

Headline earnings 431 603 

Dilutive earnings attributable to B-BBEE non-controlling interest in subsidiaries – (4) 

Dilutive earnings attributable to dilutive options at subsidiary level (11) (10) 

Non-controlling interest in adjustments 4 4 

Diluted headline earnings 424 593 

26 

Fully diluted earnings and diluted headline earnings have been calculated in accordance with IAS 33: Earnings per Share, on the basis that: 

– The recognition of the deferred sale of a 30% interest in Aberdare Cables to the Izingwe Consortium based on the assumption that the 

outstanding purchase price will be settled in cash for R46 million, adjusted for the dilutive effect of the option price at the Aberdare level and 

after taking into account the 16.5% investment in the Izingwe Consortium by Power Technologies Proprietary Limited. 

– The earnings effect of dilutive options at Allied Technologies Limited level. 

5. Acquisitions of subsidiaries 

Acquisition of 100% interest in Unisys Africa Proprietary Limited (“Unisys Africa”) and Alliance Business Solutions Proprietary Limited (“Alliance’) 

During the year the Bytes group acquired two operations, namely Unisys Africa and Alliance, for an aggregate consideration of R150 million, of which 

R43 million is deferred. 

The acquired businesses contributed revenues of R238 million and net profit after tax of R18 million to the group. 

If the acquisitions had occurred on 1 March 2012, group revenue and net profit after tax would have increased by R329 million and R18 million 

respectively. 

These amounts have been calculated using the group’s accounting policies. 

Unisys Africa provides IT services and technology offerings to customers in both the public and private sectors. 

The full issued share capital was acquired effective 31 March 2012. Alliance provides Oracle end-to-end offerings and cloud-based solutions to 

customers. 

The operations of Alliance were acquired effective 1 October 2012. 

Recognised Fair value Carrying 

values adjustments amount 

The acquirees’ balance sheets at the date of acquisition were as follows: 

Non-current assets 12 25 37 

Current assets 223 – 223 

Current liabilities (219) (12) 231 

Total net assets on acquisitions 16 13 29 

Goodwill on acquisition 121 

Total consideration 150 

Cash and cash equivalents in subsidiary acquired (35) 

Less: Amounts due to vendors (43) 

Net cash outflow on acquisitions 72


6. Disposals 


Disposal of 75% interest in Altech West Africa Limited, previously classified as held-for-sale 

Effective 28 February 2013, the group indirectly disposed of its 75% interest in the issued share capital of Altech West Africa Limited (AWA) on a wholly 

vendor-funded basis. On 14 February 2012, the decision was taken to dispose of AWA and the operation was classified as held-for-sale. 

The operation did not constitute a discontinued operation. 

The disposal value at the effective date amounted to R71 million and consequently a capital loss of R42 million was incurred after an impairment of assets 

classified as held-for-sale of R29 million. 

Net assets of subsidiary disposed: 

R millions 

Non-current assets 68 

Current assets 73 

Non-current liabilities (54) 

Current liabilities (55) 

Realisation of negative foreign currency translation reserve 30 

Negative non-controlling interest 9 

Disposal value 71 

– loss on disposal of net asset value (42) 

– impairment of assets classified as held-for-sale (29) 

Cash flow on disposal – 


Disposal of Altech’s Telecommunication Network interests in East Africa 

Effective 28 February 2013, the Altech group disposed of the following effective interests in the issued share capital of its Telecommunication Network 

interests in East Africa – 60.8% in Altech Kenya Data Networks Limited (KDN), 60.8% in Africa Digital Networks Limited (ADN), 51% in 

Altech Swift Global Limited (ASG), 51% in Altech Infocom Limited (Infocom), 64.7% in Altech Stream Rwanda Limited (ASR), 60.8% in 

Altech Data International Limited (ADI) and 60.8% in Global Digital Trading Services Limited, to the purchaser Liquid Telecommunications 

Holdings Limited. 

The disposal value at the effective date amounted to R681 million, after funds advanced to subsidiaries for no consideration of R353 million, 

and consequently a capital loss of R730 million was incurred, after accounting for the value (US$50 million, including a cash subscription of 

US$16.5 million) of the investment received in Liquid Telecommunications Holdings Limited. 

Net assets of subsidiaries disposed: 

R millions 

Non-current assets 403 

Current assets 261 

Non-current liabilities (199) 

Current liabilities (183) 

Realisation of negative foreign currency translation reserve 166 

Negative non-controlling interests 233 

Disposal value 681 

Investment received in Liquid Telecommunications Holdings Limited ($33.5 million) (304) 

Shortfall on disposal value 377 

Loss on disposal of subsidiaries (730) 

Cash flow on disposal – funds advanced to subsidiaries for no consideration (353) 

27 

RE-PRESENTED COMPARATIVE INFORMATION 

The disposals of Altech’s Telecommunication Network interests in East Africa resulted in the operations being classified as discontinued operations in the 

current financial year. The comparative consolidated statements of comprehensive income and cash flows have been re-presented. 

