AEL: ALLIED ELECTRONICS CORPORATION LIMITED - Unaudited Consolidated Interim Results for the six months ended 31 August 2018 and Interim Dividend Announcement
Unaudited Consolidated Interim Results for the six months ended 31 August 2018 and Interim Dividend Announcement
Allied Electronics Corporation Limited
(Registration number 1947/024583/06)
(Incorporated in the Republic of South Africa)
Share code: AEL ISIN: ZAE000191342
("Altron" or "the company")
2018 UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
31 AUGUST 2018 AND INTERIM DIVIDEND ANNOUNCEMENT
HIGH LEVEL OVERVIEW
During the past financial half year Altron delivered substantially on executing its One Altron
strategy anchored in four strategic pillars, namely improve revenue growth, improve profitability,
transform the customer experience and employee excellence.
Key Results Highlights on a normalised (adjusted for restructuring costs during the period)
basis:
- Revenue from continuing operations increased by 44% to R9.8 billion
- EBITDA from continuing operations increased by 16% to R686 million
- HEPS from continuing operations increased by 25% to 71 cents
- Adjusted net debt reduced to R991 million
- Free cash flow increased by 220% to R295 million
- Interim dividend declared of 28 cents per share
The Altron group ("the Group") has made considerable progress in expanding its operations in
various jurisdictions, successfully integrating three acquisitions. 57% of the Group's revenue is
generated offshore, with Altron being the number one Microsoft licensing partner in the UK. 70%
of the Group's operations have net promotor scores above industry average. During the period
the company has further lowered debt levels and completed the divestment of non-core assets.
The Group has again delivered on the stated goal of consistent double-digit growth at an
EBITDA level despite the ongoing difficult local South African economy.
As announced through SENS on 29 September 2018, the Group completed the acquisition of
the iS Partners group, including its primary subsidiaries Karabina Solutions and Zetta Business
Solutions. iS Partners group adds to Altron's existing Microsoft business offerings and will be
integrated into the Group in building a cloud and data analytics business of scale.
An element of the Group's strategy was the disposal of the remaining non-core assets. This has
now been materially concluded. Powertech Transformers was disposed of with effect from 31
July 2018. As communicated to shareholders on SENS on 25 September 2018, agreement has
been reached to dispose of Altech UEC/Multimedia, the Group's last non-core control asset.
The final conditions precedent to this transaction, including Competition Commission approval,
are expected to be concluded by the end of November 2018.
As previously communicated at the Group's last results announcement, the Board has approved
a resumption in dividends payment to shareholders at 2.5 times cover ratio. This is a result of
the Group's much improved performance over the last eighteen months, which has resulted in
strengthening of the management and leadership team, driving top line growth, improved
profitability, better working capital management, selective bolt-on acquisitions in strategic areas,
as well as a much-improved balance sheet and cash generation for the Group, and has resulted
in the first dividend paid to shareholders since the financial year-ended February 2016.
FINANCIAL OVERVIEW
Due to the inclusion of non-core operations in the total results for the first six months, the
continuing operations' results provide stakeholders with an accurate measure of the core
sustainable earnings of Altron.
Continuing operations
Revenue for the continuing operations grew by 44% to R9.8 billion, while EBITDA increased by
16% to R686 million on a normalised basis. Organic EBITDA growth for the period was 10%,
(excluding Altron ARH' ("ARH") 5% negative growth - see further comments
below) supported by acquisitive growth of 11%. The normalised EBITDA margin decreased to
7% compared to the prior period's 8.7%. The lower increase in EBITDA compared to revenue
increase, as well as the lower EBITDA margin for the current period, are both largely due to
some deliberate actions in the UK business. The Phoenix Software acquisition in the UK in
September 2017, which has more than doubled the profitability of our UK operations, is a high
volume but lower margin business due to its public sector focus. We are also pleased to report
that the borrowings relating to the purchase price for Phoenix Software were fully paid off. Bytes
UK also made a strategic decision to win the National Health Service ("NHS") contract at initially
much lower margins in return for future strategic trade-offs. Another less significant contributor
to the current period's lower margin were some delays experienced in some of the public sector
contracts for ARH. The latter's order book for the second half of the
year is satisfactory.
Normalised headline earnings increased by 26% from R210 million to R264 million while
normalised headline earnings per share grew by 25% to 71 cents against the prior period of 57
cents.
