EARNINGS PER SHARE
Headline earnings per share from continuing operations 50 179 119
Headline earnings per share from discontinued operations 500 12 2
Headline earnings per share from total operations 58 191 121
Diluted headline earnings per share from continuing operations 50 179 119
Diluted headline earnings/(loss) per share
from discontinued operations 500 12 2
Diluted headline earnings per share from total operations 58 191 121
Normalised headline earnings per share from continuing operations 36 183 135
R millions 2019 2018
6.1 Reconciliation between earnings and headline earnings
Attributable to Altron equity holders 711 187
Capital items - gross 3 309
Tax effect of capital items (6) (22)
Non-controlling interests in capital items - (26)
Headline earnings 708 448
Headline earnings per share from total operations (cents) 191 121
6.2 Reconciliation between earnings and headline earnings from
continuing operations
Attributable to Altron equity holders 655 404
Capital items - gross 26 38
Tax effect of capital items (18) (1)
Headline earnings from continuing operations 663 441
Headline earnings per share from continuing operations (cents) 179 119
6.3 Reconciliation between earnings and headline earnings from
discontinued operations
Attributable to Alton equity holders 56 (217)
Capital items - gross (23) 271
Tax effect of capital items 12 (21)
Non-controlling interests in capital items - (26)
Headline earnings from discontinued operations 45 7
Headline earnings per share from discontinued operations (cents) 12 2
Number Number
of shares of shares
6.4 Reconciliation of weighted average number of shares
Issued shares at the beginning of the year (A ordinary and N ordinary shares) 399 092 426 370 040 477
Share buy back (9 A shares for every 10 N shares) - (26 438 009)
Effect of own shares held at the beginning of the year (28 180 081) (28 180 081)
Effect of shares issued during the year 100 522 54 726 365
Weighted average number of shares 371 012 867 370 148 752
6.5 Reconciliation between number of shares used for earnings per share
and diluted earnings per share
Weighted average number of shares 371 012 867 370 148 752
Dilutive options 3 801 170 2 473 130
Diluted weighted average number of shares 374 814 037 372 621 882
R millions 2019 2018
6.6 Reconciliation between earnings and diluted earnings are as follows:
Earnings attributable to shareholders 711 187
Diluted earnings 711 187
6.7 Reconciliation between headline earnings and diluted headline
earnings
Headline earnings 708 448
Diluted headline earnings 708 448
Diluted headline earnings per share from total operations (cents) 189 120
6.8 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 associated with accessing benefits that will only be realised in subsequent
reporting periods, as well as certain restructuring costs, on the headline earnings of the group.
The presentation of normalised headline earnings is not an IFRS defined measure or requirement.
R millions 2019 2018
Headline earnings are reconciled to normalised headline earnings as follows:
Headline earnings 663 441
Foreign currency gains on contingent consideration 5 (6)
Retrenchment and restructuring costs 34 77
Acquisition-related costs - 8
Settlement of contingent consideration (13) -
Tax effect of adjustments (10) (20)
679 500
7. ACQUISITION OF SUBSIDIARIES AND BUSINESS
The following material acquisition was concluded during the current year:
Acquisition of iSPartners Group Proprietary Limited ("Altron Karabina")
Effective 1 September 2018, Altron TMT SA Group Proprietary Limited acquired 100% of the issued share
capital of Altron Karabina, a Microsoft solutions business, for a purchase price of R217 million, of which
R161 million was paid upfront and the remainder is payable over the next two years, with no targets
attached to the payment of the remaining balance.
The acquisition contributed revenue of R105 million and a net profit after tax of R6 million to the group
since acquisition. If Altron Karabina was acquired on 1 March 2018, the contributed revenue would have
been R210 million and the net profit after tax would have been R12 million.
Goodwill of R148 million was recognised on the acquisition of Altron Karabina which relates to the
expected future synergies flowing from the group's intention to increase its footprint in the Microsoft
environment in South Africa.
Carrying Fair value Recognised
R millions amount adjustments values
The acquired balances at the effective date were as follows:
Property, plant and equipment 4 - 4
Intangible assets 16 50 66
Deferred tax (2) (14) (16)
Trade and other receivables 37 - 37
Trade and other payables (37) - (37)
Cash and cash equivalents 15 - 15
Net identifiable assets acquired 33 36 69
Goodwill on acquisition 148
Total purchase consideration 217
Less: Cash and cash equivalents in subsidiary acquired (15)
Less: Deferred purchase consideration (56)
Net cash outflow on acquisitions 146
In addition to the above, the group acquired Cape Office Machines, a partner to the Altron Bytes
Document Solutions Business for a purchase price of R14 million. The acquisition resulted in intangible
assets of R15 million being recognised.