7. Events after the reporting period 

Acquisition of Brand New Technologies effective 1 March 2013 

Effective 1 March 2013, Bytes Technology Group South Africa acquired the business of Brand New Technologies Proprietary Limited (“BNTech”) 

for a total estimated consideration of R63.3 million, of which R49 million is deferred and payable on the achievement of certain earn-outs over 

the next three years. BNTech is a leading provider of identity management products and solutions, specialising in protecting, securing and 

validating identities. The acquisition of BNTech complements existing Bytes offerings and allows the group to offer and provide a holistic identity 

management solution on a turnkey basis, both in South Africa and into Africa. 

Identification and valuation of intangible assets arising from the business combination will be performed during the first half of the 2014 financial year.


SUMMARISED CONSOLIDATED STATEMENT OF BALANCE SHEET 

28 

2013 2012 


Assets 

Non-current assets 4 757 4 695 

Property, plant and equipment 1 822 2 300 

Intangible assets, including goodwill 1 613 1 732 

Associates 80 74 

Other investments 673 233 

Rental finance advances 45 67 

Non-current receivables and other assets 414 150 

Deferred taxation 110 139 

Current assets 8 210 7 585 

Inventories 2 653 2 475 

Trade and other receivables, including derivatives 4 255 3 872 

Assets classified as held-for-sale – 135 

Cash and cash equivalents 1 302 1 103 

Total assets 12 967 12 280 

Equity and liabilities 

Total equity 5 220 5 813 

Non-current liabilities 787 936 

Loans 609 707 

Empowerment funding obligation 17 47 

Provisions 25 20 

Deferred income – 51 

Deferred taxation 136 111 

Current liabilities 6 960 5 531 

Loans 1 308 613 

Empowerment funding obligation 29 24 

Bank overdraft 385 550 

Trade and other payables, including derivatives 5 105 4 079 

Provisions 100 118 

Liabilities classified as held-for-sale – 67 

Taxation payable 33 80 

Total equity and liabilities 12 967 12 280 

Net asset value per share (cents) 1 498 1 583


SEGMENTAL REPORT 

The segment information has been prepared in accordance with IFRS 8: Operating Segments, which defines the requirements for the disclosure of financial 

information of an entity’s operating segments. 

The standard requires segmentation based on the group’s internal organisation and reporting of revenue and EBITDA based upon internal accounting 

presentation. 

The segment revenues and earnings before interest, tax, depreciation and amortisation (EBITDA) generated by each of the group’s reportable segments are 

summarised as follows: 

Revenue 

EBITDA 

Growth 

Growth 

R millions 2013 2012 Cur/Pyr % 2013 2012 Cur/Pyr % 

Powertech Cables Group 4 756 4 534 5 55 118 (53) 

Powertech Transformers Group 1 459 1 446 1 138 216 (36) 

Powertech Battery Group 680 816 (17) 82 109 (25) 

Powertech Services Group 752 790 (5) 43 78 (45) 

Other Powertech segments (6) (64) 91 (30) (21) (43) 

Powertech Group 7 641 7 522 2 288 500 (42) 

Bytes Technology Group UK Software 1 541 1 168 32 45 37 22 

Bytes Document Solutions Group 2 216 2 088 6 142 188 (24) 

Bytes Managed Solutions 1 043 1 000 4 128 126 2 

Bytes Systems Integration 979 937 4 62 65 (5) 

Other Bytes segments 1 225 901 36 154 111 39 

Bytes Group 7 004 6 094 15 531 527 1 

Altech Autopage Cellular 6 027 6 069 (1) 253 266 (5) 

Altech UEC Group 1 802 1 187 52 180 126 43 

Altech Netstar Group 1 045 1 008 4 291 335 (13) 

Altech Converged Services 

(International)* 280 396 (29) (125) 27 (563) 

Other Altech segments 1 287 1 312 (2) 166 165 1 

Altech Group 10 441 9 972 5 765 919 (17) 

Corporate and financial services 18 32 (44) (5) 

Inter-segment revenue (55) (57) 

Altron Group 25 049 23 563 6 1 579 1 946 (19) 

* The majority of this segment formed the discontinued operations 

Segment EBITDA can be reconciled 

to group operating profit before 

capital items as follows: 

R millions 2013 2012 

Segment EBITDA 1 579 1 946 

Reconciling items: 

Depreciation (353) (396) 

Amortisation (160) (166) 

Group operating profit before 

capital items 1 066 1 384 

29


SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS 

2013 2012 



Cash flows from operating activities 1 150 298 

Cash generated by operations 1 878 2 023 

Net finance expense (94) (55) 

Changes in working capital 174 (540) 

Taxation paid (375) (599) 

Cash available from operating activities 1 583 829 

Dividends paid, including to non-controlling interests (433) (531) 

Cash flows utilised in investing activities (1 137) (680) 

Cash flows from/(utilised in) financing activities 1 005 (326) 


Cash flows utilised in operating activities (90) (160) 

Cash flows utilised in investing activities (22) (225) 

