It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. 31 August 2018 Carrying amount Fair value Financial assets at fair value through other compre- Designated Fair value hensive at fair hedging income R millions value instruments (FVOCI) Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Equity investments - - 198 198 - - 198 198 Derivative assets at fair value: used for hedging - 83 - 83 - 83 - 83 - 83 198 281 - 83 198 281 Financial liabilities measured at fair value Derivative liabilities at fair value: used for hedging - (20) - (20) - (20) - (20) Deferred purchase considerations (64) - - (64) - - (64) (64) (64) (20) - (84) - (20) (64) (84) 28 February 2018 Carrying amount Fair value Designated Fair value at fair hedging Available R millions value instruments for sale* Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Equity investments - - 206 206 - - 206 206 Derivative assets at fair value: used for hedging - 30 - 30 - 30 - 30 - 30 206 236 - 30 206 236 Financial liabilities measured at fair value Derivative liabilities at fair value: used for hedging - (96) - (96) - (96) - (96) Deferred purchase considerations (66) - - (66) - - (66) (66) (66) (96) - (162) - (96) (66) (162) * See note 12.8 for details regarding the restatement as a result of change in accounting policy. Financial assets that are not subsequently measured at fair value namely; rental finance advances, trade and other receivables, cash and cash equivalents and non-current receivables are categorised as financial assets at amortised cost (refer to note 12.6). It has been concluded that the carrying amount of these assets approximates their fair value. Financial liabilities that are not subsequently measured at fair value namely; loans, bank overdrafts and trade and other payables are categorised as other financial liabilities. It has been concluded that the carrying amount of these liabilities approximates their fair value. The different levels as disclosed in the table above have been defined as follows: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 Inputs for the asset or liability that are not based on observable market date (unobservable inputs). Measurement of fair values Valuation techniques and significant unobservable inputs The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used. Financial instruments measured at fair value Inter-relationship between significant Significant unobservable inputs and Type Valuation technique unobservable inputs fair value measurements Derivative Market comparison technique: Not applicable Not applicable assets and The fair value of foreign currency liabilities at fair and commodity contracts (used for value: used for hedging) are marked-to-market by hedging comparing the contracted forward rate to the present value of the current forward rate of an equivalent contract with the same maturity date. Preference The discounted cash flow method Discount rate of 13.50% The estimated fair value share was used to present value the (February 2018: 13.50%) would increase (decrease) in Technologies forecasted income from the if: Acceptances preference share investment over Forecast annual perpetuity - the discount rate were Receivables a 10-year (February 2018: 10-year) growth 3% (February 2018: lower (higher); Proprietary period. The directors' valuation is 3%) - the annual revenue Limited equal to the fair value. growth rate were higher (lower). Deferred Discounted cash flows: Forecast annual revenue The estimated fair value purchase The valuation model considers growth rate 8% to 12% would increase (decrease) consideration the present value of the expected (February 2018: 8% to if: payment, discounted using a 12%) - the annual risk adjusted discount rate. The - Forecast adjusted Profit revenue growth rate were expected payment is determined by after tax margin 20% higher (lower) considering the possible scenarios to 30% (February 2018: - the adjusted PAT margin of forecast adjusted profit after tax, 39% to 72%) were higher (lower); or the amount to be paid under each - Risk-adjusted discount - the risk-adjusted discount scenario and the probability of rate 15% (February rate were lower (higher). each scenario. 