AEL: ALLIED ELECTRONICS CORPORATION LIMITED - Unaudited consolidated interim results for the six months ended 31 August 2019 and interim dividend announcement
Click to open full article
Unaudited consolidated interim results for the six months ended 31 August 2019 and interim dividend announcement ALLIED ELECTRONICS CORPORATION LIMITED (Incorporated in the Republic of South Africa) (Registration number 1947/024583/06) Share code: AEL ISIN: ZAE000191342 UNAUDITED CONSOLIDATED INTERIM RESULTS For the six months ended 31 August 2019 and interim dividend announcement FINANCIAL COMMENTARY The consistent implementation of our FY17 One Altron strategy continues to deliver on our stated goal of doubling EBITDA by FY22, with comfortable debt levels, despite the ongoing challenging economy. During the financial half-year, the group's financial performance continued to improve: - Revenue from continuing operations increased by 8% to R8.53 billion (up 17% excluding IFRS 15 - Revenue from Contracts with Customers - adjustments). - EBITDA from continuing operations increased by 19% to R803 million (up 9% excluding R67 million IFRS 16 - Leasing - adjustments). - HEPS from continuing operations increased by 4% to 73 cents. - Basic earnings per share (EPS) from continuing increased by 4% to 76 cents. - Interim dividend declared of 29 cents per share. We continue to stay focused on delivering innovation that matters through technology solutions and services that deliver impact with tangible results for businesses and have positive societal impact. To this end, we secured key wins in the financial half-year under review. These included, amongst others, the partnership agreement entered into between Toyota, Vodacom and Netstar. Furthermore, Altron Karabina, has recently been awarded Licencing Solutions Provider status by Microsoft. We remain on track to double EBITDA by FY22. The growth in our Altron Bytes UK operations continues to exceed our expectations. Further highlights for the period under review include our improved employee engagement and customer NPS scores. During the period under review, the group experienced challenges in one of its operations. As previously communicated, Altron Nexus was impacted by the City of Tshwane ("CoT") Municipal Broadband Network judgement handed down against Thobela Telecoms. In addition, internal investigations following the precautionary suspension of key executives remains ongoing. Altron Nexus also experienced increased working capital demands as a result of large infrastructure projects and increased business activity. The integration of Altron Karabina, which was acquired during FY19, was slower than expected. However, this acquisition remains strategically relevant to the group given their capabilities in the fast-growth cloud and data analytics environment. To improve market comprehension of our solutions and services, we have again grouped our operations into the following segments, namely Digital Transformation, Healthtech/Fintech, Smart IoT and Managed Services. While the discontinued operations were included in the FY19 interim results, the process of disposing of non-core assets has largely been concluded and accordingly, these results are presented with discontinued operations excluded. Continuing operations' results provide stakeholders a more appropriate measure of the core sustainable earnings of Altron. The numbers and commentary below are shown post the incorporation of the impact of IFRS 16 which came into effect on 1 March 2019, and which had a positive impact of R67 million on EBITDA and a negative impact of R25 million on NPBT for the period ended 31 August 2019. IFRS 16 has been presented on a prospective basis without restating prior period numbers, in line with the accounting standard requirements. Continuing operations Revenue increased by 8% to R8.53 billion on a statutory basis. However, the impact of IFRS 15 on cloud-based sales in our UK operations is material given that these transactions are treated as agent and therefore only the margin is recognised as revenue. Taking gross cloud-based transactions with UK customers into account, group revenue grew by 17% on a like-for-like basis. EBITDA increased by 19% to R803 million, with strong EBITDA growth from the group's Digital Transformation operations of 31%. The group's EBITDA margin on reported revenue increased to 9.4% compared to 8.5% in the prior half-year. Within a South African context, the group generates 85% of its revenue from the private sector and 15% from the public sector. The EBITDA growth for the half-year was largely attributable to organic growth. The depreciation charge for the group increased from R256 million to R347 million and net finance expense increased from R90 million to R118 million in H1 FY20, both inclusive of the impact of IFRS 16 adjustments. Capital items were a profit of R10 million relating to the profit on disposal of fixed property offset by the impairment of contract cost in Netstar. INTERIM DIVIDEND Notice is hereby given that an interim gross cash dividend of 29 cents per share (23.2 cents net of 20% dividend withholding tax) for the six months ended 31 August 2019 has been declared, payable to shareholders recorded in the register of the company at the close of business on the record date appearing below. This is in line with the board's stated 2.5x dividend cover. 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 399 414 023, including 28 180 080 treasury shares. The salient dates applicable to the interim dividend are as follows: Dividend dates Last day to trade cum dividend Tuesday, 12 November 2019 Commence trading ex dividend Wednesday, 13 November 2019 Record date Friday, 15 November 2019 Payment date Monday, 18 November 2019 Share certificates may not be dematerialised or rematerialised between Wednesday, 13 November 2019 and Friday, 15 November 2019. OUTLOOK In the ongoing muted economic conditions in the jurisdictions in which the group operates, Altron remains positioned for continued growth and accelerating the implementation 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 the acquisition of selective small to medium sized businesses in our focus areas leading to enhanced capabilities or expanded geographic footprint. We will focus in particular on: - Return Altron Nexus to profitability and conclude unethical conduct investigations - Continued focus on working capital management - Strengthen Top Accounts focus through appointment of Group Sales Executive and dedicated account managers - High single digit EBITDA growth due to slow growth in SA economy. - Expand our Security offerings to the market. For and on behalf of the board MJ Leeming M Nyati C Miller Chairman Chief Executive Chief Financial Officer 23 October 2019 Further information This short form announcement is the responsibility of the directors and any financial forecast information has not been reviewed or reported on by the external auditors. It is only a summary of the information contained in the full announcement and does not contain full or complete details. Any investment decision should be based on the full announcement accessible from Thursday, 24 October 2019, via the JSE link and also available on the Company's website at: https://www.altron.com/wp-content/uploads/2019/10/altronfy20.pdf The full announcement is also available at our registered office for inspection, at no charge, during office hours. Copies of the full announcement may be requested by contacting WK Groenewald on telephone +27 11 645 3672, or email wkgroenewald@altron.com. The JSE link is as follows: https://senspdf.jse.co.za/documents/2019/jse/isse/AELE/H1FY20.pdf Registered office: Altron House, 4 Sherborne Road, Parktown, 2193 Sponsor: Investec Bank Limited Transfer secretaries: Computershare Investor Services (Pty) Ltd, 1st Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 Directors: MJ Leeming (Chairman), M Nyati (Chief Executive)*, C Miller (Chief Financial Officer)*, AC Ball, BW Dawson, BJ Francis, GG Gelink, P Mnganga, S Sithole (Zimbabwean), SW van Graan, RE Venter * Executive Group Company Secretary: WK Groenewald Date: 24/10/2019 08:00:00 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.