Discontinued operations
The results of the discontinued operations continued to show a significant improvement from
the previous financial half year. EBITDA improved to a profit of R65 million compared to a prior
period loss of R9 million. The main improvement came out of the Powertech Transformers and
Altech UEC/Multimedia businesses that delivered a strong EBITDA turnaround.
CASH MANAGEMENT
The overall net debt of R1.4 billion (R991 million when adjusted for disposal of group assets
and deferred receipts balances) showed a meaningful improvement on the 28 February 2018
year-end position of R1.9 billion due to increased cash generated from operations (R720 million
compared to R598 million for the prior period), as well as better working capital management.
This resulted in a 220% increase in free cash flow to R295 million, which enabled the Group to
allocate R249 million towards repaying its long-term loans during the period.
BUSINESS UNITS REVIEW
Bytes UK had another strong half year, growing revenue by 109% and EBITDA by 90% to R207
million. The performance of the business was positively impacted by the acquisition of Phoenix
Software in the second half of the previous financial year, which added scale to Bytes UK,
making it a significant player in the UK software market. Bytes UK further secured a five-year
GBP150 million contract with the NHS. The cross-selling of Altron's South
African CyberTech offering in the UK market is gaining traction.
Altron Bytes Secure Transaction Solutions ("BSTS") continued to perform well, growing revenue
by 15% and EBITDA by 22% to R134 million, driven by profit margins of 23% and a number of
new contracts secured during the period. BSTS maintains its status as a key growth focus for
the Group. All components of this business performed well, with the NuPay division again being
the outstanding performer. The HealthTech side of the business continues to grow its ecosystems
and platforms to deliver higher value services to health care professionals as well as
the public health sector. FinTech is advancing its new product offerings into the unbanked
environment, which presents a significant growth opportunity for this division. The CyberTech
division is seeing gains from the completion of its technology centre to provide security for
customer networks.
ARH experienced a challenging first half of the financial year, with a number of delays in public
sector contracts. Despite this, the business continues to win and deliver on current broadband
network opportunities, such as the Phase 2 Gauteng broadband network contract, valued at
R2.8 billion over three years, building on its momentum of evolving into the preferred safe city
solution provider for the smart city evolution.
Altron Bytes Document Solutions ("BDS") has seen revenue improve by 9% to R720 million and
EBITDA increase by 28% compared to the prior period, supported by improved margins in the
production systems division. Strategically, the business remains focused on selected growth
areas, including managed print services and the high-end production environment. BDS' growth
strategy into the rest of Africa remains on course, with the business driving cross-selling of
Altron's other offerings into its extensive base of more than 4 500 customers.
Altron Bytes Managed Solutions ("BMS") reported revenue and EBITDA largely in line with the
prior year. The performance of this business is being improved through a conversion of the
traditional retail sector with new technologies such as self-service checkouts and an expansion
of managed services to incorporate Internet of Things ("IoT") solutions. Further improvement in the
performance of BMS will be driven by the ongoing diversification of its offerings, such as the
current launch of cloud-based retail solutions for the hospitality and restaurant sectors.
Altron Bytes Systems Integration ("BSI") produced strong EBITDA results through margin
increase and benefitting from some integration gains. EBITDA increased by 24% and revenue
by 12% against the prior year. Management is taking additional steps to improve EBITDA
margin by, inter alia, focusing the business on high-growth areas and reducing overhead costs.
BSI continues to refine its operating model through the streamlining of the business and driving
the Group's initiatives into IoT, Security, Big Data and Cloud solutions.
Altron Bytes People Solutions("BPS") grew revenue by 8%, with EBITDA improving by 21% against the
prior year, the latter as a result of efficiencies in the call centre business and a focus on outbound
sales campaigns. The business also saw the appointment of a new managing director, Mr
Igshaan Soules, during the reporting period. The business is set to grow through a broadening
of skills development offerings beyond ICT sector training, and driving efficiencies in the
Business Process Outsourcing environment by focusing on enabling technologies, including
robotic processes and multi-channels.
