Allied Electronics Corporation Ltd HY 2014 results

UNAUDITED CONSOLIDATED

INTERIM RESULTSfor the six months ended 31 August

2013

Altron Unaudited Consolidated Interim Results for the six months ended 31 August 2013

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INDEX

21OUR NUMBERS

Condensed consolidated statement of comprehensive income 22

Notes 23

Condensed consolidated balance sheet 26

Segment analysis – continuing operations 27

Condensed consolidated statement of cash flows 28

Operational contribution from continued operations 29

Supplementary information 30

Condensed consolidated statement of changes in equity 31

*Change in accounting policies: Condensed consolidated statement of comprehensive income 33

*Change in accounting policies: Condensed consolidated balance sheet 35

*Change in accounting policies: Condensed consolidated statement of cash flows 36

*Change in accounting policies: Condensed consolidated statement of changes in equity 37

38MESSAGE TO SHAREHOLDERS

ALLIED ELECTRONICS CORPORATION LIMITED(Incorporated in the Republic of South Africa)(Registration number 1947/024583/06)Share code: ATN ISIN: ZAE000029658Share code: ATNP ISIN: ZAE000029666


22

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Six months Six months Yearended ended ended

31 August 31 August 28 February% 2013 2012 2013

R millions change (Unaudited) (Restated)* (Restated)*

CONTINUING OPERATIONSRevenue 8 13 443 12 500 24 464

Earnings before interest, tax, depreciation and amortisation (EBITDA) (4) 826 860 1 652Depreciation and amortisation (212) (226) (453)

Operating profit before capital items (3) 614 634 1 199Capital items (Note 1) 1 (62) (78)

Result from operating activities 8 615 572 1 121Finance income 31 29 56Finance expense (132) (59) (134)Share of profit from associates 9 9 15

Profit before taxation 523 551 1 058Taxation (182) (182) (348)STC – (16) (16)

Profit for the period from continuing operations 341 353 694

DISCONTINUED OPERATIONSLoss for the period from discontinued operations (note 7) – (732) (1 636)

Net profit/(loss) for the period 341 (379) (942)

Other comprehensive incomeItems that will never be reclassified to profit or lossRemeasurement of defined benefit obligation 2 10 19Taxation on items that will never be reclassified to profit or loss – (3) (5)Items that are or may be reclassified subsequently to profit or lossForeign currency translation differences in respect of foreign operations 94 79 310Realisation of negative foreign currency translation reserve on disposal – – 196Fair value adjustment on available-for-sale investments 62 – (5)Taxation on items that are or may be reclassified subsequently to profit or loss (11) – –

Other comprehensive income for the period, net of taxation 147 86 515

Total comprehensive income for the period 488 (293) (427)

Net profit/(loss) attributable to:Non-controlling interests 81 (364) (630)Altron equity holders 260 (15) (312)

Altron equity holders from continuing operations 260 250 484Altron equity holders from discontinued operations – (265) (796)

Net profit/(loss) for the period 341 (379) (942)

Total comprehensive income attributable to:Non-controlling interests 96 (338) (439)Altron equity holders 392 45 12

Altron equity holders from continuing operations 392 288 651Altron equity holders from discontinued operations – (243) (639)

Total comprehensive income for the period 488 (293) (427)

Basic earnings/(loss) per share from total operations (cents) 82 (5) (99)Diluted basic earnings/(loss) per share from total operations (cents) 81 (6) (90)


23

NOTES


31 August 31 August 28 February% 2013 2012 2013

R millions change (Unaudited) (Restated)* (Restated)*

Headline earnings per share (cents) 4 82 79 132Normalised headline earnings per share (cents) 15 91 79 132Diluted headline earnings per share (cents) 6 81 76 129Normalised diluted headline earnings per share (cents) 18 90 76 129

Basis of preparationThe condensed consolidated unaudited interim financial results have been prepared in accordance with IAS 34 – Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements and the requirements of the Companies Act of South Africa. 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 2013, apart from the adoption of the new accounting standards detailed below. This report was compiled under the supervision of Mr Alex Smith CA, Chief Financial Officer.

Change in accounting policiesIn accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, the changes in accounting policies described below have been applied retrospectively to adjust the statement of comprehensive income, statement of changes in equity, balance sheet and statement of cash flows for the effects of the following new or amended accounting standards:

IAS 19: Employee Benefits became effective in the interim period ended 31 August 2013. Under its previous accounting policy, Altron elected to apply the corridor method to account for the recognition of actuarial gains and losses.

Under the amended IAS 19, the calculations of interest cost and expected return on plan assets have been altered and a net interest income or expense will now be calculated by applying the discount rate used to measure the defined-benefit obligation to the net defined-benefit asset/obligation at the beginning of the period. Profit from operating activities would now include only the current service cost and the net interest income or expense. Remeasurements of the net defined-benefit asset/obligation are now recognised in other comprehensive income. Remeasurements include actuarial gains and losses, the return on plan assets and any change in the effect of the asset ceiling, excluding amounts included in the net interest on the defined benefit asset/obligation.

Altron has also adopted the new suite of consolidation standards:

IFRS 10: Consolidated Financial Statements (“IFRS 10”), IFRS 11: Joint Arrangements (“IFRS 11”), IFRS 12: Disclosure of Interests in Other Entities, IAS 27: Separate Financial Statements and IAS 28: Investment in Associates and Joint Ventures, which all became effective in the interim period ended 31 August 2013.

As a result of adopting IFRS 10, Altron has changed its accounting policy for evaluating control over its investees. IFRS 10 introduces a new control model that is applicable to all investees, by focusing on whether Altron has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns.

In terms of IFRS 11, proportionate consolidation is no longer permitted. Joint arrangements are now classified as either joint ventures or joint operations. Joint ventures are required to be equity accounted.

