· altron • 4th proof our people continue to be our greatest asset. through their deep...
TRANSCRIPT
ALTRON • 4TH PROOF
One Company, Many Minds
A N N U A L R E P O R T 2 0 0 6
ALLIED ELECTRONICS CORPORATION LIMITED
ALLIED
ELECTR
ON
ICS
COR
PO
RA
TION
LIMITED
– AN
NU
AL R
EPO
RT 2
00
6
ALTRON • 4TH PROOF
Our people continue to be our greatest asset.Through their deep understanding of customer needs, we develop solutions that improve customer productivity and enhance our brands
www.altron.co.za
Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06) (Share code: ATN) (ISIN: ZAE000029658) (Share code: ATNP) (ISIN: ZAE000029666)
(“Altron”)
ALTRON ANNUAL REPORT 2006
Nature of businessAltron, through its principal subsidiaries, Allied Technologies Limited,
Bytes Technology Group Limited and Power Technologies (Pty) Limited,
is invested in the telecommunications, multi-media, information
technology and power electronics industries.
CONTENTS01 – Financial highlights02 – Mission and core values03 – Strategic philosophies04 – Six-year financial review06 – Corporate structure08 – Executive committee10 – Chairman’s statement16 – Chief Executive’s review
44 – Sustainability report Through the Altron F1 x 2 SA grand prix R6 million was donated to the Nelson Mandela Children’s Fund and Unite Against Hunger
46 – Mission statement47 – Corporate code of conduct48 – Message from the Chief Executive50 – JSE SRI Index 200551 – Value-added statement
52 – Transformation/Broad-based black economic empowerment
56 – Corporate social investment 62 – Our people 70 – Preferential procurement and
enterprise development 73 – Safety, health and environment 82 – Shareholders 89 – Corporate governance102 – Remuneration report
28 – Operational Review28 – Telecommunications
Netstar subscriber base for stolen vehicle recovery services now exceeds 362 000 vehicles
32 – Power Electronics and Multi-media38 – Information Technology
108 – Financial statements171 – GRI content index184 – Directorate profile188 – Letter from the chairman189 – Notice of annual general meeting194 – Annual general meeting – explanatory notes195 – Form of proxy197 – Corporate data
1
Feb 06 Feb 05 % change
Revenue R14.0 bn R12.2 bn 14
Operating profit R1 040 m R963 m 8
Operating margin (%) 7.4 7.9
Operating margin excluding non-recurring losses* (%) 7.8
HEPS (cents) 189 162 17
Diluted HEPS (cents) 178 153 16
RONA (%) 26.5 24.9
Cash on hand R2.2 bn R1.5 bn
Employees 11 038 11 800
*Adjusted to exclude losses from Econet (divested) and Aberdare Telecoms (closed)
Financial highlights for the year ended 28 February 2006
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➡
HEPS increases by
17%
Revenue growth of
14%
Operating profit exceeds
R1 billion
Dividend up
24%
2
ALTRON ANNUAL REPORT 2006
Mission and core values
Altron’s mission is to:
Ü Be the leading South African-controlled information and communications
technology and power electronics group that offers high technology
products and services of quality to global markets
Ü Generate profits and create shareholder value through outstanding
customer service
Ü Remain dedicated to technological innovation
Ü Continue its commitment to the transformation process of South Africa
through broad-based black economic empowerment initiatives
Ü Integrate sustainable development into our business at every level –
our future depends on it.
Core values
Ü Customers
Ü Innovation
Ü Teamwork
Ü Accountability
Ü Sustainable development
Through these values we promote:
Ü Best business practices
Ü Environmental conservation
Ü Corporate governance
Ü Broad-based black economic
empowerment and transformation
Ü Transparency
Ü Considering the needs of all stakeholders
3
Improve existing operations
Expand organically
Acquisition criteria
Increase shareholder value
Focus on high-growth opportunities
Quality of income
International expansion
Broad-based black economic empowerment
Strategic alliances
Value-added services
Ownership of IPR
Annuity income
Market leadership/critical mass
Track record
Ü 41-year history as leading ICT and power electronics group in southern Africa
Management
Ü Decentralised management with proven track record
Competitive edge
Ü Leading market positions in most activities
Ü Exclusive relationships with leading multi-nationals including ABB, NCR, Xerox, Alcatel, Arrow and Axalto
Financial strengths
Ü Strong financial controls
Ü Strong balance sheet
Ü Strong revenue growth driven by key acquisitions and organic growth
Ü Operating profit growth to over R1 billion this year
Ü Increasing percentage of annuity-based business in the group
Risk profile
Ü Manages risk through diversified sector involvement
Ü Conservative acquisition policy
Ü High cash generation
Ü Strong internal controls
Good governance
Ü Record of sound corporate governance
Ü Responsible and transparent disclosure
Ü Listed on the JSE Social Responsibility Investment Index
Investor proposition
Strategic philosophies
4
ALTRON ANNUAL REPORT 2006
Six-year financial review
2006R million
2005*R million
2004R million
2003R million
2002R million
2001R million
INCOME STATEMENT
Revenue 13 969 12 206 10 045 11 397 9 900 8 951
Operating profit 1 040 963 718 909 763 627Financial income 112 100 145 131 110 82Financial expenses (53) (62) (26) (35) (18) (6)Share of profit from associates 32 24 9 19 24 11Capital items (54) (90) (139) 98 (133) 21
Profit before taxation 1 077 935 707 1 122 746 735Taxation (326) (339) (255) (269) (196) (146)
Profit after taxation 751 596 452 853 550 589
Attributable to minority interests 257 148 148 396 242 291Attributable to Altron equityholders 494 448 304 457 308 298
Dividends paid 176 143 117 100 90 89
BALANCE SHEET
AssetsAssociates and other investments 228 453 183 181 167 301Deferred taxation 118 112 113 132 127 80Other non-current assets 1 768 1 848 1 322 1 423 2 008 1 847Cash and cash equivalents 2 152 1 520 2 004 1 510 1 444 1 082Other current assets 3 271 3 022 2 447 2 947 3 234 2 985
Total assets 7 537 6 955 6 069 6 193 6 980 6 295
Equity and liabilitiesShareholders’ equity 2 931 2 679 2 489 2 283 1 945 1 761Minority interest 1 103 964 1 082 1 292 1 636 1 642
Fixed capital 4 034 3 643 3 571 3 575 3 581 3 403
Non-current loans 297 716 277 281 784 618Current loans 238 59 247 193 179 137
Loans 535 775 524 474 963 755
Non-current liabilities 46 83 41 120 158 165Current liabilities 2 922 2 454 1 933 2 024 2 278 1 972
Total equity and liabilities 7 537 6 955 6 069 6 193 6 980 6 295
*Restated for effect of IFRS
5
2006 2005* 2004 2003 2002 2001
RATIOS AND STATISTICS
EarningsBasic earnings per share (cents) 176.4 162.0 111.5 169.9 111.9 103.3Diluted basic earnings per share (cents) 167.8 155.1 109.3 168.3 107.5 101.0Headline earnings per share (cents) 189.2 161.7 138.1 155.3 129.2 101.5Diluted headline earnings per share (cents) 178.2 152.9 135.4 145.7 124.1 99.3Dividend proposed per share (cents) 78.0 63.0 52.0 43.0 37.0 31.0Headline dividend cover (times) 2.4 2.6 2.7 3.6 3.5 3.3Ordinary shares in issue (millions) – at year end 94 94 94 94 94 96 – weighted average 94 94 94 94 95 97Participating preference shares in issue (millions) – at year end 188 184 180 177 174 192 – weighted average 186 182 179 175 181 191ProfitabilityOperating profit to revenue (%) 7.4 7.9 7.1 8.0 7.7 7.0Return on shareholders’ equity (%) 18.2 16.8 16.0 14.3 24.1 15.1Return on capital employed (%) 22.8 21.8 17.5 22.4 16.8 15.1Return on operating assets (%) 20.6 19.8 19.1 20.8 14.6 17.2FinancialBorrowings ratio (%) 13.3 21.3 14.7 13.3 26.9 22.2Current ratio 1.9:1 1.9:1 2.0:1 2.0:1 1.9:1 1.9:1Acid test ratio 1.4:1 1.4:1 1.5:1 1.5:1 1.3:1 1.3:1Net asset value per share 1 039.6 962.6 907.0 842.9 725.9 611.7SharesNumber of shareholders – ordinary shares 1 738 1 616 1 202 1 058 1 067 510 – participating preference shares 3 396 2 916 2 722 2 685 1 471 2 184Price earnings ratio (times) – ordinary shares 13.5 9.6 8.0 5.3 5.9 7.8 – participating preference shares 11.9 9.5 8.1 4.8 5.8 7.8Market value per share at year end (cents) – ordinary shares 2 550 1 555 1 105 820 760 795 – participating preference shares 2 250 1 538 1 125 750 755 790OtherConsumer price index (percentage increase) 3.9 2.6 0.7 10.3 5.9 7.8Production price index (percentage (decrease)/increase) 5.5 1.2 (1.0) 6.2 13.2 9.1Number of employees 11 038 11 800 10 712 10 449 11 232 13 292
*Restated for effect of IFRS
DEFINITIONS
Earnings – Attributable earnings as
disclosed in the income statement.
Borrowings – All interest-bearing
liabilities, including redeemable
preference shares in subsidiaries.
Capital employed – The total of fixed
capital and borrowings.
Operating profit – is stated before
goodwill impaired and capital items.
Fixed capital – Shareholders’ equity
interest, plus minority shareholders’
equity interest in subsidiaries.
Total assets – Property, plant and
equipment, investments and loans
together with current assets.
Operating assets – Total assets less
investments, loans, deferred tax and
cash.
Acid test – The ratio of current assets
excluding inventories to current liabilities.
Borrowings ratio – The percentage of
borrowings to fixed capital.
Current ratio – The ratio of current assets
to current liabilities.
Headline dividend cover – Headline
earnings per share divided by dividends
per share.
Market value per share – The sellers’
price quoted by the JSE Limited.
Net asset value per share –
Shareholders’ equity divided by the
number of shares in issue at year end.
Price : earnings ratio – The market value
per share divided by the headline
earnings per share.
Return on capital employed – The
percentage of operating income to capital
employed.
Return on operating assets – The
percentage of operating profit to
operating assets.
Return on shareholders’ equity – The
percentage of attributable earnings to
shareholders’ equity, adjusted for net
capital items, goodwill impaired and
translation gains/losses.
6
ALTRON ANNUAL REPORT 2006
Corporate structure
TELECOMMUNICATIONS AND WIRELESS COMMUNICATIONS
Altech Autopage Cellular, Altech Supercall Cellular, Altech Mobile Direct, Altech Mobile Express – sales, distribution and services provision for cellular network operators.
Altech Netstar – Stolen Vehicle Recovery (SVR) business.
Altech Alcom Matomo and Altech Alcom Radio Distributors – design, installation and project management of Motorola radio systems.
MULTI-MEDIA AND ELECTRONICS
Altech UEC Multi-Media, Media Verge Solutions, 3CTV, Altech Global Decoder Logistics – the design and manufacture of satellite and terrestrial digital set-top decoders.
Altech Arrow Altech Distribution – the distribution of a range of professional electronic components and products.
INFORMATION TECHNOLOGY
Altech Card Solutions, Altech Data, Altech Cardtronic, Altech NamITech, Integrated Technology Solutions, Altech Isis – telecommunications middleware, payment systems and solutions, secure solutions and smartcard technologies.
OTHER
Altech Leasing
Altech Management Services
ALTECH 57.7%
7
POWER ELECTRONICS
Aberdare Cables, Alcobre (Portugal), ABB Powertech Transformers, Desta Power Matla, Willard Batteries, Sabat Battery, DC Power Systems, Dynamic (UK), Crabtree Electrical Accessories SA, Strike Technologies, Calidus/Whiteleys, Yelland Control, Tridonic SA
Ü Medium and low-voltage power cables
Ü Power and distribution transformers
Ü Automotive batteries and DC power systems
Ü Electrical accessories
Ü Lighting control gear.
TELECOMMUNICATIONS
Aberdare Network Services, Cables de Comunicaciones (Spain), Lambda Cables, Battery Technologies, Rentech
Ü Telecommunication cables and accessories
Ü Data cable systems
Ü Standby power and rectifier systems
Ü Solar systems.
BYTES TECHNOLOGY GROUP SOUTH AFRICA (BTG SA)
Bytes Document Solutions (BDS), Bytes Specialised Solutions (BSS), Bytes Managed Services (BMS), Bytes Communications Systems (BCS), Bytes Systems Integration (BSI), Bytes Outsource Services (Outsource Services), Bytes People Solutions (People Solutions), Digital Healthcare Solutions (DHS) – Xerox office products, Document management services, NCR products, Desktop services and support, Remote monitoring of computer facilities, Business communications solutions, Network and solutions management, Software sales, development, implementation and application maintenance, SAP implementation, IT infrastructure, training and education solutions, transaction switching services, practice management and informatics solutions to the healthcare industry.
BYTES TECHNOLOGY GROUP – INTERNATIONAL OPERATIONS
Bytes Technology Group UK – Software Services, Bytes Technology Group UK – IT Solutions (Plato), Xclusive Solutions, BTG Botswana, BTG Namibia, BTG Mozambique, BTG Mauritius – Microsoft licensing, Systems integration, Microsoft certified solution provider, Consulting, Document management services, Specialised equipment services, Network solutions and maintenance, Corporate internet provider.
POWERTECH 100% BTG 57.6%
8
ALTRON ANNUAL REPORT 2006
“Altron’s senior leadership team brings a wealth of
knowledge, experience and enthusiasm. Their personal,
hands-on commitment and integrity set the tone for
team Altron.”
Robert Venter
Executive Committee
Diane Radley
David Redshaw
9
ROBERT VENTER (46) Altron Chief Executive and Chairman of the Altron Executive Committee
DIANE RADLEY (40) Altron Chief Financial Officer
DOUGLAS RAMAPHOSA (49) Group Executive: Corporate Affairs
PETER CURLE (60) Director Corporate Finance: Altech
NORBERT CLAUSSEN (45) Chief Executive Officer of Powertech
DAVID REDSHAW (64) Chief Executive Officer of BTG
CRAIG VENTER (43) Chief Executive Officer of Altech
Peter Curle Douglas Ramaphosa
Norbert Claussen
Craig Venter
10
ALTRON ANNUAL REPORT 2006
Chairman’s statement
Introduction
Having successfully celebrated its 40th
anniversary during the period under review, our
group achieved significant progress in its
financial and transformation performances, as
well as sustained growth in virtually all of our
underlying operations.
Revenue increased by 14% to a record
R14 billion, while operating profit exceeded the
R1 billion mark for the first time, further
consolidating our position as a foremost player
sin our chosen markets.
The economy
The South African economy remains buoyant
and, during the period under review, was
characterised by the continued strength of the
rand, lower inflation levels, stable domestic
interest rates and sharply higher equity markets.
In particular, the commitment to accelerated
infrastructure spending has once again reinforced
government’s intention to ensure sustainable
GDP growth. I am happy to report that the sound
economic climate has created a favourable
business environment for our companies.
Inadequacies are, however, beginning to show in
certain governmental planning and spending
programmes and it is hoped that Eskom will
start to dramatically increase capacity to meet
the government’s GDP growth commitments as
we move towards 2010.
In the meantime, the long-awaited decision to
move ahead with the Gautrain project as well as
the construction of several sports arenas and
related building programmes for Soccer World
Cup 2010 augur well for many companies in
our group.
Despite the numerous challenges which the
group faced during the year, particularly
competitive imports from the East and escalating
commodity prices, our balanced portfolio of
operations has enabled us to show strong
resilience to these and other market-related
pressures. Another major strength lies in our
“I am happy to report that the sound economic climate
has created a favourable business environment for
our companies.”
11
traditional ability to adapt more readily than our
competitors to the ever continuing changes in
the global business environment.
I believe we have largely weathered the
exchange rate fluctuations, which, on the positive
side, has afforded us the opportunity to invest
further in capital equipment and thus improve
the overall competitiveness of our group.
Vision 2010
We continued to make significant progress in
our Vision 2010 transformation programme
with our internal broad-based black economic
empowerment scorecard providing the
benchmark against which we measured our
company’s progress.
This scorecard incorporates targets with specific
time frames which the group has set itself in
terms of equity ownership, management and
board representation, preferential procurement,
skills development and corporate social
investment.
Our main objective is to focus our organisation
on creating greater value by meeting the
expectations of our stakeholders and we are
achieving this through the efficient utilisation of
our capital, our people and our innovative
technologies.
The draft Codes of Good Practice on Broad-Based
Black Economic Empowerment (BBBEE),
published in December 2005 by the Department
of Trade and Industry, provides more certainty as
to how the BBBEE scorecards will be measured in
future. It is clear, however, that the significant
administrative and cost implications of these
codes on companies, in their present format, will
have to be addressed as a matter of urgency.
We stand ready with the rest of the private
sector to assist the dti in their efforts
Dr Bill Venter (Chairman and founder)
31 May 2006
12
ALTRON ANNUAL REPORT 2006
Chairman’s statement continued
to provide the most appropriate and relevant
tools for accelerating the country’s
transformation process.
Certainly, our Vision 2010 commitment has
been widely recognised as both exciting
and innovative, and has placed us in the
forefront of the local industry as far as BBBEE
is concerned.
In this regard, our anchor partnerships with
our leading empowerment companies,
Pamodzi, Kagiso and Izingwe, have added
significant value in helping us to achieve our
targets and my appreciation goes to them for
their much valued contribution.
Likewise, I have pleasure in thanking the Altron
transformation committee for the excellent
progress which is being achieved by our various
operations throughout the group. In this regard,
they have provided comprehensive comment on
our extensive progress in the Sustainability
Report.
It behoves me to welcome former senior
ABSA and Anglo American Executive,
Douglas Ramaphosa, to our group. Douglas has
been appointed Altron Group Executive for
Corporate Affairs and will sit on our various
boards and executive committees.
One of his main tasks will be to continue the
work of our Vision 2010 programme, largely
initiated by Advocate Dali Mpofu, who has left
Altron to take up the position of Chief Executive
Officer of the SABC, but who remains a non-
executive director of Altron.
Financial performance
Our financial performance this past year has been
most satisfying with healthy profitability being
driven by better-than-expected performances
from most of our operations. As pleasing as our
results are, we remain humble and far from
satisfied, although I personally believe we are
now well on our way to becoming a truly first
class, cost-effective, customer-driven group.
“Our Vision 2010 commitment has been widely
recognised as both exciting and innovative.”
13
Corporate governance
The Altron board remains cognisant of the
Listings’ Requirements of the JSE Limited, with
our companies continuing to observe sound
corporate governance principles, such as
independence, transparency and accountability.
The group benchmarks itself against the
recommendations of King II by constantly
reviewing and improving its governance
standards, full details of which are included
elsewhere in this annual report.
Share price
The market has continued to recognise Altron’s
reputation as an industry leader and confidence
in the group was clearly reflected in the
continued upward trend in our share price –
increasing by more than 90% in the 12 months
to April 2006.
Highlights
During the year a highlight was the extensive
celebration of our 40th anniversary, with several
events being held to mark this special year in
the group’s history. Particularly memorable
was an address made to the group’s senior
management by Nobel Peace Prize Winner and
Bishop Emeritus, Desmond Tutu, last July when
he congratulated Altron on its significant
contribution to the development of the local
high-technology industry and to the
transformation of South Africa as a whole.
14
ALTRON ANNUAL REPORT 2006
Chairman’s statement continued
We do, of course, value our history highly
because it has given us both the reach and
capability of our future, and this momentum
continues. Our market capitalisation, for
instance, has now exceeded the R8 billion
mark, while firm assurance in our future has,
once again been demonstrated by Vodacom
and MTN who have each concluded service
provider and incentive agreements with
Altech Autopage Cellular.
Outlook
Altron remains both enthusiastic and
optimistic about the future growth of South
Africa and looks forward to the years ahead
with confidence.
We have entered our new financial year well
positioned to take full advantage of the
commitment to infrastructural spending as
well as other exciting opportunities which
have arisen in sub-Saharan Africa. These
include increased investment in the sub-
continent’s power generation, transmission
and distribution capacity, its extensive IT and
telecommunications networks and continued
growth in the building and construction
industries. And, who better to tackle these
immense challenges than our group?
As I enter my 42nd year with Altron,
I continue to be impressed by the
performance of a fine and honourable group
and, of course, our 11 000 committed and
highly dedicated people. I heartily thank
them, our loyal customers and our many
partners and suppliers world-wide for their
continued confidence and ongoing
commitment as we continue to meet our
goals for the current year. I am also grateful
for the wise counsel of our non-executive
directors, who, in their own right, are
talented leaders or directors of other large
South African corporations and service
groups. I would like to take this opportunity
of welcoming the new board members who
“Altron remains both enthusiastic and optimistic about
the future growth of South Africa and looks forward to
the years ahead with confidence.”
15
joined the Altron board during the year,
namely Mark Lamberti and Norbert Claussen.
In particular, I applaud the outstanding
leadership abilities of our Chief Executive,
Robert Venter, and the commendable
achievements of his executive team for
continuing to shape our group and its heritage,
and for making the past year one to remember
with pride and satisfaction.
Their outstanding management skills, coupled
with their ongoing focus on costs and efficiencies,
as well as the pursuit of opportunities available
to us, will help Altron to remain a winning
company and underpin our performance
going forward.
16
ALTRON ANNUAL REPORT 2006
Chief Executive’s review
The highlight of the period under review was
the celebration of Altron’s 40th anniversary.
From its humble beginnings 40 years ago,
Altron’s principal operating subsidiaries –
Altech, Powertech and BTG – today represent
some 140 businesses, employing more than
11 000 people. Our market capitalisation
recently passed the R8 billion mark but – in an
impersonal world – personal relationships
remain the hallmark of our group. From our
international technology partners to our
operational empowerment shareholders to the
men and women of Altron, the common thread
is a desire for excellence, dedication to service
delivery and a focus on customers.
Financial overview
I am pleased to report that during the period
under review Altron posted increases in both
revenue which was up 14% to R14.0 billion
from R12.2 billion, and operating profit which
exceeded R1 billion for the first time. Our
headline earnings per share increased by 17%
to 189 cents per share and a dividend of 78
cents per share was declared representing a
24% increase on the prior year.
Based on the overall performance of our
underlying operations, we were able to
improve our return on capital employed to
23% and our return on net assets to 27%. Our
balance sheet remains strong with cash on
hand of R2.2 billion, compared to R1.5 billion
in the prior year. We remain committed to
investing in capacity within our operations and
in the light of this, we incurred capital
expenditure of R315 million during the year
under review.
Altech’s growth in headline earnings per share
of 12% to 379 cents per share was driven by
better-than-expected performances from most
of its operating companies including Altech
“Based on the overall performance by all our
underlying operations we were able to improve our
return on capital employed to 23% and our return on
net assets to 27%.”
17
Autopage Cellular, Altech Netstar, Altech
UEC Multi-media, Altech Card Solutions and
Altech Isis. However, performance was
disappointing at Altech NamITech which
experienced pricing pressures, adversely
impacting on profitability. As a result of this
underperformance and the closure of certain
operations, a goodwill impairment of
R82 million has been raised in the current year.
The necessary corrective actions have been
taken at Altech NamITech in terms of
management changes, a business realignment
and a restructuring exercise. Altech’s balance
sheet remains strong with a net asset value of
1 721 cents per share and cash of R1.5 billion.
Return on capital employed is 32%. A five-year
service provider and incentive agreement, with
an option to renew for a further five years, was
signed between Altech Autopage Cellular and
Vodacom and similar agreements are also in
place with Cell C and MTN.
BTG recorded a strong performance with
headline earnings per share growing by 48%
to 127.7 cents from 86.4 cents, which, on an
adjusted basis and when excluding the once-
off impact of raising a deferred tax asset,
shows an increase of 27% to 109.4 cents.
BTG’s revenue growth of 19% to R3.5 billion
compared to R2.9 billion for the prior year
reflects organic growth of 10%, the inclusion
of the businesses acquired from CS Holdings
for the full year as well as the consolidation of
100% of Digital Healthcare Solutions revenues
for the first time.
The improvement by 28% in operating profit
to R282 million compared to R221 million in
the previous year is as a result of margin
Robert Venter (Chief Executive)
31 May 2006
18
ALTRON ANNUAL REPORT 2006
Chief Executive’s review continued
improvements at all the BTG operations,
as well as the return to profitability of the
BTG UK operations. Operating margin at
BTG now exceeds 8%.
Powertech recorded strong results on the
back of positive performances from its
operating business units, including ABB
Powertech Transformers, Aberdare Cables,
the Powertech Battery Group and the
Powertech Industrial Group. Revenue
increased by 19% to R4.5 billion from
R3.7 billion in the prior year and operating
profit grew by 14% from R245 million to
R280 million. Aberdare’s power cable
business delivered good results for the year
but the continued downturn in the telecoms
market required a restructure of the copper
and fibre telecoms cable operations resulting
in the closure of the manufacturing plant in
Port Elizabeth.
The group’s finance operations produced an
improved contribution to the group’s overall
results. This was mainly due to higher
secondary rental income. During the year,
Altron disposed of its 33% stake in
Fintech (Pty) Limited to Fintech management
and Sanlam Investment management, in line
with the group’s long-term objectives.
Fintech Receivables 1 (FR1), Altron’s
securitised interest in the financing book, is
amortising in line with expectations.
Strategic philosophies and growth
drivers
Over the past five years, the group has
remained committed to achieving the broad
strategic philosophies and growth strategies
which are illustrated on page 3. Looking back
over the year, management is well satisfied
that many of our financial objectives and
“Looking back over the year, management is well
satisfied that many of our financial objectives and
targets have been met in terms of our strategic
philosophy to improve shareholder value.”
19
strategic targets have been met allowing us
to further improve shareholder value. In this
regard, our market capitalisation has
increased from R4.7 billion in February 2005
to R8.7 billion as at 8 May 2006 which
represents an 85% increase over this period.
In terms of our strategy to build annuity
income throughout our group, this income
grew, on a contractual revenue basis, to
approximately 50% to 60% of total revenue.
As far as the group’s commitment to
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strategic alliances is concerned, service
provider and incentive agreements have
been concluded between Altech Autopage
Cellular and Vodacom and MTN. Existing
relationships and alliances with international
partners were further strengthened and new
territories were acquired from, among
others, Xerox (Kenya) for Bytes Document
Solutions in the BTG group. Similar progress
was made in terms of the group’s strategic
philosophies with regards to broad-based
20
ALTRON ANNUAL REPORT 2006
Chief Executive’s review continued
black economic empowerment; focus on
high-growth opportunities; international
expansion and the ownership of intellectual
property rights (IPR).
The various opportunities in the relevant
sectors have been consolidated into a
number of strategic growth drivers for our
group. These key growth drivers were
identified and outlined in 2004 and continue
to form the basis of our operational growth
strategy through 2005 and 2006.
Growth drivers
Public sector infrastructure spend
To ensure that the full potential of this growth
driver is exploited, Powertech’s focus remains
on expanding its products and services
offering which span all three segments of
the power continuum, namely generation,
transmission and distribution. Systems are
being developed to maximise synergies in
the group by optimising production and
distribution capabilities and additional
manufacturing capacity is being installed in
appropriate areas. During the period under
review Powertech’s range of offerings was
enhanced with the purchase of Calidus Von
Roll Isola, a supplier of electrical insulation
materials for the high-voltage, generation
and traction industries. Additional bolt-on
acquisitions are under consideration.
Key growth drivers for the groupA positive medium to long-term outlook for Altron
Public sector infrastructure
spend
Powertech
Deregulation of the
telecoms industry
Altech BTG
Mobile telecoms market in
Africa
Altech Powertech
Conversion to Europay/Mastercard/Visa (EMV) standard
Altech BTG
Integrated IT offering
BTG
21
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Ten-year track record
22
ALTRON ANNUAL REPORT 2006
Chief Executive’s review continued
“The various opportunities in the relevant
sectors have been grouped into a number of
strategic growth drivers for our group.”
Deregulation of the South African telecoms
industry
Altech Autopage Cellular is expected to benefit
from the changing telecoms landscape in
South Africa, specifically in terms of the new
Electronic Communications Act and the
acceleration towards voice over internet protocol
(VoIP) and the demand for more affordable
broadband offerings. As a result Altech
Autopage Cellular anticipates that it will be in
a position to offer a much broader range of
voice and data products in the future. The
company is currently finalising its virtual
network operator (VNO) and electronic service
provider (ESP) strategy and has secured a VANS
licence. The announced conversion from
analogue to digital TV standard in light of the
Soccer World Cup 2010 offers further
opportunities for Altech UEC Multi-Media.
BTG’s Bytes Communication Systems and
Bytes Systems Integration are also expected
to leverage off their existing VoIP offerings.
Mobile telecoms market in Africa
The African mobile telecoms market is growing
beyond expectations while cellular penetration
rates remain well below that of the rest of the
world. Growing wireless demand in Africa has
created a variety of opportunities for the group.
Altech NamITech opened a pre-paid voucher
manufacturing plant in Nigeria during the year
which has been successfully commissioned and
is operating at full capacity. Powertech’s
Battery Technologies, with its comprehensive
product range, is securing orders from
operators in Nigeria for DC power products and
will shortly establish Battery Technologies
Nigeria.
23
Conversion to Europay/Mastercard/Visa (EMV)
standard
The implementation of the EMV standard in the
South African banking industry has been slower
than expected but should gain momentum in
the forthcoming year. ATM and EFTPOS terminal
conversions in this regard, are well progressed,
benefiting BTG through its Bytes Specialised
Solutions operation who are the suppliers and
distributors of NCR ATM products, and Altech Card
Solutions, the suppliers of Axalto EFTPOS
terminals and related software. The supply of
chip-based cards is expected to benefit Altech
NamITech as the standard is progressively
introduced. Future opportunities lie ahead for
EMV within the African banking industry.
An integrated information technology (IT)
offering
Through the group’s IT focused businesses, BTG is
able to leverage off a blue-chip customer base
by offering an integrated IT service. The IT
market in the United Kingdom offers growth
potential for the group’s data solutions and
document solutions business. In line with this
strategy, BTG finalised the acquisition of Xclusive
Solutions, a Xerox partner in the UK, post year
end. The successful integration of CS Holdings
and the acquisition of Digital Healthcare
Solutions by BTG as well as the acquisition by
Altech Isis of MobiMaster, a French billing
24
ALTRON ANNUAL REPORT 2006
Chief Executive’s review continued
software provider, have significantly enhanced
the group’s products and services offering and
further acquisitions in this regard are being
actively explored.
Broad-based black economic
empowerment
Through its anchor partnerships with Pamodzi
within Altech, Kagiso within BTG and Izingwe
within Powertech, significant value has been added
during the year in terms of commercial input and
in meeting our Altron Transformation Vision 2010
targets for broader-based BEE indicators, namely
skills development, employment equity,
preferential procurement, enterprise development
and corporate social investment. The Altron
Transformation Vision 2010 is a dynamic document
that will be aligned with the ICT charter and the
Department of Trade and Industry’s Broad-Based
Black Economic Empowerment (BBBEE) Codes of
Good Practice once these are finalised.
The draft BBBEE codes released in December
2005 provide more certainty as to how the
BBBEE scorecards will be measured, but it is
clear that the significant administrative and cost
implications of these codes on companies, in
their present format, will have to be addressed.
A comprehensive evaluation of the codes was
undertaken by the Altron transformation
committee during the past few months and a
detailed response was submitted to the
Department of Trade and Industry before
31 March 2006.
Our annual Sustainability Report (pg 44 – 88) is
based on an evolving process which relies on
feedback from our stakeholders and continual
improvement to reach the goal of responsible
citizenship. This transformation process has
grown in importance throughout our group
companies and receives the highest level of
management focus. As a group, we endeavour
to improve our measurement and reporting
“Through its anchor partnerships with Pamodzi
within Altech, Kagiso within BTG and Izingwe within
Powertech, significant value has been added.”
25
structures throughout our operations. This is
being achieved through internal performance
evaluations against scorecards and building an
internal information system to capture
sustainability data and facilitate the reporting
process. Sustainability throughout our business
practices remains an intrinsic element of
corporate success.
Key market conditions and outlook
In the telecommunications sector, the
momentum towards a liberalised market is
accelerating with the licensing of the second
network operator, the imminent introduction of
mobile number portability, the Electronic
Communications Act (signed in March 2006) and
ICASA’s announced desire to license additional
operators in the satellite television broadcast
market. The Altron group, primarily through
Altech as well as BTG, is well positioned to
benefit from this trend, given the healthy growth
of the mobile telecommunications market, both
in South Africa and in Africa.
Favourable conditions in the power electronics
and multi-media sector, as reflected through
increased capital expenditure on infrastructure
projects and accelerated spending on power
capacity, are expected to continue to bode well in
26
ALTRON ANNUAL REPORT 2006
Chief Executive’s review continued
terms of demand for Powertech products and
services. Healthy growth levels are also expected
to continue in the building and construction
industry although import competition –
particularly from China and other emerging
markets – remains a reality, highlighting the
need for internal manufacturing efficiencies and
external customer focus.
The outlook for the information technology
sector is improving, with increased local
investment supported by current levels of
company profitability. The slower-than-
anticipated adoption of the global EMV
standard is expected to gain momentum
and we anticipate that this will benefit
a number of our businesses. The continued
consolidation of the IT industry in
South Africa and offshore is expected to
generate more opportunities for Altron
to enhance critical mass and broaden our
product portfolios.
In light of these market conditions, further
real growth in earnings is expected for the
year ahead.
Acknowledgement
I would like to take this opportunity to express
my appreciation to all of our suppliers,
customers, staff, business partners and
shareholders, for their ongoing contributions and
support to our group. It is through this ongoing
support that we are able to continue to grow as
one of the leading ICT and power electronics
groups in Africa. It also behoves me to thank my
Executive Committee and other members of the
Altron board for their ongoing support and wise
counsel which they have provided to both me
and the Altron group over the past year.
“I would like to take this opportunity to express my
appreciation to all of our shareholders, customers,
staff, business partners and shareholders.”
27
Corporate activity during the period under review
During the year, the following transactions and developments took place:
Ü Altech Autopage Cellular successfully concluded five-year service provider and
incentive agreements with Vodacom and MTN;
Ü Altron increased its holding in BTG to 57.6% with the acquisition of 11 million
shares for R118 million;
Ü BTG purchased Altron’s interest in the funding structure of BTG’s inter-group lease
financing business for R43 million;
Ü BTG SA increased its shareholding in Digital Healthcare Solutions from 39.3% to
100%;
Ü Powertech acquired Calidus Von Roll Isola for R32 million; and
Ü Altech disposed of its 50% plus 1 share in Econet Wireless Global (EWG) to the
remaining EWG shareholders for US$87.5 million, plus interest.
Subsequent to year end, the following transactions took place:
Ü Altech purchased French-based MobiMaster, a specialist telecommunications real-
time converged billing system provider business;
Ü BTG acquired Xclusive Solutions, a leading provider of document and print
solutions and Xerox partner in the United Kingdom, for an initial consideration
of £3.2 million that could increase to a maximum of £4.5 million depending on
future profit performance.
28
ALTRON ANNUAL REPORT 2006
Operational review
Telecommunications contributed some 39%
towards total group revenue by generating
R5.4 billion during the year. The contribution
from telecommunications to operating profit
improved to 43% at R449 million from 37% or
R356 million the previous year on the back of
the excellent performances from the group’s
wireless communications businesses. The South
African telecommunications sector is rapidly
moving towards deregulation through a number
of regulatory initiatives, including mobile number
portability (expected in September 2006), the
investigation of handset subsidies, the Electronic
Communications Act and the award of the
second network operator’s licence.
Altech Autopage Cellular (Altech
Autopage) remains the largest independent
cellular service provider in South Africa and
has performed well ahead of expectations.
The market for cellular services has
continued to evolve, resulting in increasing
volumes of post-paid and hybrid (post-paid/
pre-paid) consumer connections. High-end
connections through corporate and fixed
cellular enabled Altech Autopage to retain
the average revenue per subscriber (ARPU)
of last year and increase its subscriber base
by more than 67 900 net connections to a
total subscriber base that now exceeds
700 000. Notable achievements during the
year included the signing of five-year service
provider and incentive agreements with
both Vodacom and MTN.
TELECOMMUNICATIONS
29Contribution by Telecommunications
Innovation: ALTECH NETSTAR
Altech Netstar’s subscriber base has grown to over 362 000 vehicles for SVR services.
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30
ALTRON ANNUAL REPORT 2006
Operational review
Altech Netstar maintained its impressive
market position in the stolen vehicle
tracking and recovery (SVR) market and
exceeded expectations in terms of profit and
cash flow. Altech Netstar’s subscriber base
has grown to over 362 000 vehicles for SVR
services. The Netstar Vigil fleet management
system increased subscribers to over 6 400
vehicles. A new low-cost GSM-based product
“Cyber Sleuth” has been developed to
provide positioning and SVR capabilities for
commercial fleets and vehicles. The Altech
Netstar Malaysian business is growing
steadily with over 32 800 vehicles on the
system and the company is planning further
expansion into Africa.