Under new leadership, Netstar is driving customer centricity and cost reductions, backed by
strong revenue and EBITDA growth at an organic level. The business in total reported an 11% increase
in revenue and a 14% improvement in EBITDA against the prior year. Netstar improved the
growth in its subscriber base, particularly in stolen vehicle recovery, with churn and retentions
under close control. Its most recent Australian acquisition, EZY2C, is performing well ahead of
prior year, with Altron's total market share in Australia now at 9%.
Altron Arrow's revenue was largely in line with the prior year, while EBITDA declined by 29%.
The reduction in EBITDA was primarily as a result of lower gross margin levels and overall
market pricing pressures, together with exchange rate fluctuations and supply chain delays. In
challenging economic conditions, the business maintained its leading component distributor
position in this market. Altron Arrow continues to work on key new lines of business, including
driving its eCommerce solutions. It is well placed to deliver in the second half of the financial
year through a strong order book on hand and sizeable new business opportunities.
DIVIDEND
Notice is hereby given that an interim gross cash dividend of 28 cents per share (22.4 cents net
of 20% dividend withholding tax) for the six months ended 30 August 2018 has been declared,
payable to shareholders recorded in the register of the company at the close of business on the
record date appearing below. The Board has confirmed by resolution that the solvency and
liquidity test as contemplated by the Companies Act, No. 71 of 2008, as amended, has been
duly considered, applied and satisfied. This is a dividend as defined in the
Income Tax Act,No.58 of 1962 and is payable from income reserves. The income tax number of the
company is 9725149711. The number of ordinary shares in issue at the date of this declaration
is 399 186 510, including 28 180 080 treasury shares. The salient dates applicable to the interim
dividend are as follows:
Dividend dates:
Last day to trade cum interim dividend Tuesday, 13 November 2018
Commence trading ex interim dividend Wednesday, 14 November 2018
Record date Friday, 16 November 2018
Payment date Monday, 19 November 2018
Share certificates may not be dematerialised or rematerialised between Wednesday,
14 November 2018 and Friday, 16 November 2018.
DIRECTORATE
During the past financial half-year, our Board took further steps to ensure alignment to our new
ICT focused strategy and implementing its diversity policy at board level. As part of this process,
Ms Berenice Francis was appointed as an independent non-executive director on the Board
with effect from 21 June 2018. Shareholders also approved the appointment of Ms Francis as
a member of the Altron Audit Committee on 1 August 2018.
The Board further announced that Dr WP Venter, Chairman Emeritus and the founder of Altron
53 years ago, retired as non-executive director of the Board, with effect from 31 July 2018.
Mr Tim Jacobs resigned as acting Chief Financial Officer ("CFO"), with effect from 19 October
2018. Mr Andrew Holden, the current Chief Operating Officer ("COO") of Altron, was appointed
in the joint role of COO and acting CFO on 19 October 2018. As previously communicated, the
recruitment process of identifying a permanent CFO remains ongoing.
OUTLOOK
Altron remains well-positioned for continued growth and execution of its One Altron strategy of
offering end-to-end solutions to its extensive customer base. We continue to focus on organic
growth, supplemented by selective acquisitions. In particular, we will:
- fully integrate Altron Karabina;
- build stronger Cloud and Data Analytics capabilities;
- operationalise the Huawei and Altron Internet of Things partnership;
- establish a presence in India through Netstar; and
- conclude a debt refinancing package.
This information is the responsibility of the directors and has not been reviewed or audited
by the auditors.