2018: 15%) Transfers There were no transfers between levels 1, 2 or 3 of the fair value hierarchy for the period ended 31 August 2018 and the year ended 28 February 2018. R millions Reconciliation of deferred purchase consideration Balance at 28 February 2018 66 Released during the year (10) Unwinding of interest (1) Foreign exchange 9 Balance at 31 August 2018 64 10. POST-BALANCE SHEET EVENTS Post the reporting period, Altron TMT SA Group Proprietary Limited concluded a share sale agreement to acquire the entire issued share capital of iS Partners Proprietary Limited ("iS Partners"), including its primary subsidiaries, Karabina Solutions Proprietary Limited ("Karabina") and Zetta Business Solutions Proprietary Limited ("Zetta"), effective 3 September 2018. Karabina (previously known as iS Partners) provides business technology services with expertise across multiple industries. The business focuses on the implementation, customisation, integration as well as core application development on the Microsoft platform for Business Intelligence ("BI"), Customer Relationship Management ("CRM"), Knowledge Management ("KM") and Corporate Performance Management ("CPM") solutions. The maximum purchase price of approximately R225 million, of which R162 million was paid upfront and the remainder is payable over two years. Management is still finalising the full purchase price allocation and related Goodwill. Management is still in the process of determining the effect on revenue and net profit after tax if the company was acquired on 1 March 2018. Dividends declared Dividends declared at the board meeting held on 24 October 2018 amounted to 28 cents per share. 11. RELATED PARTY TRANSACTIONS The group entered into various sale and purchase transactions with related parties in the ordinary course of business. The nature of related party transactions is consistent with those reported previously. 12. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP The group has adopted the following new accounting pronouncements as issued by the IASB, which were effective for the group from 1 March 2018: - IFRS 15 Revenue from Contracts with Customers (IFRS 15), and - IFRS 9 Financial instruments (IFRS 9). 12.1 Transition to IFRS 15 The group has applied IFRS 15 using the modified retrospective method, by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity at 1 March 2018. The comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. The details of the significant changes and quantitative impact of the changes are set out below. The group applied the following practical expedients when applying IFRS 15 using the modified retrospective method: - The group did not quantify the effect on opening retained income for contracts that were completed contracts at 1 March 2017. - The group did not quantify the effect on opening retained income for contracts that began and ended in the same annual reporting period. - For modified contracts, the group used the contractual terms that existed at 1 March 2017. - The group does not adjust the promised amount of consideration for the effects of a significant financing component if the group expects, at contract inception, that the period between when the group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. 12.2 Adoption of IFRS 15 The group principally generates revenue from providing the following products and services: - Project related revenue - Rental of hardware and related services - Maintenance and support - Training and skills development - Outsource services - Sale of hardware - Software and related licenses - once off - Software and related licences - recurring - Software application and development - Switching services and other transactional services IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled for transferring goods or services to a customer. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over a product or service to a customer. For bundled packages of products and services, the group accounts for individual products and services separately if they are distinct, i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it. The consideration is allocated between separate products and services in a bundle based on their standalone selling prices. The standalone selling prices are determined based on the list prices at which the company sells its products and services separately. In the comparative period, revenue was measured at the fair value of the consideration received or receivable. Revenue from the sale of goods was recognised when the significant risks and rewards of ownership had been transferred to the customer, recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably, there was no continuing management involvement with the goods and the amount of revenue could be measured reliably. Revenue from rendering of services was recognised in proportion to the stage of completion of the work performed at the reporting date. The stage of completion is time based and dependent on the terms of the contract. Revenue from operating lease arrangements is recognised in profit and loss on a straight-line basis over the term of the lease. On adoption of IFRS 15, by applying the modified retrospective method, the opening balance of equity at 1 March 2018 was restated as follows: R millions Retained earnings at 1 March 2018 as previously reported 2 543 Deferral of perpetual licence sales (refer below) (4) Opening retained earnings 1 March 2018 restated 2 539 The following tables show the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals disclosed cannot be recalculated from the numbers provided. The adjustments are explained in more detail below. 