Altron has re-evaluated its involvement in its joint ventures with CBI Electric Aberdare ATC Telecom Cables (“CBI”) and Tridonic SA Proprietary Limited (“Tridonic”). CBI has been reclassified from a jointly controlled entity that was previously proportionately consolidated to a joint venture that is now equity accounted. Tridonic has been reclassified from a jointly controlled entity that was previously proportionately consolidated to a subsidiary.


31 August 31 August 28 February2013 2012 2013

R millions (Unaudited) (Restated)* (Restated)*

1. Capital items CONTINUING OPERATIONSNet gain on disposal of property, plant and equipment 1 1 14Impairment of property, plant and equipment – – (7)Impairment of intangible assets – – (9)Net loss on disposal of businesses and investments – (1) (5)Loss on disposal of held-for sale disposal group – – (42)Impairment of held-for-sale disposal group assets – (62) (29)

1 (62) (78)

DISCONTINUED OPERATIONSImpairment of property, plant and equipment – (308) (328)Impairment of goodwill – (13) (13)Impairment of intangible assets – (294) (300)Loss on disposal of discontinued operations – – (730)

– (615) (1 371)

Total 1 (677) (1 449)

2. Reconciliation between attributable earnings and headline earnings Attributable to Altron equity holders 260 (15) (312)Capital items – gross (1) 677 1 449Tax effect of capital items – – –Non-controlling interests in capital items 1 (413) (720)

Headline earnings 260 249 417


24

NOTES continued

Six months Six months Year

ended ended ended

31 August 31 August 28 February

2013 2012 2013(Unaudited) (Restated)* (Restated)*

3. Reconciliation between attributable earnings and diluted earnings Attributable to Altron equity holders 260 (15) (312)Dilutive earnings attributable to B-BBEE non-controlling interests in subsidiaries – (5) –Dilutive earnings attributable to dilutive options at subsidiary level – – 42Non-controlling interest in adjustments – – (18)

Diluted earnings 260 (20) (288)

4. Reconciliation between headline earnings and diluted headline earnings Headline earnings 260 249 417Dilutive earnings attributable to B-BBEE non-controlling interests in subsidiaries – (5) –Dilutive earnings attributable to dilutive options at subsidiary level – (3) (11)Non-controlling interests in adjustments – 1 4

Diluted headline earnings 260 242 410

5. Reconciliation between headline earnings and normalised headline earnings Normalised headline earnings have been presented to demonstrate the impact of material, non-operational once-off costs relating to foreign exchange losses and breakage costs on transaction funding on the headline earnings of the group.

The presentation of normalised headline earnings is not an IFRS requirement.

Headline earnings are reconciled to normalised headline earnings as follows:

Headline earnings 260 249 417Foreign currency losses on transaction funding 40 – –Breakage costs on transaction funding 5 – –Tax effect of adjustments – – –Non-controlling interests in adjustments (17) – –

Normalised headline earnings 288 249 417

6. Reconciliation between diluted headline earnings and normalised diluted headline earnings Diluted headline earnings 260 242 410Foreign currency losses on bank loan 40 – –Breakage costs 5 – –Tax effect of adjustments – – –Non-controlling interests in adjustments (17) – –

Normalised diluted headline earnings 288 242 410

Fully diluted earnings, diluted headline earnings and normalised 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 R32 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 (Pty) Ltd.

7. Discontinued operations The disposals of Altech’s Telecommunication Network interests in East Africa resulted in the operations being classified as a discontinued operation in the

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

Revenue – 140 280

Earnings before interest, tax, depreciation, amortisation and capital items (EBITDA before capital items) – (33) (113)Depreciation and amortisation – (36) (52)

Operating loss before capital items – (69) (165)Capital items (Note 1) – (615) (1 371)

Result from operating activities – (684) (1 536)Finance income – 2 2Finance expense – (49) (92)

Loss before taxation – (731) (1 626)Taxation – (1) (10)

Loss for the period from discontinued operations – (732) (1 636)


25

NOTES continued

8. Acquisitions of subsidiary Acquisition of Brand New Technologies Effective 1 March 2013 the Bytes Group 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.

The acquired business contributed revenues of R11.6 million and net profit after tax of R1.6 million to the group for the six months since acquisition. These amounts have been calculated using the group’s accounting policies.

Management is still finalising the full purchase price allocation and this will be accounted for in the second half of the 2014 financial year. The acquired balances of BNTech at the effective date were as follows:

Recognised Fair value Carryingvalues adjustments amount

Current assets 5 – 5

Net identifiable assets and liabilities 5 – 5Goodwill arising on acquisition 51

Total consideration 56less deferred purchase consideration (42)

Cash outflow from the group on acquisition 14

9. Buy-back of non-controlling interests in Altech Altron, through its wholly owned subsidiary Altron Finance, acquired the Altech non-controlling shareholders’ shares in Altech effective 1 August 2013. This

brought Altron’s shareholding in Altech to 100% and will enable it to integrate and initiate synergies between Altech and Bytes, through the creation of the Altron TMT division.

The total cash consideration paid to the Altech non-controlling shareholders equalled R1.63 billion (91% of Altech non-controlling interests) and was funded by debt, while 9% of the Altech non-controlling shareholders elected to be settled in Altron participating preference shares.

Once-off directly attributable transaction costs of R15 million were capitalised to equity. The excess of the consideration paid to Altech shareholders over the non-controlling interest in Altech amounts to R1 449 million, and has been deducted

directly from the equity attributable to Altron Shareholders.