Altech Alcom Matomo produced strong
results on the back of its R500 million
Gauteng South African Police Services’ digital
Trunked Radio (TETRA) network contract
which included high site installations and
prefabrication and equipment testing at the
integration facility which had largely offset
expected project delays. The contract to
replace and manage the City of Cape Town’s
public safety TETRA communications network
was awarded to Motorola and Altech Alcom
Matomo post year end. Altech Alcom Radio
Distributors exceeded its financial targets
for the year and continues to distribute
leading Motorola two-way radio products to
the southern African market through its
network of authorised dealers.
TELECOMMUNICATIONS continued
“The contribution from telecommunications to
operating profit improved to 43% at R449 million
from 37% or R356 million the previous year.”
31
Despite continuing pressure in the telecoms
market for cable, both locally and offshore,
some improvement was seen during the
year, particularly from the operations in
Spain. The local Aberdare Telecoms
operation has been restructured and the
manufacturing plant in Port Elizabeth closed,
effective 31 August 2005.
The Powertech Battery Group outperformed
expectations on the back of improving
demand in the telecommunications sector,
the implementation of cost-management/
reduction initiatives and the successful drive
into the sub-Saharan region and Nigeria in
particular. Battery Technologies secured
a significant portion of the Nigerian cellular
telecoms market and successfully penetrated,
albeit to a lesser extent, other sub-Saharan
markets. Despite the world-wide shortage
of solar panels, Rentech delivered pleasing
results, mainly due to stringent fixed-cost
savings.
32
ALTRON ANNUAL REPORT 2006
Operational review
Altron’s power electronics and multi-media
sector contribution to total revenue is
R4.4 billion and remained stable in terms of its
contribution at 31% or R4.4 billion for the year
under review. Of the total group operating profit,
this sector contributed 27% or R276 million
compared to the 23% or R227 million for the
previous year based on increased demand from
infrastructural spend and the growth in the
building and construction industry.
Power Electronics
The demand for Aberdare’s power cables
remained high as the ongoing construction boom
resulted in a substantial increase in demand for
the low-voltage product range. The buoyant
infrastructure development also positively
impacted demand for the medium-voltage
product range. Given the planned expansion
programmes of Eskom and Transnet, the
anticipated infrastructure spend required for the
Soccer World Cup 2010, and the Gautrain project,
coupled with various other planned projects, it is
expected that future demand for power and
energy products will remain high for some time.
ABB Powertech Transformers exceeded
expectations as the strong growth for medium
and small power transformers in the domestic
market continued, mainly due to Eskom’s
planned increase in spending over the next
five years. The first Regional Electricity
POWER ELECTRONICS AND MULTI-MEDIA
33Contribution by Power Electronics and Multi-Media
Innovation: ABERDARE CABLES Power Cables
Demand for Aberdare’s power cables remained high due to the ongoing strength in the construction industry resulting in a substantial increase in demand for the low- and medium-voltage product range.
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34
ALTRON ANNUAL REPORT 2006
Operational review
POWER ELECTRONICS AND MULTI-MEDIA continued
Distributor (RED) was established in Cape
Town, effective July 2005. The establishment of
the remaining five metropolitan municipality
REDs are expected during the new financial
year and will increase demand for small and
medium power transformers as emphasis is
expected to be placed on refurbishment of the
electricity grid. The sub-Saharan African export
market has increased, driven by demand from
Nigeria where a large number of projects is
being planned and which are expected to be
of benefit to ABB Powertech Transformers. In
the forthcoming year, quality improvement
measures will continue to receive major focus,
including the ongoing education and training
of employees with regard to best practices,
quality objectives and winder recertification.
Raw material prices, specifically copper and
core steel, remain a concern in light of
increasing demand from the Chinese market,
placing some pressure on security of supply.
Desta Power Matla experienced buoyant trading
conditions due to the increased demand from
Eskom Distribution and municipalities for large
distribution transformers (LDT), small
distribution transformers (SDT) and miniature
substations. The strong rand has, however,
slightly lowered demand from the mining
sector, which impacted negatively on the
demand for medium distribution transformers
(MDT), but this was offset by an increase in
demand from industrial plants.
The Powertech Battery Group performed
above expectations and the automotive
business, despite intense volume and margin
pressure from low-cost imports, managed to
produce good results due to careful fixed-cost
“It is expected that future demand for power and
energy products will remain high for some time.”
35
management. Dynamic Batteries, the offshore
automotive battery-marketing operation,
produced a steady performance throughout the
year despite poor margins in the UK market.
The Willard DC Power operation produced
excellent results on the back of strong demand
from the mining sector.
The Industrial Group showed growth in revenue
and improved working capital. Both revenue and
profit growth were up due to manufacturing
efficiencies and a focus on margin-improvement,
as well as the acquisition of Calidus Von Roll
Isola, a processor and supplier of high
temperature insulation material to the electric
motor manufacturing and repair industry.
Crabtree’s revenue growth was positively
affected by continuing buoyancy in the
residential construction industry but adversely
impacted by the entry of low-priced imports and
a deliberate reduction of unprofitable product
sales. In order to provide the Powertech
Industrial Group wih a competitive strategy in
this regard and to assist the smaller businesses
in the group with strategic and marketing
assistance, the EPC product-development,
marketing and sales department is being
merged with that of Strike Technologies, whilst
Whiteleys was merged with Calidus. The focus
36
ALTRON ANNUAL REPORT 2006
Operational review
POWER ELECTRONICS AND MULTI-MEDIA continued
on a go-forward-basis will remain on new
product development, strong marketing
programmes and complementary acquisitions in
order to sustain the group’s competitive edge.
Tridonic SA (Pty) Limited experienced
extremely difficult trading conditions during the
year which lead to the restructuring of the
company from a manufacturing facility into a
trading operation only. Emphasis will be placed
on growing its niche markets of electronic
ballasts, building management systems,
emergency control gear, dimming products
and light emitting diodes.
Multi-media
The acceleration of converging technologies in
the multi-media sector continues to provide
opportunities for specialist companies such as
Altech UEC Multi-Media a company that
develops, manufactures and deploys innovative
and advanced set-top-box (STB) products and
associated software for the television and
entertainment market. The period under review
saw the restructuring and turnaround of Altech
UEC Multi-Media being completed, resulting in
improved results and a full order book going
forward. The highly successful launch of the
MultiChoice dual-view personal video recorder
(PVR) decoder in November 2005 was positively
received and is also attractive to offshore
customers with orders received from Greece and
Dubai. Strong consumer demand for local pay
television resulted in record quantities of STB
units being sold to MultiChoice South Africa.
Sales were also increased into other regions of
Africa, including Nigeria, which has shown strong
growth over the past two years.
“The acceleration of converging technologies in the
multi-media sector continues to provide opportunities.”
37
Altech Arrow Altech Distribution (AAD)
reported improved results for the year, driven by
increased margins and supported by further
growth in revenue from new sales initiatives.
AAD’s positive trading figures reflect the benefit
of past restructuring strategies designed to
reduce operating costs, and improve operational
procedures that focus on value-added operating
segments which offer better opportunities.
38
ALTRON ANNUAL REPORT 2006
Operational review
The contribution by the Information Technology
(IT) businesses of the Altron group in terms of
group revenue was R4.3 billion while
remaining constant at 31% in terms of its
contribution to total group revenue. The
contribution to group operating profit declined
somewhat from 39% the previous year to 31%
at R321 million due to margin pressures
experienced at Altech NamITech.
During the period under review Bytes
Technology Group (BTG) successfully
completed the integration of CS Holdings
and Digital Healthcare Solutions. These
acquisitions have increased the BTG products
and services offering and significantly
contributed towards revenue and operating
profit. Post year end, BTG acquired Xclusive
Solutions, a leading provider of document
and print solutions and Xerox partner in the
United Kingdom, for an initial consideration
of £3.2 million that could increase to a
maximum of £4.5 million depending on
future profit performance.
Bytes Document Solutions (BDS), BTG SA’s
Xerox operation, has achieved another year
of solid revenue and unit growth in the face
of stiffening competition aggravated by
product price deflation due to currency and
technology changes. Equipment sales were
impacted by a significant shift in product
mix with stronger sales of lower-priced
systems while demand and installation
activity accelerated for key products such as
INFORMATION TECHNOLOGY
39Contribution by Information Technology
Innovation: BYTES SPECIALISED SOLUTIONS
In the ATM sector BSS has benefi ted from the impact of the major banks upgrading their ATM base to become EMV compliant.
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40
ALTRON ANNUAL REPORT 2006
Operational review
INFORMATION TECHNOLOGY continued
networked desktop multifunctional devices
and entry-level colour production systems.
Bytes Specialised Solutions (BSS) is the
exclusive distributor for NCR products and
systems in South Africa and markets,
supports and maintains enterprise-wide
information products and services for the
banking industry. During the period under
review, Teradata, a data solution provider for
the banking sector and various other
organisations, recorded significant operating
profit. In the ATM sector BSS has benefited
from the impact of the major banks
upgrading their ATM base to become EMV
compliant, while the new EMV encryption
and security regulations have played a
major role in improving the division’s
revenue.
Bytes Communications Systems (BCS)
reported a satisfactory operating
performance, maintaining good margins in
both the services and product sales arenas.
This has been realised through increased
small- and medium-enterprise product sales
and improved efficiencies in delivering
services. Bytes Managed Services, a focused
workspace management and equipment
maintenance business with 70 service points
around South Africa, benefited from the
integration and consolidation of CS Holdings
which delivered significant value to all
stakeholders from a financial, service delivery
and growth perspective.
Bytes Outsource Services (BOS) was
acquired by BTG as part of the greater
CS Holdings acquisition. During the period
“Bytes Document Solutions (BDS), BTG SA’s Xerox
operation, has achieved another year of solid
revenue and unit growth.”
41
under review pleasing growth in revenue
and profitability was recorded. A solid
operating performance and close working
relationships with existing clients ensured
the retention of their client base. Bytes
People Solutions (BPS), another former
CS Holdings operation, has performed in line
with IT industry averages and showed
satisfactory year-on-year growth despite a
slow start due to changes in 2005 to the
ISETT SETA funding model. Bytes Systems
Integration (BSI) also enjoyed its first full
year of operation subsequent to the merger
and restructuring of several businesses from
both BTG and CS Holdings. The division has
entered the new financial year on a
markedly lower cost base and with exciting
prospects. Digital Healthcare Solutions
(DHS), a wholly-owned subsidiary of BTG
which comprises
a transaction switching and a software
business, reported a further significant
improvement over the previous year in
terms of operating profit. Its two
subsidiaries, Digital Healthcare Switch
(Swítch) and Med-e-Mass, both grew their
respective contributions to the group’s
revenue and profit.
42
ALTRON ANNUAL REPORT 2006
Operational review
INFORMATION TECHNOLOGY continued
BTG’s international businesses, both those in
southern Africa and in the United Kingdom,
showed good progress with significant
improvement. Bytes Software Services,
one of Microsoft’s top three large account
resellers (LARs) in the UK, has significantly
improved its net profits as a result of
substantial restructuring and additional focus
on its core competencies. UK-based
IT Solutions, which offers Application
Development services specialising in large-
scale e-commerce style systems to blue chip
clients, also returned to profitability after a
significant restructuring exercise was
completed.
Altech NamITech, a leading player in Africa
for cellular SIM cards, pre-paid vouchers and
magnetic stripe bank cards, experienced a
disappointing year due to the continued
strength of the rand and pricing pressures.
A re-engineering process and a significant
cost-reduction exercise were completed to
reposition Altech NamITech as a competitive
player in this sector of the market. It is
expected that the roll-out of EMV-compliant
smart cards will contribute significantly to
Altech NamITech’s financial success in future.
In line with its pan-African strategy, Altech
NamITech’s new pre-paid cellular voucher
manufacturing facility in Lagos, Nigeria, is
now profitable and is producing more than
one million vouchers per day.
Altech Card Solutions benefited from the
continued migration to the EMV payment
standard through the ongoing deployment
of EFTPOS terminals, as the banking industry
prepares to issue EMV smart cards. The
ongoing personalisation infrastructure
“Altech Card Solutions benefited from the continued
migration to the EMV payment standard.”
43
upgrades by card issuers and outsource
bureaus benefited Altech DataCard. Altech
Cardtronic also performed well with the
recapitalisation project complete, which
enabled it to compete more effectively in
the higher-volume business segment.
Altech ISIS recorded significant financial and
organic growth during the year,
strengthening its position as a supplier of
end-to-end operational support systems
(OSS) solutions in South Africa and Africa.
Altech ISIS has further entrenched its
position in this market through the purchase
of MobiMaster, a French business that owns
and develops a billing system for pre- and
post-paid voice and data services.
46 – Mission statement
47 – Corporate code of conduct
48 – Message from the Chief Executive
50 – JSE SRI Index 2005
51 – Value-added statement
52 – Transformation/Broad-based black economic empowerment
56 – Corporate social investment
62 – Our people
70 – Preferential procurement and enterprise development
73 – Safety, health and environment
82 – Shareholders
89 – Corporate governance
102 – Remuneration report
SU
STA
INA
BIL
ITY
REP
OR
T
THROUGH ALTRON’S VALUES,WE PROMOTE :
Ü Best business practices
Ü Environmental conservation
Ü Corporate governance
Ü BBBEE and transformation
Ü Transparency
Ü Consideration of the needsof all our stakeholders
Altron’s mission is to:Ü Be the leading South African-controlled information and communications technology
and power electronics group that offers high-technology products and services of
quality to global markets
Ü Generate profits and create shareholder value through outstanding customer service
Ü Remain dedicated to technological innovation
Ü Continue its commitment to the transformation process of South Africa through
broad-based black economic empowerment initiatives
Ü Integrate sustainable development into our business at every level – our future
depends on it.
We will achieve this through a motivated and loyal team that always:
Ü Places customer service first
Ü Has mutual trust and respect
Ü Prioritises quality, best practice and productivity improvement
Ü Adheres to the highest standards of integrity
Ü Aims at achieving excellence in financial and technical performance
Ü Takes pride in what we do and in being part of the Altron group.
Core valuesÜ Customers
Ü Innovation
Ü Teamwork
Ü Accountability
Ü Sustainable development
Through these values we promote:
Ü Best business practices
Ü Environmental conservation
Ü Corporate governance
Ü Broad-based black economic empowerment and transformation
Ü Transparency
Ü Considering the needs of all stakeholders.
46
ALTRON ANNUAL REPORT 2006
Sustainability report
Mission statement
47Corporate code of conduct
Altron is committed to excellence, integrity, professionalism and the growth
and development of all its operations. Our people are our most important asset
and are expected to share in the group’s values and beliefs, in a manner that
demonstrates:
Ü Respect for one another
Ü Honesty and integrity in dealings with one another and with all stakeholders
Ü Confidentiality and discretion in the use of information proprietary
to the Altron group
Ü Avoidance of any conflicts of interest that may interfere with the
independent exercise of their judgement in the best interests of the group
and its stakeholders
Ü Adherence to all laws and regulations determining the group’s legal
and moral obligations
Ü Fostering a non-racial, non-discriminatory work environment in
promoting a climate of harmony and tolerance
Ü Respect for the environment
Ü Commitment to the development of our nation.
Endorsed and guided by the board, the Altron code of corporate conduct
commits the group to the highest standards of behaviour expected by all its
stakeholders. In response to the obligations this places on Altron as the
controlling shareholder, Altron retains control over:
Ü Policy and strategy
Ü Key operating standards
Ü Acquisitions and disposals.
48
ALTRON ANNUAL REPORT 2006
Message from the Chief Executive
For the past four decades, Altron and its
subsidiaries have adopted a way of doing
business that attempted to benefit all
stakeholders. This approach has long been
dictated by humanity and common decency. It
will continue to guide us as we take Altron into
a future where sustainable development is an
intrinsic element of corporate success – a future
where every person who interacts with our
group, in however small a fashion, contributes to
our success. A future where our responsibility to
repay that contribution will determine our
survival on the triple bottom line of financial,
social and environmental accountability.
In this Sustainability Report, much attention is
focused on transformation, guided by the targets
set in our Altron Transformation Vision 2010
(Vision 2010). In the South African context,
transformation specifically refers to broad-based
black economic empowerment in the workplace.
This is a process we fully support and one that
we are attempting to accelerate in our own
business and in all organisations in our supply
chain.
However, we believe transformation is much
broader than the empowerment necessary to
build an equitable economic base for our nation.
Transformation is at the heart of sustainable
citizenship – and at every level, from equity
ownership to gleaming new soccer kits that see
children take to the field with dignity and hope,
the use of academics creating a useful tool for
our 11 official languages to safe products and
recycling initiatives that conserve our natural
environment. This is the ambit of sustainable
citizenship and a challenge we are meeting –
at every level.
Although our Vision 2010 is being reviewed in
light of recent draft codes and industry charters,
the principles behind its development remain
firmly in place and our group companies are
being measured accordingly. The first round of
reporting against our internal scorecard began
last year and the amount of progress is indeed
Robert Venter (Chief Executive)
49
heartening. Every effort is being made to
address areas that are behind on target.
Altron is based in South Africa, and proudly
so, but we transact in the global marketplace.
Accordingly, in reporting to stakeholders, we
have incorporated the Global Reporting
Initiative (GRI) sustainability guidelines on
triple bottom-line reporting. GRI is the
accepted international benchmark for
reporting on economic, social and
environmental performance to stakeholders.
The 2002 GRI guidelines have been updated
and are currently receiving international
feedback. As these are finalised, they will be
reviewed and incorporated into our own
framework to ensure that the communication
between our group and all stakeholders is
meaningful and dynamic.
Sustainability reporting is an evolving process
which relies on feedback from stakeholders
and continual improvement to reach the goal
of responsible citizenship. We accept this
challenge. We are committed to
incrementally improving our processes,
systems and skills – and measuring our
performance against international standards –
to ensure that our business is sustainable on
every level and touches the lives of
stakeholders as they touch ours.
Making a difference
Ü Altron is among the top 300
empowerment companies in
South Africa as rated by
Impumelelo, an annual publication
that researches over 9 000 public,
private and institutional
organisations in 150 sectors of
the economy.
Ü Altron was awarded gold as a top
future company on the JSE and first
place in the general industries
category for electronic and electrical
equipment in the PMR (Professional
Management Review) Magazine’s
annual Top Future Companies
survey.
Ü The 2005 Altron annual report won
a merit award in the South African
Institute of Chartered Secretaries
and Administrators annual report
assessment, regarded as one of
the most prestigious of its type in
the country.
Ü BTG was ranked tenth in the annual
Financial Mail Top Empowerment
Companies’ Survey and fourth in the
ICT industry. The survey ranked the
top 200 JSE-listed companies on
their contributions to broad-based
black economic empowerment
in 2005.
50
ALTRON ANNUAL REPORT 2006
JSE SRI index 2005
Final score sheet
Company classification
Environmental impact: High
Category Score
Pass/
fail
Overall categories
Corporate governance
Environment
Economy
Society
35
56
41
60
Pass
Pass
Pass
Pass
Core criteria
requirements
Corporate governance
Environment
Economy
Society
8/9
8/8
6/6
10/10
Pass
Pass
Pass
Pass
Overall final
assessment Pass
The JSE Social Responsibility Investment (SRI)
Index is the first of its kind in an emerging
market. It showcases the listed companies that
comply with increasingly-stringent criteria on
triple bottom-line performance and commitment
in four areas: corporate governance,
environment, economy and society.
Altron has qualified as a constituent of the index
since its inception in 2004. More encouragingly,
Altron has year-on-year incrementally improved
both its performance and ranking. Importantly,
our inclusion in this index underscores our
commitment to sustainability as a business
practice – an integral part of our survival and
success and our corporate duty to contribute to
the wellbeing of all our stakeholders.
In assessing Altron’s performance in the 2005
survey, the adjudicators commented on three
areas for possible improvement:
Ü Communicating non-financial challenges
Ü Reporting guidelines to inform on non-
financial issues
Ü Influencing suppliers and contractors to
improve non-financial performance.
Altron has made excellent progress on the first
two issues by implementing its own reporting
system to provide a holistic appraisal of group
performance. Progress on the third issue will be
more complex, given the quantum of factors
beyond the group’s control. However, the
inclusion of sustainability issues in our group
discretionary procurement criteria will facilitate
improvement in this area.
51Value-added statement
Value-added is the measure of wealth the group has created in its operations by “adding value” to the cost of raw materials, products and services purchased. The statement below summarises the total wealth created and shows how it was shared by employees and other parties who contributed to its creation. Also set out below is the amount retained and re-invested in the group for the replacement of assets and the further development of operations.
2006 2005R million % R million %
Revenue 13 969 12 206 Suppliers of material and services (10 216) (8 866)
3 753 3 340 Investment income 144 124 Capital items (54) (90)
Total value added 3 843 3 374
Applied as follows:To remunerate employeesSalaries, wages, pensions and other benefits 2 500 65 2 185 65
To reward providers of capital 335 9 286 8
Interest on loans 53 62 Dividends to Altron equity holders 176 143 Dividends to minority shareholders 106 81
To the state 326 8 339 10
Company taxation 291 311Secondary taxation on companies 35 28
To maintain operationsDepreciation and amortisation 213 6 192 6
To expand the group 469 12 372 11
Net earnings retained – Altron equity holders 318 305 – minority shareholders 151 67
3 843 100 3 374 100
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52
ALTRON ANNUAL REPORT 2006
TRANSFORMATION/BROAD-BASED BLACK ECONOMIC
EMPOWERMENT
Transformation in Altron is guided by a unique
internal charter that commits our group to a
steady process of empowerment through training,
shareholding and development of disadvantaged
communities.
Altron is proud to have empowerment partners
that are measured not by their political profile but
by their capacity to add value.
Although the concept of transformation is
decades old in our group, by now focusing on
areas with the maximum long-term benefit –
education, training, health, social welfare and job
creation – Altron supports a national programme
that is both a commercial and moral imperative.
The need for transformation is clear in a nation
polarised by economic disparities. What has
become blatant in recent years is that the speed
of transformation was lacking and restricted to, in
many cases, a handful of beneficiaries. This, then,
was the genesis of the Altron Transformation
Vision 2010 – a methodical and carefully-
considered blueprint for achieving set targets in
the areas that underpin sustainable
transformation:
Ü Ownership
Ü Board and management control
Ü Employment equity and skills development
Ü Preferential procurement and enterprise
development
Ü Corporate social investment.
Our transformation vision is not an isolated one.
Nor is it static. In developing the framework, we
considered national guidelines, sectoral
empowerment charters and legislation. We
have studied and submitted a comprehensive
report to the Department of Trade and Industry
regarding the draft Codes of Good Practice. These
collective inputs will guide us as we continue to
53
Altron group internal empowerment scorecard
Year 1%
Year 2%
Year 3%
Year 4%
Year 5%
Year 6%
Ownership
Board and management representation
Employment equity & skills development
● senior management
● middle management
● junior management
● training (% payroll)
Preferential procurement and enterprise development (% potential spend)
Corporate social investment (% profit before tax)
20
10
20
25
1
10
1
25
15
20
25
1
15
1
30
20
25
30
1
20
1
33
25
30
35
1
25
1
40
30
35
40
1
30
1
25.1
40
35
35
40
1
50
1
These targets will be reviewed as required to ensure that we remain abreast of current practices and
developments. Once clarity is obtained on recent government guidelines, these targets will also form
part of our performance scorecard for management.
crystallise our map towards achieving sustainable
growth of our businesses and the broader
economy, while redistributing some of the
proceeds of that growth across society to achieve
the maximum level of skills and participation in
the economy.
We firmly believe transformation is an attainable
goal. We also believe there are some ingredients
that will accelerate achieving this goal, first among
which is commitment from the top. Pre-determined
targets and ongoing monitoring to ensure steady
progress, as to the flexibility and the willingness to
learn from setbacks. This must all take place
within the daily business of managing a company,
complying with legislation and seeking growth
opportunities.
Against this background, the overarching
ingredient therefore is commitment – a deep-
seated belief that this is the correct way forward
for our nation and our economy. Encouragingly,
this commitment is evident throughout our
group and at every level. It is also evident in our
participation at sector and national levels in
developing frameworks that will make
transformation commercially feasible and
therefore sustainable. It is articulated in our
Altron Transformation Vision 2010, which
includes a group scorecard with annual targets
for broad-based black economic empowerment
beginning in financial year 2004/5, and applying
until 2010.
54
ALTRON ANNUAL REPORT 2006
Drawing on quarterly reports to the Altron board, we compile our internal BBBEE analysis. This is a
reporting discipline which highlights the companies that are progressing well (green), acceptable
progress (amber) and those failing to meet progress targets (red).
Progress to date
Group target year 1
% Altech Powertech BTG
Ownership (25.1% by 2010)
Board and management representation 20
Employment equity & skills development:
● senior management 10
● middle management 20
● junior management 25
● training (% payroll) 1
Preferential procurement and enterprise development (% potential spend) 10
Corporate social investment (% profit before tax) 1
Altron’s transformation committee is a sub-
committee of the Altron executive committee and
includes representatives of the underlying
companies. Following the launch of our Vision 2010
blueprint, the committee’s mandate was extended
from driving economic transformation and broad-
based black economic empowerment in our group
to ensuring uniform application of this vision across
the group. A formal presentation was made to
senior group executives on the draft Codes of
Good Practice and their impact on business
strategy, recruitment and procurement. Once
these codes have been finalised, the Altron
blueprint will be reviewed to closely align it with
the legislated codes and relevant sectoral
charters on empowerment.
Transformation/Broad-Based Black Economic Empowerment continued
55
Ownership
To ensure equity empowerment at ownership
level, Altron has focused on creating anchor
partners in its three major operating subsidiaries
where the following broad-based black economic
empowerment (BBBEE) equity partnerships are
now well entrenched:
Ü Altech with Pamodzi through Altech NamITech
and Altech Data
Ü Powertech with Izingwe through Aberdare
Cables
Ü BTG with Kagiso through BTG SA.
In line with Altron policy, this structure allows
value to be added at operating level, in some
cases governed by service level agreements as
with Aberdare Cables and Izingwe. Shareholder
agreements include specific activities to be
performed by BBBEE partners spanning
employment equity, skills development and
career planning, preferential procurement and
customer relations.
During the period under review, Pamodzi
Investment Holdings further entrenched its
partnership with Altech by acquiring 25.01% of
Altech Data’s issued share capital – which
incorporates Altech Isis and Altech Card Solutions.
In addition, Pamodzi holds a 28% equity stake in
Altech NamITech.
At operational level there are other equity BBBEE
partners such as Matomo and Mahogany Capital.
An internal measurement system is currently
being investigated and a BBBEE scorecard
reporting template is being developed.
Empowerment partners
Altech Powertech BTG
Pamodzi
Ü 28% Altech NamITech
Ü 25.01% Altech Data
Ü Key principal: Ndaba Ntsele, Solly Sithole
Matomo
Ü 30% Altech Alcom Matomo
Ü Key principal: Thozamile Botha
Izingwe Capital
Ü 30% Aberdare Cables (in consortium with Matomo)
Ü Key principal: Sipho Pityana
Matomo
Ü 6% Aberdare Cables (in consortium with Izingwe)
Ü 20% Rentech
Ü Key principal: Thozamile Botha
Kagiso
Ü 25.01% Battech
Ü Key principal: Eric Molobi
Wiphold
Ü 20% ABB SA – 10% ABB Powertech Transformers
Ü Key principal: Louisa Mojela
Power Matla
Ü 25.01% Desta Power Matla
Ü Key principal: Mathews Phosa
Mahogany Capital
Ü 25.01% Calidus/ Whiteleys
Ü Key principal: Taurai Muranda
Kagiso Ventures
Ü 27% BTG SA
Ü Key principal: Eric Molobi
56
ALTRON ANNUAL REPORT 2006
CORPORATE SOCIAL INVESTMENT
The Altech Grand Prix generated R6 million for charities.
Corporate social investment is an integral
part of our group’s mainstream activities –
both as a component of our scorecard for
internal transformation and a cornerstone
of our corporate accountability and
governance programme. Collectively, Altron
companies spent approximately R10 million
on corporate social investment projects
during the year.
Each year, corporate social investment
practitioners throughout the group convene
to share information, successes and lessons
learned to ensure a co-ordinated approach
and capitalise on synergies between group
companies and maximise the impact for
individual projects.
Recognising that no single company can
meet all the needs of a developing nation,
one of our group companies, Altech, for
instance, continually looks for opportunities
to maximise the impact of its social
investment funds through its own marketing
activities and those of its subsidiaries.
A prime example of this approach was the
R4-million sponsorship of the Altech Grand
Prix in the previous reporting period which
generated R6 million for Unite Against Hunger
and the Nelson Mandela Children’s Fund.
Activities and projects supported by group
companies are aligned with formal guidelines
instituted in the prior reporting period and
supplemented by workshops across the group
on implementation at operational level. This
has brought an important element of
cohesion to social investment and channelled
activities towards attaining common goals –
57
particularly in the areas of education and
training and bridging the digital divide. Some
highlights of the period include:
Ü The official opening of the R1-million Langa
Multi-media Centre in Cape Town – a
project spearheaded by BTG with the
assistance of other group companies. At
the launch, the Minister of Education,
Naledi Pandor remarked, “The Langa Multi-
media Centre is an investment not only in
the education of the Langa youth attending
the school; but an investment in future
generations. The need for computer literacy
skills cannot be overemphasised in today’s
world.”
The new centre, which benefits over 1 300
learners and the surrounding community,
features 31 of the latest Hewlett Packard
Altron CE Robbie Venter and CFO Diane Radley at the opening of the BTG Langa Multi-media Centre in Cape Town.
workstations and desks, a server, network
and power system, air-conditioning, a
state-of-the-art projector, laptops for
educators and a work centre with copier,
fax and scanner-printer. The centre also has
a complete security system.
Training is being provided to teachers –
from basic to internationally advanced
courses – and on-site training support is in
place to enable teachers already trained to,
in turn, train others. Apart from supplying
equipment and training, BTG will also
support the centre financially for a further
two years – from infrastructure and
technical support to paper supplies and
security monitoring.
58
ALTRON ANNUAL REPORT 2006
Ü An investment of almost R1 million in
soccer development by Altech Autopage
Cellular which will see hundreds of
young players from underprivileged
communities run onto the field in
new kit. This is intended to become
a five-year project.
Ü The fully-equipped computer centre for
the 900 scholars at Boikanyo Primary
School in Garankuwa which is an excellent
example of the benefit of collaboration
between the community, provincial
government and the private sector,
spearheaded by Altech NamITech.
Ü The Altech UEC Multi-Media winter school,
in conjunction with Protec, which
continues to expose scholars to careers in
the fields of science and mathematics
while developing their skills in these key
subjects.
Ü A joint venture with Foundation Beersheba of
The Netherlands, which Aeromaritime
International Management Services (AIMS) has
spearheaded for the electrification of Bertharry
Private School in Tembisa. AIMS has also funded
the construction of six classrooms at the school.
Supporting education
Bursaries covering various fields of study relevant
to the group, and predominantly for disadvantaged
students, are awarded by many subsidiaries.
Corporate social investment continued
Altech Autopage Cellular invested about R1 million in soccer development.
Altech NamITech spearheaded a computer centre at Boikanyo Primary School.
59
The BTG bursar programme follows a long-
term policy of development and
placement of young, highly-skilled talent.
Many of the bursars shown here are in the
final year of their BSc Technology degree
or in an Honours programme at a local
university. Two bursars already have full-
time employment in BTG companies, and
another three are scheduled to join full-
time in 2006.
Volunteerism is an important element in
the success of many of these initiatives
and, at every level, Altron’s people are
willing participants:
Ü At Bytes Technology Group the staff
donated food and clothing to the Kidz
Crisis Centre and Yenzani Children’s
Home, both in Gauteng.
Design your life as you want it
JP Roos, a newly-appointed mechanical designer at
ABB Powertech Transformers, is living proof that it pays
to follow your dreams, even if it means digging deep into
your pockets and your leave allocation.
JP had always wanted a seat with his name on it in the
mechanical design office. After hearing about a possible
vacancy and finding out where to obtain the necessary
qualifications, he approached his department manager.
However, because these studies were not job-related, he
did not qualify for financial support or study leave. Even
worse, there were no after-hours classes. JP was
compelled to take annual leave and pay for the course
himself. He did just that and eight months later he was
appointed as mechanical designer. The seat with his name
on it became a reality.
In recognition of JP’s determination and diligence,
ABB Powertech Transformers has agreed that when he
passes the advanced studies he is currently undertaking,
the company will reimburse him his fees.
Bytes bursars clockwise from left to right:
Back row: Rogers Sithole with his new wife Tebogo on his left (Bytes SI), behind Rogers, Mlungisi Khumalo (Bytes SI), Motlatsi Mamatela (Bytes SI), Simiso Linda, (BDS), Reuben Abrahams (Bytes SI), Siju Mammen (BCS), Rekha Varghese (DHS), Skip Franzsen (Bytes Corporate), Tumelo Monageng (BTG), and Goodlucky Magagula. (Bytes SI) Clarissa is a guest that has applied to become a bursar next year.
Monthly food parcels are supplied to the Aids orphans of kwaNxamalala community in KwaZulu-Natal by the staff
of Aberdare Cables.
60
ALTRON ANNUAL REPORT 2006
Arts and culture
Altron is a significant sponsor of
South Africa’s arts and culture. This is
effected through the group’s CSI
programme and, by chairman
Dr Bill Venter in his personal capacity.
The Bill Venter/Altron Literary Awards
date back 19 years and is presented
annually to recognise outstanding
contributions to research published in
book form by tertiary educators. This
award, prized as much for its significant
monetary value as for its prestige, helps
to promote specialised works locally
and internationally and alternates
between contributions to the
Our rainbow nation
In a nation with 11 official languages,
multi-lingualism can be both a challenge
and an advantage if well managed,
which spurred Bytes Document Solutions
to become a major funder of North West
University’s Centre for Text Technology
(CTexT).
Human language technology is a rapidly-
growing field, but relatively new in
South Africa. The applications developed
by CTexT will enable every South African
to learn to communicate in any language
they choose using multi-media
applications to acquire the basics of a
new language in 45 hours at home or in
the office. Products already developed at
CTexT include two language-learning
software packages, Ngenani! isiZulu and
Tsenang! Setswana.
CTexT is working closely with Microsoft’s
local language programme which
facilitates the development of localised
software and proofing tools for minority
languages. Apart from localisation work
for Afrikaans and Setswana, spell-checkers
are also being developed for isiXhosa,
isiZulu, Sesotho sa Leboa and Setswana.
In a collaborative effort between various
disciplines, organisations and the
university, researchers hope to contribute
significantly to the promotion of multi-
lingualism and diversity in the country.
Corporate social investment continued
The donor of the prize, Dr Bill Venter, presenting a certificate and R50 000 cheque to the 2006 prize winner, Professor Achille Mbembe of Wits University for his groundbreaking work “On the Postcolony.”
61
humanities and natural sciences each year. The 2006 recipient was Professor Achille Mbembe from
the WISER faculty of Wits University for his work, “On the Postcolony”. Past recipients include:
Year Recipient Research
2000 Prof Vivian Bickford-Smith (University of Cape Town)
Prof Michael Chapman (University of KwaZulu-Natal)
Ethnic Pride and Racial Prejudice in Victorian Cape Town
Southern African Literatures
2001 Prof Elemer E Rossinger (University of Pretoria)
Parametric Lie Group Actions on Global Generalised Solutions of Nonlinear PDEs
2002 Prof George Devenish (University of KwaZulu-Natal)
Prof John Higgins (University of Cape Town)
A Commentary of the SA Bill of Rights
Raymond Williams – Literature, Marxism and Cultural Materialism
2003 Prof Detlev Kröger (University of Stellenbosch)
Air-cooled Heat Exchangers and Cooling Towers
2004 Prof Jeff Guy (University of KwaZulu-Natal)
Prof Jeremy Seekings (University of Cape Town)
The view across the river: Harriette Colenso and the Zulu struggle against Imperialism
The UDF: A history of the United Democratic Front in South Africa
2005 Prof Vanessa Watson (University of Cape Town)
Change and continuity in spatial planning – Metropolitan planning in Cape Town under political transition
Bursaries and awards are also offered to students of journalism and music for international studies.
There are currently six young classical musicians studying in various foreign countries on the
Bill Venter/Altron/FAK music bursary project.
62
ALTRON ANNUAL REPORT 2006
OUR PEOPLE
Employment equity and skills
development
By implementing our policies on employment
equity and skills development, we can make a
significant contribution to urgent national
imperatives.
Equal opportunity and fair treatment have been
cornerstones of Altron’s human resources
practices for over four decades. The group is
committed to meeting the targets contained in
the Altron Transformation Vision 2010 and
ensuring equitable representation in all
occupational categories and levels in the
workplace. This is driven by co-ordinating
committees and progress is regularly reported to
the Altron board and executive committee.
