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One Group One Goal
Annual Report 2008
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Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06)
Financial highlights 1
Corporate structure 2
Key operational performance 4
Key growth drivers for the Altron group 4
Key performance ratios 5
Performance on strategic philosophies 6
Segmental review 8
Office of the Chairman and executive committee
10
Six-year financial review 12
Chairman’s statement 14
Chief executive’s review 18
Operational review 26
Altech 26
Bytes Technology Group 30
Powertech 34
Terminology and abbreviations 38
Sustainability report 2007/8 39
Update on 2007 sustainability targets 42
Management of sustainability 44
Shareholders 48
Customers 52
Partners 55
Employees 59
Transformation 64
Environment 70
Health and safety 80
Apppendix A 84
– Index to issues identified by the JSE SRI
Appendix B 85
– 2007 Environmental Survey (for JSE SRI Index)
Appendix C 89
– GRI content index
Shareholder analysis 90
Altron corporate governance report 95
Remuneration report 108
Financial statements 114
Administration 189
Directorate profile 189
Letter from the chairman 194
Altron notice of annual general meeting 195
Annual general meeting – explanatory notes 199
Form of proxy 201
Corporate date 203
Mission and core values
Altron’s mission is:
to be the leading ICT group offering information technology, telecoms and power electronics products and services to the southern African region and selected international markets;
to maintain our family ownership and preserve the “familiness” culture;
to generate superior financial returns, thereby driving an increase in total shareholder returns above that of our peers and the overall market;
to remain dedicated to technological innovation through internal investment and international partnerships;
to continue being committed to the transformation process of South Africa through broad-based black economic empowerment initiatives;
to provide a work environment that attracts, motivates and retains superior people skills; and
to integrate sustainable development into our business at every level as we realise that our future depends on it.
We will achieve this through a motivated and loyal team that always:
places customer service first;
has mutual trust and respect;
is totally committed to quality, best practice and the improvement of productivity;
adheres to the highest standards of integrity;
aims to achieve excellence in both financial and technological performance; and
takes pride in what we do and in being part of the Altron group.
Through these values we promote:
Environmentalconservation
CorporategovernanceSustainable
development
Transparency
Considering the needs of all
stakeholders
Best businesspractices
Teamwork
AccountabilityInnovation
Customers
COREVALUES
Broad-based black economic empowerment and transformation
Altron website address: www.altron.co.za
AltronAnnual Report 2008
Financial highlights for the year ended 29 February 2008
1
Financial summary
R millions 2008 2007 %
change
Revenue 21 431 17 126 25
EBITDA 2 209 1 763 25
Operating profit 1 937 1 528 27
Operating margin (%) 9.0 8.9
HEPS (cents) 375 283 33
Diluted HEPS (cents) 327 247 33
Adjusted HEPS (cents) 387 286 36
Cash on hand 2 083 1 589
Dividend per share (cents) 156 118 32
Return on equity (%) 24.7 23.0
200820072006200520042003
Market price per share andnet asset value per share (cents)
Market price (ordinary shares)
820 1
105 1
555
2 55
0
4 47
8
3 70
0
Net asset value per share (cents)
3
893
4#453
4#9; 3
5#573
5#; 33
6#693
6#<53
7#7; 3
8#373
8#933
200820072006200520042003
Headline earnings per share (cents)
155.
3
138.
1
161.
7 189.
2
282.
8
375.
3
200820072006200520042003
Revenue (R millions) and operating margin (%)
Revenue
11 3
97
10 0
45 12 2
06 13 9
13
17 1
26
21 4
31
Operating margin
0
5
10
15
20
25
25%Revenue
27%Operating profit
33%Headline earnings per share
33%Diluted headline earnings per share
32%Dividend
R2.1 billionCash on hand
AltronAnnual Report 20084
Key operational performance
200820072006200520042003
Revenue by operation (Rm)
4 05
6
4 14
3
5 55
2
6 04
1 6 78
0
8 24
2
3 03
5
2 60
7
2 90
6 3 47
0 4 08
8
5 18
6
4 11
7
3 33
2
3 74
0 4 41
1
6 28
9
8 01
6
Altech Bytes Powertech
200820072006200520042003
Operating profit by operation (Rm)
Altech Bytes Powertech
407
333
491
485
573
664
183
185 22
1 282 32
5 365
267
207 24
7 280
638
914
200820072006200520042003
Headline earnings by operation (Altron’s share) (Rm)
Altech Bytes Powertech
192
170 19
2 214 23
6
288
60 56
73
111
116
170
127
146
142 17
0
415
577
Infrastructurespend
Technologyconvergence
Integration of acquisitions
and launching of new ventures
Globalfootprint
Powertech AltechBytes
AltechBytes
Powertech
AltechBytes
Powertech
A positive medium- to long-term outlook for Altron
Key growth drivers for the Altron group
AltronAnnual Report 2008 5
Key performance ratios
20082007200620052004
Return on capital employed (%)
17.5
21.8
22.8
29.8
29.7
20082007200620052004
Return on operating assets (%)
19.1 19
.8 20.6
23.9
23.2
Return on equity
20082007200620052004
Return on net assets (%)
18.1
22.5 23
.8
30.5
30.3
Financial summary
R millions 2008 2007
Return on capital employed (operating income: debt and equity) 29.7 29.8
Return on equity (attributable income: equity) 24.7 23.0
Return on operating assets 23.2 23.9
Return on net assets 30.3 30.5
AltronAnnual Report 2008 2
Corporate structure
*
62%*
100%
100%
MULTI-MEDIA AND ELECTRONICS
Altech UEC Multi-media Technologies, Media Verge Solutions, 3CTV, Altech Global Decoder Logistics – the design and manufacture of satellite and terrestrial digital set-top decoders.
Altech Arrow Altech Distribution – the distribution of a range of professional electronic components and products.
TELECOMMUNICATIONS AND WIRELESS COMMUNICATIONS
Altech Autopage Cellular, Altech Supercall Cellular, Altech Mobile Direct, Altech Mobile Express – sales, distribution and service provision for cellular network operators. Altech Netstar, Altech Fleet Management Services and ComTech – Stolen Vehicle Recovery and Fleet Management business.
Altech Alcom Matomo and Altech Alcom Radio Distributors – design, installation and project management of Motorola radio systems.
BYTES TECHNOLOGY GROUP SOUTH AFRICA (BYTES SA)
Bytes Document Solutions (BDS), Bytes Specialised Solutions (BSS), Bytes Managed Services (BMS), Bytes Communication Systems (BCS), Bytes Systems Integration (BSI), Bytes Outsource Services (Outsource Services), Bytes People Solutions (People Solutions), Bytes Healthcare Solutions (BHS) – Xerox offi ce products, document management services, NCR ATM products, Teradata database solutions, PABX solutions including LAN-based telephony, mobile communications, call centres, unifi ed messaging solutions and data communications optimisation strategies, desktop services and support, remote monitoring of computer facilities, network and solutions management, software sales,
BYTES TECHNOLOGY GROUP – INTERNATIONAL OPERATIONS
Bytes Technology Group UK – Software Services, Xclusive Solutions, Vantage Business Systems, BTG Botswana, BTG Namibia, BTG Mozambique, BTG Mauritius – Microsoft licensing, Microsoft certifi ed solutions provider, consulting on corporate data strategies and delivery of data storage networks, design and implementation of complex network messaging systems, provision of software asset management solutions, Xerox offi ce products, document and print solutions.
Power solutions for mining, transport, utilities and material handling
Electrical accessories
Lighting control gear
Integrated protection and control equipment for electrical networks
Turnkey substations
Turbine control systems
Energy management systems
Operational support software
POWER ELECTRONICS
Aberdare Cables, Alcobre (Portugal), Swanib Cables (Namibia), Technology Integrated Solutions (TIS), Powertech Transformers, Desta Power Matla, Powertech Batteries, Dynamic (UK), Crabtree Electrical Accessories SA, Strike Technologies, Powertech Calidus, Tridonic.Atco SA, Powertech IST.
Low, medium and high voltage power cables
Cable network solutions and services
Power and distribution transformers
Automotive batteries (Willard and Sabat) and DC power systems
NATURE OF BUSINESS
Altron, through its principal subsidiaries, Allied Technologies Limited, Bytes Technology Group Limited and Power Technologies (Pty) Limited, operates in the telecommunications, power electronics and multi-media and information technology industries.
*JSE listed
AltronAnnual Report 20083
INFORMATION TECHNOLOGY
Altech Card Solutions, Altech Cardtronic, Altech NamITech, Integrated Technology Solutions, Altech ISIS and Altech ISIS France – telecommunications middleware, payment systems and solutions, secure solutions and smartcard technologies.
Kenya Data Networks Limited, Swift Global (Kenya) Limited, Infocom Limited and Altech Stream Rwanda Limited – data communications operator, internet service provider and IT service provider.
development, implementation and application maintenance, SAP and Axaptaimplementation, IT infrastructure as well as business application, high-quality training and education solutions, transaction switching services, practice management and informatics solutions to the healthcare industry.
TELECOMMUNICATIONS
CBi-electric Aberdare ATC Telecom Cables (including Lambda Cables), Cables de Comunicaciones (Spain), Battery Technologies, Rentech, Powertech IST, TIS
Copper and optical fi bre telecommunications cables and accessories
Data cable systems, standby power and rectifi er systems, solar systems
Access network systems
Radio solutions
Operational support software
Craig VenterChief Executive Offi cer: Altech
David RedshawChief Executive Offi cer: Bytes Technology Group
Norbert ClaussenChief Executive Offi cer: Powertech
Robert VenterChief Executive: Altron
AltronAnnual Report 20086
Strategic philosophy
2007 performance
Future plans
International expansion in niche markets
In 2007 foreign operations and exports grew to 23% of total revenue
Powertech acquired Swanib Cables in Namibia and the 25% it did not own in CdC Zaragoza, Spain
Powertech Transformers established a presence in Kenya
Battery Technologies established a presence in Nigeria and Tanzania
Altech acquired controlling interests in three subsidiaries of the Sameer ICT Group in Kenya and Uganda; rolls out broadband network in Rwanda and invests further in Altech NamITech West Africa
Altech UEC develops subcontract manufacturing capability in Thailand and China
Bytes UK grows revenue by 89% through organic growth and the acquisition of strategic Xerox businesses
Aberdare Hong Kong established
The group’s strategy remains to grow contributions from foreign operations and exports to 25% of revenue
Altech UEC establishing significant presence in Indian market
Altech investigating further opportunities in East Africa
CdC Zaragoza expanding product range and geographic reach
Strategic alliances New partners such as General Electric, Amdocs, Tellabs and Plugpower added through the IST acquisition
Strengthened global relationship with Xerox through UK growth
Extended Vodacom service provider agreement for further five years
Extended Alcatel agreement at Bytes Communication Systems
Key focus on existing alliances such as Xerox, ABB, Tridonic.atco, NCR, Motorola, Arrow Electronics, Weidmann, Kronos, Cisco, Microsoft, Gemalto and build on new alliances gained in 2007
Ownership of intellectual property
rights
Altech invested R120 million in R&D during 2007
IST acquisition brought over 115 engineers and 80 technical people into Powertech
Ongoing intellectual property investment in other group companies
A focus on skills retention through various mechanisms
Annuity revenue Altech has increased its contribution from annuity revenue to approximately 75%
Bytes continued to focus on growing their annuity revenue streams
Altron annuity revenue exceeds 40% of group revenue
The target for the group remains at 50% of its revenue being annuity in nature
Various initiatives to increase annuity revenue at Powertech
Value-added services
Powertech’s strategy of complementing its existing product range with value-added services commenced with the acquisition of IST
Establishment of standby power solutions within Powertech
Powertech’s new ventures in the alternative power supply field are expected to increase revenue
Ongoing pursuit of investment opportunities in this area throughout the Altron group
Broad-based black economic empowerment
JJ Tabane appointed as Group Executive: Corporate Affairs
Altron Transformation Vision 2012 compiled and aligned with dti Codes of Good Practice
Altech IT restructured with Pamodzi
Powertech IST empowered through Izingwe
Powertech Transformers in final stages of concluding BBBEE transaction
Altron improves to number 49 in Financial Mail/Empowerdex survey of leading empowered companies in SA
Altron Transformation Vision 2012 launched, Altron transformation committee (Transcom) will be overseeing the implementation of the Vision 2012 conference resolutions and the implementation of the guidelines in all the areas of the dti Codes of Good Practice
Target for all Altron companies is to be Level 1, 2 or 3 by 2012
All Altron executive managers will have KPAs linked to transformation goals on an annual basis
Transcom will steer various interventions on ownership and management control, employment equity and succession planning
Performance on strategic philosophies
AltronAnnual Report 2008 7
Strategic philosophy 2007 performance Future plans
Superior human capital
Establishment of Altech Academy with over 100 participants
Group bursary scheme gains momentum
Active promotion of Powertech Leadership Process and Altron Young Presidents’ Club
Powertech Transformers winding training centre established
Ongoing commitment to skills development and retention
Qualityof income
Current year revenue growth of 25% contributes to 10-year compound annual growth rate of 15% per annum
Current year headline earnings per share growth of 33% contributes to 10-year compound annual growth rate of 17% per annum
Continued pursuit of strategies for growth
Target is to outperform market and peer group
Market leadership/critical mass
Continued group-wide focus on market leadership includes:
– Powertech disposed of Yelland Control due to weakening market position
– The vertical integration within Bytes Document Solutions to maintain leading market position
– Altron group companies occupy number 1 or number 2 market position in most markets served
Bytes UK is leading Microsoft value-added reseller (VAR) and is now largest Xerox concessionaire in the UK
Altech’s East African broadband acquisitions achieve leading market share in region
Continued focus on investment to maintain leading positions
Strategicalliances
Broad-basedblack economicempowerment
Internationalexpansion in niche markets
Quality ofincome
Superior human capital
Marketleadership/
critical mass
Annuityrevenue
Ownership ofintellectualproperty
rights
Value-addedservices
Investor proposition
Increase shareholder value
AltronAnnual Report 20088
Segmental review
Operational presence
Export destinations
EUROPE
Portugal,
France,
Spain
UK
SOUTHERN AFRICA
South Africa, Botswana, Nigeria,
Mauritius, Mozambique, Namibia,
Swaziland, Tanzania, Zambia, Kenya
INDIA
ASIA
Malaysia
AUSTRALIA
Sydney
Revenue (Rm)
2008
Bytes UK
Exports
Rest of Africa
Altech NamITechWest Africa
Aberdare International
Dynamic Batteries
Other158
76987
91
969
702007
927
229
82
1 867
81
1 490
1 194
81
Total:5 024
Total:3 278
Geographic segmentation
Foreign operations and exports grow to 23% of revenue
Bytes expands UK businesses to become leading Xerox concessionaire in the United Kingdom
Powertech increases stake in CdC Zaragoza, Spain to 100%
Altech makes further investment in Altech NamITech West Africa
Powertech purchases Swanib Cables, Namibia
Battery Technologies establishes offi ces in Nigeria and Tanzania
Altech acquires 51% controlling interest in three subsidiaries of the Sameer ICT Group in Kenya
Powertech Transformers establishes offi ce in Kenya and Uganda
Powertech establishes Aberdare Hong Kong offi ce
Altech UEC India established and subcontract manufacturing facilities approved in Thailand and China
Altech rolls out broadband network in Kigali, Rwanda.