8. DISPOSAL OF SUBSIDIARY
Effective 31 July 2018, the group disposed of its collective 80% equity interest in Powertech Transformers
for R250 million.
Net assets of the above operations disposed:
R millions 2019
Non-current assets 1
Other 1
Current assets 493
Inventories 252
Trade and other receivables 241
Equity 49
Non-controlling interest 49
Current-liabilities (284)
Trade and other payables (239)
Other (45)
Disposal value 259
Less: Proceeds receivable (150)
Profit on disposal of subsidiaries 30
Proceeds received on disposal 139
9. ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS
Impairment of held-for-sale disposal groups
In prior years the decision was taken to dispose of the Powertech group and the Multimedia group and,
as a result, these businesses were classified as discontinued operations. The relevant requirements
of IFRS 5 were met for this classification at the time. The disposals of the assets and liabilities held-
for-sale were completed during the 2019 financial year, except for the investment held in CBI-Electric
Telecom Cables (ATC), which remains held for sale at the end of the year. Management believe that the
conclusion of the disposal of the investment will be affected in the 2020 financial year.
Net assets of disposal group held-for-sale:
R millions 2019 2018
Assets classified as held-for-sale 55 714
Non-current assets 55 129
Current assets - 585
Liabilities classified as held-for-sale - (465)
Non-current liabilities - (5)
Current liabilities - (460)
During the current year, the group recognised a further impairment loss in respect of the investment in
ATC based on the determination of the fair value less cost to sell of the investment in accordance with
IFRS 5 Non-current Assets Held for Sale.
The impairment is based on management's best estimate and judgement of the fair value of the
investment and represents the lowest value that the group will dispose the investment to a willing buyer.
The fair value is a level 3 due to the unobservable inputs used in the determining the value.
10. RELATED-PARTY TRANSACTIONS
The group has a related-party relationship with its subsidiaries, associates and joint ventures and with
its directors and key management personnel.
R millions 2019 2019 2018
Associates and joint ventures
Sale of goods and services to joint venture 31 246
Services received from associates 57 295
Interest earned from associate - 5
Dividends received from joint venture - 26
Dividends received from associates - 2
Balances
Thobela Telecoms - Joint venture (Trade receivables) 301 265
Credit risk, concentration risk and significant judgement applied by management
Gross trade receivable with Thobela Telecoms (RF) Proprietary Limited ("TT")
Altron Nexus Proprietary Limited (Nexus) holds a jointly controlled interest in TT. TT is the vehicle through
which the City of Tshwane ("CoT") has contracted for the procurement and installation of a fibre
broadband network ("CoT project"). Nexus has in turn been contracted by TT to complete the build and
implementation of the CoT project. In the prior year, CoT initiated legal proceedings to halt progress on
the project combined with a review of the tender given concerns over internal CoT irregularities related
to the tender process.
As at the end of the reporting period, the group had an outstanding balance of R301 million (2018:
R265 million) outstanding from TT. The increase in the balance from the prior year is as a result of delay
costs that were invoiced to TT in terms of the agreements entered into.
Management is of the view that their legal case is sound and that there is a very high probability that
judgment will go in their favour, which would escalate receipt of the outstanding funding. In addition,
CoT has commenced with certain initiatives in relation to the project in order to amicably resolve the
ongoing dispute
Any potential loss is further negated through the group's right to collect the equipment that has been
installed due to amounts owing remaining outstanding.
Management is confident that the judge presiding over the matter will issue judgment in the near future.
As at year-end management has not raised a loss allowance in respect of the outstanding balance from
TT. In accordance with IFRS 15; R34 million of the revenue relating to the delay costs charged have been
constrained at year-end.
11. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE
(a) Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and liabilities,
including their levels in the fair value hierarchy. It does not include fair value information for financial
assets and financial liabilities not measured at fair value as the carrying amount is a reasonable
approximation of fair value.
