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Chairman’s statement

The past year has been one in which the macroeconomic environment continued to experience profound disruption, and this, in turn, provided
                                                                          major challenges for both the South African and the international ICT industry. It was also one of the most difficult periods Altron has had to
                                                                             face in its 45-year history.

The economic recovery, which only really started to materialise in the fourth quarter of 2009, has been slow, with muted growth driven predominantly by commodity price increases and restricted to only a few sectors of the economy.

To a large extent, South Africa was spared the worst of the global economic collapse, although our markets were, in many    respects, just as badly affected and the limited signs of recovery that were seen at the half year failed to materialise,
     resulting in the second half of our group’s financial year being as challenging as the first.

During the first few months of 2010, there have been some positive indications of a more sustainable recovery in the South African economy, and corporations that have reduced costs during the recessionary climate are now well positioned to benefit from the recovery in the months ahead. The growth drivers, specifically applicable to our group, include the expectation that investment in power and building infrastructure will continue in the medium to long term; the convergence of technologies and the increasing potential of supplying the various products and services offered by the Altron group companies into the African continent.

However, foreign entry into the local market, coupled with increased competition in the building and construction supply industry, also remains a reality, placing more emphasis on higher efficiencies for local businesses to maintain competitiveness as the rand continues to strengthen and the South African market gains in popularity for entry by foreign operators.

Altron’s mission is:
> to be the leading ICT group offering information technology, telecoms and power electronics products and services to the southern African region and selected international markets;
> to maintain our family ownership and preserve the “familiness” culture;
> to generate superior financial returns, thereby driving an increase in total shareholder returns above that of our peers and the overall market;
> to remain dedicated to technological innovation through internal investment and international partnerships;
> to continue our commitment to the transformation process of South Africa through broad-based black economic empowerment initiatives;
> to provide a work environment that attracts, motivates and retains superior people skills; and
> to integrate sustainable development into our business at every level as we realise that our future depends on it.

We will achieve this through a motivated and loyal team that always:
> places customer service first;
> has mutual trust and respect;
> is totally committed to quality, best practice and the improvement of productivity;
> adheres to the highest standards of integrity;
> aims to achieve excellence in both financial and technological performance; and
> takes pride in what we do and in being part of the Altron group.

Altron’s sustainability approach is based on identifying and managing economic, social and environmental issues across the broad front of all of our operations. Throughout our group’s 45-year history the importance of good corporate citizenship has ensured the sustainability of our business.
In reviewing the performance of the past year, it is clear that our group’s strategy to diversify and build annuity-based income streams into its operations, has contributed to the group’s relative resilience during the recent recession.

We also applied our management skills to focus on costs and enhanced efficiencies as well as on extracting value from recent acquisitions. In this regard, it has been especially satisfying to note that the progress achieved throughout all our operations positions the group well to benefit from the recovery in the economy.

Overall, our group’s results reflected a pleasing performance with Altech and Bytes maintaining revenues at prior-year levels. Powertech, however, continued to face challenging market conditions and weak demand for its products and services.

The combination of these performances resulted in Altron’s revenue and EBITDA declining. However, I am pleased to report that the group maintained its dividend cover, declaring a dividend of 90 cents per share to its shareholders.

During the past four years, we have continued to develop our reporting standards to include all important issues affecting the group and its stakeholders. Following the recommendations of the King III report, we have gone a step further in defining a single list of issues that cut across the triple bottomline – people, planet and profit. These are categorised within eleven strategic themes that affect the long-term sustainability of our business.

For Altron, sustainability means identifying and managing economic, social and environmental issues across the broad front of all of its operations. The group’s 45-year history has demonstrated the importance of good corporate citizenship to ensure the sustainability of a business. Our approach with regard to our people, the community and all our other stakeholders is covered extensively elsewhere in this integrated annual report and incorporates both company and individual employee initiatives.

I need to emphasise that the continuous development of our people remains a key priority for the group, especially in view of the global skills shortage in both the IT and the engineering sectors. More recently, executive skills development training has also become a vital aspect of our initiatives and I am pleased to report that our leadership programme is progressing well and should meet the longer-term strategic skills requirements of our group at a senior executive level.

Transformation, and especially broad-based black economic empowerment (B-BBEE), remains one of the key focus areas throughout the group, playing an integral part in our strategic philosophy of assuring the group’s future sustainability. I am particularly pleased with the significant progress made in achieving our Vision 2012 targets. Our corporate social investment and enterprise development initiatives, in particular, make a significant difference to the lives of all South Africans.