– Altech
– Bytes Technology Group
– Powertech
Key:
CHINA
Hong Kong
AltronAnnual Report 2008 9
Revenue2008
Telecommunications
Power electronics and multimedia
Information technology
Eliminations (1%) in 2007
38%
35%
27%
2007
38%
35%
28%
Operating profit*2008
Telecommunications
Power electronics and multimedia
Information technology
Corporate, financial services and eliminations of (1%) in each year
46%
33%
22%
2007
43%
35%
23%
Businesssegmentation
*Operating profi t is stated before capital items.
Altron’s Telecommunications sector currently contributes 35% to Altron’s revenue and 33% towards operating profi t compared to 35% and 35% respectively the previous year, with the majority of the contribution currently being generated in the South African market. While we will continue to strive to grow both the revenue and profi tability of the South African businesses, there are clearly excellent opportunities in Africa, both in terms of our existing businesses and complementary operations that are placed higher up the value chain.
Currently our operations in this sector are dominated by Altech Autopage Cellular and Altech Netstar. These are relatively mature businesses that nevertheless continue to grow strongly, but the real growth opportunities lie in the provision of broadband services. In South Africa we are currently testing Wimax technologies in partnership with Samsung and have recently had our test licence period extended. In the African market we are in the process of setting up a broadband network in Rwanda through Altech Stream and have recently completed the acquisition of a controlling interest in three subsidiaries of the ICT Sameer Group in East Africa, giving us immediate critical mass in that market. These new ventures are expected to contribute strongly in the years to come and further opportunities are being identifi ed and pursued.
The group’s telecoms cable joint venture with Reunert is benefi ting from the liberalisation of the local telecommunications market as a number of operators look to build their own fi xed line networks. Telkom continues to be the largest player in the market but signifi cant orders are starting to fl ow from Neotel, InfraCo, Vodacom and MTN.
The Power Electronics sector maintained its position as the largest contributor to the group’s revenue, accounting for 38%, consistent with the prior year. This sector contributes 46% towards total operating profi t, up from 43% the previous year. In light of increased capital expenditure on infrastructure projects and the escalation in Eskom and municipalities’ demand for products, it is expected that this sector’s contribution could further increase.
The upward revision of Eskom’s fi ve-year rolling forecast for capital expansion is expected to benefi t the group’s power cable and transformer businesses. The power supply issues facing our country have resulted in a substantial increase in demand for alternative power supply solution products, including standby batteries and solar solutions, as well as energy-saving lighting options. The recently acquired IST business has, through its design solutions service, seen an increase in demand for alternative power supply in a number of forms, the most material of which are some gas turbine projects. The group’s cable businesses in the Iberian Peninsula performed above expectations and is expanding its current product range and geographic reach. The focus on infrastructure development, both locally and internationally, is expected to continue in the medium term.
Increased demand from both local and international satellite television operators for set top boxes has resulted in the group outsourcing some production to the Far East. The digitisation of the South African terrestrial television signal presents a signifi cant opportunity and we currently await government’s pronouncements on the technical specifi cations and funding
arrangements of this programme. As the only South African manufacturer of this equipment we are well placed to benefi t from this opportunity.
The Information Technology sector has contributed 27% towards the group’s total revenue compared to 28% in the previous year and its contribution to operating profi t at 22% has decreased compared to 23% last year. The geographical contribution shift is attributed to a signifi cant improvement from the Bytes UK business operations and the fact that local operations are experiencing margin pressure due to competitive market conditions. The strengthening US dollar and euro has impacted on imported products in many of the companies in the group that distribute international products.
We believe this sector is ripe for consolidation and we are currently evaluating two acquisition opportunities.
Our information technology businesses are working closely with our telecommunications businesses that are pursuing broadband opportunities, with a view to creating a very powerful market offering in terms of a full service solution.
Our UK operations in this sector have had a good year and are becoming the leading key players in a relatively fragmented market. Further consolidation opportunities are being pursued in this market.
AltronAnnual Report 200810
Office of the Chairman
DR WP (BILL) VENTER
Chairman of Altron
Date of birth: 29 July 1934 (73 years)
“Achieving goals through excellent contribution and commitment.”
RE (ROBERT) VENTER
Chief Executive of Altron
Chairman of Executive Committee
Date of birth: 7 May 1960 (48 years)DR HA (HAROLD) SEREBRO
Senior Altron Executive Director
Date of birth: 12 October 1938 (69 years)
AltronAnnual Report 2008 11
Executive committee
N (NORBERT) CLAUSSEN
Chief Executive Officer of Powertech
Date of birth: 10 December 1960 (47 years)
PMO (PETER) CURLE
Executive Director: Corporate Finance
Date of birth: 19 May 1946 (62 years)
PD (DAVID) REDSHAW
Chief Executive Officer of Bytes
Date of birth: 29 January 1942 (66 years)
CG (CRAIG) VENTER
Chief Executive Officer of Altech
Date of birth: 4 July 1962 (45 years)
ONKGOPOTSE (JJ) TABANE
Group Executive: Corporate Affairs
Date of birth: 30 June 1972 (35 years)
Chief Financial Officer to be appointed.
AltronAnnual Report 200812
2008R millions
2007R millions
2006R millions
2005R millions
2004*R millions
2003*R millions
INCOME STATEMENT
Revenue 21 431 17 126 13 913 12 206 10 045 11 397
Operating profit 1 937 1 528 1 040 963 718 909
Financial income 182 132 112 100 145 131
Financial expense (89) (56) (53) (62) (26) (35)
Profit from associates 4 4 32 24 9 19
Capital items (90) (38) (54) (90) (139) 98
Profit before taxation 1 944 1 570 1 077 935 707 1 122
Taxation (625) (481) (326) (339) (255) (269)
Profit after taxation 1 319 1 089 751 596 452 853
Attributable to minority interest 300 284 257 148 148 396
Attributable to Altron equity holders 1 019 805 494 448 304 457
Headline earnings 1 072 793 529 445 379 402
Dividends paid 331 216 176 143 117 100
BALANCE SHEET
Assets
Property, plant and equipment 1 264 954 905 848 671 666
Intangible assets 1 502 844 773 925 462 471
Associates and other investments 314 254 228 453 183 181
Rental finance advances 86 77 90 75 189 286
Deferred taxation 196 182 118 112 113 132
Cash and cash equivalents 2 116 1 613 2 152 1 520 2 004 1 510
Other current assets 5 501 4 526 3 271 3 022 2 447 2 947
Total assets 10 979 8 450 7 537 6 955 6 069 6 193
Equity and liabilities
Shareholders' equity 4 469 3 528 2 931 2 679 2 489 2 283
Minority interest 877 1 218 1 103 964 1 082 1 292
Total equity 5 346 4 746 4 034 3 643 3 571 3 575
Non-current loans 940 321 297 716 277 281
Current loans 229 65 238 59 247 193
Loans 1 169 386 535 775 524 474
Non-current liabilities 107 68 46 83 41 120
Bank overdraft 33 24 — — — —
Current liabilities 4 324 3 226 2 922 2 454 1 933 2 024
Total equity and liabilities 10 979 8 450 7 537 6 955 6 069 6 193
*Not restated for effect of IFRS due to practical constraints.
Six-year financial review
AltronAnnual Report 2008 13
2008 2007 2006 2005 2004* 2003*
RATIOS AND STATISTICS
Earnings
Basic earnings per share (cents) 356.7 287.0 176.4 162.0 111.5 169.9
Headline earnings per share (cents) 375.3 282.8 189.2† 161.7† 138.1† 155.3†
Dividend proposed per share (cents) 156.0 118.0 78.0 63.0 52.0 43.0
Headline dividend cover (times) 2.4 2.4 2.4 2.6 2.7 3.6
Ordinary shares in issue (millions)
– at year end 102 94 94 94 94 94
– weighted average 95 94 94 94 94 94
Participating preference shares in issue (millions)
– at year end 210 186 188 184 180 177
– weighted average 191 186 186 182 179 175
Profitability
Operating profit to revenue (%) 9.0 8.9 7.5 7.9 7.1 8.0
EBITDA (R millions) 2 209 1 763 1 253 1 154 847 1 071
Return on shareholders’ equity (%) 24.7 23.0 18.2 16.8 16.0 14.3
Return on capital employed (%) 29.7 29.8 22.8 21.8 17.5 22.4
Return on operating assets (%) 23.2 23.9 20.6 19.8 19.1 20.8
Return on net assets (%) 30.3 30.5 23.8 22.5 18.1 23.0
Financial
Borrowings ratio (%) 21.9 8.1 13.3 21.3 14.7 13.3
Current ratio 1.7:1 1.9:1 1.9:1 1.9:1 2.0:1 2.0:1
Acid test ratio 1.2:1 1.2:1 1.4:1 1.4:1 1.5:1 1.5:1
Net asset value per share (cents) 1 431.2 1 260.5 1 039.6 962.6 907.0 842.9
Shares
Number of shareholders
– ordinary shares 3 316 1 600 1 738 1 616 1 202 1 058
– participating preference shares 8 019 3 848 3 396 2 916 2 722 2 685
Price:earnings ratio (times)
– ordinary shares 13.1 15.8 13.5 9.6 8.0 5.3
– participating preference shares 12.7 14.9 11.9 9.5 8.1 4.8
Market value per share at year end (cents)
– ordinary shares 3 700 4 478 2 550 1 555 1 105 820
– participating preference shares 3 600 4 200 2 250 1 538 1 125 750
Other
Consumer price index (percentage increase) 9.8 5.7 3.9 2.6 0.7 10.3
Production price index (percentage (decrease)/increase) 11.3 11.3 4.7 2.6 0.5 5.9
Number of permanent employees 12 909 11 871 11 874 11 800 10 712 10 449
†Not restated under Circular 8/2007 – Headline Earnings.
D E F I N I T I O N S
Earnings – Attributable earnings as disclosed
in the income statement.
Borrowings – All interest-bearing liabilities.
Capital employed –The total of fi xed capital
and borrowings.
Operating profi t – is stated before capital
items.
Total assets – Property, plant and equipment,
investments and loans together with current
assets.
Operating assets – Total assets less
investments, loans, deferred tax and cash.
Acid test – The ratio of current assets
excluding inventories to current liabilities.
Current ratio – The ratio of current assets to
current liabilities.
Borrowings ratio – The percentage of
borrowings to total equity.
Headline dividend cover – Headline earnings
per share divided by dividends per share.
D E F I N I T I O N S (continued)
Market value per share – The sellers’ price
quoted by the JSE Limited.
Price: earnings ratio – The market value
per share divided by the headline earnings per
share.
Net asset value per share – Shareholders’
equity divided by the number of shares in issue
at the year end.
EBITDA – Operating profi t before depreciation
and amortisation.
Return on capital employed – The percentage
of operating profi t 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 to
shareholders’ equity, adjusted for net capital
items and translation gains/losses.
Return on net assets – The percentage of
profi t before tax, excluding fi nance costs and
capital items to net assets.
AltronAnnual Report 200814
Chairman’s statement
Our technology strategies, in turn, remain
focused on delivering superior performance in
our core businesses and establishing prominent
positions in emerging and transformational
technologies.
Macroeconomic overview
As I write this year’s statement to our
stakeholders, I am mindful of how volatile the
world economy has become.
From highly successful businesses to ordinary
citizens, the fall-out from the current period of
uncertainty will undoubtedly be the cause of
some economic hardship in the months ahead.
It is difficult to believe that only last year I was
able to report confidently about a robust
economy growing at near record levels.
Any short-term comment made now, in such
an uneasy market, is far less certain.
This uncertainty is founded on a number of
factors affecting the markets that we operate
in at this time.
The drop in US interest rates coupled with the
falling US dollar, has meant that all economies
strongly tied to the USA, are finding both trade
volumes and margins negatively affected.
Unfortunately for South Africa, the cost of oil has
been rising faster than the price of the precious
metals we export, resulting in continuous hikes
in fuel and other costs. The net result is an
ever-worsening balance of trade deficit. Our
reliance on oil products – 14% for the average
SA consumer – has prompted interest rate
increases of 400 basis points since June 2006
and this, in turn, has lead to a marked decrease
in consumer discretionary spending.
The most disruptive impact on the South African
economy has been the crisis in terms of
electricity supply. It would be easy to add my
voice to the growing cadre of critics, but there
cannot be any question that the inadequate and
unpredictable supply of electricity is hampering
the exploitation and beneficiation of the very
commodities and precious metals that should be
Introduction
The year under review proved to be one of
significant achievement and excellence for our
group, marked by both continuity and change.
In fact, our results have surpassed anything we
have ever achieved in our 43-year history and our
continued progress is certainly something to be
proud of.
I am pleased to report that the ICT and power
electronics industries remained buoyant and we
once again delivered on our commitment of
strategic growth and operating profit momentum,
as well as further rapid expansion of our
transformation and CSI programmes.
Our improved results have come about largely as
a result of the continuing demand for infrastructural
development by both the public and the private
sectors and, more particularly, from the building
and construction industries. In addition, several
strategic decisions were made regarding the key
markets we are competing in by investing further
in core technologies going forward, while
maintaining prudent financial controls.
During the period under review, we made
significant investments in acquisitions to grow our
product and customer base, while capital
expenditure in plant and equipment reached an
all-time high. As a result, our combined breadth of
products, capabilities, customers, expertise and
applications certainly make Altron a rather unique
group and expanding upon these business
elements has further enhanced our standing as
a technology leader on the African continent. In
addition, we executed our strategy of planned
acquisitions and managed our many businesses
profitably, while advancing several new projects
for future long-term growth and returns.
Despite the numerous challenges which we are
facing in the country at present, such as power
outages, political changes and global financial
market turmoil, our financial performance was
both solid and successful with our revenue and
operating profits continuing to be among the best
in our industry.
Dr Bill Venter
Chairman
AltronAnnual Report 2008 15
CHAIRMAN’SSTATEMENT
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providing a hedge for South Africa against the
rising cost of imports.
I am confident that given the correct incentives,
the innovation for which our country is well known
will find opportunities for growth and profit, while
offering solutions to manage power more
effectively, and generate additional power
through alternative technologies.
In the meantime, to help offset the impact of the
power outages, we have initiated an intensive
energy conservation programme at all of our
operations and are focusing on compiling a
basket of product offerings to support our
companies in what has become a new product
area for Altron.
While we are certainly heading for more
challenging times, particularly in the short term,
I am generally optimistic when looking at the
prospects of our various enterprises. Our
competitive position in all of our businesses
remains strong and we have excellent executives
throughout our group who are managing them
professionally and competently.
We are achieving success not only in South
Africa, but in East and Central Africa (through
Altech’s acquisition of a controlling interest in
three subsidiaries of the Sameer ICT Group), as
well as on the subcontinent, where Altech UEC is
serving the fast-growing pay TV market.
One of the great opportunities for our nation to
work its way through the global economic
slowdown is through investment in sorely needed
infrastructure at home. It is pleasing to note that
despite constraints hampering delivery, the
government and key utilities are showing strong
commitment to such investment, providing a solid
foundation for Powertech’s medium-term growth.
Transformation
An enduring challenge for the South African
economy is the closing of the gap between the
economically privileged sectors of the population
“Our record revenue and operating profits exceeded our expectations, as did our earnings growth and orders on hand. With our healthy cash balance, we are well poised to make meaningful acquisitions, so giving us the opportunity for above-average returns in the years ahead.”
