 |
||||||||||||
|
|
||||||||||||
|
Income statement
|
Balance sheet
|
Statement
of changes in equity
|
Cash flow statement
|
||||||||||||
|
Abridged audited consolidated financial statements for the year ended 29 February 2008
Message to shareholders Your directors are pleased to report that the Altron group has posted excellent results for the year ended 29 February 2008. Revenue increased by 25% to a record R21.4 billion and operating profit increased by 27% to R1.9 billion. Headline earnings per share grew by a commendable 33% over the high base established in the prior year. Encouragingly, all three of our operating companies namely: Altech, Bytes and Powertech recorded strong growth with headline earnings per share increasing by 23% at Altech while Bytes and Powertech increasing headline earnings by 23% and 39%, respectively. Dividends for the group increased by 32% to 156 cents per share, in line with earnings growth, maintaining a dividend cover of 2.4 times.
Business environment The impact of local power outages and political changes combined with the global financial market turmoil, and the possibility of a US recession, have impacted negatively on general market sentiment. At the same time, demand for infrastructure development is continuing at the expected pace in both the public and private sectors despite an increasing domestic interest rate environment and world wide pressures on economic growth. Government’s focus on infrastructure spend to create GDP growth and job creation as well as to deliver on election commitments, creates an environment conducive to strong demand for our group products. The infrastructure spending from state-owned enterprises and local authorities has gained momentum, especially in light of the recent national electricity supply crisis. Overall, the building and construction industry continues to grow at expected levels with the commercial side remaining strong although there are signs of lower residential housing demand. Rising interest rates and depressed business confidence have impacted negatively on consumer spending, resulting in a decline in the growth rate of residential housing plans passed, housing prices, motor vehicle sales and retail credit sales. Notwithstanding these unfavourable developments, group companies have performed exceptionally well. The weakening of the rand has had a mixed effect on the group’s businesses resulting in improved earnings from foreign operations for some companies while conversely leading to increased costs and reduced margins for others.
In the telecommunications sector, the continuing de-regulation of the market is creating numerous opportunities for growth in terms of the provision of telecom cables, products and services. These opportunities include, among others, Telkom’s capital expenditure programme, the launch of the second network operator, Neotel, government’s plans for Infraco as well as the decision made by mobile operators to “self provide” their own networks. Altech’s acquisition of a majority shareholding in the Sameer ICT group, a leading broadband network operator in East and Central Africa, is in line with group strategy to move further up the telecoms value chain, and to expand its geographic presence in Africa. This acquisition, furthermore, provides the opportunity to participate in the high growth converged technology wave, which forms part of the group’s TMT convergence strategy and also provides synergistic opportunities for the greater group. The power electronics sector remained buoyant during the period under review although the residential building sector has shown signs of slowing. The commercial market has remained strong and it is anticipated that this trend will continue for the foreseeable future. The Powertech businesses showed significant growth on the back of increased spending by Eskom and the municipalities as the need for stabilising electricity supply intensified. The power crisis in January has had a limited initial impact on group operations in terms of productivity. The group has been preparing for standby power in many of its businesses over the last few years and the necessary alternative power supplies have, for the most part, been installed. At the same time the power crisis has created opportunities and resulted in demand from businesses for standby power solutions. In this regard the newly acquired IST business in Powertech and Powertech Batteries, as well as the newly established Powertech Energy Solutions business, have played a major role in providing alternative power solutions with meaningful orders received to date. Within the information technology sector, there has been an increase in the local spend as current levels of company profitability provide funds for IT development. This has increased demand for Bytes products, though it continues to operate in a highly competitive market place. While the group’s South African IT businesses experienced margin pressure during the period under review, mainly due to adverse exchange rate movements and supplier delays, its international businesses showed excellent growth with increased operating profits and a significantly increased order book. Margin pressures are expected to continue within this sector, although Bytes is well placed to meet these challenges based on the diversity of its product range as well as its services offering and its geographical spread.
Financial overview The Altron group’s results for the year ended 29 February 2008 have shown strong growth with a 33% increase in headline earnings per share. Revenue increased by 25% from R17.1 billion in the prior year to R21.4 billion, with operating profit increasing by 27% from R1.53 billion to R1.94 billion. The group has increased its operating margin to 9.0%. Powertech has further enhanced its operating margin to 11.4% from 10.1% during the prior year as a result of operational leverage resulting from continuing high capacity utilisation. Altech has seen a marginal reduction in its operating margin to 8.1% from 8.4%. Similarly, Bytes has seen a decline in its normalised (excluding once-off expenses associated with the acquisition of minorities) operating margin from 8.0% to 7.2% - largely due to the increased contribution from its lower margin international operations. Excluding the impact of the UK National Health Services contract, the operating margin would have been 7.8%. During the period under review, the group invested R479 million in replacement as well as capacity expansion, mainly focused on the more capital intensive power electronics sector.