12.3 Impact on financial statements Impact of changes in accounting policies Balances Balance sheet (extract) Adjustments without 31 August 2018 As to IFRS 15 adoption of R millions reported (12.1.4) IFRS 15 Current assets Trade and other receivables, including derivatives 3 343 149 3 492 Inventories 1 002 77 1 079 Contract assets 226 (226) - Total assets 4 571 - 4 571 Current liabilities Trade and other payables, including derivatives 3 014 752 3 766 Taxation payable 117 1 118 Contract liabilities 762 (762) - Total liabilities 3 893 (9) 3 884 Total equity attributable to holders of Altron 2 831 9 2 840 Impact of changes in accounting policies Balances Consolidated statement of comprehensive income (extract) Adjustments without Six months to 31 August 2018 As to IFRS 15 adoption of R millions reported (12.1.4) IFRS 15 Revenue 9 779 27 9 806 Operating costs before capital items (9 102) (21) (9 123) Earnings before interest, tax, depreciation and amortisation and capital items (EBITDA before capital items) 677 6 683 Operating profit before capital items 421 6 427 Results from operating activities 437 6 443 Profit before taxation 347 6 353 Taxation (78) (1) (79) Profit for the period from continuing operations 269 5 274 Profit for the period from discontinued operations 20 20 Profit for the period from total operations 289 5 294 Profit is attributable to: Non-controlling interests (3) - (3) Altron equity holders 292 5 297 289 5 294 Total comprehensive income for the period 466 5 471 Total comprehensive income attributable to: Non-controlling interests - - - Altron equity holders 466 5 471 466 5 471 Basic earnings per share from continuing operations (cents) 73 1 74 Diluted basic earnings per share from continuing operations (cents) 72 1 73 Basic earnings per share from total operations (cents) 79 1 80 Diluted basic earnings per share from total operations (cents) 78 1 80 Headline earnings per share (cents) 70 1 71 12.4 Nature of changes in the accounting policies The nature of the changes in the accounting policies were as follows: Products Nature, timing of satisfaction of performance Nature of change in and services obligations and significant payment terms accounting policy Impact Maintenance, Software asset management services (including Under IFRS 15, This has resulted consumables platform hosting) - perpetual licence sales the licence and the in revenue from and other service cannot be perpetual licences support Bytes UK provides Software Asset Management separated and should being deferred and services Services. Certain management service contracts therefore be classified recognised over are sold together with a perpetual licence. as one performance the contract term obligation. The timing and an increase in The majority of these contracts are paid for up of revenue recognition income received front. Under IAS 18, the service together with has therefore changed in advance the licence was accounted for as two separate and licence sales (reclassified to revenue streams. Revenue from the licence was should be deferred contract liabilities). recognised upfront, on the transfer of risks and over the contract term. rewards, while revenue from the service was recognised over the contract term. 12.5 Presentation of assets and liabilities related to contracts with customers Reclassification of Inventory Work in Progress to contract assets Altech Radio Holdings enters into government contracts mainly to build, operate and transfer Broadband Networks. The supply of equipment and build of the network is recognised as milestones are achieved per the agreement. Work has been completed but not billed, therefore the entitlement to consideration is recognised as a contract asset. This was previously recognised in inventory work in progress. The current period adjustment amounted to R77 million. Reclassification of other unbilled revenue to contract assets R149 million of unbilled revenue from contracts with customers was reclassified from trade and other receivables, including derivatives to contract assets. These contract assets relate to the group's rights to consideration for work completed but not billed at the reporting date. Reclassification of consideration received in advance to contract liabilities Income received in advance amounting to R561 million was reclassified to contract liabilities. This includes an adjustment for preventative maintenance on contracts amounting to R20 million for which revenue was previously deferred. Revenue continues to be deferred under IFRS 15, however, a contract liability is raised instead of a provision. Revenue will be recognised as the maintenance services are performed. 