the power of technology - sharedataallied technologies limited (member of the altron group)...

telecommunications + multi-media +information technology

ANNUAL REPORT 2009

the power of

technology3

Contents

Altech’s mission

» Altech is a high-technology telecommunications, multi-media and information technology (TMT) solutions group, focused on providing value-added products, services and solutions through the convergence of TMT, driven by market demand. Altech is committed to the pursuit of globalisation through excellence in all its chosen operations and will continue to relentlessly pursue its ambition to be a leader in every sphere in which it operates, whilst empowering and enriching its stakeholders.

Allied Technologies Limited(Member of the Altron group)

(Incorporated in the Republic of South Africa) (Registration number 1946/020415/06)

Vision

Mission

Financial highlights and summary 2

Six-year fi nancial review 4

Corporate structure 6

Group overview 8

Chairman’s statement 10

Board of directors 12

Chief executive offi cer’s report 14

Executive committee 19

Operational review 20

Sustainability report 30

Table of material issues 31

Awards 32

Management of sustainability 33

Shareholders 34

Customers 36

Partners 39

Employees 42

Health and safety 47

Transformation and SED 50

Environment 53

GRI content index 56

Shareholders’ analysis 58

Corporate governance report 59

Remuneration report 70

Financial statements and administration 78

Directorate profi le 136

Altech notice of annual general meeting 141

Annual general meeting – explanatory notes 144

Form of proxy 145

Corporate data 147

1

annual report 2009 www.altech.co.za

Altech’s visionachieving our goals

technologysupporting an emerging nation Altech has, and always will, remain committed to its roots and help South Africa and her people fulfi l their potential. We are committed to developing this country through our mission.

»

To achieve a global strategic position

in the telecommunications, multi-media

and information technology (TMT)

environments, through a focused range

of activities, including the development

and ownership of intellectual property

rights and provision of value-added

products, services and solutions driven

by convergence.

2


23.0

22.1

22.4

25.4

24.3

Return onequity (%)

0908070605

8.8

8.0 8.

5

8.1

9.5

Operating profitto revenue (%)

0908070605

Financial highlightsfor the year ended 28 February 2009

Cash on hand – R911 million

11% on revenue

32% on operating profit

15% on adjusted headline earnings per share

12%on dividend

44.3

43.8

42.8

41.5

33.5

Return onoperating assets (%)

0908070605

34.8

31.6 34

.3 36.6

34.2

Return on capital employed (%)

0908070605

3


Financial summaryas at 28 February 2009

Divisional contributionfor the year ended 28 February 2009

Rm 2009 2008%

change

Revenue 9 164 8 242 11

EBITDA 1 066 760 40

Operating profi t 874 664 32

Operating margin (%) 9.5 8.1 17

Adjusted HEPS (cents) 592 514 15

Diluted HEPS (cents) 547 494 11

Cash on hand 911 1 591 (43)

Dividend per share (cents) 323 288 12

Return on equity (%) 24.3 25.4 (4)

see pages 20 – 23 see pages 24 – 25 see pages 26 – 27

Revenue 74%

Operating profit 83%

Revenue 18%

Operating profit 7%

Revenue 8%

Operating profit 10%

Multi-Media andElectronics

InformationTechnology

Telecommunications:Wireless Communication

and Converged Servicesand Connectivity

4


Six-year fi nancial review

2009 2008 2007 2006 2005 2004*

Rm Rm Rm Rm Rm Rm

INCOME STATEMENT

Revenue 9 164 8 242 6 780 6 041 5 552 4 143

Operating profi t 874 664 568 485 491 333

Investment income 68 98 79 54 49 129

Finance costs (70) (21) (6) (5) (4) (6)

Amortisation and impairment of goodwill — (86) — (82) (9) (10)

Share of profi t from associates — — — 26 12 —

Capital items (2) (1) (7) 74 (12) 5

Profi t before taxation 870 654 634 552 527 451

Taxation (254) (219) (211) (183) (191) (131)

Profi t after taxation 616 435 423 369 336 320

Attributable to minority shareholders 67 26 22 5 17 8

Attributable to ordinary shareholders 549 409 401 364 319 312

Earnings attributable to shareholders 616 435 423 369 336 320

Dividends paid 278 235 302 170 151 132

BALANCE SHEET

Assets

Non-current assets 2 071 796 685 650 1 103 150

Inventories, trade and other receivables 1 664 1 301 1 067 828 866 648

Cash and cash equivalents 1 221 1 591 1 173 1 498 812 1 475

Assets classifi ed as held-for-sale 107 — — — — —

Total assets 5 063 3 688 2 925 2 976 2 781 2 273

Equity and liabilities

Shareholders’ equity 2 249 1 955 1 822 1 681 1 480 1 561

Minority interest 298 72 61 89 94 44

Fixed capital 2 547 2 027 1 883 1 770 1 574 1 605

Non-current liabilities 188 100 32 39 107 5

Current liabilities 2 300 1 561 1 010 1 167 1 100 663

Liabilities classifi ed as held-for-sale 28 — — — — —

Total equity and liabilities 5 063 3 688 2 925 2 976 2 781 2 273

5


2009 2008 2007 2006 2005 2004*

Rm Rm Rm Rm Rm Rm

RATIOS AND STATISTICSEarningsBasic earnings per share (cents) 569 421 410 373 321 297Headline earnings per share (cents) 571 511 414 379 338 302Adjusted headline earnings per share (cents) 592 514 414 379 338 302Dividend per share – declared (cents) 323 288 240 209 174 143.75Dividend per share – paid (cents) 288 240 209 174 143.75 125Special dividend per share paid (cents) — — 100 — — —Headline dividend cover (times) – including special dividend 1.8 1.8 1.7 1.8 1.9 2.1Ordinary shares in issue (000’s)– at year-end 96 610 96 484 97 820 97 699 97 413 105 224– weighted average 96 530 97 040 97 763 97 591 99 344 105 221

Profi tabilityOperating profi t to revenue (%) 9.5 8.1 8.5 8.0 8.8 8.0Return on shareholders’ equity (%) 24.3 25.4 22.4 22.1 23.0 20.3Return on capital employed (%) 34.2 36.6 34.3 31.6 34.8 28.4Return on operating assets (%) 33.5 41.5 42.8 43.8 44.3 42.6

FinancialCurrent ratio 1.3:1 1.9:1 2.2:1 2.0:1 1.5:1 3.2:1Acid test ratio 1.1:1 1.6:1 1.8:1 1.7:1 1.3:1 2.8:1

SharesNumber of shareholders 2 449 2387 2 159 2 686 2 156 1 998Net asset value per share (cents) 2 328 2 026 1 863 1 721 1 519 1 484Price-earnings ratio (times) 9.0 12.1 16.0 14.1 13.6 10.9Market value per share at year-end (cents) 5 125 5 075 6 570 5 150 4 350 3 225

OtherConsumer price index (percentage increase) 8.6 9.8 5.7 3.6 3.1 12.4Number of employees 3 641 3 226 3 308 3 308 3 102 1 902

*2004 was not restated according to IFRS as the adjustments were not material.

Defi nitionsEarnings – Earnings attributable to shareholders as disclosed in the income statement.EBITDA – Operating profi t before depreciation and amortisation.Borrowings – All interest-bearing liabilities, including redeemable preference shares.Capital employed – Total assets less all non-interest-bearing debt.Total assets – Property, plant and equipment, associates and other investments together with current assets.Operating assets – Total assets less associates and other investments, loans, cash and intangible assets.Acid test – The ratio of current assets excluding inventories to current liabilities.Borrowings ratio – The percentage of borrowings to fi xed capital.Current ratio – The ratio of current assets to current liabilities.

Headline dividend cover – Headline earnings per share divided by dividends per share declared.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 earnings per share.Return on capital employed – The percentage of headline earnings to capital employed.Return on operating assets – The percentage of operating profi t to operating assets.Return on shareholders’ equity – The percentage of attributable earnings before amortisation/impairment of goodwill and capital items to shareholders’ equity.

The Groupour corporate structure and nature of business

TELECOMMUNICATIONSWireless Communication

2009 2008

Revenue R6.5bn R5.9bnOperating profit R584m R493mOperating margin 9.0% 8.3%Cash R711m R1.4bnReturn on capital employed 37% 58.6%

Altech Autopage Cellular, Altech Supercall Cellular, Altech Mobile Direct and Altech Mobile Express – sales, distribution and services provision for cellular network operators.

Altech Netstar – the largest stolen vehicle recovery (SVR) business in South Africa.

Altech Netstar Fleet Management Services and ComTech – providers of advanced fl eet management systems for logistics management.

Altech Alcom Matomo and Altech Alcom Radio Distribution – design, installation and project management of Motorola radio systems and two-way radio equipment.

Converged Services and Connectivity

2009 2008

Revenue R418m —Operating profit R146m —Operating margin 35.0% —Cash (R18m) —Return on capital employed 38.0% —

Altech Stream Rwanda – a broadband network operator utilising a city-wide Wifi /WiMax mesh network.

Kenya Data Networks – a public data network operator offering access to its network at wholesale rates to the GSM mobile operators and to Kenyan internet service providers.

Swift Global (Kenya) – an internet service provider offering IP-based network and internet solutions and VolP services. Value-added services include disaster recovery, off-site back-up, application hosting and information security.

Infocom (Uganda) – a data operator and internet service provider. Includes the design and implementation of virtual private networks. It offers fi xed wireless broadband internet access via WiMax access equipment.

Nature of business

Altech is an investment holding company

involved in the telecommunications,

multi-media and information technology

industries.

Altech’s holding company is

Allied Electronics Corporation Limited

(Altron), which is incorporated in the

Republic of South Africa.

*JSE listed.

*

6


*

MULTI-MEDIA AND ELECTRONICS

2009 2008

Revenue R1.6bn R1.6bnOperating profit R63m R121mOperating margin 3.8% 7.5%Cash (R21m) R178mReturn on capital employed 14.3% 23.6%

INFORMATION TECHNOLOGY

2009 2008

Revenue R758m R731mOperating profit R87m R56mOperating margin 11.5% 7.7%Cash R34m R112mReturn on capital employed 13.2% 4.1%

Altech UEC Multi-media (Pty) Ltd Altech Media Verge Solutions, Altech Global Decoder Logistics – 3CTV design, manufacture and service provision of satellite and terrestrial digital set-top decoders.

Altech Arrow Altech Distribution – distribution of a vast range of electronic components, products and solutions.

Altech Card Solutions, Altech Cardtronic, Altech NamITech South Africa, Altech NamITech West Africa, Integrated Technology Solutions, Altech Isis and Altech Isis France – telecommunications middleware, payment systems and solutions, secure solutions and smartcard technologies.

Corporate profi leAltech is listed on the Johannesburg Stock Exchange (JSE) and is an investment holding company, involved in the telecommunications, multi-media and information technology industries, which employs over 5 000 employees in South Africa and abroad.

As a leading South African multi-billion rand high-technology group, Altech is involved in the design, development and convergence of telecommunications equipment, multi-media systems and IT solutions. There is a strong focus on the convergence of these technologies and Altech is now also entrenched in the arena of secure technology solutions.

Altech has ongoing access to the latest technologies worldwide, while the group’s own research and development programme actively encourages and promotes internal technology.

= three strong

divisions3

7


8


» We pay tribute to our team of highly talented employees whose

passion and dedication will ensure our focus on the future.

innovation + technology

= the power of

convergence

Gro

up o

verv

iew

9


10

Chairman’s statement


Dr Hilton Davies Chairman

Once again I am extremely pleased to present an overview of Altech’s performance for the year ended 28 February 2009. The pages that follow this statement present an in-depth report of all aspects of the group’s operations.

Altech recorded excellent results during the period under review – arguably one of the most diffi cult trading periods worldwide in recent memory. These results refl ect both a robust strategy in the fast-growing sector of telecommunications, multi-media and technology, and management’s determination to develop this strategy to achieve sustainable growth and above-average shareholder returns.

On the heels of the previous diffi cult, but successful year, the review period presented larger challenges on a broader scale. Altech has met these challenges admirably – from its championing role in helping to liberalise the South African telecommunications industry, to its important expansion into East Africa, thus taking a further, major step in globalising its business. Management has also continued to focus on controlling costs and to further diversify the company’s revenue base to mitigate against the impact of the economic slowdown. As a result, Altech was able to declare an increased dividend for the year, 12% above the prior period, and achieve a compound annual growth rate over the past 10 years of 17.4%.

During the year, Altech again delivered on its declared intent to be in the forefront of leading technology: touching lives. As an example, in the technology arena Altech companies have developed a system for retail video rentals that could change this industry much in the way the personal video recorder or PVR did for home entertainment. Group companies are also in the forefront of several technological innovations that will produce affordable communication to many thousands on the African continent – from basic cellular telephony to sophisticated broadband services.

11


Gro

up o

verv

iew

» These excellent results refl ect both a robust strategy and management’s determination to develop this strategy to achieve sustainable growth and above-average shareholder returns.

Key facts

12%Increased dividend in arguably one of the most difficult trading periods worldwide in recent memory.

17.4%Compound annual growth rate on HEPS over the past 10 years.

Altech’s sustainability report on page 30 demonstrates the group’s commitment to the so-called triple bottomline of economic, social and environmental performance. Notably, in an industry where human capital plays such a pivotal role, the Altech Academy’s fi rst full year of operation underscored the part it will play in developing human potential – not only for the group, but with a spin-off for the industry as a whole.

As part of the group’s commitment to sustainable development, good corporate governance is integral to Altech’s operations. The board remains fully committed to the principles of corporate practice and conduct set out in the second King report. We also welcome the draft King III report, which aims to keep South African companies in line with global best practice in governance.

We welcome Alex Smith to the board as an Altron nominee, replacing Diane Radley who resigned from the board last year, as well as Zakhele Sithole and Moses Sindane who also joined us as independent non-executive directors on the Altech board.

Craig Venter and his management teams have delivered a top-class performance during the review period, amply demonstrating their commitment and perseverance against sometimes daunting challenges. On behalf of the board, I congratulate them and thank them for their ongoing contribution to Altech’s growth. My personal thanks go to my colleagues on the board for their consistent support and counsel.

Altech is well-positioned for sustained growth. The group is strategically placed, well-capitalised and operationally structured to take full advantage of the potential in its chosen markets. Our special business model continues to offer signifi cant opportunities for growth, backed by a strong balance sheet and committed management. In recent years, Altech has developed leading positions in highly advanced and desirable technologies in ever-broadening global markets. I am confi dent that the year ahead will see more of its potential unfolding.

Dr Hilton Davies – Chairman

12


Board of directors

1. Dr HK Davies2. CG Venter3. ML Leoka4. Dr WP Venter5. RE Venter6. M Sindane

Dr HK (Hilton) Davies

Date of birth: 23 January 1933

Qualifi cations: BCom; DEconSc

Titles: » Independent non-executive chairman of Altech

» Chairman of the Altech remuneration and nomination committee

CG (Craig) Venter

Date of birth: 4 July 1962

Qualifi cations: BA (Econ) (UCLA); BA (Psychology) (UCLA); MBA (USC); MSc (Mgmt Science) (USC)

Titles: » Chief executive offi cer of Altech » Executive director of Altron » Director of Altech Netstar, Altech

Autopage Cellular, Kenya Data Networks, Swift Global (Kenya) and various other subsidiaries of Altech

» Chairman of Altech’s executive committee, Altech Autopage Holdings, Arrow Altech Holdings, Altech Alcom Matomo, Altech Netstar Fleet Solutions, Altech UEC and Altech Information Technologies

» Member of Altron’s executive committee and risk management committee as well as Altech’s business risk committee

» A member of the worldwide Young Presidents’ Organisation (YPO)

ML (Moss) Leoka

Date of birth: 19 May 1950

Qualifi cations: BA (Economics)

Titles: » Independent non-executive director of Altech

» Director of Hatch Africa (Proprietary) Limited

» Director of Harrison & White Investments Limited

» Director of Majestic Technologies (Proprietary) Limited

» Currently executive chairman of South Atlantic Minerals

Dr WP (Bill) Venter


Qualifi cations: DPhil (Bus Man) (UJ); MPhil (Bus Man) (UJ – cum laude); MBA (Wales); DCom (hc) (UP, UFS and UPE); DSc (Eng) (hc) (Natal); DEng (hc) (Wits); C Eng (UK)

Titles: » Chairman of Altron and Bytes » Director of Altech, Bytes and

Powertech, former chairman of the CSIR, and past director of AMIC Limited and Nedcor Bank Limited

» Member of the Altron nomination committee and remuneration committee

RE (Robert) Venter


Qualifi cations: BSc (Econ) (UCLA); MBA (UCLA) Dean’s List

Titles: » Chief executive of Altron » Director of Altech, Bytes and

Powertech and various other group companies

» Chairman of Aberdare Cables » Chairman of the Altron executive

committee » Member of the Altron risk

management committee

M (Moses) Sindane


Qualifi cations: BCom; BCompt (Hons); MBA (UK); CA(SA)


» Chairman of the Altech business risk committee

» Member of the Altech audit, as well as the remuneration and nomination committees

» Chairman of the audit committee of the Cancer Association of South Africa and a member of the PAAB investigating committee

» Senior partner of Gobodo Inc and member of its national executive committee

13


Gro

up o

verv

iew

7. ZJ Sithole8. Dr JEW Carstens9. R Naidoo10. PMO Curle11. AMR Smith12. Dr HA Serebro

ZJ (Zakhele) Sithole


Qualifi cations: BAcc; BCom (Hons); Higher Diploma Tax Law; Higher Diploma Company Law; CA(SA)


» Chairman of the Altech audit committee » Chairman of Command Holdings and a

director of the Public Investment Corporation

» Member of the board of governors at the University of Zululand, South African Parks Board, the fi nance committee of the Catholic Dioceses (Johannesburg), the Independent Regulatory Board of Auditors and the Association for Advancement of Black Accountants of Southern Africa

Dr JEW (John) Carstens


Qualifi cations: BCom (Hons); MCom; PhD; CA(SA)

Titles: » Chief fi nancial offi cer of Altech » Chairman of Altech Netstar as well as

the audit committees of Arrow Altech Holdings

» Director of various other group subsidiaries

» Member of Altech’s business risk and executive committees

» Trustee of the Altron Pension Fund and the Altron Medical Aid Scheme

R (Ramani) Naidoo


Qualifi cations: BA; LLB; Certifi cate in Mergers and Acquisitions


» Former non-executive directorships include African Bank Limited, Juta and Company Limited, Stellenbosch Vineyards Limited and Member of the Advisory Council of the UNISA Centre for Corporate Citizenship

PMO (Peter) Curle


Qualifi cations: MA (Oxon)

Titles: » Executive director of Altron » Executive director of Altech: Corporate

Finance » Member of the Altron and Altech

executive committee

AMR (Alex) Smith


Qualifi cations: Bachelor of Laws (Honours) (Edinburgh); CA

Titles: » Chief fi nancial offi cer and fi nancial director of Altron

» Director of Altech, Bytes, Powertech and various other group companies

» Member of the Altron executive committee and risk management committee

Dr HA (Harold) Serebro

Date of birth: 12 October 1938

Qualifi cations: MBBCh (Wits); MD (Rand); FCRP (Canada); FACP (USA); PhD (Economics) (hc) (UFS)

Titles: » Senior Altron executive director » Director of Altech » Chairman of the Altron group

purchasing and export councils » Member of the Altron risk

management committee » Trustee of the State President’s

Empowerment Award Programme and of the Duke of Edinburgh Trust

» Trustee of the Sexwale Family Foundation

14


Chief executive offi cer’s report

Craig G Venter Chief executive offi cer

Overview

Altech operates in the telecommunications, multi-media and information technology

sector, a market characterised by high degrees of regulatory control, competition and

rapid change. The overriding theme in this market is convergence as traditionally

disparate technologies interact and meld, driven by the unprecedented capacity of

broadband technology. The steady development of this technology and its adoption

by consumers is presenting new opportunities for Altech: the group is well-positioned

to capitalise on the sustained growth projected for broadband technology in Africa,

across multiple technologies, services and geographies.

Results

The Altech group posted outstanding results for the year ended 28 February 2009,

despite the global economic slowdown. Adjusted headline earnings improved by

15% to 592 cents per share. Earnings per share improved by 35% to 569 cents, with

revenue increasing by 11% to over R9 billion, and operating profi t by 32% to

R874 million. Net asset value per share increased by 15% from 2 026 cents to

2 328 cents. Return on shareholders’ equity remained strong at 24%. A dividend

of 323 cents per share was declared, representing an increase of 12%.

Annuity revenue increased to 79% of total revenue in 2009. It is, and will remain,

Altech’s focus to increase annuity revenue which is seen as a stabilising agent in the

current turbulent environment. Foreign and export revenue increased by 56% from

R1 billion in 2008 to R1.6 billion in 2009. We ended the year with a strong balance

sheet refl ecting net cash of R911 million, despite substantial acquisition and

investing activity of over R1 billion during the period.

1 66

8

1761

1700 1

951

1 95

1

Annuity vshardware revenue (Rm)

Hardware revenueAnnuity revenue

0908070605

3 88

4

4 28

0 5 08

0

6 29

1 7 21

3

CEO

’s r

epor

t

15


» The focus on increasing our annuity revenue has paid off handsomely, underscoring its role as a stabilising agent in the current turbulent environment.

Key facts

24%Return on shareholders’ equity remained strong and the dividend was increased to 323 cents.

35% upEarnings per share rose to 569 cents with revenue exceeding R9 billion.

These results highlight the continued globalisation of Altech, particularly progress made in the East

African broadband and value-added network services markets. They also refl ect steady progress

towards our strategic objective of increasing our presence in the African broadband market.

Delivering on our strategy

Altech’s strategy is built on convergence and global expansion in the telecommunications,

multi-media and information technology sectors, the so-called TMT market. The cornerstones

of this strategy rest on achieving tactical positions in our chosen markets around the globe

by concentrating on developing and owning intellectual property rights, and providing value-added

products and solutions, particularly where technology convergence is driving consumer demand.

Growth of annuity income plays a paramount role in Altech’s strategy. A strong balance sheet

and available cash will allow us to take advantage of opportunities as they arise.

Our achievements during the review period are testimony to the group-wide commitment

to deliver leading technologies that touch lives. These are detailed in later sections.

Notably, our expansion into East Africa is already beginning to pay off. Through judicious

acquisition and organic development, Altech is now the largest full data network operator in

this fast-growing region, offering one of the most comprehensive ranges of products and

services available (detailed on page 16). In addition to other opportunities, Altech may invest in

one of several international undersea bandwidth cables that will service the east coast of Africa.

Through the acquisition of Technology Concepts and Fleetcall, we have started to capitalise on

the recently awarded I-ECNS and ECS licences, and have comprehensive plans to benefi t from a

more liberalised Telecoms environment where we will unearth opportunities in niche areas, inter

alia, gated communities. Furthermore, opportunities are presented by the Gautrain Project and

the Soccer World Cup 2010.

16


Chief executive offi cer’s report continued

Corporate actions in line with our strategic focus

Salient transactions or developments during or immediately after year-end included the

following:

» Altech Stream East Africa – our acquisition of controlling interests in East African digital

network operations (Kenya Data Networks Limited, Swift Global (Kenya) Limited and

Infocom Limited) has established a solid presence in this rapidly growing market and

provided Altech with a strategic interest in the undersea fi bre optic cable project known

as East African Marine Systems (TEAMS).

» Altech Netstar – On 1 March and 31 March 2008 respectively, the group acquired 100%

of the Altech Netstar franchises in Witbank and Bloemfontein.

» Fleetcall – Altech signed agreements to acquire 100% of the issued share capital of

Fleetcall on 1 March 2009, subject to profi t warranties over the next year. Fleetcall is

the largest trunked two-way radio operator in South Africa.

» Altech signed agreements to acquire 100% of the issued share capital of Technology

Concepts on 1 April 2009, subject to profi t warranties over the next year. Technology

Concepts is a second-tier internet service provider and information technology company

that offers strong synergies with the Altech Autopage Cellular portfolio, and indeed with

many other group companies.

» Effective 1 April 2009, Altech sold its Altech NamITech South Africa business to Gemalto,

the world leader in digital security. Given the excellent business relationship with Gemalto

that stretches back over 15 years, we believe this transaction offers the best future for the

Altech NamITech South Africa team and ongoing support to its customers. Altech Card

Solutions, Altech Isis and Altech NamITech West Africa are not included in the transaction

and remain part of the Altech group.

Technology innovation

To underscore the importance of leading by development in the rapidly changing TMT sector,

innovation is now mandated as a key strategic objective for subsidiary operations. During the

year, Altech companies continued to set new standards in TMT technologies:

» Altech UEC and Altech Isis developed a secure fl ash disk and end-to-end back-offi ce

management system for retail video rentals called MediaGate. This is the most signifi cant

technology introduction since the launch of the revolutionary personal video recorder or

PVR. Altech UEC has also introduced a low-cost PVR for emerging markets.

» Altech Netstar launched Guardian, a personal tracking device, and CyberSleuth Supreme,

a duel-technology, internet-based vehicle location system.

» Altech East Africa introduced low-cost small and medium enterprise (SME) and consumer

VoIP offerings for emerging markets.

» Altech Autopage Cellular launched Bottomline, an international cell-to-landline calling

product at local rates.

Connecting East Africa

As the largest full data network

operator in the region, Altech offers:

» internet access (using the full

spectrum of technology from

dial-up to VSAT);

» 4 000 kilometres of fi bre optic

cable from Mombasa to the

Ugandan border, and in the cities

of Nairobi and Kisumu;

» leased line (microwave, satellite,

lit fi bre, dark fi bre, copper);

» MPLS design and deployment;

» VoIP and internet protocol (IP)

telephony;

» hosting services;

» value-added services (IPTV,

hotspot operations, video

tracking, payment);

» security services (anti-spam/virus,

content fi ltering, managed

fi rewall, intrusion detection);

» undersea cable equity

participation (TEAMS);

» international satellite gateways

(Rwanda, Uganda, Kenya); and

» disaster recovery planning and

business continuity services.

CEO

’s r

epor

t

17


Liberalising an industry

In the past year, Altech has single-handedly furthered the liberalisation of telecommunications in

South Africa, securing key decisions that have been widely acknowledged as victories for the

South African consumer.

Altech’s successful court bid against the Independent Communications Authority of South Africa

(ICASA) was the subject of much media attention during the year. In essence, we sought to clarify

the rights of value-added network services (VANS) licensees to have their licences converted to

individual electronic communications network service (I-ECNS) licences. This would allow licensees,

such as Altech, the option of building their own networks, instead of relying on the infrastructure

of other network operators such as Telkom.

Following a landmark decision in our favour, we fi nally received the relevant licences, which were

offi cially issued to Altech Autopage Cellular in January 2009 by ICASA. This will enable the group’s

telecommunications subsidiary to develop and operate its own telecommunications network and

is an important victory in liberalising the sector and achieving our strategic objective of

capitalising on convergence in the TMT sector.

Sustainability

Altech remains committed to the principles of triple bottomline sustainability and is cognisant

of how important responsible business practice is to our long-term sustainability. We have again

incorporated the sustainability report into the annual report, reporting on the most material

issues to our stakeholders and our business.

A detailed discussion of each of these issues can be found in the sustainability report itself, but

I would like to emphasise some of the key highlights that have taken place during the year under

review.

On the environmental front, Altech embarked on a new journey to establish its carbon footprint,

and has continued to focus on energy-saving initiatives wherever these are possible.

We continued to make good progress in our transformation journey, moving from a policy-making

to an implementation phase with our Transformation Vision 2012 policy. While much still remains

to be done in certain areas before we can meet our targets, we are particularly proud of our

scores in skills development, enterprise development and socio-economic development. The Altech

Academy has achieved excellent results in its quest to develop skills among historically

disadvantaged employees, and we expect to see long-term results from these initiatives,

particularly in increasing our black and black female representation at the senior management

level.

Commitment to skills development

As a technology company, driven by innovation, we depend heavily on intellectual capital. Given

the skills challenge in South Africa, we took a proactive approach by establishing the Altech

Academy in November 2007.

To date, over 98 people have benefi ted from a range of programmes that offers the opportunity

for personal career development and international exposure. The academy also works closely with

the innovative leadership development programme of its parent company, Altron.

18


Chief executive offi cer’s report continued

Appreciation

Our revolutionary achievements during the review period would simply not have been possible

without the hard work and enthusiasm of all our people, who were sometimes faced with

arduous challenges. Your commitment is both a source of pride and inspiration.

I also thank our controlling shareholder, Altron, my fellow board members and all our global

and domestic partners who are the backbone of the Altech network.

We are privileged to enjoy strong relationships with our suppliers and the investment

community. We will continue to nurture these relationships, and those with our ever-increasing

circle of customers whose support and constructive contributions are so vital to our ongoing

success.

Outlook

We believe real growth in the coming year will be achieved through:

» further capitalising on the group’s strengths and strong local market positions;

» continued growth of annuity revenue businesses (currently 79%);

» strong focus on margin improvement, costs, working capital and cash fl ow;

» extraction of optimum value from the opportunities in India and the South African digital

migration programme;

» selective acquisitions;

» capitalising on the position achieved in the East African broadband and value-added

network services markets;

» increased presence in a more liberalised South African connectivity market and capitalising

on focused opportunities (I-ECNS and ECS licences);

» continued globalisation and leveraging ownership of intellectual property;

» capitalising on the convergence structure of the Altech group (telecommunications,

multi-media and technology or TMT);

» progressively enhancing the transformation of Altech through continuous innovation; and

» prudent, consistent and responsible management approach to ensure sustainable earnings

growth.

Craig G Venter – Chief executive offi cer

May 2009

Local vsforeign revenue (Rm)

Local

0908070605

Export/foreign

CEO

’s r

epor

t

19


Executive committee

1. Craig Venter » (46) Chief executive offi cer

2. Andy Baker » (44) Chief operating offi cer

3. Peter Curle » (63)

Executive director: Corporate Finance

4. Wessie van der Westhuizen » (61) Chief strategic offi cer

5. Johan Klein » (45) Group executive: Human Resources and

Industrial Relations

6. Dr John Carstens » (59) Chief fi nancial offi cer

1. Craig Venter2. Andy Baker3. Peter Curle4. Wessie van der Westhuizen5. Johan Klein6. Dr John Carstens

20


Operational review

Telecommunications – Wireless communications

Altech Autopage Cellular

Altech Autopage Cellular is the largest independent cellular service provider in South Africa.

Subsequent to year-end, the company was awarded licences to own and develop its own

telecommunications network. This is an important strategic development in our focus to

become a broad-based communications company, providing unique and creative solutions

for the convergence of voice, data and video – the major sectoral trend of the decade.

Despite the impact of the economy on subscriber spending patterns, performance for the

review period was good. Altech Autopage Cellular recorded strong growth of 195 945 gross

connections for the period, increasing its subscriber base for post- and prepaid connections

to surpass the landmark 1 million level, compared to 917 000 subscribers in the prior

period. The prepaid subscriber base continues to grow steadily, up 17% on the previous

year’s levels. Average revenue per subscriber (ARPU) was lower than 2008, refl ecting the

effect of the current economic environment on disposable income. This impact is being

mitigated by a strong focus on cost management and value-added services.

1 millionWe passed the landmark

1 million in subscribers level, reflecting our focus on providing unique and creative solutions as a broad-based communications

company.

Network agreements

21


Ope

rati

onal

rev

iew

Sales of electronic prepaid vouchers continued to grow, particularly through Absa

channels, point-of-sale terminals and our own franchised outlets. Sales of mobile

data services through add-on bundles and cellular data connections are providing

an increasingly important revenue stream for the company. The broadband and

data subscriber base has reached 71 000 (from 41 000 in the previous year) and

is rising steadily.

Altech Autopage Cellular has well-established channels to market. These include

150 franchise stores, a corporate sales force (with branches in major centres) and

premium service provider Altech Supercall. These are supplemented by third-party

call centres and distributors for data products. The company has signifi cantly

leveraged its national sales footprint in recent years and will continue to do so.

Effective management has resulted in an industry-leading churn rate of 10.34%.

Retentions were at 201 481, up from 174 938 from the previous year.

In August, Altech Autopage Cellular signed a channel partnership agreement with

Neotel, South Africa’s new telecommunications network, to provide a nationwide

retail distribution point for Neotel’s entire product range through 150 franchise

stores, allowing customers to purchase ‘off the shelf’ fi xed-line, voice and data

products. The agreement is a milestone for Altech Autopage Cellular, and the start

of the process of transforming the company from a pure cellular and data

business, to the most comprehensive, value-added provider of connectivity services

to business and consumers in South Africa.

Subsequent to year-end, Altech acquired the established internet service provider

and IT company, Technology Concepts. Almost two-thirds of Technology Concepts’

business is based on annuity income. This acquisition is expected to lead to

signifi cant synergies between Technology Concepts and Altech Autopage Cellular

as well as other group companies.

Altech Netstar

Altech Netstar is South Africa’s largest vehicle tracking company, and leader in the

stolen vehicle recovery (SVR) market.