63
Group workforce profile
Altech Powertech BTGConsolidated
total
Total workforce
Total employees with disabilities
Number
2 720
18
Number
4 974
42
Number
3 344
18
Number
11 038
78
Workforce profile
Racial and gender profile:
Non-designated group
White females
Black males
Black females
1 489
407
415
409
1 021
322
3 091
538
1 242
600
1 017
485
3 752
1 329
4 523
1 432
Occupational level profile:
Management
Non-management
130
2 590
1 073
3 901
2 313
1 031
3 516
7 522
Management profile by gender:
Females
Males
30
100
157
916
610
1 703
797
2 719
Management profile by race:
Whites (male and female)
Designated groups
110
20
610
463
1 594
719
2 314
1 202
Non-management profile by gender:
Females
Males
1 262
1 328
712
3 189
475
556
2 449
5 073
Non-management profile by race:
Whites (male and female)
Designated groups
936
1 654
546
3 355
248
782
1 730
5 791
Employees with disabilities in management 3 5 16 24
Employees with disabilities in non-management 15 37 2 54
Employees with disabilities by gender:
Females
Males
5
13
10
32
3
15
18
60
Workforce movement
Total employees before reporting cycle: 2 507 2 696 3 485 8 688
Less Resignations
Deaths
Dismissals
Retirements
Retrenchments
Appointments
(338)
(12)
(47)
(9)
(20)
44
(197)
(12)
(348)
(64)
(276)
207
(432)
(3)
(17)
(26)
(99)
436
(967)
(27)
(412)
(99)
(395)
687
Notes:1. The above figures reflect only permanent employees at SA operations.
2. Figures with regard to “Workforce Movement” exclude other possible reasons for employees being removed from companies’
Employment Equity reporting statistics (for example, transfers) as well as additions to the workforce during the reporting cycles
as a result of recruitment and acquisitions.
3. Group operations report individually to the Department of Labour on their Employment Equity progress. The above
consolidated figures are sourced from reports submitted on the reporting dates for 2005 and include acquisitions and disposals
up to 28 February 2006.
64
ALTRON ANNUAL REPORT 2006
Our people continued
Skills training and
development initiatives
In order to redress the country’s
critical skills shortage and ensure
that all employees have access to an
integrated and outcomes-based
learning system, Altron companies
allocate between at least 1% to 2%
of payroll annually, towards training
and development, particularly for
previously disadvantaged South
Africans.
Throughout the group, initiatives are
under way to accelerate progress
towards our goals for skills
development. These include bursary
programmes, management trainee
The maths and science academyThis Powertech Battery Group project in
Port Elizabeth involves 90 high school
learners from previously disadvantaged
communities, attending mathematics and
science classes over a period of 10 weeks.
The main focus of the project is to assist
these learners with examination preparation
in these subject areas. Project cost is
R35 000 per annum.
This project will continue and will link into a
Graduate-in-Training programme.
Noeleen Ferreira – Laboratory Manager at Aberdare Cables Standford Road addressing her team during their daily Mission Directed Work Team (MDWT) meeting.
Hubert Gagu (Health and Safety Representative at Aberdare Cables Standford Road) providing safety tips to some of his fellow employees.
65
Janica Nhlapo, a communications graduate
from Bond University with a diploma in
marketing from Vega, joined the Altron
corporate communications department in
January 2005 on a graduate internship
programme. To date, she has been involved
in research projects, corporate presentations and internal rebranding campaigns. Janica
says, “Information and communications technology was a new sector for me, but I have
learned that branding and marketing are key elements in any business, in any sector.
The practical experience I have gained is invaluable.”
schemes, experiential learning projects,
learnerships and educational assistance. In
many companies, mentorship programmes
are being implemented to add practical
experience to academic knowledge and
fully prepare candidates for the business
world.
All Altron companies have based their
skills development programmes on the
National Qualifications Framework (NQF)
and are working closely with their sector
education and training authorities to
ensure that learnerships have lifelong
benefits for the individual concerned.
Learnerships are in place in many group
companies.
Altron launched an Adult Basic Education Training (ABET) programme last year. During the course of the year achievements awards took place where the students who completed Communication Level 1 or 2 modules received certificates. Pictured above are Altron’s graduates with their proud classmates:
Left to right (standing): Kenneth Nicya (Lecturer), Patricia Mpange, Wilheminah Makamo, Chatiki Banda, Cynthia Molefe, Rose Mahapa, Kenneth Khoza.
(Seated): Percy Graham, James Ramoloko, Carol Mimana and Sophie Malekane.
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ALTRON ANNUAL REPORT 2006
Our people continued
Ü At BTG, learnerships at different levels
are benefiting some 200 students.
During the year, BTG also introduced
the first learnership for 40 disabled
people in the information technology
field in South Africa.
Ü In another first, Aberdare Cables
introduced learnerships in the power
cable industry, with five learners
completing certificate courses during
the year.
Experiential training programmes are also
in place in several group support
departments, including corporate
communications and company secretariat.
Through these programmes, young people
augment their tertiary education with
practical experience relevant to the world
of business and, in several cases,
experience not available through any
institutional practical training programmes.
Where possible, departments collaborate
with the relevant SETA.
Tomorrow’s leaders
In addition to skills development initiatives
throughout the group, there are also specific
projects in place to develop the future
leaders of our group. The first of these, the
Young Presidents’ Club (YPC), was formed in
1990 as a vehicle to hone the full potential
of promising managers in support of the
growth of our group. This includes
mentorship, developing strong networks and
exposing these individuals to the full array
of business issues that senior managers
must be equipped to deal with. A similar
forum was established in Powertech,
namely the Powertech Leadership Process
(PLP). The PLP has formed a partnership
with the Gordon Institute of Business
Science to deliver nine management
development modules. The strategy behind
home-grown talent is evident in our ability
to promote internal appointments to senior
positions, most recently the new chief
executive officer of ABB Powertech
Transformers, Leon Viljoen.
Worker participation
Altron encourages employees to develop
their full potential in a participative
environment. Consultative structures,
established with trade unions and other
employee representatives in our operating
companies, handle issues that affect
67
employees directly and significantly and
support constructive dialogue, information
sharing and conflict resolution.
Cordial relations with organised labour
were maintained during the review period
and all matters brought to the table were
concluded to the satisfaction of all parties.
Occupational health and safety
The future of our group’s operations
depends on the good health and safety of
our people. In addition to complying with
the stipulations of South African legislation
such as the Occupational Health and Safety
Act, many Altron companies have, or are
preparing for, international accreditation
such as International Standards
Organisation.
Sister Fikiswa Mqolomba examining Charlie Gouws who sustained an injury whilst on duty.
HIV/Aids policy
Altron has a well-defined policy relating to
HIV/Aids and other life-threatening
diseases, which provides guidelines on:
Ü managing these diseases in the
workplace
Ü protecting employees’ legal rights
Ü treating staff with respect, dignity,
fairness and equity
Ü creating awareness
Ü supporting appropriate behavioural
changes
Ü complying with statutory and labour
legislation.
The development and implementation of this
policy, is the responsibility of management,
together with human resources.
The Safety Board at Aberdare Cables Long Street, Johannesburg factory.
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ALTRON ANNUAL REPORT 2006
Numerous HIV/Aids policies exist throughout the
group in different operating units. These are
currently being reviewed with the objective
being to consolidate them into one groupwide
HIV/Aids policy.
Altron is, furthermore, planning to professionally
assess the economic impact of HIV/Aids on the
group through an accredited, independent
agency. This will be done by determining the
nature, mechanisms and determinants of
the disease on the workforce which includes
prevalence rates, workforce separations and the
impact on workforce turnover.
A highlight of the year was the extensive HIV/
Aids programme implemented by Altech
NamITech, monitored and maintained by an
external expert, and commencing with
leadership training for management and
roadshows at factory-floor level to communicate
the intention and benefits of the programme.
Altech NamITech staff elected 34 peer educators
who then underwent an intensive training course
and will continue HIV/Aids education within the
company. Monthly coaching sessions monitor
their progress and performance as peer
educators. Voluntary counselling, testing and
treatment is available from the Altech NamITech
clinic and conducted by the occupational health
nurse who has been trained on HIV/Aids
counselling, testing and treatment. Free
prophylactic treatment is provided to HIV+
employees in the early stages of the disease.
Employees who are in the advanced stage of the
disease are put onto the HIV programme
provided by the group medical aid.
A similar campaign is under way at Aberdare
Cables to ensure that employees and
management are informed about this disease
Our people continued
Sister Fikiswa Mqolomba (occupational health nurse) explaining some of the initiatives aimed at promoting HIV and Aids awareness at Aberdare Cables Standford Road.
69
and its impact on productivity. This programme
includes education, counselling on status and
treatment, influencing behavioural change
through condom distribution and liaison with
external doctors, medical-aid clinic coordinators
and community resource centres.
In 2005, Aberdare Cables consolidated its activities
into an HIV/Aids and wellness programme so that
all the aspects of the disease and occupational
activities can be managed holistically. Some 53%
of the workforce underwent voluntary counselling
and testing in November and December,
revealing a low prevalence rate of 4%.
Employees testing positive were treated with
anti-retrovirals and regularly monitored. These
employees have responded positively to
treatment, with measurable improvements in key
indicators such as CD4 cell counts, viral load and
weight gain. The company has also contributed
to the establishment of a day-care centre in
Motherwell where some employees on disability
are treated for opportunistic infections.
ABB Powertech Transformers embarked on a
Knowledge Attitude and Practices (KAP) Study in
2000 which was a qualitative study. Arising
therefrom, an HIV/Aids committee was formed
and is chaired by the human resources officer
with input from the on-site occupational health
practitioner and the occupational medical health
practitioner. Peer educators have also been
appointed and trained and have been equipped
with posters and a lecture plan to provide
training in the various departments. An HIV/Aids
awareness programme is ongoing through poster
and pamphlet communication, free condoms,
individual counselling and regular screening of
educational videos.
Derrick Hoshe (Industrial Departmental Manager) discusses performance graphs for the Industrial Plate Making Department at Willard Batteries Port Elizabeth with Gerald Peter (Industrial Quality Inspector).
HIV/Aids Peer Educators:
Left to right: Llewellyn Ho Chong, Brevin Jason, Annelize Nxele (Occupational Health Nurse) and Tony Klaasen.
70
ALTRON ANNUAL REPORT 2006
PREFERENTIAL PROCUREMENT AND ENTERPRISE
DEVELOPMENT
Altron is committed to creating a vibrant black
small, medium and micro enterprise (SMME)
sector and to encourage the formation of new
enterprises of all sizes. Accordingly, Altron
emphasises the need to procure goods and
services from previously disadvantaged
companies. This is commercially driven and the
group’s cost, quality, reliability and safety
standards are not compromised.
In terms of the Altron Transformation Vision
2010, our target for preferential procurement
began at 10% in 2005, rising to 50% by 2010.
Reporting on this area of transformation will be
monitored in the near future by the group’s new
empowerment scorecard platform which will be
based on the Department of Trade and Industry’s
BBBEE Codes of Good Practice.
During the review period, many Altron
companies met or exceeded our internal
scorecard target of 10% of discretionary
expenditure on preferential procurement and
enterprise development:
Ü Altech Netstar – 66% with black SMMEs
Ü Altech UEC Multi-Media – R25m or most of its
limited (10%) discretionary budget
Ü BTG spent 28% of discretionary purchases on
BBBEE procurement as was verified by
Empowerdex.
Ü The Powertech group averaged 28% of its
budget allocated to black companies – from a
high of 51% to a low of 2% for companies
restricted to international suppliers. Aberdare
Cables, for instance, spent R132.4 million on
preferential procurement which represents
48% of eligible spend and the group has 199
SMMEs in their supply chain – many of which
were assisted by Aberdare Cables.
Cable manufacture at Aberdare Cables Long Street factory, Johannesburg.
71
Willard Batteries assists start-up business
Willard Batteries with the assistance of financiers, Business Partners, arranged for a
former employee, Solly Nkosinkulu, to start his own business, Mlamli Sivuyile
Transport cc.
Solly purchased a truck through the company’s corporate social investment fund and
has, for the past five months, been successfully operating his waste removal business.
He has four permanent staff and two casuals.
Willard Batteries has also benefited financially as Mlamli Sivuyile Transport has been
able to clear Willard Batteries waste in a single trip per day and not two as was
previously the case.
Business Partners assigned a mentor to assist Nkosinkulu for a six-month period with
the day-to-day and financial management of his business, which he came through
with flying colours.
Story below:
Gary Paul (left) and Solly Nkosinkulu (right)
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ALTRON ANNUAL REPORT 2006
Enterprise development
Logistix, a Durban copy centre using Xerox copiers and printers, is a project initiated by
two former employees of Bytes Document Solutions (BDS) and supported by BDS as part
of its BBBEE enterprise development initiatives. BDS has
undertaken a number of similar ventures during the year
under review. Apart from providing start-up management
expertise and advice as well as sponsoring the centre’s
signage, BDS supplied equipment at preferential rates
with favourable repayment terms for two years. After the
two years, ownership of the equipment will vest with
Logistix. BDS has a reciprocal business arrangement with
Logistix, as well as a preferential payment arrangement.
One of Aberdare Cables’ enterprise development
initiatives is a drum company in Port Elizabeth, which
manufactures wooden drums for power cable
manufacturers and which is 60% black-owned and
employs some 15 people. Aberdare Cables assists the
company with its plant layout, safety compliance,
labour issues, timber supply and provides engineering
assistance on machine breakdowns. Machines and
equipment were supplied to the company on a loan basis at a value of R300 000.
Aberdare Cables purchases wooden drums from this company and, during the last year,
drums to the value of R12.5 million were procured from this company.
Preferential procurement and enterprise development continued
Logistix is a provider of Xerox copiers and printers.
73
SAFETY, HEALTH AND ENVIRONMENT
A safe and healthy working environment
allied to responsible use and management
of our natural resources are integral
elements of Altron’s commitment to
sustainable development. Throughout the
group, Safety, Health and Environment (SHE)
policies and systems are in place to ensure
that our manufacturing and production
facilities conform to best human resources
and environmental practices wherever
possible and that any negative impact from
waste disposal or pollution is appropriately
managed and mitigated.
A formal environmental management
reporting system is being implemented
throughout the group to comply with the
reporting requirements of the JSE Social
Responsibility Investment (SRI) Index. Both
Altron and Altech have qualified for this
index annually since its inception and BTG
qualified for the first time in 2005.
Regular audits are conducted by internal audit
and by an accredited external independent
consultant and quarterly reports are submitted
to the various audit and risk management
committees and boards. Reported issues
include: water use and discharge; land use;
solid and hazardous waste output and disposal;
gaseous emissions; major environmental
violations; safety and security; prosecutions
and fines; accidents and incidents.
During the period under review, no
prosecutions were brought against any
company of the group for the contravention
of any environmental laws.
Final inspection of industrial battery cells by Quality Department – Port Elizabeth Factory, before being booked into stock and despatched to Ophirton DC Power Marketing warehouse.
74
ALTRON ANNUAL REPORT 2006
Safety and health
Operational risk management committees
continue to emphasise SHE issues as a
pivotal component of our key business
objectives. Beyond legal compliance, Altron
is committed to achieving a high level of
SHE performance at both a corporate and
operational level.
Safety regulations on all sites are not
negotiable, and performance is reported
quarterly at board meetings throughout the
group. Using the Occupational Health and
Safety Act as the minimum benchmark, a
risk and safety policy at operational level
throughout the group spans health and
safety representatives; occupational injury;
disease and accidents; first aid; fire
procedures; and record keeping and training.
ISO Certification
Several group operations, particularly those in
our primary manufacturing group, Powertech,
have ISO 14001 certification governing the
implementation and maintenance of
environmental management systems.
They also have defined roles and responsibilities
including: procedures for monitoring and
measuring; procedures for training, guidelines
and awareness; emergency plans; objectives and
targets; audit and review; and corrective and
preventive actions. All operations maintain
aspect and impact registers and conduct monthly
audits which are externally reviewed. Operator
and staff training is an ongoing requirement of
these certifications, and new and existing
employees undergo specific training in their
work-related skills.
On-site medical facilities at the Aberdare Cables factory in Johannesburg.
Safety, health and environment continued
75
A recycling success
One of the most exceptional environmental success stories of our time lies in the recycling of
lead-acid batteries. In the USA, lead-acid batteries are the most highly-recycled consumer
products at 93% (42% for newspapers, 55% for aluminium cans, and 40% of plastic soft-
drink bottles). This success story is partly due to the life cycle of the lead-acid battery – such
as those used for electric wheelchairs – which is 98% recyclable.
At Willard and Sabat Batteries the recycling of lead-acid batteries is a multi-stage process.
Initially, the battery is broken apart in a hammermill. Broken pieces go into a vat or flotation
pond where the lead and heavy materials sink to the bottom while the plastic floats. At this
stage, polypropylene (or plastic) pieces are scooped away and liquids drawn off, leaving the
lead and heavy metals behind. The plastic pieces are washed, air-dried and melted together
into an almost liquid state. The molten plastic is then put through an extruder that produces
small uniform pellets, which are used to manufacture new battery cases.
The lead grids, lead oxide and other lead parts are cleaned and melted in a smelting furnace
with additives to help remove impurities. The molten lead is poured into ingot moulds. After
a couple of minutes, the impurities (or dross) float to the top of the still-molten lead in the
moulds and are scraped away. The ingots are then left to cool, after which they are removed
and ready to be resmelted to produce new lead plates and other parts for new batteries.
Old battery acid is handled in two ways:
Ü The acid is neutralised with an industrial compound similar to household bicarbonate of
soda. This turns the acid into water which is treated, cleaned and tested to ensure it
meets clean water standards, and then released into the sewerage system.
Ü Old battery acid is processed and converted into sodium sulphate, an odourless white
powder used in laundry detergent, glass and textile manufacturing. In this way, a
potentially noxious substance is transformed into a useful, reusable product.
Scrap battery cells at the Willard Batteries Port Elizabeth factory being loaded onto a Sutherland Transport company truck, for delivery to Frys Metals, for recycling.
76
ALTRON ANNUAL REPORT 2006
Business ISO OHASA Other
Altech
Altech NamITech 9001 VMC*
Altech UEC Multi-Media 14001
Powertech
Aberdare Cables
● Standford Road
● Lambda
● Pietermaritzburg
● Aberdare Network Services
● Edenvale
● Gauteng
● Jet Park
● Alcon Marepha
9001 14001 (2005)
9001
9001 14001 (2005)
9001
9001
9001
9001
9001
BASEC/ISO 9001 compliant
BASEC/ISO 9001 compliant
ABB Powertech Transformers
14001, 18001 (2005), 9001
Compliant
Crabtree 9001 14000, 18000 (2005)
Whiteleys 9001 (2005)
Desta Power Matla 9001 14000 (2005)
Strike Technologies
Tridonic SA 9001 ENEC (European standard, including VDE and CE marks)
Willard Batteries
● Port Elizabeth
● Industrial
● Automotive
14001
9001
ISO-TS 16949 Q1 (Ford); QS 9000 (GM), VDA 6 (VW and BMW).
Years in brackets denote latest certification.
Safety, health and environment continued
77
Blood-lead monitoring
Managing the lead content in the blood levels of relevant employees is a priority at
Willard and Sabat Batteries. Using legal compliance as a minimum benchmark, the
company has developed rigorous standards for monitoring blood-lead levels in
employees exposed to inorganic lead while working – from annual tests in non-lead
areas to monthly monitoring for employees working in lead areas.
If an employee’s blood-lead level exceeds the company’s prudent limits, explicit
mitigation steps are immediately instituted. These include removing the affected
worker from the lead area, investigating the possible source and notifying the
appropriate co-workers and safety representatives. No employees are returned to
the lead area until their blood-lead levels are well below the stipulated threshold.
The potential biological effects of lead are constantly monitored, and the company
has a range of additional investigations which are conducted when lead is
suspected of causing ill-health.
Education and counselling sessions ensure that employees are thoroughly familiar
with the sources of lead in the workplace, the potential dangers of exposure and the
importance of biological monitoring and medical surveillance. Precautionary
measures are emphasised, including the use of protective equipment and adherence
to environmental, housekeeping and personal hygiene practices. In addition,
meticulous training is conducted on disposing of waste material containing lead and
cleaning sites at which lead or material containing lead has been used, handled or
processed.
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ALTRON ANNUAL REPORT 2006
Waste management
Waste management projects at the
manufacturing and operational level in Altron
include the controlled separation and disposal of
hazardous waste; transport, storage or trading of
this waste; recycling and reclamation of waste
materials, and the auditing of the legal
compliance of contracted waste disposal
companies.
For operating companies handling hazardous
chemical substances, the highest level of
housekeeping standards is required. These
standards must prevent fire, spillage, ingestion
and contamination. In monitoring hazardous
chemicals, daily checks take place and waste
disposal is offsite, conducted by reputable waste
disposal contractors with verified certification.
In the Altron group, the process with the largest
environmental impact is soldering at Altech UEC
Multi-Media which results in lead waste. The
waste is disposed of according to strict
regulations by contractors that have supplied
Altech UEC Multi-Media with proof of their
compliance with water and waste bye-laws and
the National Environmental Management Act of
1998 (as amended). To comply with European
Community requirements, the company has
implemented a programme to remove lead from
the soldering process during 2006 for products
supplied into European markets. Processes
Safety, health and environment continued
Left to right: Moegamat Abrams and Peter Louw of Aberdare Cables Standford Road demarcating excess paper from the Paper Department for recycling.
Effluent pH reading check being taken on raw factory battery effluent by Chemical Initiatives employee at Willard Batteries Port Elizabeth factory. All battery effluent is held in retainer tanks and treated before being released into the municipal sewerage system. Acid is neutralised before being released in terms of the Company ISO 14001:2004 standards.
79
involving volatile organic compounds (VOC) are
also being phased out, with a water-based
process due in mid-2006. All other waste
material generated in manufacturing Altech UEC
Multi-Media decoders is recycled. Additionally, in
terms of its product design, only recyclable
packaging material is used. A modern water-
based paint plant has been installed to eliminate
the use of harmful solvents in traditional oil-
based paints.
For the remainder of Altron’s non-manufacturing
operations, the environmental effects are
managed as far as possible. The electricity that is
consumed is limited to use for lights and
computers and other office equipment. Water
consumption is for drinking purposes and
bathroom facilities. Both these resources are
monitored. No ground water is drawn for any of
Altron’s operations. The operational activities in
the Altron group do not impact on biodiversity,
protected or sensitive areas, heritage sites,
fresh water resources or related ecosystems.
During the review period, considerable
modifications took place at the Battery Group
factories in Port Elizabeth to address the
emission of pollutants – such as acid vapour
and lead dust – into the atmosphere. In
addition, considerable capex has been
allocated to ensuring emissions of liquid acid
effluent are neutralised and managed within
legal requirements. The required permits for
these processes are in place. Water from the
battery-charging baths is pumped into a
holding sump, pH corrected and re-used in
the charging process. All lead waste is
recycled and re-used in the battery
manufacturing process.
Altech NamITech’s manufacturing process is
toxin free. Waste material that cannot be
recycled is disposed of using specialist waste
disposal companies which all comply with
environmental best practices. Water is no
longer used in any part of the manufacturing
process and an electricity-saving project has
been implemented.
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ALTRON ANNUAL REPORT 2006
Floor refurbishment
In the manufacturing of lead-acid batteries, two
hazardous chemical substances, namely sulphuric
acid and lead, are used. Sulphuric acid is a highly
corrosive chemical substance and about 95% of
its usage on site is concentrated in the battery/
cell accumulator charging facilities or charge
rooms. The handling of the acid causes continual
minor spillages which, if not effectively
controlled, can detrimentally affect the
environment in terms of contamination or
pollution of the soil and subterranean water
systems under the concrete floor.
Willard Batteries accepts the responsibility for
ensuring that the environment is not
compromised. Care is, therefore, taken to
protect the floors in the charge room areas, as
well as in areas where smaller quantities of
sulphuric acid are used. This is done by means
of a floor coating which seals and protects the
areas to which it is applied. The floor coating
consists of a mixture of “silicone sand” and an
A.B.E. sealant and is applied to the floor areas
as an epoxy coating. The coating prevents any
seepage into the subterranean soil and water
and is either completely stripped off once a
year (during shutdown), if the wear and tear of
the year has been particularly severe, or
carefully repaired where the coating has been
breached.
Global reporting initiative
Altron’s incremental progress towards compliance
with GRI guidelines is detailed on pages 171 – 183.
Safety, health and environment continued
81
Recycling toxic lead-acid batteries into indigenous trees
Willard Batteries has embarked on an
innovative venture which is contributing to
enhancing our environment and improving the
quality of life for fellow South Africans.
Through this project, every scrap battery
traded in on a new Willard Battery will result in
money being invested to plant indigenous trees
in disadvantaged community areas. The funds are
donated to Food and Trees for Africa for various
urban greening projects around the country.
In the past decade, a vast number of people
have relocated from rural to urban areas, largely
due to perceived job opportunities in and around
major cities. The result of this influx has been
the formation of large informal settlements
with little or no town planning. Use of space is
poor and characterised by ever-decreasing
quality in the land, the water and the air.
The environmental and social consequences of
rapid urbanisation on our environment cannot
be ignored. Food and Trees for Africa recognised
that environmentally-sound urban development
must include urban greening. This is a
comprehensive term used to describe all urban
vegetation management (green spaces or
urban vegetated areas) including urban
agriculture/permaculture and urban forestry.
Urban forestry is the planning and management
of trees, forests and related vegetation to
create, or add value to, the local community in
an urban area. Through urban greening, areas
become more pleasant to live in, contribute to
the quality of the air, the reduction of global
warming and carbon dioxide, and eventually to
civic pride and a sense of community – the
essence of sustainable urban development.
To date, Willard Batteries has been
instrumental in planting over 4 000 indigenous
trees – a project which promises to reap untold
and sustainable rewards for future generations
of urban residents.
Willard Batteries has been instrumental in planting over 4 000 indigenous trees.
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ALTRON ANNUAL REPORT 2006
Shareholders
One of the group’s stated objectives is the enhancement of shareholder value. Both ordinary and
participating preference shareholders enjoyed share price appreciation over the past financial
year and the dividend was increased by 24%.
Presentations of financial results are held in October and May of each year once interim and
year-end results are known. The group’s corporate website www.altron.co.za is also utilised to
communicate with shareholders. A considerable amount of information is available on this
website including:
Ü presentations of financial results; Ü media releases; and
Ü interim and annual reports; Ü operational news.
Contact details
Corporate communications Secretarial and administration
Salomé Brown Andrew Johnston
Telephone: 27 11 645 3604 Telephone: 27 11 645 3609
Telefax: 27 11 726 3009 Telefax: 27 11 482 6489
Email: [email protected] Email: [email protected]
Shareholders
83
Altron shareholder analysis – compiled by the company’s transfer secretaries as at 24 February
2006 (STRATE close off)
Shareholder spread – ordinary shares
Number ofshareholders %
Number ofshares
% of sharesin issue
1 – 500 shares 369 21.23 101 737 0.11
501 – 1 000 shares 346 19.91 300 778 0.31
1 001 – 5 000 shares 671 38.61 1 663 067 1.72
5 001 – 10 000 shares 117 6.73 899 790 0.93
10 001 – 50 000 shares 155 8.92 3 498 746 3.60
50 001 – 100 000 shares 23 1.32 1 587 292 1.61
Over 100 000 shares 57 3.28 89 122 705 91.72
1 738 100.00 97 174 115 100.00
Shareholder spread – ordinary shares
Number ofshareholders %
Number ofshares
% of sharesin issue
Holding companies 2 0.11 56 649 124 58.30
Repurchased shares 1 0.06 3 246 469 3.34
Banks 25 1.44 1 024 871 1.05
Close corporations 20 1.15 29 682 0.03
Endowment funds 18 1.04 422 707 0.44
Individuals 1 158 66.63 5 875 993 6.05
Insurance companies 21 1.20 2 641 203 2.72
Investment companies 13 0.75 3 981 748 4.09
Medical aid schemes 3 0.17 19 872 0.02
Mutual funds 40 2.30 7 212 472 7.42
Nominees & trusts 267 15.36 1 546 294 1.59
Other corporations 17 0.98 165 401 0.17
Pension funds 86 4.95 13 283 349 13.67
Private companies 62 3.57 1 031 624 1.06
Public companies 5 0.29 43 306 0.05
1 738 100.00 97 174 115 100.00
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ALTRON ANNUAL REPORT 2006
Shareholder spread – participating preference shares
Number ofshareholders %
Number ofshares
% of sharesin issue
1 – 500 shares 1 518 44.69 181 860 0.08
501 – 1 000 shares 322 9.48 265 108 0.12
1 001 – 5 000 shares 852 25.09 2 077 695 0.98
5 001 – 10 000 shares 183 5.39 1 396 372 0.66
10 001 – 50 000 shares 273 8.04 6 821 237 3.21
50 001 – 100 000 shares 80 2.36 5 856 034 2.75
Over 100 000 shares 168 4.95 195 681 022 92.20
3 396 100.00 212 279 328 100.00
Shareholder spread – participating preference shares
Number ofshareholders %
Number ofshares
% of sharesin issue
Holding companies 2 0.06 34 029 256 16.03
Repurchased shares 1 0.03 24 310 492 11.45
Banks 38 1.12 1 519 695 0.72
Close corporations 36 1.06 159 926 0.08
Endowment funds 20 0.59 822 066 0.39
Individuals 2 525 74.35 6 855 751 3.23
Insurance companies 12 0.34 14 157 292 6.67
Investment companies 13 0.39 16 803 100 7.92
Medical aid schemes 3 0.09 159 827 0.08
Mutual funds 124 3.65 53 233 807 25.08
Nominees & trustees 366 10.78 7 598 794 3.57
Other corporations 26 0.77 1 149 498 0.54
Pension funds 140 4.12 47 121 075 22.19
Private companies 77 2.27 3 420 066 1.61
Public companies 13 0.38 938 683 0.44
3 396 100.00 212 279 328 100.00
Shareholders continued
85
Stock exchange performance during the past six years
2006 2005 2004 2003 2002 2001
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Market value per share (cents)
– at year-end 2 550 2 250 1 555 1 538 1 105 1 125 820 750 760 755 795 790– highest 2 610 2 350 1 725 1 665 1 150 1 150 900 890 880 845 830 820– lowest 1 460 1 385 1 100 1 099 740 680 740 720 710 700 520 485
Number of shares traded (000) 20 079 49 069 18 879 49 903 6 634 23 504 7 604 22 980 5 556 19 576 14 763 33 914
Value of shares traded(R000) 398 947 903 016 254 339 649 083 61 880 199 927 61 542 179 560 44 824 156 886 97 559 201 898
Total volume traded as % of total issued shares 21 23 19.4 23.9 6.8 11.5 7.8 11.4 5.7 9.9 15.2 17.6
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86
ALTRON ANNUAL REPORT 2006
Shareholders continued
Shareholder spread
Ordinary shares Participating preference shares
Number ofshareholders
Number ofshares %
Number ofshareholders
Number ofshares %
Public 1 727 34 121 210 35.11 3 382 149 680 980 70.51
Non-public 11 63 052 905 64.89 14 62 598 348 29.49
Major shareholders holding 2% or more of the Company’s listed ordinary shares
as at 24 February 2006
Ordinary
Name of shareholdersNumber of
shares %
Biltron (Pty) Limited 30 478 076 31.36
Perrington Investments (Pty) Limited 26 171 048 26.93
Old Mutual Life Assurance Company SA Limited 3 774 822 3.88
Public Investment Corporation 3 255 704 3.35
Altron Finance (Pty) Limited 3 246 469 3.34
Dr WP Venter 2 641 639 2.72
Liberty Group (Holdings & Funds) 2 075 626 2.14
Major shareholders holding 4% or more of the Company’s listed participating
preference shares as at 24 February 2006
Participating preference
Name of shareholdersNumber of
shares %
Biltron (Pty) Limited 30 392 400 14.32
Altron Finance (Pty) Limited 24 310 492 11.45
Public Investment Corporation 22 160 097 10.44
Old Mutual Group (Holdings & Funds) 21 057 373 9.92
Nedcor (Holdings & Funds) 13 090 289 6.17
Liberty Group (Holdings & Funds) 12 369 056 5.83
Allan Gray (Holdings & Funds) 9 882 547 4.66
Investment Solutions (Holdings & Funds) 9 025 277 4.25
87
Summarised terms of the Altron
participating preference shares
Altron has two securities listed on the JSE,
namely ordinary shares and participating
preference shares. The ordinary and participating
preference shares, other than in respect of
voting, rank pari passu for earnings and
dividends. The participating preference shares
have been classified by the JSE Limited as an
“N” share, due to their lower voting rights.
Accordingly, both classes of shares must be taken
into account when determining the market
capitalisation of Altron. The terms of the
participating preference shares are summarised
below:
Par value (nominal value)
The participating preference shares have a par
value of 0.01 cent per share while the ordinary
shares have a par value of 2 cents per share.
Earnings and dividends
The participating preference shares rank pari
passu with the ordinary shares in terms of
earnings and dividends.
Voting
Holders of participating preference shares
may attend general meetings of the
company but may only vote in the following
circumstances:
Ü where no dividend on the participating
preference shares in respect of any financial
year has been declared and paid within six
months of the end of the financial year;
Ü upon the winding-up of Altron;
Ü the resolution before the meeting involves
the disposal of the whole or substantially the
whole of the undertaking of the company or
the whole or the greater part of the assets of
the company;
Ü the resolution before the meeting directly
affects the rights attaching to the
participating preference shares;
Ü where dividends remain in arrears and unpaid
for more than six months; and
Ü otherwise in accordance with Altron’s articles
of association.
In such circumstances, a holder of the
participating preference shares will be entitled
on a poll, to that proportion of the total votes of
Altron which the aggregate of the nominal value
of the participating preference shares held by
him/her bears to the aggregate nominal value
of all the shares in Altron.
Holders of participating preference shares are
entitled to receive financial statements, notices
88
ALTRON ANNUAL REPORT 2006
of general meetings and other reports issued by
the company from time-to-time.
No resolution for the voluntary winding-up of
Altron or the creation of shares ranking in priority
to or pari passu with the participating preference
shares may be passed, unless the participating
preference shareholders have given their prior
consent thereto at a separate class meeting of
the participating preference shareholders.
Bonus or capitalisation awards
Holders of participating preference shares are
entitled to participate in any bonus or
capitalisation issues or other offer of securities
made to the holders of the ordinary shares on the
basis that, in respect of each participating
preference share so held, the holder thereof will
be offered or entitled to receive such number of
participating preference shares or like securities
having the same voting rights as the particular
preference shares on a basis and terms relative to
each ordinary share.
Distribution of assets
Holders of participating preference shares are
entitled to participate in any offer or distribution
of assets made by Altron to ordinary
shareholders. The offer or distribution in terms
thereof in respect of each participating
preference share shall be on the basis and terms
relative to each ordinary share.
Winding-up
Holders of participating preference shares are
entitled on winding up to receive out of the
surplus assets in priority to the holders of the
ordinary shares, payment of the nominal value
per participating preference share. Thereafter,
once the ordinary shares have received a
distribution of the equivalent nominal value
per participating preference share, each
participating preference share shall rank equally
with the ordinary shares in any surplus then
remaining.
Variation of rights
The rights attaching to the participating
preference shares may be varied only with
the prior consent thereto at a separate class
meeting of the participating preference
shareholders.
Shareholders continued
89
Altron has long been a forerunner in
employment equity and black economic
empowerment, before either concept became an
integral part of modern business practices.
Certain characteristics pervade our group – the
Altron hallmarks of the way we do business,
every day:
Ü strong bias for action
Ü acknowledgement of the dignity of all our
people
Ü the skill to treat customers and suppliers with
respect
Ü ability to enhance profits by controlling costs
Ü attention to detail
Ü remaining at the forefront of the technology
curve
Ü the courage and tenacity to deal with rapid
change.
These values were recognised by a 2005 merit
award from the South African Institute of
Chartered Secretaries and Administrators which,
in conjunction with the JSE, evaluates annual
reports on corporate information and
governance, among other elements.
Compliance
Altron subscribes to the values of good corporate
governance contained in King II and its key
principles are reflected in our governance
Corporate governance
“For more than 70 years, Altron
people have created an asset of
incalculable value – the company’s
reputation for integrity and high
standards of business conduct.
That reputation, built by so many
people over so many years, rides
on each business transaction we
make.”
Internal memorandum,
August 1994
Introduction
Since its founding in April 1965, Altron has
transformed from a small electronics firm
with five employees to one of the leaders in
South Africa’s high-technology industry – focused
on power electronics, telecommunications,
multi-media and information technology.
Today, the Altron group employs approximately
11 000 people through over 140 companies and
associates on five continents. It is Africa’s
foremost diversified technology group with
revenue exceeding R14 billion, a sound balance
sheet and a business founded on honesty,
sustained performance, good corporate
governance, sound management practice and
supportive leadership.
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ALTRON ANNUAL REPORT 2006
Corporate governance continued
structures. These are regularly reviewed to
incorporate changes and developments in this
field.