AltronAnnual Report 200816
Chairman’s statement continued
development of our own employees through
tertiary study at various universities in SA.
As I contemplate the macroeconomic outlook,
somewhat less buoyant than we have
experienced over the past decade, it would be
easy to be satisfi ed with our strong cash position
of R2 billion, so enabling the group to cope with
adverse economic hardships. I have been with
Altron for the past 43 years and have
experienced any number of economic cycles,
both down and up.
Over this time I have learnt to keep an eye on
the long term, and in this regard it is our function
to position each company within the Altron family
such that it serves the needs of the economy
and of its end consumers while focusing on the
importance of sustainability.
The Altron family places tremendous emphasis
on continual product innovation based on
changing consumer needs. We have a business
that spans a variety of sectors, from power
generation systems to communication networks.
In each area we are constantly exploring ways to
take advantage of changing economic
opportunities and everyone is sharing in this and
making a contribution.
As we soldier on into our new fi nancial year, I am
personally excited by the opportunities that we
are now beginning to exploit even as the
economic sectors we serve, here and abroad,
undergo profound change.
Ideally, we would like to retain our core
competence and focus on the southern African
region whilst seeking to build niche markets
globally where we can add value with the aim of
having around 25% of our revenue coming from
international operations and exports in the
foreseeable future.
Acknowledgements
On behalf of the Altron board, I thank you, our
stakeholders, for your continued support of our
strategic plan to build long-term value and for
enabling the Altron group to become a true
and the relatively poor communities – particularly
those who cannot take advantage
of economic growth opportunities.
Back in 2005 we created our Transformation
Vision 2010, recognising that black economic
transformation, as defi ned by the ICT Charter on
BBBEE, is not only a moral imperative, but
critical to the stability and future prosperity of
the South African economy.
Despite the giant strides we have made
previously, we realise they are but small steps at
the beginning of a long journey towards true
economic integration in our country.
Building on the success of Vision 2010, Altron
is tackling Vision 2012 with similar vigour and
commitment. Internal “stretch” goals have
been set for all the companies in the group,
focusing on the seven main pillars of the
codes, namely ownership, board and
management control, employment equity,
skills development, preferential procurement,
enterprise development and socio-economic
development.
At Altron, we view transformation not only as a
business imperative, but also as an integral part
of our strategic philosophy to unlock value in our
relationships with all stakeholders, from
suppliers and employees to customers and
shareholders.
Towards a sustainable future
One of the most severe impacts on Altron, as on
the economy at large, is the acute shortage of
skilled artisans and technically qualifi ed
personnel. Our country needs to get to work in
developing and protecting its skills base and we
at Altron recognise how key this is for the
sustainable growth of our businesses going
forward.
We are responding to this urgent need in a
number of ways, and I was delighted to be
present at the opening of the Altech Academy
last November, to witness the sizeable
investment we are making in the ongoing
AltronAnnual Report 2008 17
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“The growth opportunities for Altron remain virtually endless and we are both excited and enthusiastic about what the future holds for our group.”
global player. I also thank our customers for the
privilege of helping them reach their goals with
our innovative products and services.
It behoves me to express my sincere appreciation
to our team of highly talented employees
throughout the group for the passion, loyalty and
dedication that they demonstrate every day in
serving our customers and achieving our
business objectives.
I also thank members of the board and the Altron
executive committee for their ongoing advice,
loyalty and support. In this regard, I especially
wish to thank Robbie Venter for his continued
outstanding leadership at the helm of the group
and for continuing to create a strong platform
from which our organisation continues to prosper
and benefi t.
In closing, may I take this opportunity of warmly
welcoming Barbara Masekela to our board as a
non-executive director and congratulating her on
recently being conferred with the Order of Luthuli
in Silver by President Thabo Mbeki.
Prospects
The growth opportunities ahead for Altron remain
virtually endless and we are both excited and
enthusiastic about what the future holds for our
group. While we are fully aware that the
uncertainties in the socio-political and economic
environment at present make it diffi cult to predict
how our businesses will be impacted in the year
ahead, we are certainly looking forward to
another year of achievement and growth.
Dr Bill Venter
Chairman
May 2008
AltronAnnual Report 200818
Chief executive’s review
Robert Venter
Chief Executive
We, nevertheless, enter the 2008/2009 fi nancial
year with strong order books, particularly at
Altech and Powertech, and are poised to further
capitalise on the performance of our offshore
operations in the emerging markets of Africa,
Asia and India.
KEY MARKET CONDITIONS
During the period under review, market
sentiment has been negatively impacted by the
power outages resulting from the current energy
crisis, changes in the leadership of the ruling
ANC party and an increase in interest rates and
infl ation. These local market conditions have
been compounded by global market turmoil and
the possibility of a US recession.
The Polokwane ANC conference has sent out
a ripple of uncertainty regarding the country’s
political stability and future and, as with any
change in leadership, there is concern over how
these factors will impact the policies that have
a material impact on South African business.
However, initial observations positively indicate
a continuance of the economic policies that
have allowed our country to grow over the past
years as well as, encouragingly, an open and
transparent channel of communication between
government and the business community. The
increase in the prime rate over the last two years
of 400 basis points from 11% to 15% has been
felt most by the fi nancial, retail and residential
property sectors. And while infl ation linked to a
weaker rand and rising fuel costs continues to
be cause for concern, the commodities market
has been buoyant over the past year, and this
has served to soften the impact to a large
degree.
In spite of these challenges, Altron looks forward
to continued growth from the high base that has
been established. As a fi rmly established player
in the power space through our subsidiary
Powertech, the company is set to benefi t in the
medium term from increased demand for its
products following the disruption of power
supply, and in the longer term from the fact that
The 2007/2008 fi nancial year has been
characterised by fundamental changes to the
underlying market conditions affecting our
economy and the international environment.
Nonetheless, I am pleased to report that
steadfast commitment to our mission and
strategy has again delivered outstanding results
for the Altron group and its stakeholders.
Last year, I highlighted sustainable growth as
the hallmark of Altron’s strategic vision and the
tangible indicator of the success of our
long-term strategy. It is in these uncertain times
that this focus on identifi ed fundamentals bears
fruit – offering us the foundation that will see us
continuing to prosper during the challenging
period we have entered in 2008.
I am proud to report that 2007/2008 revenue
and after-tax profi t exceeded, for the fi rst time,
R20 billion and R1 billion, respectively. More
specifi cally, revenue increased by 25% to
R21.4 billion with headline earnings per share
increasing by 33% to 375 cents per share.
This is an excellent set of results, especially
considering the high base set by our 51%
headline earnings per share growth last year
and confi rms the strategic initiatives put in place
over the last few years and the sustainability of
our business model. During the course of the
year we have continued to invest signifi cantly
both internally and through acquisitions and this
combined with strong operational disciplines has
laid the foundation for our future performance.
Altron’s overriding goal is to deliver increased
value for shareholders over the long term. Going
forward we are determined to uphold this
reputation of value creation, illustrated over the
last 10 years by compound annual growth rates
in revenue of 15%, headline earnings per share
of 17%, net asset value per share of 13% and
dividends of 19%.
As anticipated in last year’s report,
macroeconomic conditions have changed. We
are likely to experience increased pressure on
margins from higher input costs and increased
competition in the tightening world economy.
AltronAnnual Report 2008 19
CHAIRMAN’SSTATEMENT
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Eskom and the municipalities will be planning
to spend signifi cant amounts on power
infrastructure way beyond 2010. Infrastructure
spend, which has become a national imperative
in the lead up to the 2010 Soccer World Cup, is
set to increase and the company can expect to
derive benefi ts from this as well.
The telecommunications market is providing
opportunities and Altech is well positioned in this
regard. Our signifi cant expansion into the African
market provides exciting growth prospects. While
the information technology market remains
competitive locally, there are some exciting
consolidation opportunities that Bytes is
exploring. Internationally, our strategy of
achieving critical mass is bearing fruit which
is expected to continue.
FINANCIAL OVERVIEW
The Altron group’s results for the year ended
29 February 2008 have shown strong growth with
a 33% increase in headline earnings per share
off the high base established in the prior year.
Revenue increased by 25% from R17.1 billion in
the prior year to R21.4 billion, with operating
profi t increasing by 27% from R1.5 billion to
R1.9 billion, refl ecting an increase in the
operating margin to 9%. During the period under
review, the group invested R479 million in
replacement as well as capacity expansion,
mainly focused on the more capital intensive
power electronics sector.
Despite higher trading volumes and increased
raw material prices, the group’s investment in
working capital was well managed during the
year, particularly in respect of the investment in
inventory. Cash fl ow generated from operating
entities increased from R399 million in 2007 to
R1 799 million in 2008, representing a 4.5 fold
increase and this resulted in cash on hand of
R2.1 billion (2007: R1.6 billion) at the year end.
Altron’s return on equity has improved to 24.7%
with our return on net assets and return on
capital employed being maintained at 30.3% and
“I am proud to report that 2007/2008 revenue and after-tax profi t exceeded, for the fi rst time, R20 billion and R1 billion, respectively.”
AltronAnnual Report 200820
Altron’s view of sustainable growth
Sustainable growth differs from
market-related growth because it is
driven by a long-term commitment to:
our identifi ed mission and strategy;
continually improve effi ciencies;
grow organically through intelligent
technology partnerships;
invest in our people and our
businesses;
grow by seeking appropriate
acquisitions in our chosen sectors;
and
sustainable growth is underpinned
by values and people and refl ected
in the care we take with our
customers and our commitments – in
equal measure.
Chief executive’s review continued
Altech’s balance sheet remains strong with a net
asset value of 2 026 cents per share and cash
of R1.6 billion. Return on shareholders’ equity for
the year was 25.4% and the dividend declared
by Altech increased by 20%.
Through Altech, Altron’s long-term plan is to
become one of the leading data network
operators and internet service providers in East
and Central Africa. To this end, Altech crowned
the year with the acquisition of a controlling
interest in three companies within Kenya’s Sameer
ICT Group for a maximum purchase consideration
of US$75 million, funded entirely from the cash the
group had accumulated from operations.
Convergence of IT solutions which allows data,
video and voice to be run through internet
protocol networks, as well as the growth in the
African data and internet markets, is expected to
reap signifi cant rewards for Altech in the future.
Altech Netstar Fleet Management Services
introduced new technologies and services to
commercial fl eets and vehicle subscribers. The
acquisition of ComTech, a leading operator
servicing the commercial transport sector,
will strengthen the Altech Netstar Fleet
Management Services’ business through its
complementary product range and customer
base. As a result, Altech Netstar Fleet
Management Services has effectively doubled
in size, with a combined fl eet management
market share in excess of 20%.
In Altech’s multi-media sector the allocation of
licences in satellite television broadcast has
opened up the market, and the substantial
investment in the broadcasting sector is
expected to stimulate growth of the pay
television market and provide consumers with
more choice and diversity of content. Globally,
Altech UEC broadened its customer base
adding Brazil, Mexico, Dubai and Spain to its
high-end market focus during the year.
29.7%, respectively. Altron increased its
dividend by 32%, providing shareholders with
an effective doubling of the dividend over the
last two years.
SUBSIDIARY REVIEW
ALTECH
Altech delivered excellent results with headline
earnings per share growing 23% to 511 cents,
revenue increasing by 22% to R8.2 billion from
R6.8 billion in the prior year and operating profi t
increasing by 17% to R664 million.
Altech Autopage Cellular performed well ahead
of expectations, exceeding both profi tability and
cash fl ow targets. The company increased its
subscriber base by over 115 000 – representing
a 14% growth in new connections during the
year. Altech Netstar also maintained its leading
market share position in the stolen vehicle
recovery market, producing excellent trading
results despite a slowdown in new car sales,
increased interest rates and the introduction of
the National Credit Act.
Altech UEC increased revenue by more than 40%
as a result of its expanding international business
although its operating margin reduced as the
product mix has moved more towards lower-end
product following the success of the PVR in the
prior year as well as the effect of outsourcing of
production to meet demand requirements.
Altech NamITech continues to experience diffi cult
trading conditions with an operating loss being
incurred by its South African operations, though
this was much reduced from last year. As a result,
the goodwill relating to the South African
operations has been fully impaired in this fi nancial
year. The Altech NamITech West Africa operations
continue to perform strongly with the combined
NamITech operations recording a profi t.
AltronAnnual Report 2008 21
CHAIRMAN’SSTATEMENT
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BYTES
Bytes achieved revenue growth of 27% to
R5.2 billion with particularly strong revenue
growth of 89% coming from the international
operations as a result of organic growth and
acquisitions concluded in the past fi nancial year.
A substantial contribution came from a large
contract with the UK’s National Health Service
(NHS). South African revenue growth was more
modest at around 7% in challenging trading
conditions.
Operating profi t improved by 12% from
R325 million to R365 million and headline earnings
improved to R248 million, an increase of
23% compared to the prior year. Normalised
operating margin declined from 8.0% to 7.2% mainly
due to the increasing contribution of the lower-
margin UK businesses to overall revenue. Excluding
the NHS contract, the normalised operating margin
at Bytes would have been 7.8%. Operating margins
within the South African businesses were, on the
whole, maintained while the UK business saw a
marginal increase in their margins as the higher
margin Xerox businesses started to increase their
contribution.
Margin pressures are pervasive in the information
technology sector due to commoditisation of
production by Far East manufacturers, resulting
in increased competition. Two of Bytes’ South
African businesses experienced the adverse
effects of exchange rate movements, delayed
orders and certain temporary supply issues.
However, the Bytes group’s international
businesses showed excellent growth with
increased operating profi ts and a substantially
increased order book. Bytes also acquired a
number of smaller niche bolt-on businesses in
South Africa and the UK and continues to
pursue opportunities to extend its IT portfolio
of service offerings.
The revenue bridge indicates how Altron’s revenue growth for the year was based on a strong performance by all three operations – Altech, Bytes and Powertech.
Altron’s growth in operating profi t was largely driven by the improved profi tability and growth of the Powertech businesses.
Altron’s growth in headline earnings refl ects Powertech’s strong operating result, a good performance by Altech as well as an additional contribution from Bytes following the acquisition of their minorities.
Feb2008
PowertechBytesAltechFeb2007
17 1
57
1 46
2
1 09
8
1 72
7
21 4
44
Revenue bridge* (Rm)
*Excludes corporate and financial services.
Feb2008
PowertechBytesAltechFeb2007
1 53
6
91
40
276
Operating profit bridge* (Rm)
*Excludes corporate and financial services.
1 94
3
Feb2008
PowertechBytesAltechFeb2007
Headline earnings bridge* (Rm)
767
52
54
162
1 03
5
*Excludes corporate and financial services.
AltronAnnual Report 200822
Chief executive’s review continued
base and expands Powertech’s base of key
principals, alliance partners and customers
through IST’s long-standing association with
major South African and international
corporations.
While the power supply interruptions have had
some negative impact on productivity, it has
increased the demand for standby power
solutions, and the IST business plays a key role
in this area through co-generation projects,
demand side management (DSM) and high-end
standby power solutions. Similarly, Powertech
Batteries and the newly established Powertech
Energy Solutions unit have experienced
dramatic growth in demand for standby battery,
solar energy and other power solutions.
