The impact of the reclassifications on financial assets measurement categories was as follows:
Amortised
FVOCI cost
(Available- (loans and
for-sale receivables
R millions FVTPL under IAS 39) under IAS 39)
Financial assets
Closing balance at 28 February 2018 195 21 4 081
Change in carrying amount due to change in measurement
under IFRS 9 - - (3)
Opening balance at 1 March 2018 195 21 4 078
Transition to IFRS 9
Changes in accounting policies from the adoption of IFRS 9 have been applied retrospectively,
however, the group has elected not to restate comparative information. Differences between the
carrying amounts of financial instruments as at 28 February 2018 and 1 March 2018 resulting from the
initial application of IFRS 9 are recognised in retained earnings. Accordingly, information relating to
28 February 2018 does not reflect the requirements of IFRS 9 but rather those of IAS 39.
The group has elected as an accounting policy choice to not adopt the hedge accounting requirements
of IFRS 9, but rather to continue applying the hedge accounting requirements of IAS 39.
Adoption of IFRS 15
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 when a customer obtains control of the goods or services. For additional information about the group's accounting policy
relating to revenue recognition, refer to the accounting policies section of the financial statements.
On adoption of IFRS 9 and IFRS 15, the group restated its retained earnings at 1 March 2018 as follows:
R millions 2018
Retained earnings - as previously reported at 28 February 2018
Closing balance at 28 February 2018 2 543
Impact on the adoption of IFRS 9 (3)
Impact on the adoption of IFRS 15 2
Opening retained earnings - 1 March 2018 2 542
The nature of the changes in the accounting policies are set out below:
Project related revenue
Changes in the accounting policy relate to certain broadband rollout projects where goods and services were provided to customers, in terms
of which the costs and related revenue relating to equipment delivered at the respective client site, was historically recognised on a milestone
basis upon delivery.
The group reviewed its contracts relating to these arrangements and in terms of IFRS 15, the goods and services were concluded to be part
of a combined performance obligation. In addition, taking into account the guidance in IFRS 15 as it relates to uninstalled materials, the group
resolved that the cost of the uninstalled materials (delivered equipment) be excluded from measuring the progress in these contracts. This
resulted in the costs (i.e. fulfilments costs) and related revenue billed to the client (contract liabilities) in respect of open contracts on adoption
date, being deferred in the opening balance sheet and subsequently recognised during the current financial reporting period.
Cloud services and related licences
The group reviewed its accounting policy for the sale of cloud services (and related licences) on adoption of IFRS 15. Previously, management
applied their judgement in determining the accounting in accordance with the "risks and rewards" approach followed under IAS 18, which resulted
in these arrangements being accounted for by the group as the principal. One of the considerations applied in reaching this conclusion was the
consideration of credit risk.
Under IFRS 15, based on the concept of "control" and the transfer thereof; and the change in the criteria to be considered when assessing
whether an arrangement should be accounted for on a principal or agent basis, these arrangements are now accounted for by the group as
an agent in terms of IFRS 15. One of the previously relevant indicators, i.e. credit risk is no longer included in the guidance under IFRS 15
further supporting the conclusion reached.
Transition to IFRS 15
Changes in accounting policies from the adoption of IFRS 15 have been applied retrospectively, however,
the group has elected not to restate comparative information. The cumulative impact of IFRS 15 is
recognised as an adjustment in retained earnings, on 1 March 2018. Accordingly, information relating
to 28 February 2018 does not reflect the requirements of IFRS 15 but rather those of IAS 18.
The group applied the following practical expedients when applying IFRS 15:
1. The group has elected to apply IFRS 15 only to contracts that are not completed as at the date of initial application.
2. For contracts that were completed that had variable consideration, the transaction price at the date that the contract was completed was
used, rather than estimating variable consideration amounts.
3. For contracts that were modified before the adoption date, the contracts were not restated for these contract modifications and instead, the
aggregate effect of all modifications that occurred before the adoption date were considered in aggregate when identifying the satisfied and
unsatisfied performance obligations, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied
performance obligations.
4. For all reporting periods presented before the date of initial application, we have elected not to disclose the amount of the transaction price
allocated to the remaining performance obligations and an explanation of when we expect to recognise that amount as revenue.