The directors recognise the need to conduct the
group’s business with integrity and according
to sound corporate practices. These include
discipline, independence, responsibility, fairness,
social responsibility, transparency and
accountability of directors to all stakeholders.
These principles are entrenched in Altron’s
internal controls and policy procedures governing
corporate conduct. In assessing the practices and
conduct of the group, two factors have been
balanced:
Ü entrepreneurial freedom to take business risks
and initiatives leading to satisfactory levels of
performance and return on shareholders’
investment
Ü conforming to corporate governance standards,
which can impose constraints on
management.
The board is satisfied that Altron has made every
practical effort to comply with all material aspects
of King II during the review period. In the new
financial year, and reflecting our determination to
constantly improve our standards, Altron will be
among the forerunners in South Africa by having
its corporate governance assertions independently
audited and assured.
Approach
Leadership
The board supports the long-term sustainability of
corporate capital, triple bottom-line performance
and balancing the interests of stakeholders with
the good of the group. The detailed responsibilities
of the board, as set out in its charter (initially
approved in April 2002, revised and adopted by
the board in February 2006), include the duty to:
Ü exercise objective, informed judgement on the
business affairs of the company
Ü determine and monitor the implementation of
strategic plans and financial, environmental and
social objectives
Ü ensure that a system of policies and procedures
is in place and maintained and that suitable
governance structures exist to ensure the
efficient and prudent stewardship of the
company
Ü ensure Altron complies with all relevant laws,
regulations and codes of practice
Ü regularly review and evaluate business risks
and ensure comprehensive, appropriate internal
controls are in place
Ü define levels of authority, reserving specific
powers and delegating other matters to the
chief executive
Ü continually monitor the exercise of delegated
authority
91
Ü ensure an appropriate balance of power and
authority on the board so that no one person
or a block of persons has unfettered power
Ü identify and monitor non-financial aspects
relevant to the company’s business and
ensure that the company acts responsibly
towards all relevant stakeholders with a
legitimate interest in its affairs.
Accountability
The board takes overall responsibility for the
company. Its role is to exercise leadership and
sound judgement in directing the company to
achieve continuing prosperity and to act in the
best interests of all stakeholders.
Transparency
Full and timeous disclosure of information to
stakeholders is prescribed by various policies
governing communication and conduct with
stakeholders.
Board structure and related matters
Composition
Altron has a unitary board consisting of
15 directors. Of these, five are independent non-
executive directors while two are non-executive
and eight are executive directors. Subsequent
to the financial year-end, and effective
1 May 2006, Douglas Ramaphosa was appointed
an alternate director to Dr HA Serebro and a
member of the Altron executive committee.
The board charter is reviewed from time-to-time
to ensure its continued compliance with local
and international best practices and changes to
the South African regulatory environment.
Chairman and chief executive
In line with best practice, the roles of chairman
and chief executive are separate. The board is
led by Dr Bill Venter. Operational management of
the group is the responsibility of the chief
executive, Robert Venter.
Particular areas of responsibility for the chairman
include strategic planning, relationships with
principals, government and customers, group
economic empowerment, corporate relations,
top-level contact with regulatory bodies, and
advice and guidance on local and overseas
acquisitions.
This level of material involvement is considered
essential by the board, given the intrinsic
knowledge and experience the chairman brings
to bear in the effective running of the board and
guidance to the operational team. It is governed
by a formal board-approved mandate which is
reviewed from time-to-time where appropriate,
regulating the terms of reference of the office of
the chairman.
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ALTRON ANNUAL REPORT 2006
Corporate governance continued
Directors
The non-executive directors bring value and insight
to the board. They are individuals of high calibre
and integrity and provide a depth of wisdom
based on knowledge and experience on an array
of issues. The composition of the board ensures
a balance of power and authority, and negates
individual dominance in decision-making processes.
The non-executive directors have no fixed term
of appointment and no service contracts with
Altron. Their fee is independent of the group’s
financial performance and they receive no share
options.
Executive directors are bound by the standard
terms and conditions of employment for all
Altron employees where their notice periods are
short term, not exceeding 60 days.
Directors are subject to retirement by rotation
and re-election by shareholders at least once
every three years under article 16 of Altron’s
articles of association.
To avoid conflicts of interest, board members
must disclose their interests in material contracts
involving the group, including shareholdings in
Altron as well as any other directorships. Board
members must recuse themselves when
participation in deliberations or decision-making
processes could in any way be affected by
vested interests.
Effectiveness of the board
The board evaluates its own effectiveness at least
every two years or more often if required by board
changes. In 2005, all directors participated in this
self-assessment. Overall ratings improved
substantially, indicating a greater understanding of
statutory and fiduciary responsibilities, improved
collective and individual functioning and effective
communication between board members.
The level of commentary and constructive
criticism, and areas identified for improvement,
are a sound platform from which to further
improve the value of the board to the group and
its governance structures.
Company secretary
All directors have access to the advice and services
of the group company secretary, who is
responsible to the board for ensuring compliance
with procedures and applicable statutes and
regulations. To enable the board to function
effectively, all directors have full and timely access
to all information that may be relevant to the
proper discharge of their duties and obligations.
This includes information such as corporate
announcements, investor communications and
any other developments which may affect Altron
or its operations. The office of the group
company secretary is responsible for facilitating
this access.
93
All directors, executive or non-executive, may
liaise with the group company secretary on
agenda items for board meetings. Where
appropriate, directors may also consult with
independent professionals, at Altron’s expense,
for advice on certain issues.
The group company secretary provides counsel
and guidance to the board, individually and
collectively, on their powers and duties. The
group company secretary is also responsible for
the development of director training. All new
directors, where relevant, are appropriately
inducted to Altron by the group company
secretary, which includes a briefing on their
fiduciary and statutory duties and responsibilities
as well as two- to three-day induction visits to
group operations around South Africa.
The group company secretary is responsible for
the functions specified in section 268(G) of the
Companies Act, of 1973 (as amended). All
meetings of shareholders, directors, and board
committees are properly recorded as per the
requirements of section 242 of the same Act.
The removal of the group company secretary
would be a matter for the board as a whole.
Board meetings
A minimum of four board meetings are scheduled
per financial year. Additional board meetings
may be convened when necessary. Four board
meetings and two strategy sessions were held
during the past financial year. Details of
attendance by each director at board and
committee meetings appear on page 101.
Board committees
The board has established several committees in
which non-executive directors play an active and
pivotal role. All committees operate under board-
approved terms of reference which, with the
exception of the executive committee’s terms of
reference, were reviewed and updated in February
2006 to further align them with best practice. All
committees, except the executive committee, are
chaired by an independent non-executive director,
who also attends the annual general meeting to
respond to stakeholder queries.
Members of each committee, except the executive
committee, are re-elected every year at the first
board meeting following the annual general
meeting.
Executive committee
Members – Robert Venter (executive committee
chairman), Diane Radley, Craig Venter, David
Redshaw, Norbert Claussen and Peter Curle (the
executive structure appears on pages 8 to 9).
Subsequent to the financial year end, Douglas
Ramaphosa was appointed to the Altron
executive committee.
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ALTRON ANNUAL REPORT 2006
Corporate governance continued
Composition and proceedings – the
committee meets monthly with additional
meetings convened when necessary.
Role – this committee comprises the chief
executive and certain senior executives of the
group. It is responsible for the operational
activities of the group, developing strategy and
policy proposals for consideration by the board
and implementing the board’s directives. It has a
properly-constituted mandate and terms of
reference which are reviewed from time-to-time.
Audit committee
Members – Peter Wilmot (chairman), Mark
Lamberti, Mike Leeming and Jacob Modise.
Composition and proceedings – Diane Radley
(chief financial officer) has right of attendance,
while Dr Bill Venter (Altron chairman) and
Robert Venter (chief executive) attend
committee meetings by invitation. The
committee meets periodically with the group’s
external and internal auditors and Altron’s
executive management. It also carefully
monitors the use of the external auditors for
non-audit related services: a formal policy
dealing with the appointment of auditors for
non-audit related services precludes services
which would impair audit independence.
Services rendered by the external auditors
during the year comprised mainly compliance
and other assurance-based engagements.
External auditors attend meetings by invitation.
At the year-end audit committee meeting, the
chairman ensures that senior management and
the external and internal auditors are able to
candidly, and independently of each other, report
back to the committee chairman on any aspect.
Two meetings are scheduled annually,
with special meetings called as required.
The committee met twice during the
period under review.
Role – the committee has written terms of
reference and its responsibilities include:
Ü considering the appointment and/or
termination of the external auditors,
including the audit fee, and their
independence and objectivity
Ü considering and setting mandatory term
limits on the period the external auditors or
audit partner may serve the company
Ü confirming internal audit’s charter and audit
coverage plan
Ü determining with the external auditors the
nature and scope of the audit and ensuring
co-ordination where more than one firm is
involved
Ü reviewing the risk areas of the company’s
operations to be covered in the scope of
internal and external audits
Ü reviewing half-year and annual financial
statements before submission to the board
focusing on:
95
– any changes in accounting policies and
practices
– major judgemental areas
– significant adjustments arising from the
audit
– the going-concern statement
– compliance with accounting standards
– compliance with stock exchange and
statutory requirements
– reliability and accuracy of the financial
information provided by management and
other users of financial information
Ü discussing any problems and reservations
arising from the interim and final audits and
any related matters that the external
auditors may wish to discuss.
The internal and external auditors have unlimited
access to the chairman of the committee. The
internal audit department reports directly to the
audit committee and is also responsible to the
chief financial officer on day-to-day matters.
Remuneration committee
Members – Jacob Modise (chairman),
Myron Berzack, Peter Wilmot and Dr Bill Venter.
Composition and proceedings – The committee
comprises a majority of non-executive directors.
Robert Venter (chief executive) has right of
attendance at committee meetings, and
Diane Radley (chief financial officer) attends by
invitation. No executives participate in discussions
on their own remuneration and benefits. Two
meetings are scheduled annually, with special
meetings called as required. The committee met
twice during the period under review.
Role – this committee, in consultation with
executive management, ensures that the
group’s directors and senior executives are fairly
rewarded for their individual contributions to
overall performance and in line with the Altron
remuneration philosophy. Further details appear
in the remuneration report on page 102.
Risk management committee
Members – Mike Leeming (chairman),
Norbert Claussen, Dali Mpofu, Diane Radley,
David Redshaw, Dr Harold Serebro, Dr Bill Venter,
Craig Venter, Robert Venter and Peter Wilmot.
Subsequent to the financial year-end,
Dr Bill Venter has resigned as a member of this
committee.
Composition and proceedings – The committee
has two scheduled meetings each year and met
twice during the review period.
Role – as the objective of risk management is
to identify, assess, manage and monitor risks to
which the business is exposed, Altron’s selected
approach involves identifying strategic risks,
reviewing their impact, assessing the probability
96
ALTRON ANNUAL REPORT 2006
Corporate governance continued
of occurrence and monitoring the perceived
effectiveness of existing controls.
In understanding the risk universe, both the
impact and probability of risk are ranked on
nine-point scales: from catastrophic to
negligible for the former; from negligible to
confidently expected for the latter. Inherent
risk is ranked similarly to the impact of risk
while control effectiveness is measured as
either good, satisfactory, corrective action
required or deficient.
Depending on the value of the residual risk
exposure, management will decide on the
acceptance of the identified residual risk or
exposure. If considered high, an action plan
– stipulating the responsible person, required
action and timeframe – will be put in place
to reduce the level of risk to a more
acceptable level.
The major consolidated risks identified at the
beginning of the review period were:
Ü the lack of black economic empowerment
partners in certain operating companies
Ü the dependence on network operators
(Altech Autopage Cellular)
Ü not achieving employment equity targets
in certain subsidiaries
Ü the lack of adequate systems to extract
operational management information.
The board has made good progress in
addressing the level of empowerment
partners in key operating companies (Altech
and Pamodzi, BTG SA and Kagiso, Powertech
and Izingwe). It is also liaising closely with the
Department of Trade and Industry on issues
relating to the department’s recently-
published draft Codes of Good Practice and
creating a sustainable business environment.
Initiatives to find suitable empowerment
partners for other operations are ongoing, in
line with the targets set and currently being
reviewed in Altron’s Transformation Vision
2010. These initiatives are championed by the
respective human resources departments and
monitored by the Altron executive committee
and transformation sub-committee.
The dependence on network operators has
been carefully mitigated through the 2005
signing of five-year service provider
and incentive agreements with Vodacom
and MTN, acknowledging the vital role
played by independent service provision in
the cellular industry in South Africa. Altech
Autopage Cellular’s existing agreement with
Cell C expires in 2009.
The implementation of a corporate
information system project aimed at
providing accurate non-financial group
information was fully implemented at BTG
97
by the end of 2005 and will be rolled out to
the rest of the group in the new financial
year.
Presently, management is focusing on two
significant group risks:
Ü the liberalisation of the telecommunications
market in South Africa
Ü the impact of import competition due to the
strength of the rand, predominantly at
Powertech.
Internal controls and internal audit
Internal controls comprise methods and
procedures adopted by management to assist
in achieving the objectives of safeguarding
assets, preventing and detecting error and
fraud, ensuring the accuracy and completeness
of accounting records and preparing reliable
financial statements. The group’s approach is
detailed in the directors’ report on page 111
dealing with the approval of annual financial
statements.
The internal audit function serves management
and the board by performing independent
evaluations of the adequacy and effectiveness
of group companies’ controls, financial
reporting mechanisms and records, information
systems and operations and provides additional
assurance on safeguarding group assets and
financial information.
The internal audit department assists
management in ensuring proper compliance
with controls and procedures while maintaining
an appropriate degree of independence to
render impartial judgements in performing its
duties. A fraud hotline, established three years
ago, enables Altron associates and employees
to anonymously report suspected irregularities
and has proved an effective tool. Throughout
the group, 77 cases of theft, fraud and other
dishonesty were recorded during the year.
This is down significantly from 140 in 2002
and reflects the benefits of a proactive approach
and the long-standing group policy on criminal
prosecution.
During October 2005 PriceWaterhouseCoopers
performed an independent current state
assessment of the Altron internal audit
department. The department was found to
be in adherence to the Standards for the
Professional Practice of Internal Auditing as
issued by the Institute of Internal Auditors and
was highly commended.
Nomination committee
Members – Dr Penuell Maduna (chairman),
Myron Berzack, Mike Leeming and Dr Bill Venter.
Composition and proceedings – This committee
comprises a majority of non-executive directors
and was established in the 2004/5 reporting
period. Robert Venter (chief executive) has right
of attendance at committee meetings. There is
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ALTRON ANNUAL REPORT 2006
Corporate governance continued
no formal meeting schedule for this committee,
which meets when required. The committee
met twice during the period under review.
Role – the committee is responsible for
identifying and evaluating suitable potential
candidates for appointment to the board as
well as succession planning. It does not have
the authority to appoint directors, which is a
board function. A formal succession-planning
policy is being finalised and will be
implemented throughout the group in the
new financial year.
The appointment of directors is a transparent
and formal procedure governed by the Altron
board charter. Factors influencing the selection
process include skills, knowledge and
qualifications: these are examined against the
backdrop of Altron’s strategies. Availability,
number of external board appointments,
diversity in demographics and experience in
relevant sectors are also considered.
Transformation committee
Members – This is a sub-committee of the
Altron executive committee, with
representatives from underlying group
companies.
Composition and proceedings – the
transformation committee was established
three years ago and has continued to drive
economic transformation and broad-based
empowerment across the group.
Role – Following the launch of the Altron
Transformation Vision 2010 blueprint, the
committee’s mandate has been extended to
develop a practical implementation plan and
guiding manuals to ensure uniform application
of the empowerment vision across the group.
The committee is currently studying the draft
Codes of Good Practice published by the
Department of Trade and Industry and
participated in industry comment on these
codes. Once this process is completed, the
Altron blueprint will be reviewed to closely
align it with the legislated codes and relevant
sectoral charters on empowerment.
Communicating with stakeholders
We believe the collective aim of corporate and
political leaders should be achieving sustainable
growth of their businesses and the economy
as a whole. Altron, therefore, presents an
integrated report to stakeholders each year,
detailing triple bottom-line performance –
economic, social and environmental.
While the directors are responsible for the
preparation of the annual financial statements,
management is responsible for maintaining
adequate accounting records to ensure the
integrity of these statements.
99
Building long-term and mutually-beneficial
relationships with our shareholders and all
stakeholders is fundamental to our ongoing
business success. This includes providing timely,
accurate announcements and circulars to
shareholders in accordance with JSE Listings
Requirements. In addition, Altron manages its
relations with stakeholders by regular contact
with domestic and international institutional
shareholders and analysts through investor road
shows, presentations and liaison with major
shareholders.
Altron recognises the importance of shareholder
attendance at annual general meetings. We
believe this presents an important opportunity
for shareholders – institutional and individual – to
raise issues and participate in discussions relating
to items in the notice of meeting. Every effort is
made to encourage this attendance and
participation.
Human capital
A fundamental requirement for achieving Altron’s
goal of continuing superior performance is
employing dedicated and competent personnel,
based on equitable recruitment practices. Our
objective is to employ, train, use and retain the
best personnel available and make diligent
efforts to develop and motivate all employees to
higher standards of performance.
Worker participation
Altron encourages employees to reach their full
potential in a more participative management
style environment. The group has numerous
participative structures at operating company level
for handling issues that affect employees directly
and significantly. These structures have been
established with trade unions and other employee
representatives, and are designed to achieve good
relations through effective sharing of relevant
information, consultation and resolution of conflict.
Currently, Altron’s various employers have
collective agreements with recognised trade
unions which regulate these relationships. Some
30% of the group’s base of employees belong to
a union.
“As all employees are aware,
. . . the Altron Group is committed
to improving the working
conditions of all their employees,
irrespective of sex, race, religion
or colour.”
Internal memorandum,
April 1977
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ALTRON ANNUAL REPORT 2006
Corporate governance continued
Affirmative action and employment equity
An affirmative action programme forms part of
the group’s business plan. Where possible, internal
promotion is preferred and employees are given
the opportunity to develop their potential.
Altron fully supports the government’s initiative
to achieve greater equity in the workplace and
management of all group companies and is fully
committed to complying with the Employment
Equity Act of 1998 (as amended). Co-ordinating
committees ensure that group companies
achieve their employment equity objectives and
that policies are properly implemented.
Our equity objectives include training and
development programmes, appropriate sharing
of information between employer and employee,
and providing equal, non-discriminatory
employment opportunities. Progress is regularly
reported to the various boards and executive
committees of Altron, Altech, BTG and Powertech
and their respective business risk and audit
committees.
“Dishonesty of any nature
whatsoever will be reported to
the appropriate authorities for
action by the courts. Suspension
or dismissal will follow if found
guilty.”
Internal memorandum,
September 1977
Corporate code of conduct
Altron is committed to promoting the highest
standards of behaviour and the group’s corporate
code of conduct (page 47) sets out the expected
behaviour of all employees in their dealings with
our stakeholders. A detailed code of conduct
forms part of the Altron group policy manual and
outlines our ethos. All employees are required to
maintain the highest ethical standards in
ensuring that our business practices are
conducted in a manner which, in all reasonable
circumstances, is above reproach.
Share dealings
Altron and its sub-holdings have approved written
policies on directors’ dealings in securities. These
require all directors who wish to deal in Altron or
its sub-holdings’ securities to obtain prior written
101
clearance from any two of the following senior
executives – the chairman, chief executive or chief
financial officer. The same restriction applies to
the group company secretary. The chairman
requires prior written clearance from the non-
executive chairman of the Altron audit committee
and the group company secretary.
The group operates closed periods as defined in
the JSE’s Listings Requirements. These periods
are communicated to directors, officers and
employees in the group policy manual and a
specific policy for directors. In addition, electronic
and printed notices advise staff of imminent
closed periods. During these periods, the group’s
directors, officers and employees may not deal in
the securities of Altron, Altech or BTG as the case
may be. Additional closed periods are enforced,
when required, in terms of corporate activities.
Attendance of meetings
Director
Board Audit Remuneration Risk Nomination
2005 2006 2005 2005 2006 2005 2005
May Aug Oct Feb May Oct April Feb April Oct Oct Nov
Dr WP Venter ✓ ✓ ✓ ✓ ✓1 ✓1 ✓ ✓ ✓ ✓ ✓ ✓
RE Venter ✓ ✓ ✓ ✓ ✓ ✓5 ✓2 ✓2 ✓ ✓ ✓2 ✓2
MC Berzack ✓ ✓ ✓ ✓ n/a n/a ✓ ✓ n/a n/a ✓ ✓
N Claussen n/a3 n/a3 n/a3 ✓ ✓1 ✓1 n/a n/a ✓ ✓ n/a n/aPMO Curle ✓ ✓ ✓ ✓ n/a n/a n/a n/a n/a n/a n/a n/aMJ Lamberti n/a3 n/a3 n/a3 ✓ n/a n/a n/a n/a n/a n/a n/a n/aMJ Leeming ✓ ✓ ✓ ✓ ✓ ✓ n/a n/a ✓ ✓ ✓ ✓
Dr PM Maduna ✓ ✓ ✓ ✓ n/a n/a n/a n/a n/a n/a ✓ ✓
JRD Modise ✓ ✓ ✓ ✓ ✗ ✓ n/a4 ✓ n/a n/a n/a n/aDC Mpofu ✓ ✗ ✓ ✓ n/a n/a n/a n/a ✓ ✗ n/a n/aDC Radley ✓ ✓ ✓ ✓ ✓2 ✓2 ✓1 ✓1 ✓ ✓ n/a n/aPD Redshaw ✓ ✓ ✓ ✓ ✓1 ✗1 n/a n/a ✓ ✓ n/a n/aDr HA Serebro ✓ ✗ ✓ ✓ n/a n/a n/a n/a ✓ ✓ n/a n/aCG Venter ✓ ✓ ✓ ✓ ✗1 ✗1 n/a n/a ✗ ✗ n/a n/aPL Wilmot ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ n/a n/a
✗ submitted apologies and was granted leave of absence in terms of the company’s articles of association.
1 Attends by invitation and is not a member of the committee.
2 Has right of attendance but is not a member of the committee.
3 Messrs Claussen and Lamberti were appointed to the board on 12 October 2005.
4 Mr Modise was appointed as a member of the remuneration committee on 2 August 2005 and as the chairman of the remuneration committee effective 1 February 2006.
5 Mr RE Venter resigned as a member of the audit committee on 7 October 2005 and will attend future audit committee meetings by invitation.
102
ALTRON ANNUAL REPORT 2006
In a competitive and rapidly-evolving industry,
finding and retaining the calibre of people
required to effectively run the group and its
subsidiary companies is an ongoing challenge –
one that Altron has successfully met over the
years through attractive and appropriate
remuneration packages that are aligned with the
interests of shareholders.
Membership
The remuneration committee has a majority
of non-executive directors and is chaired by
Jacob Modise (independent non-executive).
Other members are Myron Berzack,
Peter Wilmot and Altron chairman,
Dr Bill Venter.
Remuneration philosophy and policies
Altron’s philosophy is to set appropriate remuneration levels to attract, motivate and
retain the calibre of directors and executives needed to run the group and its subsidiaries
successfully, while aligning their interests with those of shareholders over the short,
medium and long term. The overall policy is to ensure that executive directors are fairly
rewarded for their individual contribution to the group’s operating and financial
performance, and that this reward is aligned with industry and market benchmarks.
For each executive director, group policy is to provide a remuneration package
comprising a base salary, an ability to earn a cash bonus, long-term incentives through
participation in share incentive schemes or similar instruments, pension contributions,
medical aid benefits and other benefits in kind.
The objective is to establish a level of guaranteed pay that is competitive with the upper
quartile level for similar companies. The variable element of short-term incentives is
intended to provide superior total pay opportunities should corporate performance merit
it as well as reward individual performance. Long-term incentives have been based on
multiples of base pay and structured to align with shareholders’ interests.
Remuneration report
103
The chief executive has right of attendance at
meetings unless deemed inappropriate and the
chief financial officer attends meetings by
invitation, but neither participates in discussions
regarding their own remuneration.
Composition and proceedings
The committee meets bi-annually, unless
additional meetings are required. During the
review period, the committee met twice.
Role
The committee operates under a board-approved
mandate and terms of reference, updated in the
prior period and aimed at:
Ü ensuring that Altron’s chairman, executive
directors and other senior executives are fairly
rewarded for their individual contributions to
group performance. Packages are structured to
be competitive with the upper-quartile level
of peer companies and market benchmarks
Ü ensuring that Altron’s remuneration strategies
and packages, including short- and long-term
incentive plans, are based on performance
and are appropriately competitive
Ü recommending fees for non-executive
directors for service on the board or its
committees. Once approved by the board,
these are submitted to shareholders at the
annual general meeting for ratification
Ü balancing the interests of shareholders with the
financial and commercial viability of the group.
Altron’s sub-holdings, Altech and BTG, have their
own remuneration committees which review and
recommend remuneration and related awards for
executive directors and senior management, to
their boards and within the parameters of group
policies. The Altech and BTG CEO’s remuneration,
once approved by their respective boards, is
submitted to the Altron remuneration committee
for noting and confirmation.
Service contracts
Executive directors are subject to Altron’s
standard terms and conditions of employment
where notice periods are between 30 and
60 days. In line with the stipulations of the
Companies Act of 1973 (as amended), group
policy prevents any director from being
compensated for loss of office.
Advisors
The committee regularly consults with a range of
external independent advisors on market
information and remuneration trends as well as
other advice necessary to fulfil its
responsibilities. It also considers the views of the
chief executive, Robert Venter, on the
remuneration and performance of his colleagues
on the Altron executive committee.
104
ALTRON ANNUAL REPORT 2006
Remuneration report continued
Executive directors’ salaries
The remuneration committee reviewed and
revised the salaries of executive directors at its
meeting in February 2006. The salaries of
executive directors were compared to a market
information survey on companies of similar
size and structure and adjusted to reflect levels
in the median to upper-quartile levels of the
survey.
Annual incentive plans
Executive directors and Altron executive
committee members participate in an annual
bonus plan that rewards the achievement of
group and subsidiary financial performance as
well as strategic and personal performance
objectives agreed with the chief executive. All
objectives are approved beforehand by the
remuneration committee. Under this plan, the
chief executive may earn a bonus of up to 75%
of his base salary. Other executive directors and
executive committee members may earn
55% to 65% of their base salaries.
Group and subsidiary financial performance
targets include:
Ü headline earnings per share growth
Ü return on capital employed
Ü return on operating assets
Ü cash generation.
These targets vary according to individual
company needs. In all cases, 60% of the bonus
is based on financial objectives with the balance
relating to strategic and personal performance,
benchmarked against identified key performance
indicators.
At its meeting in April 2005, the remuneration
committee reviewed the performance of
executives participating in the bonus plan
against their agreed targets. Within these
parameters, and subject to meeting the noted
criteria, bonuses were approved. Performance
measures are stringently monitored and
penalties imposed in cases where targets are
missed.
Share option schemes
Altron’s share option scheme grants options to
all senior employees within Altron and
Powertech. Grants have historically been made
annually and capped at 8.5 x base salary for the
chief executive, and 6.5 x to 7.5 x base salary for
Altron executive committee members. Options
may be exercised after three years and vest in
equal tranches in years 3, 4 and 5. All options
granted expire within a six-year period. The
share option scheme includes options granted
under a previous scheme which is in run-off and
has an expiry period of no later than 2012.
Additional options, based on both corporate and
105
individual performance, may be granted annually
to ensure that the multiple-of-base salary
parameter reflects increases in base salary.
As a result of recent changes in tax legislation
and accounting requirements, shareholders
approved certain amendments to the Altron
Share Incentive Scheme at the company’s annual
general meeting on 15 July 2005. In terms of the
amendments, rights to acquire shares may now
include achieving set performance targets,
including growth in headline earnings per share.
These share acquisitions will occur in equal
tranches over three years, starting from the third
anniversary of the rights being granted. The
quantum of shares that can be acquired may
vary, depending on the extent to which
performance targets are met.
Pensions
During the year, the companies made
contributions for executive directors to the Altron
Group Pension Fund. The rate of contribution is
12%, based on the cash salaries of these
individuals. The value of contributions for each
executive director appears in the summary of
directors’ emoluments on page 106.
Other benefits
Executive directors receive medical aid
assistance, a company car or car allowance and a
death-in-service benefit.
Non-executive directors’ fees
The fees of non-executive directors are
recommended by the remuneration committee,
approved by the Altron board and ratified by
shareholders at the annual general meeting.
Fees for the 2005/6 financial year were
reviewed and revised in April 2005, with the
basic annual fee set at R80 000.
Annual fees for membership of various
committees for the review period were:
Audit committee
– chairman
– member
R50 000
R25 000
Nomination committee
– chairman
– member
R10 000
R10 000
Remuneration committee
– chairman
– member
R50 000
R25 000
Risk management committee
– chairman
– member
R50 000
R25 000
106
ALTRON ANNUAL REPORT 2006
Remuneration report continued
The table below provides an analysis of the emoluments paid to directors for the financial year ended
28 February 2006
Disclosure for directors’ emoluments
R’000
Non-executive directors Subsidiaries Altron2006Total
2005Total
Fees for services as directors
IM Ayob* 35 35 70
MC Berzack 115 115 80
DA Hawton** 103 103 143
MJ Leeming 165 165 143
MJ Lamberti† 36 36
JRD Modise 120 120 70
Dr PM Maduna 85 85 23
DC Mpofu‡ 61 61
PL Wilmot 268 180 448 355
268 900 1 168 884
* Resigned as an independent non-executive director of Altron on 30 June 2005.
**Resigned as an independent non-executive director of Altron on 10 October 2005.
† Appointed as an independent non-executive director of Altron on 12 October 2005.
‡ Resigned from the employment of Altron on 31 July 2005 and remained as non-executive director of Altron from 1 August 2005.
R’000
Full-time directorsBasic
salary
Perfor-mancerelated
bonuses(Accrued)
Shareoption
expenseAllow-ances
Definedcontribu-
tionpension
paymentsOther
benefits2006Total
2005Total
Chairman
Dr WP Venter* 3 249 — — 120 — 1 884 5 253 4 777
Executive
Dr HA Serebro 1 569 — — 120 — 4 1 693 1 689
RE Venter 3 243 2 310 218 120 389 157 6 437 5 760
DC Radley 2 061 1 369 79 240 247 18 4 014 3 596
CG Venter 2 512 1 693 283 262 301 143 5 194 4 542
PD Redshaw 2 384 1 650 176 — 286 170 4 666 4 048
PMO Curle 1 537 859 182 127 184 16 2 905 2 605
N Claussen** 667 1 003 28 82 80 8 1 868 —
DC Mpofu# 541 — — 111 65 10 727 2 313
17 763 8 884 966 1 182 1 552 2 410 32 757 29 330
*Remuneration as Chairman of Altron includes remuneration as a director of Altech and Powertech and Chairman of BTG.
**Represents remuneration received as a director, from 1 October 2005.
#Represents remuneration received as an executive director from 1 March 2005 to 31 July 2005.
107
Directors’ options
Directors’options Entity
Strikeprice
Balance1 Mar
05 Awarded ExercisedExercise
date
NetgainsR’000
Exerciseprice
Balance28 Feb
06Expiry
date
CG Venter Altron 6.50 3 400 — 1 720 7/21/05 20 18.00 1 680 May 06
Altech 12.80 106 400 — 53 222 7/21/05 1 654 44.20 53 178 Apr 10
Altech 20.35 113 200 — 37 733 7/21/05 899 44.50 75 467 Mar 08
Altech 32.25 63 500 — — 63 500 Sept 10
Altech CRI 50.99 — 337 100 — 337 100 Dec 11
DC Radley Altron 7.25 937 900 — 312 633 11/4/05 3 914 19.92 625 267 Oct 08
Altron 11.20 134 100 — — 134 100 Jul 10
Altron CRI 22.50 — 477 520 — 477 520 Feb 12
HA Serebro Altron 6.10 5 800 — 2 920 10/13/05 34 18.00 2 880 Sep 06
BTG 4.50 50 000 — 50 000 10/13/05 — Exercised — Aug 07
N Claussen Altron 7.25 19 600 — — 19 600 Oct 08
Altron 11.20 115 100 — — 115 100 Jul 10
Altron CRI 22.50 — 466 190 — 466 190 Feb 12
PD Redshaw Altron 6.50 6 300 — 6 300 7/1/05 60 16.20 — Apr 05
Altron 4.80 12 000 — 6 000 12/20/05 92 20.20 6 000 Dec 06
BTG 4.50 833 333 — — 833 333 Aug 07
BTG 2.90 166 667 — — 166 667 Sep 08
BTG 3.85 100 000 — — 100 000 Oct 09
BTG 5.58 477 100 — — 477 100 Aug 11
BTG CRI 11.56 — 1 234 000 — 1 234 000 Feb 12
PMO Curle Altech 20.35 10 000 — 3 333 10/21/05 84 46.00 6 667 Mar 08
Altech 32.25 40 000 — — 40 000 Sept 10
Altech CRI 50.99 — 219 460 — 219 460 Dec 11
RE Venter Altron 4.85 1 068 700 — 534 050 11/9/05 8 807 21.50 534 650 Jun 10
Altron 7.25 136 100 — 45 366 11/9/05 — Exercised 90 734 Oct 08
Altron 11.20 368 500 — — 368 500 Jul 10
Altron CRI 22.50 — 837 360 — 837 360 Feb 12
WP Venter Altron 6.10 9 600 — 4 800 10/13/05 57 18.00 4 800 Sep 06
CRI = conditional rights.
PAGE 108
110 – Certifi cate from the company secretaries
110 – Report of the independent auditors
111 – Directors’ report
115 – Accounting policies
126 – Balance sheet
127 – Income statement
128 – Statement of changes in equity
130 – Cash fl ow statement
131 – Notes to the fi nancial statements
154 – Annexure 1 - Associates,other investments and joint ventures
158 – Annexure 2 - Segment information
162 – Annexure 3
166 – Financial statements of the company
FIN
AN
CIA
L ST
ATE
MEN
TS
F INANCIAL HIGHLIGHTS
Revenue ▲ 14%
Operating profi t ▲ 8%
Headline earnings per share ▲ 17%
Return on equity ▲ 18.2%
Andrew Johnston (Group Company Secretary)
Report of the independent auditors
We have audited the annual financial statements and group annual financial statements of Allied Electronics Corporation Limited set out on pages 111 to 170 for the year ended 28 February 2006. These financial statements are the responsibility of the company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the company and the group at 28 February 2006 and the results of their operations and cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act in South Africa
KPMG Inc. Chartered Accountants (SA)Registered Accountants and Auditors
Johannesburg
8 May 2006
To the members of Allied Electronics Corporation Limited
In terms of section 268G(d) of the Companies Act, 1973, as amended, we certify that, to the best of our knowledge and belief, the company has lodged with the Registrar of Companies for the financial year ended 28 February 2006, all such returns as are required of a public company in terms of the Companies Act, 1973, as
amended, and that all such returns are true, correct and up to date.
Altron Management Services (Pty) Limited (Secretaries)
per: Andrew Johnston (Group company secretary)
8 May 2006
110
ALTRON ANNUAL REPORT 2006
Certificate from the company secretaries
111
The directors have pleasure in submitting the
annual financial statements of the Altron group
for the year ended 28 February 2006.
NATURE OF BUSINESS
Altron is an investment holding company. Its
principal subsidiaries, Allied Technologies
Limited, Power Technologies (Pty) Limited and
Bytes Technology Group Limited, are invested in
the power electronics, telecommunications,
multi-media and information technology
industries.
FINANCIAL RESULTS
Group attributable earnings for the year ended
28 February 2006 were R494 million (2005:
R448 million), representing earnings per share of
176 cents (2005: 162 cents). Headline earnings
per share were at 189 cents (2005: 162 cents).
Full details of the financial position and results of
the Altron group are set out in these financial
statements.
DIVIDENDS
The following dividends were declared in respect
of the year ended 28 February 2006:
Ü ordinary dividend No. 58 of 78.0 cents per
share (2005: 63.0 cents); and
Ü participating preference dividend No. 12 of
78.0 cents per share (2005: 63.0 cents).
It remains policy to declare dividends annually at
the time of announcing the Altron group’s results
in May of each year.
SUBSIDIARIES, ASSOCIATE COMPANIES AND OTHER INVESTMENTS
Particulars of the principal subsidiaries of the Altron group are given on page 169 whilst particulars of the associate companies, joint ventures and other investments are provided in Annexure 1 on page 154.
The attributable interest of the companies in the income and losses of their subsidiaries for the year ended 28 February 2006 is:
2006R million
2005R million
Aggregate amount of income after taxation 878 695
Aggregate amount of losses after taxation 127 99
Digital Healthcare Solutions (Pty) Limited (DHS)
On 26 April 2005, BTG SA acquired the entire issued share capital of DHS for a consideration of R132.2 million. Of the shares acquired, 39.13% were previously owned by BTG with the balance being acquired from various third parties. The consideration was settled out of BTG SA’s existing cash resources.