12.6 Adoption of IFRS 9 The adoption of IFRS 9 had the following impact on the group: - Change from IAS 39 incurred loss model to the expected credit loss (ECL) model to calculate impairments of financial instruments. - Change in classification of the measurement categories for financial instruments. 12.7 Impairment Before the adoption of IFRS 9, the group calculated the allowance for credit losses using the incurred loss model. Under the incurred loss model, the group assessed whether there was any objective evidence of impairment at the end of each reporting period. If such evidence existed the allowance for credit losses in respect of financial assets at amortised cost was calculated as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Under IFRS 9 the group calculates allowance for credit losses as ECLs for financial assets measured at amortised cost or at fair value through other comprehensive income (FVOCI) (except for investments in equity instruments) and to contract assets. ECLs are a probability weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and cash flows that the group expects to receive). ECLs are discounted at the original effective interest rate of the financial asset. The group applies the simplified approach to determine the ECL for trade receivables and contract assets. This results in calculating lifetime expected credit losses for these trade receivables. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work completed and have substantially the same risk categories as the trade receivables. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. ECL for trade receivables is calculated using a provision matrix where there is sufficient historical credit loss information. Where applicable, specific provisions are also considered. For contract assets and trade receivables with low default portfolios with insufficient historic annual internal defaults, ECLs are determined using a simplified PD/LGD/EAD approach. Provision matrix ECLs are calculated by applying a loss ratio to the aged balance of trade receivables at each reporting date. The loss ratio is calculated according to the ageing/payment profile of sales by applying historic write-offs to the payment profile of the sales population. Trade receivable balances have been grouped so that the ECL calculation is performed on groups of receivables with similar risk characteristics and historical loss patterns. The historic loss ratio is then adjusted for forward looking information to determine the ECL for the portfolio of trade receivables at the reporting period to the extent that there is a strong correlation between the forward-looking information and the ECL. Specific provision Specific provisions are applied when: - evidence is available for a specific trade receivable which provides a more reliable loss estimate; and - outlier trade receivables are identified. This would include trade receivables with significant exposures and or clearly different credit risk characteristics. The estimated ECL percentage is applied with adjustments using managements assessments and professional judgement. Simplified PD/LGD/EAD approach For low default portfolios with insufficient historic annual internal defaults, the ECL is calculated using a formula incorporating the following parameters: exposure at default (EAD), probability of default (PD), loss given default (LGD) (i.e. PD x LGD x EAD = ECL). Exposures are mainly segmented by customer type (e.g. sovereign/ government, banks and corporates). Under this approach, external sources of information are considered for a representative of the company's trade receivables' exposure. 12.8 Classification, initial recognition and subsequent measurement IFRS 9 introduces new measurement categories for financial assets. The measurement categories of IFRS 9 and IAS 39 are illustrated in the table below. From 1 March 2018, the group classifies financial assets in each of the IFRS 9 measurement categories based on the group's business model for managing the financial asset and the cash flow characteristics of the financial asset. There was no impact on the accounting for trade receivables, loans, FECs and share linked incentives ("SLI") hedges that are managed on a fair value basis. IAS 39 category IFRS 9 Category Financial assets at fair value through Financial assets at FVTPL profit or loss (FVTPL) Financial assets at amortised cost Loans and receivables Instruments at fair value through other Available for sale comprehensive income (FVOCI)* * This includes both debt and equity instruments. The biggest change is that on derecognition