28 February 2019
Carrying amount Fair value
Designated
R millions at fair value Total Level 1 Level 2 Level 3 Total
Financial assets measured
at fair value
Preference share investment
in Technologies Acceptances
Receivables Proprietary Limited 21 21 - - 21 21
Cash collateral - Share-linked
incentive ("SLI") hedge* 108 108 108 - - 108
Investment in Aberdare Cables
Proprietary Limited 94 94 - - 94 94
Forward exchange contracts 6 6 - 6 - 6
229 229 108 6 115 229
Financial liabilities measured
at fair value
Forward exchange contracts (18) (18) - (18) - (18)
(18) (18) - (18) - (18)
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 71 - - 71 71 - - 71
Equity investments 185 - 21 206 - - 206 206
Forward exchange
contracts - 30 - 30 - 30 - 30
256 30 21 307 71 30 206 307
Financial liabilities
measured at
fair value
Forward exchange
contracts - (96) - (96) - (96) - (96)
Contingent
consideration (66) - - (66) - - (66) (66)
(66) (96) - (162) - (96) (66) (162)
The carrying amounts of financial assets that are not subsequently measured at fair value i.e. finance
lease assets and financial assets is considered to approximate the fair value.
The carrying amount of financial liabilities that are not subsequently measured at fair value i.e. financial
liabilities at amortised cost is considered to approximate the 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).
(b) 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
unobservable inputs and fair value
Type Valuation technique inputs measurements
Market comparison technique:
The fair value of foreign exchange
contracts are marked-to-market
Forward by comparing the contracted Not applicable Not applicable
exchange forward rate to the present value
contracts of the current forward rate of an
equivalent contract with the same
maturity date
The estimated fair value would
increase (decrease) if:
- the discount rate were
lower (higher) by 1% then
Preference share The dividend growth model was Discount rate of the value would increase
in Technologies used to determine the fair value 14.68% (2018: 13.50%) (decrease) by R2 million;
Acceptances of the preference share using and
Receivables the historic dividends that were Forecast annual
Proprietary received from the investment perpetuity growth - the annual perpetuity
Limited 0% (2018: 3%) growth rate were higher
(lower) by 1% then the
value would increase
(decrease) by R2 million.
The valuation of the investment
Investment in in underpinned by the underlying
Aberdare Cables call and put option structure Contractually The fair value is driven by
Proprietary implemented by the group with agreed amounts the put and call structure as
Limited the other shareholder to this contractually agreed.
investment
Transfers
There were no transfers between levels 1, 2 or 3 of the fair value hierarchy for the years ended
28 February 2019 and 28 February 2018.
12. EVENTS AFTER REPORTING PERIOD
Effective 1 March 2019, the group acquired a 64.59% interest in Altron Aloe Machines for R9.7 million.
This business forms part of Altron Bytes Document Solutions division.
The initial accounting for the business combination has not been completed and, as a result, it was
impracticable for certain IFRS 3 Business Combination disclosures to be made due to the close proximity
of the acquisition to the financial statements release date.
The group declared a dividend of 44 cents per share on 8 May 2019.
The group exercised its put option in respect of the investment in Aberdare Cables Proprietary Limited.
The directors are not aware of any other events after the reporting period that will have an impact on
financial position, performance or cash flows of the group.
R millions 2018*
13. REVENUE FROM CONTRACTS WITH CUSTOMERS
13.1 Prior year disclosure
Goods sold 12 521
Services rendered 5 084
Rental finance income 76
17 681
Continuing operations 14 743
Discontinued operations 2 938
17 681
R millions 2019 2018*
13.2 Assets and liabilities related to contracts with customers
The group has recognised the following assets and liabilities related to
contracts with customers:
Current contract assets 196 -
Loss allowance (1) -
Total current contract assets 195 -
Non-current contract costs capitalised 83 -
Current contract costs capitalised 98
Total contract costs capitalised 181 -
Non-current contract liabilities 87 -
Current contract liabilities 1 423 -
Total contract liabilities 1 510 -
Contract liabilities recognised at the beginning of the year
At the beginning of the year, R1 394 million was recognised as a contract
liability. The total amount was recognised as revenue during the current
year, due to the short-term nature of the contracts entered into. The closing
balance represents new contracts entered into where the performance
obligations have not yet been met at year-end. The contract liability is
expected to be recognised as revenue in the next financial year.
Revenue in terms of IAS 18 2019
Had the group applied the accounting policies effective in the prior year,
the total revenue would have been:
Revenue 20 356
Unsatisfied long-term service contracts
The following table shows unsatisfied performance obligations.