Econet Wireless Global Limited
On 1st September 2005, Altech disposed of its 50% plus one share interest in Econet Wireless Global Limited (EWG) to the remaining shareholders of EWG for US$87.5 million (R561 million).
Directors’ report
To the members of Allied Electronics Corporation Limited
112
ALTRON ANNUAL REPORT 2006
Directors’ report continued
Purchase of 6.7% of BTG
During the period under review, the company took advantage of several opportunities to purchase 6.7% of the issued share capital of BTG on the open market at a cost of R118.17 million.
SHARE CAPITAL
Full details of the authorised, issued and unissued capital of the company at 28 February 2006 are contained in note 9 to the financial statements.
Share schemes
Particulars relating to the Altron Share Incentive Scheme and The Allied Electronics Corporation Limited Share Trust are set out in note 9.6 to the financial statements.
At the date of this report, a total of 4 847 855 ordinary shares and 15 495 042 participating preference shares remain reserved for the purposes of the company’s employee share schemes.
The remaining unissued ordinary shares and participating preference shares are the subject of a general authority granted to the directors in terms of section 221 of the Companies Act, 1973, as amended, and which authority remains valid only until the next annual general meeting which will be held on Friday, 14 July 2006. At that meeting, shareholders will be asked to place 10% of the unissued ordinary and participating preference shares under the control of the directors. Shareholders will also be asked to waive their pre-emptive rights in favour of the directors to allot and issue ordinary and/or participating preference shares for cash as and when suitable circumstances arise.
DIRECTORATE
The Altron directorate is referred to on pages 184 to 187 of this report.
Appointments:12 October 2005 Mr N Claussen
Mr MJ Lamberti
Resignations:30 June 2005 Mr IM Ayob10 October 2005 Mr DA Hawton
In terms of the company’s articles of association,
Messrs N Claussen and MJ Lamberti retire at
the forthcoming annual general meeting and
Messrs RE Venter, PMO Curle, DC Mpofu and
Ms DC Radley retire by rotation. All the retiring
directors are eligible and available for re-election.
Their profiles appear on pages 184 to 187.
SECRETARIES
Altron Management Services (Pty) Limited act
as secretaries to the company. The secretaries’
business and postal addresses appear on
page 197 of this annual report.
SEGMENTAL REPORTING
Segmental information is included in this annual
report as part of the operational reviews and
shareholders are referred to annexure 2 on
page 158.
Headline earnings contributions to Altron were as
follows:
2006R million
2005R million
Altech 214 192
BTG 111 73
Powertech 170 150
Corporate 34 30
113
DIRECTORS’ INTERESTS
At 28 February 2006 the present directors of the
company held direct and indirect beneficial
interests, including family interests, in
59 791 936 of the company’s issued ordinary
shares (2005: 59 751 636 ordinary shares) and
34 511 558 of the company’s issued participating
preference shares (2005: 34 491 192). Details of
shares held per individual director are listed
below. A total of 3 684 381 participating
preference share options and conditional rights
are allocated to directors in terms of the
company’s employee share schemes.
Chairman and director, Dr WP Venter, through his
family and related trusts, is the controlling
shareholder of the company.
Direct beneficial
Name of directorOrdinary
shares
Partici-pating
preferenceshares
Dr WP Venter 2 641 639 8 039
MC Berzack — 426 332
Dr HA Serebro 495 163 1 555
MJ Leeming 2 500 —
RE Venter — 45 366
Indirect beneficial
Name of directorOrdinary
shares
Partici-pating
preferenceshares
Dr WP Venter 56 649 124 34 029 256
Dr HA Serebro 1 010 1 010
MJ Leeming 2 500 —
At the date of this report, these interests remain
unchanged.
RESOLUTIONS
The company passed and registered two special
resolutions on 26 July 2005, one approving the
acquisition by the company or any of its
subsidiaries of the company’s shares and the
other adopting amended articles of association.
At subsidiary level, Altech passed and registered
two special resolutions on 5 October 2005, one
approving the acquisition by Altech or any of its
subsidiaries of Altech’s shares and the other
adopting amended articles of association.
BTG passed and registered one special resolution
on 21 July 2005 adopting substituted articles of
association.
Except for the above, no other special
resolutions, the nature of which might be
significant to shareholders in their appreciation
of the state of affairs of the Altron group, were
passed by the company or its subsidiaries during
the period covered by this annual report.
APPROVAL OF THE ANNUAL FINANCIAL
STATEMENTS
The annual financial statements set out in this
annual report have been prepared in accordance
with International Financial Reporting Standards
and are based on appropriate accounting
policies, which are supported by reasonable and
prudent judgements and estimates.
The directors of the company are responsible for
the preparation of the annual financial
statements and related financial information that
fairly present the state of affairs and the results
of the company and the Altron group.
114
ALTRON ANNUAL REPORT 2006
Directors’ report continued
These financial statements have been prepared
on the going-concern basis, since the directors
have every reason to believe that the company
and the Altron group have adequate resources in
place to continue in operation for the
foreseeable future.
The auditors have concurred with the directors’
going-concern statement. The annual financial
statements for the year ended 28 February 2006
which appear on pages 111 to 170 were
approved by the board and signed on its behalf
on 8 May 2006.
For: Allied Electronics Corporation Limited
Dr Bill Venter (Chairman)
RE Venter (Chief Executive)
DC Radley (Chief Financial Officer)
115
Allied Electronics Corporation Limited (the “company”) is a South African registered company. The consolidated financial statements of the company for the year ended 28 February 2006 comprise the company and its subsidiaries (together referred to as the “group”) and the group’s interest in associates and jointly controlled entities.
STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the interpretations adopted by the International Accounting Standards Board (IASB) and the requirements of the South African Companies Act.
Adoption of IFRS
The group has adopted IFRS for the year ended 28 February 2006. These are the group’s first consolidated financial statements prepared in compliance with IFRS and hence IFRS 1 – First time adoption of IFRS has been applied in preparing these financial statements. The group has adopted all applicable IFRS statements and interpretations issued or revised and effective up to the annual reporting date, 28 February 2006.
An explanation of how the transition to IFRS has affected the reported financial position and performance of the group is provided in Annexure 3 to the financial statements.
Circular 7/2005 – Straight-lining of operating lease payments
The group has simultaneously changed the interpretation of the basis of the straight-line recognition of operating lease payments whereby payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Previously operating leases were expensed on a
payments basis. The adjustment has been made in accordance with IAS 8 – Accounting Policies, changes in accounting estimates and errors with the necessary restatement of comparative figures. The effect of the change is provided in Annexure 3 to the financial statements.
BASIS OF PREPARATION
The annual financial statements are prepared in millions of South African rands (Rm) on the historical cost basis, except for the following assets and liabilities which are stated at fair value: derivative financial instruments and financial intruments classified as available-for-sale.
Non-current and disposal groups held for sale are stated at the lower of carrying amount and fair value less cost to sell.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that may affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in Annexure 3 and note 30.
Accounting policies
116
ALTRON ANNUAL REPORT 2006
Accounting policies continued
The accounting policies set out below have been applied consistently to the periods presented in these consolidated financial statements and in preparing the opening IFRS balance sheet at 1 March 2004 for the purposes of transition to IFRS.
The accounting policies have been applied consistently by all group entities.
BASIS OF CONSOLIDATION
Subsidiaries
Subsidiaries are those entities over whose financial and operating policies the group has the power to, directly or indirectly, exercise control, so as to obtain benefits from their activities.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Associates
An investment in an associate is an investment in a company in which the group exercises significant influence but not control. The equity method of accounting for associated enterprises is adopted in the group financial statements. In applying the equity method, account is taken of the group’s share of accumulated retained earnings and movements in reserves from the effective date on which the enterprise became an associate and up to the effective date of disposal.
Goodwill arising on the acquisition of associates is included in the carrying amount of the associate and is treated in accordance with the group’s accounting policy for goodwill. The share of associated retained earnings and reserves is generally determined from the associate’s latest audited financial statements but, in some instances, interim results are used. Dividends received from associates are deducted from the carrying value of the investment. Where the group’s share of losses
of an associate exceeds the carrying amount of the associate, the associate is carried at no value. Additional losses are only recognised to the extent that the group has incurred obligations or made payments on behalf of the associate.
Joint ventures
Joint ventures are those enterprises over which the group exercises joint control in terms of a contractual agreement. Joint ventures are proportionately consolidated, whereby the group’s share of the joint venture’s assets, liabilities, income, expenses and cash flows are combined with similar items, on a line-by-line basis, in the group’s financial statements from the date the joint control commences until the date the joint control ceases.
Eliminations on consolidation
Intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associated companies and joint ventures are eliminated to the extent of the group’s interest against the investment in these enterprises. Unrealised losses on transactions with associated companies and joint ventures are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
Goodwill
All business combinations are accounted for by applying the “purchase method”. Goodwill represents amounts arising on the acquisition of subsidiaries, associates and joint ventures. In respect of business combinations that have occurred since the IFRS transition date, 1 March 2004, goodwill represents the difference between the cost of the acquisition and the fair value of
117
the net identifiable assets and contingent liabilities acquired.
The group made an election in terms of IFRS 1 that in respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous SA GAAP on 1 March 2004. The classification and accounting treatment of business combinations that occurred prior to 1 March 2004 has not been reconsidered in preparing the group’s opening IFRS balance sheet at 1 March 2004.
From 1 March 2004 goodwill is stated at cost less accumulated impairment losses.
Goodwill is allocated to cash-generating units and is no longer amortised but tested annually for impairment. Previously goodwill arising on each acquisition was amortised over its useful life on a straight-line basis and subjected to annual impairment testing.
Negative goodwill arising on an acquisition is recognised directly in the income statement.
Premiums and discounts arising on subsequent purchases from, or sales to, minority interests in subsidiaries
Any increases and decreases in ownership interests in subsidiaries without a change in control are recognised as equity transactions in the consolidated financial statements. Accordingly, any premiums or discounts on subsequent purchases of equity instruments from, or sales of equity instruments to, minority interests are recognised directly in the equity of the parent shareholder.
Black economic empowerment (BEE) transactions
BEE transactions involving the disposal or issue of equity interests in subsidiaries are only
recognised when the accounting recognition criteria have been met. Although economic and legal ownership of such instruments may have transferred to the BEE partner the derecognition of such equity interest sold or recognition of equity instruments issued in the underlying subsidiary by the parent shareholder is postponed until the accounting recognition criteria have been satisfied. A dilution in the earnings attributable to the parent shareholders (in the interim period) is adjusted for in the diluted earnings per share calculation by an appropriate adjustment to the earnings used in such calculation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement.
CAPITALISATION OF BORROWING COSTS
Interest on borrowings raised specifically to finance the construction of assets that require a substantial period of time to prepare them for sale or use, is capitalised up to the date that the assets are substantially complete.
CAPITAL ITEMS
Capital items are items of income and expense relating to the acquisition, disposal or impairment of property, plant and equipment, investments, intangible assets as well as closure of businesses.
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ALTRON ANNUAL REPORT 2006
Accounting policies continued
EMPLOYEE BENEFITS
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. The accruals for employee entitlements to salaries, performance bonuses and annual leave represent the amounts which the group has as a present obligation to pay as a result of the employee’s services provided. The accruals have been calculated at undiscounted amounts based on current salary levels.
Retirement benefits
The majority of the group’s employees are members of the Altron group Pension Fund.
After the acquisition of subsidiaries, certain employees remained members of their previous funds. A number of these are defined benefit plans. These industry-managed retirement benefit schemes are dealt with as defined contribution plans as the group’s obligations under the schemes are equivalent to those arising in a defined contribution plan.
The group’s contributions to defined contribution funds are charged to the income statement in the year they are incurred.
Defined benefit obligations
Certain members of the Altron group Pension Fund who were members prior to 1 September 1996 are entitled to a minimum benefit equal to the previously provided defined benefit pension. Members prior to November 1999 are entitled to some medical assistance.
The projected unit credit method is used to determine the present value of these defined benefit obligations, the related service cost and, where applicable, the past service cost.
The fair value of plan assets is deducted from the present value of the defined benefit obligation to the extent permitted by IAS 19 – Employee benefits. Past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. Past service costs, which are already vested, are expensed immediately.
Actuarial gains and losses are recognised as income or expense if the net cumulative unrecognised actuarial gains or losses at the end of the previous financial year exceeded the greater of:
Ü 10% of the present value of the defined benefit obligation at that date before deducting plan assets, and
Ü 10% of the fair value of the plan assets at that date.
The amount recognised is the excess determined above, divided by the expected average remaining working lives of the employees participating in the plan.
Post-retirement medical aid benefits
The group has an obligation to provide post-retirement medical aid benefits to certain eligible employees and pensioners. This obligation has been provided for in full.
FINANCIAL INSTRUMENTS
Measurement
Financial instruments are initially measured at fair value, which includes transaction costs, except for those items carried at fair value through profit or loss, when the group becomes a party to the contractual arrangements as set out below. Subsequent to initial recognition these instruments are measured as set out below.
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Interest-bearing borrowings
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
Investments
Investments held-for-trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the income statement.
Other investments held by the group are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity, except for impairment losses and, in the case of monetary items, foreign exchange gains or losses, which are recognised in the income statement. When these investments are disposed of, the cumulative gain or loss previously recognised directly in equity is recognised in the income statement as a capital item. Where these investments are interest-bearing, interest, calculated using the effective interest method, is recognised in the income statement.
Trade and other receivables/payables
Trade and other receivables/payables originated by the group are stated at amortised cost less impairment losses.
Derivative instruments
The group uses derivative financial instruments to manage its exposure to foreign exchange and commodity price risks arising from operational, financing and investment activities. The group does not hold or issue derivative financial instruments for trading purposes.
Derivative instruments comprise foreign exchange contracts and metal future contracts. Subsequent to initial recognition they are measured at fair value. Fair value adjustments are recognised in the income statement. Fair value is determined by comparing the contracted forward rate to the present value of the current forward rate of an equivalent contract with the same maturity date. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.
Hedging
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, a firm commitment, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity.
When the hedged firm commitment or forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the cumulative amount recognised in equity up to the transaction date is adjusted against the initial measurement of the asset or liability. For other cash flow hedges, the cumulative amount recognised in equity is recognised in the income statement in the period when the commitment or forecast transaction affects the income statement.
Where the hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative unrealised gain or loss remains in equity and is recognised in accordance with the above policy when the underlying transaction occurs. If the hedged transaction is no longer expected to occur, the cumulative unrealised gain or loss is immediately recognised in the income statement.
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ALTRON ANNUAL REPORT 2006
Accounting policies continued
Where a derivative financial instrument is used to economically hedge the foreign exchange exposure of a recognised monetary asset or liability, no hedge acounting is applied and any gain or loss on the hedging instrument is recognised in the income statement.
Offset
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when the company 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.
FOREIGN CURRENCIES
Foreign currency transactions
Foreign currency transactions are converted to South African rands at the rates of exchange ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to South African rands at the rates ruling at that date. Gains or losses on translation are recognised in the income statement.
Financial statements of foreign operations
The assets and liabilities of all foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to rands at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to rands at rates approximating the foreign exchange rates ruling at the date of the transactions.
Foreign exchange differences arising on translation are recognised directly in a separate component of equity – the foreign currency translation reserve. The foreign currency
translation reserve applicable to a foreign operation is released to the income statement as a capital item upon disposal of that foreign operation.
IMPAIRMENT OF ASSETS
The carrying amounts of the group’s assets are reviewed at least annually to determine whether there is any indication of impairment. If there is an indication that an asset may be impaired, its recoverable amount is estimated.
For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated annually.
The recoverable amount is the higher of an asset’s net selling price and its value in use.
In assessing value in use, the expected future cash flows from the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its recoverable amount.
For an asset that does not generate cash inflows that are largely independent of those from other assets the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognised in the income statement whenever the carrying amount of the cash-generating unit exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating-units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating units, and then to reduce the carrying amount of other assets in the unit on a pro rata basis.
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When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that has been recognised directly in equity is recognised in the income statement even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the income statement is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the income statement.
Reversal of impairment
A previously recognised impairment loss is reversed if there is an indication that the impairment loss no longer exists and the recoverable amount increases as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years, except as detailed below.
An impairment loss in respect of an investment in an equity instrument classified as available-for-sale is not reversed through the income statement. An impairment loss in respect of goodwill is not reversed.
INTANGIBLE ASSETS
Goodwill
Refer “Basis of consolidation” above.
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the group has sufficient resources to complete development.
The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. These items are stated at cost less accumulated amortisation and impairment losses. Other development expenditure is recognised as an expense as incurred.
Other intangible assets
Other intangible assets that are acquired by the group are stated at cost less accumulated amortisation and impairment losses.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are tested annually for impairment.
Other intangible assets are amortised from the date they are available for use. The current estimated useful lives are as follows:
Patents and trademarks – 5 years
Customer relationships – 2 to 6 years
Distribution rights – indefinite life
Proprietary software – 3 years
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ALTRON ANNUAL REPORT 2006
Accounting policies continued
INVENTORIES
Inventories are valued at the lower of cost and net realisable value taking account of market conditions and technology changes. Cost is determined on the first-in, first-out and average cost methods. Work and contracts in progress and finished goods include direct costs and an appropriate portion of attributable overhead expenditure based on normal production capacity.
NON-CURRENT ASSETS HELD-FOR-SALE AND DISCONTINUED OPERATIONS
Non-current assets held for resale are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction, not through continuing use. These assets may be a component of an entity, a disposal group or an individual non-current asset. Upon initial classification as held-for-sale, non-current assets and disposal groups are recognised at the lower of carrying amount and fair value less cost to sell. Any impairment losses arising are recognised in the income statement as capital items.
A discontinued operation is a component of the group’s business that represents a separate major line of business or geographical area of operations or a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. Discontinued operations are separately recognised in the financial statements once management has made a commitment to discontinue the operation without a realistic possibility of withdrawal.
OPERATING LEASES
Leases where the lessor retains the risks and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating leases are charged against income on a straight-line basis over the period of the lease.
PROPERTY, PLANT AND EQUIPMENT
Owned assets
Property, plant, equipment and vehicles are stated at cost less accumulated depreciation and impairment losses. When components of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items.
Leased assets
Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the group are classified as finance leases. Assets acquired in terms of finance leases are capitalised at the lower of fair value and the present value of the minimum lease payments at inception of the lease, and depreciated over the estimated useful life of the asset.
The capital element of future obligations under the leases is included as a liability in the balance sheet. Lease payments are allocated using the effective interest rate method to determine the lease finance cost, which is charged against income over the lease period, and the capital repayment, which reduces the liability to the lessor.
Subsequent costs
The group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when the cost is incurred if it is probable that additional
123
future economic benefits embodied within the item will flow to the group and the cost of such item can be measured reliably. All other costs are recognised in the income statement as an expense when incurred.
Depreciation
Depreciation is charged to the income statement for each category of assets on a straight-line basis over their expected useful lives to estimated residual values. Land is not depreciated.
The current estimated useful lives are as follows:
Ü buildings 20 to 50 years
Ü plant and equipment 3 to 20 years
Ü furniture and fittings 5 to 20 years
Ü motor vehicles 4 to 8 years
Ü software and IT systems 2 to 8 years
Ü leasehold improvements over period of lease
The depreciation methods, useful lives and residual values, if not insignificant, are reassessed annually.
Gains and losses arising on disposal of property, plant and equipment are included in capital items.
PROVISIONS
General
Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can be made of the amount of the obligation. Where the effect of discounting is material, provisions are discounted. The discount rate used reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.
Restructuring
A provision for restructuring is recognised when the group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the unavoidable cost of meeting the obligations under the contract.
SHARE-BASED PAYMENT TRANSACTIONS
Equity settled
The fair value of share options and deferred delivery shares granted to employees is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and expensed over the period during which the employees are required to provide services in order to become unconditionally entitled to the equity instruments. The fair value of the instruments granted is measured using generally accepted valuation techniques, taking into account the terms and conditions upon which the instruments are granted. The amount recognised as an expense is adjusted to reflect the actual number of share options and deferred delivery shares that vest except where forefeiture is only due to share prices not achieving the threshold for vesting. This accounting policy has been
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ALTRON ANNUAL REPORT 2006
Accounting policies continued
applied to all equity instruments granted after 7 November 2002 that had not yet vested at 1 January 2005. The fair value of share-based payments was not recognised under the group’s previous accounting policies.
Cash settled
Share-linked instruments have been granted to certain employees in the group. The fair value of the amount payable to the employee is recognised as an expense with a corresponding increase in liabilities. The fair value is initially measured at grant date and expensed over the period during which the employees are required to provide services in order to become unconditionally entitled to payment. The fair value of the instruments granted is measured using generally accepted valuation techniques, taking into account the terms and conditions upon which the instruments are granted. The liability is remeasured at each balance sheet date and at settlement date.
Black Economic Empowerment transactions
Where goods or services are considered to have been received from black economic empowerment partners as consideration for equity instruments of the group, these transactions are accounted for as share-based payment transactions, even when the entity cannot specifically identify the goods or services received. This accounting policy is applicable to equity instruments that had not vested by 1 January 2005 (as above).
RENTAL FINANCE ADVANCES
Rental finance advances to customers are supported by finance leases and are stated at the outstanding capital balances. The income earned is computed at the interest rates inherent in each contract, applied to the capital balance
outstanding under such contract and is included in revenue.
REVENUE
Revenue comprises net invoiced sales to customers excluding value-added tax, investment income and other non-operating income. Sales to customers are recognised when the related products are delivered or services are rendered.
Dividends and grants are recognised when the group’s right to receive the revenue is established.
Interest revenue is recognised on a time- apportionment basis that takes into account the effective yield on the investment.
SHARE CAPITAL
Preference share capital
Preference share capital is classified as equity if it is non-redeemable and any dividends are discretionary, or is redeemable but only at the company’s option. Dividends on preference share capital classified as equity are recognised as distributions within equity.
Preference share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders or if dividend payments are not discretionary. Dividends thereon are recognised in the income statement as interest expense.
Repurchase of share capital
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares held by subsidiaries are classified as treasury shares and presented as a deduction from total equity.
125
SEGMENTAL REPORTING
A segment is a distinguishable component of the group that is engaged in providing products or services which are subject to risks and rewards that are different from those of other segments.The primary basis for reporting segment information is business segments and the secondary basis is by significant geographical region, which is based on the location of assets. The basis of segment reporting is representative of the internal structure used for management reporting.
Segment results include revenue and expenses directly attributable to a segment whether from external transactions or from transactions with other group segments.
Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to the segment or can be allocated to the segment on a reasonable basis.
TAXATION
Current taxation
Current taxation comprises tax payable calculated on the basis of the expected taxable income for the year, using the tax rates enacted or substantively enacted at the balance sheet date, and any adjustment of tax payable for previous years.
Deferred taxation
Deferred taxation is provided using the balance sheet liability method, based on temporary differences. Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax values.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement except to the extent that it relates to a transaction that is recorded directly in equity, or a business combination that is an acquisition. The effect on deferred tax of any changes in tax rates is recognised in the income statement, except to the extent that it relates to items previously charged or credited directly to equity.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Secondary taxation on companies
Secondary taxation on companies (STC) is recognised in the year dividends are declared, net of dividends received. A deferred taxation asset is recognised on unutilised STC credits when it is probable that such unused STC credits will be utilised in the future.
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ALTRON ANNUAL REPORT 2006
GROUP
Notes2006
R million2005
R million
ASSETS
Non-current assets 2 114 2 413
Property, plant and equipment 1 905 848
Intangible assets 2 773 925
Associates and other investments 3 228 453
Rental finance advances 4 90 75
Deferred taxation 5 118 112
Current assets 5 423 4 542
Inventories 6 1 295 1 158
Trade and other receivables 7 1 976 1 864
Cash and cash equivalents 8 2 152 1 520
Total assets 7 537 6 955
EQUITY AND LIABILITIES
Total equity 4 034 3 643
Equity holders of Altron 2 931 2 679
Minority interest 1 103 964
Non-current liabilities 343 799
Loans 12 124 544
Empowerment funding obligation 13 173 172
Provisions 14 25 30
Deferred taxation 5 21 53
Current liabilities 3 160 2 513
Loans 12 238 59
Trade and other payables 15 2 680 2 223
Provisions 14 55 67
Taxation payable 187 164
Total equity and liabilities 7 537 6 955
Net asset value per share (cents) 1 040 963
Balance sheet at 28 February 2006
127
GROUP
Notes2006
R million2005
R million
Revenue 17 13 969 12 206
Operating costs before capital items (12 929) (11 243)
Material and services (10 121) (9 063)
Employees’ remuneration (2 500) (2 185)
Depreciation and amortisation (213) (192)
Net change in inventories (95) 197
Operating profit before capital items 18 1 040 963
Capital items 19 (54) (90)
Financial income 20 112 100
Financial expenses 21 (53) (62)
Share of profit from associates 22 32 24
Profit before taxation 1 077 935
Taxation 23 (326) (339)
Profit after taxation 751 596
Attributable to:
Minority interest 257 148
Altron equity holders 494 448
Basic earnings per share (cents) 24 176 162
Diluted basic earnings per share (cents) 24 168 155
Dividends per share (cents) – paid 63 52
– proposed 78 63
Income statement for the year ended 28 February 2006
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ALTRON ANNUAL REPORT 2006
Attributable to equity holders of Altron Attributable to equity holders of Altron
GROUP
Share capital and
premium(note 9)
R million
Treasuryshares
(note 9)R million
Foreigncurrency
translationreserves
R million
Premium/discount
on minority
equity transaction
R million
Cash flowhedgingreserves
R million
Share- based
paymentsreserve
R million
Statutoryreserves
R million
Fair value and other
reservesR million
RetainedearningsR million
TotalR million
Minorityinterest
R million
Totalequity
R million
Balance at 1 March 2004 (IFRS restated) 789 (222) 132 43 (1) — 9 64 1 712 2 526 1 037 3 563
Recognised income and expense
Profit for the year — — — — — — — — 448 448 148 596
Foreign currency translation differences — — (35) — — — — — — (35) 13 (22)
Release of translation surpluses (note 19) — — (67) — — — — — — (67) — (67)
Cash flow hedging reserve — — — — 1 — — — — 1 1 2
Share-based payments — — — — — 1 — — — 1 1 2
Fair value adjustments — — — — — — — (16) — (16) — (16)
Transfer between reserves — — — — — — — (22) 22 — — —
Transactions with shareholders
Dividends — — — — — — — — (143) (143) (81) (224)
Issue of share capital 17 — — — — — — — — 17 — 17
Changes in shareholding of subsidiaries — — — (53) — — — — — (53) (210) (263)
Minorities arising on acquisitions — — — — — — — — — — 55 55
Balance at 28 February 2005 (IFRS restated) 806 (222) 30 (10) — 1 9 26 2 039 2 679 964 3 643
Recognised income and expense
Profit for the year — — — — — — — — 494 494 257 751
Foreign currency translation differences — — (3) — — — — — — (3) (1) (4)
Release of translation surpluses (note 19) — — (9) — — — — — — (9) — (9)
Cash flow hedging reserve — — — — (3) — — — — (3) (1) (4)
Share-based payments — — — — — 2 — — — 2 — 2
Fair value adjustments — — — — — — — 8 — 8 — 8
Transactions with shareholders
Dividends — — — — — — — — (176) (176) (106) (282)
Issue of share capital 21 — — — — — — — — 21 — 21
Changes in shareholding of subsidiaries — — — (82) — — — — — (82) — (82)
Disposal of subsidiary — — — — — — — — — — (10) (10)
Balance at 28 February 2006 827 (222) 18 (92) (3) 3 9 34 2 357 2 931 1 103 4 034
Statement of changes in equity for the year ended 28 February 2006
129
Attributable to equity holders of Altron Attributable to equity holders of Altron
GROUP
Share capital and
premium(note 9)
R million
Treasuryshares
(note 9)R million
Foreigncurrency
translationreserves
R million
Premium/discount
on minority
equity transaction
R million
Cash flowhedgingreserves
R million
Share- based
paymentsreserve
R million
Statutoryreserves
R million
Fair value and other
reservesR million
RetainedearningsR million
TotalR million
Minorityinterest
R million
Totalequity
R million
Balance at 1 March 2004 (IFRS restated) 789 (222) 132 43 (1) — 9 64 1 712 2 526 1 037 3 563
Recognised income and expense
Profit for the year — — — — — — — — 448 448 148 596
Foreign currency translation differences — — (35) — — — — — — (35) 13 (22)
Release of translation surpluses (note 19) — — (67) — — — — — — (67) — (67)
Cash flow hedging reserve — — — — 1 — — — — 1 1 2
Share-based payments — — — — — 1 — — — 1 1 2
Fair value adjustments — — — — — — — (16) — (16) — (16)
Transfer between reserves — — — — — — — (22) 22 — — —
Transactions with shareholders
Dividends — — — — — — — — (143) (143) (81) (224)
Issue of share capital 17 — — — — — — — — 17 — 17
Changes in shareholding of subsidiaries — — — (53) — — — — — (53) (210) (263)
Minorities arising on acquisitions — — — — — — — — — — 55 55
Balance at 28 February 2005 (IFRS restated) 806 (222) 30 (10) — 1 9 26 2 039 2 679 964 3 643
Recognised income and expense
Profit for the year — — — — — — — — 494 494 257 751
Foreign currency translation differences — — (3) — — — — — — (3) (1) (4)
Release of translation surpluses (note 19) — — (9) — — — — — — (9) — (9)
Cash flow hedging reserve — — — — (3) — — — — (3) (1) (4)
Share-based payments — — — — — 2 — — — 2 — 2
Fair value adjustments — — — — — — — 8 — 8 — 8
Transactions with shareholders
Dividends — — — — — — — — (176) (176) (106) (282)
Issue of share capital 21 — — — — — — — — 21 — 21
Changes in shareholding of subsidiaries — — — (82) — — — — — (82) — (82)
Disposal of subsidiary — — — — — — — — — — (10) (10)
Balance at 28 February 2006 827 (222) 18 (92) (3) 3 9 34 2 357 2 931 1 103 4 034
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ALTRON ANNUAL REPORT 2006
Notes2006
R million2005
R million
Cash flows from operating activities 819 750
Cash generated by operations 31 1 412 1 200 Interest received 93 82 Dividends received 32 — 6 Interest paid (54) (48) Taxation paid 33 (350) (266)
Cash available from operating activities 1 101 974 Dividends paid – to Altron equity holders (176) (143) – to minority shareholders (106) (81)
Cash flows from investing activities (62) (1 381)
Acquisition of subsidiaries and joint venture 34 (126) (985)
Proceeds on disposal of subsidiaries and joint venture 35 472 — Proceeds on disposal of property, plant and equipment 36 46 75 Net repayment of rental finance advances 13 83 Acquisition of property, plant, equipment and intangibles (315) (333)
Replacement capital expenditure (173) (218) Expansion capital expenditure (142) (115)
Change from subsidiary to associate 37 — (3) Other investing activities 38 (152) (218)
Cash flows from financing activities (122) 155
Repayment of loans (166) (20) Proceeds from empowerment funding obligation — 158 Proceeds on issue of shares 21 17 Changes in minority interests 39 23 —
Net increase/(decrease) in cash and cash equivalents 635 (476) Cash and cash equivalents at the beginning of the year 1 520 2 004 Effect of foreign exchange translation on cash balance (3) (8)
Cash and cash equivalents at the end of the year 8 2 152 1 520
Cash flow statement for the year ended 28 February 2006
131
Land andbuildingsR million
Plant andmachinery
R million
Motor vehicles,
furniture andequipment
R million
IT equipment
and softwareR million
TotalR million
1. PROPERTY, PLANT and EQUIPMENTCostBalance at 1 March 2004 221 1 217 196 396 2 030 Additions at cost 21 123 112 77 333 Arising on business combinations 10 120 54 86 270 Disposals (27) (29) (62) (11) (129)Translation and reclassification (4) (2) (36) (4) (46)
Balance at 28 February 2005 221 1 429 264 544 2 458
Additions at cost 15 152 76 67 310Arising on business combinations — 8 12 72 92Disposals (5) (10) (49) (88) (152)Disposals of subsidiaries and joint ventures (2) (11) (5) (16) (34)Translation and reclassification (11) (3) (11) (4) (29)
Balance at 28 February 2006 218 1 565 287 575 2 645
Depreciation and impairment lossesBalance at 1 March 2004 57 914 137 251 1 359 Depreciation for the year 4 75 32 77 188 Arising on business combinations 2 76 27 51 156 Disposals (4) (14) (28) (13) (59)Translation and reclassification (1) (28) (2) (3) (34)
Balance at 28 February 2005 58 1 023 166 363 1 610
Depreciation for the year 5 85 36 76 202Impairment losses — 17 — — 17Arising on business combinations — 5 4 70 79Disposals (4) (17) (11) (81) (113)Disposals of subsidiaries and joint ventures (2) (4) (5) (15) (26)Translation and reclassification — (16) (12) (1) (29)
Balance at 28 February 2006 57 1 093 178 412 1 740
Carrying amount at 1 March 2004 164 303 59 145 671 Carrying amount at 28 February 2005 163 406 98 181 848
Carrying amount at 28 February 2006 161 472 109 163 905
Land and buildingsDetails of land and buildings are available, on request, for inspection at the registered office of the company.
Encumbered assetsThe group leases certain property, plant and motor vehicles under finance lease agreements. They are included in the above amounts.
2006Rm
2005Rm
The net carrying amount of the leased assets is: 20 16
Assets under constructionIncluded in the cost of assets are the following items of capital work in progress:
Plant and machinery 81 87IT equipment and software 14 7Other equipment 1 7
96 101
Impairment lossesImpairment losses relate to the assets of businesses closed during the year.Useful livesUseful lives are reflected under accounting policies on page 123.
Notes to the financial statements
132
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
GoodwillR million
Customerrelationships
R million
Patents andtrademarks
R million
Licence agreements
R million
Proprietary softwareR million
Total R million
2. INTANGIBLE ASSETS
CostBalance at 1 March 2004 436 — 7 23 — 466Adjustments (4) — — — — (4)Arising on business combinations 639 — — 31 1 671Disposals (3) — — — — (3)
Balance at 28 February 2005 1 068 — 7 54 1 1 130
Additions at cost — — 1 4 — 5Adjustments (38) — — — — (38)Arising on business combinations 95 26 — — 5 126Disposals of subsidiaries and joint ventures (117) — — (31) — (148)Translation differences — — — (3) — (3)
Balance at 28 February 2006 1 008 26 8 24 6 1 072
Amortisation and impairment lossesBalance at 1 March 2004 — — 2 — — 2Amortisation for the year — — — 4 — 4Impairment losses 200 — — — — 200Disposals (1) — — — — (1)
Balance at 28 February 2005 199 — 2 4 — 205
Amortisation for the year — 9 — — 2 11Impairment losses 82 — 1 — — 83
Balance at 28 February 2006 281 9 3 4 2 299
Carrying amount at 1 March 2004 436 — 5 23 — 464Carrying amount at 28 February 2005 869 — 5 50 1 925
Carrying amount at 28 February 2006 727 17 5 20 4 773
133
2006R million
2005R million
2. INTANGIBLE ASSETS (continued)
Adjustments to goodwillA reduction of goodwill was adjusted in the income statement in respect of tax losses and deductible temporary differences realised or recognised as deferred tax assets after acquisition of a subsidiary that did not meet the recognition criteria of a deferred tax asset at acquisition.
Impairment tests for cash-generating units containing goodwillThe following units have significant carrying amounts of goodwill:
Altech NamlTech 332 414
Plato Computer Services UK 50 50
CS Holdings 105 105
Digital Healthcare Solutions 64 —
Bytes Document Solutions 67 67
Econet — 117
Multiple units without significant goodwill 109 116
727 869
Description of impairment tests and key assumptionsImpairment tests are conducted on an annual basis using a discounted cash flow valuation model.
The impairment tests are prepared on the basis of forecast profits generated by the cash generating unit.
Management forecasts typically cover a two-year period and thereafter a reasonable rate of growth is applied based on current market conditions.
In assessing future cash flows, management has used assumptions relating to the growth in the units market potential, new market opportunities as well as reductions in manufacturing costs based on business plans.
Discount rates used in the discounted cash flow models are based on price-earnings ratios of similar businesses in the same sector and of generally similar size.
Impairment lossesIn view of the trading loss incurred by Altech NamITech the directors concluded that the carrying value of goodwill relating to the Altech NamITech acquisition was impaired by an amount of R82 million. Impairment losses of R176 million in the prior year primarily related to Plato Computer Services UK.
2006R million
2005R million
3. ASSOCIATES AND OTHER INVESTMENTS
Associates 14 249
Investments 94 153
Loans 120 51
Refer annexure 1 for details 228 453
4. RENTAL FINANCE ADVANCES
AssetsPresent value of minimum lease payments receivable 146 159
Less: current portion (note 7) (56) (84)
Non-current finance lease asset 90 75
Liabilities (included under loans)
Present value of minimum lease payments payable (note 12) 95 53
Less: current portion (27) (29)
Non-current finance lease liability 68 24
Group entities sell certain document-processing equipment to third parties, on a finance lease basis.