The cable business in South Africa compares
favourably with the rest of the world in terms of
delivery and capacity. Aberdare Cables’ mixed
offering of low, medium and high voltage cables
has resulted in a broad customer base each
with different dynamics. Low-voltage cables are,
for instance, supplied through wholesalers with
which the group has long-established
relationships or directly to customers such as
municipalities and Eskom, while medium-voltage
cables are supplied to building contractors in a
market characterised by cyclical demands and
shorter lead times. To meet these demands,
Powertech has expanded its capacity and will
continue to do so by approximately 25% to 30%
over the next three years.
GROWTH DRIVERS
Our most signifi cant growth drivers remain the
increase in national infrastructural spend, the
convergence of technology, the integration of
acquisitions and the launching of new ventures,
as well as the expansion of our global footprint.
Increase in infrastructural spend
The southern African and global markets require
substantial spend to build new capacity and to
maintain existing networks. Powertech has
invested prudently to increase capacity and also
POWERTECH
Powertech again produced an excellent
performance with a 27% increase in revenue to
R8.0 billion on the back of a signifi cant increase
in power infrastructure spend, the continuing
strength of commercial property development
and strong demand from the mining industry.
Operating profi t increased by 43% from
R638 million in the prior year to R914 million,
while the operating margin improved from 10.1%
to 11.4%. This improvement in operating margin
is largely due to stronger trading conditions
driving volume effi ciencies which resulted in
good capacity utilisation and effective cost
management. Powertech’s headline earnings
improved by 39% to R577 million compared to
R415 million in the prior year.
Aberdare Cables’ local operation continues to
perform well, growing revenue by 32% and
improving its operating margin. This growth was
assisted by the inclusion of an additional
11 months of trading from our telecoms joint
venture which contributed R451 million for the
year under review. Aberdare Cables’
international operations exceeded R1 billion in
revenue for the fi rst time and produced
improved operating margins. Powertech
Transformers also benefi ted from the
infrastructure spend, growing revenue in excess
of 22%. Revenue in Powertech Batteries grew
signifi cantly and its operating margin also
improved based on higher volumes. Powertech
Industrial experienced a diffi cult year with import
competition negatively impacting operating
margins, but the rationalisation plans that were
implemented have returned margins to normal
levels.
In line with its strategy to create a signifi cant
service business to complement its existing
marketing and manufacturing businesses,
Powertech acquired the IST Group (Pty) Limited
in a R504 million deal to offer a complete
solution to its customers in chosen markets.
The acquisition also enhances Powertech’s skills
AltronAnnual Report 2008 23
CHAIRMAN’SSTATEMENT
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
to improve effi ciencies to best capitalise on this
imperative infrastructure requirement. This
investment is not limited to the power network,
but includes the telecommunications arena as
new fi xed-line network operators build their initial
networks and traditional wireless operators self-
provide their own fi xed-line fi bre systems.
Technology convergence
The concept of technology convergence
culminates in the offering to customers of voice,
data and wireless media services over multiple
distribution channels and devices. In the same
way that the convenience and mobility of the
cellphone revolutionised telecommunications,
so we expect that technology convergence will
offer similar growth opportunities. Our strategy
has been to move up the value chain in order
to provide services at the operator or near
operator level.
By defi nition, technology convergence crosses
various operating boundaries, requiring the
liberalisation of markets for effective competition
and deployment of services. While this has been
slow to materialise in South Africa, we have kept to
our vision of pursuing opportunities that exploit the
convergence arena. Altech has formed a number
of alliances and made acquisitions in the more
liberalised markets of Central and East Africa,
resulting in the formation of the largest IP-based
data and telecommunications business in the
region. The bridgehead thus established paves
the way for exciting growth prospects in these
emerging markets.
The African pay television market is set to double
in the next fi ve years, while in South Africa, new
operators have been licensed for Pay TV. A
further development is that the Digital Migration
Project, which will convert South Africa’s existing
analogue system to a digital signal, is gaining
momentum and is expected to be completed by
2012, presenting opportunities for Altech UEC.
0
3 000
6 000
9 000
12 000
15 000
18 000
21 000
24 000
2008200720062005200420032002200120001999
Revenue (Rm)
10-year CAGR15.2%
0
250
500
750
1 000
1 250
1 500
2008200720062005200420032002200120001999
Net asset value per share (cents)
10-year CAGR13.0%
0
20
40
60
80
100
120
140
160
2008200720062005200420032002200120001999
Dividends per share (cents)
10-year CAGR19.0%
0
50
100
150
200
250
300
350
400
2008200720062005200420032002200120001999
Headline earnings per share (cents)
10-year CAGR17.0%
AltronAnnual Report 200824
Chief executive’s review continued
cost containment. (For details on these and
other sustainability issues, refer to the
sustainability report section on page 40).
Numerous intellectual capital projects across the
group are making headway in developing a
sustainable skills pipeline that will meet our skills
requirements both immediately and in the long
term. These include both external partnerships
with educational institutions, and internal
initiatives such as learnerships, training and
capacity building. The newly established Altech
Academy and other company training centres of
excellence will, for example, provide invaluable
training for our telecoms, IT, cable and
transformer businesses.
Altron remains as committed as ever to bringing
about meaningful transformation to the ICT
industry and the business. Our transformation
focus is ongoing and the group will be offi cially
relaunching its Transformation Vision 2010 in the
form of the updated Transformation Vision 2012
shortly. Vision 2012 will provide the framework
for the achievement of transformation targets up
to the year 2012.
FUTURE PROSPECTS
Looking to the future, the demand outlook for
infrastructure spend continues to be promising,
particularly in light of what is required to alleviate
the recent electricity supply problems. It is
anticipated that Altron will continue to
experience solid growth for the forthcoming year
as a result of these favourable market
conditions. However, this is balanced by gaining
a full appreciation of the signifi cant profi t base
established over recent years and the more
volatile macroeconomic and political
environment.
All these factors provide a solid foundation for
continued strong growth albeit at lower levels
than those achieved in the last two years.
Integration of acquisitions and launching of
new ventures
Altron invested substantially in acquisitions
during 2007/2008 and into 2008/2009 through
purchasing the Bytes minorities, Swanib Cables
in Namibia, Cables de Comunicaciones
Zaragoza, IST, ComTech, certain subsidiaries
within the Sameer ICT Group and ABB’s 50%
equity interest in Powertech Transformers. These
transactions provide substantial opportunities for
growth in our selected markets but require
diligence in integration to release maximum
benefi t. Various start-up ventures in the standby
power fi eld also provide opportunities in markets
not previously served. Within Bytes, two
South African acquisitions which will provide
over R400 million in annual revenue, are in the
fi nal stages of approval.
Global footprint
Our strategy of niche expansion in selected
geographic markets has proved to be
successful with 23% of our revenue now being
derived from international businesses and
exports. This is in line with our medium-term
target of 25%. In addition to our acquisitions in
the UK, Namibia and East Africa, new offi ces for
existing products have been opened in Nigeria,
Kenya, Tanzania, India, Hong Kong and Saudi
Arabia demonstrating the Altron group’s
commitment to globalisation.
SUSTAINABILITY
Sustainability remains a key business driver
throughout the group, and once again we
include, within this annual report, a
comprehensive sustainability report that deals
with the most material sustainability challenges
facing the Altron group. Among the most
signifi cant of these are the skills shortage in the
ICT and engineering sector, transformation and
AltronAnnual Report 2008 25
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
ACKNOWLEDGEMENTS
The board would like to express its appreciation
to all of its customers, staff, business partners,
shareholders and other stakeholders for their
contributions and continued support towards the
growth of our group as one of the leading ICT
and power electronics groups in Africa. I, in turn,
would like to thank my executive committee for
the excellent contribution and commitment made
by them in achieving our goals, the chairman for
his ongoing wise counsel and the Altron board
for its continuing support and contribution.
Robert Venter
Chief Executive
Corporate activity
The following signifi cant transactions
and developments have taken place
during 2007/2008:
The acquisition by Powertech of the
electrical engineering operations of
the IST group for R504 million,
effective 1 September 2007;
The acquisition by Altron of the
minority shareholders in Bytes
Technology Group Limited
for R1.4 billion. Bytes was
delisted from the JSE Limited
on 15 January 2008;
The acquisition by Altech of
ComTech for R53 million, effective
1 January 2008;
The purchase by Altron of an
additional 3.7% of Altech for
R187 million at an average price
of R52.14 per share, thereby
increasing its stake in Altech to 62%;
The acquisition by Powertech of local
management’s 25% equity interest in
Cables de Comunicaciones Zaragoza,
effective 1 August 2007 for €8 million;
The acquisition by Powertech of
Swanib Cables in Namibia for
R43 million, effective 1 March 2007.
Post year end:
The acquisition by Altech of 51%
of certain subsidiaries of the Sameer
ICT Group in Kenya for a maximum
consideration of US$75 million,
effective 1 March 2008;
The acquisition by Powertech of the
50% stake it did not own in ABB
Powertech Transformers
from ABB for R320 million,
effective 1 April 2008; and
The disposal by Powertech of
Yelland Control to Omron Europe for
R65 million, effective 1 April 2008.
AltronAnnual Report 200826
Operational review – Altech
branches in Durban, Cape Town, Port Elizabeth
and Bloemfontein) and premium service provider
Altech Supercall – have been supplemented by
third-party call centres and distributors for data
products.
Mobile Number Portability continues to generate
a steady migration of “port customers” for the
company. This removal of a long-standing
barrier to open competition for subscribers in
the cellular market has resulted in a net gain of
4 172 subscribers for Altech Autopage Cellular.
The trading environment for Altech Netstar has
been good despite the slowdown in new car
sales, following increased interest rates and the
application of the National Credit Act. The
company maintained its leading market share
position as being South Africa’s largest vehicle
tracking company in the Stolen Vehicle
Recovery market.
The Altech Netstar Fleet Management division
experienced a remarkable growth of 70% in the
commercial fl eets and vehicles subscriber
market due to the introduction of new
technology solutions, which when combined with
the newly acquired ComTech business, will see
Altech Netstar Fleet Management emerge as a
signifi cant player with in excess of 20% market
share at double its current size. It is further
expected that smart technology and high-end
products will augur well for the prospects of this
business going forward. Recognition for Altech’s
commitment to excellence that has kept the
company at the forefront of the market came at
year end when Altech Netstar was awarded the
highest accolade of the Technology Top 100
Awards, namely the 2007 Minister’s Award for
Overall Excellence.
Altech Stream successfully commissioned its
trial Wimax network in Gauteng during the year
under review and it is expected that the Wimax
802 standard will become the dominant wireless
IP delivery technology to exploit opportunities
presented by media convergence over
broadband delivery systems. While liberalisation
in the South African market is proceeding at a
Operating at the intersection of
telecommunications, multi-media and
technology, the Altech group has further
established itself as a service provider with
cutting-edge technology and a solid reputation
for reliable delivery and service during the year
under review. Chief executive offi cer of Altech,
Craig Venter, remarked that it is the group’s
objective to further achieve strategic positions in
its chosen markets globally, while focusing on
the development and ownership of intellectual
property rights and the provision of value-added
products, services and solutions.
Altech’s growth drivers during the period under
review included the leveraging of local market
positions, growing annuity revenue, building an
Internet Protocol (IP) delivery system and
products as a foundation for expansion into
Africa, and exploiting demand in India. Altech
expanded its businesses in closely related areas
such as digital TETRA wireless networks at
Altech Alcom Matomo, digital TV at Altech UEC,
its extensive wireless network technology for
vehicle tracking at Altech Netstar and voice and
data network service provision at Altech
Autopage Cellular.
Telecommunications
Altech Autopage Cellular, the largest
independent cellular services provider in South
Africa, increased its number of new connections
by over 14% in 2007, and continued its steady
growth – it is expected to exceed its interim
target of 1 million subscribers in the next
fi nancial year. The average revenue per user
(ARPU) has also improved compared with the
previous fi nancial year.
Sales of mobile data services through add-on
data bundles and cellular data connections
provided a growing stream of revenue for the
company. The broadband and data subscriber
base now stands at over 41 000 subscribers.
Altech Autopage Cellular’s existing channels to
market – which comprise 150 franchise stores,
the corporate sales force (supported by
Altron shareholding: 62%Revenue R8.2bn ü22%
Operating profi t R664m ü16%
Operating margin 8.4% û8.1%
HEPS 511c ü23%
Cash R1.6bn
ROE 22.3% û25.4%
Headline earningsFeb 2008
27%
Operating profitFeb 2008
34%
RevenueFeb 2008
38%
Altech’s contribution to Altron
Reana Wolmarans, Altech group company secretary.
AltronAnnual Report 2008 27
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Main pictureFrom left: Dr John Carstens, Altech chief fi nancial offi cer, Craig Venter, Altech chief executive offi cer and Peter Curle, Altech executive director: corporate fi nance.
slow pace, opportunities in the rest of Africa are
opening up and Altech has moved quickly to
capitalise on these, gaining bridgeheads in key
African markets. In June 2007, Altech Stream
Rwanda was awarded internet and gateway
licences, as well as a frequency spectrum in the
Wimax bands. Already, the company is installing
a network in Kigali, Rwanda, that will begin
distributing IP-based services over broadband in
the 2008 fi nancial year.
In line with Altech’s strategy to move up the
telecoms value chain and expand its geographic
presence in Africa, controlling interests were
acquired in certain subsidiaries of the Sameer
ICT Group in Kenya (Sameer) for a consideration
of US$75 million. This acquisition, which positions
Altech as the largest data operator in Central and
East Africa, sees Altech acquiring a 51%
controlling interest in Kenya Data Networks
Limited, Swift Global (Kenya) Limited and
Infocom Limited. The business comes with
cutting-edge IP data network infrastructure in the
region, as well as operating licences for Kenya,
Tanzania and Uganda.
Altech Alcom Matomo enhanced its
performance with the completion of the
R540 million contract for the SAPS Gauteng
TETRA Radio System. During the year under
review the company also exported radio systems
into Africa, implemented signifi cant telemetry
system sales and supplied specialised
telecommunications equipment to South African
network operators. With its signifi cant engineering
and project management experience, this
company is well placed to exploit further
opportunities for the provision of similar systems
throughout southern Africa and for the 2010
Soccer World Cup infrastructure projects.
“Focus remains on the development of human capital.”
Wessie van der Westhuizen, Altech chief strategic offi cer.
AltronAnnual Report 200828
Johan Klein, Altech group executive: human resources and industrial relations and Natascha Jansen van Vuuren, human resources assistant.
Operational review – Altech continued
with sales of these vouchers in Nigeria growing
from less than 10 million per month in 2006 to
over 100 million per month by the end of 2007.
Product enhancements, including cellular SIM
cards and banking cards, are expected to add
further value to the company’s offerings in the
fi nancial and the telecommunication sectors.
The South African operation has concluded its
rationalisation programme, which consolidated
all manufacturing activities into one facility. This
has resulted in signifi cant cost reductions,
operational effi ciencies and improved economies
of scale.
Altech ISIS, a supplier of turnkey business
support systems in South Africa and Africa, has
fully integrated MobiMaster (renamed Altech
ISIS France), which was acquired in 2006, into
the group’s systems during the fi nancial year
and product integration is progressing as
planned. Existing customers have been retained
and new orders have been received. In addition,
the team in France is investigating a number of
opportunities in the Middle East.
At Altech Card Solutions, substantial growth
was experienced in card personalisation
solutions and in its switching division. During the
year under review it was awarded the Thales
eSecurity distributorship for the supply of
cryptographic solutions to the banking and
government sectors and signifi cant orders were
received for EFTPOS terminals from the fi nancial
sector.