26

CONDENSED CONSOLIDATED BALANCE SHEET



AssetsNon-current assets 5 236 4 353 4 863

Property, plant and equipment 1 890 1 996 1 765Intangible assets including goodwill 1 694 1 528 1 597Associates 256 251 250Other investments 731 191 673Rental finance advances 40 56 45Non-current receivables and other assets 521 183 414Deferred taxation 104 148 119

Current assets 9 233 8 070 8 080

Inventories 2 885 2 650 2 586Trade and other receivables, including derivatives 5 054 4 220 4 219Assets classified as held-for-sale – 85 –Cash and cash equivalents 1 294 1 115 1 275

Total assets 14 469 12 423 12 943

Equity and liabilitiesTotal equity 3 868 5 124 5 229

Non-current liabilities 2 030 1 042 782

Loans 1 878 818 609Empowerment funding obligation – 33 17Provisions 5 6 25Deferred income – 55 –Deferred taxation 147 130 131

Current liabilities 8 571 6 257 6 932

Loans 1 743 730 1 308Empowerment funding obligation 32 27 29Bank overdraft 976 825 385Trade and other payables, including derivatives 5 709 4 366 5 072Provisions 70 121 100Liabilities classified as held-for-sale – 85 –Taxation payable 41 103 38

Total equity and liabilities 14 469 12 423 12 943

Net asset value per share (cents) 1 131 1 509 1 497


27

SEGMENT ANALYSIS – CONTINUING OPERATIONS

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.

Altron commenced to equity account for its stake in CBi Electric Aberdare ATC Telecom Cables (CBI) effective 1 March 2013 where previously it was proportionally consolidated. The change in accounting policy has resulted in a restatement of the Powertech Cables Group’s revenue and EBITDA.

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

Revenue Normalised EBITDA

Six months to Six months to 12 months to Six months to Six months to 12 months to 31 August 31 August 28 February 31 August 31 August 28 February

R millions 2013 2012 2013 2013 2012 2013

Altech Autopage Cellular 2 907 3 032 6 027 139 122 253Altech UEC Group 966 803 1 802 83 62 180Altech Netstar Group 538 518 1 045 143 160 291Other Altech Segments 729 664 1 287 52 61 154

Altech Group 5 140 5 017 10 161 417 405 878

Bytes Technology Group UK Software 1 041 878 1 541 47 30 45Bytes Document Solutions Group 1 167 1 064 2 216 52 70 142Bytes Managed Solutions 644 585 1 205 74 65 150Bytes Systems Integration 747 531 1 145 41 38 85Other Bytes Segments 535 453 897 50 41 109

Bytes Group 4 134 3 511 7 004 264 244 531

Altron TMT 9 274 8 528 17 165 681 649 1 409

Powertech Cables Group 2 508 2 363 4 426 47 74 33Powertech Transformers Group 835 824 1 459 84 94 138Powertech Battery Group 401 345 680 47 54 82Powertech Services Group 430 409 752 19 28 43Other Powertech Segments 22 52 19 (4) (18) (29)

Powertech Group 4 196 3 993 7 336 193 232 267

Corporate and financial services 3 14 18 (3) (21) (24)Inter-segment revenue (30) (35) (55)

Altron Group 13 443 12 500 24 464 871 860 1 652

Segment EBITDA can be reconciled to group operating profit before Six months to Six months to 12 months to capital items as follows: 31 August 31 August 28 FebruaryR millions 2013 2012 2013

Segment EBITDA 871 860 1 652Reconciling items:Depreciation (161) (153) (303)Amortisation (51) (73) (150)Foreign currency losses on transaction funding (40) – –Breakage costs on transaction funding (5) – –

Group operating profit before capital items 614 634 1 199


28

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS




Continuing operationsCash flows from/(utilised in) operating activities 200 (108) 1 138

Cash generated by operations 959 809 1 862 Changes in working capital (279) (280) 172 Net finance expense (101) (31) (95)Taxation paid (160) (180) (368)

Cash available from operating activities 419 318 1 571 Dividends paid, including to non-controlling interests (219) (426) (433)

Cash flows utilised in investing activities (2 484) (377) (1 132)

Cash flows from financing activities 1 694 238 1 005

Cash flows utilised in discontinued operations – (30) (687)

Net (decrease)/increase in cash and cash equivalents (590) (277) 324Net cash and cash equivalents at the beginning of the period 890 533 533Effect of exchange rate fluctuations on cash held 18 20 33Cash classified as held-for-sale – 14 –

Net cash and cash equivalents at the end of the period 318 290 890


29

OPERATIONAL CONTRIBUTION FROM CONTINUED OPERATIONS


% 31 August 31 August 28 Februarychange 2013 % 2012 % 2013 %


RevenueAltech 2 5 140 38 5 017 40 10 161 42Bytes 18 4 134 31 3 511 28 7 004 29

Altron TMT 9 9 274 8 528 17 165

Powertech 5 4 196 31 3 993 32 7 336 29Corporate, financial services and eliminations (27) 0 (21) 0 (37) 0

Altron 8 13 443 100 12 500 100 24 464 100

Normalised operating profit*Altech 5 340 51 325 51 713 59Bytes 13 213 32 189 30 423 35

Altron TMT 8 553 514 1 136

Powertech (23) 109 17 142 22 94 9Corporate and financial services (3) 0 (22) (3) (31) (3)

Altron 4 659 100 634 100 1 199 100

% held at % held at % held at31 August 31 August 28 February

Normalised headline earnings** 2013 2012 2013Altech 100,0 50 114 40 61,4 76 31 61,4 160 38Bytes 100,0 14 133 46 100,0 117 47 100,0 253 61Powertech 100,0 (45) 33 11 100,0 60 24 100,0 1 0Corporate and financial services 100,0 8 3 100,0 (4) (2) 100,0 3 1

Altron 15 288 100 249 100 417 100

* Normalised operating profit is stated before capital items and non-operational once-off costs relating to foreign exchange losses and breakage costs on transaction funding.

** Normalised headline earnings is stated before non-operational once-off costs relating to foreign exchange losses and breakage costs on transaction funding.