5. We have elected when, at contract inception, the period between the transfer of a promised good or service and payment for that good or
service will be one year or less, not to account for the effects of the time value of money; and
15. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE
The group is required to adopt IFRS 16 Leases from 1 March 2019. The group has made an initial
assessment of the impact that the standards will have on its financial statements and is in the process of
quantifying the impact on equity as at 1 March 2019. Further the group is in the process of implementing
changes to its processes relating to leases.
IFRS 16 Leases
IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the statement of
financial position by lessees, as the distinction between operating and finance leases is removed. Under
the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are
recognised. Practical expedients are available for short-term and low-value leases. Lessors continue
to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially
unchanged from its predecessor, IAS 17 Lease (IAS 17).
The group expects that the most significant impact of the new standard will result from its current
property and network site operating leases. As at the reporting date, the group has non-cancellable
operating lease commitments of R481 million. Of these commitments, approximately R73 million relates to
non-lease components of operating leases which will continue to be recognised as an expense in profit
or loss as they are incurred.
For lease commitments (excluding non-lease components, short-term and low-value leases) the group
will recognise lease liabilities, representing the present value of the future minimum lease payments
discounted at a rate appropriate and after taking into account the lease term, value, economic
environment and security over the asset applicable, on 1 March 2019, and corresponding right-of-use
assets in respect of these leases, adjusted for prepayments recognised as at 28 February 2019.
On adoption of IFRS 16 operating lease costs (other than short-term and low value lease) will no longer
be recognised as part of operating expenses. The group intends to apply a threshold of R100 000
for assessing what constitutes low-value assets. For the year ended 28 February 2019 the group has
recognised lease expenses of R176 million. Of these operating lease expenses, approximately R39
million relates to non-lease components of operating leases which will continue to be recognised as an
expense in operating expenses as they are incurred.
As a result of the new accounting rules, EBITDA (as defined) used to measure segment results is expected
to increase, as the total operating lease payments were previously included in EBITDA (as defined) under
IAS 17. The group will recognise depreciation on the right-of-use assets and interest on the lease liabilities
over the lease term in profit or loss - these charges are excluded from EBITDA (as defined).
Due to the impact of reducing finance charges over the life of the lease, the impact on earnings
will initially be dilutive, before being accretive in later periods. Furthermore, leases denominated in
currencies that are not the functional currency of the operation will increase foreign exchange exposure.
Therefore, the group expects that net profit after tax may decrease for 2019 as a result of adopting the
new standards.
Cash generated from operations will increase, as lease costs will no longer be included in this category
of cash flows. Interest paid will increase, as it will include the interest portion of the lease liability
repayments. This is expected to have a net positive impact on net cash generated from operating
activities. Net cash used in financing activities will increase, as the capital portion of lease liability
repayments will be included within repayment of borrowings.
The group's activities as a lessor are not material and hence the group does not expect any significant
impact on the financial statements. However, some additional disclosures will be required in the next
reporting period.
The Group will apply the standard using the modified retrospective approach on 1 March 2019 with
optional practical expedients and will apply its election consistently to all of its leases. 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. Right-of-use assets
will be measured at the amount of the lease liability on adoption (adjusted for any prepaid lease
expenses). The group has elected to apply the practical expedient to not reassess the lease definition.
Other standards
The following relevant amended standards and interpretations are not expected to have a significant
impact on the Group's consolidated financial statements.
- IFRIC 23 Uncertainty over Income Tax Treatments.
16. REPORTING SEGMENTS
An operating segment is a component of the group that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses that relate to transactions with any
of the group's other components. The group determines and presents operating segments based on the
information that is internally provided to the group's executive committee and board of directors, who
is the group's chief operating decision-makers ("CODM"). An operating segment's operating results are
reviewed regularly by the CODM to make decisions about resources to be allocated to the segment and
assess its performance, and for which discrete financial information is available. Segment results that
are reported to the CODM include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the
group's headquarters and the subgroup's headquarters).
The segmental information has been prepared to highlight the continuing and discontinued operating segments.
This provides more insight into revenue and earnings before interest, tax, depreciation and amortisation before capital
items (EBITDA before capital items), disclosed in the statement of comprehensive income.