» Altech Netstar Focus award for best vehicle

tracking company

22


Operational review continued

473 000vehicles, valued at over R6 billion,

protected by Altech Netstar.

Despite the substantial decrease in motor vehicle sales during the year, exacerbated by high

interest rates and the continued impact of the National Credit Act, Altech Netstar proved its

resilience and continued to deliver strong results. The company now manages a subscriber base

of over 473 000 vehicles with the value of protected vehicles exceeding R6 billion.

During the year, Altech Netstar sustained its commitment to technology development and innovation with the launch of Guardian and CyberSleuth Supreme, personal tracking and internet-based location systems that enable subscribers to track people or vehicles via computer or cellphone.

New regional offi ces were established in East London, Newcastle and Richards Bay, and satellite offi ces set up in Welkom, Kimberley and George, further enhancing Altech Netstar’s national presence. The 2008 acquisition of the Bloemfontein and Witbank franchises has proved very successful fi nancially, and the acquisition of Polokwane and Nelspruit is likely to take place early in the new fi nancial year.

In a joint venture with ITIS Holdings plc of the United Kingdom, Altech Netstar Traffi c is nearing the completion of the testing phase, and has already been awarded the fi rst stage of the Johannesburg Road Agency’s traffi c project. This initiative enables Altech Netstar Traffi c to provide a range of traffi c information services to subscribers using advanced technology and systems developed and provided by ITIS internationally.

Altech Netstar Fleet Solutions has recorded outstanding results. Following several notable contract awards against more established competitors, its subscriber base has increased to over 52 000, almost double the level of the prior period. Altech Netstar Fleet Management Services and ComTech, acquired in the prior year, have been merged into a single operating entity, with the strongest array of products on the market and showing greater effi ciencies.

Altech Netstar’s record of innovation was recognised when it received the Focus award for best vehicle tracking company, and again qualifi ed for the Technology Top 100 held by the Department of Science and Technology.

Altech Alcom Matomo

Altech Alcom Matomo provides a number of radio and telemetry products and solutions for various customers. The company again recorded a solid performance, refl ecting good management of multiple-year contracts and an expanded network of clients in South Africa and further afi eld.

The R540 million project for the South African Police Service (SAPS) in Gauteng is effectively complete. The company is now implementing a range of projects for police services in neighbouring countries, signifi cantly upgrading the City of Cape Town’s communications network, and fulfi lling orders for the national power utility and certain municipalities.

Unfortunately, the company was unsuccessful in its bid for the SAPS Eastern Cape tender, but remains committed to the pending SAPS KwaZulu-Natal tender.

Backed by signifi cant engineering and project management experience, Altech Alcom Matomo is capitalising on opportunities to provide digital radio communication networks, telemetry systems and specialised telecommunications equipment throughout southern Africa and for forthcoming sporting events in South Africa.

Altech Alcom Radio Distributors

Altech Alcom Radio Distributors is a leading supplier of Motorola two-way radio products in southern Africa via a network of authorised dealers. The company recorded a commendable performance and was again named as Motorola’s top distributor for Europe, the Middle East and Africa.

Broadband sales continued to rise, refl ecting steady demand for these robust internet protocol-based digital radio links for digital networks. The introduction of the digital radio range, augmented by third-party proprietary application software for effi cient personnel and vehicle tracking, is presenting numerous opportunities for further growth.

» Launches Innovative product launches set

new standards in security for people and vehicles

23


Ope

rati

onal

rev

iewConverged services and connectivity

Altech Stream East Africa

Altech Stream East Africa was formed after acquiring 51% of the Sameer Group’s ICT assets.

It has been a signifi cant success, rapidly forging several interconnected telecommunications

companies into a group-managed portfolio that has, to date, met all expectations.

Kenya Data Networks (KDN) produced solid results for the period, mostly attributable to

strong growth in the East African ICT sector and further developments in the KDN fi bre

network. This growth is expected to continue, supported by KDN’s strengthened position as the

infrastructure provider of choice in Kenya after winning the total network roll-out of the new

GSM entrant and other signifi cant contracts. The company has opened a subsidiary, Africa

Digital Networks Limited, based in the Democratic Republic of Congo.

The landing of the undersea data cable, Seacom, remains on track for July 2009 and is set to

both grow the overall ICT sector in East Africa and enhance the company’s ability to distribute

data capacity to the entire East African community. KDN will be an 10% shareholder in the

Kenyan government TEAMS undersea fi bre cable project. This will provide additional landing

points as well as redundancy.

It has been a year of consolidation and rationalisation for Swift Global (Kenya) across products

and services. The company’s technical platforms have been integrated into the KDN backbone

structure. The business will continue to leverage the operational synergies of KDN to provide

last-mile connectivity and value-added services to ICT markets in Kenya.

Infocom is a network operator and the leading internet service provider in Uganda and is

recognised as a technologically strong services entity. In addition, it holds very attractive

telecommunications infrastructure and service licensing rights in Uganda.

Infocom is well-positioned to generate strong revenue from distributing the pending

undersea data cable capacity to Uganda, and also provides the vital link between KDN and

Altech Stream Rwanda.

Altech Stream Rwanda is a start-up broadband network and internet service provider, which

was granted the necessary internet and gateway licences in June 2007. By February 2009, the

business had completed the roll-out of an outdoor WiFi network for consumers and a WiMax

network for corporate customers, both covering most of Kigali, the capital city. It is working

closely with Altech subsidiaries, KDN and Infocom, to provide local carrier services for the

Seacom cable landing in July 2009.

The company is well-positioned to achieve market leadership in Rwanda through the

distribution of undersea bandwidth capacity and interconnect facilities.

24



640 000personal video recorders sold

worldwide, offering unparalleled convenience.

Multi-media and electronics

Altech UEC

Altech UEC develops, manufactures, services and deploys advanced set-top box products and

associated software. The company produced very good results for the year, despite the

dramatic slowdown in consumer spending.

The benefi ts of sustained investment in developing advanced technologies and products were

refl ected in decoder production doubling to nearly 2 million units. Exports to India and

Australia are growing strongly.

Since launching the ground-breaking personal video recorder (PVR) in 2003, some 640 000

units have been sold worldwide building on the success of the dual-view decoder which rapidly

saw hundreds of thousands of households around the globe enjoying the unparalleled

convenience of this technology. In 2009 Altech UEC will be launching the high-defi nition PVR.

In addition to brisk South African sales, the company has orders for high-defi nition PVRs to the

Middle East.

25


Ope

rati

onal

rev

iew

Continuing this sterling record of innovation, Altech UEC completed development

of MediaGate, which allows the user to download a movie from a kiosk onto a

fl ash drive, and then play it at home through a low-cost internet protocol set-top

box.

Ahead of the proposed South African digital migration programme, Altech UEC has

developed a terrestrial set-top box and is participating in trials for both the

national broadcaster, SABC, and pay-TV operators.

The service divisions providing software design and after-sales service (Altech

Media Verge and Altech Global Decoder Logistics) recorded good performances for

the year from service operations based in South Africa and Australia.

Arrow Altech Distribution

Arrow Altech Distribution is a leading distributor of a vast range of professional

electronic components, products and solutions. The nature of its business exposes

the company to economic fl uctuations, as was the case in the review period when

key customers were affected by the global economic meltdown. Management’s

rapid response to these diffi cult conditions and a consistent performance from all

the company’s technology groups resulted in a solid operational performance for

the year.

Backed by its reputation in the market and formidable in-house technological

expertise, the company is well-placed to continue developing customised solutions

in this fast-changing sector.

Opportunities in energy and demand-side management are being explored, with

strong upside potential in the short to medium term.

» Altech UEC Our sterling record of innovation

continues with MediaGate

26



Technology (information technology)

Altech Isis

Altech Isis performed satisfactorily for the review period, strengthening its customer base for

its ground-breaking real-time converged customer care and billing product. To meet market

demand, the company has increased its systems integration capability, entrenching its position

as a reputable supplier of turnkey business support systems in South Africa and Africa.

Altech Isis France (the renamed entity after the 2006 acquisition of MobiMaster) improved its

trading performance for the review period. The company is actively exploring synergies within

the Altech group, and addressing opportunities in other territories.

27


Ope

rati

onal

rev

iew

Altech NamITech West Africa

Located in Lagos, Nigeria, this company manufactures prepaid cellular vouchers

for all fi ve major telecommunications operators in the country. The company is

currently processing over 75 million PINs for the production of prepaid air-time

vouchers per month, compared to 10 million per month in its launch year, 2006.

Several sizeable contracts were secured in 2008. The development drive for

regional export business has been ramped up with the successful delivery of the

fi rst export order.

During the review period, the company successfully lobbied to have an excise duty

of 5% of turnover, proposed by the Nigerian government, removed effective from

January 2009.

In 2009, the company will expand its product lines by adding the capability to

supply initialised and personalised chip card products to telecommunications

network operators and fi nancial institutions.

Altech Card Solutions

Continuing the trend of recent years, Altech Card Solutions delivered excellent

results for the period. Point-of-sale and PIN pad solutions for leading fi nancial

institutions are progressing to schedule, with a healthy order book for 2009.

Growth in the electronic security division has exceeded all expectations for the

year, with strategic business development initiatives well under way for aggressive

expansion into West and East Africa.

» Altech NamITech West Africa

Monthly PIN processing has increased over sevenfold in three years

28


» Altech is committed to conducting business according to

sustainable practices that take into account the people with

whom the company interacts and the environment.

people + environment

= the power of

partnerships

Sust

aina

bilit

y re

port

29


30


Sustainability report

Contents

For questions regarding this report, contactSecretarial and administration

Janine van Eden – Group company [email protected]

011 715 9017

About this report

This sustainability report forms part of the Altech annual report and aims to provide

all stakeholders in the business with a transparent and balanced report about the

company’s management of certain key sustainability issues and its impact on the

environment. Key stakeholders include shareholders, government, employees,

customers, suppliers, partners and the communities in which Altech operates.

This report covers the fi nancial period from 1 March 2008 to 28 February 2009, and

is the second time we have reported on sustainability issues, the last being for the

previous reporting period. This report includes Altech’s key operations. It does not

include the social or environmental performance of partners, other than how these

relate to preferential procurement, enterprise development and human rights in

operations outside South Africa.

The report concerns itself mainly with the company’s major operations, ie those that

contribute most signifi cantly to Altech’s business. These include Altech Card Solutions

(ACS), Altech UEC, Arrow Altech Distribution (AAD), Altech Isis, Altech Autopage Cellular,

and Altech Alcom Matomo.

The acquisition by Altech of a 51% controlling interest in certain digital network

operations of the Sameer ICT Group in Kenya, effective 1 March 2008, are included

in this report in so far as policy and governance of material issues is concerned.

Targets and measurement against indicators will only be available for the next

reporting period.

This report has not been externally assured.

Table of material issues 31

Awards 32

Management of sustainability 33

Shareholders 34

Customers 36

Partners 39

Employees 42

Health and safety 47

Transformation and SED 50

Environment 53

GRI content index 56

Shareholders’ analysis 58

31


Sust

aina

bilit

y re

port

Sustainability report – Table of material issues

Chapter Material issue Stakeholders affected Page No

Sustainability management

Corporate ethics, bribery, corruption and fraud

Shareholders, employees, customers, suppliers, regulatory bodies

33

Shareholders Transformation at ownership level Shareholders and all stakeholders in the value added statement, including government

34

Transformation through management control

Shareholders and all stakeholders in the value added statement, including government

35

Customers Meeting the evolving needs of customers Customers, shareholders, employees 36

Customer service Customers, shareholders, employees 37

Expansion of the customer base Customers, shareholders, employees 38

Liberalisation of the telecommunications industry

Shareholders and all stakeholders in the value added statement, including government

39

Partners Securing continuity of supply Suppliers, customers, shareholders 40

Maintaining product quality from outsourced suppliers

Suppliers, customers, shareholders 41

Human rights in operations outside of South Africa

Suppliers, partners, distributors 41

Transformation through preferential procurement

Historically disadvantaged suppliers and all stakeholders in the value-added statement, including government

42

Transformation through enterprise development

Historically disadvantaged businesses and all stakeholders in the value-added statement, including government

42

Employees Employment equity Employees, historically disadvantaged employees, prospective employees, shareholders, government

43

Skills development Historically disadvantaged employees and all stakeholders in the value-added statement, including government

45

Health and safety Employees, their families and communities related to Altech

47

HIV/Aids Employees, contractors 48

Transformation and SED

Transformation through socio-economic development

Communities that relate to Altron, society at large and government

52

Environment Carbon footprint All stakeholders to the business 54

Energy usage and efficiency All stakeholders to the business 55

Impact of products on the environment All stakeholders to the business 55

32


Sustainability report – Management of sustainability

Value-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 stakeholders who contributed to its creation.

Also set out below is the amount retained and reinvested in the group for the replacement of

assets and the further development of operations.

2009 2008

Rm % Rm %

Revenue 9 164 8 242

Suppliers of materials and services 7 189 6 640

1 975 1 602

Other income – net (4) (10)

Total value added 1 971 1 592

Applied as follows:

To remunerate employees

Salaries, wages, pensions and other benefi ts 971 49.3 842 53.2

To reward providers of capital

Dividends to ordinary shareholders 288 14.1 235 14.9

To the state 254 12.9 219 13.9

Company tax 226 193

Secondary tax on companies 28 26

To replace assets

Depreciation 130 6.6 96 5.4

To expand the group

Net earnings retained – shareholders (including minority

portion) 328 17.1 200 12.6

1 971 100.0 1 592 100.0

Awards

» Altech included in the 2008 JSE (SRI) Index

» Altech takes top honours in the 2008 TT100 JSE Limited Award for Excellence in the

Management of Technology, Innovation and People

» Altech wins Best Reporting and Communications in the General/Industrial category of

the 2008 Investment Analyst Society of South Africa Awards

Sust

aina

bilit

y re

port

33


Sustainability approach and identifi cation of material issues

As a responsible corporate citizen, Altech is committed to conducting its business according to

sustainable practices that take into account the people with whom the company interacts, the

lasting economic impact the organisation has on the planet, and the economic environment.

Sustainability is integrated into the company’s everyday business practice and treated as

business imperative that will affect the long-term well-being of the company.

In identifying its most material sustainability issues, Altech considers its daily interaction with

stakeholders such as suppliers, partners, customers, employees and shareholders and how its

business impacts these groups. Many of the issues identifi ed are therefore closely linked to

Altech’s core operational issues and risks. The company also takes into consideration the issue

of transformation in the South African context and global concerns about climate change.

Management of sustainabilityAltech uses certain local and international standards to inform its management of

sustainability in the business. These include the King Report on Corporate Governance for

South Africa – 2002 (King II); the JSE SRI (JSE Limited Social Responsibility Investment) Index;

the Department of Trade and Industry Codes of Good Practice (dti CoGP); and the Global

Reporting Initiative’s (GRI) guidelines and indicators (G3 edition). This report is self-declared

at a level C compliance with the GRI G3.

Altech manages certain sustainability issues that are relevant to the entire group, including

issues of corporate ethics and transformation. But while such issues are guided by centrally

derived group-wide policies and strategy, Altech leadership takes responsibility for driving

these issues in the business. Various committees drive sustainability issues, including a

transformation committee (with subcommittees at the operational level) and a business risk

committee. Each operation is responsible for identifying its key sustainability risks and for

implementing policies, procedures and initiatives to meet sustainability targets.

Corporate ethics, bribery and corruption

Altech takes issues of corporate governance extremely seriously, and has a zero-tolerance

policy on all issues of bribery and corruption. Altech is guided by Altron’s Policy Manual which

includes a corporate code of conduct that covers improper use of company funds; customer/

supplier/government relationships; confl ict of interest; duties of directors; operating

procedures; and supplemental guidelines for government contracting.

During the year under review the company fi nalised a new corporate gifts and entertainment

policy to provide guidelines for dealing with this particular risk area. In compiling the policy, the

company was informed by the Prevention and Combating of Corrupt Activities Act, No 12 of

2004.

Internally, Altech raises awareness of issues of corporate governance by providing all

employees with a copy of the corporate code of conduct and the corporate gifts and

entertainment policy at induction. A fraud hotline, managed externally by Deloitte & Touche

to ensure confi dentiality, allows employees to blow the whistle on any fraudulent or suspect

activities.

» Altech takes top honours in the 2008 TT100 JSE Limited Award for Excellence in the Management of Technology, Innovation and People

34


Sustainability report continued

Known as Tip-Offs Anonymous, employees are made aware of the existence of this hotline and

how to use it through an internal poster campaign, the intranet and numerous articles in

internal magazines and publications.

Each of Altech’s operations, together with the business risk committee, regularly assess any

potential bribery, fraud and corruption risks. These are infl uenced by the nature of the business

and its geographical location.

Two of Altech’s operations, in Rwanda and Uganda, are in countries that have been identifi ed

as high-risk bribery regions, and the nature of the Altech NamITech West Africa operation in

selling prepaid cards puts it at an increased risk for fraud. That operation mitigates this risk

by adhering to international compliance standards and implementing the tightest security

and information systems.

Altech also has structures in place to identify, mitigate and manage risks. They include

insurance cover, disaster recovery and business continuity planning. All operations have

contingency plans in place in the event of civil unrest and riot, fl ood, fi re and prolonged strike

or terrorism.

The corporate governance report (pages 59 to 69) deals with the responsible stewardship of

the company.

Shareholders

Introduction

Altech’s interaction, communication and engagement with shareholders, investors and analysts

is detailed in the corporate governance report on pages 59 to 69.

Transformation through ownership

Altech is committed to increasing the level of black ownership of businesses and other fi nancial

assets. Decisions with regard to ownership at all levels within the organisation remain the

prerogative of the shareholders, the board and senior top management of the group. The

Altech CEO, together with the Altech board, is required to empower the business in accordance

with the Transformation Vision 2012 and the requirements of the dti CoGP.

Status

Altech’s anchor B-BBEE partners are Platina Venture Holdings, which has an effective 25% equity

interest in Altech Alcom Matomo, and Pamodzi Investment Holdings, which has a 25.1% equity

stake in Altech IT. As a result, Altech Alcom Matomo scores 18 points out of a possible 20 for

Code 100 Ownership, while Altech Isis, Altech Card Solutions (ACS) and Altech NamITech South

Africa (since sold) score 14.35, 14.35 and 14.35 points respectively. Altech Netstar Fleet

Solutions scores 14 points, but the remaining Altech operations score 0. These fi gures were

verifi ed during the year under review by external B-BBEE compliance verifi cation fi rm,

Empowerdex.

» Altech is committed to increasing the level of black ownership of its businesses

Sust

aina

bilit

y re

port

35


Transformation through management control

Transformation through management control is a key area of focus for Altech and one

governed by the Transformation Vision 2012 policy, under the guidance of the transformation

committee and the transformation subcommittees at the operational level. The company is

committed to changing the racial composition of management of the organisation, and

particularly to increasing the representation of black females in middle to senior management

positions.

Status

This particular Code is one on which Altech’s scores are below average, with all operations

scoring 2.5 points or less out of a possible 20. The general shortage of skills and especially

of black skills in the ICT sector presents a challenge to the task of improving the demographics

of Altech management. Black female talent is in particularly short supply and in spite of

progress being made by initiatives such as Jipsa (Joint Initiative on Priority Skills Acquisition),

the ICT and engineering sectors are still largely dominated by white males. At board level,

Mr Zakhele Sithole and Mr Moses Sindane were appointed as independent non-executive

directors, improving the transformation profi le at director level.

Approach, policy and structures

Considering the scarcity of black and black female ICT and engineering graduates relative to

the skills requirements of the industry, Altech has focused its efforts on the creation of an

internal skills pipeline through targeted skills development programmes. The Altech Academy

is driven by a policy aimed at identifying talent and leadership potential. It drives an increased

commitment from management to the strategic importance of managing the fl ow of talent

through the organisation. The policy maps out indicators of talent and a process for identifying

sustainable career growth for high-potential individuals.

Initiatives

The Altech Academy has a variety of leadership development programmes that target

high-potential black employees and fast-track them to middle and senior management

positions. These include the Accelerated Leadership Development Programme and the

Altron Young Presidents’ Club.

The former identifi es historically disadvantaged employees with high growth potential and,

through individual assessments, maps out a career path and tailored training programme to

grow them into leadership positions. The latter targets young future leaders, many of whom

are from historically disadvantaged backgrounds, and exposes them to many different levels

and job types in the group. During the year the Altech Academy launched a targeted two-year

leadership development programme, resulting in a master’s degree in the Management of

Technology and Innovation. The career development of these individuals to management

positions will take time to produce results but is intended to bring about long-term, sustainable

transformation of the company’s management. During the year 12 black employees were

enrolled in the Accelerated Leadership Development Programme.

25%Equity interest held by B-BBEE partner, Platina Venture Holdings, in Altech Alcom Matomo.

25.1%B-BBEE Equity interest held by Pamodzi Investment Holdings in Altech IT.

36



Customers

Introduction

Meeting customer needs is central to the ongoing success of Altech’s business. The most

material sustainability issues regarding customers include customer service, meeting the

evolving needs of customers, expansion of the customer base and the liberalisation of the

telecommunications market.

Engagement

Altech engages with customers on each of these issues in a variety of different ways,

depending on the issue at hand, the nature of the relationship and the type of business

conducted by each operation. Depending on the requirement, each operating company holds

monthly or quarterly strategic level meetings with customers to discuss their future plans and

gauge the type of products and services these plans will require. Feedback from these forums,

together with monthly reports made by each operating company to the board on the various

opportunities, challenges and threats that exist, informs the broader strategy of the Altech

group. Each operation also holds weekly meetings that focus on the operational side of the

business and discuss issues relating to specifi c project delivery and customer satisfaction.

Meeting the evolving needs of customers

As technology rapidly evolves, so technology companies need to ensure they remain at the

forefront of the latest developments in order to offer their customers products that are

relevant and up-to-date.

In meeting this aim, Altech Media Verge, a division of Altech UEC, engages with a diverse range

of current and potential customers to understand their perspective on change and develop

technical innovations that will address their future needs. Internally, the company holds regular

‘Blue Sky’ forums to present the latest research and trends and stimulate discussions about

future innovations. Innovative concepts are presented at these forums to the Altech UEC

business panel, and the company also holds bi-monthly ‘Decoding the Future’ sessions where

technical leaders discuss future trends. These are passed on to technical architects at a

quarterly architects’ innovation forum.

Altech NamITech West Africa also harnesses innovative ideas to meet its customers’ need

for lower costs per recharge card, assisting the company to penetrate the low ARPU

(Average Revenue Per User) marginal revenue customer segment. In meeting this goal,

Altech NamITech West Africa has developed partnerships with material and manufacturing

equipment suppliers with whom it will run joint technical development initiatives.

With the acquisition of the operation in France, Altech Isis is now able to offer all customers

the administration system product (previously only available in South Africa) and the billing

system product (from France). Because the same customer often requires both products,

this development provides Altech Isis with a stronger market offering.

» As technology rapidly evolves, Altech ensures that it remains at the forefront of the latest developments in order to offer customers relevant, up-to-date products

Sust

aina

bilit

y re

port

37


Altech Card Solutions (ACS) has plans in place to invest in the development of an

‘active-active’ transaction switch, together with technology partner, Postillion. During the

year under review the company also invested heavily in its transaction switch software to

ensure compliance with various international payment standards to which its customers are

subject. These include standards from the Payment Card Industry, Europay MasterCard, Visa

and MasterCard.

For Altech Netstar, innovation remains the most critical factor in developing new products and

reducing costs. The company has launched a new internal innovation stimulation programme,

encouraging employees to submit ideas for new products and services.

These submissions are rated and approved by an innovation committee comprising members

of senior management, and employees are rewarded each time one of their submissions is

approved.

The bulk of Altech Netstar’s sales are driven by the insurance industry and motor dealers, and

much of the company’s innovation and product development therefore responds to the

requirements of these two market segments. Senior executives meet on a regular basis with

key clients from these industries to understand their needs.

Arrow Altech Distribution (AAD) keeps in close contact with its customers and the international

demands and trends which drive its business. It regularly embarks on customer surveys to

determine current and future needs, and whether its products are meeting these. Plans are in

place to run a real-time SMS-based survey in the year ahead to facilitate ease of response.

Customer service

The economic downturn has led to an increasingly competitive business environment in which

customer service is often a key differentiator, particularly at a time when costs are diffi cult

to contain.

Altech Autopage Cellular has made good progress in putting systems in place to improve

service levels.

The company measures customer service on the length of time it takes to answer a call and

how many calls are abandoned. During 2009 it will add the Net Promoter Score to its

measurement tools as a comparative quality benchmark.

During the year the company identifi ed the key reasons for the unsatisfactory grade of service.

These include network billing errors and Altech Autopage Cellular billing errors arising from late

migrations and cancellations. The tools used by credit control to collect money also drive large

volumes of calls to the call centre. In response, Altech Autopage Cellular has recruited

additional staff into the call centre particularly to deal with increased demand in peak periods;

boosted staff numbers in the managing director’s offi ce to deal with customer queries and

complaints; restructured the management team to make it more customer-centric; and created

an accounts helpdesk. The company continued with its ‘Everyone Owns the Customer’ (EOTC)

philosophy, identifying and acting on each instance where this principle is not applied to

customer interaction.

Corporate clients

38



The managing director continues to take ultimate responsibility for customer service and to

review daily service levels. Work is under way to combine the Altech Autopage Cellular and

Altech Netstar call centres, which will boost capacity and improve service levels. The company

is also investigating the possibility of automating more functions to allow customers to serve

themselves. To circumvent the issue of payment reminders and credit control, it plans to

implement a debit order on demand system of payment.

Divisional heads, senior managers and the managing director of Altech Netstar personally deal

with customer complaints and receive daily performance statistics, reviewing any instances

where service has been less than exemplary. During the year the company implemented a

system to manage escalated complaints and meet its ‘one touch resolution’ goal, and placed

a strong focus on the qualitative aspect of service delivery. SMS communication is utilised to

confi rm sales and fi tment bookings and personal follow-up calls are used to gauge customer

satisfaction after each interaction. The company has also upgraded its online Customer Zone

facility to provide 24-hour, multi-channel customer access.

The above interventions have resulted in much-improved customer service, with 94% of calls

being answered within 20 seconds at Altech Netstar. This is against an industry norm of

80% in 20 seconds and comparable with leading international call centres. The average speed

of answer is 5 seconds.

AAD closely monitors all customer complaints, including the number of product returns, and

reviews these on a monthly basis at senior and middle management level. During the year

this fi gure has dropped signifi cantly.

Expansion of the customer base

As technology changes, new opportunities arise for Altech’s businesses to expand their

customer base into new markets. This is as important to the company’s sustainability as the

retention of existing customers. The issue is the responsibility of the chief strategic offi cer and

the chief operations offi cer, who drive customer expansion plans throughout the business.

Altech UEC continued to make progress in reducing its dependency on MultiChoice, while

still retaining its market share with this important customer. The company now exports to

41 countries globally and during the year delivered 700 000 set-top boxes to the Indian

market. The focus for the year ahead will be on exploring the many opportunities that lie

outside South Africa and taking further advantage of the huge Indian market potential.

Altech Netstar has identifi ed signifi cant opportunities for expansion into Brazil, where vehicle

theft rates are similar to South Africa and the vehicle tracking market is as yet untapped. In

South Africa, the company is making extensive use of automated client engagement tools, such

as the newly launched Auto-Dialer, to retain and up-sell to existing customers. The system

facilitates calls to customers whose contracts are due to expire and has helped keep cancellation

fi gures static, a signifi cant achievement when compared to an industry trend of increasing

cancellations.

A number of small acquisitions by Altech Netstar Fleet Solutions has increased this business’s

market share from 8% to 15% in 15 months.

94%Number of calls answered in

20 seconds at Altech Netstar Call Centre.

» Everyone Owns the Customers

Altech Autopage Cellular continues with its ’Everyone Owns the Customer’ (EOTC) philosophy, building on its customer-centric approach

Sust

aina

bilit

y re

port

39


Although developments in Africa are slow due to the slow rate of growth in the automated

payment solutions market, Altech NamItech West Africa has made good progress in this sector

during the year and has approved funding for a personalisation bureau in Lagos, Nigeria.

Liberalisation of the telecommunications industry

2008 saw Altech playing a leading role in pioneering the liberalisation of the telecommunications

market. Deregulation of the market will provide customers with access to a wider range of

telecommunications providers, of which Altech is just one.

In August 2008, the High Court ruled that Altech Autopage Cellular be allowed to convert

its existing value-added network services (VANS) licence into an individual electronic

communications network service (I-ECNS) licence. Effectively this allows the company to develop

and operate its own telecommunications network and expand its offering.

These opportunities, however, need to be balanced against the threat of competition caused by

signifi cant delays in the legal process. This allowed existing players to entrench their market

position while Altech awaited outcome of the court ruling. In response to this, and as a new

entrant to an established market, Altech took a strategic decision to focus on niche opportunities

in internet service provision in South Africa. In April 2009, it acquired 100% of Technology

Concepts, an internet service provider (ISP) and information technology company. The company

plans to leverage its existing footprint and scale up Altech Technology Concepts by introducing

new internet services to Altech Autopage Cellular’s one million corporate and retail clients. The

acquisition enhances its ability to provide data services to its voice cellular subscribers, and

represents a response to the developing convergence of voice and data in the telecoms arena

and the increasing demand for bundled services.

East Africa also presents better opportunities for Altech Autopage Cellular to establish itself as

a dominant industry player and the company will focus efforts in this area in the coming year.

PartnersIntroduction

Altech procures goods and services from many different suppliers and the provision of materials,

product components and services is central to its ability to meet customer needs and deliver on

its business strategy. The partners who supply these materials and services are therefore

important stakeholders in the business. In addition to ensuring the continued supply of

high-quality goods and services, Altech promotes responsible procurement practices and

encourages suppliers and partners to behave in an ethical and responsible way.

Management of partner relationships

The chief strategic offi cer and chief operating offi cer hold regular monthly or quarterly meetings

with key suppliers to discuss their roadmaps and future plans. This enables the company to

match these plans against its own future strategy to ensure alignment. Divisional heads at each

operation also interact with suppliers as necessary to discuss operational issues.

2008High Court rules that Altech Autopage Cellular can convert its VANS licence to an I-ECNS licence, allowing the company to operate its own telecommunications network.

40



Altech is represented on the Altron group purchasing council which comprises purchasing and

materials managers from each of the group companies, and on the export council which

involves sales and logistics managers. These councils convene bi-annually and offer guidance

and support on, amongst other issues, developing a more demographically representative

supplier base and foreign exchange controls and international commercial (INCO) terms.

With regard to the issues of preferential procurement and enterprise development, Altech is

guided by the dti CoGP and the Transformation Vision 2012 policy. The chairperson of the

transformation subcommittees in each operation is responsible for the performance on each

of these two Codes, the progress of which is reported to the Altech transformation committee.

The most material sustainability issues regarding partners include:

» securing continuity of supply;

» maintaining product quality from outsourced suppliers;

» human rights in the outsourced supply chain;

» preferential procurement; and

» enterprise development.

Securing continuity of supply

A large proportion of the Altech UEC’s product components are sourced directly from Chinese

suppliers and the language barrier, business culture and physical distance of current sourcing

operations can complicate the supply chain, resulting in high supply costs. In tackling these

challenges, Altech UEC has established partnerships with existing service providers who track

the reduction of import costs and benchmark these against current Bill of Materials (BOM)

costs. The managing director at Altech UEC is ultimately responsible for securing continuity of

supply and reports to the chief operating offi cer.

Formal service level agreements with suppliers provide tangible measures for improvement and

the company holds monthly objective reviews with its partners.

The success of Altech’s operations in East Africa, and particularly the planned roll-out of a

telecommunications network, will be infl uenced by the quality of suppliers with whom the

company interacts. Altech’s strategy is to engage a few large suppliers that are top players in

their sector, instead of a range of smaller ones. During the year the chief strategic offi cer was

involved in establishing strategic supplier relationships with future partners for the East Africa

operation.

Altech Card Solutions (ACS) facilitates two-way interaction between its customers and partners,

to ensure that partners are in a position to meet evolving customer needs. It also holds annual

meetings with partners to share information on trends, future developments and the way

forward.

» Quality suppliers The success of Altech’s

operations in East Africa, and particularly the planned roll-out of a telecommunications network, will be infl uenced by the quality of suppliers with whom the company interacts

Sust

aina

bilit

y re

port

41


Maintaining product quality from outsourced suppliers

Generally speaking, Altech’s policy of partnering with large suppliers that are in leadership

positions in their industry helps to ensure high levels of product quality. International norms

apply for most of the products, and service level agreements, negotiated upfront at the

contract stage of the supplier relationship, establish the minimum quality requirements.

The manufacturing operations within Altech use statistical process control as a basis for

incoming quality verifi cation of components and products. This uses sampling methods and

verifi cation against world standards, each of which depend on the nature of the business.

During the year some products manufactured in China for Altech UEC were defi cient and had

to be recalled.