30

SUPPLEMENTARY INFORMATION



Borrowings 3 653 1 608 1 963

– interest bearing 3 621 1 316 1 917– non-interest bearing – 232 –– B-BBEE funding obligation 32 60 46

Depreciation 161 180 345Amortisation 51 82 160Net foreign exchange (losses)/profits (24) 28 (18)

Capital expenditure 356 229 672Additions to contract fulfilment costs 197 133 430Capital commitments 77 183 124

Lease commitments 845 944 953Payable within the next 12 months: 233 229 232Payable thereafter: 612 715 721

Weighted average number of shares (millions) 318 316 316Diluted average number of shares (millions) 322 318 319Shares in issue at end of period (millions) 324 316 317

RatiosEBITDA margin (%) 6,1 6,5 6,2ROCE (%) 16,3* 16,8* 14,4ROE (%) 15,1* 10,2* 9,1ROA (%) 10,6* 10.7* 10,1RONA (%) 16,5* 16,9* 14,6Current ratio 1,1:1 1,3:1 1,2:1Acid test ratio 0,7:1 0,9:1 0,8:1

* Annualised


31

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to Altron equity holders

Sharecapital Non-

and Treasury Retained controlling TotalR millions premium shares Reserves earnings Total interests equity

Balance at 29 February 2012 (Restated)* 2 244 (299) (1 100) 4 158 5 003 820 5 823Total comprehensive income for the periodLoss for the period – – – (15) (15 ) (364) (379)Other comprehensive incomeForeign currency translation differences in respect of foreign operations – – 53 – 53 26 79Remeasurement of defined benefit obligation – – 7 – 7 – 7

Total other comprehensive income – – 60 – 60 26 86

Total comprehensive income for the period – – 60 (15) 45 (338) (293)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersDividends to equity holders – – – (291) (291) (135) (426)Issue of share capital 1 – – – 1 – 1Share-based payment transactions – – 12 – 12 3 15

Total contributions by and distributions to owners 1 – 12 (291) (278) (132) (410)

Changes in ownership interests in subsidiariesChange in shareholding of subsidiaries – – 1 – 1 3 4

Total changes in ownership interests in subsidiaries – – 1 – 1 3 4

Total transactions with owners 1 – 13 (291) (277) (129) (406)

Balance at 31 August 2012 (Restated)* 2 245 (299) (1 027) 3 852 4 771 353 5 124

Total comprehensive income for the periodLoss for the period – – – (297) (297) (266) (563)Other comprehensive incomeForeign currency translation differences in respect of foreign operations – – 139 – 139 92 231Realisation of negative foreign currency translation reserve on disposal – – 120 – 120 76 196Fair value adjustment on available-for-sale investments – – (3) – (3) (2) (5)Remeasurement of defined benefit obligation – – 7 – 7 – 7


Total comprehensive income for the period – – 263 (297) (34) (100) (134)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersDividends to equity holders – – – – – (7) (7)Issue of share capital 9 – (10) – (1) – (1)Share-based payment transactions – – 5 – 5 1 6

Total contributions by and distributions to owners 9 – (5) – 4 (6) (2)

Changes in ownership interests in subsidiariesChange in shareholding of subsidiaries – – (1) – (1) (3) (4)Introduction of non-controlling interests – – – – – 3 3Disposal of operations – – – – – 242 242

Total changes in ownership interests in subsidiaries – – (1) – (1) 242 241

Total transactions with owners 9 – (6) – 3 236 239

Balance at 28 February 2013 (Restated)* 2 254 (299) (770) 3 555 4 740 489 5 229


32

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY continued

Attributable to Altron equity holders

Sharecapital Non-

and Treasury Retained controlling TotalR millions premium shares Reserves earnings Total interests equity

Total comprehensive income for the periodProfit for the period – – – 260 260 81 341Other comprehensive incomeForeign currency translation differences in respect of foreign operations – – 92 – 92 2 94Fair value adjustment on available-for-sale investments – – 38 – 38 13 51Remeasurement of defined benefit obligation – – 2 – 2 – 2


Total comprehensive income for the period – – 132 260 392 96 488

Transactions with owners, recorded directly in equityContributions by and distributions to ownersDividends to equity holders – – – (190) (190) (29) (219)Share-based payment transactions – – 13 – 13 3 16

Total contributions by and distributions to owners – – 13 (190) (177) (26) (203)

Changes in ownership interests in subsidiariesBuy-back of non-controlling interest 158 – (1 449) – (1 291) (355) (1 646)

Total changes in ownership interests in subsidiaries 158 – (1 449) – (1 291) (355) (1 646)

Total transactions with owners 158 – (1 436) (190) (1 468) (381) (1 849)

Balance at 31 August 2013 (unaudited) 2 412 (299) (2 074) 3 625 3 664 204 3 868


33

*CHANGE IN ACCOUNTING POLICIES:

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Six months Six months Six months Year Year Yearended ended ended ended ended ended

31 August 31 August 31 August 28 February 28 February 28 February2012 2012 2012 2013 2013 2013

R millions (Unaudited) (Adjustments) (Restated)* (Audited) (Adjustments) (Restated)*

CONTINUING OPERATIONSRevenue 12 662 (162) 12 500 24 769 (305) 24 464

Earnings before interest, tax, depreciation and amortisation (EBITDA) 885 (25) 860 1 692 (40) 1 652Depreciation and amortisation (230) 4 (226) (461) 8 (453)

Operating profit before capital items 655 (21) 634 1 231 (32) 1 199Capital items (Note 1) (62) – (62) (78) – (78)

Result from operating activities 593 (21) 572 1 153 (32) 1 121Finance income 29 – 29 57 (1) 56Finance expense (59) – (59) (134) – (134)Share of profit from associates 1 8 9 5 10 15

Profit before taxation 564 (13) 551 1 081 (23) 1 058Taxation (188) 6 (182) (358) 10 (348)STC (16) – (16) (16) – (16)

Profit for the period from continuing operations 360 (7) 353 707 (13) 694


34




DISCONTINUED OPERATIONSLoss for the period from discontinued operations (732) – (732) (1 636) – (1 636)

