summarised audited consolidated financial statements - Altron

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