Altech Alcom Radio Distributors, a leading
distributor of Motorola two-way radio products in
southern Africa via a network of authorised
dealers, recorded satisfactory results and
achieved signifi cant sales of the Motorola
Canopy broadband range of products which
provide robust network IP-based digital radio
links for digital networks.
Multi-media and Electronics
In foreign markets, and India in particular,
Altech UEC, manufacturer and service provider
of set-top-box decoders and associated
software, recorded good results for the year,
proving that sustained investment in the
development of advanced set-top-box products
and associated software is bearing fruit, even
as consumer spending comes under pressure.
Altech UEC is well positioned in India to
capitalise on a market that is expected to
surpass the entire African market within one
year. Altech UEC has concluded contractual
agreements with two of the major broadcasting
networks in India. These are being serviced from
subcontracted manufacturing facilities in South
East Asia. It is expected that the Digital
Migration Project, which will convert South
Africa’s existing analogue system to digital, will
offer further opportunities for Altech UEC as it is
scheduled for completion by 2012.
Arrow Altech Distribution has enjoyed solid
growth during the year under review with several
new product suppliers being added, allowing
the offering of new products into new markets.
Information Technology
In Nigeria, the growth of Altech NamITech West
Africa, provider of GSM and CDMA cellular SIM
cards, prepaid vouchers, and non-secure and
secure cards for retail and banking, including
EMV smart cards and magstripe cards, has
proceeded at an astounding pace over the prior
year. From starting out as a new entrant only
three years ago, the company has become
Africa’s leading provider of prepaid vouchers
Anton de Wet, Altech group fi nancial manager and Tebalo Langa, Altech group assistant company secretary.
Johan Gellatly, Altech group executive: information technology.
AltronAnnual Report 2008 29
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“It is Altech’s objective to further achieve strategic positions in its chosen markets globally.”
Andy Baker, Altech chief operating offi cer.
Graham Passmoor, Altech group executive: wireless communications.
Steve Sidley, Altech chief technology offi cer.
AltronAnnual Report 200830
space but also in other areas complementary to
the group’s activities.
Bytes Document Solutions
Notwithstanding tough business conditions,
Bytes Document Solutions (BDS) once again
performed strongly. Both its Xerox businesses
and its “non-Xerox” businesses have been
restructured during the year under review and
delivered better than expected results. Xerox
Global Services, the direct equipment sales
division, fuelled by large account roll-outs
together with its long-standing customers such
as Absa, Nedcor, Unisa and SITA, contributed
to substantial growth in revenue. It is also
noteworthy that BDS has secured three new
signifi cant customers, namely Mondi, SAA and
SARS during the year and it is expected that this
division will deliver signifi cant contributions on
the back of its increased customer base.
The Production Systems division contributed
signifi cantly, with a profi t improvement of
44% based on good results from the Igen3
printing, continuous feed and light production
black/white and colour divisions, while its direct
and indirect sales, dealers and concessionaires
also generated increased revenue. The volumes
within the Offi ce Supplies division improved and
its new management team delivered record
revenue growth. In order to improve the cost
base of Laser Facilities and to diversify its
product offering, the business of Mailing
Facilities (a long-standing on-site supplier) as
well as Papergeni, predominantly an envelope
manufacturer, were acquired. This forms part of
BDS’s objective to grow its “non-Xerox” centric
business, a strategy which is expected to assist
overall growth in the future.
Bytes Managed Services
As a focused workspace management and
IT equipment maintenance business, Bytes
Managed Services (BMS) leverages off its
90 service points and 1 100 service focused
staff throughout southern Africa, supporting over
600 000 OEM devices under warranty and over
350 000 devices on maintenance contracts.
Despite margin pressures and the challenge to
deliver measurable value to customers and
stakeholders, BMS recorded an exceptional
The information technology sector has
experienced stronger local spend due to current
levels of company profi tability, and a need to
address its approach in terms of its technology
service offering. This has resulted to some
degree in improved demand for Bytes products
and services, though it continues to be a highly
competitive marketplace, especially in South
Africa. David Redshaw, chief executive offi cer
of Bytes Technology Group, remarked that while
the group’s South African IT businesses
experienced margin pressure during the period
under review, due in part to adverse exchange
rate movements and strong competition, its
international businesses showed excellent
growth.
Bytes UK
Bytes UK recorded an outstanding performance
in terms of revenue with its operating profi t
increasing by 63% for the year.
The Software Services business, which provides
large volume software licensing contracts from
vendors such as, among others, Microsoft, Citrix,
Adobe, IBM and Symantec, signed over 500
new customer contracts during the year, the
most notable of which was the £41 million
contract to supply Microsoft software to the
National Health Service (NHS). The NHS
contract runs over three years which secures
similar annual revenue over the medium term.
Other notable contracts for the year included
Tesco, Network Rail, Logica CMG and a renewal
of the BBC contract. Bytes is now regarded as
the leading Microsoft LAR (Large Account
Reseller) in the UK, a position which further
entrenches it as a key Microsoft partner.
The UK’s Xerox business performed
satisfactorily for its fi rst full year of trading
following the two acquisitions made in the prior
year. Notwithstanding this, plans are in place to
further improve the operating margin at these
businesses in the year ahead. This has
confi rmed that the group’s strategy of
expanding its presence in the UK and moreover
diversifying its operations within its sphere of
competence is starting to bear fruit. Prospects
for future growth at Bytes UK are based on both
organic growth and further acquisitions. These
are expected to occur not only in the Xerox
Operational review – Bytes Technology Group
Headline earningsFeb 2008
16%
Operating profitFeb 2008
19%
RevenueFeb 2008
Bytes contribution to Altron
24%
Altron shareholding: 100%Revenue R5.2bn ü27%
Operating profi t R365m ü12%
Operating margin 8.0% û7.0%
HEPS R248m ü23%
Cash R176m
ROE 30.4% û30.7%
Neil Murphy, managing director: Bytes UK.
AltronAnnual Report 2008 31
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FINANCIAL STATEMENTS
Main picture
David Redshaw, Bytes chief executive offi cer and Peter Riskowitz, Bytes chief fi nancial offi cer.
performance. It is BMS’s strategy to increase its
market share within its current support offering
while at the same time expanding its business to
include new and complementary services to both
existing and new customers. The business is well
positioned to take full advantage of the IT
support environment and is expected to grow its
market share by pursuing new industries and
expanding its service offering.
Bytes Healthcare Solutions
The year under review has seen Bytes
Healthcare Solutions (BHS) (formerly DHS)
grow revenue by 11% over the prior year, despite
a market in which medical scheme membership
experienced limited growth. The acquisition of
Mastermed, which included some 1 000 medical
practice customers, has added to revenue and
profi t for the year, and its integration into the
Med-e-Mass business was successfully
completed. Medical claim volumes processed by
Digital Healthcare Switch grew by about 8% over
the previous period and averaged 5.8 million
transactions per month.
The company’s new switching platform, which
includes a redesign of its core claims processing
system, was commissioned and will allow the
company to launch new services to its customer
base and to medical schemes. The system’s
improved scaleability and its change
management features are expected to
signifi cantly improve fl exibility in respect of
responding to the often rapidly changing
requirements of the healthcare industry. The
company’s objectives for the following year are
centred around the pursuit of off-shore business
opportunities, among others in the Middle East,
the launch of new switching products and an
expansion into fi nancial transaction processing.
Bytes Systems Integration
In its third year as a cohesive division, Bytes
Systems Integration (BSI) delivered satisfactory
growth and continued to grow its market share.
During the year under review, BSI, in association
with MTN Networks, expanded BytesNet, a 2nd tier
“Bytes international businesses showed excellent growth.”
Douglas Ramaphosa, managing director: Bytes Specialised Solutions.
AltronAnnual Report 200832
Operational review – Bytes Technology Group continued
Bytes Outsource Services
Bytes Outsource Services (BOS) recorded a
solid performance and has successfully
extended all its support agreements due for
renewal during the year. New business growth
from its existing client base bears testimony to
professional service standards and sound
relationships with clients. In keeping with its
strategy, the Shared Services business unit has
seen satisfying growth with the addition of a
number of corporate clients as well as the
Department of Public Enterprises as its fi rst
major client in the public sector. Partnerships
with Telkom, Getronics and the Altron group
companies, as well as general market
conditions, continue to present exciting
opportunities for further sustainable growth.
Bytes Communication Systems
Bytes Communication Systems (BCS), a
supplier of state-of-the-art communication
solutions and value-added services in the ICT
sector, recorded a healthy operating profi t
improvement for the year under review.
Benefi ting from its renewed business strategy
to deliver various value-added services, BCS
secured a number of new clients in the mining,
local government, hotel, retail and education
sectors.
BCS was also awarded a contract by
Anglo Platinum which is geared to yield further
business with the extension of additional
value-added services such as multi-media in
the contact centre environment. In addition, its
contract with Alcatel-Lucent as a premium
business partner in South Africa was renewed.
The business is also continuing to expand into
the rest of Africa, delivering robust Alcatel-
Lucent solutions throughout the continent. The
year ahead will see the company broaden its
range by adding further multi-media, voice and
speech recognition solutions to its current
basket of offerings.
Bytes People Solutions
Bytes People Solutions (BPS) is the group’s
internationally accredited education, training,
skills development and people consulting arm.
As an industry leader, BPS has built a credible
track record over more than a decade by
Telco services provider of video, voice, data,
security and hosting facilities, with many new
corporate client subscribers. The Microsoft
Dynamics (formerly Axapta) ERP practice
established in the prior year, has also won
signifi cant new accounts and is progressively
becoming recognised as a market leader. The
Microsoft Licensing business continued to expand
and deliver solid profi ts. As a market leader in
South Africa for Business Objects (BO), BSI, also a
major SAP partner and a supplier of business
intelligence, stands to benefi t substantially from
SAP AG’s acquisition of BO.
BSI experienced various challenges as a result of
the increasing shortage of key skills in the
workplace, particularly at the high-end of the
software consulting market. This trend is expected
to continue over the coming months. Focus will
remain on curbing the knock-on costs of
recruitment and the replacement of staff at
increasing salaries, often against fi xed-priced
customer contracts.
Bytes Specialised Solutions
Bytes Specialised Solutions (BSS) is the
exclusive distributor for NCR and Teradata
solutions in South Africa and selected
neighbouring countries. The company markets,
services and supports various points of service
and enterprise-wide information solutions. The
diffi cult conditions experienced by BSS during the
year under review were largely due to external
factors which included large contracts being
postponed or cancelled as well as operational
constraints experienced by certain of its key
customers.
Despite this diffi cult operating environment, the
company successfully implemented the Teradata
Customer Relationship Management Solution at
Standard Bank, thereby making it the fi rst bank in
Africa to have implemented a sophisticated
event-based marketing solution. BSS, in
partnership with Nedbank, also successfully rolled
out the Nedbank Self Service application
software project.
Future prospects look promising with NCR’s newly
released ATM self-service platform strengthening
the value proposition in BSS’s Retail ATM division.
New intelligent deposit, electronic shelf labelling
and self-checkout solutions will be aggressively
marketed during the period ahead.
Hennie du Plessis, managing director: Bytes Healthcare Solutions.
Deidre Le Hanie, managing director: Bytes Managed Services.
Andrew Holden, managing director: Bytes Outsource Services.
AltronAnnual Report 2008 33
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FINANCIAL STATEMENTS
providing innovative human capital resource
solutions and services to a large number of
blue-chip companies throughout southern Africa.
Continued focus on sustainable growth and
profi tability yielded a satisfactory performance
during the year, with solid margins and growth in
both revenue and profi t. Furthermore, the annuity
revenue portion of its business grew to more than
75% of total revenue.
“Improved demand experienced for Bytes products and services.”
George Isaacson, managing director: Bytes Communication Systems.
Rob Abraham, managing director: Bytes Document Solutions.
Rob Griggs, managing director: Bytes Systems Integration.
Dr Madelise Grobler, managing director: Bytes People Solutions.
AltronAnnual Report 200834
Operational review – Powertech
Powertech IST Telecom is active in access
network turnkey solutions and the power
back-up systems market, and is also starting
to show success in growing its value-added
telecommunications services. Ongoing focus on
servicing the network roll-outs by the telecoms
industry in South Africa and sub-Saharan Africa
offers new opportunities. Powertech IST
Industrial successfully realigned its business
into the air and water pollution control
environment over the past number of years.
These include large projects with companies
such as Highveld Steel and Lafarge and,
together with the environmental protection trends
and requirements, is expected to position itself
in terms of offering new solutions in power
generation and large industries. The business
also won its fi rst large contract in Africa for
refurbishment of electrostatic precipitator
installations in Mali. TIS experienced a much-
improved performance for the period under
review showing growth on both its top and
bottom line. The acute skills shortages, position
this division well to offer its engineering and
installation services into the electrical and the
telecommunications networks for the years
ahead.
Powertech Cables
Aberdare Cables once again delivered
exceptional results for the year with the
strongest contribution from its local power
cables operation. The offshore cable operations
in the Iberian Peninsula, Alcobre and Cables de
Comunicaciones Zaragoza, delivered
particularly satisfactory results, while newly
acquired Swanib Cables, the largest cables
and electrical distributor in Namibia, made a
very positive contribution in its debut year to
Aberdare Cables’ earnings. The joint-venture
operation between Aberdare Cables and
CBi-electric, CBi-electric Aberdare ATC
Telecoms Cables’ delivered a profi table
performance in its fi rst full year contributing to
Powertech Cables’ results. Aberdare Intelec in
Mozambique also delivered a good performance
for the year.
Powertech has shown signifi cant growth over the
past two years and is now operating off a
signifi cantly higher base than it was three years
ago. This growth has been predominantly due to
the increased infrastructure spend, the
continuing strength of commercial property
development and strong demand from the
mining industry. Norbert Claussen, chief
executive offi cer of Powertech, said that it was
the group’s strategy to create a signifi cant
service business to complement its existing
marketing and manufacturing businesses, and
consequently the group has acquired the
electrical and mechanical engineering
businesses of the IST Group (Pty) Limited for
R504 million, effective 1 September 2007.
Powertech System Integrators
Powertech purchased the IST Group (Pty)
Limited (excluding its defence and nuclear
divisions) during the year under review. The fi ve
IST divisions acquired were Energy, Otokon,
Data, Telecom and Industrial, and in
the six-month period for which it was included
in the Powertech numbers, the operation
met expectations.
Powertech IST Energy experienced a strong
year particularly as a result of the current
energy crisis, as well as the expansion of the
business from tele-control and protection
systems to turnkey substations and turbine
control systems. Powertech IST Otokon
opportunities in energy metering and demand-
side management were predominantly based on
Eskom’s usage reduction programmes where its
main customers include the large energy users
in the mining and industrial sectors. It is
expected that Powertech IST Otokon’s role in the
co-generation projects at large power users will
begin translating into opportunities in the year
ahead. Powertech IST Data is active in
providing operational software solutions to
utilities and industry, including asset
management, geographic information and
workforce management software systems. The
growth in the infrastructure asset base is
expected to offer new prospects to the division.
Seara Macheli-Mkhabela, Powertech group executive: corporate affairs.