R millions 2019 2018*
Aggregate amount of the transaction price allocated to contracts that are
partially or fully unsatisfied as at 28 February 2019 3 553 -
3 553 -
Management expects the contract liabilities that are allocated to contracts
with partially or fully unsatisfied performance obligations will be recognised
as follow:
Within one year 257 -
Within two years 114 -
Thereafter 3 182 -
3 553 -
* The group elected to adopt IFRS 15 using the modified retrospective approach without restating the prior year,
therefore prior year balances have not been disclosed.
13.3 Revenue by segment
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 based upon
internal accounting presentation.
Revenue by reportable segment is disaggregated by major product/service and geographic region
below.
Continuing operations Altron ICT international operations Altron ICT South African operations
Altron
Altron Altron Altron Bytes Altron Altron
Bytes Bytes Bytes Secure Bytes ICT South Bytes Other Altron ICT Corporate
Altron Document Managed People Transaction Systems Altron African Technology international International Altron and con- Continuing
R millions Nexus Solutions Solutions Solutions Solutions Integration Karabina Operations Group UK operations operations Arrow Netstar solidation operations
Revenue by product
Project related revenue 515 - - - - 522 80 1 117 216 2 218 - - (42) 1 293
Over time 515 - - - - 522 80 1 117 216 2 218 - - (42) 1 293
Sale of goods and
related services 150 861 407 - 276 602 - 2 343 320 152 472 499 1 521 (155) 4 680
At a point in time 150 861 407 - 245 560 - 2 223 320 152 472 499 85 (105) 3 174
Over time - 47 - - 31 42 - 120 - - - - 1 436 (50) 1 506
Maintenance, support
and outsource services 520 557 761 - 124 580 8 2 550 91 89 180 - - (87) 2 643
Over time 520 557 761 - 124 580 8 2 550 91 89 180 - - (87) 2 643
Training and skills
management - - - 427 - - 1 428 34 - 34 - - (15) 447
Over time - - - 427 - - 1 428 34 - 34 - - (15) 447
Software, cloud and
related licences,
including software
assurance services - 33 - 31 168 36 - 268 5 712 42 5 754 - - (209) 5 813
At a point in time - 33 - 23 168 36 - 260 4 137 42 4 179 - - (154) 4 285
Over time - - - 8 - - - 8 1 575 - 1 575 - - (55) 1 528
Software application
and development - - - - 34 212 16 262 - - - - - (9) 253
Over time - - - - 34 212 16 262 - - - - - (9) 253
Switching and other
transactional services - - - - 539 75 - 614 - - - - - (20) 594
Over time - - - - 539 75 - 614 - - - - - (20) 594
Total Revenue 1 185 1 451 1 168 458 1 141 2 027 105 7 535 6 373 285 6 658 499 1 521 (537) 15 676
Rental finance income - 47 - - - - - 47 - - - - - - 47
Total Revenue 1 185 1 498 1 168 458 1 141 2 027 105 7 582 6 373 285 6 658 499 1 521 (537) 15 723
Revenue by geographic
region
South Africa 1 169 1 351 1 056 450 1 120 1 937 105 7 188 5 22 27 494 1 292 (194) 8 807
Rest of Africa 16 147 112 1 21 77 374 2 208 210 5 - (35) 554
Total Africa 1 185 1 498 1 168 451 1 141 2 014 105 7 562 7 230 237 499 1 292 (229) 9 361
Europe - - - 7 - 10 - 17 6 311 17 6 328 - 1 (308) 6 038
Rest of world - - - - - 3 - 3 55 38 93 - 228 - 324
Total international - - - 7 - 13 - 20 6 366 55 6 421 - 229 (308) 6 362
Total Revenue 1 185 1 498 1 168 458 1 141 2 027 105 7 582 6 373 285 6 658 499 1 521 (537) 15 723
28 February 2019
Discontinued operations Discontinued operations
Corporate
Powertech Multimedia Autopage and Discontinuing
R millions Group Group Group consolidation operations
Revenue by product
Sale of goods and related services 427 761 - - 1 188
At a point in time 427 761 - - 1 188
Maintenance, support
and outsource services - 14 - - 14
Over time - 14 - - 14
Total revenue 427 775 - - 1 202
Revenue by geographic region
South Africa 394 481 - - 875
Rest of Africa 33 - - - 33
Total Africa 427 481 - - 908
Rest of world - 294 - - 294
Total international - 294 - - 294
Total revenue 427 775 - - 1 202
14. CHANGES IN ACCOUNTING POLICIES
The group has adopted the following new accounting pronouncements as issued by the International
Accounting Standards Board (IASB), which were effective for the group from 1 March 2018:
- IFRS 9 Financial Instruments (IFRS 9).