of equity instruments gains and losses accumulated in OCI are not reclassified to profit or loss. The following investments held for long-term strategic purposes, were classified as available for sale at 28 February 2018. Under IFRS 9, the group has designated these investments as measured at FVOCI. Consequently, all fair value gains and losses will be reported in OCI, no impairment losses will be recognised in profit or loss and no gains or losses will be reclassified to profit or loss on disposal. Carrying Carrying value value 31 August 28 February 2018 2018 R millions Note 9 Note 9 Preference share investment in Technologies Acceptances Receivables Proprietary Limited ("TAR") 21 21 Investment in Aberdare Cables Proprietary Limited 94 94 Preference share investment in Auto X Proprietary Limited 83 91 198 206 The carrying value of the above investments approximate the fair value, therefore no adjustments were made to OCI in the current reporting period. Reclassification of derivative assets included in trade and other receivables to financial assets at fair value through profit and loss Previously the group included derivative assets at fair value in trade and other receivables. Derivative assets relate to the fair value of foreign currency contracts used for hedging and represent a separate measurement category under IFRS 9. For this reason, derivative assets amounting to R83 million have been reclassified and separately disclosed as financial assets at fair value through profit and loss. Reclassification of derivative liabilities included in trade and other payables to financial liabilities at fair value through profit and loss Previously the group included derivative liabilities at fair value in trade and other payables. Derivative assets relate to the fair value of foreign currency contracts used for hedging and represent a separate measurement category under IFRS 9. For this reason, derivative liabilities amounting to R20 million have been reclassified and separately disclosed as financial liabilities at fair value through profit and loss. 12.9 Transition to IFRS 9 The group has applied IFRS 9 using the modified retrospective method, by recognising the cumulative effect of initially applying IFRS 9 as an adjustment to the opening balance of equity at 1 March 2018. The comparative information has not been restated and continues to be reported under IAS 39. There were no material adjustments to opening retained earnings. Hedge accounting The group uses forward foreign exchange contracts to hedge the variability in cash flows arising from changes in foreign exchange rates relating to foreign currency payables, receivables, sales and inventory purchases. Under IAS 39, the change in fair value of the forward element of the forward exchange contracts ('forward points') is recognised immediately in profit or loss. The group has elected not to adopt the hedge accounting requirements of IFRS 9, but to continue applying the hedge accounting requirements of IAS 39. 13. STANDARDS ISSUED BUT NOT YET EFFECTIVE IFRS 16 Leases IFRS 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 at or before the date of initial application of IFRS 16. IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right- of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard i.e. lessors continue to classify leases as finance or operating leases. The group has completed an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the financial statements in the period of initial application will depend on future economic conditions, including the group's borrowing rate at 1 March 2019, the composition of the group's lease portfolio at that date, the group's latest assessment of whether it will exercise any lease renewal options and the extent to which the group chooses to use practical expedients and recognition exemptions. In addition, the nature of expenses related to those leases will now change as IFRS 16 replaces the straight- line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. i. Determining whether an arrangement contains a lease The group plans to apply the practical expedient to grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 March 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. ii. Transition As a lessee, the group will apply the standard using the modified retrospective approach with optional practical expedients. The lessee applies the election consistently to all of its leases. The group plans to apply IFRS 16 initially on 1 March 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 March 2019, with no restatement of comparative information. When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The group is assessing the potential impact of using these practical expedients. The group is not required to