Johannesburg
25 October 2018
Sponsor
Investec Bank Limited
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2018 2017* 2018*
R millions change (Unaudited) (Unaudited) (Audited)
Continuing operations
Revenue 44 9 779 6 792 14 743
Operating costs before capital items** (9 102) (6 248) (13 518)
Earnings before interest, tax, depreciation and amortisation
and capital items (EBITDA before capital items)** 24 677 544 1 225
Depreciation and amortisation** (256) (210) (442)
Operating profit before capital items 26 421 334 783
Capital items (note 1) 16 (16) (38)
Result from operating activities 437 318 745
Finance income 72 85 164
Finance expense (162) (172) (342)
Share of profit of equity accounted investees, net of taxation - (1) (1)
Profit before taxation 347 230 566
Taxation (78) (60) (145)
Profit for the period from continuing operations 269 170 421
Discontinued operations
Revenue 921 1 905 2 938
Operating costs before capital items (856) (1 914) (2 930)
Earnings before interest, tax, depreciation and amortisation
and capital items (EBITDA before capital items) 65 (9) 8
Depreciation and amortisation - - -
Operating profit/(loss) before capital items 65 (9) 8
Capital items (note 1) (48) (63) (271)
Result from operating activities 17 (72) (263)
Finance income 13 25 56
Finance expense (14) (42) (77)
Profit/(loss) before taxation 16 (89) (284)
Taxation 4 (6) 31
Profit/(loss) for the period from discontinued
operations 20 (95) (253)
Profit for the period from total operations 289 75 168
Other comprehensive income
Items that will never be reclassified to profit or loss
Remeasurement of net defined benefit asset/obligation - - (5)
Items that are or may be reclassified subsequently
to profit or loss
Foreign currency translation differences in respect
of foreign operations 165 5 (62)
Transfer to reserves - - (3)
Effective portion of changes in the fair value of cash flow hedges 12 5 2
Other comprehensive income for the period, net of taxation 177 10 (68)
Total comprehensive income for the period 466 85 100
Net profit/(loss) attributable to:
Non-controlling interests (3) (12) (19)
Non-controlling interests from continuing operations - 7 17
Non-controlling interests from discontinued operations (3) (19) (36)
Altron equity holders 292 87 187
Altron equity holders from continuing operations 269 163 404
Altron equity holders from discontinued operations 23 (76) (217)
Net profit for the period 289 75 168
Total comprehensive income attributable to:
Non-controlling interests - (11) (18)
Non-controlling interests from continuing operations - 7 17
Non-controlling interests from discontinued operations - (18) (35)
Altron equity holders 466 96 118
Altron equity holders from continuing operations 434 178 356
Altron equity holders from discontinued operations 32 (82) (238)
Total comprehensive income for the period 466 85 100
Basic earnings per share from
continuing operations (cents) 66 73 44 109
Diluted basic earnings per share from
continuing operations (cents) 64 72 44 108
Basic profit/(loss) per share from
discontinued operations (cents) 129 6 (21) (58)
Diluted basic profit/(loss) per share from
discontinued operations (cents) 129 6 (21) (58)
Basic earnings per share from total operations (cents) 229 79 24 51
Diluted basic earnings per share from
total operations (cents) 239 78 23 50
* 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.
** Contract fulfilment costs relating to hardware and fitment have been reclassified to depreciation. These expenses were previously included
in operating costs before capital items.
CONDENSED CONSOLIDATED BALANCE SHEET
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2018 2017* 2018*
R millions (Unaudited) (Unaudited) (Audited)
Non-current assets 3 787 3 187 3 709
Property, plant and equipment 618 570 615
Intangible assets including goodwill 1 761 1 193 1 669
Equity-accounted investments 20 23 20
Other investments 463 503 468
Rental finance advances 88 95 98
Contract fulfilment costs and other 448 432 461
Defined benefit asset 170 162 164
Deferred taxation 219 209 214
Current assets 6 169 5 626 5 749
Inventories 1 002 931 993
Trade and other receivables 3 343 2 605 3 270
Financial assets at fair value through profit and loss 83 - -
Contract assets 226 - -
Assets classified as held for sale 274 1 013 714
Taxation receivable 4 5 4
Cash and cash equivalents 1 237 1 072 768
Total assets 9 956 8 813 9 458
Equity and liabilities
Total equity 3 062 2 523 2 545
Equity holders of Altron 3 264 2 760 2 790
Non-controlling interests (202) (237) (245)
Non-current liabilities 1 192 1 694 1 491
Loans 1 128 1 633 1 413
Provisions 5 4 5
Deferred taxation 59 57 73
Current liabilities 5 702 4 596 5 422
Loans 354 323 314
Bank overdraft 1 187 808 972
Trade and other payables 3 014 2 654 3 582
Financial liabilities at fair value through profit and loss 20 - -