The lease asset arising is, in turn, financed by a reciprocal lease agreement with financial institutions.
The underlying loans receivable and payable are settled in monthly instalments over periods up to six years and bear interest at rates linked to the prime bank overdraft rate. The loans are secured by the underlying equipment sold.
5. DEFERRED TAXATION
5.1 Deferred taxation movementBalance at beginning of year (59) (76)
Charged to the income statement (47) 31
Charged directly in equity – available-for-sale investments 1 (3)
Acquisitions and disposal of subsidiaries 8 (11)
Balance at end of year (97) (59)
134
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
2006R million
2005R million
5. DEFERRED TAXATION (continued)
5.2 Deferred taxation balancesAttributable to the following temporary differences:
Property, plant and equipment 56 35
Intangible assets 5 —
Construction work in progress — (1)
Prepaid expenditure 5 —
Receipts in advance (41) (34)
Receivables (16) (3)
Contract allowances 21 21
Provisions (69) (41)
Tax losses (53) (22)
Investments and other 6 (2)
Secondary taxation credits (11) (12)
(97) (59)
The above balance comprises:
Deferred taxation liabilities 21 53
Deferred taxation assets (118) (112)
(97) (59)
Tax lossesEstimated tax losses available for set-off against future taxable income 356 240
Applied to reduce deferred taxation (183) (80)
173 160
Attributable to minority shareholders (27) (8)
146 152
2006R million
2005R million
6. INVENTORIES
Raw materials 403 429
Work in progress 226 256
Finished goods 570 428
Merchandise 89 82
Consumable stores 21 19
1 309 1 214
Less: receipts in advance (14) (56)
1 295 1 158
Inventories carried at cost 1 103 932
Inventories carried at fair value less cost to sell 192 226
1 295 1 158
7. TRADE AND OTHER RECEIVABLES
Trade receivables 1 879 1 776
Less: impairment losses (129) (137)
Current portion of rental finance advances (note 4) 56 84
Derivative assets at fair value 7 3
Other receivables 163 138
1 976 1 864
8. CASH AND CASH EQUIVALENTS
Cash at bank 954 968
Cash on deposit 1 198 552
2 152 1 520
135
GROUP AND COMPANY
2006Number
of shares
2005Number
of shares2006
R million2005
R million
9. SHARE CAPITAL AND PREMIUM
9.1 AuthorisedOrdinary shares of 2 cents each 247 500 000 247 500 000 5 5
Participating preference shares of 0.01 cents each 500 000 000 500 000 000 * *
5 5
9.2 IssuedOrdinary sharesIn issue at beginning of year 97 174 115 97 174 115 2 2
Issued in terms of share schemes — — — —
In issue at end of year 97 174 115 97 174 115 2 2
Less: own shares acquired by subsidiary (3 246 469) (3 246 469)
Net ordinary shares 93 927 646 93 927 646
Participating preference sharesIn issue at beginning of year 208 698 664 204 790 976 * *
Issued in terms of share schemes 3 623 838 3 907 688 * *
In issue at end of year 212 322 502 208 698 664 * *
Less: own shares acquired by subsidiary (24 310 492) (24 310 492)
Net participating preference shares 188 012 010 184 388 172
Total number of shares in issue at the end of the year net of own shares acquired 281 939 656 278 315 818
9.3 Share premiumBalance at beginning of year 804 787
Share premium arising from issue of shares 21 17
Balance at end of year 825 804
9.4 Total issued share capital and premium 827 806
*Less than R1 million
136
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
2006 Number
of shares
2005Number
of shares
9. SHARE CAPITAL AND PREMIUM (continued)
9.5 UnissuedOrdinary shares Shares reserved for allocation under employee share schemes 4 847 855 4 847 855
Shares under the control of the directors until the forthcoming annual general meeting 145 478 030 145 478 030
150 325 885 150 325 885
Participating preference sharesShares reserved to meet the requirements of:
Allied Electronics Corporation Limited Share Trust 2 399 162 5 247 687
Altron Group Share Incentive Trust 3 845 773 5 211 600
Conditional Rights Scheme 4 243 940 —
Shares reserved for allocation under employee share schemes 15 495 042 19 148 468
Shares under the control of the directors until the forthcoming annual general meeting 261 693 581 261 693 581
287 677 498 291 301 336
The members in a general meeting on 15th July 2005 reserved shares for the Altron share schemes provided that issues in the aggregate in any one financial year shall not exceed 10% of the number of shares of any class of shares in issue, less any shares issued during the year pursuant to the exercise of share options.
Terms of equity shares
Ordinary sharesThe holders of ordinary shares are entitled to receive dividends as declared from time-to-time and are entitled to one vote per share at meetings of the company.
Participating preference sharesHolders of participating preference shares rank pari passu with the ordinary shares with regard to entitlement to dividends and the company’s residual assets. The shares have limited and diluted voting rights only in specific and limited circumstances (refer page 87).
Treasury sharesThe directors have a general authority to repurchase shares of the company not exceeding 20% of the company’s ordinary and/or participating preference issued share capital in any one financial year until the next annual general meeting. No shares were repurchased during the year.
9.6 Employee share options – participating preference shares
Allied ElectronicsCorporationShare Trust
Altron Group Share
Incentive TrustConditional
Rights SchemeTotal share
options
Number of options allocated at beginning of year 5 247 687 5 211 600 — 10 459 287
Number of options granted — — 4 243 940 4 243 940
Number of options lapsed/forfeited (275 214) (315 300) — (590 514)
Number of options exercised (2 573 311) (1 050 527) — (3 623 838)
Number of options allocated at end of year 2 399 162 3 845 773 4 243 940 10 488 875
137
9. SHARE CAPITAL AND PREMIUM (continued)
9.7 The Altron Group Share Incentive Trust, Allied Electronics Corporation Limited Share Trust and the Conditional Rights Scheme.Details of rights outstanding at the end of the year under review:
Options and deferred delivery shares outstanding
at 28 February 2006
Date grantedExercise price
per share
Allied Electronics CorporationShare Trust
Altron GroupShare
Incentive Trust
ConditionalRights
Scheme
6 April 95 R6.50 8 000
6 April 96 R6.50 1 100
10 May 96 R6.50 1 680
2 September 96 R6.10 7 680
20 December 96 R4.80 129 300
6 March 97 R5.05 117 292
12 January 98 R8.30 20 000
15 September 98 R3.49 601 372
26 January 99 R4.70 39 400
5 March 99 R5.25 419 164
30 May 00 R5.00 169 580
28 June 00 R4.85 837 994
10 April 01 R7.00 26 400
7 June 02 R7.40 20 200
1 October 02 R7.25 2 410 373
The following options are subject to IFRS 2
14 February 03 R7.70 50 000
1 April 03 R7.00 41 000
11 December 03 R10.00 30 000
27 July 04 R11.20 1 314 400
9 February 06 R22.50 4 243 940
2 399 162 3 845 773 4 243 940
Terms of schemesAllied Electronics Corporation Share TrustThe Allied Electronics Corporation Limited Share Trust is a ten-year scheme and is currently in run-off where the last of the options so granted are exercisable in March 2012. It has a vesting period of three years from initial date of grant before the options may be exercised.
Altron Group Share Incentive TrustThe Altron Group Share Incentive Trust is a six-year scheme. The vesting period is three years from initial date of grant before the options may be exercised in equal tranches over a three-year period.
The Conditional Rights SchemeUnder the Conditional Rights Scheme participants are granted rights to acquire shares subject to meeting future performance vesting conditions. Vesting of Conditional Rights occurs in equal tranches over a three-year period commencing on the third anniversary of the granting of the Conditional Rights, subject to meeting the vesting conditions.
Please refer to the remuneration report for details of options held by directors.
138
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
9. SHARE CAPITAL AND PREMIUM (continued)
9.8 Share-based paymentsThe number and weighted average exercise prices of share options accounted for under IFRS 2 are:
Weightedaverage
exercise price2006
R
Numberof options
2006000’s
Weightedaverage
exercise price2005
R
Numberof options
2005000’s
AltechOutstanding at the beginning of the period 34.44 485 30.00 30
Forfeited during the period 32.25 (15) — —
Exercised during the period — — — —
Granted during the period 50.99 2 179 34.74 455
Outstanding at the end of the period 48.07 2 649 34.44 485
Exercisable at the end of the period — —
BTGOutstanding at the beginning of the period 5.19 3 011 3.61 650
Forfeited during the period — — —
Exercised during the period 5.44 (811) 3.63 (67)
Granted during the period 11.566 524
5.582 428
Outstanding at the end of the period 9.93 8 724 5.19 3 011
Exercisable at the end of the period 869 150
Altron
Outstanding at the beginning of the period 10.96 1 589 8.03 121
Forfeited during the period 11.20 (154) — —
Exercised during the period — — —
Granted during the period 22.504 244
11.201 468
Outstanding at the end of the period 19.58 5 679 10.96 1 589
Exercisable at the end of the period 17 —
Share options granted before 7 November 2002 or vested before 1 January 2005 have not been accounted for under IFRS 2 in accordance with the transitional provisions in IFRS 1 and IFRS 2.
The fair value of services received in return for share options granted is measured by reference to the fair value of the share options granted. The estimate of the fair value of the services received is measured based on the Black Scholes Model. Options are assumed to be exercised midway between the vesting date and the expiry date. There is no difference between the options granted to key management and senior employees. All awards are made up of three equal tranches, which vest three, four and five years after grant date.
139
9. SHARE CAPITAL AND PREMIUM (continued)
Fair value of share options and assumptionsFair value at measurement date:
2005Share Incentive Scheme Altech BTG AltronFair value at measurement date (Rand) 4.92 to 9.14 1.14 to 1.77 2.02 to 2.61
Share price 32.00 to 39.94 5.575 11.20Exercise price 32.00 to 39.94 5.575 11.20Expected volatility 14.30% 38.80% 20.00%Option life 3.5 to 5.5 1.5 to 3.5 3.5 to 5.5Dividend yield 3.13% to 3.91% 3.95% 4.64%Risk-free interest rate 9.50% 9.50% 9.50%2006Conditional Rights Altech BTG AltronFair value at measurement date (Rand) 12.20 to 13.85 3.12 to 3.42 5.09 to 5.69
Share price 50.99 11.56 22.50Exercise price 50.99 11.56 22.50Expected volatility 24.5% to 26.4% 26.60% 19.4% to 19.9%Option life 4.5 to 5.5 4.5 to 5.5 4.5 to 5.5Dividend yield 3.41% 2.67% 2.80%Risk-free interest rate 7.27% 7.09% 7.27%
The expected volatility is based on the historic volatility over a similar period to the option life, adjusted for once-off events in the historic volatility and for any expected changes to future volatility due to publicly available information.
Share options granted in periods prior to the current financial year had a service condition attached. The new conditional rights scheme implemented in the current financial year includes both a service condition and a non-market performance condition. The non-market performance conditions are not taken into account in the grant date fair value measurement of the services received. There are no other market conditions associated with any of the share option grants.
Employee expenses Group
2006R million
2005R million
Share options granted between 7 November 2002 and 28 February 2005 3 2Share options granted in 2006* 1 —Expense arising from share appreciation rights granted in 2006 9 —
Total expense recognised as employee costs 13 2
Total carrying amount of cash-settled transaction liabilities 9 —
* Share options in Altron and BTG were only granted in late February 2006 and so there is no charge in respect of these options in the current financial year.
The fair value of the share appreciation rights at grant date is determined based on the Black Scholes Model. The fair value of the liability is remeasured at each balance sheet date and at settlement date. The model inputs at 28 February 2006 were as follows:
Altech BTG AltronShare price 51.50 12.00 22.50Exercise price 32.25 5.575 11.20Terms (years) 1.4 to 3.4 1.4 to 3.4 1.4 to 3.4
Volatility 24.1% to 27% 22.7% to 26.6% 20.2% to 23%Dividend yield 3.38% 2.67% 2.80%Risk-free interest rate 7.20% 7.20% 7.20%
140
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
GROUP
2006R million
2005R million
10. RESERVES
10.1 Retained earnings 2 357 2 039
Are distributable and would be subject to secondary tax on companies.
10.2 Foreign currency translation reserve 18 30
Comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.
10.3 Premium/discount on minority equity transactions (92) (10)
Comprises the premium or discount on subsequent purchase or sale of equity instruments in existing subsidiaries.
10.4 Cash flow hedging reserve (3) —
Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments that have not yet occurred.
10.5 Share-based payments reserve 3 1
Comprises the net fair value of equity instruments granted to employees under share schemes expensed.
10.6 Statutory reserves 9 9
Comprises the Capital Redemption Reserve Funds as well as legal reserves of a foreign subsidiary.
10.7 Fair-value reserve 34 26
Comprises the cumulative net change in the fair value of available-for-sale investments until the investment is derecognised.
Total reserves 2 326 2 095
11. BLACK ECONOMIC EMPOWERMENT (BEE) TRANSACTIONS
The group entered into the following material BEE transactions during the previous year:
11.1 Altech group – NamITech Holdings Limited (NamITech) – Pamodzi Investment Holdings (Pty) Limited (Pamodzi) The Altech group acquired an interest in NamITech. Simultaneously with the acquisition, NamITech issued preferred ordinary shares to Pamodzi, a BEE company. The preferred ordinary shares entitle Pamodzi to 28% of the voting rights in respect of the total issued share capital of NamITech and to 28% of the earnings in excess of predetermined base earnings of NamITech. Pamodzi will be entitled to dividends on the earnings in excess of base-year earnings at the rate of 32%, with a guideline dividend policy being a dividend equal to one-third of NamITech’s earnings, subject to the discretion of the directors.
At the time the dividends on the preferred ordinary shares equal the dividends on the ordinary shares then the preferred ordinary shares will be entitled to 28% of the total annual earnings of NamITech and 28% of its shareholders equity. In the event of a liquidation or sale of NamITech, Pamodzi will be entitled to 28% of the proceeds at that date.
Assuming that any of the above events had occurred at the dates of transactions the interest of Pamodzi would have equated to R93 million (2005: R115 million). A transfer to the Pamodzi minority will be made from retained earnings when they are entitled thereto in the year that the dividends on the preferred ordinary shares are equal to the dividends on the ordinary shares.
A diluted earnings adjustment has not been made in respect of the preferred ordinary shares as the earnings of NamITech have yet to meet the level at which the shares would have full participative rights to earnings and dividends of the company.
11.2 Powertech group – Aberdare Cables (Pty) Limited (Aberdare) – Izingwe Aberdare Cables Investments (Pty) Limited (Izingwe)Powertech entered into an agreement with Izingwe to dispose of 30% of its equity interest and shareholders’ loans in Aberdare. The purchase price was funded by a financial institution. The financing arrangement includes certain put and call options to Altron and Powertech and includes a number of terms and conditions that need to be maintained or fulfilled before the risks attached to repayment of the loan fully transfer to Izingwe.
Although the rewards of ownership have fully vested in Izingwe, due to the requirements of the current accounting framework, the recognition of the disposal has been deferred in the financial statements until the obligation to repay the funding has been fully transferred to Izingwe.
141
11.2 Powertech group - Aberdare Cables (Pty) Limited (Aberdare) – Izingwe Aberdare Cables Investments (Pty) Limited (Izingwe) (continued)The funding obligation is consequently reflected as a liability of the group (refer note 13).
A diluted earnings adjustment has not been made as the recognition of the 30% minority interest with a settlement of the outstanding balance on the funding obligation is currently antidilutive (refer note 24.4).
11.3 BTG group – BTG South Africa (Pty) Limited (BTG SA) – Kagiso Strategic Investments (Pty) Limited (Kagiso)BTG entered into an agreement with Kagiso to effectively dispose of 5% of its equity interest in BTG SA for a cash consideration fully funded by Kagiso. In addition Kagiso were granted options to acquire a further 22% equity interest in BTG SA for R198 million. In the interim period Kagiso is entitled to 27% of the voting rights of the total issued share capital of BTG SA in respect of the ordinary shares acquired and class B non-participative shares held by them. The class B shares are cancellable upon Kagiso exercising its options.
A diluted earnings adjustment amounting to a net R16 million (2005: R9 million) has been calculated based on the profit that would be attributable to the additional 22% shareholding adjusted for the dilutive effect of the option price at the BTG SA level (refer note 24.4).
GROUP
2006R million
2005R million
12 LOANS
12.1 Non-current loansPreference shares of subsidiary (a) 206 206
Rental finance liabilities note 4 95 53
Finance leases (b) 27 24
Spanish Government (c) 2 3
Minority shareholders loans (d) 32 31
Venopt (e) — 208
Barclays Bank (f) — 78
362 603
Less: payable within one year shown as current loans (238) (59)
Total non-current loans 124 544
GROUP
2006R million
2005R million
12.2 Current loansCurrent portion of loans 238 59
238 59
(a) Cumulative redeemable preference shares in a subsidiary are regarded as a loan. These shares have a variable dividend coupon rate of 68% of the prime bank overdraft rate. The dividends are payable half yearly in arrear commencing 31 March 2004 and were redeemed on 2 March 2006.
(b) Capitalised finance leases and the property sale and leaseback liabilities are settled in monthly instalments over periods of up to seven years and bear interest at rates linked to the prime bank overdraft rate. The property lease runs over a period of ten years, of which three years remain. The lease liabilities are secured by land and buildings with a net book value of R13.5 million and plant and motor vehicles with a book value of R6 million.
(c) Euro loans from the Spanish Government which are interest free and repayable in four equal annual instalments.
(d) Minority shareholders’ loans
Arrow Altech Holdings (Pty) Limited: The loan is unsecured and bears interest at a 12-month fixed deposit rate and has no fixed terms of repayment 24 31
NamITech West Africa Limited: The loan is unsecured and bears interest at 2% per annum above the South African prime rate and has no fixed terms of repayment 6 —
Desta Power Matla (Pty) Limited: The loan is unsecured and bears no interest with no fixed terms of repayment 2 —
32 31
142
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
12. LOANS (continued)
(e) The loan granted by Venopt (Pty) Limited, a company controlled by Kagiso Strategic Investments (Pty) Limited, was a five-year term loan at an interest rate of JIBAR plus 2.1%, funded in equal parts by Absa and Nedcor. The loan was repaid during the year.
(f) The Barclays Bank facility was an Econet Wireless Global Limited US Dollars based loan at LIBOR plus 2.5% which was disposed of during the year.
2006R million
2005R million
12.3 Borrowing facilitiesIn terms of the articles of association, the borrowing powers of the group are unlimited.
Unutilised banking facilities 2 248 1 854
2006R million
2005R million
13. EMPOWERMENT FUNDING OBLIGATION
Opening balance 172 165
Interest accrued 15 14
Dividend paid (16) (7)
Capital costs accrued 2 —
173 172
The dividends on the preference shares bear an indicative dividend rate of 9.61% (2005: 9.61%). The expected redemption period is from March 2008 to March 2014. (refer note 11.2)
Warranties andcontract losses
R million
Post-retirementmedical aid
benefitsR million
TotalR million
14. PROVISIONS
Non-current provisions 20 10 30
Current portion included in current liabilities 67 — 67
Total provisions at 28 February 2005 87 10 97
Provisions raised during the year 3 — 3
Disposals of subsidiaries and joint ventures (3) — (3)
Provisions utilised/released during the year included in operating profit (17) — (17)
Total provisions at 28 February 2006 70 10 80
Provisions comprise:
Non-current 15 10 25
Current portion included in current liabilities 55 — 55
70 10 80
Refer to accounting policies for description of provisions.
143
2006R million
2005R million
16.1 Value of obligationsFair value of plan assets 1 809 1 412 Present value of funded obligations (1 271) (1 169)
Surplus at year-end 538 243 Unrecognised due to paragraph 58 limit (132) (105)Unrecognised actuarial gains (406) (138)
Asset recognised on the balance sheet — —
16.2 Components of income statement expenseCurrent service cost 72 74 Interest cost 97 95Expected return on plan assets (limited by paragraph 58) (103) (113)
Current service cost 66 56
16.3 Reconciliation of the net assets recognised on the balance sheetAmount recognised at beginning of year — — Unrecognised due to paragraph 58 limit at beginning of year 105 104 Net expense recognised in the income statement (66) (56)Contributions 66 56 Current year unrecognised return on assets due to paragraph 58 limit 27 1
Net asset at end of year 132 105 Unrecognised due to paragraph 58 limit at end of year (132) (105)
Amount recognised at end of year — —
IAS 19 – Employee Benefits paragraph 58 only allows an asset to be recognised on the company’s balance sheet to the extent that economic benefits are available to the company in the form of refunds or reductions in future contributions. The Pension Funds Act, 1956, as amended, precludes the company from accessing the asset in 16.1 above and accordingly, it has not been recognised on the group’s balance sheet.
2006R million
2005R million
15. TRADE AND OTHER PAYABLES
Trade payables 2 501 2 022
Derivative liability at fair value 21 9
Other payables 158 192
2 680 2 223
16. RETIREMENT BENEFIT PLANS
Defined contribution plans The majority of the group’s employees are members of the Altron Group Pension Fund which is a defined contribution fund and is governed by the Pension Funds Act, 1956 as amended. The contribution rate of the employers is 10% (2005: 10%), calculated on the pensionable emoluments of members.
Additionally, the group provides retirement benefits for certain of its employees through the Altron Group Provident Fund. The fund is a defined contribution fund and is governed by the Pension Funds Act, 1956 as amended. Contributions to the fund comprise between 8% and 20% of pensionable emoluments.
The group’s contribution to these funds amounted to R86 million (2005: R70 million).
Multi-employer plans Post-acquisition of subsidiaries, certain employees remained members of their previous funds. A number of these are defined benefit plans. These industry-managed retirement benefit schemes are dealt with as defined contribution plans where the group’s obligations under the schemes are equivalent to those arising in a defined contribution plan. The group’s contribution to these other funds amounted to R31 million (2005: R23 million).
Defined benefit plans Members of the Altron Group Pension Fund who were members prior to 1 September 1996 are entitled to a minimum benefit equal to the previously provided defined benefit pension. Certain members who were members prior to 1 November 1999 are entitled to post-retirement medical assistance. The benefit plan disclosed below is only in respect of those defined as benefit pension and medical assistance.
144
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
2006R million
2005R million
16. RETIREMENT BENEFIT PLANS (continued)
16.4 Principal actuarial assumptions Discount rate 7.5% 8.5%
Inflation rate 4.5% 4.0%Salary increase rate 5.5% 5.5%Expected return on assets 9.0% 9.5%Pension increase allowance 4.5% 4.0%Actual return on the Altron Group Pension Fund 29.5% 22.1%
17. REVENUE
Goods sold 8 756 8 065 Services rendered 5 169 4 101 Rental finance income 44 40
13 969 12 206
18. OPERATING PROFIT BEFORE CAPITAL ITEMS
Is stated after taking account of the following items:
18.1 Auditors’ remunerationAudit fees 15 12 Fees for other services 2 2
17 14
18.2 Directors’ remunerationRefer to remuneration report on page 106 34 30
18.3 Employee remuneration (including directors’ remuneration)Salaries and wages 2 262 1 993 Share-based payments – equity settled (note 9.8) 4 2 Share-based payments – cash settled (note 9.8) 9 — Retirement and provident funds 117 95 Medical aid and other 108 95
2 500 2 185
18.4 Fees paidManagerial fees 14 13 Technical, consultancy and administration 64 54
78 67
2006R million
2005R million
18.5 Foreign exchange gains/(losses)Gains 27 44 Losses (9) (28)Forward exchange contracts fair value adjustments (2) (3)
16 13
Being:
Realised 19 17 Unrealised (3) (4)
18.6 Net decrease in provisions (14) (28)
18.7 Operating lease chargesProperty 107 92 Plant, equipment and vehicles 12 24 Additional cost of straight- lining of leases 10 4
129 120
18.8 Other incomeGovernment grants and other allowances 7 12
18.9 Research and development expenditure 90 56
19. CAPITAL ITEMS
Net gain on disposal of property, plant and equipment 7 7 Impairment of property, plant and equipment (17) —
Impairment of intangible assets (83) (200)Goodwill adjustment on utilisation of at acquisition tax losses (38) (4)Net gain/(loss) on disposal and closure of businesses 65 (4)Profit on disposal of associate 3 —Foreign currency translation reserves realised 9 67 Release of discontinuance provision — 44
(54) (90)
145
2006R million
2005R million
20. FINANCIAL INCOME
Interest received 93 82
Dividends from preference share investments 19 18
112 100
21. FINANCIAL EXPENSE
Interest paid 24 33
Interest on empowerment funding obligation 15 14
Dividends on preference shares of subsidiary 14 15
53 62
22. SHARE OF PROFITS FROM ASSOCIATES
Attributable earnings 32 24
23. TAXATION
23.1 Taxation chargeCurrent taxation
– normal 314 280
– capital gains taxation 24 —
Deferred taxation
– current year (10) 29
– change in rate — 1
– tax losses recognised (39) (13)
Adjustment to prior years
– deferred taxation 2 14
291 311
Secondary tax on companies 35 28
326 339
2006R million
2005R million
23.2 Reconciliation of rate of taxation % % South African normal tax rate
29.0 30.0
Adjusted for:
Disallowable expenditure 2.8 3.8
Goodwill impaired and adjusted 3.2 6.4
Non-taxable income (5.4) (7.5)
Capital gains tax rate differential 2.2 —
Foreign tax rate differential — (0.1)
Prior period tax losses recognised (3.6) —
(Utilisation)/creation of tax losses not capitalised (0.4) 0.1
Income from associates (0.9) (0.3)
Change in rate of taxation — 0.2
Prior year adjustments 0.2 0.7
(1.9) 3.3
Secondary tax on companies 3.2 3.0
Net increase 1.3 6.3
Effective tax rate 30.3 36.3
24. EARNINGS PER SHARE
24.1 Reconciliation between earnings and headline earningsAttributable earnings to Altron equity holders 494 448
Adjustments for:
Capital items 54 90
Tax effect on capital items 9 (10)
Minority interest in capital items (28) (83)
Headline earnings 529 445
Headline earnings per share (cents) 189 162
146
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
2006 2005
24. EARNINGS PER SHARE (continued)
24.2 Reconciliation of weighted average number of sharesIssued shares at beginning of year (ordinary and participating preference shares) 305 872 779 301 965 091
Effect of own shares held (27 556 961) (27 556 961)
Effect of shares issued in June 498 826 467 721
Effect of shares issued in July 337 541 —
Effect of shares issued in August 80 633 1 123 575
Effect of shares issued in November 566 442 81 699
Effect of shares issued in January 10 364 25 008
Effect of shares issued in February 7 642 36
Weighted average number of shares 279 817 266 276 106 169
24.3 Reconciliation between number of shares used for earnings per share and diluted earnings per shareWeighted average number of shares 279 817 266 276 106 169
Dilutive options 2 792 366 5 463 428
Number of shares to calculate dilution 282 609 632 281 569 597
2006R million
2005R million
24.4 Reconciliation between earnings attributable to Altron equity holders and fully diluted earnings are as follows:Attributable earnings to Altron equity holders 494 448 Additional earnings attributable to BEE minorities in subsidiaries (28) (18)Minority interest in adjustments 12 9Additional earnings attributable to dilutive options at subsidiary level (3) (1)
Fully diluted earnings 475 438
24.5 Reconciliation headline earnings attributable to Altron equity holders and fully diluted headline earnings are as follows:Headline earnings 529 445 Additional earnings attributable to BEE minorities in subsidiaries (38) (19)Minority interest in adjustments 16 9Additional earnings attributable to dilutive options at subsidiary level (3) (5)
Fully diluted headline earnings 504 430
Diluted headline earnings per share (cents) 178 153
Basic earnings per share is calculated by dividing the earnings attributable to Altron equity holders by the weighted average number of ordinary and participating preference shares in issue during the year.
Basic headline earnings per share is calculated by dividing headline earnings by the weighted average number of ordinary and participating preference shares in issue during the year.
For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of not yet released purchased shares under the Employee Share Option Scheme, net of shares held by the scheme for releasing purposes.
Fully diluted earnings and headline earnings have been calculated on the basis that:
147
2006R million
2005R million
Ü Kagiso Strategic Investments (Pty) Limited exercised its full option on 22% of the shares in Bytes Technology Group South Africa (Pty) Limited effective 1 March 2004 adjusted for the dilutive effect of the option price at the BTG SA level.
Ü The recognition of the deferred sale of the 30% interest of the Izingwe Consortium in Aberdare Cables based on the assumption that a portion of the purchase price will be settled in cash of R173 million. The effective option was antidilutive in the current and prior year and consequently, no dilution was calculated.
Ü The earnings effect of dilutive options at BTG Limited and Allied Technologies Limited subsidiary level.
25. DIVIDENDS PROPOSED
Ordinary dividend No 58 of 78.0 cents 73 (2005: 63.0 cents per share) 59
Preference dividend No 12 of 78.0 cents 147 (2005: 63.0 cents per share) 117
220 176
26. COMMITMENTS
26.1 Capital expenditureContracts for capital expenditure not provided for in the financial statements 23 43
Capital expenditure authorised but not contracted for 47 34
70 77
This expenditure will be incurred in the ensuing year and will be financed from existing cash resources.
2006R million
2005R million
26.2 Amounts outstanding under operating lease agreementsAt the balance sheet date the group had outstanding commitments under non-cancellable operating leases, which fall due as follows:
Within one yearproperty 85 92
plant, equipment and vehicles 33 41
118 133
One to five yearsproperty 233 233
plant, equipment and vehicles 18 36
251 269
Thereafterproperty 115 40
Total 484 442
27. CONTINGENT LIABILITIES
The South African Revenue Services had disallowed certain assessed losses in a prior year to the value of R27 million, excluding interest, in group companies which had previously been allowed. Objections have been lodged against the revised assessments and the group is confident, based on the opinion from senior counsel, that the objections will be upheld by the Income Tax Court.
148
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
28. FINANCIAL INSTRUMENTS
Exposure to currency, interest rate and credit risk arises in the normal course of the group’s business.
28.1 Foreign currency riskForeign exchange contracts are used as a means of reducing exposure to fluctuations in foreign exchange rates. The group incurs currency risk as a result of transactions which are denominated in a currency other than the group entity’s functional currency in respect of purchases, sales and borrowings. The currencies, giving rise to currency risk, in which the group primarily deals are British Pounds, US Dollars and Euros. The group entities hedge payables, receivables and borrowings denominated in a foreign currency.
28.2 Foreign exchange contractsThe principal or contract amounts of foreign exchange contracts for trade payables, receivables and borrowings including forecast transactions, at balance sheet date, were:
2006 2005Foreign amount
R million
Rand amount
R million
Foreign amount
R million
Rand amount
R million
Net foreign exchange contracts to pay/(receive)British Pounds 9.9 107.1 6.4 71.7
US Dollars 64.5 400.5 17.2 101.8
Euros 18.5 136.5 18.4 142.7
Swedish Kroners 8.4 6.6 15.1 13.0
New Zealand Dollars 1.7 7.0 1.3 5.5
Swiss Francs 0.4 2.0 0.7 3.4
Australian Dollars (2.8) (12.9) — —
Various — 0.7
646.8 338.8
Comprising foreign exchange contracts:
– to pay 894.9 445.3
– to receive (248.1) (106.5)
646.8 338.8
Value of contracts at marked-to-market 661.6 344.7
Contracts in respect of forecast transactions
The group has entered into certain forward exchange contracts, included above, which do not relate to specific items appearing on the balance sheet, but were entered into to cover foreign commitments not yet due. The contracts will be utilised for purposes of inventory procurement and sales during the following year.
– to pay 84 82
– to receive — (1)
84 81
149
28.3 Monetary assets/(liabilities) Monetary assets and liabilities denominated in currencies other than South African Rands and not covered by forward exchange contracts into South African Rands were as follows:
2006 2005Foreign amount
R million
Rand amount
R million
Foreign amount
R million
Rand amount
R million
Net assets/(liabilities) British Pounds — (0.1) (0.2) (2.0)
US Dollars (8.9) (55.0) 4.5 25.6
Euros (0.2) (1.8) 3.0 27.1
Australian Dollars 6.8 30.8 8.5 39.2
Other — (0.6) — (16.4)
(26.7) 73.5
28.4 Interest rate risk
Financial assets and liabilities that are sensitive to interest rate risk are cash and cash equivalents and loans receivable/payable, rental finance advances/liabilities and preference share liabilities. The interest rates applicable to these financial instruments are in line with those currently available in the market.
28.5 Credit risk
Management has a credit risk policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. Credit guarantee insurance is taken where appropriate. The maximum exposure to credit risk is represented by the carrying value of each financial asset in the balance sheet. The maximum exposure to credit risk arising from derivative financial instruments are the contractual amounts receivable in respect of foreign exchange contracts.
28.6 Fair values
The fair values of all financial instruments are substantially identical to the carrying values reflected in the balance sheet. Unlisted equity investments are fair-valued based on directors’ valuations using the discounted cash flow method. Forward exchange contracts are marked-to-market using listed market prices. Interest-bearing borrowings and receivables are generally at interest rates in line with those currently available in the market on a floating-rate basis.
29. RELATED PARTY TRANSACTIONS
The group has a related party relationship with its subsidiaries (see note 3 page 169), associates and joint ventures (see Annexure 1), its directors (see page 106) and key management personnel (refer below)
2006 R million
2005R million
29.1 Associates and joint ventures
Sale of goods and services to associates 32 1
Interest earned from associates 1 1
Finance costs with joint venture 4 1
29.2 DirectorsDetails relating to directors’ emoluments and shareholdings in the company are disclosed in the remuneration report on page 106 and in the Directors’ report on page 113.
150
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
2006R million
2005R million
29. RELATED PARTY TRANSACTIONS (continued)
29.3 Key management personnelKey management personnel are defined as directors of the company and its principal subsidiary companies, Allied Technologies Limited (Altech), Bytes Technology Group Limited (BTG) and Power Technologies (Pty) Limited (Powertech). The key management personnel compensations were as follows:
Short-term employee benefits, including salaries and bonuses 52 44
Post-employment benefits 4 3
Equity compensation benefits 1 1
57 48
29.4 Shareholders
The principal shareholders of the company are detailed in the Analyses of Shareholders on page 86 of the annual report. Directors’ shareholdings are detailed in the directors’ report on page 113.
30. JUDGEMENTS MADE BY MANAGEMENT
In preparing financial statements in conformity with IFRS, estimates and assumptions that affect the reported amounts and related disclosures are:
Ü Deferred taxation assets
Deferred taxation assets have been raised at year-end on income tax losses and temporary differences in certain of the former CS Computer Services Holdings operations. Consequently, a further adjustment to goodwill has been made as these operations have made, and are expected to continue making taxable profits resulting in the utilisation of tax losses. Goodwill approximating the taxation which would have been recognised at acquisition has now been expensed in the income statement.
Ü Assets’ lives and residual values
The useful life of the rights to distribute Xerox equipment in 23 African territories is considered to be indefinite as these rights will automatically be renewed at no further cost upon the renewal of the group’s South African distribution agreement. Software, patents and trademarks and customer relationships are amortised over their remaining useful lives of up to six years. These intangible assets have no residual values as the group has no intention of disposing them.
Ü Impairment of assets
The impairment of goodwill is considered at least annually. Property, plant and equipment as well as intangible assets are considered for impairment when conditions indicate that impairment may be necessary. These conditions include economic conditions of the operating unit as well as the viability of the asset itself. The discounted cash flow method is used, taking into account future expected cash flows, market conditions and the expected useful lives of the assets.
151
2006R million
2005R million
31. CASH GENERATED BY OPERATIONS
Operating profit before capital items 1 040 963
Adjustments for:
Depreciation and amortisation 213 192
Closure cost of subsidiaries (44) —
Unrealised foreign exchange losses 3 4
Movement in provisions and other non-cash movements (14) (37)
Cash generated before movements in working capital 1 198 1 122
Increase in inventories (142) (153)
(Increase)/decrease in trade and other receivables (176) 51
Increase in trade and other payables 532 180
1 412 1 200
32. DIVIDENDS RECEIVED FROM ASSOCIATES AND OTHER INVESTMENTS
Dividends receivable at beginning of year 37 25
Attributable income per the income statement 19 18
Dividends receivable at end of year (56) (37)
— 6
33. TAXATION PAID
Amounts unpaid at beginning of year (164) (116)
Amounts charged to the income statement (373) (308)
Relating to acquisitions, disposals and translation — (6)
Amounts unpaid at end of year 187 164
(350) (266)
30. JUDGEMENTS MADE BY MANAGEMENT (continued)
Ü Post-employment benefit obligations
Post-retirement defined benefits are provided for certain existing and former employees (see note 16). The actuarial valuation method used to value the obligations is the Projected Unit Method. The assumptions used include a discount rate, inflation rate, salary increase rate, expected rate of return on assets and a pension increase allowance.
Ü Pension fund surplus investigation
The Pension Fund Second Amendment Act, 2001 requires that the trustees of all retirement funds undertake a surplus investigation. This investigation was undertaken on the Altron Group Pension Fund as at 31 December 2002. The investigation involved comparing assets of the fund to the liabilities and reserves of the fund at the valuation date and investigating instances of fund surpluses having been utilised improperly by the employer. The investigation was completed by the trustees and revealed that no instances of improper uses of any surplus, as defined in the Act, have occurred and that the assets in the fund as at 31 December 2002 did not exceed the liabilities and reserves of the fund at that date.