Net profit/(loss) for the period (372) (7) (379) (929) (13) (942)

Other comprehensive incomeItems that will never be reclassified to profit or lossRemeasurement of defined benefit obligation – 10 10 – 19 19Taxation on items that will never be reclassified to profit or loss – (3) (3) – (5) (5)Items that are or may be reclassified subsequently to profit or lossForeign currency translation differences in respect of foreign operations 79 – 79 310 – 310Realisation of negative foreign currency translation reserve on disposal – – – 196 – 196Fair value adjustment on available-for-sale investments – – – (5) – (5)

Other comprehensive income for the period, net of taxation 79 7 86 501 14 515

Total comprehensive income for the period (293) – (293) (428) 1 (427)

Net profit/(loss) attributable to:Non-controlling interests (364) – (364) (631) 1 (630)Altron equity holders (8) (7) (15) (298) (14) (312)

Altron equity holders from continuing operations 257 (7) 250 498 (14) 484Altron equity holders from discontinued operations (265) – (265) (796) – (796)

Net profit/(loss) for the period (372) (7) (379) (929) (13) (942)

Total comprehensive income attributable to:Non-controlling interests (338) – (338) (439) – (439)Altron equity holders 45 – 45 11 1 12

Altron equity holders from continuing operations 288 – 288 650 1 651Altron equity holders from discontinued operations (243) – (243) (639) – (639)

Total comprehensive income for the period (293) – (293) (428) 1 (427)

Basic earnings/(loss) per share from total operations (cents) (3) (2) (5) (94) (5) (99)Diluted basic earnings/(loss) per share from total operations (cents) (4) (2) (6) (86) (5) (91)Headline earnings per share (cents) 81 (2) 79 136 (4) 132Diluted headline earnings per share (cents) 78 (2) 76 133 (4) 129

HEADLINE EARNINGS ARE DERIVED FROM:Profit attributable to Altron equity holders (8) (7) (15) (298) (14) (312)Capital items – gross 677 – 677 1 449 – 1 449Non-controlling interests in capital items (413) – (413) (720) – 720

Headline earnings 256 (7) 249 431 (14) 417

*CHANGE IN ACCOUNTING POLICIES: CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


35


CONDENSED CONSOLIDATED BALANCE SHEET



AssetsNon-current assets 4 251 102 4 353 4 757 106 4 863

Property, plant and equipment 2 054 (58) 1 996 1 822 (57) 1 765 Intangible assets including goodwill 1 544 (16) 1 528 1 613 (16) 1 597 Associates 83 168 251 80 170 250 Other investments 191 – 191 673 – 673 Rental finance advances 56 – 56 45 – 45 Non-current receivables and other assets 183 – 183 414 – 414 Deferred taxation 140 8 148 110 9 119

Current assets 8 208 (138) 8 070 8 210 (130) 8 080

Inventories 2 718 (68) 2 650 2 653 (67) 2 586 Trade and other receivables, including derivatives 4 271 (51) 4 220 4 255 (36) 4 219 Assets classified as held-for-sale 85 – 85 – – –Cash and cash equivalents 1 134 (19) 1 115 1 302 (27) 1 275

Total assets 12 459 (36) 12 423 12 967 (24) 12 943

Equity and liabilitiesTotal equity 5 114 10 5 124 5 220 9 5 229Non-current liabilities 1 039 3 1 042 787 (5) 782

Loans 818 – 818 609 – 609 Empowerment funding obligation 33 – 33 17 – 17 Provisions 6 – 6 25 – 25 Deferred income 55 – 55 – – – Deferred taxation 127 3 130 136 (5) 131

Current liabilities 6 306 (49) 6 257 6 960 (28) 6 932

Loans 730 – 730 1 308 – 1 308 Empowerment funding obligation 27 – 27 29 – 29 Bank overdraft 825 – 825 385 – 385 Trade and other payables, including derivatives 4 410 (44) 4 366 5 105 (33) 5 072 Provisions 121 – 121 100 – 100 Liabilities classified as held-for-sale 85 – 85 – – – Taxation payable 108 (5) 103 33 5 38

Total equity and liabilities 12 459 (36) 12 423 12 967 (24) 12 943

Net asset value per share (cents) 1 509 – 1 509 1 498 (1) 1 497


36


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS




Continuing operationsCash flows from/(utilised in) operating activities (107) (1) (108) 1 150 (12) 1 138

Cash generated by operations 825 (16) 809 1 878 (16) 1 862Changes in working capital (292) 12 (280) (94) 266 172Net finance expense (30) (1) (31) 174 (269) (95)Taxation paid (184) 4 (180) (375) 7 (368)

Cash available from operating activities 319 (1) 318 1 583 (12) 1 571Dividends paid, including to non-controlling interests (426) _ (426) (433) – (433)

Cash flows utilised in investing activities (379) 2 (377) (1 137) 5 (1 132)

Cash flows from financing activities 238 – 238 1 005 – 1 005

Cash flows utilised in discontinued operations (30) – (30) (687) – (687)

Net (decrease)/increase in cash and cash equivalents (278) 1 (277) 331 (7) 324Net cash and cash equivalents at the beginning of the period 553 (20) 533 553 (20) 533Effect of exchange rate fluctuations on cash held 20 – 20 33 – 33Cash classified as held-for-sale 14 – 14 – – –

Net cash and cash equivalents at the end of the period 309 (19) 290 917 (27) 890


37


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



Loss for the period (372) (7) (379) (929) (13) (942)Foreign currency translation differences in respect of foreign operations 79 – 79 310 – 310Remeasurement of defined benefit obligation – 7 7 – 14 14Realisation of negative foreign currency translation reserve on disposal – – – 196 – 196Fair value adjustment on available-for-sale investments – – – (5) – (5)Dividends to equity holders (426) – (426) (433) – (433)Issue of share capital 1 – 1 – – –Share-based payment transactions 15 – 15 23 (2) 21Change in shareholding of subsidiaries 4 – 4 – – –Introduction of non-controlling interests – – – 3 – 3Disposal of operations – – – 242 – 242