Contract liabilities 762 - -
Provisions 52 19 20
Liabilities classified as held for sale 196 739 465
Taxation payable 117 53 69
Total equity and liabilities 9 956 8 813 9 458
Net asset value per share (cents) 880 744 752
* 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.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to Altron equity holders
Share Non-
capital and Treasury Retained controlling Total
R millions premium shares Reserves earnings Total interests equity
Balance at 28 February
2017 (Audited)* 2 747 (299) (2 536) 2 356 2 268 (240) 2 028
Total comprehensive
income for the period
Profit for the period - - - 87 87 (12) 75
Other comprehensive
income
Foreign currency translation
differences in respect of
foreign operations - - 5 - 5 - 5
Effective portion of changes
in the fair value of cash flow
hedges - - 4 - 4 1 5
Total other comprehensive
income - - 9 - 9 1 10
Total comprehensive income
for the period - - 9 87 96 (11) 85
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Dividends to equity holders - - - - - (5) (5)
Issue of share capital 410 - (10) - 400 - 400
Share-based payment
transactions - - 13 - 13 - 13
Total contributions by and
distributions to owners 410 - 3 - 413 (5) 408
Changes in ownership
interests in subsidiaries
Acquisition of subsidiary - - - - - 2 2
Buy-back of non-controlling
interest - - (17) - (17) 17 -
Total changes in
ownership interests in
subsidiaries - - (17) - (17) 19 2
Total transactions with
owners 410 - (14) - 396 14 410
Balance at 31 August 2017
(unaudited)* 3 157 (299) (2 541) 2 443 2 760 (237) 2 523
Total comprehensive
income for the period
Profit for the period - - - 100 100 (7) 93
Other comprehensive
income
Foreign currency translation
differences in respect of
foreign operations - - (67) - (67) - (67)
Remeasurement on net
defined benefit asset - - (5) - (5) - (5)
Transfer to reserves - - (3) - (3) - (3)
Effective portion of changes
in the fair value of cash flow
hedges - - (3) - (3) - (3)
Total other comprehensive
income - - (78) - (78) - (78)
Total comprehensive income
for the period - - (78) 100 22 (7) 15
* 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.
Attributable to Altron equity holders
Share Non-
capital and Treasury Retained controlling Total
R millions premium shares Reserves earnings Total interests equity
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Share-based payment
transactions - - 7 - 7 - 7
Issue of share capital 3 - (3) - - - -
Total contributions by and
distributions to owners 3 - 4 - 7 - 7
Changes in ownership
interests in subsidiaries
Buy-back of non-controlling
interest - - 1 - 1 (1) -
Total changes in ownership
interests in subsidiaries - - 1 - 1 (1) -
Total transactions with
owners 3 - 5 - 8 (1) 7
Balance at 28 February
2018 (Audited)* 3 160 (299) (2 614) 2 543 2 790 (245) 2 545
Impact of change in
accounting policy (note 12) - - - (4) (4) - (4)
Restated total equity
at the beginning of the
financial year 3 160 (299) (2 614) 2 539 2 786 (245) 2 541
Total comprehensive
income for the period
Profit for the period - - - 292 292 (3) 289
Other comprehensive
income
Foreign currency translation
differences in respect of
foreign operations - - 165 - 165 - 165
Effective portion of changes
in the fair value of cash flow
hedges - - 9 - 9 3 12
Total other comprehensive
income - - 174 - 174 3 177
Total comprehensive income
for the period - - 174 292 466 - 466
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Dividends to equity holders - - - - - (6) (6)
Share-based payment
transactions - - 12 - 12 - 12
Issue of share capital 1 - (1) - - - -
Total contributions by and
distributions to owners 1 - 11 - 12 (6) 6
Changes in ownership
interests in subsidiaries
Non-controlling interest
disposed - - - - - 49 49
Total changes in ownership
interests in subsidiaries - - - - - 49 49
Total transactions with
owners 1 - 11 - 12 43 55
Balance at 31 August 2018
(unaudited) 3 161 (299) (2 429) 2 831 3 264 (202) 3 062
* 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.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2018 2017 2018
R millions (Unaudited) (Unaudited) (Audited)
Cash flows from operating activities 486 15 582
Cash generated by operations 720 598 1 234
Interest received 77 86 178
Interest paid (177) (214) (417)
Dividends received from equity accounted investees
and other investments 4 1 32
Changes in working capital (90) (363) (298)
Taxation paid (48) (90) (141)
Cash available from operating activities 486 18 588
Dividends paid, including to non-controlling interests - (3) (6)
Cash flows utilised in investing activities (65) (296) (971)
Proceeds on the disposal of subsidiaries and businesses net of cash 73 117 233
Acquisition of subsidiaries, net of cash acquired - (86) (698)
Acquisition of intangible assets (24) (43) (84)