- IFRS 15 Revenue from Contracts with Customers (IFRS 15).
The changes in accounting policies have been applied retrospectively, however, the comparative
numbers have not been restated, the cumulative impact of the changes in accounting policies have
been recognised in opening retained earnings i.e on 1 March 2018.
Adoption of IFRS 9
The adoption of IFRS 9 had the following impact on the group:
- Change from the IAS 39 incurred loss model to the Expected Credit Loss (ECL) model to calculate impairments on applicable financial assets
- Change in classification of the measurement categories for financial instruments.
Impairments
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 were calculated as the difference between the asset's
carrying amount and its recoverable amount, being its present value of the estimated future cash flows
discounted at the original effective interest rate (EIR).
Under IFRS 9, the group calculates the allowance for credit losses based on the ECLs for financial assets measured at amortised cost,
finance lease assets, investments at FVOCI and contract assets. ECLs are a probability weighted estimate of credit losses. Credit losses are measured
as the present value of all cash shortfalls, being the difference between the cash flows to the group in accordance with the contract and the cash flows
that the group expects to receive. ECLs are discounted at the original EIR of the financial asset.
The impact of applying the ECL model (under the general 3 step approach) on non-current financial assets at amortised cost and at fair value
through other comprehensive income was not material on adoption date.
The group applies the simplified approach to determine the ECL for trade receivables, finance lease
assets and contract assets. This results in calculating lifetime ECLs for these assets. ECLs for trade
receivables, finance lease assets and contract assets are determined using a simplified parameter-
based approach.
The table below reconciles the loss allowance as reported on 28 February 2018 in accordance with IAS 39
to the ECL as determined under IFRS 9 of financial instruments that have been impacted by the adoption
of IFRS 9:
R millions 2018
Loss allowance
Closing balance at 28 February 2018 169
Adjustment on adoption of IFRS 9 3
Opening loss allowance as at 1 March 2018 172
Due to the conservative approach previously followed, the adoption of IFRS 9 did not result in a material change in
the loss allowance on adoption date.39.
Classification, initial recognition and subsequent measurement
IFRS 9 introduces new measurement categories for financial assets, the impact of which is illustrated in
the table below. From 1 March 2018, the group classifies financial assets in each of the IFRS 9 categories
based on the group's business model for managing the financial asset and the cash flow characteristics
of the financial asset.
The group intends to hold the non-current financial assets at amortised costs to maturity to collect
contractual cash flows and these cash flows consists solely of payments of principal and interest on the
principal amount outstanding. The group's business model for these instruments is to hold to collect the
contractual cash flows and is monitored at an investment level.
The group intends to hold the non-current financial assets at FVOCI as long-term strategic investments
that are not expected to be sold in the short to medium term.
Measurement category Carrying amount
28 February 1 March
R millions IAS 39 IFRS 9 2018 2018 Difference
Non-current financial assets
Participation Loan to TAR Loans and
receivables Amortised cost 191 191 -
Preference share investment
in TAR Available for sale FVOCI 21 21 -
Cash collateral - Share linked
incentive ("SLI") hedge FVTPL* FVTPL 71 71 -
Preference share investment in Loans and
Auto X Proprietary Limited receivables* Amortised cost 91 91 -
Investment in Aberdare Cables
Proprietary Limited FVTPL* FVTPL 94 94 -
Current financial assets
Cash and cash equivalents Loans and
receivables Amortised cost 1 067 1 067 -
Trade and other receivables Loans and
receivables Amortised cost 3 031 3 028 (3)
Forward exchange contracts FVTPL FVTPL 30 30 -
Non-current financial liabilities
Loans Amortised cost Amortised cost 1 464 1 464 -
Loans - contingent consideration FVTPL FVTPL 38 38 -
Current financial liabilities
Loans Amortised cost Amortised cost 386 386 -
Loans - contingent consideration FVTPL FVTPL 28 28 -
Trade and other payables Amortised cost Amortised cost 3 562 3 562 -
Bank overdraft Amortised cost Amortised cost 972 972 -
Forward exchange contracts FVTPL FVTPL 101 101 -
* These financial assets were classified as available for sale in the prior year, however, the measurement of
these instruments were in accordance with the categories indicated above. These have been amended
accordingly to present the appropriate classification.
The reclassification into the new measurement categories of IFRS 9 did not have a significant impact on
the group.