Equity at the beginning of the period 5 813 10 5 823 5 813 10 5 823

Equity at the end of the period 5 114 10 5 124 5 220 9 5 229

Made up as follows:

Share capital and premium 2 245 – 2 245 2 254 – 2 254Treasury shares (299) – (299) (299) – (299)

Reserves (1 034) 7 (1 027) (784) 14 (770)Retained earnings 3 859 (7) 3 852 3 570 (15) 3 555Non-controlling interests 343 10 353 479 10 489

5 114 10 5 124 5 220 9 5 229


38

MESSAGE TO SHAREHOLDERS

The Altron financial results for the six month period ended 31 August 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.

During the period under review, the group achieved revenue growth as well as a pleasing increase in normalised headline earnings per share, with margins generally being maintained. As previously reported, Altron, through its wholly owned subsidiary Altron Finance, acquired the Altech minorites’ shares in Altech effective 1 August 2013. This brought Altron’s shareholding in Altech to 100% and will enable it to integrate and initiate synergies between Altech and Bytes, through the creation of the Altron TMT division. Given the effective date, the benefit of these synergies is not yet evident in the results for this period but it is anticipated they will have an effect from the next reporting period. For the six months ended 31 August 2013, Altech showed a good recovery with Altech Autopage and Altech UEC performing above expectation. Bytes continued its strong performance across most divisions with Bytes Universal Systems and the UK businesses contributing significantly, and positive inroads being made into the public sector coupled with good progress in its Africa strategy. Powertech experienced 5% revenue growth but earnings were negatively impacted by reduced margins primarily as a result of underperformance from the Aberdare Cables business albeit that this division showed a marked improvement when compared to the second half of the prior year. Overall, the Powertech group’s performance is also much improved from the second half of the prior financial year.

Financial overview Income In accordance with the treatment of East Africa as a discontinued operation at the last year-end, the comparative period has been restated to separate out those operations. There have also been restatements in order to implement various accounting standard changes that are effective this year and which have to be retrospectively applied. In some cases reference is made to normalised results which excludes the once-off non-operational forex and breakage costs associated with the repatriation of the East Africa loan.

Continuing operationsWhile Altron’s revenue increased by 8% to R13.4 billion from R12.5 billion in the comparative period, EBITDA declined by 4% from R860 million to R826 million. Normalised EBITDA equalled R871 million, up 1%, which excludes the effect of once-off, non-operational forex losses and breakage costs totalling R45 million following the repatriation of a loan pertaining to Altech East Africa. Normalised EBITDA margin was 6.5% compared to the prior period’s 6.9%.

The non-recurrence of the impairments of the prior period as well as a lower depreciation charge, related to the disposal of Altech’s West African operation, resulted in a profit of R615 million from operating activities, 8% higher than last year’s R572 million. Net finance costs have increased from R30 million to R101 million as average borrowings have increased significantly due to various loans taken on to fund the cash requirements associated with the disposal of Altech’s East African operations. The borrowings taken out to acquire the Altech minorities had virtually no impact on the results for this period.

Total operationsThe effective tax rate remains high at 34.7% due to some interest deductibility issues as well as the inability to raise deferred tax assets in certain loss making operations, though it is lower than the 36.7% experienced in the prior period. This resulted in a profit after tax of R341 million compared to the loss of R379 million experienced in the prior period.

Headline earnings per share is up 4% at 82 cents while normalised HEPS increased 15% to 91 cents.

Cash managementCash generated by operations of R959 million was up 19% on the prior period but R279 million was absorbed into working capital. Despite continued focus on working capital there has been a seven-day increase in the net investment when compared to February 2013, all coming out of debtors. The comparison to August 2012 shows an improvement from 29 days to 20 days of net investment. This increase is primarily due to significantly higher activity levels in the last two months of the period. A significant reduction in dividends paid, mainly as a result of Altech not paying a dividend, resulted in R200 million cash flow being generated from operating activities.

Investing activities increased to R838 million, excluding the effects of the R1.6 billion invested as a result of the acquisition of the Altech minorities. A significant portion of the increase was due to the continued investment into capitalised subscriber acquisition costs of R281 million in the Altech group, which are recovered over the term of their contracts. Capital expenditure amounted to R356 million in both property, plant and equipment and capitalised research and development costs, with the latter reflecting the group’s focus on generating its own intellectual property.

Subsidiary reviewSubsidiary income and growthAltron TMT DivisionThe acquisition of the Altech minorities’ shares in Altech has enabled Altron to reorganise its telecommunications, multi-media and IT businesses in a more efficient way in order to increase revenue growth, enable effective business cross-sell and achieve cost savings going forward. Significant successes have already been achieved and, although it is early in the process, management is pleased with the progress made to date. On a consolidated, total operations level the Altron TMT Division, consisting of Altech and Bytes, increased revenue by


39

MESSAGE TO SHAREHOLDERS continued

by 7% from R8.7 billion to R9.3 billion and normalised EBITDA by 11% from R616 million to R681 million. The EBITDA margin improved from 7.1% to 7.3%. Normalised headline earnings improved 18% to R284 million.

Altech maintained revenue at R5.1 billion compared to the prior period, while normalised EBITDA increased by 12% to R417 million with the normalised EBITDA margin increasing from 7.2% to 8.1%. Normalised headline earnings increased by 22% to R151 million.

Revenue at Altech Autopage was marginally down as a result of a decline in the voice environment and a clean-up of the subscriber base, but the business increased EBITDA by 14% showing the benefits of its strategy of bundling products and value adding services along with the traditional voice product. The Average Revenue Per User (ARPU) has continued to decline, although ARPUs on new subscribers are encouraging, while churn is being maintained at industry leading levels. Valued-added services and data sales were up and the number of subscribers increased to approximately 1.1 million.