The company has product warranty clauses in place, and has agreed levels of quality and

conformity with its Chinese suppliers to prevent repeat incidents.

Arrow Altech Distribution (AAD) leverages the relationships that parent company, Arrow, has

with suppliers, and predominantly partners with blue-chip organisations that are original

equipment manufacturers and have a solid track record of quality. AAD also prefers to partner

with organisations that are ISO-listed or adhere to recognised international quality

benchmarks.

Human rights in operations outside South Africa

Altech strongly rejects any labour practices that do not conform with international standards

governing human rights and the fair treatment of workers. As a subsidiary of Altron, the

company is a signatory to the United Nations Global Compact and is therefore committed to

upholding the rights of employees, whether they be employed directly by Altech or by its

suppliers.

Poor labour practices have been identifi ed as a potential risk in China, from which Altech UEC

sources some of its products.

The managing director of Altech UEC, together with the chief operating offi cer, engineering

director and head: supply chain, is responsible for ensuring that the company does not partner

with organisations who are guilty of unfair labour practices. The company includes general

safety regulations in all contracts and requires audits of the working environment and written

reviews of all appointed staff.

Preferential procurement

Preferential procurement remains a key focus for Altech, both as a business imperative and

from the point of view of transformation. As a transformation issue, the setting of targets and

achievement of goals relating to preferential procurement is governed by the Transformation

Vision 2012 which is aligned to the dti CoGP, and overseen by the Altech transformation

committee and transformation subcommittees within each operation.

6.32%Percentage of net profit after tax that Altech spent in 2009 developing small black-owned supplier enterprises.

42



All Altech operations show good progress on reaching preferential procurement targets, with

many scoring well above 14 points out of a possible 20. Those that performed particularly well

include AAD (15.03), Altech UEC (18.06), Altech Netstar (17.01), Altech Netstar Fleet Solutions,

Altech Alcom Matomo (19.8), Altech Isis (15.3) and ACS (18.42).

Enterprise development

Four Altech operations (Altech UEC, Altech Autopage Cellular, ACS and Altech NamITech South

Africa) scored full points for enterprise development during the year under review, but the

remaining operations all score below 4 points out of a possible 15. To boost the performance of

these operations, the Altech transformation committee is in the process of fi nalising guidelines

to enable operations to develop an enterprise development strategy that will highlight

immediate enterprise development opportunities within each business.

The issue of enterprise development is governed by the Transformation Vision 2012 policy and

is the strategic responsibility of the Altech transformation committee, although line managers

and divisional heads are responsible for the achievement of enterprise development targets

within their area. As with all other dti CoGP, the company measures performance on this issue

against the B-BBEE scorecard. In addition, Altech has committed to spending 3% of net profi t

after tax on enterprise development activities. The total spend for the period amounted to

R34 570 295, which equates to 6.32% of NPAT.

Among the successful enterprise development projects implemented during the year are

Altech Autopage Cellular’s assistance programme for black owners of its dealership stores.

This programme identifi es and meets the training, systems and payment term needs of these

business partners. Similarly, Altech Netstar discounts various stock items to assist in the cash

fl ow of black-owned fi tment centres.

Employees

Introduction

Some 2 599 full-time and 1 042 temporary and contract workers are employed by Altech in its

South African operations, with a further 900 in offshore operations. The company values the

contribution that these people make to its ongoing success, particularly in light of the severe

skills shortages that continue to characterise the ICT sector. Altech makes every effort to

attract and retain the most talented people in the industry by investing in the training,

development, career growth and remuneration of its employees.

Management of employee relationships

Altech’s interaction with its employees is governed by the Altron group policy manual, which

outlines all aspects of human resources and employment.

» 3% of net profi t after tax committed to enterprise development activities

Sust

aina

bilit

y re

port

43


The group executive: HR is responsible for all group human resource-related issues and

strategy, while human resource managers in each group company are responsible for

operational HR issues.

The company is guided by and complies with all relevant labour legislation, including the Basic

Conditions of Employment Act, Labour Relations Act, Skills Development Act and Employment

Equity Act.

Two of Altech’s operations – Altech UEC and AAD – are unionised, with 10% of Altech staff

belonging to either NUMSA, CEPPWAWU or SATU. These operations are also members of the

Metal Industry Bargaining Council and some 40% of employees are represented by equivalent

consultative structures. All employees are provided with a copy of the disciplinary and

grievance procedure on induction and in the letter of employment, copies of which can be

accessed via the intranet. There was no signifi cant industrial action during the year under

review.

Operational management holds monthly or quarterly review sessions to share progress reports

with employees and provide a forum for open two-way discussion between staff and

management. The company also conducts employee climate surveys on specifi c topics where

these are called for. A grievance procedure is in place and provides individuals with a formal

structured process through which to raise specifi c grievances. These mechanisms provide

management with a good sense of the issues facing the employee stakeholder group.

Material issues discussed:

» Employment equity

» Skills development

» Health and safety

» HIV/Aids

Employment equity

Altech recognises the importance of bringing about transformation inside the organisation and

ensuring that its workforce profi le refl ects the demographic diversity of the country.

The dti Code 300 Employment Equity (EE) measures the number of black employees holding

positions of junior, middle and senior management, as well as the number of black disabled

employees. With the formal adoption of the Transformation Vision 2012 in 2008, Altech

committed to adopting the Code’s occupational category defi nitions of senior, middle and

junior management throughout the group, resulting in a uniform approach to measuring

occupational levels and categories of employees. The group is committed to addressing current

distorted employee demographics by employing black people and in particular black women

and black disabled individuals.

70%Score achieved by Altech Autopage Cellular for Employment Equity.

44



Measurement and goals

During the year under review Altech set internal transformation targets in line with the B-BBEE

scorecard. The results of the April 2009 audit, conducted by rating agency Empowerdex, are as

follows:

Scorecard weightingequals 15

Weightingpercentage

Arrow Altech Distribution 6.54 44Altech UEC South Africa 5.48 37Altech Autopage Cellular 10.78 72Altech Netstar 3.72 25Altech Netstar Fleet Solutions 7.05 46Altech Alcom Matomo 3.37 22Altech Alcom Radio Distribution 5.81 39Altech Isis 3.8 25Altech Card Solutions 6.18 41Altech NamITech South Africa 11.4 77

Both Altech Autopage Cellular and Altech NamITech South Africa (sold during 2009) achieved

a score above 70% for EE. Companies falling short of the 50% target of the CoGP scorecard of

15 points include Arrow Altech Distribution (AAD) (44%), Altech UEC (37%), Altech Netstar

(25%), Altech Netstar Fleet Solutions (46%), Altech Alcom Matomo (22%), Altech Alcom Radio

Distribution (39%), Altech Isis (25%) and Altech Card Solutions (ACS) (41%). These scores

refl ect the scarcity of black candidates in the general ICT skills pool. Nationally, less than 50%

of technology and engineering graduates are female and not even 10% of this 50% is black

women.

Altech response

Recognising that the number of ICT graduates is not suffi cient to meet the industry’s need for

skills, Altech has adopted a dual internal and external skills development, attraction and

retention strategy. Its approach is to nurture and develop human and intellectual capital within

the organisation, and to retain existing talent through a combination of career development

programmes, remuneration benchmarking and fast-tracking of critical skills.

Details of the company’s response is reviewed in the next section that deals with the skills

development element of the dti CoGP.

» Altech has adopted a dual internal and external skills development attraction and retention strategy

Sust

aina

bilit

y re

port

45


Workforce profi le

Male Female

Total SA workforce

% black represen-

tation

% female represen-

tation

Abled Disabled Abled Disabled

A C I W A C I W A C I W A C I W

Senior top management 1 18 1 20 10.0 5.0

Other top management 1 33 1 1 2 38 5.3 7.9

Senior management 3 3 13 77 1 1 2 6 26 132 21.2 26.5

Middle management 22 15 45 185 1 1 9 9 17 66 370 31.9 27.3

Junior management 216 98 199 263 1 1 1 8 256 114 180 268 3 1 608 66.3 51.1

Semi-skilled 89 9 9 14 139 52 6 12 1 331 91.8 63.4

Unskilled 21 24 1 13 3 38 100 100 54.0

Total permanent workforce 351 127 290 590 1 3 1 11 418 181 248 374 0 0 0 4 2 599 62.3 47.1

Temporary/contractors 251 24 413 55 1 118 29 139 12 1 042 93.5 28.6

Total workforce 602 151 703 645 1 3 1 12 536 210 387 386 0 0 0 4 3 641 71.2 41.8

Key: A – African C – Coloured I – Indian W – White

Skills development

Skills shortages in the ICT sector present an ongoing national challenge which necessarily

impacts Altech’s business as a technology-based company. Altech’s most critically scarce skills

are in the software engineering, systems engineering and project management disciplines,

and while all operations experience some degree of skills shortage, Altech Isis, Altech UEC,

Altech Netstar and Altech Autopage Cellular are most signifi cantly affected.

Our approach

The company is guided by the Altech education, training and development policy while the

Altech Academy, established in partnership with the Da Vinci Institute of Technology in 2007

to meet the company’s skills requirements, carries out the operational aspects of skills

development, attraction and retention. This is done through three pillars of intellectual

capacity building: leadership development, learnerships and bursaries. The Academy’s

activities are aligned with the relevant skills legislation and national skills development goals.

Governance structure, reporting and measurement

The group executive: HR is jointly responsible for skills development, attraction and retention,

together with the Altech Academy Learning Board, which meets bi-annually. This board is

chaired by the Altech CEO and includes members of the Da Vinci Institute and representatives

from Altech senior management.

46



The Academy Advisory Board, chaired by the group executive: HR and including internal and

external skills development experts, plays an important advisory role and ensures that the

Academy’s learning interventions are aligned with Altech’s business strategy and designed to

meet changing industry skills requirements.

Altech aims to spend 1% of payroll on skills development and during the year achieved 100%

against this goal, spending a total of R9.64 million. Return on investment is measured as the

percentage of employees trained to certifi cation, which amounted to 80% during the year.

Skills development – initiatives and progress

» Accelerated Leadership Programme

Altech’s biggest challenge lies in increasing the number of black individuals in management

positions. The Altech Academy’s Accelerated Leadership Programme was established

specifi cally to achieve this goal. It targets high-potential employees from historically

disadvantaged groups and fast-tracks their development within the group. This helps to ensure

that employment equity targets are met and prepares a diverse future skills pipeline.

Currently, Altech has a 66% black representation at the junior management level, with a 31.9%

representation at middle management and a 21.4% representation at senior management

levels. Black managers from these areas have high potential and the Accelerated Leadership

Programme fast-tracks them through the different management levels. During the year

13 black managers embarked on the programme. They each undergo assessments and a

career path mapping exercise, and a training programme is tailored to meet their individual

development needs.

» Graduate training programme

Of the 15 graduates who participated in the graduate training programme during the year,

eight were historically disadvantaged individuals. Once these graduates complete their practical

training, Altech has the option of offering them permanent positions within the company.

Skills attraction – initiatives and progress

» Bursary programme

In order to increase the number of graduates in critical ICT skills areas, Altech offers both

undergraduate and postgraduate tertiary study bursaries, reviewed on an annual basis based

on academic performance. Students gain valuable work experience at Altech during university

vacations and the company aims to give them maximum exposure to as many operations and

departments as possible. Graduates are placed in Altech on a permanent basis as part of a

year-for-year work-back agreement that forms part of the bursary conditions. This provides

Altech with a good return on the bursary investment and provides the company with direct

access to ICT graduates. During the year the company increased the number of bursaries from

eight to 21, seven of whom are black candidates and three of whom are black females.

The company awarded an additional 13 bursaries during 2008, exceeding the commitment

made in 2007, and bringing the total to 21 bursars at different universities around the

country.

» Altech Academy bursary students

Altech offers both undergraduate and postgraduate tertiary study bursaries

Sust

aina

bilit

y re

port

47


In line with Altech’s critical skills requirements, these bursars are enrolled in Electrical,

Industrial, Mechanical and Computer Engineering programmes, as well as in Computer Science

and Information Technology degrees.

» Learnerships

Altech strongly favours historically disadvantaged individuals for its various learnership

programmes. During the year a total of 71 candidates were enrolled in the learnership programme,

allowing them to gain valuable hands-on work experience. The programme links structured

learning with work experience so that learners can obtain registered NQF qualifi cations.

Bytes People Solutions (BPS), which manages learnerships for companies within the Altron

group, introduced contact centre support as a way to expose learners to a number of different

areas within the company and allow them to gain valuable insight into the world of work.

Altech Autopage Cellular’s contact centre took in the fi rst group of 20 contact centre support

learners for this programme, exceeding all expectations in mentoring and coaching learners.

Altech Autopage Cellular subsequently took in a second group of 20 contact centre support

learners with the expectation that these learners achieve their Contact Centre Support NQF

Level 2 qualifi cation, and fi nd employment.

During the year Altech Netstar trained 11 learners in Contact Centre Support NQF Level 2 and

Level 4; Systems Support NQF Level 5 and Technical Support NQF Level 4, while ACS trained

12 learners on the Systems Support NQF Level 5 programme.

» Engineer-in-training programme

The shortage of engineering graduates has a signifi cant impact on Altech’s ability to secure

a future skills pipeline, and has prompted the development of an engineer-in-training

programme. This allows the company to employ engineering graduates for a period of

18 months hands-on work experience, a requirement to complete the engineering qualifi cation.

There are currently 19 such engineers-in-training employed at Altech and the company aims

to employ as many as possible on a full-time basis once they are fully qualifi ed.

Skills retention – initiatives and progress

» Salary benchmarking

Retaining existing talent is as important as attracting external skills, with an important element

being remuneration. Towards the end of 2007, Altech commissioned an external consultancy,

HAY Consultants, to conduct a job-mapping and salary benchmarking exercise. Following the

results of this survey, Altech made certain critical skills salary adjustments in October 2008.

The adjustments were in addition to the annual increases. Salary benchmarking will be

updated on an annual basis to ensure that Altech’s remuneration remains competitive.

Health and safetyApart from its manufacturing operations, Altech is not categorised as a high-risk health and

safety (H&S) business. However, the company takes the health and safety of all employees

and contractors extremely seriously.

» Altech Academy During 2008, 98 Altech Academy

inaugural students embarked on various programmes of study. These include certifi cate, diploma, master’s and doctorate qualifi cations in project management, management of technology and innovation, key account management and systems engineering.

Recognising the importance of the skills pipeline for the future leadership of the company, Altech implemented a formal succession plan for the four most senior levels within the company during 2008.

In line with this strategy, the Altech Academy launched the Altron Young Presidents’ Club (AYPC) Leadership Programme during the year. Formally implemented in 2009, this initiative will allow young employees with leadership potential to attend a two-year leadership development programme resulting in a master’s degree in Management of Technology and Innovation.

The Altech Academy also runs a leadership development programme which was attended by 13 Altech employees during the year. The programme has a strong transformation focus and develops candidates’ ability to lead multi-discipline teams tasked with facilitating business improvement and socio-economic transformation. Such leadership skills will prove critical to Altech’s ongoing ability to remain competitive and meet its transformation objectives.

48



Governance structure, training and compliance

The issue of H&S is governed by the Altech H&S policy and the CEO is ultimately responsible for

all internal H&S issues.

In accordance with the Occupational Health and Safety Act (OHASA), each operating company

has an H&S committee, which meets once a month to discuss H&S issues. These committees

comprise, as relevant, H&S representatives, people trained in fi rst-aid, fi re team members GSR 8

stackers and DMR forklift operators. Altech’s manufacturing operations, AAD and Altech UEC,

are both certifi ed as ISO 9001:2000 compliant, indicating the superior nature of their H&S

quality management systems.

Altech places a high level of importance on H&S training, and provides regular instruction for

specialist H&S functions such as fi rst aid. It also appoints new H&S representatives each year to

ensure that all Altech employees are exposed to H&S training and operational H&S issues and

management. The health and safety offi cers perform regular checks and the results are

reviewed at the health and safety meetings.

H&S auditing undertaken during the year

An internal audit was conducted in March 2009 at Altech Isis. An action plan was drafted to

deal with areas of concern, which have since been addressed.

H&S performance during the year

There were no signifi cant H&S incidents during the year under review. Altech Netstar’s

agreement with external National Airways Corporation (NAC) (Pty) Limited is still in place,

whereby NAC provides both pilots and aircraft to Altech Netstar for a 24-hour airborne reaction

service. Although NAC takes full responsibility for the safety of aircraft and crew, Altech Netstar

nevertheless takes an active interest in the H&S performance of this operation, which carries

the company’s branding. There were no helicopter crashes or H&S incidents during the year

under review. The investigation into the April 2008 Rand Airport accident which killed two

people, reported on in the 2007 sustainability report, was completed during the year

under review.

HIV/Aids

Although HIV/Aids does not present a signifi cant risk to Altech, the company nevertheless

recognises the profound negative social and economic impact that the disease will have on the

country if it is not contained. The company therefore sees part of its responsibility as a good

corporate citizen and best-practice employer, to educate employees about the disease and do

everything it can to minimise the spread of infection.

» Health and safety is governed by the Altech H&S policy

Sust

aina

bilit

y re

port

49


Policy, governance structure and measurement

Altech is guided by the Altech HIV/Aids policy, which aims to guide employees in

understanding, assessing and responding to HIV/Aids in the workplace. It further aims to:

» prevent unfair discrimination and prejudice against employees living with HIV/Aids;

» minimise fear and panic among employees;

» ensure stability and productivity in the workplace;

» encourage disclosure by HIV/Aids employees without fear of victimisation or prejudice;

» enable line management to respond appropriately in the event of an HIV/Aids-related case;

» minimise Altech’s liability to wrongful conduct by its employees in relation to HIV/Aids; and

» empower employees to prevent the spread of HIV and Aids through training and education.

In developing the policy, the company was guided by national legislative framework, including

relevant sections of the Constitution of the Republic of South Africa, the Employment Equity

Act, the Labour Relations Act, the Basic Conditions of Employment Act, the Occupational Health

and Safety Act, the Compensation for Occupational Injuries and Diseases Act and the Skills

Development Act.

The policy outlines the employment policies, grievance procedures, company position on

confi dentiality and disclosure and management practices regarding HIV/Aids in the workplace.

During the year, Altech operations each formed an HIV/Aids steering committee, coordinated

by an HR representative and comprising trained peer educators, who provide monthly feedback

reports to HR regarding HIV/Aids issues. The HIV/Aids activities undertaken at each operation

depend on the relevance, need and risk profi le of that operation.

Measurement

As reported in the 2008 sustainability report, non-profi t organisation, the Aurum Institute of

Health Research, researched and assessed the potential risk of HIV/Aids in Altron and Altech

during 2007. Data from Altech Autopage Cellular, Altech Isis, Altech NamITech South Africa and

Altech UEC were used in determining prevalence and risk areas.

The fi ndings of this report revealed that Altech has a prevalence rate of 8.4%, with the highest

prevalence rate found in Job Grade 1 (unskilled and defi ned decision-making employees)

decreasing for higher job grades. The economic impact of HIV in Altech is currently estimated at

0.7% of annual payroll, increasing to just over 0.8%. This is predominantly the result of an

increase in employee benefi t payments (59%), with the remaining economic impact being

composed of absenteeism (18%), medical costs (12%), programme costs (6%) and training

and recruitment (5%).

Externally, HIV/Aids concerns for Altech include the indirect impact of HIV on the Altech

Autopage Cellular subscriber base (currently around 800 000 people).

R9.64 millionTotal amount spent by Altech on skills development during the year.

50



Treatment, benefi ts and education

The rules of the company medical aid scheme determine the medical benefi ts to which

HIV-infected employees are entitled; these benefi ts comply with all legislation regarding

non-discrimination and prescribed minimum benefi ts. Employees have access to HIV/Aids

counselling through the company medical aid scheme and Altech workplace HIV/Aids programme.

This internal initiative is aimed at preventing new infections, providing care and support for

infected and affected employees and managing the impact of the pandemic on the organisation.

Employees receive regular HIV/Aids information through training, workshops, industrial theatre,

guest speaker programmes and electronic media.

Transformation and SED

Introduction

Broad-based black economic empowerment (B-BBEE) is one of Altech’s key sustainability focus

areas and the company remains committed to bringing about meaningful transformation in all

its operations, in line with the dti CoGP.

Management of transformation

In meeting its transformation goals, Altech is guided by the Transformation Vision 2012 policy,

which is aligned with each of the seven CoGP and sets out B-BBEE guidelines for the

achievement of targets. The Altech transformation committee is chaired by the group executive:

HR and comprises chairpersons from each operation’s transformation committee. At the

operational level, the chairpersons of the individual operations’ transformation committees are

responsible for monthly monitoring of the progress on each of the dti CoGP.

Employees are kept abreast of the transformation strategy, goals, successes and areas of

challenge via various communication channels, including strategy sessions and internal

publications and awareness campaigns. Cost constraints in the wake of the economic downturn

led to the postponement of the transformation climate survey, which is now due to take place

in 2009/2010.

Current status on dti CoGP

During the year under review Altech set internal transformation targets in line with the

B-BBEE Scorecard. These are combined targets for a single B-BBEE contributor rating and

therefore amalgamate all of the seven dti Codes into one score. For operations with black

ownership or shareholding, the target was to become a Level 5 contributor by February 2009,

while those operations without a B-BBEE shareholding aimed for Level 6 contributor status.

Sust

aina

bilit

y re

port

51


During the year under review Altech’s B-BBEE status was audited by external empowerment accreditation agency, Empowerdex, the results of

which are detailed in the table below.

Code

Scor

e-ca

rd

wei

ghtin

g

AAD

Alte

ch U

EC

AAC

Alte

ch

Nets

tar

Alte

ch N

etst

ar

Flee

t Sol

utio

ns

Alte

ch A

lcom

M

atom

o

Alte

ch A

lcom

Ra

dio

Dist

ribut

ion

Alte

ch Is

is

ACS

Nam

ITec

hSo

uth

Afric

a

100 ownership 20 0 0% 0 0% 0 0% 0 0% 14 70% 18 90% 0 0% 17 85% 14.35 72% 14.35 72%

200 management control 10 0 0% 0 0% 2.5 25% 1.07 11% 0.8 8% 0 0% 2.4 24% 1.5 15% 1.83 18% 1.92 19%

300 employment equity 15 6.54 44% 5.48 37% 10.78 72% 3.72 25% 2.60 17% 3.37 22% 5.81 39% 3.8 25% 6.18 41% 11.49 77%

400 skills development 15 9.86 66% 12 80% 7.88 53% 10.41 69% 5.50 37% 0 0% 12 80% 7.22 48% 8.86 59% 3.61 24%

500 preferential procurement 20 15.03 75% 18.06 90% 13.65 68% 17.01 85% 18.0 90% 19.8 99% 13.48 67% 15.3 77% 18.42 92% 11.64 58%

600 enterprise development 15 14.75 98% 15 100% 15 100% 9.19 61% 15 100% 0 0% 3.93 26% 2.04 14% 15 100% 155 100%

700 SED 5 5 100% 5 100% 5 100% 5 100% 5 100% 5 100% 3.59 72% 5 100% 4.21 84% 63 100%

Totals 100 51.7 51% 55.54 55% 54.82 55% 46.4 46% 61 61% 46.17 46% 41.23 41% 51.85 52% 68.85 69% 63 63%

Level contributor 6 5 6 8 7 6 7 6 4 5

Target level 6 6 6 6 5 5 6 5 5 5

*Initial fi gure indicates actual score.

AAD, Altech Autopage Cellular, ACS and Altech NamITech South Africa (since sold) all achieved or

exceeded their target for B-BBEE level contribution. Work still remains to be done for Altech UEC, Altech

Netstar, Altech Netstar Fleet Solutions, Altech Alcom Matomo, Altech Alcom Radio Distributors and

Altech Isis to meet their internal targets.

The scorecard above also shows that while Altech performs well on certain CoGP in some operations,

other Codes still present an area of challenge. The company is particularly proud of its skills

development, preferential procurement, enterprise development and socio-economic development

achievements, but is aware that it scores low on ownership, management control and employment

equity.

A summary of Altech’s response

» Code 100: Ownership – Altech continues to evaluate further ownership at certain operations in

line with its business strategy.

» Codes 200 & 300: Management control and employment equity. These are key focus areas. The

accelerated development programme which commenced in November 2008 will fast-track

middle and senior B-BBEE managers. A critical area is the development of female B-BBEE talent

to senior management, for which Altech is developing a specifi c strategy. In order to show

short-term progress in this area, black female talent needs to be recruited into the group.

52



» Code 400: Skills development. The implementation on learnerships and accreditation of

internal training programmes should assist performance on this Code, while operational

workplace skills plans will focus on employment equity.

» Code 500: Preferential procurement. This remains a critical area and all operations show

good progress.

» Code 600: Enterprise development. The Altech transformation committee is in the process

of fi nalising guidelines for operations to enable them to develop an ED strategy.

» Code 700: Socio-economic Development. A new central coordination of the SED fund is

working well.

A detailed discussion of performance and plans for each Code can be found in the Shareholders

(Codes 100 and 200), Employees (Codes 300 and 400) and Partners (Codes 500 and 600)

chapters of this report. Discussion of Code 700 Socio-economic development follows below.

Socio-economic development

Altech recognises its responsibility as a corporate citizen towards the communities in which it

operates and is committed to various initiatives that bring about meaningful SED.

As one of the seven B-BBEE codes, SED has been integrated into Altech’s Transformation Vision

2012, providing guidelines for implementation of each code within the company. Altech is also

guided by a company SED policy which outlines focus areas, criteria for adjudication of projects,

measuring and reporting, management and fi nancial targets.

Governance of SED

SED is managed at the group level by an SED committee comprising the chairperson of the

Altech transformation committee, the chief fi nancial offi cer, the chief strategic offi cer and the

company secretary. This committee coordinates and manages the SED spend within Altech.

Ownership of SED lies with executive management at the operating level and is the

responsibility of the transformation committee chairperson or SED committee. This year, Altech

changed its project selection approach to achieve greater impact and reach more benefi ciaries.

Each operating company now disburses 1% of net profi t after tax into a central Altech

SED fund on a monthly basis, with a minimum threshold of R100 000. This pool of funds

is allocated to various approved projects, allowing those operating companies with a small

SED budget to be involved in substantial projects that have the potential to make a meaningful

impact in the lives of benefi ciaries.

Altech aims to invest in SED projects that are sustainable and favours those initiatives in which

it can enter into long-term partnerships with benefi ciaries and NGOs, and are aligned with

national social development imperatives. Projects should be located within the company’s

geographical footprint and should fall into one of the following focus areas:

» Education and training, with a focus on schools development, particularly in the areas of

technology, multi-media, engineering, maths and science, infrastructural development and

adult basic education and training.

» Altech UEC Briardene School

Sust

aina

bilit

y re

port

53


» Flagship SED projects – Altech UEC Briardene School

(R261 276): Altech UEC partners with Project Build, an NGO that builds classrooms for underresourced schools in KwaZulu-Natal. During the year the company’s funding helped to build classrooms and a media centre at Briardene Primary School.

– AAD/Altech IT Ekurhuleni Primary School (R242 313): AAD continued its ongoing support for this Germiston-based school which, three years ago, faced closure by the Department of Education due to poor infrastructure. During the year under review, the company assisted the school with further infrastructural improvements and equipment. It upgraded the laptops of all heads of department, provided desks and chairs for learners in grades 1 to 3, upgraded the furniture in the staffroom and computer room and provided athletics kits to the school athletic team.

– Altech Autopage Cellular’s Mariannhill Crèche and Community Centre (R1.5 million). The investment funded the construction of the centre’s entire infrastructure including classrooms, procurement of land, teaching equipment and security. Operating costs will also be subsidised for 12 months.

» Job creation outside the company’s value chain, helping benefi ciaries become

self-sustainable through job creation projects that do not qualify for the company’s

enterprise development or preferential procurement funds.

» Community development and support, divided into health and social welfare, and support

for security and public safety programmes.

Projects are evaluated annually by way of site visits, benefi ciary reports, collection of relevant

statistics and formal research. The company is committed to open engagement with

benefi ciaries and communities, and provides feedback and forums for discussion where these

are required. Altech also conducts stakeholder reviews in order to audit the perceptions of

various SED stakeholder groups, both within the company and externally, and to guide future

programme improvements.

SED activities during 2008

During the year Altech achieved its SED target of 1% of net profi t after tax, which is in line with

the dti’s guidelines for this Code. In total R5.43 million was invested in SED projects across the

operating companies.

Utilising the funds created by the common SED pool, Altech is planning the development of the

Altech Netstar Legacy Sports Park in Thembisa township at a cost of R1,7 million. Local schools

will be able to use the facility during the day for sporting activities and in the afternoon it will be

used to train local community members in life-skills. The police will make use of the building at

night to feed and shelter street children from the community. Long-term plans include the

development of a multi-media centre to be used for adult education and computer skills training.

EnvironmentIntroduction

While the ICT sector has a moderate to low impact on the environment, Altech recognises its

responsibility to quantify the effect its operations have on the environment and to reduce this

wherever possible. This commitment is underpinned by a recognition that no company, industry

or sector is immune to the long-term effects of global warming and the growing energy crisis.

These issues have a direct and material impact on the long-term sustainability of all

businesses, including Altech’s.

Management, measurement and compliance

The Altech board, together with the business risk committee, is ultimately responsible for

identifying and managing the company’s environmental risks. The company benchmarks its

environmental performance against South African legislation, international best practices and

sustainability indicators. These include legal requirements as set out by the South African

Department of Environment and Tourism (DEAT), the environmental aspects of King II and

various ISO certifi cation requirements. » Altech Autopage Cellular’s Mariannhill Crèche and Community Centre

54



The company’s operations fall into either the very low-risk or the low-risk category. During the

year under review there were no environmental incidents and Altech was not subject to any

non-compliance, prosecutions or fi nes relating to environmental performance or management.

Altech commissions external environmental audits. The last of these was conducted by

MS Alexander & Associates in 2007, reported on in the 2008 Sustainability Report. During the

year under review the company also submitted environmental data as part of the requirements

of the JSE (SRI) Index, for which its environmental policy, strategy, management, reporting and

performance were assessed. Companies listed as constituents on the JSE (SRI) Index should be

able to show that they are continually seeking to improve their environmental performance by

reducing and controlling direct negative environmental impacts; promoting awareness of

signifi cant direct and indirect impacts; working to use natural resources in a sustainable

manner; and committing to risk reduction, reporting and auditing. Altech was successfully listed

as a constituent on the 2008 JSE (SRI) Index.

Altech operations also comply with ISO and other international environmental benchmarks as

shown in the accompanying table.

Name ISO 14001 ISO 18001 and other

AAD Compliant but not accredited as operation does not handle hazardous substances

RoHS (Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Regulations) compliant – all products are now lead-free

Altech Netstar 70% of components are lead-free

Altech UEC System has been updated for ISO 14001 compliance. Audit has been undertaken and results are awaited for June 2009

RoHS and WEEE (Waste Electrical and Electronic Equipment) compliant

ACS RoHS and WEEE compliant

The most material environmental issues affecting the company include:

» carbon footprint;

» energy usage and effi ciency; and

» impact of products on the environment.

Carbon footprint

In the 2008 sustainability report, Altech committed to conducting an investigation into the

climate change risks, greenhouse gas emission sources and opportunities for developing

low-carbon energy-effi cient products. During the year it participated in a carbon footprint

survey and environmental impact assessment along with other subcompanies within the

Altron group.

This exercise was conducted in conjunction with auditing fi rm PricewaterhouseCoopers (PWC),

which held workshops with senior management at Altech to discuss what climate change

means to the company and to outline a methodology, approach and roadmap for assessing

Altech’s carbon footprint.

Sust

aina

bilit

y re

port

55


In the fi rst phase of the carbon footprint exercise, Altech operations, under the strategic

guidance and support from PWC, collected relevant environmental impact data on

production-related emissions, air travel and car travel. This information has been fed through

to PWC to be interpreted by the fi rm in the project’s second phase. The results of PWC’s

fi ndings will be available for reporting in the 2010 sustainability report.

Energy usage and effi ciency

The economic downturn experienced during the year under review led to a decrease in

production, and therefore energy demand, among many South African industries, which

resulted in a temporary hiatus in the country’s energy crisis. However, reduction of

energy-usage and increased energy-effi ciency remains an important environmental

sustainability issue, and one to which Altech is fully committed.

The company continued to participate in the Altron energy-saving initiative, Powersave@Altron,

which raises awareness of the importance of energy-saving and provides employees with

practical energy-saving and effi ciency tips. These are communicated through internal staff

publications, poster campaigns and on the intranet.

In 2008, ACS made a commitment to reduce its energy usage by at least 10% to 15%.

Following review of energy consumption at its sites, ACS has managed to achieve a

11% reduction.

Impact of products on the environment

Altech’s operations do not produce dust, noise or atmospheric pollution at anything above

negligible levels and the company is classifi ed as very low risk when it comes to these impacts.

Waste disposal is managed at an operational level. As none of the waste disposed of by Altech

is radioactive or toxic, there is a very low risk of environmental contamination.