Acquisition of property, plant and equipment (72) (99) (194)
Investment in contract fulfilment costs (95) (118) (257)
Other investing activities 53 (67) 29
Cash flows (utilised in)/from financing activities (249) 73 (160)
Loans repaid (251) (335) (627)
Proceeds from share issue - 400 400
Loans advanced - - 67
Other financing activities 2 8 -
Net increase/(decrease) in cash and cash equivalents 172 (208) (549)
Net cash and cash equivalents at the beginning of the period (204) 329 329
Cash and cash equivalents at the beginning of the period (204) 417 417
Cash previously classified as held for sale - (88) (88)
Effect of exchange rate fluctuations on cash held 82 20 16
Bank overdraft classified as held for sale - 123 -
Net cash and cash equivalents at the end of the period 50 264 (204)
NOTES
Six months Six months Year
ended ended ended
31 August 31 August 28 February
% 2018 2017 2018*
Cents change (Unaudited) (Unaudited) (Audited)
Headline earnings per share from continuing operations 49 70 47 119
Normalised headline earnings per share from
continuing operations 25 71 57 135
Headline earnings/(loss) per share from
discontinued operations 286 13 (7) 2
Headline earnings per share from total operations 108 83 40 121
Diluted headline earnings per share from total operations 95 78 40 120
* 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.
BASIS OF PREPARATION
The condensed consolidated interim financial statements for the six months ended 31 August 2018 are prepared in
accordance with International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee (APC), Financial Pronouncements as issued by
the Financial Reporting Standards Council (FRSC), and the requirements of the Companies Act of South Africa.
The condensed consolidated interim financial statements should be read in conjunction with the annual financial
statements for the year ended 28 February 2018, which have been prepared in accordance with International
Financial Reporting Standards (IFRS).
This report was compiled under the supervision of Mr Tim Jacobs CA(SA), acting Chief Financial Officer. The
condensed consolidated interim financial results have not been audited or reviewed by the company's auditor,
PricewaterhouseCoopers Inc.
Principal accounting policies
The group has adopted all the new, revised or amended accounting pronouncements as issued by the International
Accounting Standards Board (IASB) which were effective for the group from 1 March 2018. The following standards
had an impact on the group:
- IFRS 9 Financial instruments (IFRS 9), and
- IFRS 15 Revenue from Contracts with Customers (IFRS 15).
The accounting policies applied in the preparation of the condensed consolidated interim financial statements
are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous
consolidated annual financial statements except for the adoption of the accounting standards as stated above.
Refer to note 12 for details.
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2018 2017 2018
R millions (Unaudited) (Unaudited) (Audited)
1. CAPITAL ITEMS
Continuing operations
Net profit on disposal of property, plant and equipment 16 1 1
Impairment of property, plant and equipment - - (17)
Impairment of intangible assets - (17) -
Impairment of goodwill - - (30)
Reversal of provision related to East Africa disposal - - 10
Impairment of historic proceeds receivable - - (2)
16 (16) (38)
Discontinued operations
Impairment of property, plant and equipment (6) - -
Impairment of intangible assets (22) - (6)
Impairment of held-for-sale disposal groups (53) (48) (175)
Profit/(loss) on disposal of discontinued operations 30 (15) (90)
Net profit on disposal of property, plant and equipment 3 - -
(48) (63) (271)
Total (32) (79) (309)
2. RECONCILIATION BETWEEN ATTRIBUTABLE
EARNINGS AND HEADLINE EARNINGS
Attributable to Altron equity holders 292 87 187
Capital items 32 79 309
Tax effect of capital items 2 (12) (22)
Non-controlling interest in capital items (18) (5) (26)
Headline earnings 308 149 448
3. RECONCILIATION BETWEEN ATTRIBUTABLE
EARNINGS AND HEADLINE EARNINGS FROM
CONTINUING OPERATIONS
Attributable to Altron equity holders 269 163 404
Capital items (16) 16 38
Tax effect of capital items 5 (5) (1)
Headline earnings 258 174 441
4. RECONCILIATION BETWEEN ATTRIBUTABLE
EARNINGS AND HEADLINE EARNINGS FROM
DISCONTINUED OPERATIONS
Attributable to Altron equity holders 23 (76) (217)
Capital items 48 63 271
Tax effect of capital items (3) (7) (21)
Non-controlling interest in capital items (18) (5) (26)
Headline earnings 50 (25) 7
5. RECONCILIATION BETWEEN HEADLINE EARNINGS
AND NORMALISED HEADLINE EARNINGS FROM
CONTINUING OPERATIONS
Normalised headline earnings from continuing operations have
been presented to demonstrate the impact of material one-off
costs on the headline earnings of the continuing operations.