The Altech Netstar group achieved revenue growth of 4%. However, EBITDA declined by 11% with margins impacted by inflationary increases linked to cost of sales, a competitive environment and resultant lower monthly Average Revenue Per Vehicle (ARPV). Significant focus is being directed to cost controls and internal efficiencies. Recent wins in the fleet management business and the installation of over 30 000 telematics units for insurance companies to monitor driver behaviour should assist in reversing some of this margin decline going forward.

Altech Multimedia again performed exceptionally well, with revenue increasing by 20% and EBITDA increasing by 34%. This significant improvement in performance can be attributed to, amongst other reasons, increased sales to MultiChoice for digital migration in Africa. The continued international diversification of the customer base, which includes Angola, the Middle East, Turkey and Australia, has led to an improvement in the product mix. The business has initiated the production of flat panel televisions for Samsung, which has increased recoveries in the manufacturing facilities. Additional capacity has been added to the manufacturing facility in Mount Edgecombe in KwaZulu-Natal and a record number of five million set-top boxes are expected to be manufactured during this financial year.

The Altech Information Technology group’s revenue decreased by 7% and EBITDA increased by 21%, with the profitability improvement mainly related to the disposal of Altech West Africa. Altech Isis performed well but Altech Card Solutions experienced a challenging market. Altech NuPay delivered excellent results while Swisttech performed satisfactorily. Going forward most of the IT assets in Altech will be operationally managed by Bytes, streamlining the group’s IT products and service offerings.

Altech’s return on equity was 21.8% while its return on capital employed was 34.31%.

Altech is focused on maximising returns from its existing assets while also looking ahead at how these businesses must be developed for future relevance and growth. Three new business development areas are being focused on and invested in, which could generate extensive new revenue streams in the future. Partnerships such as the one with Huawei are also key to the future of the group.

Bytes reported a pleasing 18% increase in revenue and an 8% increase in EBITDA. The EBITDA margin declined from 6.9% to 6.4%. Headline earnings for the Bytes group was up 14% to R133 million.

Bytes Document Solutions (South Africa and UK) reported a 10% increase in revenue but a decrease of 25% in EBITDA. EBITDA was impacted through the concerted effort to increase “machines in the field’ which will have a positive impact on future service revenue. The Xerox business experienced difficult market conditions in both South African and UK markets and was negatively affected by a materially weaker Rand. Lasercom and Nor Paper performed satisfactorily.

Bytes Managed Solutions again posted pleasing results, increasing revenue by 10% and EBITDA by 13%, with improved sales of NCR Automated Teller Machines and Point of Sale devices. The business won a three year contract to the value of approximately R400 million from Absa/Barclays for IMAC/Break-fix services in Africa.

Bytes Systems Integration achieved an exceptional 41% growth in revenue, but saw EBITDA grow by only 7%. The decline in EBITDA margins in this business is indicative of some of the margin pressure in the industry, particularly in commoditised products and services. The local operations experienced a competitive pricing environment, but were assisted by good margins in the African business.

Bytes Healthcare Solutions performed well, increasing revenue by 7% and EBITDA by 8% which was well ahead of expectations given the mature state of its market and their strong market position.

Bytes Universal Systems, a division formed in April 2012 as a result of the acquisition of Unisys Africa, had an excellent six months, increasing revenue by 29% and increasing EBITDA by 52%. The business performed particularly well in the public sector, an area that Bytes has specifically been targeting for growth. An example of this is a R250 million contract recently awarded by a major public sector client.

The Bytes International operations returned pleasing results, increasing revenue by 20% and EBITDA by 50% in Rand terms. The UK Software Services side of the business performed excellently by diversifying the business away from the core Microsoft business and increasing revenue by 19%. The overall profitability of the International businesses was assisted by Security Partnerships Limited which performed ahead of expectations.

Bytes’ return on equity was 21.1%, while return on capital employed was 21.5%.

Bytes’ prospects are viewed as positive as it builds on the momentum created over the last few years and ongoing IT spend by corporates. However, competitive pricing environment is expected to continue. With the Altech IT businesses now being managed under Bytes and the creation of the Altron TMT division, significant cross-sell and up-sell opportunities are likely to emerge.


40


Altron Power Electronics DivisionPowertech revenue increased by 5% to R4.2 billion, while EBITDA reduced by 17% to R193 million and the EBITDA margin declined from 5.8% to 4.6%. Headline earnings for the Powertech group decreased by 45% to R33 million with a higher interest cost and an increased effective tax rate.

The Powertech Cables group experienced a 6% increase in revenue, but lower margins resulting in a 37% decline in EBITDA. Although these results are disappointing, there are indications of a recovery when compared to the second half of the prior period. Pricing continues to be an issue in the market, while product mix has also been suboptimal, with increased volumes in lower margin products. Benefits from the restructuring, announced at the year-end, have been limited in the first half, but will be more significant in the second half. 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 some success has already been achieved. The international cables operations in Iberia are operating in a depressed economy. Although Portugal has returned to profitability, Spain remains an area of concern. The local electric cables order book is strong at R685 million.

The Powertech Transformers group maintained revenue but EBITDA decreased by 11%. The Pretoria West power transformer plant struggled with under-recoveries due to manufacturing inefficiencies although test-failure rates have improved. The significant investment in a new small power transformer manufacturing line is now complete and started operating in September 2013. The Johannesburg distribution transformer business recovered to a profitable position and the distribution transformer manufacturing facility in Cape Town performed excellently, recently receiving a R350 million order enabling contract from Eskom for miniature substations.

In the Powertech Batteries group revenue increased by 16% while EBITDA declined by 12%. The automotive battery business performed well over the winter months but margins have declined as a result of cost pressures, most notably from the increasing Rand lead price.