Ü Fair value of investments-held-for-sale
The investments in Fintech Receivables 1 (FR1) and Technologies Acceptances Receivables (TAR) (see Annexure 1) have been designated as available-for-sale financial assets and as such have been fair valued using the discounted cash flow method.
Ü Valuation of financial instruments
In note 28 a detailed analysis is given of the foreign exchange exposure of the group and risks in relation to foreign exchange movements.
152
ALTRON ANNUAL REPORT 2006
Notes to the financial statements continued
2006R million
2005R million
35. PROCEEDS ON DISPOSAL OF SUBSIDIARIES AND JOINT VENTURE
Property, plant and equipment 8 —
Goodwill and intangible assets 148 —
Investments 311 —
Trade and other receivables 57 —
Trade and other payables (98) —
Provisions (3) —
Deferred tax and taxation 8 —
Net loans (78) —
Net cash 89 —
Minority interest (10) —
432 —
Profit on disposal 129 —
561 —
Less: cash disposed (89) —
Net proceeds on disposal 472 —
During the year the joint venture with Econet was disposed of comprising:
Joint venture – Econet Wireless Global 121Associate – Mascom Wireless Botswana (Pty) Ltd 226Econet Wireless Nigeria Investment 85Profit on disposal 129
561
2006R million
2005R million
34. ACQUISITION OF SUBSIDIARIES AND JOINT VENTURE
Property, plant and equipment (13) (114)
Intangibles – fair value adjustment (31) (32)
Investments — (272)
Inventories (14) (103)
Trade and other receivables (21) (294)
Trade and other payables 23 354
Provisions — 16
Taxation — 7
Deferred tax 1 (11)
Net loans 3 5
Net cash (4) 52
(56) (392)
Minority interest — 55
Costs — (2)
Shares issued in subsidiary — 45
Investment in associates eliminated 21 —
Goodwill paid (95) (639)
Cash paid (130) (933)
Less: cash acquired 4 (52)
(126) (985)
The following subsidiaries were acquired during the yearThe remaining 60,87% share in Digital Healthcare Solutions 85Nicor Printing Solutions 12Calidus 33
130
Results of subsidiaries acquired
From acquisition
Fullyear
Revenue 188 209
Profit after tax 22 25
153
2006R million
2005R million
36. PROCEEDS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
Carrying amount 39 68
Surplus on disposal 7 7
46 75
37. CHANGE FROM SUBSIDIARY TO ASSOCIATE
Property, plant and equipment — 2
Goodwill — 2
Inventories — 3
Trade and other receivables — 6
Trade and other payables — (1)
Taxation — (1)
Increase in investment in associate — (12)
Reductions in minority interest — (2)
Net cash and cash equivalents removed — (3)
2006R million
2005R million
38. OTHER INVESTING ACTIVITIES
Acquisition of additional shares in BTG (118) —
Proceeds on sale of investment in associate 17 —
Proceeds on disposal of partial investment in subsidiaries 11 46
Net increase in loans with associates and other investments (62) (1)
Treasury shares in Altech — (257)
Redemption of share in associate — (6)
(152) (218)
39. CHANGES IN MINORITY INTERESTS
Proceeds on shares issued in subsidiaries 18 —
Capital introduced by minority 5 —
23 —
154
ALTRON ANNUAL REPORT 2006
ASSOCIATES, OTHER INVESTMENTS AND JOINT VENTURES
Altron controlled interest
Investment at cost less amounts written off
Attributable share of retained income Indebtedness Total investment
2006%
2005%
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
ASSOCIATE COMPANIES
– UnlistedAeromaritime International Management Services (Pty) Limited 50.0 50.0 — — 4 3 — — 4 3 Fintech (Pty) Limited — 33.0 — — — 4 — 8 — 12 Digital Healthcare Solutions (Pty) Limited — 39.1 — — — 21 — — — 21 Mascom Wireless Botswana (Pty) Limited — 20.0 — 187 — 12 — — — 199 Alcon Marepha (Pty) Limited 49.0 49.0 1 1 3 2 6 11 10 14
1 188 7 42 6 19 14 249
Directors’ valuation based on a price-earnings ratio relevant to the market within which the associates operate. 23 282
Investments at fair value
Preference dividend receivable Indebtedness Total investment
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
OTHER INVESTMENTS
– UnlistedFintech Receivables 1 (Pty) Limited (preference share) 20 31 55 36 27 27 102 94Technologies Acceptances Receivables (Pty) Limited (preference share) 18 — 1 1 93 24 112 25 Econet Wireless Nigeria Limited — 85 — — — — 85
Total 38 116 56 37 120 51 214 204
Directors’ valuation based on the discounted cash flow method over a five- to seven-year period using discount rates of 13.5% to 15.4%. 214 204
The loan in Technology Acceptances Receivables earns interest at JIBAR plus 2.5%.The loan in Fintech Receivables 1 earns interest between 15% and 20%.The loans are repayable when cash is available in accordance with the priority of payments.
ALTRON-CONTROLLED INTEREST IN JOINT VENTURES
2006%
2005%
ABB Powertech Transformers 50.0 50.0Tridonic SA 50.0 50.0Econet Wireless Global — 50.1
Annexure 1
155
ASSOCIATES, OTHER INVESTMENTS AND JOINT VENTURES
Altron controlled interest
Investment at cost less amounts written off
Attributable share of retained income Indebtedness Total investment
2006%
2005%
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
ASSOCIATE COMPANIES
– UnlistedAeromaritime International Management Services (Pty) Limited 50.0 50.0 — — 4 3 — — 4 3 Fintech (Pty) Limited — 33.0 — — — 4 — 8 — 12 Digital Healthcare Solutions (Pty) Limited — 39.1 — — — 21 — — — 21 Mascom Wireless Botswana (Pty) Limited — 20.0 — 187 — 12 — — — 199 Alcon Marepha (Pty) Limited 49.0 49.0 1 1 3 2 6 11 10 14
1 188 7 42 6 19 14 249
Directors’ valuation based on a price-earnings ratio relevant to the market within which the associates operate. 23 282
Investments at fair value
Preference dividend receivable Indebtedness Total investment
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
OTHER INVESTMENTS
– UnlistedFintech Receivables 1 (Pty) Limited (preference share) 20 31 55 36 27 27 102 94Technologies Acceptances Receivables (Pty) Limited (preference share) 18 — 1 1 93 24 112 25 Econet Wireless Nigeria Limited — 85 — — — — 85
Total 38 116 56 37 120 51 214 204
Directors’ valuation based on the discounted cash flow method over a five- to seven-year period using discount rates of 13.5% to 15.4%. 214 204
The loan in Technology Acceptances Receivables earns interest at JIBAR plus 2.5%.The loan in Fintech Receivables 1 earns interest between 15% and 20%.The loans are repayable when cash is available in accordance with the priority of payments.
ALTRON-CONTROLLED INTEREST IN JOINT VENTURES
2006%
2005%
ABB Powertech Transformers 50.0 50.0Tridonic SA 50.0 50.0Econet Wireless Global — 50.1
156
ALTRON ANNUAL REPORT 2006
Annexure 1 continued
INFORMATION IN RESPECT OF INTEREST IN ASSOCIATES, JOINT VENTURES, FR1 AND TAR
Joint ventures Associates FR1 and TAR
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
Abridged balance sheets
Non-current assets 38 437 3 433 660 730 Net current assets/ (liabilities) (excluding liquid resources) 41 (9) 3 (90) (16) (31) Liquid resources 67 158 8 197 161 107 Long-term liabilities (3) (75) (6) (111) (750) (774)
Equity 143 511 8 429 55 32
Abridged income statements
Revenue 431 350 54 652 365 355 Expenditure (381) (302) (48) (518) (338) (330)
Income before taxation 50 48 6 134 27 25 Taxation (17) (16) (2) (39) (7) (7)
Income after taxation 33 32 4 95 20 18
157
Nature of businesses
Associates
Aeromaritime International Management Services
Provides services of clearing for both imports and exports, international forwarding on both seafreight
and airfreight, local and national freight distribution and cross-border roadfreight to neighbouring
countries in Africa.
Alcon Marepha
Manufacturers of medium-voltage power cable.
Fintech
An independent lease originator, underwriter and administrator of business equipment was sold during
the year.
Mascom Wireless Botswana
Mascom, a cellular operator in Botswana, was sold as part of the Econet disposal during the year.
Digital Healthcare Solutions
A provider of transaction switching services, practice management and informatics solutions, was fully
acquired during the year.
Joint ventures
ABB Powertech Transformers
Manufacturer of power and distribution transformers. ABB Powertech Transformers is a 50% joint venture
with ABB Sub-Sahara.
Tridonic SA
Distributor of lighting control gear. Tridonic SA is a 50% joint venture with Tridonic (Austria).
Econet Wireless Global
An international company with telecommunication interests in Africa, the United Kingdom and the
Asia Pacific region was sold during the year.
158
ALTRON ANNUAL REPORT 2006
SEGMENT INFORMATION – INCOME STATEMENT
Consolidated TelecommunicationsMulti-Media and
Electronics Information TechnologyCorporate and eliminations
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
BUSINESS SEGMENTATION
Revenue Goods sold 8 756 8 065 1 988 1 799 4 271 3 587 2 519 2 655 (22) 24 Services rendered 5 169 4 101 3 385 2 908 74 66 1 710 1 156 — (29) Rental finance income 44 40 — — — 4 30 23 14 13 Inter-segment revenue — — 14 6 57 66 11 1 (82) (73)
Total segment revenue 13 969 12 206 5 387 4 713 4 402 3 723 4 270 3 835 (90) (65) Expenditure (12 716) (11 051) (4 905) (4 322) (4 043) (3 422) (3 853) (3 383) 85 76 Depreciation and amortisation (213) (192) (33) (35) (83) (74) (96) (80) (1) (3)
Segment operating profit 1 040 963 449 356 276 227 321 372 (6) 8 Financial income 112 100 31 38 4 7 22 14 55 41 Financial expense (53) (62) (4) (4) (13) (11) (39) (22) 3 (25) Share of profit from associates 32 24 26 12 2 1 — 8 4 3
Profit before capital items and taxation 1 131 1 025 502 402 269 224 304 372 56 27
GEOGRAPHIC SEGMENTATION
Revenue by market 13 969 12 206 5 387 4 713 4 402 3 723 4 270 3 835 (90) (65)
South Africa 11 707 9 982 4 783 4 228 3 646 2 897 3 368 2 922 (90) (65) Rest of Africa 670 641 127 54 275 245 268 342 — — Europe 1 359 1 242 420 371 305 300 634 571 — — Rest of world 233 341 57 60 176 281 — — — —
Segment operating income by location 1 040 963 449 356 276 227 321 372 (6) 8
South Africa 987 933 435 343 263 220 295 362 (6) 8 Rest of Africa 29 22 8 1 13 12 8 9 — — Europe 22 5 6 12 (2) (8) 18 1 — — Rest of world 2 3 — — 2 3 — — — —
Segment revenues and expensesRevenues and expenses that are directly attributable to segments are allocated to those segments. Those that are not directly attributable to segments are allocated on a reasonable basis.Segment operating profit is stated before capital items.
Inter-segment transfersSegment revenue, segment expenses and segment results include transfers between business segments and between geographical segments.These transfers occur at market prices and are eliminated on consolidation.
Annexure 2
159
SEGMENT INFORMATION – INCOME STATEMENT
Consolidated TelecommunicationsMulti-Media and
Electronics Information TechnologyCorporate and eliminations
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
BUSINESS SEGMENTATION
Revenue Goods sold 8 756 8 065 1 988 1 799 4 271 3 587 2 519 2 655 (22) 24 Services rendered 5 169 4 101 3 385 2 908 74 66 1 710 1 156 — (29) Rental finance income 44 40 — — — 4 30 23 14 13 Inter-segment revenue — — 14 6 57 66 11 1 (82) (73)
Total segment revenue 13 969 12 206 5 387 4 713 4 402 3 723 4 270 3 835 (90) (65) Expenditure (12 716) (11 051) (4 905) (4 322) (4 043) (3 422) (3 853) (3 383) 85 76 Depreciation and amortisation (213) (192) (33) (35) (83) (74) (96) (80) (1) (3)
Segment operating profit 1 040 963 449 356 276 227 321 372 (6) 8 Financial income 112 100 31 38 4 7 22 14 55 41 Financial expense (53) (62) (4) (4) (13) (11) (39) (22) 3 (25) Share of profit from associates 32 24 26 12 2 1 — 8 4 3
Profit before capital items and taxation 1 131 1 025 502 402 269 224 304 372 56 27
GEOGRAPHIC SEGMENTATION
Revenue by market 13 969 12 206 5 387 4 713 4 402 3 723 4 270 3 835 (90) (65)
South Africa 11 707 9 982 4 783 4 228 3 646 2 897 3 368 2 922 (90) (65) Rest of Africa 670 641 127 54 275 245 268 342 — — Europe 1 359 1 242 420 371 305 300 634 571 — — Rest of world 233 341 57 60 176 281 — — — —
Segment operating income by location 1 040 963 449 356 276 227 321 372 (6) 8
South Africa 987 933 435 343 263 220 295 362 (6) 8 Rest of Africa 29 22 8 1 13 12 8 9 — — Europe 22 5 6 12 (2) (8) 18 1 — — Rest of world 2 3 — — 2 3 — — — —
Segment revenues and expensesRevenues and expenses that are directly attributable to segments are allocated to those segments. Those that are not directly attributable to segments are allocated on a reasonable basis.Segment operating profit is stated before capital items.
Inter-segment transfersSegment revenue, segment expenses and segment results include transfers between business segments and between geographical segments.These transfers occur at market prices and are eliminated on consolidation.
160
ALTRON ANNUAL REPORT 2006
SEGMENT INFORMATION – BALANCE SHEET
Consolidated TelecommunicationsMulti-Media and
Electronics Information TechnologyCorporate and eliminations
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
BUSINESS SEGMENTATION
ASSETS Property, plant and equipment 905 848 110 129 469 455 299 237 27 27 Intangible assets 773 925 21 128 21 — 731 797 — — Associates and other investments 228 453 — 284 11 15 53 23 164 131 Rental finance advances 90 75 — — — — 68 24 22 51 Inventories 1 295 1 158 147 187 898 742 250 229 — — Trade and other receivables 1 976 1 864 432 443 709 611 732 685 103 125
Operating assets 5 267 5 323 710 1 171 2 108 1 823 2 133 1 995 316 334
Deferred tax assets 118 112 Cash and cash equivalents 2 152 1 520
Total assets per balance sheet 7 537 6 955
LIABILITIES Trade and other payables 2 680 2 223 951 894 661 526 924 831 144 (28) Provisions 80 97 7 14 42 40 29 37 2 6
Non-interest-bearing liabilities 2 760 2 320 958 908 703 566 953 868 146 (22)
Non-current loans 297 716 Current loans 238 59 Taxation payable 187 164 Deferred tax liabilities 21 53
Total liabilities per balance sheet 3 503 3 312
GEOGRAPHIC SEGMENTATION
Operating assets 5 267 5 323 710 1 171 2 108 1 823 2 133 1 995 316 334
South Africa 4 671 4 423 463 507 1 948 1 691 1 944 1 891 316 334 Rest of Africa 121 33 — — — — 121 33 — — Europe 448 830 247 664 133 95 68 71 — — Rest of world 27 37 — — 27 37 — — — —
Non-interest-bearing liabilities 2 760 2 320 958 908 703 566 953 868 146 (22)
South Africa 2 402 1 947 811 718 636 488 809 763 146 (22) Rest of Africa 31 24 — — — — 31 24 — — Europe 320 304 147 190 60 33 113 81 — — Rest of world 7 45 — — 7 45 — — — —
Capital expenditure 315 333 28 26 101 113 178 172 8 22
South Africa 235 312 23 23 98 100 106 167 8 22 Rest of Africa 68 2 — 1 — — 68 1 — — Europe 11 11 5 2 2 5 4 4 — — Rest of world 1 8 — — 1 8 — — — —
Segment assets and liabilitiesSegment assets include all operating assets used by a segment and consist principally of operating receivables, inventories, investments and fixed assets net of related allowances and provisions. While most such assets can be directly attributable to individual segments, the carrying amount of certain
assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities, and consist principally of accounts, accruals and provisions.
Annexure 2 continued
161
SEGMENT INFORMATION – BALANCE SHEET
Consolidated TelecommunicationsMulti-Media and
Electronics Information TechnologyCorporate and eliminations
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
2006R million
2005R million
BUSINESS SEGMENTATION
ASSETS Property, plant and equipment 905 848 110 129 469 455 299 237 27 27 Intangible assets 773 925 21 128 21 — 731 797 — — Associates and other investments 228 453 — 284 11 15 53 23 164 131 Rental finance advances 90 75 — — — — 68 24 22 51 Inventories 1 295 1 158 147 187 898 742 250 229 — — Trade and other receivables 1 976 1 864 432 443 709 611 732 685 103 125
Operating assets 5 267 5 323 710 1 171 2 108 1 823 2 133 1 995 316 334
Deferred tax assets 118 112 Cash and cash equivalents 2 152 1 520
Total assets per balance sheet 7 537 6 955
LIABILITIES Trade and other payables 2 680 2 223 951 894 661 526 924 831 144 (28) Provisions 80 97 7 14 42 40 29 37 2 6
Non-interest-bearing liabilities 2 760 2 320 958 908 703 566 953 868 146 (22)
Non-current loans 297 716 Current loans 238 59 Taxation payable 187 164 Deferred tax liabilities 21 53
Total liabilities per balance sheet 3 503 3 312
GEOGRAPHIC SEGMENTATION
Operating assets 5 267 5 323 710 1 171 2 108 1 823 2 133 1 995 316 334
South Africa 4 671 4 423 463 507 1 948 1 691 1 944 1 891 316 334 Rest of Africa 121 33 — — — — 121 33 — — Europe 448 830 247 664 133 95 68 71 — — Rest of world 27 37 — — 27 37 — — — —
Non-interest-bearing liabilities 2 760 2 320 958 908 703 566 953 868 146 (22)
South Africa 2 402 1 947 811 718 636 488 809 763 146 (22) Rest of Africa 31 24 — — — — 31 24 — — Europe 320 304 147 190 60 33 113 81 — — Rest of world 7 45 — — 7 45 — — — —
Capital expenditure 315 333 28 26 101 113 178 172 8 22
South Africa 235 312 23 23 98 100 106 167 8 22 Rest of Africa 68 2 — 1 — — 68 1 — — Europe 11 11 5 2 2 5 4 4 — — Rest of world 1 8 — — 1 8 — — — —
Segment assets and liabilitiesSegment assets include all operating assets used by a segment and consist principally of operating receivables, inventories, investments and fixed assets net of related allowances and provisions. While most such assets can be directly attributable to individual segments, the carrying amount of certain
assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities, and consist principally of accounts, accruals and provisions.
162
ALTRON ANNUAL REPORT 2006
Annexure 3
TRANSITION TO IFRSAs stated in the accounting policies on page 115 these are the group’s first consolidated financial statements prepared in accordance with IFRS. In preparing the opening IFRS balance sheet the group has adjusted amounts previously reported under SA GAAP. Accounting policies adopted under IFRS have been applied consistently in preparing the financial statements for the year ended 28 February 2006, the comparative information for the year ended 28 February 2005 and the opening balance sheet on 1 March 2004.An explanation of how the transition has affected the group’s previously reported financial position and performance is set out in the following tables and notes. The cash flow statement was not affected by any of these adjustments.
Reconciliation of equity
Notes
At 28 Feb2005
R million
At 1 Mar2004
R million
Equity previously reported under SA GAAP 3 566 3 571 Impact of adopting IFRS and other adjustments 77 (8)
Equity reported under IFRS 3 643 3 563
Equity adjustmentsRetained earnings: Net reversal of goodwill amortised
and impaired 1 96 — Expensing of share-based payments 2 (2) — Foreign operations 3 3 — Property, plant and equipment 4 1 — Intangible assets (2) — Operating leases straight-line adjustment 5 (13) (9) Minorities’ share of adjustments (40) 4 Share-based payment reserve 1 —Foreign currency translation reserve (3) —Fair value reserve 6 26 42Treasury shares reclassified 8 16 16Premium/discount on minority equity transactions 8 (16) (16)Minorities’ shareholder loans reclassified (31) (41)Minorities’ share of adjustments 41 (4)
77 (8)
Assets and liabilities adjustmentsProperty, plant and equipment 1 —Intangible assets and goodwill 94 —Associates and other investments 30 49Deferred tax (1) (5)Non-current loans (31) (41)Accounts payable (16) (11)
77 (8)
163
Reconciliation of profit for the year ended 28 February 2005
NotesAs reported
previouslyEffect
of IFRSIFRS
restated
Operating profit before capital items 2, 3, 4, 5 968 (5) 963 Financial income 100 — 100 Financial expense (62) — (62)Profit from associates 24 — 24 Goodwill amortised and impaired 1 (300) 96 (204)Capital items 114 — 114
Profit before taxation 844 91 935 Taxation (340) 1 (339)
Profit for the period 504 92 596
Attributable to:Altron shareholders 400 48 448 Minority shareholders 104 44 148
504 92 596
EPS 145 17 162 HEPS 161 1 162
NOTES SUPPORTING THE IFRS ADJUSTMENTS
1. Goodwill
All business combinations are accounted for by applying the “purchase method”. Goodwill represents amounts arising on acquisition of subsidiaries and associates. In respect of business combinations that have occurred since the IFRS transition date, 1 March 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets and contingent liabilities acquired.
The group made an election in terms of IFRS 1 that in respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under SA GAAP on 1 March 2004. The classification and accounting treatment of business combinations that occurred prior to 1 March 2004 has not been reconsidered in preparing the groups opening IFRS balance sheet at 1 March 2004.
From 1 March 2004 goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is no longer amortised but tested annually for impairment. Previously goodwill arising on each acquisition was amortised over its useful life on a straight-line basis and subjected to annual impairment testing.
2. Share-based payments
The fair value of share options and deferred delivery shares granted to employees is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and expensed over the period during which the employees are required to provide services in order to become unconditionally entitled to the equity instruments. The fair value of the instruments granted is
164
ALTRON ANNUAL REPORT 2006
Annexure 3 continued
measured using generally accepted valuation techniques, taking into account the terms and conditions upon which the instruments are granted. This accounting policy has been applied to all equity instruments granted after 7 November 2002 that had not yet vested at 1 January 2005. The fair value of share-based payments was not recognised under the group’s previous accounting policies.
3. Foreign operations
The assets and liabilities of all foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to rands at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to rands at rates approximating the foreign exchange rates ruling at the date of the transactions. Foreign exchange differences arising on translation are recognised directly in a separate component of equity – foreign currency translation reserve. The foreign currency translation reserve applicable to a foreign operation is released to the income statement upon disposal of that foreign operation. The functional currencies of all entities in the group have also been reconsidered. Previously, the non-monetary assets and liabilities of all foreign subsidiaries considered to be integrated foreign operations were translated at historic exchange rates, and the foreign exchange gains and losses arising on translation of monetary assets and liabilities were recognised in operating income.
4. Intangible assets
Intangible assets other than goodwill that are acquired by the group are stated at cost less accumulated amortisation and impairment losses.
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life are tested annually for impairment.
Other intangible assets are amortised from the date they are available for use. Currently the estimated useful lives are as follows:
Ü Patents and trademarks 5 years
Ü Distribution rights indefinite life
Previously distribution rights were included with goodwill and not separately identified on the balance sheet and amortisation charged to the income statement as part of goodwill amortisation on a straight-line basis over the useful life of the intangible asset.
5. Straight-lining of operating leases
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.
Past practice, whereby operating lease payments were expensed on a payments basis, was based on an interpretation that was generally accepted in the South African financial reporting community. This interpretation considered the contractual-payments basis as being most representative of the time pattern of the entity’s benefit obtained from the leased property. The global spotlight has led to the view that the entity is obliged to adopt the straight-line basis of accounting for all lease payments. The adjustment has been made as required by IAS 8 – Accounting Policies, changes in accounting estimates and errors with the necessary restatement of comparative figures.
165
6. Designation and fair valuing of available-for-sale investments
Available-for-sale investments are non-derivative financial assets other than:
(a) those that the group upon initial recognition designates as at fair value through profit or loss;
(b) held to maturity assets; and
(c) those that meet the definition of loans and receivables.
Gains or losses from fair valuing these available-for-sale investments are recognised directly in equity. The investments in Fintech Receivables One and Technologies Acceptances Receivables meet this criteria and as such have been designated as available-for-sale assets and are measured at fair value. The comparative figures have been restated.
7. Black Economic Empowerment (BEE) transactions
Where goods or services are considered to have been received from BEE partners as consideration for equity instruments of the group, these transactions are accounted for as share-based payment transactions, even when the entity cannot specifically identify the goods or services received. This accounting policy is applicable to equity instruments that had not vested by 1 January 2005 and consequently had no impact on the group.
8. Premiums and discounts arising on subsequent purchases from, or sales to, minorities
Any increase or decrease in ownership interests in subsidiaries without a change in control are recognised as equity transactions in the consolidated financial statements.
Accordingly, any premium or discount on subsequent purchases or sales of equity instruments from or to minority interests are recognised directly in the equity of the parent shareholder.
Previously premiums on subsequent sales of equity instruments to minorities were taken to profit as a capital item in the income statement and premiums on subsequent purchases of equity instruments were classified as goodwill.
9. Reclassification of finance lease receivables and payables
Previously certain finance lease receivables and payables were offset. These have been grossed up and reported separately as the criteria for offset are no longer considered applicable. The effect of the reclassification at 28 February 2005 is as follows:
Assets
Decrease in rental finance advances (31)
Increase in accounts receivable (short-term portion of rental finance advances) 84
53
Liabilities
Increase in non-current loans 24
Increase in current loans 29
53
166
ALLIED ELECTRONICS CORPORATION LIMITED ANNUAL REPORT 2006
COMPANY
Notes2006
R000’s2005
R000’s
ASSETS
Non-current assets 1 015 223 896 565
Property 2 50 50 Investment in subsidiaries 3 1 015 173 896 515
Current assets 356 673 455 426
Receivables 11 — Amounts receivable from subsidiary 3 356 565 455 357 Cash at bank 97 69
Total assets 1 371 896 1 351 991
EQUITY AND LIABILITIES
Shareholders’ equity 4 1 371 366 1 351 559
Current liabilities 530 432
Accounts payable 507 409 Taxation payable 23 23
Total equity and liabilities 1 371 896 1 351 991
Balance sheet at 28 February 2006
167
Statement of changes in equity for the year ended 28 February 2006
COMPANY
R000’s
Ordinary share capital
Preferenceshare
capitalShare
premiumRetained earnings
Totalequity
Balance as at 29 February 2004 1 943 20 787 885 414 575 1 204 423 Profit after taxation — — — 287 732 287 732 Dividends paid — — — (157 556) (157 556)Share issue — 1 16 959 — 16 960
Balance as at 28 February 2005 1 943 21 804 844 544 751 1 351 559 Profit after taxation — — — 192 767 192 767 Dividends paid — — — (193 187) (193 187)Share issue — — 20 227 — 20 227
Balance as at 28 February 2006 1 943 21 825 071 544 331 1 371 366
COMPANY
2006R000’s
2005R000’s
Operating expenditure (428) (153)Dividends received from subsidiaries 193 195 287 831 Gain on disposal of property — 77
Profit before taxation 192 767 287 755 Taxation — (23)
Profit after taxation 192 767 287 732
Income statementfor the year ended 28 February 2006
168
ALLIED ELECTRONICS CORPORATION LIMITED ANNUAL REPORT 2006
COMPANY
Notes2006
R000’s2005
R000’s
Cash flows from operating activities 98 459 (7 437)
Cash utilised by operations (428) (153)Dividends received 193 195 287 831 Taxation paid 5 — — Changes in working capital 87 2 776 Movement of loan with subsidiary 98 792 (140 335)
Cash available from operating activities 291 646 150 119 Dividends paid (193 187) (157 556)
Cash flows from investing activities (118 658) (9 509)
Proceeds on disposal of property 6 — 180 Increase of investment in subsidiaries (118 658) (9 689)
Cash flows from financing activities
Shares issued 20 227 16 960
Cash resourcesNet increase in cash 28 14 Cash and cash equivalents – at beginning of year 69 55
– at end of year 97 69
Cash flow statementfor the year ended 28 February 2006
169Notes to the financial statementsfor the year ended 28 February 2006
COMPANY
2006R000’s
2005R000’s
1. ACCOUNTING POLICIES
Please refer to the group accounting policies on pages 115 to 125
2. PROPERTY
Balance at beginning of year 50 153
Disposals — (103)
Balance at end of year 50 50
3. INTEREST IN SUBSIDIARIES
Issued capital Effective holding
Shares at cost less amounts written off Indebtedness
Rm2006
%2005
%2006
R000’s2005
R000’s2006
R000’s2005
R000’s
Allied Technologies Limited (Altech) 62 57 58 48 541 48 541 — —
Bytes Technology Group Limited (BTG) 716 57 52 595 017 476 359 — —
Power Technologies (Pty) Limited (Powertech) 411 100 100 249 869 249 869 — —
Altron Finance (Pty) Limited – ordinary shares — 100 100 235 235 356 565 455 357
Altron Finance (Pty) Limited – preference shares 80 — — 121 509 121 509 — —
Other 3 100 100 2 2 — —
1 015 173 896 515 356 565 455 357
Notes: The above details are given in respect of interest in subsidiaries, where material. A full list of South African subsidiaries is available on request, at the registered office of the company.
All subsidiaries are incorporated in South Africa.
170
ALLIED ELECTRONICS CORPORATION LIMITED ANNUAL REPORT 2006
COMPANY
2006R000’s
2005R000’s
4. SHARE CAPITAL AND PREMIUM
Please refer to the group note 9 on page 135
5. TAXATION PAID
Amounts unpaid at beginning of year 23 —
Charged to the income statement — 23
Amounts unpaid at end of year (23) (23)
— —
6. PROCEEDS ON DISPOSAL OF PROPERTY
Carrying amount — 103
Surplus on disposal — 77
— 180
7. RELATED PARTIES
The company has a related party relationship with its subsidiaries (see note 3)
DividendsThe company received dividends from subsidiaries 193 195 287 831
ShareholdersThe principal shareholders of the company are detailed in the Analysis of shareholders on page 86 of the annual report.