Altron shareholding: 100%Revenue R8.0bn ü27%
Operating profi t R914m ü43%
Operating margin 10.1% û11.4%
HEPS R577m ü39%
Cash R336m
ROE 21.3% û25.4%
Headline earningsFeb 2008
54%
Operating profitFeb 2008
47%
RevenueFeb 2008
Powertech contribution to Altron
38%
AltronAnnual Report 2008 35
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Main picture
From left: Harry Coetzee, Aberdare Cables’ chief executive offi cer, Hannes Visagie, chief executive offi cer: Powertech System Integrators and Norbert Claussen, Powertech chief executive offi cer.
The demand for electrical cable remained strong
throughout the year and Aberdare Cables’ local
manufacturing and distribution facilities were able
to effectively capitalise on major projects and
gained an increased level of market share in the
building and construction market due to its
service capabilities and capacity. It is expected
that these market conditions will remain favourable
in the commercial and industrial building sector,
although the National Credit Act and recent hikes
in interest rates are expected to place a
dampener on the residential housing market.
Material and metal prices, particularly copper,
continued to rise during the year impacting on
the value of inventories and associated
stockholding costs, although a strong focus on
inventory management offset the impact by year
end. The operations have continued to invest in
capacity in their manufacturing facilities and
these investments have, to date, matched the
rising demand. Further investments in capacity
will be made over the next number of years.
Powertech Transformers
Powertech Transformers’ good performance
refl ected a 23% increase in revenue with
particularly good performance from the
distribution transformer operation, Desta Power
Matla. Due to the growth in revenue, as well as
some operational challenges, working capital has
increased during the year. It is anticipated,
however, that by maintaining and improving
on-time delivery and increasing capacity through
enhanced productivity and the securing of raw
materials, working capital will be reduced going
forward.
Elizabeth Defi llo, Powertech group company secretary and Ronnie Krüger, Powertech group executive: supply chain management.
“Powertech has shown signifi cant growth over the past two years and is now operating off a signifi cantly higher base than three years ago.”
AltronAnnual Report 200836
Operational review – Powertech continued
by Eskom’s load-shedding activities in the fi rst
quarter of 2008 presented exciting opportunities
for Rentech. These opportunities, which include
the solar powering of traffi c lights, standby power
solutions and solar hot water systems, are
expected to lift demand for autonomous power
systems.
Powertech Industrial
Crabtree Electrical Accessories SA,
Powertech Industrial’s largest business,
managed to maintain its market share by
focusing on the reduction of manufacturing
costs resulting in low-cost strategic production
units. These actions resulted in once-off
restructuring expenses which suppressed its
profi ts during the year but are expected to yield
signifi cant savings going forward. The company
continued to develop new products and entered
the standby power market supplying domestic
diesel generator systems.
Powertech Calidus experienced extremely
diffi cult conditions and was under pressure
during the year under review, although the
corrective action taken in terms of certain
management changes resulted in a turnaround
in the second half of the year. Further
management intervention is, however, required
to allow the operation to achieve its full potential.
Yelland Control delivered a solid performance
and achieved growth of over 20% in all key
areas for the year under review. It was
subsequently sold to its principal Omron in a
transaction that became effective on 1 April 2008.
Strike Technologies enjoyed an exceptionally
good year, growing its revenue by 27%
compared to the prior year. The company
completed the launch of its new electricity meter
and continued the development of new
earth-leakage relays which will be launched in
the new fi nancial year. A new service division,
Powertech Energy Solutions, an initiative to
provide turnkey energy management services to
medium and large enterprises, was established
in partnership with a British fi rm, PS2.
The strong order books of both Powertech
Transformers and Desta Power Matla over the
past year indicate that the demand for power
infrastructure is expected to continue over the
medium term. The strong demand is, however,
attracting outside competition, resulting in
increased competition particularly in the
distribution transformer market. Input costs due
to substantial increases in raw material prices,
such as core steel, mild steel, copper and
transformer oil, continue to impact prices offered
to customers. These same factors, combined
with worldwide short supply and high demand,
create challenges in ensuring availability of
materials to manufacture transformers.
Powertech Batteries
Powertech Batteries recorded good growth
compared to the prior year within its Automotive
and Industrial businesses (incorporating the
Willard and Sabat brands), and succeeded in
gaining additional market share in the
replacement market. The good results achieved
in its UK operation further enhanced the
automotive division’s performance. The Industrial
business’s results were supported by strong
demand from the mining and the materials
handling sectors. This is expected to continue in
the new fi nancial year. Battery Technologies’
performance remained steady despite limited
business from Nigeria impacting its growth
performance. This was partially offset with
prospects from its East African operation, which
was established during the second half of the
year. This operation remains strong and it is
expected to deliver a positive contribution going
forward. In addition, as a result of the power
crisis in the fi rst quarter of 2008, some
prospects for its domestic UPS systems have
exceeded expectations and are also expected
to have a favourable effect on the business.
Rentech felt the effects of reduced demand in
the telecoms industry due to a change in
technology, initiated by the operation, from rigid
to fl exible solar panels, that curbs the theft rate
of the rigid panels. The power outages caused
Vusi Sidinile, managing director: Desta Power Matla.
Tshepo Molope, managing director: Battery Technologies.
Herb Chikwanda, chief executive offi cer, Powertech IST.
AltronAnnual Report 2008 37
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Tridonic.Atco SA experienced and operated in
an extremely competitive market for the year
under review, with limited opportunity for growth.
However, it had a stable year, marginally
improving its performance. Due to the size of its
contribution this had a minimal impact on the
Powertech results.
Leon Viljoen, chief executive offi cer: Powertech Transformers, Kevin Burger, chief executive offi cer: Powertech Batteries and Pierre Nothard, chief executive offi cer: Powertech Industrial.
Regula Niehus, Powertech communications manager, Peter Riley, Powertech group executive and Neil Kayton, Powertech chief fi nancial offi cer.
“It is Powertech’s strategy to build a signifi cant service business to complement its current offering.”
38AltronAnnual Report 2008
Terminology and abbreviations used in this report
AAD: Arrow Altech Distribution
ABET: Adult Basic Education and Training
ACS: Altech Card Solutions
Altech: Allied Technologies Limited
Altron: Allied Electronics Corporation Limited
AsgiSA: Accelerated Share Growth Initiative of South Africa
BBBEE: Broad-based black economic empowerment
BDS: Bytes Document Solutions
BSS: Bytes Specialised Solutions
Bytes: Bytes Technology Group Limited
Calidus: Powertech Calidus
CDP: Carbon Disclosure Project
CE: Chief Executive
CEO: Chief Executive Officer
CERs: Certified Emission Reductions
CGA: Corporate Governance Accreditation (Pty) Limited
CoGP: Codes of Good Practice
Crabtree: Crabtree Electrical Accessories SA
CSI: Corporate Social Investment
DPM: Desta Power Matla
dti: Department of Trade and Industry
EE: Employment Equity
GHGs: Greenhouse gases
GRI: Global Reporting Initiative
H&S: Health and Safety
HDIs: Historically disadvantaged individuals
HR: Human Resources
ICASA: Independent Communication Authority of South Africa
Jipsa: Joint Initiative on Priority Skills Acquisition
JSE SRI: JSE Limited Social Responsibility Investment index
KAP: Knowledge, Attitudes and Practices
King II: King Report on Corporate Governance for South Africa – 2002
LSE: London Stock Exchange
OHASA: Occupational Health and Safety Act
Powertech: Power Technologies (Pty) Limited
Powertech IST: Powertech Integrators of System Technology (Powertech)
Rentech: Renergy Technologies
RoHS: Restriction of Hazardous Substances
SABS: South African Bureau of Standards
SENS: Securities Exchange News Service
SMMEs: Small, Medium and Micro Enterprises
Strike: Strike Technologies
UNFCC: United Nations Framework Convention on Climate Change
Altron sustainability report 2007/8
Introduction 40Boundaries of reporting
Standards used
Material issues summary table
Update on 2007 targets
Management of sustainability 44Altron’s sustainability philosophy
Arriving at our most material issues
Economic impact by size and value contribution
The value added statement
Management of sustainability
ISSUE: Integration of corporate ethics
Compliance monitoring
Bribery and corruption
Risk and crisis management
Shareholders 48Relationship to the annual report
Engagement with shareholders
Independent report on analyst poll
Corporate Governance Accreditation
ISSUE: Altron’s treatment of minority investors
Independence of the chairman
ISSUE: Transformation at ownership level
Customers 52Introduction
ISSUE: Customer service
ISSUE: Meeting the evolving needs of customers
ISSUE: Liberalisation of the telecommunications market
ISSUE: Expansion of customer base
Partners 55Management of partner relationships
ISSUE: Securing continuity of supply
ISSUE: Foreign direct imports and dumping
ISSUE: Mergers and acquisitions
ISSUE: Transformation through preferential procurement
Employees 59Management of employee relationships
ISSUE: Skills attraction and retention
ISSUE: Employment equity
ISSUE: Transformation through skills development
Transformation – Vision 2012 64ISSUE: Socio-economic development
ISSUE: Enterprise development
Environment 70Material issues identified
Systems to manage our environmental impact
ISSUE: Climate change
ISSUE: Compliance with legislation
ISSUE: Pollution and emissions
ISSUE: Energy use and efficiency
ISSUE: Environmental impact of products and services
Health and Safety 80ISSUE: Internal health and safety
ISSUE: HIV/Aids
Appendices 84A: Index to issues identified by the JSE SRI
B: 2007 Environmental Survey for the JSE SRI Index
C: GRI content index to G3 indicators
One Group One Goal
Sustainability Report 2008
AltronAnnual Report 200840
This report does not cover all of the
Altron group’s operations. Instead it
concentrates on the major operations that
contribute the most substantial portion of
Altron’s business. They include Altech,
Altech Card Solutions (ACS), Altech UEC,
Arrow Altech Distribution (AAD), Altech
Netstar, Altech NamITech, Altech Isis,
Altech Autopage Cellular, Altech Alcom
Matomo, Bytes, Bytes Systems Integration
(BSI), Bytes Document Solutions (BDS),
Bytes Specialised Solutions (BSS),
Powertech Transformers, Desta Power
Matla (DPM), Aberdare Cables, Crabtree
Electrical Accessories SA (Crabtree),
Strike Technologies (Strike), Powertech
Batteries, Battery Technologies, Renergy
Technologies (Rentech) and Powertech
Calidus (Calidus).
Guidelines and standards consulted for
the compilation of this report included:
the King Report on Corporate
Governance for South Africa – 2002
(King II), forming the basis of Altron’s
self-evaluation independently certifi ed
by Corporate Governance
Accreditation (Pty) Limited (CGA);
the JSE SRI (JSE Limited Social
Responsibility Investment) Index;
the Global Reporting Initiative’s (GRI)
guidelines and indicators (G3 edition);
and
the dti CoGP.
Introduction
Allied Electronics Corporation Limited
(Altron or the company) is an investment
holding company. Its principal
subsidiaries are Allied Technologies
Limited (Altech), Bytes Technology Group
Limited (Bytes) and Power Technologies
(Pty) Limited (Powertech).
During the year under review, Altron
acquired the balance of shares that it
did not already own from the minority
shareholders of Bytes. Further information
regarding corporate activity is contained
in the CE review of the annual report
(see page 18).
Boundaries of reporting
Unless otherwise disclosed, this report
covers the South African operations of
Altron and its subsidiaries for the full
fi nancial reporting year from 1 March
2007 to 29 February 2008. The previous
Sustainability Report was published in the
2007 annual report. While issues such as
governance, code of conduct, ethics,
engagement with employees, suppliers,
customers, joint-venture partners,
regulatory bodies, etc. in other countries
are managed in the same way and
according to the same principles as at
Altron and its South African subsidiaries,
sustainability performance in foreign
countries is not covered in this report.
With respect to its suppliers and the dti
Codes of Good Practice (dti CoGP), the
Altron group monitors preferential
procurement and the stewardship of
waste and recycling with contracted
partners. But apart from these issues,
the report does not cover the social or
environmental performance of our supply
chain partners.
Altech Netstar: Technology Top
100 Award for Excellence in the
Management of Innovation
Prof Roy Marcus of the Da Vinci Institute; Mr Bernie Bowers, Chief Technology Offi cer of Altech Netstar and Minister of Science and Technology Mr Mosibudi Mangena.
AltronAnnual Report 2008 41
CHAIRMAN’SSTATEMENT
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Awards received in the reporting period
Altech Limited: Technology Top 100
Award for Excellence in the
Management of Technology,
Innovation and People (for Altech
Academy)
Altech Card Solutions: Datacard’s
President Club Award for Sales
Excellence
Altech UEC: 2007 Winner – Proudly
South African Innovator Award
Altech UEC, Altech NamITech and
Altech Netstar: 2007 Technology
Top 100 Award: Qualifi er
Bytes Systems Integration’s
Process Management and Control:
Southern Africa Top System
Integrator Award
Bytes (UK): Microsoft Worldwide
Software Asset Management
Partner of the Year award
Xerox’s Erasable Paper lauded by
TIME magazine: November 2007
Table of material issues
Material issue Stakeholders affected Page No.
Integration of corporate ethics Shareholders, employees, customers, suppliers, regulatory bodies 46
Altron’s treatment of minority investors Minority investors, regulatory bodies 50
Transformation at ownership level Shareholders and all stakeholders in the value added statement, including government 51
Customer service Customers, shareholders, employees 52
Meeting the evolving needs of customers
Customers, shareholders, employees53
Liberalisation of the telecommunications market
Shareholders and all stakeholders in the value added statement, including government 53
Expansion of customer base Shareholders, customers, employees 54
Securing continuity of supply Suppliers, customers, shareholders 55
Foreign direct imports and dumping Suppliers, customers, shareholders, government 56
Mergers and acquisitions Suppliers, customers, shareholders 56
Transformation through preferential procurement
Historically disadvantaged suppliers and all stakeholders in the value added statement, government 57
Skills attraction, development and retention
Employees, candidate employees, shareholders, government 59
Employment equity Historically disadvantaged employees and all stakeholders in the value added statement, government 61
Transformation through skills development
Employees, candidate employees, shareholders, government 63
Socio-economic development Communities that relate to Altron and society at large, government 66
Enterprise development Historically disadvantaged businesses and all stakeholders in the value added statement, government 68
Climate change All stakeholders to the business 71
Compliance with environmental legislation
All stakeholders to the business and government73
Pollution and emissions All stakeholders to the business 76
Energy use and effi ciency All stakeholders to the business 77
Environmental impact of products and services
All stakeholders to the business78
Internal health and safety Employees 80
HIV/Aids Employees and their families and communities related to Altron 82
Contact for questions regarding this report:
Corporate Communications Secretarial and administration
Salomé Brown Andrew Johnston
Group Executive: Corporate Communications Group Company Secretary
[email protected] [email protected]
011 645 3604 011 645 3609
AltronAnnual Report 200842
Section Assertion/Targets Update page
BBBEE Ongoing BBBEE ratings of subsidiaries and group companies
All group companies and subsidiaries have been set BBBEE targets in line with Vision 2012. Performance measured and evaluated against these targets monthly at Altech, Bytes and Powertech.
65
Increase in preferential procurement and enterprise development
This is a key priority of Vision 2012 which is being driven in all group companies. Group-wide results indicate an increase in both areas, with all eight Bytes companies outperforming the group average. At Altech seven companies outperformed the group average with three companies facing challenges to reach group targets.
57 – 58,
65,
68 – 69
Human Resources
Increase the number of black people in senior management positions
Bytes increased its black management numbers by 4.36% during the year from 26.26% in 2006 to 30.65% in 2007. At Altech two companies outperformed the group average with eight companies facing challenges to reach group targets.