make any adjustments for leases in which it is a lessor except where it is an intermediate lessor in a sub-lease. REVENUE INFORMATION AND DISAGGREGATION The Altron group is a diversified group which derives its revenues and profits from a variety of sources. Segmentation is based on the group's internal organisation and reporting of revenue and EBITDA based upon internal accounting presentation (refer to summary of segment information). Revenue by reportable segment is disaggregated by major product/service and geographic region below. The analysis excludes Discontinued operations and Corporate and Cons and financial services. Altron ICT South African operations Altron ICT South African operations Altron ICT International operations Altron Bytes Altron Bytes Altron Bytes Altron Bytes Secure Altron Bytes Altron ICT Bytes Altron ICT 31 August 2018 Document Managed People Transaction Systems South African Technology Altron International Altron R millions Altron ARH Solutions Solutions Solutions Solutions Integration operations group UK Rest of Africa operations Arrow Netstar Revenue by product Project related revenue 256 - 60 - 2 136 454 115 - 115 - - Rental of hardware and related services 21 11 - - 4 29 65 - - - - 732 Maintenance and support 130 135 308 - 36 80 689 318 32 350 - 10 Training and skills development - - - 40 - - 40 16 - 16 - - Outsource services - 151 - 172 3 264 590 - - - - - Sale of hardware 89 423 149 - 130 382 1 173 63 98 161 287 - Software and related licenses - one off - - - 25 97 - 122 1 963 - 1 963 - - Software and related licenses - recurring - - - - - - - 2 813 - 2 813 - - Software application and development - - - - - 137 137 - - - - - Switching services and other transactional services - - - - 308 - 308 - - - - - Total revenue 496 720 517 237 580 1 028 3 578 5 288 130 5 418 287 742 Revenue by geographic region Rest of Africa 37 71 59 - 10 56 233 - 130 130 - 2 South Africa 459 649 458 237 570 972 3 345 - - - 287 630 Total Africa 496 720 517 237 580 1 028 3 578 - 130 130 287 632 United Kingdom - - - - - - - 5 075 - 5 075 - - Australia - - - - - - - - - - - 110 Other - - - - - - - 213 - 213 - - Total international - - - - - - - 5 288 - 5 288 - 110 Total revenue 496 720 517 237 580 1 028 3 578 5 288 130 5 418 287 742 Altron ICT South African operations Altron ICT South African operations Altron ICT International operations Altron Altron Bytes Altron ICT Altron Bytes Altron Bytes Altron Bytes Secure Altron Bytes ICT South Bytes Inter- 31 August 2017* Document Managed People Transaction Systems African Technology Altron national Altron R millions Altron ARH Solutions Solutions Solutions Solutions Integration operations Group UK Rest of Africa operations Arrow Netstar Revenue by product Project related revenue 334 - 74 - 1 122 531 10 - 10 - - Rental of hardware and related services 22 11 - - 2 26 61 - - - - 651 Maintenance and support 160 131 303 - 40 72 706 232 31 263 - 17 Training and skills development - - - 73 - - 73 13 - 13 - - Outsource services - 149 - 127 1 236 513 - - - - - Sale of hardware 70 369 140 - 108 342 1 029 42 83 125 291 - Software and related licenses - one off - - - 20 77 - 97 916 - 916 - - Software and related licenses - recurring - - - - - - - 1 312 - 1 312 - - Software application and development - - - - - 123 123 - - - - - Switching services and other transactional services - - - - 275 - 275 - - - - - Total revenue 586 660 517 220 504 921 3 408 2 525 114 2 639 291 668 Revenue by geographic region Rest of Africa 17 75 46 - 5 50 193 - 114 114 - - South Africa 569 585 471 220 496 871 3 212 - - - 291 593 Total Africa 586 660 517 220 501 921 3 405 - 114 114 291 593 United Kingdom - - - - - - - 2 374 - 2 374 - - Australia - - - - - - - - - - - 75 Other - - - - 3 - 3 151 - 151 - - Total international - - - - 3 - 3 2 525 - 2 525 - 75 Total revenue 586 660 517 220 504 921 3 408 2 525 114 2 639 291 668 * The group has initially applied IFRS 15 using the cumulative effect method. Under this method, the comparative information is not restated. See note 12. SEGMENT SUMMARY The group has identified reportable segments that are used by the group executive committee (chief operating decision maker (CODM)) to make key operating decisions, allocate resources and assess performance. The reportable segments are grouped according to the group's internal organisation and reporting of revenue and EBITDA based upon internal accounting presentation. The segment revenue and earnings before interest, tax, depreciation and amortisation and capital items (EBITDA) generated by each of the group's reportable segments are summarised as follows: Revenue EBITDA August August February August August February R millions 2018 2017* 2018* 2018 2017* 2018* Altron ARH 496 586 1 155 0 32 80 Altron Bytes Document