In the 2008 sustainability report, we outlined the environmental risk of Altech UEC’s

soldering process with regard to lead waste, and reported that by the end of 2007 all lead and

harmful substances had been removed by the operation’s production processes in accordance

with European Union requirements and RoHS and WEEE directives. This remains the case.

AAD’s products are now also all lead-free and therefore similarly compliant. The lead-related

environmental risk of these products is therefore no longer an issue.

Altech is committed by increasing its energy-efficiency and uses the Powersave @ Altron initiative to raise awareness of the issue and drive behavioural change among staff

56


Sustainability report – GRI content index

G3 Indicator Description Page/s

Stra

tegy

1. Statement from senior decision-maker about the relevance and importance of sustainability to Altron, the overall vision and strategy for the short term, medium term and long term, particularly with regard to managing the key challenges associated with economic, environmental and social performance

19

Org

anis

atio

nal p

rofi

le

2.1 Name of the organisation contents

2.2 Primary products, brands and/or services 6 – 7; contents

2.3 Operational structure of the organisation 6 – 7

2.4 Head offi ce location IFC

2.5 Number of countries where Altron operates, and names of countries with major operations relevant to the sustainability issues covered in this report

20 – 27

2.6 Nature of ownership and legal form 2 – 3

2.7 Markets served 6 – 7

2.8 Scale of reporting organisation including: number of employees net sales total capitalisation broken down in terms of debt and equity quantity of products or services provided

3 – 545

2.9 Signifi cant changes in the reporting organisation during period under review 16 – 19

2.10 Awards received during the reporting period 32

Repo

rt s

cope

and

bou

ndar

y

3.1 Reporting period 30

3.2 Date of most recent previous report 30

3.3 Reporting cycle 30

3.4 Contact details for further information about this report 30

3.5 Process for: determining materiality process for prioritising topics in the report identifying stakeholders expected to use this report

33

3.6 Report boundary 30

3.7 Limitations on the scope or boundary of the report 30

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities and outsourced operations 30

3.12 GRI table 56

Sust

aina

bilit

y re

port

57



Gove

rnan

ce

4.1 Governance structure of the organisation 59 – 69

4.2 Indicate whether the chairman is also an executive offi cer and, if so, reasons for this arrangement 12

4.3 Number of independent and/or non-executive members 12 – 15; 59

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the board

4.14 List of stakeholder groups engaged by the organisation 31

4.15 Basis for identifi cation and selection of stakeholders with whom to engage 33


Perf

orm

ance

indi

cato

rs

EC1 Direct economic value generated and distribution, including revenue, operating cost, employee compensation, donation and other community investments, retained earnings and payments to capital providers and governments

3; 4; 5; 32 – 33

EC7 Procedures for local hiring and proportion of senior management hired from the local community 45

EN10 Percentage and total volume of water recycled and reused n/a

EN23 Total number and volume of signifi cant spills n/a

EN26 Initiatives to mitigate environmental impacts of products and services and extent of impact mitigation 53 – 55

EN30 Total environmental protection expenditures and investments by type n/a

LA3 Benefi ts provided to full-time employees that are not provided to part-time or temporary employees

LA8 Education, training, counselling, prevention and risk-control programmes in place to assist workforce members, their families or community members, regarding serious diseases

45 – 47

LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

45 – 47

LA13 Composition of governance bodies in terms of diversity and breakdown of employees per category according to gender and other relevant indicators of diversity

45

58


Number of shareholdings %

Number of shares %

SHAREHOLDER SPREAD

1 – 500 shares 825 33.69 231 770 0.22

501 – 1 000 shares 552 22.54 468 878 0.45

1 001 – 5 000 shares 729 29.77 1 766 841 1.68

5 001 – 10 000 shares 127 5.18 974 947 0.93

10 001 – 50 000 shares 123 5.02 2 736 305 2.60

50 001 – 100 000 shares 35 1.43 2 489 763 2.36

Over 100 000 shares 58 2.37 96 551 095 91.76

Totals 2 449 100 105 219 599 100

DISTRIBUTION OF SHAREHOLDERS

Banks 14 0.57 454 239 0.43

Close corporations 35 1.43 30 423 0.03

Endowment funds 19 0.78 113 140 0.11

Holding company 2 0.08 59 927 685 56.95

Individuals 1 536 62.72 2 398 779 2.28

Insurance companies 25 1.02 3 266 685 3.10

Investment companies 12 0.49 170 228 0.16

Medical aid schemes 4 0.16 85 339 0.08

Mutual funds 127 5.19 11 642 943 11.07

Nominees and trusts 457 18.66 1 269 951 1.21

Other corporations 26 1.06 65 603 0.06

Private companies 70 2.86 293 429 0.28

Public companies 4 0.16 91 620 0.09

Repurchased shares 2 0.08 8 609 607 8.18

Retirement funds 116 4.74 16 799 928 15.97

Totals 2 449 100 105 219 599 100

PUBLIC/NON-PUBLIC SHAREHOLDERS

Non-public shareholders 13 0.53 68 577 292 65.17

Directors and associates of the company 9 0.37 40 000 0.04

Holding company 2 0.08 59 927 685 56.95

Repurchased shares 2 0.08 8 609 607 8.18

Public shareholders 2 436 99.47 36 642 307 34.83

Totals 2 449 100 105 219 599 100

Benefi cial shareholders holding 2% or more

Allied Electronics Corporation Limited 59 927 685 56.99

Public Investment Corporation 10 745 318 10.22

Altron One Nominees (Pty) Limited 8 609 607 8.19

Old Mutual 4 260 527 4.05

Totals 83 543 137 79.45

Sustainability report – Shareholders’ analysis

Corp

orat

e go

vern

ance

rep

ort

59


Corporate governance report

Introduction

Good corporate governance is integral to Altech’s operations and, as such, the board is fully

committed to the principles of the Code of Corporate Practices and Conduct (the code) set out

in the King Report on Corporate Governance (King II). The purpose of King II is to promote the

highest level of corporate governance in South Africa. In supporting the code, the board of

directors (the Altech board) recognises the need to conduct the enterprise with integrity and

in accordance with generally acceptable corporate practices.

The Altech board is the focal point of the group’s corporate governance system and remains

ultimately accountable and responsible for its performance and affairs.

Compliance with King II

The directors believes that the Altech group materially complied with the requirements of

King II during the year under review.

Application of King II

All entities within the group are required to subscribe to the spirit and principles of King II. The

Altech board also seeks to ensure that good governance is practised at all levels in the group

and that it is an integral part of Altech’s operations.

Whereas the Altech board takes responsibility for group compliance with the code and is the

focal point of the group’s corporate governance system, the directors of specifi c companies in

the group are responsible for ensuring compliance in respect of the companies of which they

are directors.

All key King II principles refl ected in Altech’s corporate governance structures are reviewed from

time to time to take into account corporate changes and international developments in

corporate governance.

Responsibility for annual fi nancial statements

Shareholders are referred to the statement of approval of the annual fi nancial statements set

out on page 83 of the directors’ report.

Board of directors

Board composition

Altech has unitary board structures in all its subsidiaries.

The Altech board comprises 12 directors. Of these, fi ve are considered independent

non-executive directors while four are considered non-executive directors. Three are executive

directors. Details of the categorisation of the directors appear on pages 136 to 140 of

the annual report.

The Altech board has an appropriate balance, with the majority being non-executive directors.

In line with best practice, the roles of the chairman and the chief executive offi cer are separate.

The board is led by Dr Hilton Davies, an independent non-executive chairman. The chief

executive offi cer is Craig Venter.

60


Corporate governance report continued

The Altech board recognises the importance of promoting entrepreneurial fl air, while continuing

to ensure conformance to governance and other compliance restraints. The directors bring a

wealth of skills, knowledge and experience from their own fi elds of business to the Altech board

and ensure that debate on matters of strategy, performance, resources, transformation,

diversity, employment equity, standards of conduct and policy is robust, informed and

constructive.

The role of the board and board procedures

The Altech board exercises leadership, enterprise, integrity and judgement in directing the

group to achieve continued prosperity for Altech and its shareholders.

The Altech board, which meets at least quarterly, retains full and effective control over all the

operational companies in the group and monitors executive management in implementing

board plans and strategies. Additional board meetings, apart from those planned, are

convened as circumstances dictate. The number of meetings held during the year under review

(including meetings of board-appointed committees) and the attendance of each director are

set out on page 62 of this report. Where directors are unable to attend a meeting personally,

teleconferencing facilities are made available to include them in the proceedings and allow

them to participate in the decisions made and conclusions reached.

The Altech board’s primary responsibilities include determining the group’s purpose and values

and providing strategic direction to the group, identifying key risk areas and key performance

indicators of Altech’s business, monitoring the performance of the group against agreed

objectives, advising on signifi cant fi nancial matters and reviewing the performance of

executive management against defi ned objectives and, where applicable, industry standards.

The Altech board has unrestricted access to all company information, records, documents and

resources to enable it to properly discharge its responsibilities. Management ensures that

board members are provided with all relevant information and facts to enable the Altech board

to reach objective and informed decisions. Effi cient and timely procedures for informing and

briefi ng board members prior to board meetings have been implemented.

Board meetings are scheduled well in advance and board documentation is provided timeously.

Tabling documents at board meetings is the exception rather than the rule. The Altech board

agenda and meetings’ structure assists the Altech board to focus on strategy and performance

monitoring, followed by governance and related matters, which ensures that the Altech board’s

time and energy is appropriately applied.

The Altech board considers a number of key performance indicators, variance reports and

industry trends in evaluating the fi nancial performance of the group. A range of non-fi nancial

information is also provided to the board to enable it to consider qualitative performance

factors that involve broader stakeholder interests. Directors are afforded the opportunity to

propose additional matters for discussion at board meetings.

Corp

orat

e go

vern

ance

rep

ort

61


The Altech board is appropriately informed of key developments affecting the group between

board meetings. Non-executives directors have access to management and may meet

separately with management without the attendance of executive directors.

All Altech board members complete a detailed board assessment each year, probing the

composition, duties, responsibilities, process and effectiveness of the board.

Although the Altech board still retains overall responsibility for the affairs of the group,

subsidiary boards play an important role in the group’s overall governance approach.

Altech directors have full access to subsidiary board documentation. These boards meet up to

four times a year, usually prior to the Altech board meetings. The level of detail dealt with by

the subsidiary is generally greater than that dealt with by the Altech board and is specifi c to

the relevant subsidiary.

Board charter

The Altech board has developed and adopted a charter to regulate how business is to be

conducted in accordance with the principles of good corporate governance and legislation.

This charter was reviewed in February 2008 and sets out the specifi c responsibilities to be

collectively discharged by the board members as well as the individual roles expected of board

members.

The purpose of the board charter is to ensure that all the directors are aware of their duties

and responsibilities when acting on behalf of the company. The salient features thereof are

set out below:

» Role and function of the Altech board

» Roles of the chairman and the chief executive offi cer

» Board and meeting procedures

» Board composition

» Conduct regarding confl icts of interest

» Risk management and internal control

» Supply of information to directors

» Directors’ training and development

» Succession planning

» Compliance with laws and regulations

» Altech board evaluation

62



Attendance of board meetings

The following is a list of board meetings attended by each director during the year 1 March

2008 to 28 February 2009:

2008 2009

Name Mar* Apr Jul Sept* Sept Feb

Dr HK Davies X X

CG Venter

Dr E Bandał X n/a n/a n/a n/a n/a

Dr JEW Carstens

PMO Curle

ML Leoka

R Naidoo X X

Dr HA Serebro X

ZJ Sithole# n/a

M Sindane# n/a

AMR Smith# n/a n/a n/a

RE Venter

Dr WP Venter X

Notes

X Submitted apologies and was granted leave of absence in terms of the company’s articles of association.

* Special board meetings.

# ZJ Sithole and M Sindane joined the board in April 2008, and AMR Smith in September 2008.

ł Dr E Banda resigned in March 2008.

Board appointments and director training

A third of the directors retire by rotation annually. If eligible, their names are submitted for

re-election at the annual general meeting accompanied by an appropriate curriculum vitae set

out in the annual report.

The board as a whole selects and appoints directors, including the chief executive offi cer and

executive directors, on the recommendation of the remuneration and nomination committee.

A formal and transparent procedure applies to all appointments, which are subject to

confi rmation by the shareholders at the annual general meeting. Prior to appointment,

potential board appointees are subject to a fi t and proper test as required by the Listings

Requirements of the JSE Limited. Re-election to the board is considered subject to performance

and continued eligibility.

On appointment, new board members undergo a formal induction programme aimed at

facilitating their understanding of the Altech group, its business environment and the markets

in which it operates. The induction programme is conducted by the Altech group secretary and,

where appropriate, the company’s sponsor. The induction programme includes:

» background on the Altech group and guidance on the business of the Altech group

(business processes, corporate strategies, organisation, management and people, and

comparison with international benchmarks);

Corp

orat

e go

vern

ance

rep

ort

63


» instruction in the key fi nancial statements (ie annual accounts, directors’ reports, trends

of key fi nancial ratios and fi nancial performance of the business);

» a clear identifi cation of reciprocal expectations on appointment (by way of discussions

with the Altech group secretary and, where appropriate, the group’s sponsor); and

» formal induction in terms of their statutory and common-law (fi duciary) duties and

responsibilities.

Board committees

A number of board-appointed committees have been established to assist the board in

discharging its responsibilities. The membership and principal functions of the standing

committees appear in the pages below.

The board recognises that it is ultimately accountable and responsible for the performance and

affairs of the group and that the use of delegated authorities to the board committees and

management in no way mitigates or dissipates the discharge by the board and its directors of

their duties and responsibilities.

Specifi c responsibilities have been delegated to the board committees and they operate under

written terms of reference approved by the board. Each committee’s terms of reference are

reviewed annually by the board. Board committees are free to take independent outside

professional advice as and when deemed necessary. The offi ce of the group company secretary

provides secretarial services for each of the committees.

Notwithstanding the establishment of various board committees, the Altech board reserves for

itself a range of key matters to ensure that it retains proper direction and control of the company.

There is transparency and full disclosure from board committees to the board. The minutes of

committees represented by predominantly non-executive directors are submitted to the board for

noting and discussion, if required. In addition, directors have full access to all board committee

documentation and committee chairpersons provide the board with a verbal report on recent

committee activities.

The board is of the opinion that the board committees below have effectively discharged their

responsibilities, as contained in their respective terms and references, for the year under review.

Remuneration and nomination committee

Members: Dr HK Davies (chairman), RE Venter, M Sindane.

The remuneration and nomination committee is chaired by Dr HK Davies, the chairman of the board,

with the chief executive offi cer having right of attendance at meetings except during the

consideration of his remuneration. The chief fi nancial offi cer attends the meetings by invitation and

recuses himself when his remuneration is discussed. This committee generally meets twice a year.

Executive directors’ emoluments, share option/conditional rights allocations and other benefi ts

are considered by the committee, taking account of responsibility, individual performance and

retention. To this end, the committee relies on external market surveys and industry reward levels

as benchmarks.

64



Further details may be found in the remuneration report on page 70 of this annual report.

The committee further reviews the size and composition of the board from time to time. It makes

recommendations for changes that would result in a board that collectively contains the skills,

experience, diversity and demographics, as well as a mix of personalities appropriate to the

strategic direction of the Altech group that is necessary to secure its sound performance. It also

is responsible for succession plans for key members of the board, and for the chairman and chief

executive offi cer in particular.

Remuneration and nomination committee – meeting attendance 2008/2009

2008 2008 2009

Name April September February

Dr HK Davies

M Sindane

RE Venter

Audit committee

Members: ZJ Sithole (chairman), MS Leoka, M Sindane.

The audit committee comprises independent non-executive directors only and is chaired by

Mr ZJ Sithole. Amendments to the Corporate Law Amendment Act, which became effective

on 14 December 2007, requires all members of the audit committee to be independent

non-executive directors.

Meetings are held at least twice a year and are attended by the group’s external and internal

auditors as well as Altech’s executive management to review accounting, auditing and fi nancial

reporting matters to ensure that an effective control environment is maintained in the group. It

also considers the appropriateness of the expertise and experience of the chief fi nancial offi cer

on an annual basis. All the members of the committee are fi nancially literate.

The committee also monitors proposed changes in accounting policies, reviews the internal audit

function and discusses the accounting implications of major transactions. In addition, the

committee advises the board on the adequacy of the group’s internal controls and the content

and presentation of the group’s preliminary, interim and annual fi nancial reports.

The committee has adopted a policy for the use of external auditors for non-audit-related

services. In terms of this policy, the external auditors are prohibited from acting as the registered

offi ce address for Altech or any of its subsidiaries; performing any internal audit or internal audit

outsourcing service for Altech or any of its subsidiaries; performing any valuations on any

business asset of Altech or any of its subsidiaries for which the external auditors will be required

to subsequently issue an audit opinion; providing any legal or information technology consulting

services to Altech or any of its subsidiaries; conducting due diligence exercises for and on behalf

of Altech or any of Altech’s subsidiaries which use Altech’s external auditors for audit-related

services, without prior permission from the chairman of the audit committee; and any services

which entail providing management functions for Altech or any of its subsidiaries.

Corp

orat

e go

vern

ance

rep

ort

65


Non-audit-related services which the external auditors are permitted to provide to the Altech

group include: tax compliance services; assurance-related work (excluding implementation

consulting work that results in an impairment of the external auditors’ independence); and

opinion work, provided, however, that where any of the aforementioned non-audit-related

services are likely to exceed, in aggregate, 5% of the annual Altech audit fee, the prior approval

of the Altech audit committee is required.

The internal and external auditors have unrestricted access to the audit committee, who ensure

that their independence is unimpaired. Members of the committee are also afforded the

opportunity to meet with the head of internal audit and the external auditors without

management being present.

The audit committee recommends the appointment of the external auditors for the board and

shareholders’ approval. During the fi nancial year, PKF (Jhb) Inc. were the external auditors for

the Altech group, and the audit committee is satisfi ed that they are independent and

registered as auditors on the JSE’s Register of Auditors.

Audit committee – meeting attendance 2008/2009

2008

Name April September

ZJ Sithole

ML Leoka

M Sindane

Business risk committee

Members: M Sindane (chairman), AJ Baker, Dr JEW Carstens, JC Gellatly, G Passmoor, SH Sidley,

AMR Smith, AJO van der Westhuizen, R Warren and CG Venter.

(G Passmoor retired during November 2008 and SH Sidley resigned after year-end in

April 2009. AMR Smith joined the committee during September 2008.)

The business risk committee has been established to assist the board of directors in the

discharge of its duties relating to the identifi cation of risk and the assessment of the

effectiveness of risk management within the group. The committee meets at least twice per

annum and reviews and assesses issues such as the integrity of risk control systems,

compliance with King II and other corporate governance matters, the impact that signifi cant

litigation could have on the group, the adequacy of the insurance coverage as well as the

control effectiveness of risks in relation to assurance reports from the group’s internal audit,

Safety Health and Environment and OHASA, ISO, management and external audit. It monitors

external developments relating to corporate accountability, with specifi c reference to emerging

and prospective impacts.

The business risk committee is chaired by an independent non-executive director and

comprises group executives of the principal operating groups and divisions and other senior

executives.

66



The major risks identifi ed and addressed during the past fi nancial year on a consolidated

basis were:

» skills shortage; and

» the continued focus on the development of alternative technologies.

Business risk committee – meeting attendance 2008/2009

2008

Name April September

M Sindane

AJ Baker

Dr JEW Carstens

JC Gellatly

G Passmoor

SH Sidley

AMR Smith n/a X

AJO van der Westhuizen X

CG Venter X

R Warren X

Note

X Submitted apologies and were granted leave of absence.

Executive committee

Members: CG Venter (chairman), AJ Baker, Dr JEW Carstens, PMO Curle, J Klein, M Lynch,

SH Sidley and AJO van der Westhuizen.

(M Lynch joined Altech UEC as operations director as from January 2009 and SH Sidley

resigned from the Altech group during April 2009.)

The executive committee is chaired by the chief executive offi cer and comprises group

executives of the principal operating groups. It meets monthly, except during the month where

there is an Altech board meeting, and deals with day-to-day operational matters, strategic

issues for the future as well as human resources and public relations matters.

AJ Baker is the company’s chief operating offi cer and reports directly to CG Venter. Group

executives who report directly to AJ Baker include JC Gellatly (Group executive: IT Division)

and G Passmoor(Group executive: Telecommunications and Wireless Communications).

AJO van der Westhuizen is also Altech’s chief strategic offi cer and reports directly to CG Venter.

The remainder of the executive team reporting to CG Venter is Dr JEW Carstens (chief fi nancial

offi cer), PMO Curle (director: corporate fi nance), and J Klein (Group executive: human resources

and industrial relations). The executive structure appears on page 19.

Group secretary

All Altech board members have access to the advice and services of the Altech company

secretary, who is responsible to the board for ensuring that established procedures and the

relevant statutes and regulations are complied with.

The secretary also assists the chairman and chief executive offi cer in determining the annual

board plan, board agendas and formulating governance and board-related matters.

Corp

orat

e go

vern

ance

rep

ort

67


Internal controls and internal audit

Internal control comprises 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 fi nancial

statements. The group’s approach in this regard is further set out on page 83 of the directors’

report dealing with the approval of the annual fi nancial statements.

The internal audit function, conducted by the Altron internal audit department and supported

by the Altech internal audit department, as well as the external auditors, serve management

and the Altech board by performing independent evaluations of the adequacy and

effectiveness of the group companies’ controls, fi nancial reporting mechanisms and records,

information systems and operations and reporting on the adequacy of these controls.

They also provide additional assurance regarding the safeguarding of group assets and

fi nancial information. There is a signifi cant focus on information technology, including the

general and specifi c control environment throughout the group, in order to maintain

satisfactory IT governance and assurance.

The Altron internal audit department provides internal audit services to the Altech group and is

structured to respond to Altech management’s needs while maintaining an appropriate degree

of independence in order to render impartial and unbiased judgements in performing its

services. It also enables the internal audit staff to obtain a broad range of diverse, group-wide

experience and provides them with an opportunity to share their experience with other team

members. The Altech internal divisional audit department assists the internal audit function in

performing ad hoc trouble shooting and follow-up functions as opposed to a traditional

internal audit function.

Annual fi nancial statements

The Altech board is responsible for the preparation of the annual fi nancial statements.

Management fulfi ls its responsibilities by maintaining adequate accounting records to ensure

the integrity of these annual fi nancial statements. This is accomplished by systems of internal

controls designed to provide reasonable, but not absolute, assurance as to the reliability of

these fi nancial statements. Such controls provide assurance that the group’s assets are

safeguarded, that transactions are executed in accordance with management’s authorisations

and that the fi nancial records are reliable. This is augmented by the Altron policy manual

which outlines the group’s ethics and prescribes fundamental group policies and procedures.

It is regularly updated to take cognisance of changing circumstances in the fi nancial and

operational environment.

Going concern

The Altech board has considered and recorded the facts and assumptions on which it relies

to conclude that Altech will continue as a going concern in the fi nancial year ahead. Their

statement in this regard is contained in the statement on the responsibility of directors for

the annual fi nancial statements. The Altech board considers this aspect at both the interim

reporting stage and fi nancial year-end.

68



Corporate code of conduct and ethics

Altech is committed to promoting the highest standards of behaviour, and the group’s

corporate code of conduct (page 33) gives a clear guide as to the expected behaviour of all

employees in their dealings with the group’s stakeholders. This is further augmented by

a detailed code of conduct which forms part of the Altron policy manual and outlines the

Altron group’s ethics. All employees are required to maintain the highest ethical standards in

ensuring that the group’s business practices are conducted in a manner which in all reasonable

circumstances is above reproach.

Altech’s management demonstrates its commitment to the code of conduct by following

disciplinary procedures and instituting criminal and civil charges for theft, fraud, corruption

or any other dishonest behaviour. A facility for the reporting of unethical conduct, “Tip-offs

Anonymous”, an independent hotline service provider, was implemented in April 2007 and is

available to all staff and clients of the Altron group. This hotline allows staff members and

clients to report any misconduct on an anonymous basis and guarantees the protection of

their identity.

Share dealings

Altech has adopted a closed-period policy, which precludes directors, offi cers, participants and

staff who may have access to price-sensitive information from dealing in Altech securities

prior to the release of interim and fi nal results as well as during sensitive periods.

All the directors of Altech and its material subsidiaries, who wish to deal in Altech’s securities,

are required to obtain written clearance from the chief executive offi cer of Altech and the

Altech chief fi nancial offi cer. They, in turn, require prior clearance from any two of the

Altron chairman, the Altron chief executive or the Altron chief fi nancial offi cer.

Details of share dealings by any of Altech’s directors, as well as the directors of its major

subsidiaries, are disclosed to the board and the JSE Limited through the Securities Exchange

News Service (SENS).

Integrated sustainability reporting

Reporting approach

Altech has adopted the GRI sustainability guidelines on economic, environmental and social

performance as a benchmark for the group’s sustainability reporting, and a sustainability

report is included on pages 30 to 58 of this annual report.

JSE Socially Responsible Investment (SRI) Index

Altech has qualifi ed for the fi fth consecutive year for the JSE SRI Index. This index was launched

by the JSE in 2004 and measures the listed companies’ performance with regard to economic,

environmental and social affairs (collectively known as the triple bottomline).

Corp

orat

e go

vern

ance

rep

ort

69


Relationship with stakeholders

The Altech group has various policies governing communication, relationships and conduct with its

stakeholders that comprise shareholders, employees, customers, suppliers, service providers, the

community and government.

Altech is committed to:

» enhancing shareholder value;

» maintaining and creating excellent relationships with its customers/suppliers;

» maintaining a healthy, safe and non-racial working environment for employees and assisting

them to achieve their full potential through skills development and employment equity

initiatives;

» providing fi nancial assistance to disadvantaged communities and supporting broad-based

black economic empowerment initiatives; and

» continuing to comply with South Africa’s laws and regulations and to assist with the

development of a sound information, communication and telecommunication (ICT) sector.

In communicating the group’s strategy and results, Altech makes use of a broad range of

communication channels such as the Altech website (www.altech.co.za), SENS, the written media,

radio and television media.

Altech also has a media and investor relations department responsible for ensuring appropriate

and timeous communication with shareholders and the investment community. Regular

presentations are made by the chief executive offi cer, the chief operating offi cer and the chief

fi nancial offi cer to institutional investors, analysts and the media.

Investec Bank Limited acted as the company’s sponsor during the year under review.

Altech acknowledges the importance of its shareholders attending the company’s annual general

meetings as these meetings offer an opportunity for shareholders to participate in discussions

relating to general meeting agenda items and to raise additional issues. Explanatory notes setting

out the effects of all proposed resolutions have been included in the notice of meeting.

The chairmen of board-appointed committees, as well as the executive directors, are required to

attend annual general meetings or other general meetings to respond to questions from

shareholders.

A section dealing with employment equity issues, training and development initiatives,

occupational health and safety matters and Altech’s policy with regard to HIV/Aids appears on

pages 47 to 50 of the annual report.

The company’s overall strategy on broad-based black economic empowerment is contained on

pages 50 to 53 of the annual report.

An environmental report is set out on pages 53 to 55 of the annual report.

Donations to political parties

During the period under review the Altech group did not make any donations to political parties.

70


Remuneration report

Governance

The remuneration and nomination committee is responsible for determining the remuneration of

the executive directors and executive management, as well as approving grants to these individuals

under the company’s share incentive schemes. The committee also makes recommendations in

respect of the fee structure for non-executive directors and the fees for members of the board

committees for ratifi cation by the shareholders, once approved by the board.

The remuneration and nomination committee operates under a board-approved mandate and

terms of reference that was last updated during February 2009.

Remuneration policies

The Altech group’s remuneration philosophy is to set appropriate remuneration levels to

attract, motivate and retain top-grade, high-calibre directors and executive managers required

to run the company successfully while aligning their interests with those of the shareholders.

The Altech group applies a remuneration practice of “total cost of employment” (TCOE).

The concept of TCOE introduces a remuneration philosophy and practice that enables

remuneration to be compared by the employer across various peer groupings. Consequently,

it aims to achieve equitable remuneration practices within the greater Altech group and in

the longer term assists in achieving fair treatment of all group employees. The TCOE concept

offers transparency as each employee is able to view and understand his/her total

remuneration package.

The group’s remuneration structure for senior management has three components:

» Fixed remuneration – annual/base salary and benefi ts.

» Variable remuneration – a short-term performance-related incentive scheme.

» Share option and/or conditional rights grants – a long-term performance-related incentive

scheme.

Fixed remuneration is reviewed annually to ensure that the directors and executives who

contribute to the success of the group and who have the potential to sustain performance are

remunerated competitively.

The variable pay element provided by the short-term incentive scheme is intended to provide superior

total pay opportunities, should corporate performance merit it, as well as rewarding individual

performance. Long-term incentives in the form of share options and/or conditional rights have been

based on multiples of TCOE and are intended to reward sustained long-term performance.

Advisors

Independent advice on market information and remuneration trends is provided to the

remuneration and nomination committee by external remuneration consultants. Altech’s

human resources department assists the committee by providing the supporting information

and documentation relating to matters presented to the remuneration and nomination

committee. Altech bears all the expenses relating to the appointment of external remuneration

consultants and other appropriate independent professional advisors.

Rem

uner

atio

n re

port

71


Executive directors’ remuneration

The Altech group aims to employ individuals of the highest calibre who create value for all of its

stakeholders. Executive directors are rewarded as individuals for the value they add through the

payment of fi xed remuneration, performance bonuses and share option and/or conditional right

allocations.

(a) Fixed remuneration

Altech applies discretion in all remuneration reviews and there is no minimum across-the-board

increase to all employees. The sustainable contribution of each executive director is used as a basis for

remuneration reviews and a TCOE approach is followed. Benefi ts include, as part of the TCOE packages,

a retirement scheme, medical aid cover, a car allowance as well as a cellphone allowance if deemed

necessary.

The remuneration and nomination committee reviewed and revised the TCOE packages of the executive

directors at its meeting in February 2009. These packages were compared to a market survey of

companies similar in size and structure to Altech and adjusted to refl ect levels in the median to upper

quartile levels of the survey.

(b) Pensions

During the year the relevant Altech operations contributed 12% of the pensionable salaries to the Altron

Group Pension Fund on behalf of executive employees. The value of contributions made for each executive

director is also depicted in the summary of the directors’ emoluments on page 73.

(c) Annual incentive schemes

Executives are entitled to participate in an annual performance bonus scheme to reward achievement in

the group and subsidiary company fi nancial performances as well as strategic and personal objectives

agreed with the chief executive offi cer. These arrangements are also approved by the remuneration

and nomination committee.

The Altech group’s fi nancial performance targets relate to headline earnings per share growth, return

on equity, and return on operating assets. Up to 70% of the maximum bonus is based on the

achievement of fi nancial objectives with the balance relating to identifi ed key performance indicators.

At its meeting in April 2009, the remuneration and nomination committee reviewed the performance of

executives participating in the performance bonus scheme as measured against their agreed targets.

The bonuses were approved in accordance with these parameters.

(d) Share option scheme

Altech operates a share option scheme which grants options and/or conditional rights to all senior

employees. Grants are made annually and are capped at 6.4 times TCOE for the chief executive offi cer

and between 4.4 and 5.3 times TCOE for the members of the executive committee.

Options and conditional rights are exercisable after the expiry of a three-year period and vest in equal

tranches in years three, four and fi ve. All options and conditional rights granted expire within a six-year

72


Remuneration report continued

period. Grants are made annually to ensure that the multiple of TCOE refl ects increases in

remuneration packages. These are granted based both on corporate and individual performance.

Vesting of conditional rights is based on achieving performance-related conditions.

Altech is in the process of adopting a new share incentive scheme. The purpose of the scheme

shall be to attract, motivate, reward and retain employees who are able to infl uence the

performance of the group. The plan will be implemented upon shareholder approval.

Service contracts

Executive employees are appointed subject to Altech’s standard terms and conditions of

employment where notice periods may vary between 30 and 60 days.

Non-executive directors’ fees

Non-executive directors are remunerated for their membership of the board of Altech and

board-appointed committees. The fees refl ect the size and complexity of the Altech group

and market practices are taken into account in determining non-executive directors’ fees.

The elements of non-executive directors’ remuneration are an annual board fee and a fee as

a member of a board-appointed committee.

Non-executive directors are not eligible to participate in any of Altech’s incentive arrangements

and share option schemes.

The fees of the non-executive directors are recommended by the remuneration and nomination

committee, approved by the board and ratifi ed and approved by the shareholders in general

meeting. Fees for the period under review in respect of directorship and membership of the

various committees were as follows:

Director fee R92 000

Chairman of the board R85 000

Audit committee member R31 000

Audit committee chairman R63 000

Remuneration and nomination committee member R25 000

Remuneration and nomination committee chairman R32 500

Business risk committee chairman R36 000

On 19 February 2009, the Altech remuneration and nomination committee recommended the

following fees for the non-executives for the period 1 September 2009 to 30 August 2010, which

was approved by the Altech board on the same day. The shareholders will be requested to

approve this fee structure at the company’s annual general meeting on 10 July 2009.