61 – 62
Increased spend on development of priority skills as identified and required in the various businesses and a national level, as required by the codes
Altech has granted bursaries to black candidates in BSc Electronics and Computer Science, both of which are critical skills to the industry, the business and on a national level. The company implemented plans to increase its learnership programme for black people. The newly formed Altech Academy will be hugely instrumental in increasing internal employee development and training for critical skills with an overall increase of 15% on skills development spend. Bytes has an extensive disabled learnership training programme, the numbers for which increased further in 2007. Powertech has a number of Training programmes to upskill historically disadvantaged individuals (HDIs) in the critical skills of engineering, electrical design and winders.
59 – 60,
63
The formalisation and implementation of performance and career development review systems, where these are not as yet in place
Aberdare’s performance management system and succession planning system are in place and are conducted bi-annually. They form part of Aberdare’s overall human capital development strategy and also form an important component of Aberdare’s retention strategy. All results are reported on and analysed at the highest levels. The on-time and in-full completion of these two systems are part of every manager’s human capital measures. A talent management programme, including an accelerated leadership development programme has been established to ensure Altech grows the depth of its talent pool throughout the group and to build additional capacity for technical as well as leadership skills.
60, 67
Increasing the number of quantitative human resources performance indicators
HR performance indicators have been added to measure the following issues:
BBBEE
headcount according to the dti CoGP on BBBEE
on BBBEE
achieving EE Targets
Compliance in terms of statutory reporting (employment equity/skills development).
59
Corporate Social Investment
Altron aims to develop a more comprehensive database for capturing the CSI spend in all our various operations for reporting purposes going forward
The new Everest system has been implemented and Trialogue captured all the data into this system for the 2007 Social Report. Updating of the system will occur annually.
66 – 68
Update on 2007 sustainability targets
AltronAnnual Report 2008 43
Section Assertion/Targets Update page
Health and Safety: Certification
Plans are under way at Aberdare to obtain certification at the Standford Road, Pietermaritzburg and Gauteng operations
Aberdare is in the process of developing the management systems for ISO 18001 at Standford Road and Pietermaritzburg (target date for certification being June 2009), and ISO 14001 at the Gauteng operation (target date being March 2009).
74
At Powertech Batteries, implementation of ISO 18001 will commence in the 2nd half of 2007
This did not commence due to a five-month industrial action strike. To commence in 2008.
80
DPM’s Cape Town operation is scheduled for an ISO 18001 certification audit in May 2007
DPM’s Cape Town operation has obtained ISO 18001 certification. To receive SABS certificate on 22 May 2008.
74, 80
Health and Safety: HIV/Aids
Make investments where the greatest reduction in infection can be gained
Working in conjunction with Aurum Institute of Health Research, a not-for-profit public benefit organisation that conducts research and supports companies in assessing and mitigating the impact of HIV/Aids, Altron has developed a phased approach to managing this impact, that will consist of both a study of the actual prevalence and impact of HIV and Aids on its business, and assessing the effect of HIV on key suppliers and market groups. This project commenced in March 2007 and Altron has reported on the preliminary results of this assessment in this report.
82 – 83
Implement the most effective interventions As above. 82 – 83
Focus our available resources such as CSI on HIV/Aids, particularly where it affects our markets, future employees and potential suppliers
Various CSI projects benefit people suffering from the effects of HIV/Aids. Interventions are not exclusively focused on the market environment.
66, 67, 83
Provide guidance at Altron group level to operations in terms of policy and practices for addressing HIV/Aids
The current study in partnership with Aurum Institute will result in guiding policy.
82 – 83
Health and Safety: General
The formulation and implementation of a group level health and safety policy to provide guidance and ensure uniformity
Group level SHE policy not yet in place. Policies at the operational level have been formulated and put in place.
80
Pursue ISO 18001 certification of operations, specifically Aberdare Cables, Powertech Batteries and DPM Booysens
This is being pursued in all of these operations. Some of the divisions received accreditation during the year and those outstanding are due for completion in 2009.
80
Report results of HIV/Aids prevalence study across the group, as well as its key suppliers and market groups
The Aurum Institute assessment and preliminary findings have been disclosed in this report.
82 – 83
Environment: Certification
Altech UEC aims to have its operations ISO 14001 certified during 2007
Altech UEC is currently in the process of updating the system to become ISO 14001 compliant.
70 – 71, 74
Certification of Altech NamlTech’s Linbro Park site is in progress, with certification due by January 2008
The Linbro Park facility was recertified as ISO 9001/2000 compliant in December 2007.
70 – 71, 74
Aberdare’s Gauteng operations will be ISO 14001 certified in July 2007
This was deferred to March 2009. 70 – 71, 74
Environment: Performance
Continue to pursue ISO certification of operations
Various operations have been pursuing and achieving various ISO certifications during the year.
70 – 71, 74
Develop a position paper regarding the group’s response to the challenges of climate change
Climate change position paper adopted in the first quarter of 2008.
71
Pursue emission reduction targets in operations, where applicable
This is being carried out in various operations and departments.
75 – 77, 86, 88
Explore collaborations with suppliers and business partners around recycling
This is being carried out at specific operations and departments.
79, 87
CHAIRMAN’SSTATEMENT
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
AltronAnnual Report 200844
Management of sustainability
2008
11%
57%
13%
1%
18%
2007
10%
60%
13%
17%
Capital providers
Employees
Central and local government
CSI
Reinvested in the group to maintain anddevelop operations
Issues within this section
Integration of corporate ethics
Value added statement
The measure of the value created by the group is the amount of value added by its diverse
manufacturing, distribution and other activities to the cost of raw materials, products and services
purchased. This statement shows the total value created and how it was distributed.
2008R millions %
2007R millions %
Revenue from continuing operations 21 431 17 126
Paid to suppliers for material and services (16 299) (12 707)
Value added 5 132 4 419
Income from investments* 186 136
Total value created 5 318 4 555
Value distribution
Employees 3 053 57 2 736 60
Capital providers 584 11 445 10
Finance costs 89 56
Dividends to Altron shareholders 331 216
Dividends to minority shareholders in subsidiaries 164 173
Central and local government 688 13 606 13
Company taxation 591 493
Secondary taxation on companies 54 58
Rates and taxes; licences and levies 33 34
Skills development levy 10 27
Subsidies granted by the government — (6)
Corporate social investment (CSI)** 53 1 14 —
Reinvested in the group to maintain and develop operations 940 18 754 17
Depreciation and amortisation 272 235
Retained profi t 688 589
Deferred taxation (20) (70)
5 318 100 4 555 100
Value added ratios
Number of employees*** 12 909 11 871
Revenue per employee (Rand) 1 660 160 1 442 675
Value created per employee (Rand) 411 961 383 708
Corporate social investment – % of profi t after tax 4.0 1.3
*Income from investments include interest received, dividend income and share of associates’ profi ts.
**CSI includes education, training and social upliftment projects.
***These are permanent group employees.
AltronAnnual Report 2008 45
CHAIRMAN’SSTATEMENT
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
based in South Africa and in over 20 foreign
countries including among others the
African continent, the United Kingdom, the
Iberian Peninsula, France and Australasia.
Considering the diversifi ed nature of our
business, we recognise that the Altron group
of companies has a range of impacts on
society and the environment ranging from the
exploitation of resources in the supply chain
to the responsible stewardship of our
products in the marketplace. For the purposes
of this report we have chosen to categorise
our material issues in three broad sections:
Business stakeholders – shareholders,
customers, suppliers, partners and
employees
Transformation – the seven issues (dti
CoGP) relating to broad-based black
economic empowerment (BBBEE)
Environment
This classifi cation encompasses all the major
stakeholder groups with which the company
engages in a format that facilitates the easy
interrogation of information pertinent to
readers from any specifi c stakeholder group.
The full list of material issues are contained in
the table on page 41.
Management of sustainability
Issues that can be applied broadly across the
Altron group, such as transformation and
corporate governance, are dealt with centrally
at group level. Other issues, such as specifi c
environmental impacts, are managed directly
by the operations concerned, although in all
cases, ultimate leadership and responsibility
vests with the leadership of Altron.
The link between operational management
and board responsibility when it comes to
sustainability issues is achieved through
regular appraisal by the Altron risk
management committee in conjunction with
the relevant responsible body, be it internal
audit, secretarial, legal, the transformation
committee, executive committee, etc. This
Altron’s sustainability philosophy
In our annual report we have emphasised the
importance of sustainable growth and our
long-term commitment to our business
relationships. In this sustainability report, we set
out to explore these relationships more closely,
understand the impacts we have on the
environment and the stakeholder groups we
interface with, and report fairly and transparently
on the most material issues that we have
identifi ed as being important to the long-term
survival and success of our business.
Arriving at our most material issues
Altron is a diversifi ed business operating in
the power electronics, telecommunications,
multi-media and information technology
industries:
Multi-media designs and manufactures
among others satellite and terrestrial
digital set-top decoders.
Telecommunications sells, distributes and
services cellular network operators and
designs, instals and manages Motorola
radio systems and operates in data
distribution as an operator and
manufactures telecom copper and fi bre
optic cables.
The IT division deals with telecommunications
middleware, payment systems and solutions,
secure solutions and smartcard technologies
and the full integrated spectrum of IT
products, solutions and services.
Economic impact by size and value
contribution
Altron has an employee complement of
11 586 permanent employees in South Africa.
Of these 2 535 employees are in Altech,
5 000 employees are in Powertech, 3 968 are
employed by Bytes and 83 at corporate.
(Worldwide, the Altron group has 14 217
employees including non-permanent workers.)
The Altron group has an annual revenue in
excess of R21 billion and has operations
AltronAnnual Report 200846
Management of sustainability continued
which includes the corporate code of
conduct, is made available to every
employee joining the Altron group and forms
part of their terms and conditions of
employment. This sets out the high risk areas
which employees should be aware of in their
business dealings for and on behalf of the
Altron group.
Employee training occurs regularly through
poster and marketing campaigns and there
is a continuous drive to enforce the code of
ethics throughout the Altron group. In-house
magazines and publications frequently make
reference to the code of ethics.
The code of ethics was reviewed in 2007
and the code of conduct in February 2008 by
the Altron audit committee (see governance
report).
Compliance monitoring
Altron is committed to managing
whistleblowing, fraud reports and other
concerns over ethics in a non-discriminatory
and confi dential fashion, through a secure
communication channel for employees to seek
advice or voice concerns. The Altron group
recently engaged Deloitte Tip-Offs Anonymous
to manage an independent and confi dential
fraud and theft hotline. This has been widely
communicated to staff members both in terms
of poster campaigns, training sessions, and
in-house magazines and publications.
Monitoring compliance with ethical practices
takes place both through the external and
independent fraud and theft hotline managed
by Deloitte and fi ltered through the Altron
internal audit department and relevant
subholding group security offi cers.
Bribery and corruption
Altron is aware of the detrimental effects that
bribery and corruption have on the security of
the business environment and takes proactive
measures to counter this threat. Contained
within Altron’s corporate code of conduct (see
structure ensures that the appropriate steps
and processes are put in place to mitigate
against the risks associated with these
issues. All these risks are consolidated at the
Altron risk management committee level and
reported to both the Altron audit committee
and board for noting and/or action.
Evaluation of the fi nancial implications of
sustainability challenges, risks and
opportunities is the purview of the Altron risk
management committee. The head of Altron
legal reports into this committee as an invitee
and detailed legal reports are tabled at the
meeting. Likewise the transformation
committee chairman reports into the risk
management committee and tables the Altron
group’s compliance with EE and BBBEE
requirements. The risk management
committee chairman is a member of the
Altron audit committee and provides
feedback to the audit committee in terms of
any material risks and potential liabilities to
the Altron group which may require the
making of provisions, or the tabling of
contingent liabilities in the balance sheet.
The chairmen of both the Altron audit and
risk management committees are required to
table the fi ndings of these committee
meetings at the board meeting following the
previous committee meetings. Minutes of
these committee meetings are also tabled
with the board packs. All material issues are
brought to the attention of the Altron board
and relevant remedial action plans put in
place, as necessary.
Material issue
Integration of corporate ethics
As highlighted in the corporate governance
report (see page 95) the integration of
corporate ethics is an important and material
issue that receives the highest levels of
stewardship at Altron. The Altron chief
executive is responsible for implementing the
code of ethics. The Altron policy manual,
Standards for operating in other countries
Where group companies operate in
other countries, such as Altech in
France, Nigeria, Kenya and Uganda,
Bytes in the UK, Mozambique,
Botswana, Namibia and Mauritius, and
Powertech in Mozambique, Namibia,
Nigeria, Tanzania, Kenya, Spain,
Portugal and UK, the same level of
honesty and ethical conduct in all
dealings with stakeholders is required.
Altron maintains standard operating
procedures applicable to South Africa
in foreign territories while being
cognisant of local differences. Bribery
and corruption is not tolerated under
any circumstances.
Ethics campaign in 2007
During 2007, a dedicated marketing
and poster campaign, endorsed by
the CE, was conducted throughout the
Altron group to ensure that the group’s
ethics were made visible and
understood. The company’s code of
ethics was highlighted in brochures,
poster campaigns and posted on the
group intranet. Specifi c issues were
highlighted in the audit committee
evaluation and corporate ethics have
been marked as an action item at
future audit committee meetings to
ascertain to what extent ethics are
driven and monitored throughout the
group by executive management.
AltronAnnual Report 2008 47
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FINANCIAL STATEMENTS
Risk and crisis management
Altron makes use of a variety of instruments
to offset the risk of crises that could befall the
company, impact on operations, or cause
signifi cant loss. These include: insurance,
self-insurance, disaster recovery and business
continuity planning. The company has
insurance cover for:
product liability;
key managerial staff/directors;
acts of terrorism;
loss of data;
natural disasters;
theft, including theft of infrastructure; and
director liability (including environmental
liability and professional indemnity).
Business continuity plans are in place should
the systems and networks go down or be lost.
Furthermore, disaster recovery plans are in
place in the manufacturing operations should
a factory be burnt down or production be
hindered in any way. This includes incidents
such as civil unrest or rioting, fl ood, fi re,
prolonged strike or terrorism.
For further details on Altron’s risks and how
we manage them, refer to the corporate
governance report.
http://www.altron.co.za/about_governance.
asp) is our policy towards bribery and
corruption, and we make it clear to all parties
that the company adopts a zero tolerance
approach towards the same. This policy
applies to all operations within the Altron
group.
Guidance on the level of sanctions to be
applied in the event of a violation of the policy
is dealt with in terms of the Altron policy
manual, in terms of general staff information
notices, and through poster and marketing
campaigns dealing with the Altron group’s
ethics and the Deloitte Tip-Offs Anonymous
hotline. Regular updates by the Altron legal
department are also provided, which deal with
prevailing legislation in terms of bribery and
corruption.
Among the systems Altron has in place is the
due diligence process, conducted before the
acquisition of businesses or the establishment
of joint ventures by the relevant legal and
secretarial departments. Likewise, due
diligence in evaluating prospective
contractors and suppliers is facilitated
through the Altron group purchasing and
export council.
The company’s vulnerability and exposure to
bribery is regularly assessed at Altron risk
management committee meetings. We are
aware that we operate in countries identifi ed
as presenting a high risk environment for
bribery and corruption, including Kenya,
Lesotho, Mozambique, Nigeria and Uganda.