Cash flows (utilised in)/from financing activities (146) 363 

Cash flows on disposal of discontinued operations (429) – 

(687) (22) 

Net increase/(decrease) in cash and cash equivalents 331 (730) 

Net cash and cash equivalents at the beginning of the year 553 1 253 

Effect of exchange rate fluctuations on cash held 33 19 

Cash classified as held for sale – 11 

Net cash and cash equivalents at the end of the year 917 553 

Continuing operations 917 557 

Discontinued operations – (4) 

Note: 

For the year ended 29 February 2012, R137 million has been reclassified from cash flows from operating activities (movements in working capital) to cash flows 

utilised in investing activities. This represents investments made during the prior financial year by operating entities in respect of additions to contract fulfilment 

costs. Management believes that this better represents the nature of the cash flows being of an investing rather than an operating nature. 

30


OPERATIONAL CONTRIBUTION 

% 2013 % 2012 % 

R millions change (Audited) (Audited) 

Revenue 

Altech 5 10 441 42 9 972 42 

Bytes 15 7 004 28 6 094 26 

Powertech 2 7 641 30 7 522 32 

Corporate and eliminations (37) – (25) – 

6 25 049 100 23 563 100 

Operating profit* 

Altech (16) 548 51 649 47 

Bytes – 423 40 424 31 

Powertech (66) 107 10 314 23 

Corporate and eliminations (12) (1) (3) (1) 

(23) 1 066 100 1 384 100 

% held at % held at 

28 February 29 February 

Attributable headline earnings 2013 2012 

Altech 61,4 61,5 (23) 160 37 208 34 

Bytes 100,0 100,0 – 253 59 253 42 

Powertech 100,0 100,0 (99) 1 – 125 21 

Corporate and eliminations 100,0 100,0 17 4 17 3 

(29) 431 100 603 100 

* Operating profit is stated before capital items 

31


SUPPLEMENTARY INFORMATION 

32 

2013 2012 


Borrowings 1 963 1 391 

– interest bearing 1 917 1 076 

– non-interest bearing – 244 

– B-BBEE funding obligation 46 71 

Depreciation 353 396 

Amortisation 160 166 

Net foreign exchange (gains)/losses (18) 21 

Capital expenditure (including intangibles) 675 687 

Additions to contract fulfilment costs 430 137 

Capital commitments 126 161 

Lease commitments 953 797 

Payable within the next 12 months: 232 189 

– property 208 169 

– plant, equipment and vehicles 24 20 

Payable thereafter: 721 608 

– property 697 580 

– plant, equipment and vehicles 24 28 

Unlisted investments (including associates) 

– Carrying amount 753 307 

– Directors’ valuation 757 307 

Weighted average number of shares (millions) 316 316 

– Ordinary shares 102 102 

– Participating preference shares 214 214 

Diluted average number of shares (millions) 319 318 

Shares in issue at the end of the year (millions) 317 316 

– ordinary shares 102 102 

– participating preference shares 215 214 

Ratios 

EBITDA margin (%) 6,3 8,3 

ROCE (%) 14,8 19,2 

ROE (%) 9,4 11,6 

ROA (%) 10,3 13,2 

RONA (%) 14,9 19,1 

Borrowings ratio (%) 37,6 24,0% 

Current ratio 1,2:1 1,4:1 

Acid test ratio 0,8:1 0,9:1 

Definitions: 

Contract fulfilment costs 

Contract fulfilment costs include hardware, fitment, commissions and other costs directly attributable to the negotiation and conclusion of customer service 

contracts. These costs are expensed over the expected period of the customer service contract.


SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

Attributable to Altron equity holders 

Share 

capital 

Nonand 

Treasury Retained controlling Total 

R millions premium shares Reserves earnings Total interests equity 

Balance at 28 February 2011 (Audited) 2 241 (299) (1 192) 4 325 5 075 1 239 6 314 

Total comprehensive income for the year 

Profit for the year – – – 174 174 (253) (79) 


Foreign currency translation differences 

in respect of foreign operations – – 54 – 54 41 95 

Total other comprehensive income – – 54 – 54 41 95 

Total comprehensive income for the year – – 54 174 228 (212) 16 

Transactions with owners, recorded directly 

in equity 

Contributions by and distributions to owners 

Dividends to equity holders – – – (341) (341) (190) (531) 

Issue of share capital 3 – – – 3 – 3 

Share-based payment transactions – – 27 – 27 6 33 

Total contributions by and distributions to owners 3 – 27 (341) (311) (184) (495) 

Changes in ownership interests in subsidiaries 

Buy back of non-controlling interests – – 11 – 11 (30) (19) 

Disposal of subsidiary – – – – – (3) (3) 

Total changes in ownership interests in subsidiaries – – 11 – 11 (33) (22) 

Total transactions with owners 3 – 38 (341) (300) (217) (517) 

Balance at 29 February 2012 (Audited) 2 244 (299) (1 100) 4 158 5 003 810 5 813 

Total comprehensive income for the year 

Loss for the year – – – (298) (298) (631) (929) 