Solutions 720 660 1 353 32 25 70 Altron Bytes Managed Solutions 517 517 1 027 30 32 74 Altron Bytes People Solutions 237 220 438 23 19 29 Altron Bytes Secure Transaction Solutions 580 504 1 073 134 110 253 Altron Bytes Systems Integration** 1 028 921 1 897 36 29 123 Altron ICT South African operations 3 578 3 408 6 943 255 247 629 Bytes Technology Group UK 5 288 2 525 6 088 207 109 206 Altron Rest of Africa 130 114 244 14 12 16 Altron ICT International operations 5 418 2 639 6 332 221 121 222 Shared Services, Corporate and cons - - - 7 8 33 Altron ICT 8 996 6 047 13 275 483 376 884 Netstar**** 742 668 1 378 258 227 481 Altron Arrow 287 291 560 15 21 33 Corporate and con and financial services (246) (214) (470) (70) (31) (94) Normalised continuing operations 9 779 6 792 14 743 686 593 1 304 Foreign currency gains or deferred acquisition liability - - - - (2) 6 Retrenchment and restructuring costs - - - (9) (47) (77) Acquisition related costs - - - - - (8) Continuing operations as reported 9 779 6 792 14 743 677 544 1 225 Altech Multimedia group 494 599 974 33 47 44 Altech Autopage group - - - (4) (7) (23) Powertech Cables - 103 103 - 5 5 Powertech Transformers group*** 427 522 1 015 39 (51) (28) Powertech Battery - 344 344 - 33 33 Powertech System integrators - 214 241 - (12) (11) Other Powertech Segments - 123 261 (3) (24) (12) Powertech group 427 1 306 1 964 36 (49) (13) Discontinued operations 921 1 905 2 938 65 (9) 8 Altron group 10 700 8 697 17 681 742 535 1 233 * The group has initially applied IFRS 15 using the modified retrospective method. Under this method, the comparative information is not restated. See note 12. ** Bytes Systems Integration and Bytes Universal Systems were merged into one segment effective 1 October 2017. *** Powertech Transformers group was disposed of 31 July 2018 (refer to note 7). **** Contract fulfilment costs relating to hardware and fitment have been reclassified to depreciation. These expenses were previously included in operating costs before capital items. August August February R millions 2018 2017* 2018* Segment EBITDA can be reconciled to group operating profit before capital items as follows: Segment EBITDA 742 535 1 233 Reconciling items: Depreciation**** (192) (163) (339) Amortisation (64) (47) (103) Group operating profit before capital items 486 325 791 Capital items (32) (79) (309) Results from operating activities 454 246 482 Finance income 85 110 220 Finance expense (176) (214) (419) Share of profit of equity accounted investees, net of taxation - (1) (1) Profit before taxation 363 141 282 * The group has initially applied IFRS 15 using the modified retrospective method. Under this method, the comparative information is not restated. See note 12. SUPPLEMENTARY INFORMATION Six months Six months Year ended ended ended 31 August 31 August 28 February 2018 2017* 2018* R millions (Unaudited) (Unaudited) (Audited) Total operations Depreciation*** 192 163 339 Amortisation 64 47 103 Net foreign exchange (profit)/losses (31) 4 44 Cashflow movements Capital expenditure (including intangibles) 96 142 278 Net additions to contract fulfilment costs (12) 26 58 Additions to contract fulfilment costs 95 118 257 Depreciation of hardware and fitment*** (107) (92) (199) Capital commitments 16 5 - Contingent liabilities There were no contingent liabilities identified as at 31 August 2018 Lease commitments 452 410 513 Payable within the next 12 months: 176 166 180 Payable thereafter: 276 244 333 Weighted average number of shares (millions) 371 369 370 Diluted average number of shares (millions) 373 371 372 Shares in issue at end of period (millions) 371 371 371 Ratios (total operations) EBITDA margin (%) 6.9 5.1 5.9 ROCE (%) 21.4^ 14.5^ 18.5 ROE (%) 19.5^ 11.5^ 16.7 ROA (%) 12.9^ 9.5^ 10.2 RONA (%) 17.4^ 12.6^ 15.5 Current ratio 1.1:1 1.2:1 1.1:1 Acid test ratio 0.9:1 1:1 0.9:1 * The group has initially applied IFRS 15 using the modified retrospective method. Under this method, the comparative information is not restated. During the current year, the group has also adopted IFRS 9 and, in accordance with the standard, comparative information has not been restated. See note 12 ^ Annualised *** Contract fulfilment costs: Contract fulfilment costs include hardware, fitment, commissions and other costs directly attributable to the negotiation and conclusion of customer service contracts. Contract fulfilment costs relating to hardware and fitment have been reclassified to depreciation. These expenses were previously included in operating costs. Altron House 4 Sherborne Road, Parktown 2193 Gauteng SOUTH AFRICA POSTAL PO Box 981, Houghton 2041 Gauteng SOUTH AFRICA www.altron.com Date: 25/10/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 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