Director fee R110 000

Chairman of the board R95 000

Audit committee member R40 000

Audit committee chairman R75 000

Remuneration and nomination committee member R30 000

Remuneration and nomination committee chairman R40 500

Business risk committee chairman R43 000

Business risk committee member R30 000

Rem

uner

atio

n re

port

73


DISCLOSURE OF DIRECTORS’ EMOLUMENTSNon-executives

2009 2008

R’000 R’000

Dr HK Davies 209 189

ML Leoka 123 111

R Naidoo 92 83

ZJ Sithole 142 —

M Sindane 168 —

Dr HA Serebro — —

AMR Smith — —

RE Venter — —

Dr WP Venter — —

734 662

Executives2009

Defi ned Performance-contribution related Share

Basic pension bonuses optionsalary payments (accrued) expenses Allowances TotalR’000 R’000 R’000 R’000 R’000 R’000

CG Venter 3 837 517 3 913 1 585 262 10 114

JEW Carstens 1 818 484 1 519 138 120 4 079

PMO Curle 2 043 290 1 933 790 127 5 183

7 698 1 291 7 365 2 513 509 19 376

2008

Defi ned Performance-

contribution related Share

Basic pension bonuses option

salary payments (accrued) expenses Allowances Total

R’000 R’000 R’000 R’000 R’000 R’000

CG Venter 3 370 459 2 659 1 409 265 8 162

JEW Carstens 1 657 444 1 110 472 125 3 808

PMO Curle 1 849 264 1 232 860 127 4 332

6 876 1 167 5 001 2 741 517 16 302

74


Remuneration report continued

Directors’ options

CompanyPurchase

date

Strikeprice

RBalance

1 Mar 08

Dr JEW Carstens Allied Technologies Limited Share Trust 31/08/2004 32.25 30 000

Allied Technologies Limited Conditional Rights Issue 15/12/2005 50.99 112 200


PMO Curle Allied Technologies Limited Share Trust 31/08/2004 32.25 40 000



AMR Smith Allied Electronics Corporation Limited Conditional Rights Issue 09/02/2006 22.50 58 400

Allied Electronics Corporation Limited Conditional Rights Issue 23/11/2006 30.75 1 508


CG Venter Allied Technologies Limited Share Trust 31/08/2004 32.25 63 500




RE Venter Allied Electronics Corporation Limited 28/06/2000 4.85 416 750

Allied Electronics Corporation Limited 27/07/2004 11.20 245 667




Rem

uner

atio

n re

port

75


Awarded Lapsed ExercisedExercise

date

NetgainsR’000

Expiry priceR

Balance28 Feb 09

Expiry date

— — 20 000 12/11/2008 271 45.78 10 000 Sept 2010

— — — — — — 112 200 Dec 2011

— — — — — — 15 869 Nov 2012

— — 26 666 20/10/2008 471 49.91 13 334 Sept 2010

— — — — — — 219 460 Dec 2011

— — — — — — 20 232 Nov 2012

— — — — — — 58 400 Feb 2012

— — — — — — 1 508 Nov 2012

— — — — — — 32 766 Feb 2014

— — — — — — 63 500 Sept 2010

— — — — — — 337 100 Dec 2011

— — — — — — 53 775 Nov 2012

— — — — — — 94 092 Feb 2014

— — 307 962 19/06/2008 10 643 39.41 108 788 Jun 2010

— — — — — — 245 667 Jul 2010

— — — — — — 837 360 Feb 2012

— — — — — — 156 186 Nov 2012

— — — — — — 381 457 Feb 2014

76


» Information technology is at the core of Altech making it the

success that it is today. We acknowledge our team of highly

talented employees and are sure that their passion and

dedication will assist the group in focusing on the future.

transparency + disclosure

= the power of

information

Fina

ncia

l sta

tem

ents

77


76


» Information technology is at the core of Altech making it the

success that it is today. We acknowledge our team of highly

talented employees and are sure that their passion and

dedication will assist the group in focusing on the future.

transparency + disclosure

= the power of

information

Fina

ncia

l sta

tem

ents

77


78


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 fi nancial year ended 28 February 2009 all

such returns as are required of a public company in terms of

the Companies Act, and that all such returns are true, correct

and up to date.

Altech Management Services (Pty) Limited – Secretaries

per: Reana Wolmarans – Company secretary

April 2009

Financial statements

Certifi cate from the company secretaries

Pages

Certifi cate from the company secretaries 78

Independent auditor’s report 79

Directors’ report 80

Accounting policies 84

Balance sheets 92

Income statements 93

Statements of changes in equity 94

Cash fl ow statements 96

Notes to the fi nancial statements 97

Annexure 1 – Subsidiaries 131

Annexure 2 – Segmental information 132

Fina

ncia

l sta

tem

ents

79


Independent auditor’s report

TO THE MEMBERS OF ALLIED TECHNOLOGIES LIMITED

Report on the fi nancial statements

We have audited the accompanying annual fi nancial statements

and group annual fi nancial statements of Allied Technologies

Limited set out on pages 78 to 135, which comprise the balance

sheet as at 28 February 2009, and the income statement,

statement of changes in equity and cash fl ow statement for the

year then ended, and a summary of signifi cant accounting policies

and other explanatory notes.

Directors’ responsibility for the fi nancial statements

The directors are responsible for the preparation and fair

presentation of these fi nancial statements in accordance with

International Financial Reporting Standards and the requirements

of the Companies Act in South Africa. This responsibility includes:

designing, implementing and maintaining internal control relevant

to the preparation and fair presentation of fi nancial statements

that are free from material misstatement, whether due to fraud or

error; selecting and applying appropriate accounting policies; and

making accounting estimates that are reasonable in the

circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these fi nancial

statements based on our audit. We conducted our audit in

accordance with International Standards on Auditing. Those

standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance whether

the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the fi nancial statements. The

procedures selected depend on the auditor’s judgement, including

the assessment of the risks of material misstatement of the

fi nancial statements, whether due to fraud or error. In making

those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of the

fi nancial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal

control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting

estimates made by the directors, as well as evaluating the overall

presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient

and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the annual fi nancial statements and group annual

fi nancial statements present fairly, in all material respects, the

fi nancial position of Allied Technologies Limited as of 28 February

2009, and of its fi nancial performance and its cash fl ows for the

year then ended in accordance with International Financial

Reporting Standards and the requirements of the Companies Act in

South Africa.

PKF (Jhb) Inc.

Director: Paul Badrick

Registration number 1994/001166/21

Chartered Accountants (SA)

Registered Auditors

Sandton

21 April 2009

80


The directors have pleasure in submitting the annual fi nancial statements

of the company and the group for the year ended 28 February 2009.

NATURE OF BUSINESS

Altech is an investment holding company involved in the broad fi elds

of telecommunications, multi-media and information technology.

Altech’s holding company is Allied Electronics Corporation Limited

(Altron) which is incorporated in the Republic of South Africa.

FINANCIAL RESULTS

Group attributable earnings for the year ended 28 February 2009 were

R549 million (2008: R409 million), representing earnings per ordinary

share of 569 cents (2008: 421 cents) based on the weighted average

number of shares in issue of 96 530 (2008: 97 040).

Full details of the fi nancial position and results of Altech are set out in

these fi nancial statements.

DIVIDEND

Dividend No 66 of 323 cents per share (2008: 288 cents), in respect of

the year ended 28 February 2009, was declared payable on

Monday, 1 June 2009 to ordinary shareholders recorded in the register

at the close of business on Friday, 29 May 2009.

It is Altech’s policy to declare a single annual dividend at the time of

announcing the group’s results in April of each year.

SUBSIDIARIES

Particulars of the principal subsidiaries of the group are given in

Annexure 1 on page 131.

The attributable interest of the company in the profi ts and losses of

its subsidiaries for the year ended 28 February 2009 is:

2009R million

2008 R million

Aggregate amount of

profi t after taxation 640 511

Aggregate amount of

losses after taxation 18 46

TRANSACTIONS WITH MINORITIES

Subsequent to year-end, on 1 March 2009, Altech bought back

Nariku (Pty) Limited’s 25.1% of the issued share capital in Altech

Netstar Fleet Solutions (Pty) Limited for a consideration of R130 000.

Altech is presently in the process of restructuring the whole Altech

Netstar group with the view to expand and grow the business.

ACQUISITIONS

Refer to note 31 to the annual fi nancial statements for more

information.

51% in Kenya Data Networks Limited, Swift Global (Kenya)

Limited and Infocom Limited (Uganda)

On 1 March 2008, Altech acquired from Sameer ICT Limited, 51% of

the issued share capital in Kenya Data Networks Limited,

Swift Global (Kenya) Limited and Infocom Limited. The combined

purchase price of US$75 million was allocated as follows:

» US$68 million for the shares in Kenya Data Networks Limited.

» US$5 million for the shares in Swift Global (Kenya) Limited.

» US$2 million for the shares in Infocom Limited.

Of the total amount of US$75 million, an amount of US$10 million

was held in escrow (plus interest), and will be released to the vendors

of the shares concerned, on the achievement by the companies

concerned of an aggregated combined profi t after taxation of

US$11.7 million for the 12 months ended 28 February 2009.

In addition, Altech and Sameer ICT Limited have injected new capital

of US$25 million into the three companies acquired, of which 51%

was provided by Altech and the remaining 49% by Sameer ICT

Limited.

Bloemfontein and Witbank Netstar franchises

Altech Netstar acquired 100% of the abovementioned franchises

for a combined consideration of R18.3 million.

POST-BALANCE SHEET EVENTS

Refer to note 32 to the annual fi nancial statements for more

information.

Nelspruit Netstar franchise

Subsequent to year-end, Altech Netstar acquired 100% of the

Nelspruit franchise for a total consideration of R7.7 million.

Fleetcall (Pty) Limited

Effective as from 1 March 2009, Altech acquired 100% of the

issued share capital in Fleetcall (Pty) Limited. The total purchase

consideration in this regard was R75 million, of which R35 million

will be held in escrow to be released to the respective sellers of the

company achieving a profi t after taxation of R9.6 million for the

period ended 28 February 2009 and R15.8 million for the period

ending 28 February 2010.

Directors’ report

Fina

ncia

l sta

tem

ents

81


Technology Concepts

Altech further acquired all the issued share capital in Lateral

Technology Concepts (Pty) Limited for a total consideration of

R45 million, of which R7.5 million was paid upfront and R37.5 million is

being held in escrow to be paid as follows to the respective vendors:

» R19.3 million on the achievement of profi t after taxation of

R5.5 million for the period ending 28 February 2010.

» R15.7 million on the achievement of profi t after taxation of

R8.6 million for the period ending 28 February 2011.

DISPOSALS

Altech disposed of the businesses known as Altech NamITech

South Africa and Altech Cardtronics to Gemalto for a consideration

of R79 million. These businesses comprised all business activities of

the commercialisation, manufacturing and personalisation of secure

and non-secure, chip and chipless, cards for the telecommunications,

fi nancial services, government, utility, security and retail markets;

recharge vouchers as well as related packaging and fulfi lment

services. The transaction became effective on 1 April 2009.

Refer to note 32.2 to the annual fi nancial statements for more

information.

RESOLUTIONS

Altech passed and registered one special resolution on

11 August 2008, approving the acquisition by Altech or any of its

subsidiaries of Altech’s shares.

Except for the above, no special resolutions, the nature of which

might be signifi cant to shareholders in their appreciation of the

state of affairs of the Altech group, were passed by the company or

its subsidiaries during the period covered by this annual report.

SHARE CAPITAL

Full details of the authorised, issued and unissued capital of the

company at 28 February 2009 are contained in note 7 to the

fi nancial statements.

SHARE OPTION SCHEMES

The company has two share incentive schemes namely the Allied

Technologies Limited Share Trust and the Altech Group Share

Incentive Trust. Details of these schemes are more fully contained in

note 7 to the annual fi nancial statements.

During the past fi nancial year, options in respect of 4 440 ordinary

shares were exercised, allotted and issued in terms of the

Allied Technologies Limited Share Trust for a consideration of

R39 693. Altogether 2 400 ordinary share options were forfeited.

With regard to the Altech Group Share Incentive Trust, options

relating to 121 361 ordinary shares were exercised, allotted and

issued for a consideration of R3 889 759. No share options and

343 782 conditional rights were forfeited.

Accordingly, at the date of this report, the issued capital of the

company comprises 105 219 599 ordinary shares of

0.5 cents each.

A total of 325 828 ordinary shares of 0.5 cents each therefore

remain reserved for allocation in terms of the Altech Group Share

Incentive Trust in the current year. No conditional rights have

been allocated to employees in the current year in terms of the

Altech Group Share Incentive Trust.

Five percent of the remaining 931 556 240 unissued ordinary

shares are the subject of a general authority granted to directors in

terms of the Companies Act, 1973, as amended, which authority

remains valid only until the next annual general meeting which will

be held on Friday, 10 July 2009. At that meeting, shareholders will

be asked to place 5% of the unissued ordinary shares under the

control of the directors.

DIRECTORATE

The names of the directors and alternate directors of the company

in offi ce at the date of this report appear on pages 136 to 140.

Appointments

1 April 2008 Mr ZJ Sithole

4 April 2008 Mr M Sindane

1 September 2008 Mr AMR Smith

Resignations

25 March 2008 Dr EN Banda

In terms of the company’s articles of association, Mr AMR Smith

retires at the forthcoming annual general meeting and

Dr HK Davies, Dr JEW Carstens and Mr CG Venter retire by rotation.

All the retiring directors are eligible and available for re-election.

Their profi les appear on pages 136 to 140.

82

Directors’ report continued


DIRECTORS’ INTERESTS IN THE ISSUED SHARES OF THE COMPANY

As at year-end, the directors’ interests in the issued shares of the company were as follows:

Benefi cial Non-benefi cial

Direct 2009 2008 2009 2008

Dr HK Davies — — — —

CG Venter* — — 1 000 1 000

Dr EN Banda — — — —

Dr JEW Carstens* — 25 000 1 000 1 000

PMO Curle* — — — —

ML Leoka — — — —

R Naidoo — — — —

Dr HA Serebro 4 000 4 000 — —

M Sindane — — — —

ZJ Sithole — — — —

AMR Smith — — — —

RE Venter — — — —

Dr WP Venter 25 500 25 500 — —

Total direct 29 500 54 500 2 000 2 000

Benefi cial Non-benefi cial

Indirect 2009 2008 2009 2008

Dr HK Davies — — — —

CG Venter* — — — —

Dr EN Banda — — — —

Dr JEW Carstens* — — — —

PMO Curle* — — — —

ML Leoka — — — —

R Naidoo — — — —

Dr HA Serebro 3 000 3 000 3 000 3 000

M Sindane — — — —

ZJ Sithole — — — —

AMR Smith — — — —

RE Venter — — — —

Dr WP Venter — — — —

Total indirect 3 000 3 000 3 000 3 000

Total 32 500 57 500 5 000 5 000

*Executive directors.

Subsequent to 28 February 2009, CG Venter exercised options and sold 42 332 Altech ordinary shares on 12 May 2009, at an average price

of R60.36.

Fina

ncia

l sta

tem

ents

83


Other interests of directors and offi cers

Dr WP Venter, through his family and related trusts, holds a controlling

interest in this company’s holding company, Altron.

Directors’ emoluments

The emoluments of executive and non-executive directors are

determined by the company’s remuneration committee. Further

information relating to the earnings and perquisites of the directors,

together with details relating to option allocations, are set out in the

directors’ remuneration report on page 70.

Secretaries

Altech Management Services (Pty) Limited acts as secretaries to the

company. The secretaries’ business and postal addresses appear on

page 148.

Segment reporting

The operational reviews on pages 20 to 27 of the annual report

provide details pertaining to each major class of business of the group.

See also Annexures 1 and 2 on pages 131 to 135.

Corporate governance

The directors subscribe to the values of corporate governance as

embodied in the King II Report on Corporate Governance, published in

March 2002. Details of the group’s compliance with the Code of

Corporate Practices and Conduct as contained in the King II Report

appear on page 59 of this report.

Approval of the annual fi nancial statements and going-concern

statement

The annual fi nancial statements set out in this report have been

prepared in accordance with statements of International Financial

Reporting Standards and in the manner required by the South African

Companies Act, and are based on appropriate accounting policies,

consistently applied, which are supported by reasonable and prudent

judgements and estimates.

The directors of the company are responsible for the preparation of the

annual fi nancial statements and related fi nancial information that

fairly present the state of affairs and the results of the company and

the group.

To enable the board to meet these responsibilities, systems of internal

control and accounting and information systems have been

implemented aimed at providing reasonable assurance that risk of

error, fraud or loss is reduced. The group’s internal audit function,

which has unrestricted access to the group’s audit committee,

evaluates and, if necessary, recommends improvements in the

systems of internal control and accounting practices, based on audit

plans that take cognisance of the relative degrees of risk of each

function or aspect of the business.

The audit committee, together with the internal and external auditors,

plays a central role in matters relating to fi nancial and internal

control, accounting policies, reporting and disclosure.

To the best of their knowledge and belief, based on the above and

after making enquiries, the board of directors confi rms that they have

every reason to believe that the company and the group have

adequate resources in place to continue in operational existence for

the foreseeable future. For this reason, they continue to adopt the

going-concern basis in preparing the annual fi nancial statements.

The annual fi nancial statements for the year ended 28 February 2009,

which appear on pages 78 to 135, were approved by the board on

21 April 2009 and are signed on its behalf by:

Dr Hilton Davies – Independent non-executive chairman

Craig Venter – Chief executive offi cer

Dr John Carstens – Chief fi nancial offi cer

84


Accounting policies

Allied Technologies Limited (the company) is a South African registered company. The consolidated fi nancial statements of the company for the year ended 28 February 2009 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 fi nancial 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.

BASIS OF PREPARATION

The annual fi nancial 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 fi nancial instruments classifi ed as available-for-sale.

Non-current assets and liabilities and disposal groups held-for-sale are stated at the lower of carrying amount and fair value less costs to sell.

The preparation of fi nancial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that may affect the application of accounting policies and the 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. Actual results may differ from these estimates.

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 signifi cant effect on the fi nancial statements and estimates with a signifi cant risk of material adjustment in the next year are discussed in note 17.2.

The accounting policies set out below have been applied consistently to the periods presented in these consolidated fi nancial statements.

The group’s accounting policies have been applied consistently by all group entities.

BASIS OF CONSOLIDATION

Subsidiaries

Subsidiaries are those entities over which the group has the power to, directly or indirectly, exercise control over the fi nancial and operating policies, so as to obtain benefi ts from their activities.

The fi nancial statements of subsidiaries are included in the consolidated fi nancial 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 signifi cant infl uence but not control over the fi nancial and operating policies. The equity method of accounting for associates is adopted in the group fi nancial 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 fi nancial 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 fl ows are combined with similar items, on a line-by-line basis, in the group’s fi nancial statements from the date the joint control commences until the date the joint control ceases.

Eliminations on consolidation

Intragroup balances and transactions, and any unrealised gains or losses arising from intragroup transactions, are eliminated in preparing the consolidated fi nancial statements. Unrealised gains arising from transactions with associates and joint ventures are eliminated to the extent of the group’s interest in the investment in these enterprises. Unrealised losses on transactions with associates 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.

85


Fina

ncia

l sta

tem

ents

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. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifi able assets, liabilities and contingent liabilities acquired.

Goodwill is measured 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 group fi nancial 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.

Broad-based black economic empowerment (B-BBEE) transactions

B-BBEE 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 B-BBEE 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 satisfi ed. 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, call deposits and cash fl oats, including amounts held by a related-party treasury company and a wholly owned subsidiary of Allied Technologies Limited. 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 fl ow statement. Cash and cash equivalents are measured at amortised cost.

CAPITAL ITEMS

Capital items are items of income and expense relating to the acquisition, disposal or impairment of property, plant and equipment, investments, subsidiaries, intangible assets as well as the closure of businesses.

EMPLOYEE BENEFITS

Short-term employee benefi ts

The cost of all short-term employee benefi ts are recognised during the period in which the employee renders the related service. The accruals for employee entitlements to salaries and annual leave represent the amounts which the group has 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 benefi ts

The majority of the group’s employees are members of the Altron Group Pension Fund and Altron Group Provident Fund, which are defi ned contribution funds.

After the acquisition of subsidiaries, certain employees remained members of their previous funds. A number of these are defi ned benefi t plans. These industry-managed retirement benefi t schemes are dealt with as defi ned contribution plans as the group’s obligations under the schemes are equivalent to those arising in a defi ned contribution plan.

The group’s contributions to defi ned contribution funds are charged to the income statement in the year they are incurred.

Defi ned benefi t obligations

Certain members of the Altron Group Pension Fund who were members prior to 1 September 1996 are entitled to a minimum benefi t equal to the previously provided defi ned benefi t pension.

Furthermore, upon retirement, any member of the Altron Group Pension Fund can purchase a defi ned benefi t pension from the fund. The base pension and subsequent increases, based on weighted average investment returns on funds, are guaranteed by the pension fund.

The projected unit credit method is used to determine the present value of these defi ned benefi t 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 defi ned benefi t obligation to the extent permitted by IAS 19 – Employee benefi ts. Past-service costs are recognised as an expense on a straight-line basis over the average period until the benefi ts become vested. Past-service costs which are already vested, are expensed immediately.

86

Accounting policies continued


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 fi nancial year exceeded the greater of:

» 10% of the present value of the defi ned benefi t obligation at that date before deducting plan assets; and

» 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.

When the calculation results in a benefi t to the group, the recognised asset is limited to the net total of any unrecognised past-service cost and the present value of any future refunds from the plan or reductions in future contributions to the plan.

Post-retirement medical aid benefi ts

The group has an obligation to provide post-retirement medical aid benefi ts 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 profi t 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.

Derecognition

Financial assets are derecognised if the group’s contractual rights to the cash fl ows from the fi nancial assets expire or if the group transfers the fi nancial assets to another party without retaining control or substantially all the risks and rewards of the asset.

Financial liabilities are derecognised if the group’s obligations specifi ed in the contract expire or are discharged or cancelled.

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 classifi ed 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 classifi ed 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 on receivables.

Derivative fi nancial instruments

The group uses derivative fi nancial instruments to manage its exposure to foreign exchange and commodity price risks arising from operational, fi nancing and investment activities. The group does not hold or issue derivative fi nancial instruments for trading purposes.

Derivative fi nancial instruments comprise foreign exchange contracts. Derivatives are recognised initially at fair value, and attributable transaction costs are recognised in profi t or loss when incurred. Subsequent to initial recognition derivatives are measured at fair value through 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 fi nancial instrument is designated as a hedge of the variability in cash fl ows attributable to a particular risk associated with a recognised asset or liability, a fi rm commitment if it is a hedge of foreign exchange risk, or a highly probable forecast transaction that could affect the income statement, the effective part of any gain or loss on the derivative fi nancial instrument is recognised directly in equity in the deferred hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the income statement.

When the hedged fi rm commitment or forecast transaction results in the recognition of a non-fi nancial asset or a non-fi nancial 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 fl ow 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.

87


Fina

ncia

l sta

tem

ents

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, then hedge accounting is discontinued and the cumulative unrealised gain or loss is immediately recognised in the income statement.

Where a derivative fi nancial instrument is used to economically hedge the foreign exchange exposure of a recognised monetary asset or liability, no hedge accounting is applied and any gain or loss on the hedging instrument is recognised in the income statement.

Offset

Financial assets and fi nancial 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.

Financial income and expense

Finance income comprises interest income on funds invested, dividend income and changes in the fair value of fi nancial assets at fair value through the income statement, and gains on hedging instruments that are recognised in the income statement. Interest income is recognised as it accrues in the income statement, using the effective interest method. Dividend income is recognised in profi t or loss on the date that the group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions and other interest-free liabilities, changes in the fair value of the fi nancial assets at fair value through the income statement, impairment losses recognised on fi nancial assets, and losses on hedging instruments that are recognised in the income statement.

FOREIGN CURRENCIES

Foreign currency transactions

Foreign currency transactions are translated to the respective functional currencies of group entities at the rates of exchange ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the exchange 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 acquisition, are translated to South African rands at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to South African 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 indefi nite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated annually, or whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of an asset’s fair value less cost to sell and its value in use.

In assessing value in use, the expected future cash fl ows from the asset are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c 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 infl ows 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 fi rst 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.

When a decline in the fair value of an available-for-sale fi nancial 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 fi nancial 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 fi nancial asset previously recognised in the income statement.

88



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 or amortisation) 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 classifi ed 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 to “Basis of consolidation” above.

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientifi c or technical knowledge and understanding, is recognised as an expense incurred.

Expenditure on development activities, whereby research fi ndings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if development cost can be measured reliably, the product or process is technically and commercially feasible, future economic benefi ts are probable and the group intends to and has suffi cient resources to complete development and to use or sell the assets.

The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses. Other development expenditure is recognised as an expense incurred.

Other intangible assets

Other intangible assets that are acquired by the group which have fi nite useful lives are measured 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 benefi ts embodied in the specifi c asset to which it relates. All other expenditure is expensed as incurred.

Amortisation

Amortisation is recognised in the income statement on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use, unless such lives are indefi nite. Goodwill and intangible assets with an indefi nite useful life are not amortised but tested annually for impairment. The estimated useful lives vary between 3 and 10 years.

INVENTORIES

Inventories are measured at the lower of cost and net realisable value taking account of market conditions and technology changes. Cost is determined on the fi rst-in fi rst-out and average cost methods. Work and contracts in progress and fi nished goods include direct costs and an appropriate portion of attributable overhead expenditure based on normal production capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

NON-CURRENT ASSETS HELD-FOR-SALE AND DISCONTINUED OPERATIONS

Non-current assets held-for-resale are classifi ed 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 classifi cation 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. Classifi cation as a discontinued operation occurs upon the earlier of disposal or when the operation meets the criteria to be classifi ed as held-for-sale. When an operation is classifi ed as a discontinued operation, the comparative income statement and cash fl ow statement are restated as if the operation has been discontinued from the start of the comparative period.

OPERATING LEASES

Leases where the lessor retains the risks and rewards of ownership of the underlying asset, are classifi ed as operating leases. Payments made under operating leases are recognised in the income statement on a straight-line basis over the period of the lease.

89


Fina

ncia

l sta

tem

ents

PROPERTY, PLANT AND EQUIPMENT

Owned assets

Property, plant and equipment are measured 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 of property, plant and equipment.

Purchase software that is integral to the functionality of the related equipment is capitalised as part of the equipment.

Leased assets

Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the group are classifi ed as fi nance leases. Assets acquired in terms of fi nance 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 shorter of the estimated useful life of the asset or the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term.

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 method to determine the lease fi nance cost, which is recognised in the income statement 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 future economic benefi ts embodied within the item will fl ow 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 recognised in 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 estimated useful lives are as follows:

» Buildings 20 to 50 years

» Plant and machinery 3 to 20 years

» Furniture and equipment 5 to 20 years

» Motor vehicles 4 to 8 years

» Data infrastructure 8 years

» IT equipment and software 2 to 8 years

» Leasehold improvements over the period of the lease

The depreciation methods, useful lives and residual values, if not insignifi cant, are reassessed annually.

Gains and losses arising on disposal of property, plant and equipment are included as capital items in the income statement.

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 outfl ow of economic benefi ts will be required to settle the obligation, and where a reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected future cash fl ows at a pre-tax discount rate that refl ects current market assessments of the time value of money and, where appropriate, the risks specifi c to the liability.

Warranties and fault rectifi cation

A provision for warranties and fault rectifi cation is recognised when the underlying products or services are sold. The provision is based on historical warranty and fault rectifi cation data and a weighting of all possible outcomes against their associated probabilities.

Retrenchment and restructuring

A provision for retrenchment and 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. No provision is made for future operating costs.

Contract losses

A provision for onerous contracts is recognised when the expected benefi ts to be derived by the group from a contract are lower than the unavoidable cost of meeting the obligations under the contract.

The provision is measured at the present value of the lower of the expected costs of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the group recognises any impairment loss on the assets associated with that 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

90



upon which the instruments are granted. The amount recognised as an expense is adjusted to refl ect the actual number of share options and deferred delivery shares that vest except where forfeiture is only due to share prices not achieving the threshold for vesting. 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.

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. Any changes in the fair value of the liability are recognised as employees’ remuneration in the income statement.

Group share-based payment transactions

Transactions in which a parent grants rights to its equity instruments directly to the employees of its subsidiaries are classifi ed as equity settled in the fi nancial statements of the subsidiary, provided the share-based payment is classifi ed as equity settled in the consolidated fi nancial statements of the parent.

The subsidiary recognises the services acquired with the share-based payment as an expense and recognises a corresponding increase in equity for a capital contribution from the parent for those services acquired. The parent recognises in equity the equity-settled share-based payment and recognises a corresponding increase in the investment in subsidiary.

A recharge arrangement exists whereby the subsidiary is required to fund the difference between the exercise price on the share options and the market price of the share at the time of exercising the option. The recharge arrangement is accounted for separately from the underlying equity-settled share-based payment as follows upon initial recognition:

» The subsidiary recognises a recharge liability and a corresponding adjustment against equity for the capital contribution recognised in respect of the share-based payment.

» The parent recognises a recharge asset and a corresponding adjustment to the carrying amount of the investment in the

subsidiary.

Subsequent to initial recognition, the recharge arrangement is remeasured at fair value at each subsequent reporting date until settlement date. Where the recharge amount is greater than the initial capital contribution recognised by the subsidiary in respect of the share-based payment, the excess is recognised as a net capital distribution to the parent. The amount of the recharge in excess of the capital contribution recognised as an increase in the investment in subsidiary is recognised as dividend income by the parent.

B-BBEE 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 specifi cally identify the goods or services received. This accounting policy is applicable to equity instruments that had not vested by 1 January 2005 (as above).

REVENUE

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts, volume rebates and value-added tax.

Revenue is recognised when the signifi cant risks and rewards have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.

Revenue from services rendered is recognised in profi t or loss in proportion to the stage of completion of the transaction at reporting date.

SHARE CAPITAL

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 deduction from equity. Repurchased shares held by subsidiaries are classifi ed as treasury shares and presented as a deduction from total equity.

91


Fina

ncia

l sta

tem

ents

SEGMENTAL REPORTING

A segment is a distinguishable component of the group that is engaged in either providing related products or services (business segment), or in producing products or undertaking service activities within a particular economic environment (geographical segment), which is 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 signifi cant 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.

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

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax

Current tax 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 tax

Deferred tax is recognised using the balance sheet method, based on temporary differences. Temporary differences are differences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and their tax values.

Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affect neither accounting nor taxable profi t, and differences relating to investments in subsidiaries and joint ventures to the extent that they will not reverse in the foreseeable future.

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. 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 profi ts will be available against which the unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

Secondary tax on companies

Secondary tax on companies (STC) is recognised in the year dividends are declared, net of dividends received. A deferred tax asset is recognised on unutilised STC credits when it is probable that such unused STC credits will be utilised in the future.

EARNINGS PER SHARE

The group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profi t or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees and B-BBEE transactions that have not yet met the applicable accounting recognition criteria.

92


Balance sheetsat 28 February 2009

GROUP COMPANY

2009 2008 2009 2008

Notes Rm Rm Rm Rm

ASSETS

Non-current assets 2 071 796 1 860 1 190

Property, plant and equipment 1 837 299 — —

Intangible assets, including goodwill 2 1 122 409 — —

Investment in subsidiaries 3 — — 1 860 1 190

Deferred taxation 11 112 88 — —

Current assets 2 885 2 892 535 330

Inventories 4 416 364 — —

Loans to subsidiaries 3 — — 381 327

Trade and other receivables, including derivatives 5 1 248 937 2 3

Cash and cash equivalents 6 1 221 1 591 152 —

Assets classifi ed as held-for-sale 32.2 107 — — —

Total assets 5 063 3 688 2 395 1 520

EQUITY AND LIABILITIES

Total equity 2 547 2 027 758 776

Altech equity holders 7 2 249 1 955 758 776

Minority interest 8 298 72 — —

Non-current liabilities 188 100 — 9

Interest-bearing loans 12 115 77 — 9

Deferred taxation 11 73 23 — —

Current liabilities 2 300 1 561 1 637 735

Trade and other payables, including derivatives 13 1 827 1 452 103 1

Warranty provisions 14 18 22 — —

Loans from subsidiaries 3 — — 1 532 675

Bank overdraft 6 310 — — 59

Taxation payable 145 87 2 —

Liability classifi ed as held-for-sale 32.2 28 — — —

Total equity and liabilities 5 063 3 688 2 395 1 520

Net asset value per share (cents) 2 328 2 026

Fina

ncia

l sta

tem

ents

93


Income statementsfor the year ended 28 February 2009

GROUP COMPANY

2009 2008 2009 2008

Total Total

Notes Rm Rm Rm Rm

Revenue 18 9 164 8 242 — —

Operating costs before capital items (8 290) (7 578) — —

Material and services consumed 7 200 6 604 — —

Employees’ remuneration 971 842 — —

Depreciation and amortisation 191 96 — —

Net change in inventories (72) 36 — —

Operating profi t before impairment and capital items 19 874 664 — —

Financial income 20 68 98 319 337

Financial expense 21 (70) (21) (13) (70)

Goodwill impaired 2 — (86) — —

Capital items 22 (2) (1) (26) (88)

Profi t before taxation 870 654 280 179

Taxation 23 (254) (219) (1) —

Profi t for the year 616 435 279 179

Attributable to minority interest 8 67 26 — —

Attributable to Altech equity holders 549 409 279 179

616 435 279 179

Basic earnings per share (cents) 24 569 421

Diluted basic earnings per share (cents) 24 545 406

Dividend paid 25 278 235

Details of the headline earnings, headline earnings per share and dividend per ordinary share are given in note 24 and 25 to the annual fi nancial statements.