Foreign currency translation differences 

in respect of foreign operations – – 192 – 192 118 310 

Realisation of negative foreign currency translation 

reserve on disposal – – 120 – 120 76 196 

Fair value adjustment on available-for-sale investments – – (3) – (3) (2) (5) 

Total other comprehensive income – – 309 – 309 192 501 

Total comprehensive income for the year – – 309 (298) 11 (439) (428) 

Transactions with owners, recorded directly 

in equity 

Contributions by and distributions to owners 

Issue of share capital 10 – (10) – – – – 

Dividends to equity holders – – – (290) (290) (143) (433) 

Share-based payment transactions – – 17 – 17 6 23 

Total contributions by and distributions to owners 10 – 7 (290) (273) (137) (410) 

Changes in ownership interests in subsidiaries 

Introduction of non-controlling interests – – – – – 3 3 

Disposal of operations – – – – – 242 242 

Total changes in ownership interests in subsidiaries – – – – – 245 245 

Total transactions with owners 10 – 7 (290) (273) 108 (165) 

Balance at 28 February 2013 (Audited) 2 254 (299) (784) 3 570 4 741 479 5 220 

33


MESSAGE TO SHAREHOLDERS 

34 

The Altron financial results for the year ended 28 February 2013 are reported in an integrated manner in accordance with the G3 Guidelines of the Global 

Reporting Initiative (GRI) as recommended by King III, reflecting those issues that are applicable and which materially affect or contribute to the sustainable 

development of Altron in terms of its financial and non-financial performance. 

The group has achieved revenue growth, but has experienced margin pressure across most operations. Powertech experienced revenue growth primarily 

out of the cables group on higher copper prices. Bytes continued to perform in line with expectations, with the UK businesses contributing significantly, 

and positive inroads being made into African markets. Altech’s overall results were negatively impacted by impairments, a loss on disposal and operating 

losses of its East and West African operations. The group is encouraged that the significant operating losses of R205 million incurred by these disposed 

operations will not recur. Altech’s remaining businesses performed in line with expectations. 

External factors 

The macro-economic environment remains challenging and highly volatile. While there is growth in the local economy, there remains uncertainty around 

the future, due to a combination of global factors as well as the policy uncertainties in the local environment. Emerging market currencies, particularly 

the Rand, weakened and this will assist exports and provide some protection against direct foreign imports. 

Despite interest rates remaining low during the period under review, the building and construction sector continued to show no real signs of recovery. 

Demand in the electrical infrastructure market was strong in the first half of the year, led by spending from Eskom and certain of the larger municipalities, 

but we saw a notable decline in the second half, particularly in the electric cables business. However, parastatals have generally provided encouraging 

support to locally-based manufacturing operations. 

The telecommunications sector is seeing price deflation, particularly on the voice side, as various operators seek to grow or protect market share. The main 

growth area remains the data market, although margins have been under pressure with rapid declines in data package pricing in both the mobile and Internet 

Service Provider (ISP) spaces. Data volumes are increasingly being driven by the rapid uptake of smartphones and the inadequacies of the fixed line network. 

The migration to digital terrestrial television in South Africa continues to progress at a very slow pace. Nevertheless it is on an inevitable path and, as TV set-top 

boxes have been classified as designated products, local manufacturers should benefit. 

The South African information technology (IT) market has shown good growth as businesses continue to invest in new technologies. However, margins are 

under pressure due to the highly competitive nature of the sector, deflationary forces and the increasing commoditisation of IT products. Cloud computing 

is becoming an increasingly important feature of the IT sector, which will present both opportunities and some risks to the Altron group. 

Financial overview 

Income 

While Altron’s revenue increased by 6% to R25 billion from R23.6 billion in the comparative period, EBITDA declined by 19% from R1.9 billion to 

R1.6 billion, reflecting an EBITDA margin of 6.3%, down from the previous 8.3%. Headline earnings per share was down by 29% at 136 cents. 

The statement of comprehensive income has been split into continuing and discontinued operations in the current period, with the East African 

operations classified as discontinued. It should be noted that the West African operations are included in continuing operations in accordance 

with accounting standards. 


The group’s revenue from continuing operations increased by 7% in the current year to R24.8 billion, though EBITDA declined to R1.7 billion, a 12% decrease 

and representing a 6.8% EBITDA margin, as against the 8.3% in the prior year. 

Capital items were significantly reduced to R78 million, of which R71 million related to Altech West Africa. This, combined with an increased finance expense 

on higher borrowing levels, resulted in profit before taxation being consistent with the prior year. The reduction in the tax charge primarily reflects the lower 

STC expense, though the effective tax rate, after STC and capital items actually increased from 29.2% to 30.9%. These factors resulted in a 12% increase 

in profit for the year from continuing operations. 


The operating results for the year showed the continued decline of the East African businesses, while the significant increase in capital items reflects the 

further impairments and ultimate loss that was taken on the disposal of these businesses. 

Cash management 

The cash flow statement has also been aligned with the split between continuing and discontinued operations, with the cash cost to the group of the 

East African business being a net outflow of R687 million. 