Notes to the financial statements continued
171GRI content index
GRI benchmark Page Comment
GENERAL PERFORMANCE INDICATORS
1.1 Mission statement 2
1.2 Chief executive’s report 16, 48 Chief Executive’s review
2.1 Name of organisation Cover
2.2 Major products and services IFC Operational reviews
2.3 Operational structure 6 Group structure
2.4 Description of operating
companies’ business
28 – 43 Operational reviews
2.6 Nature of ownership 82 – 86 Shareholders
2.10 Contact information 197 Corporate administration
2.11 Reporting period 108 – 170 Annual Financial Statements
2.12 Date of most recent
previous report
2005 annual report
2.13 Boundaries of report Predominantly South Africa
2.14 Significant changes in size,
structure, ownership
or products/services that
have occurred since the
previous report
27
28 – 43
Chief Executive’s review,
Operational reviews
2.15 Basis for reporting 16 – 27
108 – 170
Chief Executive’s review;
Annual financial statements
2.16 Explanation of the nature
and effect of any
restatement
108 – 170 Annual Financial Statements
2.17 Decisions not to apply GRI
principles or protocols
Not applicable
2.18 Criteria/definitions 108 – 170 Annual Financial Statements
2.19 Significant changes in
measurement
Not applicable
ALTRON • 4TH PROOF
172
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GRI content index continued
GRI benchmark Page Comment
2.20/
2.21
Policies and internal
practices to enhance and
provide assurance about the
accuracy, completeness and
reliability of the
sustainability report
Policies available on request
2.22 Additional information and
reports on sustainability
Corporate Communications
3.1 Governance structure 89 – 101 Corporate governance
3.2 Percentage board of
directors that are
independent non-executives
89 – 101
184 – 187
Corporate governance
Directorate profile
3.3 Board member expertise 184 – 187 Directorate profile
3.4 Board level processes 89 – 101 Corporate governance
3.5 Link between executive
compensation and
objectives
102 – 107 Remuneration Report
3.6 Organisational structure and
key responsibilities
8 – 9
93
Executive committee
Corporate governance
3.7 Mission statement and code
of conduct
46 Sustainability Report
3.8 Mechanisms for
shareholders to provide
comment
98 Annual general meetings
Direct communication to the group
3.9 Major stakeholders 44 – 88 Sustainability Report
3.10 Stakeholder consultation 44 – 88
189
Sustainability Report
Annual general meetings
3.11 Stakeholder information 98
44 – 88
Corporate governance
Annual report; Interim report
Sustainability Report
3.12 Use of stakeholder
information
Annual report; Interim report
173
GRI benchmark Page Comment
3.13 Precautionary approach Not applicable
3.14 Economic, environment and
social charters
44 – 88 Sustainability Report
3.15 Industry and business
associations
28 – 43 Operational reviews
3.16 Policies/systems to manage
upstream and downstream
impacts
44 –88 Sustainability Report
3.17 Approach to manage
impacts
78 – 81 Sustainability Report – Environment
3.18 Decisions regarding
locations and change in
operations
28 – 43 Operational reviews
3.19 Programmes and procedures
relating to economic and
environmental performance:
– priority and target setting 44 –88 Sustainability Report
– major programmes to
improve performance
16 – 27 Chief Executive’s review
– internal communication
and training
62 Sustainability Report
– performance monitoring 44 – 88 Sustainability Report
– internal and external
auditing
95 – 97 Corporate governance – risk
management
– senior management
review
16 – 27
92, 111
Chief Executive’s review, Corporate
governance, Directors’ Report
3.20 Certification status 50, 76 Sustainability Report
174
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ECONOMIC PERFORMANCE INDICATORS
EC1 Revenue 127 Income statement
EC2 Geographic break-down of
markets
158 – 161 Segment information
EC3 Cost of goods 131 Notes to financial statements
EC4 Percentage of contracts paid
in accordance with terms
Not measured
EC5 Employment costs 51 Value-added statement
EC6 Distributions to providers
of capital
51
131
Value-added statement
Notes to financial statements
EC7 Increase/decrease in
retained earnings
128 Statement of changes in equity
EC8 Taxes paid 51 Notes to financial statements
EC9 Subsidies received Not disclosed
EC10 Donations to communities 56 – 61 Sustainability Report
EC11 Supplier breakdown Not disclosed
EC12 Total spend on non-core
infrastructure
Not disclosed
EC13 Organisation’s direct
economic impact
Not disclosed
175
GRI benchmark Page Comment
EN1 Total material use, other
than water
EN2 Percentage of materials
used that are wastes from
sources external to the
reporting organisation
EN3 Direct energy use
EN4 Indirect energy use
EN5 Total water use
EN6 Location and size of land
owned, leased or managed
in biodiversity rich habitats
EN7 Description of the major
impacts on biodiversity
EN8 Greenhouse gas emissions
EN9 Use and emissions of ozone-
depleting substances
Limited impact – certain operations
are ISO compliant, – see
Sustainability Report pages 73 – 81
EN10 Significant air emissions by
type
EN11 Total amount of waste by
type and destination
EN12 Significant discharges to
water by type
EN13 Significant spills of
chemicals, oils and fuels
EN14 Significant environmental
impacts of principal products
and services
EN15 Percentage of weight of
products sold that is
reclaimable versus the
percentage that is actually
reclaimed
176
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GRI content index continued
GRI benchmark Page Comment
EN16 Incidents of and fines for
non-compliance associated
with environmental issues
73 Sustainability Report
EN17 Initiatives to use renewable
energy sources
n/a
EN18 Energy consumption
footprint of major products
73 – 81 Sustainability Report
EN19 Other direct (upstream/
downstream) energy use
and implications
n/a
EN20 Water sources and related
ecosystems/habitats
significantly affected by use
of water
*
EN21 Annual withdrawals of
ground and surface water
*
EN22 Total recycling and re-use of
water
*
EN23 Total amount of land
owned, leased or managed
for production activities or
extractive use
*
EN24 Amount of impermeable
surface as a percentage of
land purchased or leased
*
EN25 Impacts of activities on
protected and sensitive areas
n/a
EN26 Changes to natural habitats n/a
EN27 Strategies for protecting and
restoring native ecosystems
and species in degraded
areas
n/a
*Under development
n/a Not applicable
177
GRI benchmark Page Comment
EN28 Number of IUCN Red List
species with habitats in
areas affected by operations
n/a
EN29 Business units currently
operating or planning
operations in or around
protected or sensitive areas
n/a
EN30 Other relevant indirect
greenhouse gas emissions
*
EN31 All production, transport,
import or export of any
waste deemed hazardous
under the terms of the
Basel Convention
n/a
EN32 Water sources and related
ecosystems/Habitats
significantly affected by
discharges of water and
runoff
*
EN33 Performance of suppliers
relative to environmental
components or programmes
and procedures
not measured
EN34 Significant environmental
impacts of transportation
used for logistical purposes
*
EN35 Total environment
expenditure by type
*
*Under development
n/a Not applicable
178
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SOCIAL PERFORMANCE INDICATORS
Labour practices
LA1 Breakdown of workforce 63 Sustainability Report
LA2 Employment creation and
average revenue
51 Value-added statement
LA3 Trade Union representation 99 Corporate governance
LA4 Policy and procedures
involving information,
consultation and negotiation
with employees over
changes in the reporting
organisation’s operations
99 Corporate governance
LA5 Occupational accidents and
diseases
73 Sustainability Report – SHE
LA6 Health and Safety
Committees
74 Sustainability Report – SHE
LA7 Injury, lost days and
absentee rates
*
LA8 HIV/Aids policies or
programmes
67 Sustainability Report
LA9 Training per employee level,
gender and ethnic split
*
LA10 Equal opportunity policies or
programmes and the
monitoring thereof
64
100
Sustainability Report
Corporate governance
LA11 Composition of senior
management and corporate
governance bodies
89 – 101 Corporate governance
LA12 Employee benefits beyond
those legally mandated
Not disclosed
LA13 Provision for formal worker
representation in decision-
making
99 Corporate governance
*Under development
179
GRI benchmark Page Comment
LA14 Compliance with the ILO
guidelines for occupational
health management systems
73 – 81 Sustainability Report – SHE
LA15 Formal agreements with
trade unions covering health
and safety at work and
proportion of workforce
covered by such agreements
96 – 97 Corporate governance
LA16 Programmes to support the
continued employability of
employees and to manage
career developments
62 – 66
100
Sustainability Report
Corporate governance
LA17 Policies and programmes for
skills management
62 – 66
100
Sustainability Report
Corporate governance
Human rights
HR1 Policies, guidelines,
corporate structure and
procedures to deal with all
aspects of human rights
99 Corporate governance
HR2 Evidence of consideration of
human rights impacts as
part of investment and
procurement
47 Corporate code of conduct
HR3 Policies and procedures to
evaluate and address
human rights performance
within the supply chain and
contractors
47 Corporate code of conduct
HR4 Global policy procedures/
programmes preventing all
forms of discrimination in
operations
100 Corporate governance
*Under development
180
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GRI benchmark Page Comment
HR5 Freedom of association
policy
99 Corporate governance statement
HR6 Child labour policy
HR7 Forced and compulsory
labour policy
HR8 Employee training on
policies and practices
concerning all aspects of
human rights relevant to
operations
HR9 Appeal practices
HR10 Non-retaliation policy and
employee grievance system
HR11 Human rights training for
security personnel
Human rights are recognised
and observed in all of Altron’s
internal policies
HR12 Description of policies,
guidelines and procedures
to address the needs of
indigenous people
HR13 Description of jointly
managed community
grievance mechanisms/
authority
HR14 Share of operating revenues
from the area of operations
that are redistributed to
local communities
Society
SO1 Policies to manage impacts
on communities
56 – 61 Sustainability Report
SO2 Policy/procedures for
addressing bribery and
corruption
47
97
Corporate code of conduct
Corporate governance
181
GRI benchmark Page Comment
SO3 Description of policy,
procedures/management
systems for managing
political lobbying and
contributions
Government, regulatory authority
SO4 Awards received 49 Chief Executive’s review
SO5 Money paid to political
parties
47 Corporate code of conduct
Articles of association
SO6 Court decisions regarding
cases pertaining to anti-trust
and monopoly regulations
No court cases instituted against
Altron
SO7 Policies/procedures for
preventing anti-competitive
behaviour
Procedures are in place at the
operating company level
Product responsibility
PR1 Policy for preserving
customer health and safety
during use of products and
services
PR2 Policy/procedures related to
product information and
labelling
PR3 Policy/procedures relating
to consumer privacy
Internal policies are in place at the
operating company level
PR4 Non-compliance with
customer health and safety
regulations
PR5 Complaints upheld by
regarding the health and
safety of products and
services
182
ALTRON ANNUAL REPORT 2006
GRI content index continued
GRI benchmark Page Comment
PR6 Voluntary code compliance,
product labels or awards
with respect to social and
environmental responsibility
PR7 Non-compliance concerning
product information and
labelling
PR8 Policies/procedures and
mechanisms related to
customer satisfaction
Internal policies are in place at the
operating company level
PR9 Policies/procedures for
adherence to standards and
voluntary codes related to
advertising
PR10 Breaches of advertising and
marketing regulations
PR11 Complaints regarding
breaches of consumer
privacy
Corporate social responsibility management
CSR1 Social elements of CSR
policy
56 – 61 Sustainability Report
CSR2 Structure and relevant CSR
responsibilities
56 – 61 Sustainability Report
CSR3 CSR audit *
CSR4 Procedures for handling
issues sensitive to
stakeholders
98 Corporate governance
CSR5 Non-compliance incidents
with any law or regulatory
code of conduct
95 Corporate governance – risk
management
CSR6 Stakeholder dialogue and
involvement procedures
98 Corporate governance
*Under development
183
GRI benchmark Page Comment
Internal social performance
INT1 Social responsibility issues
covered in the human
resources policies
59 Sustainability Report
INT2 Staff turnover 63 Corporate governance –
Employment Equity/Workforce
profile
INT3 Employee satisfaction *
INT4 Remuneration of senior
management and board of
directors
102 – 107 Remuneration Report
INT5 Bonuses that contain
additional sustainability
elements
Not applicable
INT6 Ratio of female to male
salaries, including bonuses,
per hierarchy level
*
INT7 Employee profile per
hierarchy level
*
Performance to society
SOC1 Contributions to charitable
causes, community
investments and commercial
sponsorships
56 – 61 Sustainability Report
SOC2 Economic value added 51 Sustainability Report
Value-added statement
Suppliers
SUP1 Policies/procedures to
screen suppliers’ social
performance
52 – 55 BBBEE – Sustainability Report
SUP2 Supplier satisfaction *
*Under development
184
ALTRON ANNUAL REPORT 2006
Directorate profile
Date of birth: 29 July 1934
Qualifications: CEng; Fellow IEE (UK); MBA (Wales); MPhil (Bus Man) (UJ – Cum laude); DCom (hc) (UP, UFS and UPE); DSc (Eng) (hc) (Natal); DEng (hc) (Wits)
A UK Chartered Engineer and founder of Altron, through Allied Electric in 1965 and recipient of the Order of Meritorious Service (Gold), as awarded by the State President of South Africa for his significant contribution to South Africa’s electronics industry.
Titles: Ü Chairman of Altron and BTG
Ü Director of Altech, BTG and Powertech. Former Chairman of the CSIR, and past Director of AMIC Limited and Nedcor Bank Limited
Ü Member of the Altron Nomination Committee and Remuneration Committee
Experience: Some 41 years devoted to entrepreneurial endeavours and initiatives in the electronics, telecommunications and power electrical industries, both in South Africa and offshore, firstly as design engineer then marketing manager at STC (SA) and thereafter Chief Executive and latterly as Chairman of the Altron group. Dr Venter has played an important role in developing the South African electronics and electrical industry into the key component of the national economy that it is today. He is a trustee of the Nelson Mandela Children’s Fund and a member of its Finance Committee.
Date of birth: 7 May 1960
Qualifications: BSc (Econ) (UCLA); MBA (UCLA) Dean’s List
Titles: Ü Chief Executive of Altron
Ü Director of Altech, BTG, Powertech, Zetex plc (formerly Telemetrix plc) and various other group companies
Ü Chairman of Aberdare Cables
Ü Chairman of the Altron Executive Committee
Ü Member of the Altron Risk Management Committee
Experience: Four years’ merchant banking experience in the United States, the latter part as Vice-President, Bear Stearns and Co. Inc (1987 to 1990). Sixteen years’ experience in senior management positions in the Altron group (1990 to current).
Date of birth: 30 May 1949
Titles: Ü Non-executive Director of Altron Ü Chairman of Voltex Holdings and Non-executive Director of Amap Ü Executive Director of the Bidvest Group and numerous subsidiaries thereof Ü Member of the Altron Nomination Committee and Remuneration Committee
Experience: 35 years’ experience in the cable manufacturing industry. 14 years’ experience in the electrical distribution industry.
DR WP (BILL) VENTER omsg
RE (ROBERT) VENTER
MC (MYRON) BERZACK
185
Date of birth: 10 December 1960
Qualifications: BEng (Stellenbosch); MEng (UP); MBA (UCT); PrEng (ECSA)
Titles: Ü Executive Director of Altron
Ü Chief Executive Officer of Powertech
Ü Director of ABB Powertech Transformers, Aberdare Cables and Powertech Industries
Ü Member of the Altron Executive committee and Risk Management Committee
Experience: Norbert joined the Altron group in 1996 as the Chief Executive Officer of Willard Batteries which expanded over five years to become the Powertech Battery Group, comprising Willard Batteries, Dynamic Batteries, SABAT Batteries and Battery Technologies.
In March 2001 Norbert was appointed Chief Executive Officer of Powertech. Since 1989, he has been a registered professional engineer with the Engineering Council of South Africa.
Date of birth: 19 May 1946
Qualifications: MA (Oxon)
Titles: Ü Executive Director of Altron
Ü Executive Director of Altech: Corporate Finance
Ü Member of the Altron Executive Committee
Experience: 36 years in merchant banking/corporate finance activities in South Africa and internationally.
Re-joined the Altron group in 1997, having previously served the group in a senior executive capacity from 1979 to 1986.
Date of birth: 4 August 1950
Qualifications: BCom (Wits); MBA (Wits); PPL (Harvard)
Titles: Ü Independent Non-executive Director of Altron
Ü Chief Executive Officer and Deputy Chairman of Massmart Holdings Limited
Ü Member of the Altron Audit Committee
Experience: In 1988 Mark was appointed Managing Director of Makro. With the successfully repositioned Makro as a base, he founded Massmart in 1990 as a vehicle for multi-chain growth in food, liquor and general merchandise distribution. Massmart was listed on the JSE Limited on 4 July 2000. In 1984, Mark won the IMM Raymond Ackerman Marketing Director of the Year award. In 2001 he was the winner of the Ernst & Young South Africa’s Best Entrepreneur award and was one of 22 finalists in the 2001 Ernst & Young World Entrepreneur competition. Mark was also the 2001 winner of the Institute of Marketing Management’s Marketer of the Year award and in 2004 was named the Italian – South African Businessman of the Year by the Italian South African Chamber of Commerce.
Date of birth: 26 October 1943
Qualifications: BCom (Rhodes); MCom (Wits); FIBSA (Wits); FCMA; AMP (Harvard)
Titles: Ü Independent Non-executive Director of Altron
Ü Chairman of the Altron Risk Management Committee
Ü Member of the Altron Audit Committee and Nomination Committee
Experience: Retired banker. Director of companies.
N (NORBERT) CLAUSSEN
PMO (PETER) CURLE
MJ (MARK) LAMBERTI
MJ (MIKE) LEEMING
186
ALTRON ANNUAL REPORT 2006
Directorate profile continued
Date of birth: 29 December 1952
Qualifications: Bluris (Unisa); LLB (Zimbabwe); LLM (Wits); HDIP Tax Law (Wits); LLD (Unisa)
Titles: Ü Independent Non-executive Director of Altron
Ü Chairman of the Altron Nomination Committee
Experience: Former Deputy Minister of the Department of Home Affairs (1994 to 1996) and former Minister of the Departments of Minerals and Energy (1996 to 1999) and Justice and Constitutional Development (1999 to 2004). Attorney, notary and conveyancer. Visiting Scholar of Constitutional Law at Columbia University Law School (New York). Founder member of the ANC’s Constitutional Committee. Currently an active partner at Bowman Gilfillan Attorneys as well as a member of the Executive Committee at Bowman Gilfillan Attorneys and a senior special advisor of Sasol Limited. Date of birth: 9 September 1966
Qualifications: BCom (Wits); BAcc (Wits); CA(SA); MBA (Wits); AMP (Samford); AMP (Harvard)
Titles: Ü Independent Non-executive Director of Altron Ü Member of the Altron Audit Committee Ü Chairman of the Altron Remuneration Committee Ü Executive Chairman of Batsomi Investments (Pty) Limited
Experience: Past Chief Operating Officer of Johnnic Holdings Ltd. Prior to that he held various senior financial executive positions at Eskom, Teljoy and JCI. Qualified as a Chartered Accountant while serving his articles at Deloitte & Touche.
Current board member of Blue IQ Holdings Limited and Eskom Holdings Limited and finance and audit committee of the Development Bank of South Africa. Serves on the Advisory Board of the Nelson Mandela Children’s Fund. Member of the South African Institute of Chartered Accountants and Association of Black Accountants of South Africa.
Previous board memberships include MTN, M-Net.
Date of birth: 26 September 1962
Qualifications: BProc (Wits); LLB (Wits)
Titles: Ü Independent Non-executive Director of Altron
Ü Chief Executive Officer of the SABC
Ü Member of the Altron Risk Management Committee
Experience: Former acting judge in the Labour Court of South Africa. Director of Deutsche Securities. National executive member of the National Association of Democratic Lawyers. Member of the Johannesburg Bar Council. President of the Electronics Industry Federation. Member of Council of the University of Johannesburg.
Date of birth: 7 February 1966
Qualifications: BComm (Rhodes); BCompt (Hons) (Unisa); CA(SA); MBA (Wits)
Titles: Ü Chief Financial Officer of Altron Ü Director of Altech, BTG and Powertech Ü Member of the Altron Executive Committee and Risk Management Committee Ü Chairman of the Powertech Audit Committee
Experience: Some 15 years as an accounting professional and was the former Partner-in-charge: Transaction Services at PricewaterhouseCoopers in South Africa.
Currently serves as an Independent Non-executive Director on the board of Omnia Holdings Limited and chairman of their Audit Committee.
DC (DALI) MPOFU
DR PM (PENUELL) MADUNA
JRD (JACOB) MODISE
DC (DIANE) RADLEY
187
Date of birth: 29 January 1942
Qualifications: BA (Hons) (Birmingham); ACMA
Titles: Ü Executive Director of Altron Ü Chief Executive Officer of BTG Ü Executive Chairman BTG SA Ü Member of the Altron Executive Committee and Risk Management Committee
Experience: 41 years in senior financial and general management positions.
Date of birth: 12 October 1938
Qualifications: MB BCh (Wits); MD (Rand); FCRP (Canada); FACP (USA); PhD (Economics) (hc) (UFS)
Titles: Ü Senior Altron Executive Director Ü Director of Altech, Altech Autopage Holdings, BTG, and Bytes Specialised Solutions Ü Chairman of the Altron Group Purchasing and Export Councils Ü Member of the Altron Risk Management Committee Ü Trustee of the State President Empowerment Award Programme and of the Duke of
Edinburgh Trust
Experience: 24 years in the electronics industry with the Altron group.
Date of birth: 4 July 1962
Qualifications: BSc (Econ) (UCLA); BA (Psychology) (UCLA); MBA (USC); MSc (Mgmt Science) (USC)
Titles: Ü Executive Director of Altron
Ü Chief Executive Officer of Altech
Ü Director of Altech Netstar, Altech Autopage Cellular and various other wholly-owned subsidiaries
Ü Chairman of Altech Autopage Holdings; Arrow Altech Holdings, Altech Alcom Matomo, Altech UEC Multi-Media and Altech NamITech
Ü Member of the Altron Executive Committee and Risk Management Committee
Experience: 17 years in senior management positions in the Altech group.
Date of birth: 13 March 1940
Qualifications: CA(SA)
Titles: Ü Independent Non-executive Director of Altron, Director of Altech and BTG
Ü Chairman of the Altron Audit Committee
Ü Member of the Altron Remuneration Committee and Risk Management Committee
Experience: Former Chairman of Deloitte & Touche and past president of the South African Institute of Chartered Accountants having spent over 40 years in the accounting and auditing profession. Director of companies.
PD (DAVID) REDSHAW
DR HA (HAROLD) SEREBRO
CG (CRAIG) VENTER
PL (PETER) WILMOT
188
ALTRON ANNUAL REPORT 2006
Letter from the chairman
Altron House
4 Sherborne Road
Parktown
2193
31 May 2006
Dear Shareholder
Re: ALLIED ELECTRONICS CORPORATION LIMITED (“Altron”):
ANNUAL GENERAL MEETING
On behalf of the board of directors of Altron, I have pleasure in extending an invitation to you to attend
Altron’s annual general meeting, which will be held on Friday, 14 July 2006 at 09:30 in the Boardroom,
Altech Corporate Offices, 79 Central Street, Houghton. If you are unable to attend, please arrange to vote
by proxy in accordance with the instructions on the proxy form.
The board recognises the importance of its shareholders’ presence at the annual general meeting. This is
an opportunity for shareholders to participate in discussion relating to items included in the notice of
meeting. In addition, the chairmen of board-appointed committees as well as senior members of
management will be present to respond to questions from shareholders.
The notice of meeting, which is set out on pages 189 to 193 of the annual report, is accompanied by
explanatory notes setting out the effects of all proposed resolutions included in the notice.
I look forward to your presence at the meeting.
Yours faithfully
Dr WP Venter (Chairman)
189
Notice is hereby given that the sixtieth
annual general meeting of the shareholders
of Altron will be held in the Boardroom,
Altech Corporate Offices, 79 Central Street,
Houghton, Johannesburg on Friday, 14 July
2006 at 09:30 to conduct the following
business:
1. To receive, consider and adopt the annual
financial statements of the company and
of the Altron group for the year ended
28 February 2006.
2. To re-elect by way of separate
resolutions directors in the place of those
retiring in accordance with the company’s
articles of association. The directors
retiring are:
Messrs N Claussen, MJ Lamberti,
RE Venter, PMO Curle, DC Mpofu and
Ms DC Radley, all of whom being eligible
offer themselves for re-election.
An abbreviated curriculum vitae in respect
of each director offering himself for re-
election is contained on pages 184 to 187
of this annual report.
3. To ratify the remuneration paid to non-
executive directors during the past
financial year.
4. To re-appoint KPMG Inc. as independent
auditors of the company and to authorise the
directors to determine the remuneration of
the auditors for the past year’s audit as
reflected in note 18 of the annual financial
statements.
As special business to consider and, if deemed
fit, pass with or without modification the
following resolutions, that numbered 5 as a
special resolution and those numbered 6, 7 and
8 as ordinary resolutions.
5. SPECIAL RESOLUTION NUMBER 1: GENERAL
AUTHORITY TO REPURCHASE SHARES
That the company or any of its subsidiaries be
and are hereby authorised, by way of a
general approval, to acquire ordinary and/or
participating preference shares issued by the
company, in terms of Sections 85(2) and
85(3) of the Companies Act No 61 of 1973, as
amended (the Companies Act), and in terms
of the JSE Limited (the JSE) Listings
Requirements, being that:
Ü any such acquisition of ordinary and/or
participating preference shares shall be
effected through the order book operated
by the JSE trading system and done
without any prior understanding or
arrangement between the company and
the counter-party;
Allied Electronics Corporation LimitedIncorporated in the Republic of South Africa (Registration number 1947/024583/06) (Share code: ATN) (ISIN: ZAE000029658) (Share code: ATNP) (ISIN: ZAE000029666)
(“Altron” or “the company”)
Altron notice of annual general meeting
190
ALTRON ANNUAL REPORT 2006
Altron notice of annual general meeting continued
Ü this general authority shall be valid until
the company’s next annual general
meeting, provided that it shall not extend
beyond 15 (fifteen) months from the
date of passing of this special resolution
number 1;
Ü an announcement will be published as
soon as the company or any of its
subsidiaries has acquired ordinary and/or
participating preference shares constituting,
on a cumulative basis, 3% of the number
of ordinary and/or participating preference
shares in issue and for each 3% in
aggregate of the initial number acquired
thereafter, in compliance with Rule 11.27 of
the JSE Listings Requirements;
Ü acquisitions of shares in aggregate in any
one financial year may not exceed 20% of
the company’s ordinary and/or participating
preference issued share capital, as the case
may be, as at the date of passing of this
special resolution number 1;
Ü ordinary and/or participating preference
shares may not be acquired at a price
greater than 10% above the weighted
average of the market value at which such
ordinary and/or participating preference
shares are traded on the JSE as determined
over the five business days immediately
preceding the date of repurchase of such
ordinary and/or participating preference
shares;
Ü the company has been given authority by
its articles of association;
Ü at any point in time, the company may
only appoint one agent to effect any
repurchase on the company’s behalf;
Ü the company undertaking that it will not
enter the market to repurchase the
company’s securities until the company’s
sponsor has provided written confirmation
to the JSE regarding the adequacy of the
company’s working capital in accordance
with Schedule 25 of the JSE Listings
Requirements;
Ü the company remaining in compliance
with the shareholder spread requirements
of the JSE Listings Requirements; and
Ü the company and/or its subsidiaries not
repurchasing any shares during a
prohibited period as defined by the JSE
Listings Requirements.
Before entering the market to effect the general
repurchase, the directors, having considered the
effects of the repurchase of the maximum
number of ordinary and/or participating
preference shares in terms of the aforegoing
general authority, will ensure that for a period of
12 (twelve) months after the date of the notice
of annual general meeting:
Ü the company and the Altron group will be
able, in the ordinary course of business, to
pay its debts;
Ü the consolidated assets of the company and
the Altron group, fairly valued in accordance
with International Financial Reporting
Standards, will exceed the consolidated
liabilities of the company and the Altron
group;
Ü the company and the Altron group’s ordinary
and/or participating preference share capital,
reserves and working capital will be adequate
for ordinary business purposes; and
191
Ü the working capital of the company and the
Altron group will be adequate for the
purposes of the business of the company and
the Altron group.
The following additional information, some of
which may appear elsewhere in the annual
report of which this notice forms part, is
provided in terms of the JSE Listings
Requirements for purposes of the general
authority:
Ü directors and management – pages 184 to
187
Ü major beneficial shareholders – page 86
Ü directors’ interests in ordinary shares –
page 113
Ü share capital of the company – page 135
LITIGATION STATEMENT
In terms of Section 11.26 of the JSE Listings
Requirements, the directors, whose names
appear on pages 184 to 187 of this annual
report of which this notice forms part, are not
aware of any legal or arbitration proceedings
that are pending or threatened, that may have
or had in the recent past, being at least the
previous 12 (twelve) months, a material effect
on the Altron group’s financial position.
DIRECTORS’ RESPONSIBILITY STATEMENT
The directors, whose names appear on pages
184 to 187 of this annual report, collectively and
individually accept full responsibility for the
accuracy of the information pertaining to this
special resolution and certify that, to the best of
their knowledge and belief, there are no facts
that have been omitted which would make any
statements false or misleading, and that all
reasonable enquiries to ascertain such facts have
been made and that this special resolution
contains all information required by law and the
JSE Listings Requirements.
MATERIAL CHANGES
Other than the facts and developments reported
on in this annual report, there have been no
material changes in the affairs or financial
position of the company and its subsidiaries
since the date of signature of the audit report
and up to the date of this notice.
The reason for and effect of this special
resolution is to grant the directors of the
company a general authority in terms of the
Companies Act and the JSE Listings Requirements
for the repurchase by the company, or a
subsidiary of the company, of the company’s
shares.
The directors have no specific intention, at
present, for the company to repurchase any of
its shares but consider that such a general
authority should be put in place should an
opportunity present itself to do so during the
year which is in the best interests of the
company and its shareholders.
6. ORDINARY RESOLUTION NUMBER 1: CONTROL
OF AUTHORISED BUT UNISSUED SHARES
That the general authority granted to
directors to allot and issue the unissued
ordinary and participating preference shares
of the company be renewed, after providing
for the allotment and issue of ordinary and
participating preference shares in terms of
the company’s share schemes, which
192
ALTRON ANNUAL REPORT 2006
Altron notice of annual general meeting continued
authority shall be restricted to 10% of the
issued ordinary and/or participating
preference shares as at 28 February 2006,
upon such terms and conditions as they in
their sole discretion may determine; subject
to the provisions of the Companies Act, and
the JSE Listings Requirements.
7. ORDINARY RESOLUTION NUMBER 2: GENERAL
AUTHORITY TO ISSUE SHARES FOR CASH
That subject to renewal of the general
authority proposed in terms of 6 above and in
terms of the JSE Listings Requirements,
shareholders to grant a waiver in favour of
the directors for the allotment and issue of
ordinary and/or participating preference
shares in the capital of the company for cash
other than in the normal course by way of a
rights offer or pursuant to the company’s
share schemes or acquisitions utilising such
securities.
The allotment and issue of shares for cash, as
and when suitable situations arise, shall be
subject to the following limitations:
Ü any issue of securities shall be to public
shareholders as defined by the JSE Listings
Requirements;
Ü this authority shall only be valid until the
next annual general meeting of the
company but shall not endure beyond the
period of 15 (fifteen) months from the
date set down for the sixtieth annual
general meeting;
Ü a paid press announcement giving details,
including the impact on net asset value
and earnings per share, will be published
at the time of any such allotment and
issue of shares representing, on a
cumulative basis within one year, 5% or
more of the number of shares of that class
in issue prior to any such issues;
Ü that issues in the aggregate in any one
financial year shall not exceed 10% of the
number of shares of any class of the
company’s issued share capital less any
shares that may be issued during the
financial year arising from the exercise of
share options in the normal course; and
Ü that, in determining the price at which an
allotment and issue of shares will be
made in terms of this authority, the
maximum discount permitted will be 10%
of the weighted average traded price of
the class of shares to be issued over the
30 days prior to the date that the price of
issue is determined or agreed by the
directors of the company.
In terms of the JSE Listings Requirements, the
approval of a 75% majority of the votes cast
by shareholders present or represented by
proxy at this annual general meeting will be
required for this authority to become
effective.
8. ORDINARY RESOLUTION NUMBER 3:
SIGNATURE OF DOCUMENTS
That any one director or the secretary of the
company be and is hereby authorised to do
all such things and sign all documents and
take all such action as they consider
necessary to implement the resolutions set
out in the notice convening this annual
general meeting at which this ordinary
resolution will be considered.
193
VOTING AND PROXIES
Ordinary and participating preference
shareholders are entitled to attend and speak at
the meeting, but only ordinary shareholders are
entitled to vote.
Ordinary and participating preference
shareholders may appoint a proxy to attend,
speak and, in respect of an ordinary shareholder,
vote in their stead. Shareholders holding
dematerialised shares but not in their own name
must furnish their Central Securities Depository
Participant (CSDP) or broker with their
instructions for voting at the annual general
meeting should they wish to vote. If your CSDP
or broker, as the case may be, does not obtain
instructions from you, it will be obliged to act in
terms of your mandate furnished to it, or if the
mandate is silent in this regard, to complete the
relevant form of proxy attached. Unless you
advise your CSDP or broker, in terms of the
agreement between you and your CSDP or
broker by the cut-off time stipulated therein,
that you wish to attend the annual general
meeting or send a proxy to represent you at the
annual general meeting, your CSDP or broker
will assume you do not wish to attend the
annual general meeting or send a proxy. If you
wish to attend the annual general meeting or
send a proxy, you must request your CSDP or
broker to issue the necessary letter of authority
to you.
Shareholders holding dematerialised shares in
their own name, or who hold shares that are not
dematerialised, and who are unable to attend
the annual general meeting and wish to be
represented thereat, must complete the relevant
form of proxy attached in accordance with the
instructions therein and lodge it with, or mail it
to, the transfer secretaries.
Forms of proxy should be forwarded to reach the
company’s transfer secretaries at the address
given below by not later than 09:30 on Thursday,
13 July 2006. The completion of a form of proxy
will not preclude a shareholder from attending
the annual general meeting.
By order of the board
Altron Management Services (Pty) Limited
(Secretaries)
per: AG Johnston (Group Company secretary)
31 May 2006
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty)
Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
194
ALTRON ANNUAL REPORT 2006
1. ADOPTION OF ANNUAL FINANCIAL STATEMENTS
At the annual general meeting, the directors
must present the annual financial statements
for the year ended 28 February 2006 to
shareholders, together with the reports of the
directors and the auditors. These are contained
within the annual report.
2. RE-ELECTION OF DIRECTORS
In accordance with the company’s articles of
association, one third of the directors is
required to retire at each annual general
meeting and may offer themselves for re-
election. In addition, any person appointed to
the board of directors is similarly required to
retire and is eligible for re-election at the next
annual general meeting. Messrs N Claussen
and MJ Lamberti retire from the board and
Messrs RE Venter, PMO Curle, DC Mpofu and
Ms DC Radley retire by rotation at the annual
general meeting.
An abbreviated curriculum vitae in respect of
each director offering him/herself for re-
election is contained on pages 184 to 187 of
this annual report.
3. REMUNERATION OF NON-EXECUTIVE DIRECTORS
Shareholders are requested to ratify the fees
paid to non-executive directors during the past
financial year. Full particulars of all fees and
remuneration for the past financial year are
contained on pages 105 to 106 of the annual
report.
4. RE-APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Inc has indicated its willingness to
continue in office and resolution 4 proposes the
re-appointment of that firm as the company’s
auditors until the next annual general meeting.
The resolution also gives authority to the
directors to fix the auditors’ remuneration.
5. SPECIAL RESOLUTION NO. 1 – GENERAL
AUTHORITY TO REPURCHASE SHARES
The effect of special resolution number 1 and
the reason therefor is to grant the company
or any of its subsidiaries a general approval in
terms of the Companies Act No 61 of 1973,
as amended (the Companies Act), for the
acquisition by the company or any of its
subsidiaries of the company’s shares, which
general approval shall be valid until the
earlier of such next annual general meeting
of the company or its variation or revocation
of such general authority by special resolution
at any subsequent annual general meeting of
the company, provided that the general
authority shall not extend beyond 15 months
from the date of the annual general meeting.
6. ORDINARY RESOLUTIONS NOs. 1 AND 2 –
CONTROL OF AUTHORISED BUT UNISSUED
SHARES AND GENERAL AUTHORITY TO ISSUE
SHARES FOR CASH
In terms of Sections 221 and 222 of the
Companies Act the shareholders have to
approve the placement of the unissued shares
under the control of the directors. A general
authority to issue shares for cash has also
been granted to the directors. The authorities
will be subject to the Companies Act and the
JSE Listings Requirements.
In terms of the JSE Listings Requirements
ordinary resolution number 2 requires the
approval of 75% of the shareholders present
or represented by proxy at the annual general
meeting, in order to become effective.
Annual general meeting – explanatory notes
195
FORM OF PROXY FOR THE SIXTIETH ANNUAL GENERAL MEETING TO BE HELD IN THE BOARDROOM, ALTECH CORPORATE OFFICES, 79 CENTRAL STREET, HOUGHTON, JOHANNESBURG ON FRIDAY, 14 JULY 2006 AT 09:30 – FOR USE BY CERTIFICATED ORDINARY SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY
Holders of dematerialised ordinary shares other than “own name” registration must inform their CSDP or broker of their intention to attend the annual general meeting and request their CSDP to issue them with the necessary authorisation to attend the annual general meeting in person or provide their CSDP or broker with their voting instructions should they not wish to attend the annual general meeting in person but wish to be represented thereat.
I/We(PLEASE PRINT)of address
being the registered holder(s) of ordinary shares in the capital of the company do hereby appoint
1. or failing him/her,
2. or failing him/her,
the Chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held on Friday, 14 July 2006 at 09:30 for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at any adjournment thereof, and to vote for and/or against the resolutions and/or abstain from voting in respect of the shares registered in my/our name/s, in accordance with the following instructions:
Number of ordinary shares
For Against Abstain
1. Adoption of annual financial statements
2. Re-election of directors 2.1 Mr N Claussen
2.2 Mr MJ Lamberti
2.3 Mr RE Venter
2.4 Mr PMO Curle
2.5 Mr DC Mpofu
2.6 Ms DC Radley
3. Remuneration of non-executive directors
4. Reappointment of independent auditors
5. Special Resolution Number 1: General authority to repurchase shares
6. Ordinary Resolution Number 1: Control of authorised but unissued shares
7. Ordinary Resolution Number 2: General authority to issue shares for cash
8. Ordinary Resolution Number 3: Signature of documents
Signed at on 2006
Signature
Assisted by me (where applicable)
Notes:1. An ordinary shareholder may insert the name of a proxy or the names of two alternative proxies of the ordinary shareholder’s choice in
the space provided and any such proxy need not be a shareholder of the company. Should a proxy not be specified, this will be exercised by the Chairman of the annual general meeting.
2. An ordinary shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. An ordinary shareholder’s instructions to the proxy must be indicated by inserting the relevant number of votes exercisable by the ordinary shareholder in the appropriate box(es). An ordinary shareholder or his/her proxy is not obliged to use all the votes exercisable by the ordinary shareholder, or to cast all those votes exercised in the same way, but the total of the votes cast and in respect whereof abstention is recorded may not exceed the total of the votes exercisable by the ordinary shareholder.
3. If any ordinary shareholder does not indicate on this instrument that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or give contradictory instructions, or should any further resolution(s) or any amendment(s) which may be properly put before the annual general meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit.
4. Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be attached to this form, unless previously recorded by the company or waived by the Chairman of the annual general meeting.
5. This proxy form should be completed and returned to the company’s transfer secretaries, Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to reach them by not later than Thursday, 13 July 2006 at 09:30.
ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.
Allied Electronics Corporation LimitedIncorporated in the Republic of South Africa
(Registration number 1947/024583/06) (Share code: ATN) (ISIN: ZAE000029658)
(“Altron” or “the company”)
196
ALTRON ANNUAL REPORT 2006
FORM OF PROXY FOR THE SIXTIETH ANNUAL GENERAL MEETING TO BE HELD IN THE BOARDROOM, ALTECH CORPORATE OFFICES, 79 CENTRAL STREET, HOUGHTON, JOHANNESBURG ON FRIDAY, 14 JULY 2006 AT 09:30 – FOR USE BY CERTIFICATED PARTICIPATING PREFERENCE SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY
Holders of dematerialised participating preference shares other than “own name” registration must inform their CSDP or broker of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the necessary authorisation to attend the annual general meeting in person.
I/We(PLEASE PRINT)of address
being the registered holder(s) of participating preference shares in the capital of the company do hereby appoint
1. or failing him/her,
2. or failing him/her,
the Chairman of the annual general meeting as my/our proxy to attend and speak for me/us at the sixtieth annual general meeting of the company to be held on Friday, 14 July 2006 at 09:30 and at any adjournment thereof.
Signed at on 2006
Signature
Assisted by me (where applicable)
Notes:1. A participating preference shareholder may insert the name of a proxy or the names of two alternative proxies of the participating
preference shareholder’s choice in the space provided and any such proxy need not be a shareholder of the company. Should a proxy not be specified, this will be exercised by the Chairman of the annual general meeting.
2. A participating preference shareholder or his proxy is entitled to attendance at the annual general meeting, and to speak but not vote thereat in terms of the company’s articles of association.
3. Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be attached to this form, unless previously recorded by the company or waived by the Chairman of the annual general meeting.
4. This proxy form should be completed and returned to the company’s transfer secretaries, Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to reach them by not later than Thursday, 13 July 2006 at 09:30.
ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.
Allied Electronics Corporation LimitedIncorporated in the Republic of South Africa (Registration number 1947/024583/06) (Share code: ATNP) (ISIN: ZAE000029666)
(“Altron” or “the company”)
197
SHAREHOLDERS’ DIARY
Financial year end 28 February 2006
Annual general meeting 14 July 2006
Reports and financial statements
Preliminary reports and
dividend announcements
(published) 9 May 2006
Annual financial statements
(mailed to shareholders) June 2006
Interim Reports October 2006
Dividend details
Dividend declared 8 May 2006
Record date 30 June 2006
Payable 3 July 2006
CURRENCY
To facilitate the interpretation of this report by
readers not familiar with the South African Rand,
we provide the following conversion guide:
At 28 February 2006 one Rand (ZAR) was
equal to:
2006 2005
UK £ 0.09208 0.08912
US$ 0.1613 0.1713
Euro 0.1355 0.1294
Yen 18.82 18.07
ADMINISTRATION
Business, secretaries and registered address
Altron House
4 Sherborne Road
Parktown 2193
(PO Box 981, Houghton 2041), South Africa
Telephone: National (011) 645-3600
International 27 11 645-3600
Telefax: (011) 482-6489
Transfer Secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg 2001
(PO Box 61051, Marshalltown 2107), South Africa
Telephone: National (011) 370-5000
International 27 11 370-5000
Telefax: (011) 370-5271/2
Auditors
KPMG Inc
Bankers
ABSA Bank Limited
FNB Corporate Bank
(a division of FirstRand Bank Limited)
Nedbank, a division of Nedcor Bank Limited
The Standard Bank of South Africa Limited
Sponsor
Nedbank Capital
Corporate data
BASTION GRAPHICS
ALTRON • 4TH PROOFA
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ALLIED ELECTRONICS CORPORATION LIMITED