Powertech System Integrators’ revenue increased by 5% compared to the prior period while EBITDA levels declined by 31%. A new contributor to the business, namely Powertech QuadPro, has built a strong order book for turnkey electrical substations in Africa, which bodes well for future profitability of this business, even though it is currently working through some legacy low-margin projects. The remaining operations in Powertech System Integrators, namely Strike Technologies, TIS and Powertech IST, saw continuing margin pressure and a lower revenue performance.

Powertech Africa is making good progress with the recent win of a $20 million order for medium-voltage cables and a $3.5 million order for transformers from Ghana. Other contracts include a $6.7 million contract to Powertech QuadPro for turnkey substations in Zambia and a $2.6 million order for low-voltage cable in Mozambique.

Powertech’s return on equity was 2.6% while return on capital employed was 7.9%.

The various restructuring projects which were undertaken by Powertech during the period under review should have a positive impact on the second half of the year’s performance. Powertech’s medium term prospects appear encouraging considering that there is continued emphasis on infrastructure spend in the country and support from State-owned entities for local manufacturing operations. The building and construction industry is also showing tangible initial signs of a gradual recovery. Continued focus will be placed on the renewable energy sector where in excess of R300 million in orders have already been won, as well as rail projects which are about to go out to tender or nearing adjudication. 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 activityThe following transactions were concluded during the period under review:• Effective1March2013,BytesTechnologyGroupSouthAfricaacquiredBrandNewTechnologiesProprietaryLimited(“BNTech”)fora

total estimated purchase price 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.

• Effective1August2013,AltronFinancepurchasedtheremainingAltechordinarysharesthattheAltrongroupdidnotalreadyown, from Altech’s minority shareholders. The total cash consideration paid to 91% of the Altech minority shareholders equalled R1.6 billion, while 9% of the Altech minority shareholders elected to be settled in Altron participating preference shares.

Human capitalAltron continues to focus on transformation as a competitive advantage and as a social responsibility imperative within the socio-economic environment. In this regard, economic benefit accrues to the black and/or female shareholders at the Powertech group, Bytes group, Altech Netstar, Altech Multimedia and Altech Radio Holdings.

With regards to business development, several small to medium sized sustainable enterprises have been developed at Aberdare Cables, the Powertech Batteries group and Powertech Transformers.


41


Over the last 48 months in excess of R30 million has been invested in health infrastructure development and education through the various social empowerment programmes which the group has committed itself to supporting.

Altron has maintained its level 3 Broad Based Black Economic Empowerment rating, whilst Powertech has dropped to a level 4 contribution from level 3 in respect of the dti Broad Based Black Economic Empowerment Codes. Bytes and Altech have been rated under the ICT Charter and have both achieved level 2 ratings.

Altron has continued with the implementation of its group-wide Human Capital and Transformation Strategy “BEYOND 2012” adopted in July 2012. The internal metrics versus each divisional goal and industry show a positive trend. The challenge remains attraction and retention of black professionals at the managerial and executive levels. The former Altech Academy will be converted to an Altron corporate university for execution of this strategy within the current financial year.

SustainabilityAltron continues to build on the group’s four core themes and objectives as identified in its 2012 Integrated Annual Report. The recent acquisition of the Altech minorities’ shares in Altech and the establishment of the Altron TMT division is evidence of the group’s commitment to improve profitable revenue growth, invest in its people, lead through innovation and build and maintain strategic alliances.

Altron disclosed its first comparable data for electricity use and waste disposal in its 2013 Integrated Annual Report. Water data had to be restated due to system improvements which resulted in more accurate data being available. Altron’s annual sustainability workshop took place in September 2013 and re-enforced the importance of reporting correct data on a regular basis. The workshop also highlighted environmental cost-saving initiatives implemented throughout the group and increased the overall awareness of Altron’s ‘green agenda’. Altron successfully submitted its third Carbon Disclosure Programme (CDP) as well as its second voluntary Water CDP project during the period under review.

Corporate governance The Altron group continues to embrace and implement the recommendations of the King Report on Governance for South Africa 2009, as well as the King Code of Governance Principles for South Africa 2009 (the Code) and has satisfied itself that Altron has complied throughout the period under review in all material aspects with the Code and the Listings Requirements of the JSE.

OutlookThe recent long-planned acquisition of the Altech minorities’ shares in Altech marks the beginning of a new era for the group. It is believed that the combination of Altron’s telecommunications, multi-media and IT businesses under the Altron TMT division, will help unlock new revenue streams, result in efficiencies and pool talent from the Bytes and Altech entities, which will result in new innovations and growth opportunities.

A recovery and increase in activity seems to be emerging in the building and construction sector which will positively affect the power electronics side of the group. The first phase of the National Rail Projects should come to fruition in the second half of the year as should phase two of the REIPPP renewable energy projects.

Altron intends continuing to focus on the basics of rigorous cost control, working capital management and extracting efficiencies from its existing businesses. Margin erosion will be countered by expanding the group’s product portfolio, implementing shared services and lowering its cost base.

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.

On behalf of the board

Dr Bill Venter Robert Venter Alex SmithNon-Executive Chairman Chief Executive Chief Financial Officer

7 October 2013


42

The unaudited consolidated interim results are available at www.altron.com

CORPORATE INFORMATION

BOARD OF DIRECTORSIndependent non-executive: Mr NJ AdamiMr GG GelinkMr MJ LeemingDr PM MadunaMs DNM MokhoboMr JRD ModiseMr SN Susman

Non-executive: Dr WP Venter (Chairman)Mr MC Berzack

Executive: Mr RE Venter (Chief Executive)Mr RJ AbrahamMr AMR Smith*Mr CG Venter * British

Secretaries: Altron Management Services (Pty) Ltd – Mr AG Johnston (Group Company Secretary)

Sponsor: Investec Bank

http://www.altron.com

www.altron.com

http://www.altron.com

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