In the continuing operations, cash generated by operations of R1.9 billion is down around 7% on the prior year, while we have seen some R174 million 

released from working capital. There has been considerable focus on improving working capital levels, and working capital days are lower across the group 

at year-end. Cash outflows on taxation have normalised after the additional payment in the comparative period, and cash was positively influenced by reduced 

dividends, though some of this has been offset by the near doubling of the finance cost. 

Investing activities increased to R1.1 billion. A significant portion of the increase was due to capitalised subscriber acquisition costs of R430 million 

in the Altech group, which are recovered over the term of their contracts. Capital expenditure in continuing operations was also higher in both property, 

plant and equipment and capitalised research and developments costs, the latter reflecting the group’s focus on generating its own intellectual property. 

Powertech incurred R280 million of capital expenditure primarily in the transformers and cables operations. 

The R1 billion of cash derived from financing activities was predominantly due to new borrowings in Altech to fund the operating losses in East Africa 

as well as to meet some funding obligations associated with the disposal of its East and West African operations.


Subsidiary review 

Subsidiary income and growth 

Altech increased revenue by 5% to R10.4 billion from prior year levels, while EBITDA declined by 17% to R765 million with the EBITDA margin reducing 

from 9.2% to 7.3%. Headline earnings per share declined by 23%. Altech experienced higher finance charges and substantial capital items referred 

to earlier as well as an inflated effective tax rate of 56.8%, primarily as a result of the non-recognition of deferred tax assets on the losses in its East and 

West African operations. These operations were disposed of effective 28 February 2013, with East Africa being treated as a discontinued operation. 

The remaining continuing operations all performed satisfactorily, with Altech UEC generating particularly good results. 

Revenue at Altech Autopage Cellular was marginally down as a result of deflation in the voice environment, and the business suffered a 4% decrease in 

EBITDA. This was driven primarily by lower than expected Global System for Mobile communications (GSM) airtime and ISP revenue growth mitigated to 

a degree by good sales in prepaid airtime and value added services. A focus on service levels and customer retention has seen churn rates significantly 

improve and is helping to increase the subscriber base which now stands at close to 1.1 million. The integration of the business with Altech Technology 

Concepts has been completed and has produced cost benefits as well as a more cohesive approach to the market. 

The Altech Netstar group achieved revenue growth of 4% with subscriber bases increasing for both Stolen Vehicle Recovery (SVR) and Fleet Management. 

However, EBITDA declined by 13% with margins under pressure due to a competitive environment and resultant lower monthly Average Revenue per 

Vehicle (ARPV) – significant focus is being directed to cost controls to mitigate against this factor. Comprehensive plans have been formulated and 

implemented to grow sales, introduce value-add consumer services and invest in the fleet management offering. International expansion and partnerships 

remain key strategic objectives for Altech Netstar in the medium term. 

Altech Multimedia had a very pleasing year, with revenue increasing by 52%, and EBITDA by 44%. This significant improvement in performance can be 

attributed to a greater emphasis on the provision of services and a good manufacturing performance. The continued international diversification of the 

customer base has led to an improvement in the product mix and the business is now involved in contract manufacturing for Samsung, which has increased 

recoveries in the manufacturing facilities. 

Altech Information Technology group’s revenue remained flat and EBITDA declined by 14%, primarily as a result of the underperformance of the West African 

operation which has now been disposed of effective 28 February 2013. The remainder of the Altech Information Technology group performed satisfactorily, 

though margins were generally under pressure. 

The Altech Converged Services International group (Altech East Africa) reported extremely disappointing results with revenue declining by 29% and an 

EBITDA loss of R125 million. The East African operations were disposed of to Liquid Telecommunications Holdings Limited (Liquid) and Altech became 

a strategic minority shareholder in Liquid, holding 8.6% of Liquid’s issued share capital. For more information on the transaction, shareholders are referred 

to the SENS announcement released by Altech on 28 January 2013. 

Altech’s return on equity was 31,5% despite the reduced profitability of the group due to the significant impairments and losses incurred on the disposal 

of its East and West African operations. Their return on capital employed was 28.2%. 

Following the disposal of the loss making East and West African operations, Altech will now focus on maximising the returns from its remaining businesses 

and developing some of the new organic strategic initiatives that it has previously highlighted. 

Bytes reported a pleasing 15% increase in revenue to R7 billion although the EBITDA increase was limited to 1% (R531 million) as margins came under 

pressure. The EBITDA margin declined from 8.6% to 7.6%. Headline earnings for the Bytes group remained flat at R253 million. 

Bytes Document Solutions (South Africa and UK) reported a 6% increase in revenue but a decrease of 24% in EBITDA. While the Bytes Document Solutions 

business in the UK performed in line with expectations, improving revenue and margins slightly, the Bytes Document Solutions SA business experienced 

difficult market conditions, accentuated by the volatility in the Rand exchange rate. Both Lasercom and Nor Paper recovered from their poor performances 

of the previous period. The Bytes Document Solutions businesses will focus on improving their successful managed print services businesses which, 

are higher margin annuity-based offerings. 