94


ATTRIBUTABLE TO ALTECH EQUITY HOLDERS

Foreign currencyShare capital Treasury translation Otherand premium

(note 7)shares

(note 7)reserves(note 7)

reserves(note 7)

GROUP Rm Rm Rm Rm

Balance at 1 March 2007 64 (257) 5 —Recognised income and expenseForeign currency translation differences 66Attributable earningsCash fl ow hedging reserve 2Transactions with shareholdersTransaction with minoritiesDividendsTreasury shares acquired (35)Cancellation of treasury shares acquired (67)Share-based paymentsIssue of share capital 6

Balance at 29 February 2008 3 (292) 71 2

Recognised income and expenseForeign currency translation differences 18Attributable earningsCash fl ow hedging reserve (4)Transactions with shareholdersDividendsCapital subscription received from minority shareholdersMinority interest on acquisition of subsidiariesShare-based paymentsIssue of share capital 4

Balance at 28 February 2009 7 (292) 89 (2)

COMPANY

Balance at 1 March 2007Recognised income and expenseAttributable earningsShare-based paymentsTransactions with shareholdersDividendsCancellation of treasury shares acquiredIssue of share capital

Balance at 29 February 2008

Recognised income and expenseAttributable earningsShare-based paymentsTransactions with shareholdersDividendsIssue of share capital

Balance at 28 February 2009

Statements of changes in equityfor the year ended 28 February 2009

Fina

ncia

l sta

tem

ents

95


ATTRIBUTABLE TO ALTECH EQUITY HOLDERS

Transaction with Share-based Retained Minorityminorities

(note 7)payments reserve

(note 7)earnings

(note 7)Shareholders’

equityinterest(note 8)

Total equity

Rm Rm Rm Rm Rm Rm

28 9 1 973 1 822 61 1 883

66 66409 409 26 435

2 2

(20) (20) (12) (32)(235) (235) (3) (238)

(35) (35)(67) (67)

7 7 76 6

8 16 2 147 1 955 72 2 027

18 (8) 10549 549 67 616

(4) (4)

(278) (278) (11) (289)79 7999 99

5 5 54 4

8 21 2 418 2 249 298 2 547

Share capital Share-based Retained and premium

(note 7)payments reserve

(note 7)earnings

(note 7)Shareholders’

equityRm Rm Rm Rm

64 9 833 906

179 1797 7

(255) (255)(67) (67)

6 6

3 16 757 776

279 2792 2

(303) (303)4 4

7 18 733 758

96


GROUP COMPANY

2009 2008 2009 2008

Notes Rm Rm Rm Rm

Cash fl ows from/(utilised by) operating activities 301 683 5 (80)

Cash generated/(utilised) by operations 26 799 1 009 1 (90)

Interest received 68 94 15 82

Dividends received — 4 304 255

Interest paid (70) (21) (13) (70)

Taxation paid 27 (207) (165) 1 (2)

Cash available from operating activities 590 921 308 175

Dividends paid

– to Altech equity holders 25 (278) (235) (303) (255)

– to minority interest 8 (11) (3) — —

Cash fl ows (utilised in)/from investing activities (1 026) (242) 211 (7)

Investment to maintain operations (9) 2 — —

Replacement of property, plant and equipment 1 (21) (18) — —

Proceeds on disposal of property, plant and equipment 28 12 20 — —

Investment to expand operations (1 017) (244) 211 (7)

Additions to property, plant and equipment 1 (364) (119) — —

Additions to intangible assets (118) (4) — —

Acquisition of subsidiaries and businesses 30/31 (535) (56) (605) —

Transactions with minorities 30 — (30) — —

Other investing activities 29 — (35) 816 (7)

Cash fl ows from/(applied in)fi nancing activities 45 (23) (5) (52)

Share issues 4 6 4 6

(Decrease)/increase in long-term liabilities (38) 46 (9) 9

Change in minority shareholders’ loan — (8) — —

Capital subscription received from minority shareholders 79 — — —

Cancellation of treasury shares acquired — (67) — (67)

(Decrease)/increase in net cash and cash equivalents (680) 418 211 (139)

Net cash and cash equivalents

– at the beginning of the year 1 591 1 173 (59) 80

– at the end of the year 6 911 1 591 152 (59)

Cash fl ow statementsfor the year ended 28 February 2009

97


Fina

ncia

l sta

tem

ents

GROUP

Land and Plant and Computer

buildings machinery equipment Other* Total

Rm Rm Rm Rm Rm

1. PROPERTY, PLANT AND EQUIPMENT

Cost

Balance at 1 March 2007 60 340 201 85 686

Additions at cost 7 78 52 — 137

Translation 2 — 8 — 10

Disposals (7) (54) (73) (15) (149)

Balance at 29 February 2008 62 364 188 70 684

Additions at cost 4 73 37 271 385

Arising on acquisitions of subsidiaries — 183 4 130 317

Translation 4 33 12 7 56

Disposals — (8) (19) — (27)

Balance at 28 February 2009 70 645 222 478 1 415

Depreciation and impairment losses

Balance at 1 March 2007 21 200 168 37 426

Depreciation for the year 4 47 25 10 86

Translation 1 2 1 — 4

Disposals (5) (61) (57) (8) (131)


Depreciation for the year 5 87 29 9 130

Translation — 19 2 — 21

Disposals — (4) (6) (2) (12)


Carrying amount at 28 February 2009 before items classifi ed as held-for-sale 44 355 60 432 891

Property, plant and equipment classifi ed as held-for-sale (refer to note 32.2) (6) (32) (6) (10) (54)

Carrying amount at 28 February 2009 38 323 54 422 837

Carrying amount at 29 February 2008 41 176 51 31 299

Details of land and buildings are available, on request, for inspection at the registered offi ce of the company.

Useful lives are refl ected under accounting policies on page 89.Note

* Other: Furniture and equipment, motor vehicles and capital work in progress.

Notes to the fi nancial statementsfor the year ended 28 February 2009

98

Notes to the group fi nancial statements continued

for the year ended 28 February 2009


GROUP

Trade names,

customer

relationships,

internal developed

Goodwill cost and other Total

Rm Rm Rm

2. INTANGIBLE ASSETS, INCLUDING GOODWILL

Cost

Balance at 1 March 2007 522 35 557

Additions at cost — 4 4

Arising on acquisition of subsidiaries 17 56 73

Translation 60 3 63

Balance at 29 February 2008 599 98 697

Development cost capitalised — 106 106

Arising on acquisition of subsidiaries 508 160 668

Translation 1 (1) —


Amortisation and impairment losses

Balance at 1 March 2007 187 5 192

Amortisation during the year — 10 10

Impairment during the year 86 — 86


Amortisation during the year — 61 61


Carrying amount at 28 February 2009 835 287 1 122

Carrying amount at 29 February 2008 326 83 409

Development cost capitalised

Development costs on designs capitalised with a carrying value of R57 million have not yet been brought into use. Impairment tests were conducted on the carrying values based on forecast contributory cash fl ows on the underlying products and did not reveal any apparent impairment.

Impairment tests are conducted on an annual basis for goodwill and indefi nite life intangible assets.

Impairment losses

In the prior year the directors concluded that the carrying value of goodwill relating to the NamITech South Africa cash-generating unit should be impaired by an amount of R86 million in view of the trading loss incurred by that business.

Useful lives

Useful lives are refl ected under accounting policies on page 89.

99


Fina

ncia

l sta

tem

ents

2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)

Impairment test for cash-generating units containing goodwill

The following units have signifi cant carrying amounts of goodwill:GROUP

2009 2008

Rm Rm

NamITech West Africa 332 306

ComTech 30 18

Kenya Data Networks Limited 425 —

Altech Swift Global Limited 32 —

Altech Infocom Limited 14 —

Other units without signifi cant goodwill 2 2

835 326

Description of impairment tests

The carrying amount of goodwill is reviewed at each reporting date using a discounted cash fl ow valuation based on the profi ts expected to be generated by the cash-generating unit using the value-in-use methodology.

Management projections cover a three-year period.

Management has used discount rates ranging between 19% to 15% (2008: 19% to 15.8%) for the purpose of determining the value-in-use.

The perpetuity growth rate used beyond the three-year period is not greater than the long-term predicted infl ation rate in the respective country.

Based on these projections, the value-in-use exceeds the carrying value of goodwill and the underlying assets in all instances and therefore no impairments are necessary.

A key assumption applied in the goodwill impairment test for NamITech West Africa is the discount rate used of 17.5%. Assuming all the other inputs remain the same in the goodwill impairment test, an impairment of R4 million arises if the discount rate is changed by 1% to 18.5%.

A key assumption applied in the goodwill impairment test for Kenya Data Networks is the discount rate used of 15%. Assuming all other inputs remain the same in the goodwill impairment test, an impairment of R17 million arises if the discount rate changes by 2% to 17%.

COMPANY

2009 2008

Rm Rm

3. INTEREST IN SUBSIDIARIES

Shares at cost less amounts written off 1 842 1 173

Share-based payments and other loans 18 17

1 860 1 190

Loans to subsidiaries – these loans are interest-free and repayable on demand 381 327

Loans from subsidiaries – these loans are interest-free and repayable on demand (1 532) (675)

Net interest in subsidiaries 709 842

Refer to Annexure 1 for details.

100




GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

4. INVENTORIES

Raw materials 186 154

Work in progress 39 21

Design work in progress — 13

Finished goods 110 45

Merchandise 76 100

Contracts in progress and other 24 31

Less: Assets classifi ed as held-for-sale(refer to note 32.2) (19) —

416 364

Inventories carried at cost 410 358

Inventories carried at net realisable value 6 6

416 364

5. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES

Gross trade receivables 1 043 813

Less: Allowance for impairment losses (60) (21)

Derivative assets at fair value used for hedging 4 10

Prepayments 32 16

Sundry debtors 142 98

Other receivables 121 21 2 3

Receivables classifi ed as held-for-sale (refer to note 32.2) (34) —

1 248 937 2 3

Exposure to credit risk

Gross trade receivables represents the maximum credit exposure.

The maximum exposure to credit risk at the reporting date was:

Gross trade receivables 1 043 813

Mitigated by:

Credit guarantee insurance (33) (32)

Residual exposure 1 010 781

101


Fina

ncia

l sta

tem

ents

GROUP

Gross Gross

2009 2008

5. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)

The maximum exposure to credit risk for gross trade receivables at the reporting date by type of customer was:

Parastatals/government 58 33

Corporates 626 410

SMMEs 182 174

Individuals 177 196

1 043 813

The group has a relatively large diversity of customers and thus has a limited exposure to any one customer.

The maximum exposure to credit risk for gross trade receivables at the reporting date by geographical region was:

South Africa 508 586

Rest of Africa 248 79

Europe 28 28

Rest of world 259 120

1 043 813

Management views the debtors days per geographic region as within expectations compared with the group’s standard payment terms for that region. Our various international operations are experienced in managing their own local credit risk.

Debtors terms differ in the Europe and Africa regions due to local economic and market conditions and the risks involved in trading in that geographical region.

Credit risk is minimised through an initial new client acceptance procedure whereby potential customers are individually assessed before an appropriate credit limit is allocated to the new client. Altech makes use of credit vetting agencies who maintain current credit data on most companies in South Africa.

Impairment losses

The following table illustrates the relationship between aged debt and the impairment allowance:

GROUP

Impairment Impairment

Gross allowance Gross allowance

2009 2009 2008 2008

Not past due 611 — 733 —

Past due 0 – 30 days 153 36 74 18

Past due 31 – 120 days 279 24 6 3

1 043 60 813 21

Listings of overdue customer balances are reviewed monthly and reviewed against their credit terms/limits. Customers exceeding their credit terms/limits must settle their overdue balances before any further credit is extended. Appropriate action is taken to recover long overdue debts.

102




GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

5. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)The movement in the impairment allowance in respect of trade receivables during the year was as follows:Balance at the beginning of the year 21 10Impairment loss recognised 49 15Allowance utilised (10) (4)

Balance as at the end of the year 60 21

The following impairment losses were recognised:Financial diffi culties/bankruptcy 15 32Absconded 14 19Dispute — 1

29 52

Currency riskA sensitivity analysis for foreign currencies can be seen in note 16.

Derivative assets at fair valueDerivative assets at fair value include:Forward exchange contracts used for hedging– Cash fl ow hedge (4) 2– Fair value hedge 8 8

4 10

Credit risk on derivative assetsThe group limits its exposure to credit risk by only entering into forward contracts with counterparties that have a sound credit rating. Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.The carrying amount of the following fi nancial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:Derivative assets at fair value 4 10Prepayments 32 16Sundry debtors 142 98Other receivables 121 21

299 145

6. CASH AND CASH EQUIVALENTSCash at bank and on deposit 1 221 1 591 152 —Bank overdraft (310) — — (59)

911 1 591 152 (59)

Included in cash and cash equivalents are amounts owing by/to a related party (refer to note 17.1.6).

103


Fina

ncia

l sta

tem

ents

6. CASH AND CASH EQUIVALENTS (continued)

Credit risk

With the exception of the amounts due from the related party, the group limits its exposure to credit risk by only investing in liquid instruments and only with counterparties that have a sound credit rating. As a result management does not expect any counterparty to fail to meet its obligations.

Interest risk

The group limits its interest risk by managing the term of its deposits to coincide with possible changes to interest rates as determined by the Monetary Policy Committee of the South African Reserve Bank.

Currency risk

Currency risk positions are refl ected in note 16.GROUP AND COMPANY

2009 2008 2009 2008

Number Number

of shares of shares Rm Rm

7. SHAREHOLDERS’ EQUITY

Share capital and premium7.1 Authorised

Ordinary shares of 0.5 cents each 1 041 820 600 1 041 820 600 5 5

7.2 IssuedOrdinary sharesIn issue at the beginning of the year 105 093 798 105 868 163 1 1Cancellation of treasury shares — (1 073 729) — —Issued in terms of share schemes 125 801 229 364 — —

In issue at the end of the year 105 219 599 105 093 798 1 1

Less: Own shares acquired (8 609 607) (8 609 607)

Net shares 96 609 992 96 484 191

7.3 Share premiumBalance at the beginning of the year 2 63Share premium arising from issue of shares 4 6Cancellation of treasury shares — (67)

Balance at the end of the year 6 2

7.4 Total issued share capital and premium 7 3

7.5 UnissuedOrdinary shares Shares Shares

Shares reserved to meet the requirements of:Allied Technologies Limited Share Trust — 6 840

– unexercised allocations of share options at various prices and expiry dates — 6 840

Altech Group Share Incentive Trust 3 264 846 3 729 989

– unexercised allocations of share options and conditional rights 2 939 018 3 404 161– available for future allocation 325 828 325 828

Shares under the control of the directors until the forthcoming annual general meeting 933 336 155 931 556 240

936 601 001 935 293 069

104




Share incentive Share Total share

trust trust options

7. SHAREHOLDERS’ EQUITY (continued)

7.6 Employee share options – ordinary shares

Number of options and conditional rights allocated at the beginning of the year 3 404 161 6 840 3 411 001

Number of options lapsed/forfeited — (2 400) (2 400)

Number of conditional rights lapsed/forfeited (343 782) — (343 782)

Number of options exercised (121 361) (4 440) (125 801)

Number of options and conditional rights allocated at the end of the year 2 939 018 — 2 939 018

2009 2008

Rm Rm

7.7 Share-based payments – cash settled (4) 2

Share-based payments were valued by making use of the Black-Scholes model.

No conditional rights were granted to directors during the year.

The market price of the ordinary share options exercised during the year ranged from 3 710 cents to 6 101 cents and the subscription prices ranged from 894 cents to 3 225 cents.

46 666 share options were exercised by directors during the year. For further details of the options held by directors please see pages 74 to 75.

GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

Reserves

7.8 Non-distributable reserves

Balance at year end 89 71 — —

Foreign currency translation reserve 89 71 — —

7.9 Distributable reserves

Accumulated profi ts 2 418 2 147 733 757

7.10 Share-based payment reserve 21 16 18 16

7.11 Transactions with minorities 8 8 — —

7.12 Other reserves (2) 2 — —

7.13 Total reserves 2 534 2 244 751 773

Own shares acquired (292) (292) — —

Total shareholders’ equity 2 249 1 955 758 776

The accumulated distributable reserves, if declared as a dividend, would be subject to secondary tax on companies of R219 million at 10% (2008: R195 million at 10%.)

105


Fina

ncia

l sta

tem

ents


7.14 The Allied Technologies Limited Share Trust, Altech Share Incentive Scheme and the Conditional Rights Scheme

Details of share options and conditional rights outstanding at the end of the year under review:

Options and deferred delivery shares outstanding at 28 February 2009

Altech Share Conditional

Exercise price Incentive Rights

Date granted per share Scheme Scheme

The following options are subject to IFRS 2:

12 May 2004 R32.00 6 534

31 August 2004 R32.25 131 840

5 November 2004 R39.94 97 600

15 December 2005 R50.99 1 720 296

24 November 2006 R57.75 506 111

10 May 2007 R66.00 36 364

20 February 2008 R49.00 439 673

235 974 2 702 444

Terms of the schemes

Altech Share Incentive Scheme

The Altech Share Incentive Scheme 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 Scheme

Under 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 granting of the conditional rights subject to meeting the vesting conditions.

7.15 Share-based payments

The number and weighted average exercise prices of share options accounted for under IFRS 2 are as follows:

Weighted average Number Weighted average Number

exercise price of options exercise price of options

2009 2009 2008 2008

Outstanding at the beginning of the period 50.39 3 404 50.39 3 312

Forfeited during the period 52.89 (344) 52.72 (352)

Exercised during the period 32.05 (121) 34.21 (53)

Granted during the period — — 50.28 497

Outstanding at the end of the period 50.79 2 939 50.39 3 404

Exercisable at the end of the period 612 100

The weighted average market price on exercised options was R49.06 (2008: R60.60).

Exercise prices on outstanding options at the end of the period ranged from R32.00 to R66.00 (2008: R30.00 to R66.00).

The weighted average remaining period to vesting on outstanding options at the end of the period was 14 months (2008: 23 months).

106





7.15 Share-based payments (continued)

Fair value of share options and assumptions

Fair value at measurement date:

2009

No new conditional rights were granted during the period under review.

2008

Conditional rights

Fair value at grant date (rand) 10.12 to 12.04

Share price (rand) 49.00

Exercise price (rand) 49.00

Expected volatility 25% to 26.3%

Option life (years) 3 to 5

Dividend yield 4.90%

Risk-free interest rate 9.38%

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 2006 fi nancial year had a service condition attached. The new Conditional Rights Scheme implemented in the 2006 fi nancial year includes both a services condition and a non-market performance condition. The non-market performance condition is not taken into account in the grant date fair value measurement of the service received. There are no other market conditions with any of the share option grants.

GROUP

2009 2008

Rm Rm

Employee expenses

Expense arising from conditional rights granted 5 8

Expense arising from share appreciation rights granted (4) 2

Total expense recognised as employee cost 1 10

Total carrying amount of cash-settled transaction liabilities 2 7

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 2009 were as follows:

Share price 51.25 50.75

Exercise price 32.25 32.25

Term (years) 0.4 0.4 to 1.4

Volatility 30% 31% to 44%

Dividend yield 5.60% 4.73%

Risk-free interest rate 8.07% 9.60%

107


Fina

ncia

l sta

tem

ents

GROUP

2009 2008

Rm Rm

8. MINORITY SHAREHOLDERS’ INTEREST

Balance at the beginning of the year 72 61

Foreign currency translation difference (8) —

Attributable earnings 67 26

Transactions with minorities — (12)

Dividends (11) (3)

Capital subscription received from minority shareholders 79 —

Minority interest on acquisition of subsidiaries 99 —


9. BORROWING FACILITIES

In terms of the articles of association, the borrowing powers of the company are unlimited.

Unutilised banking facilities 1 080 1 080

10. RETIREMENT BENEFIT PLANS

Defi ned contribution plans

The majority of the group’s employees are members of the Altron Group Pension Fund which is a defi ned contribution fund and is governed by the Pension Funds Act, 1956, as amended. The contribution rate of the employers is 10% (2008: 10%), calculated on the pensionable emoluments of members.

Additionally the group provides retirement benefi ts for certain of its employees through the Altron Group Provident Fund. The fund is a defi ned 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 Altron group’s contribution to these funds amounted to R149 million (2008: R125 million).

Multi-employer plans

Post-acquisition of subsidiaries, certain employees remained members of their previous funds. A number of these are defi ned benefi t plans. These industry-managed retirement benefi t schemes are dealt with as defi ned contribution plans as the group’s obligations under the schemes are equivalent to those arising in a defi ned contribution plan.

The Altron group’s contribution to these other funds amounted to R41 million (2008: R42 million).

Defi ned benefi t plans

Members of the Altron Group Pension Fund who were members prior to 1 September 1996 are entitled to a minimum benefi t equal to the previously provided defi ned benefi t pension. Furthermore, upon retirement, any member of the Altron Group Pension Fund can purchase a defi ned benefi t pension from the fund. The base pension and subsequent increases granted, based on weighted average investment returns on funds, are guaranteed by the pension fund.

The benefi t plans disclosed below are only in respect of members with minimum entitlement benefi ts and retirees with purchased defi ned benefi t pensions.

108




2009 2008

Rm Rm

10. RETIREMENT BENEFIT PLANS (continued)

10.1 Value of obligations

Fair value of plan assets 2 435 2 228

Present value of funded obligations (2 615) (2 101)

(Defi cit)/surplus (180) 127

Unrecognised actuarial losses 180 —

Unrecognised due to paragraph 58 limit — (127)

(Liability)/asset recognised in the balance sheet — —

10.2 Components of income statement expense

Current service cost (58) (70)

Interest cost (268) (154)

Expected return on plan assets (limited by paragraph 58) 334 213

Change in paragraph 58 limit 127 (26)

Actuarial (loss)/gain recognised (132) 26

3 (11)

10.3 Reconciliation of unrecognised actuarial gain/loss

Unrecognised actuarial loss at the beginning of the year — 58

Actuarial gain on liabilities (780) (39)

Actuarial loss/(gain) on assets 1 092 (45)

Actuarial (loss)/gain recognised (132) 26

Unrecognised actuarial loss at the end of the year 180 —

10.4 Reconciliation of paragraph 58 limit

Paragraph 58 limit at the beginning of the year (127) (101)

Change in paragraph 58 limit during the year 127 (26)

Paragraph 58 limit at the end of the year — (127)

10.5 Reconciliation of defi ned benefi t obligation

Defi ned benefi t obligation at the beginning of the year 2 101 1 983

Fund credits of defi ned benefi t members previously refl ected under defi ned contribution fund allocation 1 120 —

Service cost 58 70

Interest cost 268 154

Benefi ts paid (197) (67)

Employee contributions to defi ned contribution fund credits subject to defi ned benefi t underpin 11 —

Transfers from defi ned contribution fund 34 —

Actuarial gain (780) (39)

Defi ned benefi t obligation at the end of the year 2 615 2 101

109


Fina

ncia

l sta

tem

ents

2009 2008

Rm Rm

10 RETIREMENT BENEFIT PLANS (continued)10.6 Reconciliation of fair value of plan assets

Assets at market value at the beginning of the year 2 228 2 084Fund credits of defi ned benefi t members previously refl ected under defi ned contribution fund allocation 1 120 —Expected return on assets 334 223Contributions due 58 54Company contribution holiday granted (50) (43)Benefi ts paid (197) (67)Transfers from/(to) defi ned contribution fund 34 (68)Actuarial (loss)/gain (1 092) 45

Assets at market value at the end of the year 2 435 2 228

Plan assets comprise:

Local equities 59% 54% Bonds 15% 20% International investments 21% 16% Cash and other 5% 10%

10.7 Expected 2010 contributionsService cost 61Interest cost 222Expected return on assets (217)Amortisation of unrecognised actuarial loss/gain —

Net periodic defi ned benefi t pension expense 66

10.8 Principal actuarial assumptionsDiscount rate 8.50% 8.50%Infl ation rate 5.00% 5.25%Salary increase rate 6.00% 6.25%Expected return on assets 8.95% 10.50%Pension increase allowance 3.33% 5.25%Actual return on the Altron Group Pension Fund (23.00%) 13.27%

In performing the current year actuarial calculation, the fund credits of defi ned contribution members with minimum benefi ts have been presented as part of the defi ned benefi t asset and liability analysis presented above in order to better refl ect the defi ned benefi t effects of such arrangements. The comparative actuarial analysis excluded such fund credits from the defi ned benefi t fund analysis, however this did not have an effect on the net surplus or unrecognised gains/losses of the defi ned benefi t fund.Actuarial losses on assets in the current year comprise the differential between expected returns and actual returns for the year. Actuarial gains on obligations primarily comprise the decrease of defi ned contribution members’ fund credits following the negative actual return on investments for the year, partially offset by minimum benefi t arrangements, as well as the realignment of expected pension increases of defi ned benefi t members, previously aligned with expected infl ation, to affordability relative to investment returns in accordance with the fund’s practice and policy.Unrecognised actuarial losses were within the 10% corridor margin and accordingly no amortisation of the loss has been recognised. The Pension Funds Act, 1956, as amended, precluded the group from accessing the benefi t of any surplus assets in previous years without the specifi c consent of the trustees of the fund in the form of employer contribution holidays. Accordingly the surplus was not recognised on the group’s balance sheet. The group was granted a contribution holiday on the defi ned contribution plan for the fi ve months ended 28 February 2009 in lieu of surpluses accumulated on the defi ned benefi t plans (2008: six months ended 31 October 2007). The contribution holiday was made available to all participating group employer companies.

110




GROUP

2009 2008

Rm Rm

11. DEFERRED TAXATION

11.1 Deferred tax movement

Balance at the beginning of the year 65 58

Rate change — 1

Translation effect 2 2

Arising on acquisition of subsidiaries (37) (10)

Credit to the income statement 9 14


11.2 Deferred tax balances

Provision for taxation on temporary differences resulting from:

Property, plant and equipment (28) (3)

Intangible assets (48) (17)

Prepaid expenses (4) (4)

Receipts in advance 3 4

Accounts receivable 10 4

Provisions 25 20

Other 14 6

Estimated tax losses 67 55

Net deferred tax 39 65

The above balance comprises:

Deferred tax assets 112 88

Deferred tax liabilities (73) (23)

Net position 39 65

111


Fina

ncia

l sta

tem

ents

GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

12. INTEREST-BEARING LOANS

12.1 Minority shareholders’ loans

Arrow Altech Holdings (Pty) Limited 20 22 — —

The loan is unsecured, bears interest at a 12-month commercial bank fi xed deposit rate and is repayable annually at R1.25 million.

12.2 Long-term loans

Siemens Financial Services 122 — — —

Commercial Bank of Africa Limited 4 — — —

Barclays Bank of Kenya Limited 18 — — —

First Community Bank Limited 18 — — —

Subscription shares to be allocated – Sameer ICT group 26 — — —

The payments due to the shareholders of ComTech (Pty) Limited on acquisition of business — 9 — 9

Standard Chartered Bank 49 82 —

257 113 — 9

Less: Transfer to current liabilities (142) (36) — —

115 77 — 9

Siemens Financial Services

The loan is secured over the debenture on Nbi-Busia Fiber of Kenya Data Networks Limited, bears interest at EURIBOR + 1% and is repayable over 57 months, quarterly in arrear. The loan is denominated in euros.

Commercial Bank of Africa Limited

The loan is secured over all asset debentures (excluding other debentures) of Kenya Data Networks Limited, bears interest at 12.5% per annum and is repayable over 14 months, monthly in arrear. The loan is denominated in Kenyan shillings.

Barclays Bank of Kenya Limited

The loan is secured over the debenture on Nbi-Thika Fiber of Kenya Data Networks Limited, bears interest at 12% per annum and is repayable over 22 months, monthly in arrear. The loan is denominated in Kenyan shillings.

First Community Bank Limited

The loan is secured over the debenture on Nyeri-Nakura Fiber of Kenya Data Networks Limited, bears interest at 12% per annum and is repayable in May 2009. The loan is denominated in Kenyan shillings.

Standard Chartered Bank

The loan is secured over the fi xed and fl oating assets of NamITech West Africa Limited, bears interest at a rate equal to the Nigerian prime overdraft rate and is repayable over 15 months, quarterly in arrear. The loan is denominated in naira.

Sameer ICT group

Subscription shares to be allocated after a full valuation has been done on Kenya Data Networks Limited. The loan is unsecured and interest free.

Other

The payments due to the shareholders of ComTech (Pty) Limited on the acquisition of that business, were unsecured, bore interest at 11.44% per annum and have been fully repaid.

112




12. INTEREST-BEARING LOANS (continued)

6 months 6 – 12 1 – 2 2– 5

2009or less

Rmmonths

Rmyears

Rmyears

RmTotal

Rm

Maturity analyses (including interest payments)Arrow Altech Holdings (Pty) Limited — 4 4 22 30Standard Chartered Bank — 47 12 — 59Siemens Financial Services 15 15 29 70 129Commercial Bank of Africa Limited 2 2 1 — 5Barclays Bank of Kenya Limited 6 6 9 — 21First Community Bank Limited 20 — — — 20

43 74 55 92 264

2008Maturity analyses (including interest payments)Arrow Altech Holdings (Pty) Limited — 3 3 20 26Payments due to the shareholders of ComTech (Pty) Limited — 6 5 — 11Standard Chartered Bank — 36 42 9 87

— 45 50 29 124

GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

13. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVESTrade payables 1 088 901 1 1Derivative liability at fair value used for hedging 42 1 — —Payroll liabilities — 32 —Short-term portion of long-term loans 142 36 — —Receipts in advance 20 31 —Other payables 563 451 102 —Less: Liability classifi ed as held-for-sale (refer to note 32.2) (28) — — —

1 827 1 452 103 1

Included in other payables are amounts due on the purchase of subsidiaries amounting to R102 million (US$10 million).

a. Trade payablesManagement of liquidity riskThe group has negotiated favourable credit terms with suppliers, which enables the group to utilise its operating cash fl ow to full effect. The suppliers’ age analysis is reviewed by management on a regular basis to ensure that credit terms are adhered to and suppliers are paid when due.The group utilises multiple credit terms, most of which are less than one year.

Currency riskMost amounts owed in foreign currency are covered by foreign exchange contracts (refer to note 16).A sensitivity analysis for foreign currencies can be seen in note 16.

Interest rate riskThe group has no material exposure to interest risk as there are no suppliers that charge interest.

113


Fina

ncia

l sta

tem

ents

13. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVES (continued)

b. Receipts in advance

Revenue on receipts in advance is recognised as and when the goods are delivered or the services are rendered. Until the revenue recognition criteria are met, these amounts remain payable to the respective customers.

6 months 6 – 12 1 – 2or less

Rmmonths

Rmyears

RmTotal

Rm

2009Estimate of when revenues are expected to be earned on these receipts — 20 — 20

2008

Estimate of when revenues are expected to be earned on these receipts — 31 — 31

GROUP

2009 2008

Rm Rm

Derivatives’ liability at fair valueDerivative liability at fair value includes:

Forward exchange contracts used for hedging

– Fair value hedge 42 1

42 1

14. WARRANTY PROVISIONSBalance at the beginning of the year 22 20Provision raised during the year 23 21Provisions utilised during the year (27) (19)


The provisions are expected to be realised during the next 12 months.

15. COMMITMENTS15.1 Capital expenditure

Contracts for capital expenditure not provided for in the fi nancial statements 280 —Capital expenditure authorised but not contracted for 2 5

282 5

15.2 Amounts outstanding under operating lease agreementsPayable within one yearProperty 43 50Plant, equipment and vehicles 35 28

78 78

Payable within two to fi ve yearsProperty 98 125Plant, equipment and vehicles 38 5

136 130

Total 214 208

114




16. FINANCIAL RISK MANAGEMENT

Exposure to currency, interest rate, liquidity and credit risk arises in the normal course of the group’s business.

Forward exchange contracts are used as a means of reducing exposure to fl uctuations in foreign exchange rates.