The below is categorised in accordance with the group's reporting segments. The segment revenues and
earnings before interest, tax, depreciation, amortisation and capital items (EBITDA and capital items) by
each of the group's reportable segments are the key performance measures reviewed by the CODM and
are summarised as follows:
Revenue EBITDA before capital items
Growth Growth
R millions 2019 2018 % 2019 2018 %
Altron Nexus 1 185 1 155 3 123 80 54
Altron Bytes Document Solutions 1 498 1 353 11 77 70 10
Altron Bytes Managed Solutions 1 168 1 027 14 78 74 5
Altron Bytes People Solutions 458 438 5 29 29
Bytes Secure Transaction
Solutions 1 141 1 073 6 289 253 14
Bytes Systems Integration 2 027 1 897 7 119 123 (3)
Altron Karabina 105 - 10 -
Altron ICT South African
operations 7 582 6 943 9 725 629 15
Bytes Technology Group UK 6 373 6 088 5 368 206 79
Other international operations 285 244 17 7 16 (56)
Altron ICT international
operations 6 658 6 332 5 375 222 69
Corporate and consolidation
(other) - - 29 33 (12)
Revenue EBITDA before capital items
Growth Growth
R millions 2019 2018 % 2019 2018 %
Altron ICT 14 240 13 275 7 1 129 884 28
Altron Netstar* 1 521 1 378 10 582 490 19
Altron Arrow 499 560 (11) 29 33 (12)
Corporate and consolidation
(other) (537) (470) (14) (107) (94) (14)
Normalised continuing
operations 15 723 14 743 7 1 633 1 313 24
Foreign currency gains on
deferred acquisition liability 6
Retrenchment and
restructuring costs (26) (77)
Acquisition related costs (8)
Continuing operations
as reported 15 723 14 743 7 1 607 1 234 30
Altech Multimedia 775 974 (20) 15 44 (66)
Altech Autopage - - 5 (23) 122
Powertech Group 427 1 964 (78) 34 (13) 362
Discontinued operations 1 202 2 938 (59) 54 8 575
Altron Group 16 925 17 681 (4) 1 661 1 242 34
Segment EBITDA before capital items can be reconciled to operating profit before capital items as
follows:
R millions 2019 2018
EBITDA before capital items 1 661 1 242
Reconciling items:
Depreciation (179) (149)
Amortisation (134) (103)
Amortisation of costs incurred to fulfil contracts* (253) (199)
Total operating profit before capital items 1 095 791
Discontinued operations profit before capital items (54) (8)
Continuing operations profit before capital items 1 041 783
* Costs incurred to obtain contracts and capital rental devices have been reclassified to amortisation.
The expense was previously included in operating costs before capital items.
Revenues/EBITDA before capital items from segments below the quantitative thresholds
are attributable to smaller operating segments of the Altron group.
None of those segments have met any of the quantitative thresholds for determining reportable
segments for the reportable periods.
Quantitative thresholds have been calculated based on totals for the Altron group and not per
subgroup.
17. CORRECTION OF PRIOR YEAR ACCOUNTING TREATMENT
During the current year, the group undertook a detailed review of the contracts with customers
and vendors in respect of specific business operations. Upon conclusion of this process, the group
discovered that the terms and conditions of certain contracts had not been correctly accounted for
historically. As a consequence, these contracts had an impact on the presentation and disclosure of the
prior year balances.
Matters identified
The group sells goods under finance lease arrangements in certain parts of its business. As part of these
transactions, the group enters into back-to-back arrangements with an external party to receive cash
from the transaction on day one. As the customer settles the monthly lease instalments with the group,
the group settles its monthly instalments with the external financier. In previous years, the finance lease
asset and the finance lease liability were set off on presentation in the balance sheet. Upon analysis
of the IFRS requirements for set off, i.e. that the group currently has a legally enforceable right to set off
the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously, were not met. Due to the offset requirements not being met in accordance with
the requirements of IFRS, the finance lease asset and finance lease liability needed to be presented
separately on the balance sheet and as a result the comparative balances were accordingly restated.
The group enters into arrangements in terms of which it acts as a clearing/collecting agent on behalf of certain merchants.
In terms of these arrangements, the group collects the cash on behalf of the merchant which is paid into the group's bank account,
after which it is paid over by the group to the merchant immediately once the payment clears the bank account. In prior years, the
group netted the amounts received into its bank account and the amounts payable to the merchant when presenting its balance
sheet. Upon reflection, it was concluded that the balance sheet presentation as previously applied was not appropriate and the cash
received as well as the payable to the merchant should have been included on a gross basis, resulting in the comparative balances
being restated. As this arrangement had an impact on the cash on hand balances maintained by the group, the statement of cash
flow has been restated to reflect the impact of the additional cash on hand at the end of the preceeding reporting periods.