Bytes Managed Solutions achieved a better than expected 4% increase in revenue and 1% increase in EBITDA. The prior year produced a record 

performance with substantial NCR equipment sales into the retail sector that were unlikely to be repeated, so the organic growth in this business was 

pleasing and well above the reported levels. The core services business continues to perform well. Bytes Managed Solutions is introducing new solutions 

to the financial sector such as Financial Kiosks, Teller Cash Recyclers and enabling Software Solutions. 

Bytes Systems Integration achieved 4% revenue growth and a decline in EBITDA of 4%. The business has continued to deliver significant new business, 

particularly in the financial services sector. The acquisition of Alliance Business Solutions, an Oracle Software implementation consultancy, in October 2012 

contributed positively to the business. 

Bytes Healthcare Solutions performed well, increasing revenue by 9% and EBITDA by 5% which was well ahead of expectations given that its market 

strength constrains growth opportunities and it has been investing in some new business initiatives. 

Bytes Universal Systems, a new division formed in April 2012 as a result of the acquisition of Unisys Africa, contributed revenue of R231 million and 

EBITDA of R18 million towards the group over 11 months. The business has performed particularly well in the petroleum and public sectors. 

Bytes People Solutions produced particularly pleasing results, increasing revenue by 11% and EBITDA by 15%, as it continues to develop its portfolio 

of training solutions. 

The Bytes International operations returned excellent results, increasing revenue by 37% and EBITDA by 42% in Rand terms. The UK Software Services side 

of the business performed well, increasing revenues by 32% although margins are under pressure since the change in the Microsoft rebate structure. 

The overall profitability of the International businesses was significantly assisted by the inclusion of a full year of Security Partnerships Limited which was 

acquired on 1 August 2011 and performed ahead of expectations. 

Bytes’ return on equity was 20%, while return on capital employed was 21.5%. 

35


MESSAGE TO SHAREHOLDERS continued 

36 

Bytes’ prospects are viewed as positive as it builds on the momentum created over the last few years and consolidates its position as the largest South 

African-owned IT group. However, margin pressure is expected to continue. Bytes continues to look for cross-sell opportunities within the Altron group, 

and expansion into Africa, together with some of its current clients. Bytes South Africa is currently undergoing a realignment of its business units as well 

as the creation of a shared services centre with a view to further enhancing customer service, market reach and reducing administration costs. 

Powertech has experienced an extremely challenging year, mainly in the second half, and while revenue increased by 2% to R7.6 billion, EBITDA reduced 

by 42% to R288 million and the EBITDA margin declined from 6.7% to 3.8%. Headline earnings for the Powertech group decreased by 99% to R1 million. 

Although the Powertech Cables group increased revenue by 5%, reduced margins resulted in a 54% decline in EBITDA. Revenue growth was attributable 

to higher and more stable demand for product in the first six months of the year as well as a higher average copper price through the year. However, in the 

second half it experienced significantly reduced demand from the formal sector and, while much of the revenue was replaced with informal sector business, 

this was at significantly lower margins, particularly in the last quarter. The decreased profitability was exacerbated by the transport strike in 

September 2012, which had a ripple effect on the entire supply chain. In view of these developments, the local cables operation has entered into 

an exercise to further reduce its fixed cost base. The formal sector demand is expected to pick up after the award of certain tenders and 

significant opportunities exist in the renewables and rail sectors, where we have already seen some success. The international cables operations in 

Iberia are operating in a depressed economic environment, but progress is being made in addressing these issues. Spain, which is now focusing 

on export markets, saw an improvement in the second half of the year, though it is still generating losses. The Portuguese operation, 

which delivered a profit in the first half, has since undergone a restructuring that should enhance its profitability going forward. 

The Powertech Transformers group improved revenue by 1% while EBITDA decreased by 36%. The decline in profitability was due to a combination of margin 

pressure, product mix, less favourable contract price adjustments and operational challenges at the distribution transformer facility in Johannesburg and the 

power transformer factory in Pretoria West, which are being addressed. However, the distribution transformer factory in Cape Town performed well. To date, 

demand for distribution transformers has remained low in the building and construction industry but new municipal spend is resulting in steady growth in the 

small to medium distribution market. The power transformer market is still receiving steady demand from Eskom, while the new Switchgear division contributed 

positively towards the Transformers group. 

Revenue decreased by 17% in the Powertech Batteries group while EBITDA declined by 25%, with most of these declines attributable to the disposal of the 

industrial battery business in November 2011. The automotive business performed well in the first half of the year, but in the second half experienced tighter 

margins due to pricing pressure from competitors. Battery sales into Africa increased significantly, though these are still relatively small in absolute terms. 

Powertech System Integrators has seen revenue decline by 5% over the prior period and a 45% decrease in EBITDA levels. Strike Technologies has been the 

standout performer of the group as it delivered on the Demand Side Management projects it was involved in with Powertech IST Otokon. Powertech IST has not 

delivered results according to expectations and the group has been subject to a restructure which involved the closure of some loss making divisions in order 

to drive better performance out of this asset. Powertech System Integrators should be boosted going forward by the recent acquisition of QuadPro, a business 

focused on turnkey sub-station solutions, which brings a strong order book and significant experience to the electrical sub-station industry. 