The group’s progress in terms of B-BBEE is a clear indication that this process is driven from board level through to our shop floors with total commitment to the group’s targets as set out in Vision 2012. A report marking our progress during the last two years has been published.

In this regard, I wish to congratulate the transformation committee, under the guidance of Seara Macheli-Mkhabela, the Altron group executive for corporate affairs, as well as each and every one of our employees who assisted in attaining these very commendable results.

We have embarked on an extensive programme to educate and train management, as well as our transformation practitioners, on the implementation guidelines which have been developed to assist our operations in meeting their scorecard targets. This is understandably an ongoing process that requires commitment at every level of the organisation, as well as the balancing of resources in order to deliver the outcomes expected by all of our stakeholders.

In celebrating our 45th anniversary this year, we are proud to reflect on our group’s commitment towards South Africa in terms of the environment. Our carbon footprint is discussed in detail elsewhere in this report. As a signatory to the Copenhagen Communiqué on Climate Change, and in view of the emphasis being placed on corporations worldwide to acknowledge their responsibilities to reduce their carbon footprint and thereby stem global warming, I wish to highlight that Altron is making great strides in this regard.

Our group’s commitment towards the environment, which falls under the “On Envirowatch” banner, quantifies our organisation’s total carbon dioxide and other greenhouse gas emissions. At Altron, we aim for complete transparency, and, as a result, our group-wide environmental policy has become an integral part of our strategic policy aimed at a balanced and harmonious integration of business, environmental and societal interests.

Managing an ICT group in these challenging conditions has certainly not been easy, and the fact that we have come through it intact, speaks well of the diversity, technological excellence and resilience of both our group and its people. Improving our results and ensuring the long-term sustainability of Altron’s businesses is going to require constant hard work; sustained innovation of our technological portfolio; best practice corporate governance; maintaining strong alliances with our global leading partners; transparent financial reporting; inspirational leadership and continuing focus on our well-known entrepreneurial excellence.

The South African economy is showing encouraging signs of recovery. While we may not see a return to the pre-recession growth path within the next year or two, some semblance of normality seems to be on the cards – at least in the conventional macroeconomic sense of the word.

It is particularly commendable that we managed to overcome a number of challenges posed by policy changes in the South African political landscape during the period under review.

The inauguration of President Jacob Zuma and the appointment of his new cabinet finalised a period of uncertainty in government spending and we welcomed the opportunity to play a significant role in many of the key infrastructure developments for the 2010 FIFA World Cup. Our involvement in this prestige international event is reflected in the chief executive’s review and includes a wide range of cables and telecommunications for the newly launched Gautrain; intricate cabling systems for no fewer than nine of the soccer stadiums and a comprehensive voice and data network for the stadium in Nelspruit.

A successful soccer World Cup would, of course, help to boost the nation’s confidence, and this, in turn, should enhance consumer confidence.

Expectations are that government’s current focus on infrastructure spend will greatly assist in kick-starting economic growth, thus creating jobs, and in turn, forging an environment conducive to the demand for our group’s diverse range of products and services in our various fields of endeavour. In this regard, I was pleased with the appointment of Ms Naledi Pandor as the Science and Technology Minister, and wish her well in her new and exciting portfolio.

On behalf of the board, I wish to express my deep and sincere appreciation to all of our customers, suppliers, employees, business partners and other stakeholders for their ongoing support during a difficult period of our history and for their continued belief in the future sustainability of our group and its strong underlying businesses.

In particular, I wish to thank our chief executive, Robert Venter, and his hard-working executive team, as well as our highly talented employees throughout the group, for the passion, loyalty and dedication that they demonstrate every day in serving our stakeholders and achieving our objectives. Despite the enormous challenges facing the group, our employees have remained motivated, continuing to display diligence, integrity, a sense of teamwork and, above all, a sound understanding of the socio-economic pressures with which we have had to contend during the past 18 months.

May I also take this opportunity of thanking the board for their support and wise counsel during these extremely difficult times. As usual, they continue to bring significant strategic and commercial experience to our group and their sage advice is appreciated.

There is no question that the growth opportunities for our group in a continuously evolving world of innovative technologies, are endless. The lowering of global trade barriers, the rise of developing nations and the rapid emergence of the internet are unleashing a flow of work on a scale never seen before.

At Altron, we are pleased with the extent of our efforts across all aspects of our business and eagerly await the impact this will have on the group’s long-term prospects. I am therefore looking forward to the future with confidence.


Dr Bill Venter – Chairman
May 2010