The above has been corrected by updating each of the affected financial statement line items for the prior period noted below.
The corrections did not have an impact on the consolidated statement of comprehensive income:
Year ended 28 February 2017 Year ended 28 February 2018
As As
previously previously
R millions reported Adjustments Restated reported Adjustments Restated
Statement of
financial position
(Extract)
Non-current assets
Finance lease assets 98 89 187 113 77 190
Current assets
Trade and other
receivables 3 270 90 3 360 2 669 83 2 752
Cash and cash
equivalents 768 299 1 067 1 373 173 1 546
Non-current
liabilities
Loans 1 413 89 1 502 1 923 77 2 000
Current liabilities
Loans 314 90 404 312 83 395
Trade and other
payables 3 582 299 3 881 3 177 173 3 350
28 February 2018
As
previously
R millions reported Adjustments Restated
Cash flow (Extract)
Cash flows from operating activities
Cash generated from operations 936 126 1 062
Cash flow
(Extract)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 936 126 1 062
CASH FLOWS USED IN FINANCING ACTIVITIES
Loans advanced 67 (128) 195
Loans repaid (627) 128 (755)
Net decrease in cash and cash equivalents (549) 126 (423)
Net cash and cash equivalents at the beginning of the year 329 173 502
Net cash and cash equivalents at the end of the year (204) 299 95
18. COMMITMENTS
R Millions 2019 2018
Non-cancellable operating leases
At year-end the group had outstanding commitments under non-cancellable
operating leases, which fall due as follows:
Within one year
Property 114 155
Plant, equipment and vehicles 13 22
127 177
One to five years
Property 250 252
Plant, equipment and vehicles 15 48
265 300
Thereafter
Property 44 35
Plant, equipment and vehicles 45 1
89 36
Total 481 513
Capital commitments
Significant capital expenditure authorised and contracted for at the end of the
reporting period but not recognised as liabilities are as follow:
Property, plant and equipment 6 -
6 -
19. OTHER MATERIAL TRANSACTIONS DURING THE CURRENT YEAR
During the current year, the group renegotiated its long-term debt financing with the banks at more
favourable terms. A long-term facility of R2 billion was granted to the group of which R1.3 billion was
drawn at 28 February 2019. The previous drawn facility of R1.2 billion was settled on 28 February 2019.
The remaining undrawn facility at year-end is R700 million. At year-end, R267 million is repayable within
12 months and R1 033 million repayable after 12 months.
During the current year the group acquired property, plant and equipment at a cost of R190 million, consisting
mainly of land, buildings and leasehold improvements, motor vehicles, furniture and equipment and IT equipment
and software. During the current year the group disposed of property, plant and equipment with a carrying amount of
R43 million, consisting mainly of land, buildings and leasehold improvements and motor vehicles, furniture and equipment.
SUPPLEMENTARY INFORMATION
(TOTAL OPERATIONS)
R millions 2019 2018
Total operations
Depreciation and amortisation* 566 451
Net foreign exchange (profits)/losses (11) 43
Cashflow movements
Capital expenditure (including intangibles) 283 278
Net additions to costs to fulfil contracts (42) 58
Additions to costs to fulfil contracts 246 257
Amortisation of costs incurred to fulfil contracts during the year (353) (199)
Contract costs written off (35) -
Lease commitments 481 513
Payable within the next 12 months: 127 180
Payable thereafter: 354 333
Weighted average number of shares (millions) 371 370
Diluted average number of shares (millions) 374 373
Shares in issue at the end of the year (millions) 371 371
Ratios
EBITDA margin (%) 9,8 7,0
ROCE (%) 21,4 17,8
ROE (%) 21,3 16,7
ROA (%) 12,0 9,9
RONA (%) 17,3 14,9
Current ratio 1,1:1 1,1:1
Acid test ratio 0,9:1 0,9:1
* Amortisation of contract costs and capital rental devices have been reclassified from operating expenses to
depreciation and amortisation.
CONTACT US
Altron
4 Sherborne Road, Parktown 2193
Gauteng SOUTH AFRICA
PO Box 981, Houghton 2041
Gauteng SOUTH AFRICA
Home
Date: 09/05/2019 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