The principal or contract amounts of foreign exchange contracts outstanding at balance sheet date were:

GROUP

2009 2008

Rm Rm

Foreign exchange contracts:

– to pay 391 364

– to receive 560 328

16.1 Currency risk

The group incurs currency risk as a result of transactions which are denominated in a currency other than the group entity’s functional currency on purchases, borrowing and sales.

The currencies, giving rise to currency risk, in which the group primarily deals are UK sterling, US dollars, euros, Japanese yen, naira and Kenyan shillings.

The group entities hedge trade creditors and trade debtors denominated in foreign currencies.

The group is exposed to the following principal foreign exchange risks:

The NamITech West Africa loan from Standard Chartered Bank, as this loan is denominated in naira.

If the naira strengthened by 20% against the rand, the effect on equity would be an increase of R12 million (2008: R20 million).

If the naira weakened by 20% against the rand, the effect on equity would be a decrease of R8 million (2008: R13 million).

The Kenya Data Networks’ loan from Siemens Financial Services, as this loan is denominated in euros.

If the euro strengthened by 20% against the rand, the effect on equity would be an increase of R31 million (2008: nil).

If the euro weakened by 20% against the rand, the effect on equity would be a decrease of R20 million (2008: nil).

The Kenya Data Networks’ loan from Commercial Bank of Africa Limited, as this loan is denominated in Kenyan shillings.

If the Kenyan shilling strengthens by 20% against the rand, the effect on equity would be an increase of R1 million (2008: nil).

If the Kenyan shilling weakens by 20% against the rand, the effect on equity would be a decrease of R0.7 million (2008: nil).

The Kenya Data Networks’ loan from Barclays Bank of Kenya Limited, as this loan is denominated in Kenyan shillings.


If the Kenyan shilling weakens by 20% against the rand, the effect on equity would be a decrease of R3 million (2008: nil).

The Kenya Data Networks’ loan from First Community Bank Limited, as this loan is denominated in Kenyan shillings.


If the Kenyan shilling weakens by 20% against the rand, the effect on equity would be a decrease of R3 million (2008: nil).

Included in trade and other payables is an amount owing to the vendors for the acquisition of a subsidiary amounting to US$10 million. This liability has been hedged by an equivalent amount which was transferred to a US$ bank account so as to mitigate any foreign exchange exposure.

16.2 Credit risk

Credit risk is the risk of fi nancial loss to the group if a customer or counterparty to a fi nancial instrument fails to meet its contractual obligations, and arises principally from the group’s trade receivables, foreign exchange forward contracts and cash and cash equivalents. 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 considered appropriate. The maximum exposure to credit risk is represented by the carrying value of each fi nancial asset in the balance sheet. The group has no signifi cant concentration of credit risk, with exposure spread over a large number of customers. The maximum exposure to credit risk arising from derivative fi nancial instruments is the contractual amounts receivable in respect of foreign exchange contracts.

115


Fina

ncia

l sta

tem

ents

16. FINANCIAL RISK MANAGEMENT (continued)

16.2 Credit risk (continued)

The group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specifi c loss component that relates to individually signifi cant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identifi ed, based on the historical trends, adjusted for current economic conditions.

Cash and cash equivalents

The group limits its exposure to credit risk by only investing in liquid investments and only with counterparties that have a sound credit rating. Given these sound credit ratings, management does not expect any counterparty to fail to meet its obligations. Deposits and cash balances are all maintained at reputable fi nancial institutions. Cash management is performed by central corporate treasury.

16.3 Liquidity risk

Liquidity risk is the risk that the group will not be able to meet its fi nancial obligations as they fall due. The group’s approach to managing liquidity risk is to ensure that suffi cient liquidity is available to meet its liabilities when due.

The group ensures it has suffi cient cash on demand or access to facilities to meet expected operational expenses for the next 12 months, including the servicing of fi nancial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The group maintains the following lines of credit:

– R1 080 million overdraft facility that is unsecured. Interest payable is linked to the prime interest rate.

16.4 Fair values

The following methods and assumptions were used to estimate the fair value of each class of fi nancial instruments for which it is practical to estimate that value:

Cash and short-term investments

The carrying amount approximates fair value because of the short maturity of those instruments.

Loan receivables/payables

Interest-bearing borrowings and receivables are generally at interest rates in line with those currently available in the market on a fl oating rate basis, and therefore the fair value of these fi nancial assets and liabilities closely approximates their carrying values. Fixed interest rate instruments are fair valued based on the present value of future principal and interest cash fl ows, discounted at the market rate of interest at the reporting date.

Trade and other receivables/payables

The fair value of trade and other receivables/payables is estimated as the present value of future cash fl ows, discounted at the market rate of interest at the reporting date.

Foreign currency contracts

The fair value of foreign currency contracts (used for hedging purposes) are marked-to-market by comparing the contracted forward rate to the present value of the current forward rate of an equivalent contract with the same maturity date.

16.5 Interest rate risk

The group is exposed to interest rate risk due to cash put on call and loans from banks and other fi nancial institutions for its subsidiaries NamITech West Africa and Kenya Data Networks.

If the rate was to improve by 2%, the effect on interest would be an increase of R23 million (2008: R26 million). If the rate was to deteriorate by 2%, the effect on interest would be a decrease of R25 million (2008: R27 million).

116




16. FINANCIAL RISK MANAGEMENT (continued)

16.6 Foreign currency commitments

The net liabilities are as follows:

Foreign exchange contractsForeign amount ZAR contract ZAR fair

in respect of exports Thousands value ‘000 value ‘000 Average rate

US dollars 57 956 559 769 588 545 10.16

Total 559 769 588 545

Foreign exchange contractsForeign amount ZAR contract ZAR fair

in respect of imports Thousands value ‘000 value ‘000 Average rate

Euro 5 958 66 928 70 421 11.82

Japanese yen 6 627 743 689 0.10

Pound sterling 60 945 589 9.82

US dollars 31 873 322 103 323 656 10.15

Total 390 719 395 355

17. OTHER DISCLOSURES

17.1 Related-party transactions

During the year the company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase transactions with fellow subsidiaries. These transactions occurred under terms that are no more or less favourable than those arranged with third parties.

17.1.1 Subsidiaries

Details of income from and investments in subsidiaries are disclosed in note 20 and Annexure 1 respectively.

17.1.2 Directors

Executive directors are defi ned as senior management. Details relating to directors’ emoluments and shareholdings (including options) in the company are disclosed in the remuneration report and directors’ report respectively.

17.1.3 Senior employees

Details relating to option and share transactions are disclosed in the directors’ report and note 7.

17.1.4 Shareholders

The principal shareholders of the company are detailed in the shareholders’ analysis on page 58 of the annual report.

17.1.5 Management fee

The group paid a management fee of R23 million (2008: R20 million) to Allied Electronics Corporation Limited for certain shared services.

17.1.6 Cash and cash equivalents

Included in cash and cash equivalents are monies amounting to nil (2008: R754 million) held by Altron Finance (Pty) Limited, a treasury company and a wholly owned subsidiary of Allied Electronics Corporation Limited.

Interest received from Altron Finance (Pty) Limited amounted to nil (2008: R69 million).

17.1.7 Bank overdraft

Included in cash and cash equivalents are monies amounting to R277 million (2008: nil) owing to Altron Finance (Pty) Limited, a treasury company and a wholly owned subsidiary of Allied Electronics Corporation Limited.

Interest paid to Altron Finance (Pty) Limited amounted to R5 million (2008: nil).

117


Fina

ncia

l sta

tem

ents

17. OTHER DISCLOSURES (continued)

17.2 Judgements made by managementIn preparing fi nancial statements in conformity with IFRS, estimates and assumptions that affect the reported amounts and related disclosures are as follows:

» Deferred tax assets Deferred tax assets, representing income tax losses and temporary differences in certain subsidiaries, have been assessed as

recoverable based on current profi t forecasts for the business.

» Asset useful lives and residual values The useful lives and residual values of property, plant, equipment and intangible assets are reviewed at each reporting date based on

current utilisation, prospects and market conditions.

» Business combination purchase price allocations On completion of an acquisition, management undertakes a full purchase price allocation exercise. Tangible assets and liabilities and

contingent liabilities are fair valued. The business is reviewed and types of intangible assets are identifi ed. These are then valued according to established valuation techniques applicable to the type of intangible asset. Any excess of the purchase price over the value of the business as determined above is allocated to goodwill. Independent external consultants are utilised on the larger acquisitions.

» Impairment of assets The impairment of goodwill is tested at least annually. A discounted cash fl ow valuation model is used to calculate value-in-use.

Future expected cash fl ows are based on management forecasts, typically over a three-year period, and thereafter a reasonable rate of growth is applied based on current market conditions. Discount rates used are calculated using the principles of the capital asset pricing model based on current market conditions. The resulting weighted average cost of capital is compared to industry and regional averages to ensure reasonableness. 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 fl ow method is used, taking into account future expected cash fl ows, market conditions and the expected useful lives of the assets.

» Post-employment benefi t obligations Post-retirement defi ned benefi ts are provided for certain existing and former employees (see note 10). The actuarial valuation method used to value the obligations is the projected unit method. The assumptions used include a discount

rate, infl ation rate, salary increase rate, expected rate of return on assets and a pension increase allowance.

» Valuation of fi nancial instruments In note 16 a detailed analysis is given of the foreign exchange exposure of the group and risks in relation to foreign exchange

movements.

17.3 Standards and interpretations in issue but not yet effectiveA number of new standards, amendments to standards and interpretations are not yet effective for the year ended 28 February 2009.These include the following standards and interpretations that are applicable to the business of the group, and have not been applied in preparing these consolidated fi nancial statements:

IFRS 2 amendment – Share-based Payment – Vesting Conditions and CancellationsThe amendments to the standard are effective for the group for the year ending 28 February 2010 with the restatement of comparatives required. The amendment to IFRS 2 clarifi es that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment agreement should be treated as non-vesting conditions and should be included in the grant date fair value of the share-based payment. It also specifi es that cancellations by parties other than the entity should be accounted for in the same way as cancellations by the entity. This amendment is not expected to impact the group’s results signifi cantly.

IFRS 3 – Business CombinationsThe amendments to the standard are effective for the group for the year ending 28 February 2011 with no restatement of comparatives required. The principal amendments to IFRS 3 include:

– the requirement to expense all acquisition-related costs;

– recognition of fair value gains and losses in the income statement on interests in an acquiree at the time at which control is lost;

– recognition of all increases and decreases in ownership interests over an acquiree within equity while control is held;

– the option to recognise any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the net identifi able assets of the entity acquired;

118





17.3 Standards and interpretations in issue but not yet effective (continued)– restriction of adjustments to the initial measurement of contingent considerations on a business combination, with subsequent

measurement of such items being recognised in the income statement; and

– the requirement at acquisition to reclassify and redesignate all contractual arrangements, excluding leases and insurance contracts.

The amendments are expected to affect the group’s accounting for business combinations that arise after the date on which the amendments are adopted. The effect on the fi nancial statements will be a function of the number and value of any business combinations transacted after the effective date.

IFRS 5 – Non-current Assets Held-for-Sale and Discontinued Operations (Improvement to IFRSs 2008)This amendment is effective for the group for the year ending 28 February 2010, with the restatement of comparatives required. IFRS 5 is amended to specify that for the sale of a subsidiary, all subsidiary assets and liabilities are classifi ed as held-for-sale once the relevant criteria are met. In addition, the amendment requires disclosure for discontinued operations by the parent when a subsidiary meets the defi nition of a discontinued operation.

IFRS 7 – Financial Instruments: DisclosureThe amendments to the standard are effective for the group for the year ending 28 February 2010, with no restatement of comparatives required. The amendments to IFRS 7 focus on enhancing disclosures over fair value measurements relating to fi nancial instruments, specifi cally in relation to disclosures over the inputs used in valuations techniques and the uncertainty associated with such valuations. In addition, the amendments improve the disclosure surrounding liquidity risk. The principal amendments include the following:

– Fair value disclosures to be presented in terms of a fair value hierarchy. The hierarchy considers the extent to which information from active markets is used in valuations.

– Maturity analysis for derivative fi nancial liabilities does not need to be based on contractual maturities unless essential for an understanding of the timing of cash fl ows.

– Additional guidance is provided on the inclusion of fi nancial guarantee contracts in the liquidity maturity analysis.

– A maturity analysis of fi nancial assets is required if held as part of managing liquidity risk.

IFRS 8 – Operating SegmentsThis standard is effective for the group for the year ending 28 February 2010, with the restatement of comparatives required. Segment reporting will be made based on the components of the entity that management monitors in making decisions about operating matters. Such components (operating segments) would be identifi ed on the basis of internal reports that the entity’s chief operating decision-maker reviews regularly in allocating resources to segments and in assessing their performance. Operating segments would become reportable based on threshold tests related to revenues, results and assets. The statement also requires more qualitative disclosures, such as the types of products and services offered by each segment, geographical areas covered and major customers.

IAS 1 – Presentation of Financial StatementsThe revised IAS 1 supersedes the 2003 version of IAS 1 and is effective for the group for the year ending 28 February 2010. The main change in the revised IAS 1 is the requirement to present all non-owner changes in equity in either:

– a single statement of comprehensive income which includes income statement line items; or

– a statement of comprehensive income which includes only non-owner equity changes. In addition, an income statement is also disclosed.

A statement of fi nancial position, preferred term for “balance sheet”, also has to be presented at the beginning of the comparative period when the entity restates the comparatives as a result of a change in accounting policy, the correction of an error, or the reclassifi cation of items in the fi nancial statements. The revised IAS 1 will not impact the results of the group but will impact the format of the income statement and statement of changes in equity.

IAS 23 – Borrowing CostsThis revision is effective for the group for the year ending 28 February 2010. IAS 23 Revised eliminates the option of immediate recognition as an expense of borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. The group’s current policy is to capitalise borrowing costs attributable to the acquisition, construction or production of a qualifying asset and as such this revision is not anticipated to have a material effect.

IAS 27 – Consolidated and Separate Financial StatementsThe amendments to the standard are effective for the group for the year ending 28 February 2011 with no restatement of comparatives required. The amendments to IAS 27 require changes in a parent’s ownership interest in a subsidiary that does not result in a loss of control to be accounted for within equity as transactions with owners in their capacity as owners. At the time at which control is lost, a parent shall derecognise all assets, liabilities and non-controlling interest at their carrying amounts. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. A gain or loss on the loss of control is recognised in profi t or loss. The revised standard also requires an entity to attribute its share of total comprehensive income to the non-controlling interest, even if this results in the non-controlling interest having a defi cit balance.

The effect on the fi nancial statements will be a function of the number and value of transactions that result in the loss of control over subsidiaries and any potential future losses attributable to group minorities with defi cit balances.

119


Fina

ncia

l sta

tem

ents


17.3 Standards and interpretations in issue but not yet effective (continued)

IAS 27 and IFRS 1 – Consolidated and Separate Financial Statements and First-time Adoption of International Financial Reporting StandardsThe amendments to the standard are effective for the group for the year ending 28 February 2010 with no restatement of comparatives required. In addition to amendments with respect to fi rst-time adoption of IFRS, IAS 27 has been revised to require the recognition of preacquisition dividends on investments in subsidiaries in the separate fi nancial statements in the income statement. Additional impairment considerations have also been provided in IAS 36 – Impairment of Assets.

IAS 28 – Investments in AssociatesThe amendment to the standard is effective for the group for the year ending 28 February 2010 with no restatement of comparatives required. The amendment clarifi es that an investment in an associate shall be treated as a single asset for impairment testing. Therefore an impairment loss recorded by an investor after applying the equity method is not allocated against any goodwill included in the equity-accounted investment balance. Such an impairment loss should be reversed in a subsequent period to the extent that the recoverable amount of the associate increases. The amendment is not expected to have a signifi cant impact on the results of the group.

IAS 32 and IAS 1 amendments – Financial Instruments: Disclosure and Presentation and IAS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on LiquidationThe amendments to the standards are effective for the group for the year ending 28 February 2010 with no restatement of comparatives required. The amendment to IAS 32 requires the classifi cation of certain puttable fi nancial instruments and fi nancial instruments that impose on the issuer an obligation to deliver a pro rata share of the entity only on liquidation as equity. The amendment sets out specifi c criteria that are to be met to present the instruments as equity, together with related disclosure requirements. This amendment is not expected to have a signifi cant impact on the group’s results.

IAS 39 – Financial Instrument, Recognition and MeasurementThe amendment to the standard is effective for the group for the year ending 28 February 2010 with the restatement of comparatives required. The amendment to IAS 39 clarifi es the following in relation to hedge accounting: infl ation can only be designated as a hedged risk or portion if it is a contractually specifi ed portion of the cash fl ows of the hedged item; the time value of a purchased option used as a hedging instrument may not be included as a designated component of the hedging instrument; and a risk-free or benchmark interest rate portion of the fair value of a fi xed-rate fi nancial instrument will normally be separately identifi able and reliably measurable, and hence may be hedged.

This amendment is not expected to have a signifi cant impact on the group’s results.

IFRIC 9 and IAS 39 amendments – Reassessment of Embedded DerivativesThe amendments to the standards are effective for the group for the year ending 28 February 2010. These amendments require that an entity assess whether an embedded derivative is required to be separated from a host contract when the entity reclassifi es a hybrid fi nancial asset out of the fair value through profi t or loss category.

IFRIC 13 – Customer Loyalty ProgrammesThis interpretation is effective for the group for the year ending 28 February 2010. The interpretation addresses the recognition and measurement of obligations to provide customers with free or discounted goods or services if and when they choose to redeem their loyalty award credits. The interpretation requires entities to allocate some of the proceeds of the initial sale to the award credits and recognise these proceeds as revenue only when the obligations have been fulfi lled. They may fulfi l their obligations by supplying awards themselves, or engaging and paying a third party to do so. This interpretation is not expected to impact the group’s results signifi cantly.

IFRIC 16 (AC 449) – Hedges of a Net investment in a Foreign OperationThis interpretation is effective for the group for the year ending 28 February 2010 with no restatement of comparatives required. The interpretation applies to all entities using net investment hedging for investments in foreign operations (subsidiaries, joint ventures, associates or branches) and clarifi es the following:

– A parent entity may not designate, as the hedged risk, the foreign exchange differences arising from converting the functional currency of the foreign operation to the presentation currency of the group (ie, an accounting exposure).

– The hedging instrument, used to hedge the net investment in a foreign operation, may be held by any entity or entities within the group (except the foreign operation that itself is being hedged).

– The hedging instrument used to hedge a net investment in a foreign operation may be a derivative or non-derivative instrument, or a combination of both.

– On disposal of a foreign operation, the cumulative gain or loss on the hedging instrument that was determined to be an effective hedge is reclassifi ed from the foreign currency translation reserve to profi t or loss in the consolidated fi nancial statements of the parent.

This interpretation is not expected to impact the group’s results signifi cantly.

120





17.3 Standards and interpretations in issue but not yet effective (continued)

IFRIC 17 – Distributions of Non-cash Assets to Owners

This interpretation is effective for the group for the year ending 28 February 2010 with no restatement of comparatives required. This interpretation gives guidance on the accounting for distributions of non-cash assets to the owners of an entity by the entity making the distribution (eg, dividends in specie). If the fair value of the assets distributed exceeds its carrying amount, that difference will be recognised in profi t or loss – but only at the date of settlement. In many cases a liability for the distribution will be recognised prior to that date, at the fair value of the assets to be distributed.


AC 503 – Accounting for Black Economic Empowerment (BEE) Transactions amendments

This interpretation is effective for the group for the year ending 28 February 2010 with no restatement of comparatives required. This standard has been amended to align itself with the changes to the defi nition of vesting conditions and the accounting treatment of non-vesting conditions in IFRS 2 – Share-based Payments.

An entity should assess whether a BEE transaction includes service conditions, performance conditions or non-vesting conditions as these would impact the recognition and measurement of the associated IFRS 2 cost. Should the BEE transaction not contain a service condition, the cost of the transaction is recognised immediately.


AC 504 – IAS 19 (AC 116) – The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction in the South African Pension Fund Environment

This interpretation is effective for the group for the year ending 28 February 2010 with the restatement of comparatives required. This interpretation focuses on the application of IFRIC 14 by employers in South Africa in relation to defi ned benefi t funds. It deals with the situation where a surplus in the fund, as determined by the actuarial valuation, is attributable, at the discretion of the trustees, to the employer company, members of the fund or a combination of both.


IASB 2008 and 2009 annual improvements project

The amendments embodied in the IFRS 2008 improvement project are effective for the group for the year ending 28 February 2010. The amendments embodied in the IFRS 2009 improvement project are effective for the group for the year ending 28 February 2011.

As part of its annual improvements project, the International Accounting Standards Board (IASB) made amendments to a number of accounting standards. These amendments were primarily made to resolve confl icts and remove inconsistencies between standards, clarify the status of application guidance in standards, clarify existing IFRS requirements, as well as conforming the terminology used in standards with that used in other standards and to that more widely used.

Management’s assessment of the improvements has not revealed any material impact on the group’s results.

The 2009 IASB annual improvements project was published on 24 April 2009 with the amendments to IFRS embodied therein being effective for the group for the year ended 28 February 2011. Management has not assessed the impact of the improvements in detail but does not expect any signifi cant impact on the group’s results.

121


Fina

ncia

l sta

tem

ents

GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

18. REVENUE

Goods sold 4 083 3 944

Services rendered 5 081 4 298

9 164 8 242

19. OPERATING PROFIT

Operating profi t is stated after taking account of the following items:

19.1 Auditors’ remuneration

Audit fees 5 5

Fees for other services 1 1

6 6

19.2 Directors’ emoluments

Executive directors

– salaries and bonuses 18 15

– retirement, medical and other benefi ts 1 1

19 16

Non-executive directors

– fees 1 1

Total directors’ emoluments 20 17

Less: Paid by subsidiaries (20) (17)

Emoluments paid by the company — —

See also directors’ report and page 73.

19.3 Employee remuneration

(including directors’ remuneration)

Salaries and wages 908 762

Share-based payments – equity settled (note 7.15) 5 8

Share-based payments – cash settled (note 7.15) (4) 2

Retirement and provident funds 42 52

Medical aid and other 20 18

971 842

19.4 Fees paid

Managerial – fellow subsidiary company 23 20

– other 15 1

Technical, consultancy and “know-how” 80 45

118 66

122




GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

19. OPERATING PROFIT (continued)

19.5 Foreign exchange gains

Realised 77 23

Unrealised 27 11

104 34

19.6 Foreign exchange losses

Realised 92 9

Unrealised 18 —

110 9

19.7 Share-based payments

Equity settled 5 8

Cash settled (4) 2

1 10

19.8 FEC fair value adjustment 1 —

19.9 (Decrease)/increase in warranty provisions (4) 2

19.10 Operating lease charges

Property 75 58

Plant, equipment and vehicles 9 4

84 62

19.11 Research and development expenditure 109 120

19.12 Loss on disposal of property, plant and equipment (2) (1)

19.13 Amortisation of intangibles 61 10

20. INVESTMENT INCOME

Income from subsidiaries 305 256

– dividends 303 255

– interest 2 1

Income from related party

– interest — 69 14 81

Income from other investments

– dividends — 4 — —

– interest 68 25

Total 68 98 319 337

21. FINANCE COSTS

Interest paid (70) (21) (13) (70)

123


Fina

ncia

l sta

tem

ents

GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

22. CAPITAL ITEMSLoss on disposal, property, plant and equipment (2) (1) — —

Profi t on disposal of investment — — 1 —

Impairment of investment in Altech Data (Pty) Limited — — (27) —

Impairment of investment in NamITech South Africa — — — (88)

(2) (1) (26) (88)

23. TAXATION23.1 Tax charge

Current tax 241 208 — 4

Deferred tax 6 (13) — —

Adjustment to prior years

– current tax (6) — (1) (2)

– deferred tax (15) (1) — —

– rate change — (1) — —

226 193 (1) 2

Secondary tax on companies 28 26 — (2)

254 219 (1) —

23.2 Reconciliation of rate of taxation % % % %

South African normal tax rate 28.0 29.0 28.0 29.0

Adjusted for:

Disallowable expenditure 1.2 4.5 4.3 14.3

Non-taxable income (0.7) (5.7) (31.9) (43.3)

Goodwill impaired — 3.8 — —

Prior year adjustments (2.5) (2.1) — —

(2.0) 0.5 (27.6) (29.0)

Secondary tax on companies 3.2 4.0 — —

Net movement 1.2 4.5 (27.6) (29.0)

Effective tax rate 29.2 33.5 0.4 —

23.3 Tax lossesThe estimated tax losses available for set-off against future taxable income are as follows:

Total available tax losses 239 196

Deferred tax raised thereon (239) (196)

Available tax losses — —

Attributable to minority shareholders — —

— —

124




GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

24. EARNINGS PER SHARE24.1 Reconciliation between earnings and

headline earningsEarnings attributable to Altech equity holders 549 409Adjustments for:Impairment of goodwill — 86Capital items – gross 2 1

551 496Tax effects of adjustments — —Minority interest in adjustments — —

551 496

24.2 Earnings per share (cents) 569 421Fully diluted earnings per share (cents) 545 406

24.3 Headline earnings per share (cents) 571 511Dilutive headline earnings per share (cents) 547 494Dividend per share – declared (cents) 323 288Headline dividend cover (times) 1.8 1.8

24.4 Adjusted headline earnings per share (cents) 592 51424.5 Reconciliation between earnings attributable

to Altech equity holders and fully diluted earnings are as follows:Earnings attributable to Altech equity holders 549 409Dilutive earnings attributable to B-BBEE minorities in a subsidiary (6) (4)

Fully diluted earnings 543 405

24.6 Reconciliation between headline earnings attributable to Altech equity holders and fully diluted headline earnings are as follows:Headline earnings 551 496Diluted earnings attributable to B-BBEE minorities in a subsidiary (6) (4)

Fully diluted headline earnings 545 492

24.7 Reconciliation between headline earnings and adjusted headline earningsHeadline earnings 551 496Adjustments for:Amortisation of intangible assets arising on business combinations 25 4

576 500

Tax effects of adjustments (5) (1)

571 499

125


Fina

ncia

l sta

tem

ents

GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

24. EARNINGS PER SHARE (continued)

24.8 Reconciliation between number of shares used for earnings and headline earnings per share, and diluted earnings and diluted headline earnings per share 000’s 000’s

Weighted average number of shares 96 530 97 040

Dilutive options 3 042 2 641

Number of shares to calculate dilution 99 572 99 681

For diluted attributable earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of not yet released purchased shares under the share option schemes, net of shares held by the schemes for future releases.

Basic headline earnings per share is calculated by dividing headline earnings by the weighted average number of ordinary shares in issue during the year. Diluted headline earnings per share is calculated by dividing headline earnings by the adjusted diluted weighted average number of shares in issue.

Fully diluted earnings and headline earnings have been calculated on the basis that:

– the recognition of the deferred sale of the 25.11% interest to Platina Venture Holdings(Pty) Limited in Alcom Matomo based on the assumption that the purchase price will be settled in cash of R13 million.

25. DIVIDENDS

Ordinary dividend number 66 of 288 cents per share (2008: 240 cents per share) 278 235 303 255

126




GROUP COMPANY

2009 2008 2009 2008

Rm Rm Rm Rm

26. CASH GENERATED BY OPERATIONS

Operating profi t 874 664

Adjustments for:

Depreciation – property, plant and equipment 130 86

Amortisation – intangibles 61 10

Loss on disposal of property, plant and equipment 3 1

Movement in provisions (4) 2

Other movements (14) (2) — (88)

Cash generated before movements in working capital 1 050 761 — (88)

(Increase)/decrease in inventories (71) 44 — —

(Increase)/decrease in accounts receivable (240) (261) 1 3

Increase/(decrease) in accounts payable 60 465 — (5)

799 1 009 1 (90)

27. TAXATION PAID

Amounts unpaid at the beginning of the year (87) (19) — (2)

Amounts charged to the income statement (264) (234) (1) —

Translation effect (1) 1 — —

Amounts unpaid at the end of the year 145 87 2 —

(207) (165) 1 (2)

28. PROCEEDS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT

Carrying amount of property, plant and equipment 15 21 — —

Loss on disposal (3) (1) — —

12 20 — —

29. OTHER INVESTING ACTIVITIES

Decrease in amounts owing by subsidiaries — — 816 2

Increase in investments and loans — (35) — (12)

Shareholders’ loan acquired — — — 3

— (35) 816 (7)

127


Fina

ncia

l sta

tem

ents

GROUP

2009 2008

Rm Rm

30. ACQUISITIONS30.1 Subsidiaries and businesses acquired

Intangibles 158 56Inventories — 9Trade and other receivables 266 9Property, plant and equipment 317 2Tax and deferred tax liabilities (50) (10)Trade and other payables (132) (15)Cash and cash equivalents 3 (2)Interest-bearing loans (182) —

Fair value of net assets acquired 380 49Less: Deferred purchase consideration — (9)Minority interest (177) —Net cash — (2)Goodwill arising on acquisition 499 18

Total purchase consideration 702 56

Purchase consideration settled in cash 620 56Less: Amount paid for subscription shares (82) —Cash and cash equivalents in subsidiary acquired (3) —

Cash outfl ow on acquisition 535 56

Refer to note 31 for more details on the business combinations.

30.2 Transactions with minoritiesAltech Data (Pty) Limited — (28)NamITech Holdings (Pty) Limited — (2)

— (30)

31. BUSINESS COMBINATIONSAcquisition of Kenya Data Networks Limited, Swift Global (Kenya) Limited and Infocom LimitedOn 1 March 2008 the group acquired 51% of the share capital of Kenya Data Networks Limited (“KDN”), Swift Global (Kenya) Limited (“Swift”) and Infocom Limited (“Infocom”).The acquired businesses contributed revenues of R418 million and net profi t after tax of R95 million to the group for the year 1 March 2008 to 28 February 2009. These amounts have been calculated using the group’s accounting policies and by adjusting the results of the subsidiaries to refl ect amortisation on the fair value adjustments to intangible assets from 1 March 2008, together with the consequential tax effects.Details of the net assets acquired and goodwill are as follows:Purchase consideration:– Cash paid (including amount for subscription shares) 594– Direct costs relating to the acquisition 11

605– Probable liability raised on acquisition for additional purchase price on achievement

of warranted profi ts 79

Total purchase consideration 684

The goodwill arising is attributable to the synergies expected to arise after the group gained control of the acquired businesses.

128




31. BUSINESS COMBINATIONS (continued)

The assets and liabilities as at 1 March 2008 arising from the acquisition are as follows:

Acquiree’s

carrying

Fair value amount

Cash and cash equivalents 3 3Property, plant and equipment 317 317Intangible assets 141 —Trade and other receivables (including receivable for subscription shares) 265 265Trade and other payables (132) (132)Interest-bearing borrowings (182) (182)Tax and deferred tax liabilities (50) (8)

Fair value of net assets 362 263Minority interests (177) —Goodwill 499 —

Total purchase consideration 684 263

Purchase consideration settled in cash 605 —Less: Amount paid for subscription shares and received by subsidiary companies (82) — Cash and cash equivalents in subsidiaries acquired (3) —

Cash outfl ow from the group on acquisition 520 —

Acquisition of Altech Netstar franchises in Witbank and BloemfonteinOn 1 March 2008 and 31 March 2008 the group acquired 100% of the Altech Netstar franchises in Witbank and Bloemfontein respectively.

The acquired businesses contributed revenues of R31.1 million and net profi t after tax of R6 million to the group for the year 1 March 2008 to 28 February 2009.

If the Bloemfontein acquisition had occurred on 1 March 2008, group revenue and net profi t after tax before allocations would have increased by R1 million and R0.2 million respectively.These amounts have been calculated using the group’s accounting policies and by adjusting the results of the subsidiaries to refl ect amortisation on the fair value adjustments to intangible assets from 1 March 2008, together with the consequential tax effects.

Details of the net assets acquired and goodwill are as follows:

Purchase consideration:– Cash paid 15– Amounts owing to the vendors 3

Total purchase consideration 18

The assets and liabilities as at 1 March 2008 arising from the acquisition are as follows:Property, plant and equipment — —Intangible assets 17 —Trade and other receivables 1 1

Fair value of net assets 18 1Goodwill — —

Total purchase consideration 18 —

Purchase consideration settled in cash 15 —Cash and cash equivalents in subsidiary acquired — —

Cash outfl ow on acquisition 15 —

Refer to note 32.1 for business combinations that took place after the balance sheet date but before approval of these fi nancial statements.

129


Fina

ncia

l sta

tem

ents

Acquiree’s

carrying

amount

32. POST-BALANCE SHEET EVENTS

32.1 Acquisition of 100% interest in Fleetcall (Proprietary) Limited

The group has signed agreements to acquire 100% of the issued share capital of Fleetcall (Proprietary) Limited on 1 March 2009. The maximum purchase price is R75 million, payable in cash. The purchase price is payable as follows:

– fi rst tranche: R40 million

– second tranche: R35 million

The second tranche will be paid in terms of an earn-out mechanism over one year based on after-tax profi t targets for the year ending February 2010 being achieved.