Powertech’s return on equity was 0% while return on capital employed was 3.2%. 

Following a disappointing second half at Powertech, various restructuring projects have been undertaken to reduce costs and refocus various businesses. These 

are expected to improve results in the short term. Powertech’s prospects appear positive considering that there is continued emphasis on infrastructure spend 

in the country and support from State-owned entities for local manufacturing operations. New opportunities exist in the service and supply of renewable energy 

solutions as well as the increased demand from the transport sector. A number of initiatives are underway to balance the group’s exposure to the building and 

construction sector, expand sales into Africa and reduce reliance on pure manufacturing operations. 

Corporate activity 

The following transactions were concluded during the period under review: 

• With effect from 31 March 2012, Bytes South Africa acquired 100% of the issued share capital of Unisys Africa, from Unisys Corporation and a local 

empowerment company CyberKnowledge Systems Investments, for a purchase price of R89 million. Unisys has been merged into the existing operations 

of the Bytes group and has increased its exposure to the public sector. 

• Bytes, through Bytes Systems Integration, acquired Alliance Business Solutions, a leader in the South African ERP space and an Oracle Platinum Partner 

with effect from 1 October 2012 for an estimated purchase price of R61 million, subject to certain earn outs. The acquisition seeks to leverage synergistic 

Oracle capabilities and cloud-based solutions to the combined customer base. 

• With effect from 1 November 2012, Powertech acquired a 51% stake in QuadPro a turnkey solutions provider specialising in electrical sub-stations for 

R9 million. This business has been combined with a similar division in Powertech System Integrators which will be synergistic and provide critical 

mass to the electrical sub-station industry. 

• Altech has disposed of its 75% equity stake in Altech West Africa, a secure recharge voucher and plastic card manufacturer. This transaction was effective 

on 28 February 2013. 

• On 28 February 2013, Altech disposed of its East African operations to Liquid Telecommunications Holdings Limited (Liquid) and Altech became a strategic 

minority shareholder in Liquid, holding 8.6% of Liquid’s issued share capital, with shareholder voting rights amounting to 10% and representation on the 

board of Liquid. 

The following transaction was concluded post the balance sheet date: 

• Effective 1 March 2013, Bytes Technology Group South Africa acquired Brand New Technologies Proprietary Limited (“BNTech”) for a total estimated 

consideration of R63.3 million of which R49 million is deferred and payable on the achievement of certain earn-outs over the next three years. 

BNTech is a leading provider of identity management products and solutions, specialising in protecting, securing and validating identities. 

The acquisition of BNTech complements existing Bytes offerings and allows the group to offer and provide a holistic identity management 

solution on a turnkey basis, both in South Africa and into Africa.


Human capital 

Altron has maintained its Level 3 rating in respect Broad-Based Black Economic Empowerment. Bytes has been rated at Level 2, while Altech and 

Powertech were both rated at Level 3. Bytes and Altech will in future be rated in accordance with the newly-gazetted ICT Charter. Altron has commenced 

with the implementation of its Human Capital Strategy “Beyond 2012” that was adopted in July 2012. 

In April 2013, Altron was ranked number 24 in the Most Empowered Companies in South Africa survey. Altech was ranked number 23 in the 

same national survey. 

Sustainability 

In January 2013, Altron formally launched its group sustainability strategy, together with a sustainability manual. This strategy is in line with 

the group’s four core themes and objectives identified in 2012. Altron’s objectives remain to: improve profitable revenue growth, invest in its people, 

lead through innovation and build and maintain strategic alliances. To monitor the core themes and objectives, 12 material focus areas were identified 

in 2013. As part of its on-going commitment towards the environment, Altron revised its environmental baseline data in 2012 and will provide feedback 

in this regard in the 2013 integrated annual report. At the same time, Altron will report on progress made towards achieving its three-year environmental impact 

reduction targets. These targets are monitored on an on-going basis using the updated electronic data capturing system rolled out in 2012. 

During 2013, Altron will again participate in the Carbon Disclosure Programme (CDP) as well as the Water CDP project. 

Corporate governance 

The Altron group continues to embrace the recommendations of King III and strives to ensure that all disclosures to shareholders are timely, accurate, balanced 

and relevant. 

Further to our SENS announcement published in May 2010, we continue to co-operate with the Competition Authorities regarding their investigations into 

alleged prohibited practices by Aberdare Cables and other competitors in the power cable market. 

In these tough and challenging market conditions, the group has pursued an aggressive training strategy of re-enforcing ethical business practices and 

leadership throughout the group, which was recently recognised by Altron being rated the top company in South in the South African Business Ethics Survey run 

under the auspices of the Ethics Institute of South Africa. 

Outlook 

The disposal of Altech’s East and West African operations will remove a significant cash and earnings drain on the group. As indicated above, there are 

a number of initiatives underway that will deliver a lower cost base and improve the group’s ability to service growing areas of the market. Altron expects 

to see the benefits of these factors start to realise in the coming financial year. 