Subsidiary review Altech delivered an excellent set of results for the financial year ended 29 February 2008, with headline earnings per share growing by 23% to 511 cents. Revenue increased by 22% to R8.2 billion from R6.8 billion in the prior year. Operating profit increased by 17% to R664 million with the operating margin reducing marginally to 8.1%. Altech Autopage Cellular performed well ahead of expectations, exceeding both profitability and cash flow targets. The company increased its subscriber base by over 115 000 - representing a 14% growth in new connections during the year. Altech Netstar also maintained its leading market share position in the stolen vehicle recovery market, producing excellent trading results despite a slow down in new car sales, resulting from increased interest rates and the introduction of the National Credit Act. Altech UEC Multi-media increased revenue by more than 40% as a result of its expanding international business. The operating margin has, however, reduced from the prior year as the mix has moved more towards lower end products, following the success of the PVR in the last financial year, as well as the effect of outsourcing of production. Altech NamITech continues to experience difficult trading conditions with an operating loss being incurred by its South African operations, though this was much reduced from last year. As a result, the goodwill relating to the South African operations has been fully impaired in this financial year. The Altech NamITech West Africa operations continue to perform strongly with the combined operations recording a profit. Altech’s balance sheet remains strong with a net asset value of 2,026 cents per share and cash of R1.6 billion. Return on shareholder’s equity for the year was 25.4% and the dividend declared by Altech increased by 20%. Bytes achieved revenue growth of 27% to R5.2 billion with particularly strong revenue growth of 89% from the international operations, as a result of organic growth and acquisitions concluded in the past financial year. A substantial contribution came from the large contract with the UK’s National Health Service that was disclosed at the half year. South African revenue growth was more modest at around 7% in challenging trading conditions. Operating profit improved by 12% from R325 million to R365 million and headline earnings improved to R248 million, an increase of 23%. Normalised operating margin declined from 8.0% to 7.2% mainly due to the increasing contribution of the lower margin UK businesses to overall revenue. Operating margins within the South African businesses were on the whole maintained, while the UK business saw a marginal increase in their margins as the higher margin Xerox businesses started to increase their contribution. Powertech produced another excellent performance, reporting a 27% increase in revenue to R8.0 billion as a result of the significant increase in power infrastructure spend, the continuing strength of commercial property development and strong demand from the mining industry. Operating profit increased by 43% from R638 million to R914 million, while the operating margin increased from 10.1% to 11.4%. This improvement in Powertech’s operating margin is predominantly due to improved trading conditions which drove volume efficiencies, as a result of good capacity utilisation and effective cost management. Powertech’s headline earnings improved by 39% to R577 million compared to R415 million in the prior year. Aberdare Cables’ local operation continues to perform well, growing revenue by 32%. This revenue growth was assisted by the inclusion of an additional eleven months of trading from our telecoms joint venture with Reunert, which contributed R451 million for the year under review. Aberdare Cables international operations exceeded R1 billion in revenue for the first time and produced improved operating margins. Powertech Transformers also benefited from the infrastructure spend, growing revenue in excess of 22%. Powertech Batteries saw good revenue growth and managed to improve its operating margin on higher volumes. They are benefiting from the increase in new car sales in recent years. Powertech Industrial has had a difficult year with import competition and rationalisation costs eroding margins. Rationalisation plans have been implemented which should see a return to normal margin levels in the upcoming year. Altron’s finance operations at the corporate level continue to run down with the amortisation of Fintech Receivables 1, but are producing returns above expectations as a result of high secondary rentals.
Corporate activity The following significant transactions and corporate developments have taken place:
Post year end:
Outlook Despite the excellent trading results achieved by the group during the year under review, the uncertainties and volatility in the economic environment at present make it challenging to predict how these will impact on group performance. However, the significant investments we have made both internally and externally over the last few years, combined with a disciplined commitment to our business model should provide a strong foundation for the group to experience positive earnings growth in the forthcoming year, albeit not at the high levels achieved over the last two years.
Acknowledgements The board would like to express its appreciation to all of its customers, staff, business partners, shareholders and other stakeholders for their ongoing contributions and continued support towards the growth of our group as one of the leading ICT and power electronics groups in Africa.
Directorate
Shareholders are referred to the SENS announcement published by
Altron on 4 February 2008 advising that
Ms Barbara Masekela
had been appointed as an Dividend The following dividends are hereby declared for the year ended 29 February 2008: - ordinary dividend No. 60 of 156 cents per share (2007 : 118 cents) - participating preference dividend No. 14 of 156 cents per share (2007: 118 cents). The above dividends are payable as follows:
Last day of trading to qualify for and participate in the dividend
Dividend cheques in payment of these dividends to certificated shareholders will be posted to shareholders on or about Monday, 30 June 2008. Electronic payment to certificated shareholders will be undertaken simultaneously. Shareholders who have dematerialised their share certificates will have their accounts at their central securities depository participant or broker credited on Monday, 30 June 2008. In the case of certificated shareholders, notice of any change of address of shareholders must reach the transfer secretaries, Computershare Investor Services (Pty) Limited, on or before Friday 20 June 2008. Share certificates may not be de-materialised or re-materialised from Monday, 23 June 2008 to Friday 27 June 2008, both days inclusive.
Annual General Meeting
Altron’s
62nd annual general meeting will be held in the Boardroom, Altech
Corporate Offices, 79 Central Street, Houghton, Johannesburg on
Tuesday 15 July 2008 at 09:30. Further details on the company’s
annual general meeting will be contained in Altron’s annual report
to be posted to shareholders on or about 31 May 2008. On behalf of the board
6 May 2008
|