Fleetcall is the only trunk two-way radio operator in South Africa.

The acquiree’s balance sheet at the date of acquisition is as follows:

Property, plant and equipment 9

Inventories 1

Trade and other receivables 5

Trade and other payables (8)

Cash and cash equivalents 4

Total net assets 11

Acquisition of 100% interest in Lateral Technology Concepts (Proprietary) Limited (“Technology Concepts”)

The group has signed agreements to acquire 100% of the issued share capital of Technology Concepts on 1 April 2009. The maximum purchase price is R45 million payable in cash. The purchase price is payable as follows:

– initial payment of R7.5 million

– the remaining maximum payments of R37.5 million will be paid in terms of an earn-out mechanism over two years based on after-tax profi t targets for the year ending February 2010 and 2011 being achieved.

Technology Concepts is an established internet technology services business and corporate internet service provider.

The acquiree’s balance sheet at the date of acquisition is as follows:

Property, plant and equipment 2

Inventories —

Trade and other receivables 4

Trade and other payables (1)

Cash and cash equivalents (1)

Total net assets 4

As these acquisitions were effective post-year-end, the purchase price allocations will be done during the next fi nancial year.

130




32. POST-BALANCE SHEET EVENTS (continued)

32.2 Assets classifi ed as held-for-sale

The assets and liabilities relating to NamITech South Africa, a division of Altech Information Technologies (Proprietary) Limited (part of the information technology segment), have been presented as held-for-sale following the group’s decision to sell the operation to a third party. The completion date for the transaction was 1 April 2009. This operation did not constitute a discontinued operation.

2009 2008

Rm Rm

Cash fl ows from disposal group:

Operating cash fl ows (23) —

Investing cash fl ows (10) —

Financing cash fl ows 42 —

Total cash fl ows 9 —

Assets classifi ed as held-for-sale:

Property, plant and equipment 54 —

Inventories 19 —

Trade and other receivables 34 —

Total 107 —

Liabilities classifi ed as held-for-sale:

Trade and other payables 28 —

Total 28 —

33. CAPITAL MANAGEMENT

The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confi dence and to sustain the future development of the business. The board of directors monitors both the demographic spread of shareholders and the return on capital, capital being defi ned as total shareholders’ equity, excluding minority interests. The board of directors monitors and approves the level of dividends to shareholders.

The board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The board has a policy in place that the group’s net debt (borrowings less cash and cash equivalents) does not exceed 25% of total equity. The group’s target is to achieve a return on shareholders’ equity of between 20% and 25%. The return in 2009 was 24.3% (2008: 25.4%).

Altech’s share capital consists of 105 million ordinary shares.

The group utilises share options in the form of conditional rights as a long-term retention mechanism for senior executives and other key employees. The conditional rights are linked to the headline earnings performance of the group so that the interests of existing shareholders and management are aligned. The award of conditional rights is in accordance with a matrix and is approved by the board’s remuneration committee.

The group does not have a defi ned share buyback plan, but does from time to time purchase its shares on the market; the timing of these purchases depends on market prices. Shares acquired are either held as treasury shares or would be cancelled on repurchase. The group currently holds approximately 8.6 million treasury shares (see note 7) and there are restrictions on the rights of these shares under the JSE Listings Requirements. The group has a general authority in place to acquire up to 20% of the company’s issued share capital in any one fi nancial year, which expires at the next annual general meeting, but adheres to a 10% limit on its holding of treasury shares.

There were no changes in the group’s approach to capital management during the year.

Refer to note 7 for a quantitative summary of authorised and issued capital.

Fina

ncia

l sta

tem

ents

131


Annexure 1Subsidiaries

Issued Shares at cost less

capital Effective holding amounts written off Net indebtedness

2009 2008 2009 2008 2009 2008

% % Rm Rm Rm Rm

Altech Alcom Radio Distributors (Pty) Limited 100 100.0 100.0 — — — —

Alcom Systems (Pty) Limited 200 000 100.0 100.0 — — (13) (13)

Altech Alcom Matomo (Pty) Limited 1 800 100.0 100.0 7 7 — —

Altech Data (Pty) Limited 2 700 100.0 100.0 62 89 (76) (62)

Altech Industries (Pty) Limited 43 002 100.0 100.0 10 10 (395) (349)

Altech Infocom Limited 24 002 51.0 — 16 — — —

Altech Management Services (Pty) Limited 100 100.0 100.0 — — 15 (24)

Altech Stream (Pty) Limited 200 100.0 100.0 — — 4 —

Arrow Altech Holdings (Pty) Limited 880 000 50.0 50.0 53 53 19 20

Altech Autopage Cellular (Pty) Limited 20 000 100.0 100.0 4 4 (609) (154)

Autopage Holdings Limited 1 245 250 100.0 100.0 344 344 (40) (40)

Altech ISIS (Pty) Limited 100 100.0 100.0 — — — —

Comtech (Pty) Limited 1 000 100.0 100.0 61 50 4 —

Media Verge Solutions (Pty) Limited 20 000 100.0 100.0 — — — —

Mobile Direct Telecom (SA) (Pty) Limited 100 100.0 100.0 — — — —

Altech NamITech Holdings (Pty) Limited 1 324 691 100.0 100.0 479 479 1 —

Altron One Nominees (Pty) Limited 3 600 100.0 100.0 — — 292 292

Altech Netstar (Pty) Limited 1 000 100.0 100.0 6 6 — —

Altech Netstar Fleet Management Services (Pty) Limited 4 000 100.0 100.0 — — (360) —

Altech Supercall Cellular (Pty) Limited 100 100.0 100.0 — — — —

Altech Swift Global (Kenya) Limited 617 248 51.0 — 40 — — —

Altech UEC Multi-media Limited 100 000 000 100.0 100.0 130 130 (2) (2)

Altech UEC Technologies (Pty) Limited 1 100.0 100.0 — — 15 15

Kenya Data Networks Limited 201 259 51.0 — 629 — 26 —

Share-based payments and other loans — — 18 17 — —

10 minor subsidiaries (2008: 10) 100.0 100.0 1 1 (32) (31)

1 860 1 190 (1 151) (348)

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 offi ce of the company.

Kenya Data Networks Limited and Altech Swift Global (Kenya) Limited are incorporated in Kenya and Altech Infocom Limited in Uganda.

132


Consolidated Wireless Communication

2009 2008 2009 2008

Rm Rm Rm Rm

BUSINESS SEGMENTATION

Revenue

Goods sold 4 092 3 943 1 908 1 838

Services rendered 5 072 4 299 4 551 4 100

Intersegment revenue — — 6 12

Total segment revenue 9 164 8 242 6 465 5 950

Operating expenses (8 099) (7 482) (5 849) (5 426)

Depreciation/impairment (191) (96) (32) (31)

Operating profi t/(loss) 874 664 584 493

Investment income 68 98 72 81

Interest expense (70) (21) (38) —

Profi t before goodwill impaired, capital items and taxation 872 741 618 574

GEOGRAPHIC SEGMENTATION

Revenue 9 164 8 242 6 465 5 950

South Africa 7 449 7 129 6 385 5 891

Rest of Africa 1 001 574 — 37

Europe 84 72 — —

Rest of world 630 467 80 22

Operating profi t 874 664 584 493

South Africa 665 602 584 493

Rest of Africa 206 60 — —

Europe — — — —

Rest of world 3 2 — —

Annexure 2Segmental information – Income statement

Fina

ncia

l sta

tem

ents

133


Converged services Multi-Media and Information Corporate and

and connectivity Electronics Technology eliminations

2009 2008 2009 2008 2009 2008 2009 2008

Rm Rm Rm Rm Rm Rm Rm Rm

35 — 1 537 1 522 612 583 — —

335 — 51 51 135 148 — —

48 — 61 82 11 — (126) (94)

418 — 1 649 1 655 758 731 (126) (94)

(230) — (1 524) (1 512) (634) (632) 138 122

(42) — (62) (22) (37) (43) (18) —

146 — 63 121 87 56 (6) (6)

1 — 11 10 3 2 (19) 5

(18) — (14) (11) (19) (22) (19) 12

129 — 60 120 71 36 (6) (11)

418 — 1 649 1 655 758 731 (126) (94)

— — 792 917 398 415 (126) (94)

408 — 245 234 348 303 — —

— — 84 72 — — — —

10 — 528 432 12 13 — —

146 — 63 121 87 56 (6) (6)

— — 56 119 31 (4) (6) (6)

146 — — — 60 60 — —

— — — — — — — —

— — 7 2 (4) — — —

134


Consolidated Wireless Communication

2009 2008 2009 2008

Rm Rm Rm Rm

BUSINESS SEGMENTATION

ASSETS

Property, plant and equipment 837 299 56 53

Goodwill and intangible assets 1 122 409 37 78

Associates and other investments — — — —

Inventories 416 364 113 91

Trade and other receivables 1 248 937 451 456

Assets classifi ed as held-for-sale 107 — — —

Operating assets 3 730 2 009 657 678

Deferred tax assets 112 88 — —

Cash and cash equivalents 1 221 1 591 — —

Total assets per balance sheet 5 063 3 688 — —

LIABILITIES

Minority shareholders’ loans 20 22 — —

Long-term liabilities 95 55 — —

Trade and other payables 1 827 1 452 1 000 999

Provisions 18 22 — 1

Liability classifi ed as held-for-sale 28 — — —

Interest and non-interest-bearing liabilities 1 988 1 551 1 000 1 000

Taxation payable 145 87 — —

Bank overdraft 310 — 310 —

Deferred tax liabilities 73 23 — —

Total liabilities per balance sheet 2 516 1 661 — —

GEOGRAPHIC SEGMENTATION

Operating assets 3 730 2 009 657 678

South Africa 2 766 1 794 657 678

Europe 6 13 — —


Interest and non-interest-bearing liabilities 1 988 1 551 1 000 1 000

South Africa 1 557 1 380 1 000 1 000

Europe 33 — — —


Capital expenditure 385 137 31 36

South Africa 74 106 31 36

Europe — — — —


Annexure 2Segmental information – Balance sheet

Fina

ncia

l sta

tem

ents

135


Converged services Multi-Media and Information Corporate and

and connectivity Electronics Technology eliminations

2009 2008 2009 2008 2009 2008 2009 2008

Rm Rm Rm Rm Rm Rm Rm Rm

597 — 83 85 94 154 7 7

3 — 70 — 158 331 854 —

— — — — — — — —

— — 255 191 48 82 — —

155 — 473 284 136 174 33 23

— — — — 107 — — —

755 — 881 560 543 741 894 30

— — — — — — 112 88

— — — — — — 1 221 1 591

— — — — — — 2 227 1 709

— — — — — — 20 22

85 — — — 10 45 — 10

230 — 331 283 98 163 168 7

— — 12 14 6 7 — —

— — — — 28 — — —

315 — 343 297 142 215 188 39

— — — — — — 145 87

— — — — — — 310 —

— — — — — — 73 23

— — — — — — 716 149

755 — 881 560 543 741 894 30

— — 872 552 343 534 894 30

— — — — 6 13 — —

755 — 9 8 194 194 — —

315 — 343 297 142 215 188 39

— — 335 215 34 126 188 39

— — — — 33 — — —

315 — 8 82 75 89 — —

302 — 25 52 20 49 7 —

— — 23 50 13 20 7 —

— — — — — — — —

302 — 2 2 7 29 — —

136


Directorate profi le

DR HK (HILTON) DAVIES


Qualifi cations: BCom; DEconSc

Titles: » Independent non-executive chairman of Altech

» Chairman of the Altech remuneration and nomination committee

Experience: 48 years in the De Beers and Anglo American groups, which period included 10 years as non-executive director of Altech. Until

recently, he also served as chairman of Waco International.

Prior to retirement, he held the following positions: joint deputy chairman of Anglo American Industrial Corporation, chairman of LTA and the

Boart Longyear Group. He also served as a director of Investec Bank.

Joined the Altech board in 1996.

CG (CRAIG) VENTER


Qualifi cations: BA (Econ) (UCLA); BA (Psychology) (UCLA); MBA (USC); MSc (Mgmt Science) (USC)

Titles: » Chief executive offi cer of Altech

» Executive director of Altron

» Director of Altech Netstar, Altech Autopage Cellular, Kenya Data Networks, Swift Global (Kenya) and various other subsidiaries of

Altech

» Chairman of Altech’s executive committee, Altech Autopage Holdings, Arrow Altech Holdings, Altech Alcom Matomo, Altech Netstar

Fleet Solutions, Altech UEC Multi-media and Altech Information Technologies

» Member of Altron’s executive committee and risk management committee as well as Altech’s business risk committee

» A member of the worldwide Young Presidents’ Organisation (YPO)

Experience: 20 years in senior management positions in the Altech group.


Adm

inis

trat

ion

137


DR JEW (JOHN) CARSTENS


Qualifi cations: BCom (Hons); MCom; PhD; CA(SA)

Titles: » Chief fi nancial offi cer of Altech

» Chairman of Altech Netstar as well as the audit committees of Arrow Altech Holdings

» Director of various other Altech group subsidiaries

» Member of Altech’s business risk and executive committees

» Trustee of the Altron Pension Fund and the Altron Medical Aid Scheme

Experience: 21 years in the electronics, telecommunications and power electrical industries, previously in the auditing profession and

academic fi eld.


PMO (PETER) CURLE


Qualifi cations: MA (Oxon)

Titles: » Member of the Altron executive committee

» Executive director of Altron

» Executive director of Altech: Corporate Finance

Experience: 39 years in merchant banking/corporate fi nance activities in South Africa and internationally.


ML (MOSS) LEOKA


Qualifi cations: BA (Economics)


» Director of Hatch Africa (Proprietary) Limited

» Director of Harrison & White Investments Limited

» Director of Majestic Technologies (Proprietary) Limited

» Currently executive chairman of South Atlantic Minerals

Experience: Extensive management experience at some of South Africa’s leading corporations, including Tiger Oats, JSE Limited, Standard Bank

Investment Corporation, KPMG and Alliance Capital. Previously chaired the business committee of the United States – South Africa Bi-National

Commission.


138

Directorate profi le continued


R (RAMANI) NAIDOO


Qualifi cations: BA; LLB; Certifi cate in Mergers and Acquisitions


» Former non-executive directorships include African Bank Limited, Juta and Company Limited, Stellenbosch Vineyards Limited and

Member of the Advisory Council of the UNISA Centre for Corporate Citizenship

Experience: An admitted attorney, notary public and conveyancer, Ramani spent a number of years in private legal practice before taking up a

position with the Airports Company South Africa as its Head of Legal Services and Company Secretary. Her other corporate roles have included

that of Legal Services Manager to the Southern Sun Group, Senior Manager of Private Equity for Gensec Bank and Director of Edward Nathan

Corporate Governance Advisory Services. Ramani has a special interest in corporate governance and has written extensively on the topic. She is

the author of Corporate Governance: An Essential Guide for South African Companies; The Essential Directors’ Guide and the Introduction to

corporate governance course offered through the UNISA Centre for Corporate Citizenship.


DR HA (HAROLD) SEREBRO

Date of birth: 12 October 1938

Qualifi cations: MBBCh (Wits); MD (Rand); FCRP (Canada); FACP (USA); PhD (Economics) (hc) (UFS)

Titles: » Non-executive director of Altech

» Senior Altron executive director

» Chairman of the Altron group purchasing and export councils

» Member of the Altron risk management committee

» Trustee of the State President Empowerment Award Programme and of the Duke of Edinburgh Trust

» Trustee of the Sexwale Family Foundation

Experience: 27 years in the electronics industry full-time with the Altron group and 5 years part-time training at Altron group, culminating in

non-executive director of Powertech in 1981.


M (MOSES) SINDANE


Qualifi cations: BCom; BCompt (Hons); MBA (UK); CA(SA)


» Chairman of the Altech business risk committee

» Member of the Altech audit, as well as the remuneration and nomination committees

» Chairman of the audit committee of the Cancer Association of South Africa and a member of the PAAB investigating committee

» Senior partner of Gobodo Inc and member of its national executive committee

Experience: 33 years in the auditing, fi nancial and business development fi elds which included the Offi ce of the Auditor General. He has

occupied a senior executive partner at Ernest & Young as well as a member of its National Executive Committee.


Adm

inis

trat

ion

139


ZJ (ZAKHELE) SITHOLE


Qualifi cations: BAcc; BCom (Hons); Higher Diploma Tax Law; Higher Diploma Company Law; CA(SA)


» Chairman of the Altech audit committee

» Chairman of Command Holdings and a director of the Public Investment Corporation

» Member of the board of governors at the University of Zululand, South African Parks Board, the fi nance committee of the Catholic

Dioceses (Johannesburg), the Independent Regulatory Board of Auditors and the Association for Advancement of Black Accountants

of Southern Africa

Experience: 30 years in the accounting and auditing profession. He founded Sithole & Co, and co-founded Ebony Financial Services.


AMR (ALEX) SMITH


Qualifi cations: Bachelor of Laws (Honours) (Edinburgh); CA

Titles: » Chief fi nancial offi cer and fi nancial director of Altron

» Non-executive director of Altech, Bytes, Powertech and various other group companies

» Member of the Altron executive committee and risk management committee

Experience: In 1991 Alex joined Price Waterhouse in Scotland initially as a trainee accountant progressing to assistant manager. He relocated to

South Africa in 1995 where he was employed as an audit manager with Price Waterhouse in Johannesburg until 1997.

Between 1997 and 2005, Alex was instrumental in assisting with the development of the Transaction Services department at

PricewaterhouseCoopers (PWC). As an associate director of PWC, Alex provided specialist transaction-related advice, principally related to due

diligence processes. Some of the transactions which Alex was involved in at PWC included the listing of South African Breweries (SAB) on the

London Stock Exchange, the acquisition of ABSA by Barclays Bank Plc, Standard Bank’s defence of the attempted hostile takeover by

Nedcor Bank and the acquisition of Miller by SAB.

Alex is a member of the Institute of Chartered Accountants of Scotland.


140

Directorate profi le continued


DR WP (BILL) VENTER


Qualifi cations: DPhil (Bus Man) (UJ); MPhil (Bus Man) (UJ – cum laude); MBA (Wales); DCom (hc) (UP, UFS and UPE); DSc (Eng) (hc)

(Natal); DEng (hc) (Wits); C Eng (UK)

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 signifi cant contribution to South Africa’s electronics industry.

Titles: » Chairman of Altron and Bytes

» Non-executive director of Altech, Bytes and Powertech, former chairman of the CSIR, and past director of AMIC Limited and Nedcor

Bank Limited

» Member of the Altron nomination committee and remuneration committee

Experience: Some 44 years devoted to entrepreneurial endeavours and initiatives in the electronics, telecommunications and power electrical

industries, both in South Africa and offshore, fi rstly 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.

Awarded the Sunday Times Lifetime Achievement Award in 2006, and the Minister’s Technology Top 100 Lifetime Achiever Award in 2009,

in recognition of his signifi cant contribution to technology development in South Africa.


RE (ROBERT) VENTER


Qualifi cations: BSc (Econ) (UCLA); MBA (UCLA) Dean’s List

Titles: » Chief executive of Altron

» Non-executive director of Altech, Bytes and Powertech and various other group companies

» Chairman of the Altron executive committee

» 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).

19 years experience in senior management positions in the Altron group (1990 to current), including chief executive offi cer of Aberdare Cables

(1993 to 1996), chief executive offi cer of Powertech (1994 to 2001) before joining Altron as chief executive (2001 to current).


Adm

inis

trat

ion

141


Altech notice of annual general meeting

Allied Technologies LimitedIncorporated in the Republic of South Africa

(Registration number 1946/020415/06)

(Share code: ALT) (ISIN: ZAE000015251)

(“Altech” or “the Company”)

Notice is hereby given that the sixty-third annual general meeting

of shareholders of Allied Technologies Limited (“Altech”) will be

held in the Boardroom, Altech Corporate Offi ces, 79 Central Street,

Houghton, Johannesburg, on Friday, 10 July 2009 at 15:00 to

conduct the following business:

1. To receive, consider and adopt the annual fi nancial statements

of Altech and the Altech group for the year ended

28 February 2009.

2. To re-elect by way of separate resolutions directors in the place

of those retiring in accordance with Altech’s articles of

association. The directors retiring are:

Dr HK Davies, Dr JEW Carstens and Messrs CG Venter and

AMR Smith, 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 136 to

140 of this annual report.

3. To ratify the fees paid to the non-executive directors during the

past fi nancial year.

4. To reappoint PKF (Jhb) Incorporated as independent auditors

of Altech and to note that the individual registered auditor who

will undertake the audit during the fi nancial year ending

28 February 2010 is Mr Paul Badrick.

As special business, to consider and if deemed fi t, pass with or

without modifi cation 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 Altech or any of its subsidiaries be and are hereby

authorised, by way of a general approval, to acquire ordinary

shares issued by Altech, in terms of sections 85 (2), 85 (3)

and 89 of the Companies Act, No 61 of 1973, as amended,

(“the Companies Act”), and in terms of the Listings

Requirements of the JSE Limited (“the JSE”), being that:

» any such acquisition of ordinary shares shall be effected

through the order book operated by the JSE trading system

and done without any prior understanding or arrangement

between Altech and the counterparty;

» this general authority shall be valid until Altech’s next

annual general meeting, provided that it shall not extend

beyond 15 (fi fteen) months from the date of passing of this

special resolution number 1;

» an announcement will be published as soon as Altech or any

of its subsidiaries have acquired ordinary shares

constituting, on a cumulative basis, 3% of the number of

ordinary 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;

» acquisitions of shares in aggregate in any one fi nancial year

may not exceed 20% of Altech’s ordinary issued share

capital as at the date of passing of this special resolution

number 1;

» ordinary shares may not be acquired at a price greater than

10% above the weighted average of the market value at

which such ordinary shares are traded on the JSE as

determined over the fi ve business days immediately

preceding the date of repurchase of such ordinary shares

by Altech or any of its subsidiaries;

» Altech has been given authority by its articles of

association;

» at any point in time, Altech may only appoint one agent

to effect any repurchase on its behalf;

» Altech undertakes that it will not enter the market to

repurchase Altech’s securities until Altech’s sponsor has

provided written confi rmation to the JSE regarding the

adequacy of Altech’s working capital in accordance with

Schedule 25 of the JSE Listings Requirements;

» Altech remaining in compliance with the minimum

shareholder spread requirements of the JSE Listings

Requirements; and

» Altech and/or its subsidiaries not repurchasing any shares

during a prohibited period as defi ned by the JSE Listings

Requirements unless a repurchase programme is in place,

where dates and quantities of shares to be traded during

the prohibited period are fi xed and full details of the

programme have been detailed in an announcement

over SENS prior to the commencement of the

prohibited period.

142


Altech notice of annual general meeting continued

Before entering the market to effect the general repurchase,

the directors, having considered the effects of the repurchase

of the maximum number of ordinary 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:

» Altech and the Altech group will be able, in the ordinary

course of business, to pay its debts;

» the consolidated assets of Altech and the Altech group,

fairly valued in accordance with statements of

International Financial Reporting Standards, will exceed the

consolidated liabilities of Altech and the Altech group; and

» Altech and the Altech group’s ordinary share capital,

reserves and working capital will be adequate for ordinary

business purposes.

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:

» directors and management – pages 12 to 13, 19; 136 to 140;

» major benefi cial shareholders – page 58;

» directors’ interests in ordinary shares – page 82;

» share capital of Altech – note 7 on page 104.

LITIGATION STATEMENT

In terms of section 11.26 of the JSE Listings Requirements, the

directors, whose names appear on pages 136 to 140 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 have had in the recent past, being at least the

previous 12 (twelve) months, a material effect on the Altech

group’s fi nancial position.

DIRECTORS’ RESPONSIBILITY STATEMENT

The directors, whose names appear on pages 136 to 140 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

fi nancial position of Altech and its subsidiaries since the date of

signature of the audit report and up to the date of this notice.

The directors have no specifi c intention, at present, for Altech 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

Altech and its shareholders.

The reason for and effect of this special resolution is to grant the

directors of Altech a general authority in terms of the

Companies Act and the JSE Listings Requirements for the

repurchase by Altech, or a subsidiary of Altech, of Altech’s shares.

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 shares of the company be renewed

subject to the following limitations:

» The authority shall be valid until the date of the next

annual general meeting of the company, provided that it

shall not extend beyond 15 (fi fteen) months from the date

of this annual general meeting.

» Issues in terms of this authority will not, in any fi nancial

year, in aggregate exceed 5% of the number of ordinary

shares in the company’s issued share capital as at

28 February 2009, provided that this limitation will not

apply to the issue of ordinary shares in terms of any share

incentive scheme and, accordingly:

– in calculating the number of ordinary shares issued in

any fi nancial year for the purpose of determining

whether the aforementioned 5% threshold has been

reached, any ordinary shares issued in terms of the rules

of any share incentive scheme shall not be included in

that calculation; and

– the number of ordinary shares which directors are

authorised to allot and issue in terms of the rules of any

share incentive scheme shall not be subject to limitation

other than in terms of the rules applicable to that scheme;

» Issues in terms of this authority shall be subject to the

provisions of the Companies Act and the JSE Listings

Requirements.

Adm

inis

trat

ion

143


7. ORDINARY RESOLUTION NUMBER 2 – FEES OF NON-EXECUTIVE

DIRECTORS 2009/2010

That with effect from 1 September 2009 the fees payable to

the non-executive directors be set as follows:

a) The board chairman, R205 000 per annum.

b) A board member, R110 000 per annum.

c) The audit committee chairman, R75 000 per annum.

d) An audit committee member, R40 000 per annum.

e) The remuneration and nomination committee chairman,

R40 500 per annum.

f) A remuneration and nomination committee member,

R30 000 per annum.

g) The business risk committee chairman, R43 000 per annum.

h) A business risk committee member, R30 000 per annum.

8. ORDINARY RESOLUTION NUMBER 3 – SIGNATURE OF

DOCUMENTS

That any one director or the Secretaries of Altech be and they

are 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 the

annual general meeting at which this ordinary resolution will

be considered.

VOTING AND PROXIES

Shareholders are entitled to attend, speak and vote at the annual

general meeting.

Ordinary shareholders may appoint a proxy to attend and vote in

their stead. A proxy need not be a shareholder of Altech.

Shareholders holding dematerialised shares but not in their own

names must furnish their Central Securities Depositary Participant

(CSDP) or broker with their instructions for voting at the annual

general meeting. 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 Altech’s transfer

secretaries by not later than 15:00 on Thursday, 9 July 2009. The

completion of a form of proxy will not preclude a shareholder from

attending the meeting.

By order of the board

Altech Management Services (Pty) Limited – Secretaries

per: R Wolmarans – Group company secretary

21 April 2009

TRANSFER SECRETARIES

Computershare Investor Services (Pty) Limited

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107)

144


Annual general meeting – explanatory notes

1. RESOLUTION 1 – ADOPTION OF ANNUAL FINANCIAL

STATEMENTS

At the annual general meeting, the directors must present the

annual fi nancial statements of the year ended 28 February

2009 to shareholders, together with the reports of the directors

and the auditors. These are contained within the annual report.

2. RESOLUTION 2 – RE-ELECTION OF DIRECTORS

In accordance with Altech’s articles of association, one-third of

the directors are 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. Dr HK Davies, Dr JEW Carstens and

Messrs CG Venter and AMR Smith retire by rotation at the

annual general meeting.

An abbreviated curriculum vitae in respect of each director

offering himself for re-election is contained on pages 136 and

140 of this annual report.

3. RESOLUTION 3 – RATIFICATION OF NON-EXECUTIVE DIRECTORS’

FEES 2008/2009

Shareholders are requested to ratify the fees paid to the

non-executive directors during the past fi nancial year.

Full particulars of all fees for the past fi nancial year are

contained on page 73 of the annual report.

4. RESOLUTION 4 – REAPPOINTMENT OF INDEPENDENT AUDITORS

PKF (Jhb) Incorporated has indicated its willingness to continue

in offi ce and resolution 4 proposes the reappointment of that

fi rm as Altech’s auditors until the next annual general meeting.

5. RESOLUTION 5 (SPECIAL RESOLUTION NO 1) – SHARE

REPURCHASE

The effect of special resolution number 1 and the reason thereof

is to grant Altech or any of its subsidiaries a general approval in

terms of the Companies Act No 61 of 1973, as amended, for the

acquisition by Altech or any of its subsidiaries of Altech’s

shares, which general approval shall be valid until the earlier of

such next annual general meeting of Altech or its variation or

revocation of such general authority by special resolution at any

subsequent annual general meeting of Altech, provided that the

general authority shall not extend beyond 15 months from the

date of the annual general meeting.

6. RESOLUTION 5 (ORDINARY RESOLUTION NO 1) – CONTROL OF

AUTHORISED BUT UNISSUED SHARES

In terms of sections 221 and 222 of the Companies Act No 61

of 1973, as amended, the shareholders have to approve the

placement of the unissued shares under the control of the

directors. The authorities will be subject to the Companies Act

No 61 of 1973, as amended, and the JSE Listings Requirements.

7. RESOLUTION 6 – (ORDINARY RESOLUTION NO 2) –

REMUNERATION OF NON-EXECUTIVE DIRECTORS

Shareholders are also requested to approve the fees payable to

the company’s non-executive directors with effect from

1 September 2009. This resolution is recommended by the

company’s board of directors. The process followed by the

remuneration and nomination committee in recommending the

non-executive director fees is contained on page 72 of this

annual report.

Adm

inis

trat

ion

145


Allied Technologies Limited(Incorporated in the Republic of South Africa)(Registration number 1946/020415/06) (Share code: ALT) (ISIN: ZAE000015251)

(“Altech” or “the Company”)

PROXY FOR THE SIXTY-THIRD ANNUAL GENERAL MEETING – FOR USE BY CERTIFICATED ORDINARY SHAREHOLDERS AND DEMATERIALISED

SHAREHOLDERS WITH “OWN NAME” REGISTRATION ONLY

Holders of dematerialised ordinary shares other than with “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 names in full)

of (address)

being the 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, 10 July 2009 at 15:00 at 79 Central Street, Houghton, for the purpose of considering and, if deemed fi t, passing, with or without modifi cation, 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. Annual fi nancial statements

2. Re-election of directors 2.1 Dr HK Davies

2.2 Dr JEW Carstens

2.3 Mr CG Venter

2.4 Mr AMR Smith

3. Ratifi cation of non-executive directors’ fees 2008/2009

4. Reappointment of auditors

5. Special resolution number 1: General repurchase of securities

6. Ordinary resolution number 1: Control of authorised but unissued shares

7. Ordinary resolution number 2: Approval of non-executive directors’ fees 2009/2010

8. Ordinary resolution number 3: Signature of documents

Signed at on 2009

Signature

Assisted by me (where applicable)

146


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 specifi ed, 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 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 fi t.

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 Limited,

70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to reach them by not later than Thursday, 9 July 2009

at 15:00.

ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.

Adm

inis

trat

ion

147


SHAREHOLDERS’ DIARY

Financial year-end 28 February 2009

Annual general meeting 10 July 2009

Reports and fi nancial statements

Preliminary report and

dividend announcement 23 April 2009

Annual fi nancial statements

(mailed to shareholders) June 2009

Interim report September 2009

Dividend details

Ordinary dividend declared 21 April 2009

Last day for trading to qualify for

and participate in the dividend

(cum dividend) 22 May 2009

Trading ex dividend commences 25 May 2009

Record date 29 May 2009

Dividend payment date 1 June 2009

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 2009 one rand was equal to:

2009 2008

British pounds 0.0688 0.06417

US dollars 0.0985 0.1275

Japanese yen 9.6091 13.31

Euros 0.0777 0.0849

Corporate data

CORPORATE ADMINISTRATION

Corporate and business offi ce

79 Central Street

Houghton 2198

Telephone: (011) 715 9000

Telefax: (011) 715 9048

Internet address: http://www.altech.co.za

Secretaries and registered offi ce

Altech Management Services (Pty) Limited

79 Central Street, Houghton, 2198

PO Box 153, Bergvlei, 2012, South Africa

Telephone (National): 011 715 9000

Telephone (International): (+27 11)715 9000

Telefax: 011 715 9048

Internet address: http://www.altech.co.za

Transfer secretaries

Computershare Investor Services (Pty) Limited

70 Marshall Street

Johannesburg, 2001

PO Box 1053, Johannesburg, 2000, South Africa

Telephone: 011 370 5000

Auditors

PKF (Jhb)(Inc)

42 Wierda Road West, Wierda Valley, 2196

Telephone: 011 384 8000

Bankers

Absa Bank Limited

Nedbank, a division of Nedcor Bank Limited

Sponsor

Investec Bank Limited

148


= the power of

BASTION GRAPHICS

Text prepared and compiled by the Altech Group Secretarial and Corporate Relations Division

Designed and produced by Bastion Graphics (Pty) Limited

Business Offi ce

79 Central Street

Houghton, 2198

South Africa

Telephone:

National (011) 715-9000

International 27 11 715-9000

www.altech.co.za

the power of technology - sharedataallied technologies limited (member of the altron group)...

Documents