Nevertheless, the current business environment is not an easy one in which to operate, particularly given the on-going policy uncertainties and threat of labour 

unrest. Altron intends continuing to focus on the basics of rigorous cost control, working capital management and extracting efficiencies from its businesses. 

Margin erosion will be countered by expanding the group’s product portfolio, implementing shared services and lowering its cost base. 

Notwithstanding the aforesaid challenges, Altron believes that significant opportunities exist for: 

• Altech in the convergence space; 

• Bytes to build on its strong performance of the last few years and expand its products and services as well as its presence in the public sector; and 

• Powertech within the electrical services, transport and renewable energy sectors. 

Acknowledgements 

The board would like to once again express its appreciation to all of its customers, staff, business partners, shareholders and other stakeholders for their support 

during the past year and for their continued belief in the future sustainability of the group and its strong underlying businesses. 

Dividend 

Notice is hereby given that on Tuesday, 7 May 2013, Altron declared a gross ordinary dividend (number 65) of 60.0 cents per ordinary share (2012: 92.0 cents) 

and a gross participating preference dividend (number 19) of 60.0 cents per participating preference share (2012: 92.0 cents) for the period 1 March 2012 

to 28 February 2013, payable on Monday, 1 July 2013 to holders of the ordinary and participating preference shares recorded in the books of the company at 

close of business on Friday, 28 June 2013. 

The dividends have been declared out of income reserves and will be subject to dividends tax. The local dividends tax rate is 15%. The company has no 

secondary tax on companies’ credits available. 

Accordingly, the net local dividend amount is 51.0 cents per ordinary and participating preference shares for shareholders liable to pay the new dividends 

tax and 60.0 cents per ordinary and participating preference shares for shareholders exempt from paying the new dividends tax. 

In terms of the dividends tax legislation, the dividends tax amount due will be withheld and paid over to the South African Revenue Service (“SARS”) 

by a nominee company, stockbroker or Central Security Depository Participant (“CSDP”) (collectively “Regulated Intermediary”) on behalf of shareholders. 

However, all shareholders should declare their status to their Regulated Intermediary, as they may qualify for a reduced dividends tax rate or they may 

even be exempt from dividends tax. 

Altron’s issued share capital at the declaration date is 105 669 131 ordinary shares and 241 848 047 participating preference shares. 

Altron’s tax reference number is 9725/149/71/1. 

In compliance with the requirements of STRATE, the following dates are applicable: 

Last day of trading to qualify for and participate in the dividend (cum dividend) Friday, 21 June 2013 

Trading ex-dividend commences Monday, 24 June 2013 

Record date Friday, 28 June 2013 

Dividend payment date (electronic and certificated) Monday, 1 July 2013 

Dividend cheques in payment of these dividends are no longer, as a result of increasing fraud, posted to certificated shareholders, but may instead be collected 

from the offices of the transfer secretaries from Monday, 1 July 2013. Electronic payment to certificated shareholders will be made simultaneously. 

37


MESSAGE TO SHAREHOLDERS continued 

Shareholders who have dematerialised their share certificates will have their accounts at their Central Securities Depository Participant or broker credited on 

Monday, 1 July 2013. 

Share certificates may not be dematerialised or re-materialised from Monday, 24 June 2013 to Friday, 28 June 2013, both days inclusive. 

In accordance with the company’s memorandum of incorporation, dividends amounting to R30.00 or less due to any one holder of the company’s ordinary 

or participating preference shares, held in certificated form, will not be paid, unless otherwise requested in writing, but will be aggregated with other 

such amounts and be donated to a charity nominated by the directors. 

Annual General Meeting 

Altron’s 67th annual general meeting will be held in The Altron Boardroom, 5 Winchester Road, Parktown, Johannesburg on Monday, 22 July 2013 at 09h30. 

Further details of the company’s annual general meeting will be contained in Altron’s integrated annual report to be posted to shareholders on or about 

1 June 2013. 

On behalf of the board 

Dr Bill Venter Robert Venter Alex Smith 

Chairman Chief Executive Chief Financial Officer 

7 May 2013 

38


CORPORATE INFORMATION 

BOARD OF DIRECTORS 

Independent non-executive: 

Mr NJ Adami 

Mr GG Gelink 

Mr MJ Leeming 

Dr PM Maduna 

Ms DNM Mokhobo 

Mr JRD Modise 

Mr SN Susman 

Non-executive: 

Dr WP Venter (Chairman) 

Mr MC Berzack 

Executive: 

Mr RE Venter (Chief Executive) 

Mr RJ Abraham 

Mr AMR Smith* 

Mr CG Venter 

* British 

Secretaries: 

Altron Management Services (Pty) Ltd – Mr AG Johnston 

(Group Company Secretary) 

Sponsor: 

Investec Bank 

The summarised audited consolidated financial statements are available at www.altron.com

www.altron.com

summarised audited consolidated financial statements - Altron

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