The presentation of normalised headline earnings is not
an IFRS requirement.
Headline earnings are reconciled to normalised headline earnings
as follows:
Headline earnings 258 174 441
Foreign currency losses on transaction funding/gains on deferred - 2 (6)
acquisition liability
Retrenchment and restructuring costs 9 47 77
Acquisition related costs - - 8
Tax effect of adjustments (3) (13) (20)
Normalised headline earnings 264 210 500
6. RECONCILIATION BETWEEN ATTRIBUTABLE EARNINGS AND DILUTED EARNINGS
There were no reconciling items between attributable earnings and diluted earnings.
7. DISPOSAL OF SUBSIDIARIES AND BUSINESSES
Disposal of 80% interest in Powertech Transformers Proprietary Limited ("Powertech
Transformers")
Effective 31 July 2018, Powertech disposed of its collective 80% equity interest in Powertech Transformers for
R250 million.
This operation formed part of the Powertech group, which has been disclosed as a discontinued operation.
R millions
Net assets of the above operations disposed are as follows:
Non-current assets 2
Current assets 493
NCI 49
Current liabilities (285)
Disposal value 259
Profit on disposal of subsidiaries 30
Cash and cash equivalents disposed (39)
Proceeds receivable (189)
Proceeds received on disposal 61
8. DISCONTINUED OPERATIONS
Impairment of held-for-sale disposal groups
Previously, the decision was taken to dispose of the Powertech group and the Multimedia group and, as a result,
these businesses have been classified as discontinued operations. The relevant requirements of IFRS 5 have
been met for this classification.
The disposal groups are stated at fair value less costs to sell. The non-recurring fair value measurement of
the disposal groups was determined with reference to amongst other things indicative offers from prospective
buyers and any shortfall to the carrying value was then impaired.
The impairments charged in the current period reflect a decline in expected proceeds due to the prolonged
disposal processes and the performance of the operations.
Powertech Transformers was disposed of in the current period (note 7).
Management believes that the conclusion of the remaining disposals will be effected within the next 12 months.
The Powertech and Mutimedia group businesses were previously classified as held-for-sale as well as
discontinued operations.
31 August 31 August 28 February
R millions 2018 2017 2018
Net assets of disposal groups held for sale:
Assets classified as held for sale 274 1 013 714
Non-current assets 75 256 129
Current assets 199 757 585
Liabilities classified as held for sale (196) (739) (465)
Non-current liabilities - (9) (5)
Current liabilities (196) (730) (460)
31 August 31 August 31 August
2018 2018 2018
Multimedia
R millions group Other Total
Breakdown of disposal groups held for sale:
Assets classified as held for sale 233 128 361
Non-current assets 34 128 162
Current assets 199 - 199
Impairment of held for sale disposal group (87)
274
Liabilities classified as held for sale (196) - (196)
Non-current liabilities - -
Current liabilities (196) (196)
28 February 28 February 28 February 28 February
2018 2018 2018 2018
Powertech Multimedia
R millions Transformers group Other Total
Breakdown of disposal groups held for sale:
670 228 138 1 036
Non-current assets 224 60 5 289
Current assets 446 168 133 747
Impairment of held for sale disposal group (322)
Assets classified as held for sale 714
Liabilities classified as held for sale (263) (160) (42) (465)
Non-current liabilities - (5) - (5)
Current liabilities (263) (155) (42) (460)
Six months Six months Year
ended ended ended
31 August 31 August 28 February
R millions 2018 2017 2018
Cash flows utilised in discontinued operations
Net cash utilised in operating activities 110 (6) (178)
Net cash generated from investing activities 62 84 186
Net cash utilised in financing activities - (1) (9)
Net cash flow for the period 172 77 (1)
9. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
The group measures two preference share investments, its derivative foreign exchange contracts used for
hedging and contingent purchase considerations at fair value.
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.