Likewise, we are involved in various
government contracts that may require
government licensing.
Incidences of criminal activity reported and
dealt with by the Altron group during the
period under review are detailed in the
corporate governance report on page 102.
Janica Nhlapo shows the number to dial for Deloitte’s Tip-Offs Anonymous hotline.
AltronAnnual Report 200848
Engagement with shareholders
Certain forms of communication with
shareholders, investors and analysts offer
opportunities for two-way interaction – the
essence of engagement is reported in the
corporate governance report on page 107.
Independent report on investment
analyst poll
Aside from these forms of proactive
engagement, Altron has also sought to
obtain structured feedback from analysts –
representing the majority of shares outside
of the Venter family holding – on its
performance. To this end, Altron engaged
an independent fi rm (College Hill) to
conduct an analyst poll on the company
during 2007, following the release of the
company’s annual results. Analysts were
asked to rate Altron in terms of its quality of
management, leadership, strategy, earnings
growth potential, sustainability of earnings,
liquidity, dividend policy, cost controls,
corporate governance and investor
communications. The comments were
non-attributable to encourage frank
comment.
Relationship to the annual report
The annual report, of which this
sustainability report is a subsection, reports
on the company’s performance to
shareholders and investors, while offering an
appraisal of the company’s future ability to
continue generating returns on shareholders’
equity. The responsible stewardship of the
company is dealt with in the corporate
governance report (see pages 95 to 107).
Subject areas listed in that report include:
compliance with King II;
the board – leadership, role, transparency,
effectiveness and meetings;
strategy and policy over operational
activities of the Altron group (executive
committee);
responsible stewardship of the
company’s fi nances (audit committee);
safeguarding assets, preventing and
detecting error and fraud, reporting
controls (audit committee);
risk management (risk management
committee);
fair remuneration of the Altron group’s
directors and senior executives
(remuneration committee);
appointments to the board and
succession planning (nomination
committee);
planning and guidance with respect to
transformation (transformation
committee);
code of conduct (audit committee);
ethics (corporate governance);
communication with shareholders and
investors; and
share dealings.
Shareholders
Issues within this section
Altron’s treatment of minority investors
Transformation at ownership level
Robert Venter, CE of Altron presenting to the investor community.
AltronAnnual Report 2008 49
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Summary of analyst feedback to investor-related questions
Issue Analyst perceptions Company response
Impression of the annual results for 2006/2007
Altron results were good, with a strong contribution from Powertech. Results impressed analysts and were ahead of expectations.
See Altron chief executive’s review, pages 18 to 19.
Key investor issues facing the company
Surplus cash on the Altech/Altron balance sheet
Altech crowned the year with the acquisition of a controlling interest in three subsidiaries of Kenya’s Sameer ICT Group for approximately R650 million, funded entirely from the surplus cash in hand. Powertech concluded the acquisition of the 50% of Powertech Transformers it did not own from ABB for R320 million.
The multiple entry points to the Altron group
Altron made an offer to buy out minorities at both Bytes and Altech. Bytes’ offer accepted, Altech’s rejected.
The maturation of the Altech Autopage Cellular market placing pressure on margins
The company has signifi cantly leveraged its national sales footprint during the year by adding a number of third-party call centres and distributors for data products.
The impact of the copper price on margins when the copper price declines
This risk is mitigated by contract clauses with major customers which adjust prices for metal and other input fl uctuations.
Execution risks to deliver on strategy
Powertech not having suffi cient capacity to meet rising demand
Acquisition of IST Group for R504 million.
Capacity expansion in Powertech operations are signifi cant and ongoing (see 2008 year end presentation on website (www.altron.co.za) and Powertech operational review on pages 34 to 37.
The capital structure of the company
Discomfort with the dual share structure and the different values attached to these instruments because of different voting rights, raising concerns that minorities may be prejudiced in the future. Merging Altron and Altech was mooted as an option to simplify the Altron group structure and bring surplus cash to the centre to be dealt with more directly.
Minority rights – see discussion further in this section.
Group structure – see attempted buyout of minorities above.
AltronAnnual Report 200850
Integrated sustainability – issues relating
to corporate ethics.
Altron’s response to the issue of corporate
ethics is detailed both in the corporate
governance report (see page 106), as well as
within the sustainability section of this report
(see page 46). Altron’s response to the
treatment of minority investors is dealt with
hereunder.
Material issue
Altron’s treatment of minority investors
Altron is aware of the concerns of minority
shareholders. These concerns arise mainly as
a result of the company being a business that
is largely family owned and are thus systemic.
Nevertheless, we believe the company has
shown good faith by its actions and
Summary of analyst feedback to investor-related questions (continued)
Issue Analyst perceptions Company response
Family control The control of the Venter family is generally regarded as value-enhancing with particular reference to their long-term investment focus and conservative capital management style, though cash build-up at Altech was regarded as an urgent matter to resolve.
See discussion supporting Altron’s sustainable growth strategy in the CE’s review, page 24.
Key investor issues – see subsection above.
Impressions of management and disclosure
Altron’s commitment to thorough disclosure and dynamic, open and transparent investor relations is complimented and appreciated. There are no material disclosure issues. Altron management enjoys the respect and confi dence of the market.
Altron will continue its commitment to positively engage with shareholders.
Certain sectors of the investor community criticised Altech’s management for not addressing the surplus cash issue in a satisfactory manner.
The surplus cash issue has been partially addressed (see above). Communication is being addressed in this regard.
Transformation issues Some analysts believe structuring BBBEE at the operating level is more cumbersome and even convoluted compared to a single entry at the Altron level.
Developing anchor BBBEE partners at Altech, Bytes and Powertech is considered to be more enhancing given the diverse spread of products across the Altron group coupled with customer preference to have empowerment at the operating company level.
Shareholders continued
Corporate Governance Accreditation
CGA provides a formal certifi cation of
conformance with the good corporate
governance practices as recommended by
King II and the Code and Guidelines published
by the King Committee. The independent
certifi cation provided by CGA validates the
self-evaluation score achieved by the company
utilising a software questionnaire that
measures the implementation of the King II
Codes and Guidelines.
Overall, Altron scored exceptionally high, being
placed in the Silver class at 79%. Two general
areas were identifi ed for attention:
Stakeholder relationships – the disclosure
of voting issues by institutional investors
and their ability to infl uence corporate
strategy.
AltronAnnual Report 2008 51
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The company endeavours to engage large
institutional minority shareholders prior to
annual general meetings on resolutions that
it proposes passing, in order to get feedback
and comment. Any objections and material
concerns made by these minority
shareholders are also taken into
consideration and efforts made to
accommodate these wherever possible.
Material issue
Transformation at ownership level
ABB South Africa, part of the global power and
automation group, and Powertech are keenly
aware of and acknowledge South Africa’s need
for broad-based black economic empowerment
at all levels of society. To facilitate the inclusion
of an empowerment partner, ABB took the
decision to sell its 50% stake in Powertech
Transformers to Powertech. Powertech, in turn,
has agreed to sell 25.1% to black economic
empowerment investors. Discussions with
BBBEE partners, already involved in Powertech
companies, are progressing and a further
announcement will be made as soon as these
negotiations have been fi nalised. Unconditional
approval has been received from the
Competition Tribunal for the acquisition by
Powertech of ABB’s 50% of Powertech
Transformers for R320 million, effective
1 April 2008.
governance policies to invite the infl uence
of minority shareholders on its material affairs.
Taking the subissues in turn:
Disclosure of voting by institutional investors
– While this is not a legal requirement in
South Africa (as opposed to the
requirements of the LSE), we do in all of our
minutes of general meetings, as well as in
the AGM minutes, disclose how shareholders
voted in respect of each resolution. These
minutes are available to shareholders at any
time. We do not, however, publish on SENS
how each specifi c institution voted in respect
of resolutions.
The ability of minority shareholders to
infl uence corporate strategy – The failed
scheme of arrangement to acquire the
outstanding shares held by minorities in
Altech illustrates Altron’s approach to its
engagement with all its stakeholders. Altron
took the decision not to vote its shareholding
(in which the family has a majority interest) in
respect of the Altech offer, despite there
being no legal impediment to doing so.
Minority shareholders were able to exercise
their rights and managed to block the
scheme, thereby infl uencing Altron’s
corporate strategy. On the other hand, Bytes
shareholders voted in favour of Altron’s
proposal. Bytes delisted in January 2008 and
became a 100%-owned subsidiary of Altron.
Altron also took steps to ensure parties with
vested interests recused themselves from
making decisions on behalf of minority
shareholders in respect of both schemes.
Altech and Bytes formed board sub-
committees consisting only of independent
directors and the respective company chief
executive offi cers (CEOs). These directors
were advised by their respective fi nancial
advisors and took their decisions on the
Altron offer to their respective boards.
Continued commitment from ABB
ABB has confi rmed its continued
commitment to the African market
and has signed a long-term tech-
nology agreement with Powertech
to support the realignment to
promote transformation. This will
allow the transformer company to
maintain its leadership position
through full access to ABB’s
leading technology for power
transf ormers ranging from 20 MVA
to 795 MVA. Powertech Trans-
formers is the only transformer
company that manufactures almost
the entire range of power
transformers in sub-Saharan Africa.
AltronAnnual Report 200852
Altech Netstar places a strong emphasis on customer service.
company. Considering the different market
environments pertaining to different business
avenues, each company manages customer
service in its own unique way.
POWERTECH
During 2007, Powertech Transformers
improved its test failure rate to its best level
yet since that company started measuring it
in 1998, while the on-time delivery rate was
close to 100% by the end of the year. DPM’s
on-time delivery rate is currently at 80%.
ALTECH
Altech Netstar places a strong emphasis on
customer service; the managing director (MD)
receives daily performance statistics and monthly
reports highlighting service trends. His offi ce
deals with customer complaints while divisional
managers are held personally accountable for
service standards within their departments.
Altech Netstar achieved outstanding customer
service levels during 2007: 90% of calls were
answered within 20 seconds, compared with a
call centre norm of 80% in 20 seconds. This is a
radical improvement on the previous year, where
customer service levels were at 30% of calls
answered within 20 seconds.
Altech Autopage Cellular increased the number
of staff and developed new procedures and
systems to service customers more effi ciently.
An independent customer survey commissioned
by ACS showed a total service rating of between
80% and 90%, signifi cantly higher than other
companies ranked (which scored between 60%
and 80%) on the same survey by the same
independent organisation.
BYTES
A signifi cant portion of Bytes’ business is
based on service-related offerings and the
provision of professional solutions and technical
support. Customer service levels and the
customer service feedback loop are critical to
Bytes’ business, and in this regard the various
Introduction
Customers infl uence the business of every
operation in the Altron group. By listening to
customer concerns, meeting customer needs,
ensuring outstanding customer service and
following a philosophy of ongoing product
innovation, the company ensures its ongoing
sustainability in the many markets in which it
operates.
The most signifi cant customer issues facing the
Altron group include:
the continuing drive to enhance customer
service;
the importance of meeting evolving customer
demands through the development of new
technologies and innovations;
the liberalisation of the telecommunications
market; and
the need to expand our customer base.
Depending on the Altron subsidiary and the type
of product or service on offer, these customers
are either end-consumers or business-to-business
customers. Different material issues affect these
differing business relationships. For example,
customer service may be more material to a
company such as Altech Netstar, which supplies
products for both businesses and end-consumers,
while other Altron group companies in the
business-to-business space may have more of
a need to expand their customer base.
The company’s responses to these issues are
therefore largely dealt with on an individual
company basis, and specifi c responses noted
in the sections that follow are not necessarily
applicable to the Altron group as a whole.
Material issue
Customer service
In an increasingly competitive business
environment, customer service is often the
difference between success and failure. Enhancing
customer service that retains existing customers
and secures new customers can have a direct
impact on the long-term sustainability of a
Customers
Issues within this section
Customer service
Meeting the evolving needs of customers
Liberalisation of the telecommunications market
Expansion of customer base
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An amount of R110 million has been earmarked
to upgrade the automotive manufacturing
facility and a further R30 million will be spent
on upgrading the industrial manufacturing
facility.
Altech Netstar developed the new VBU 505 fl eet
management product which enables insurance
companies to monitor customer driver behaviour
at a very competitive price. At present Altech
Netstar instals around 800 units per month. Other
new products which were launched in 2008
include the Guardian personal tracking unit and
the Boomerang mobile vehicle unit.
Material issue
Liberalisation of the
telecommunications market
The convergence of voice and data over
broadband Internet Protocol (IP) networks is
creating a whole new realm for the creation of
new products and services that greatly increase
customers’ convenience and functionality. In
2007, Altech Stream, in partnership with Samsung
Electronics, successfully commissioned its trial
network in Gauteng based on the test WiMax
802.16e licence awarded earlier in the year by
ICASA. The network is focused on the wireless
delivery of triple play services, including video
streaming, internet access and voice-over IP to
both PCs as well as new-generation handsets.
Considering that the WiMax 802 standard is now
widely expected to emerge as the dominant
wireless IP delivery technology, we are confi dent
that this initiative will exploit to the full the
opportunities presented by media convergence
over broadband delivery systems.
Altech believes that deregulation will encourage
competition in the industry, to the benefi t of the
most advanced and nimble service providers,
to the ultimate benefi t of consumers. While
liberalisation in the South African market is
proceeding at a slow pace, opportunities in the
rest of Africa are opening up and Altech has
gained bridgeheads in key African markets in
this regard. In June 2007, Altech Stream
operations conduct regular customer
satisfaction surveys. This provides among
others an understanding of customers’
perception of adherence to service level
agreements and highlights problem areas and
matters requiring attention. Proper and direct
customer feedback follows.
Call centres are present in most of the
operations throughout the Bytes group. Several
hundred of Bytes’ employees are engaged in
this function where they interface with customers
on a daily basis. Response times, percentage of
‘dropped calls’ and the like are regularly
measured and benchmarked against industry
standards.
Material issue
Meeting the evolving needs of
customers
Outlining the issue
As new technologies are made available,
customer expectations soon adapt to the new
standards and the demand for the latest
innovations rapidly makes itself felt. In this
evolving arena, technology companies such as
Altron need to ensure that they remain at the
forefront of the latest technological product
developments and innovations in order to retain
their competitive edge.
Addressing the challenge
For certain companies within the Altron group
this issue is of key importance. These
companies have placed a strong emphasis on
continuously improving their technology in order
to be able to meet the evolving needs and
expectations of customers.
Battery technology is changing rapidly and
Powertech Batteries has experienced an
increasing demand to supply products that
comply with the latest technical specifi cations.
The unreliability of Eskom power has also
created new opportunities for the business to
supply backup power, standby battery and solar
power solutions.
AltronAnnual Report 200854
Customers continued
access to new customers, particularly in the
retail market. Battery Technologies and
Rentech broadened their customer base,
both locally and in sub-Saharan Africa with
the establishment of operations in Lagos
(Nigeria) and Dar-Es-Salaam (Tanzania).
Some of Battery Technologies’ new customer
relationships include those with Celtel in
sub-Saharan Africa and Tedelex in South
Africa, while Rentech has grown its customer
base to the point that it now depends on a
single customer for less than 50% of its
business. Powertech IST’s new line of
business allows it to offer turnkey solutions to
a more diverse group of customers,
including those in its co-generation business.
Altech: Throughout the Altech businesses
new customer bases are being pursued.
ACS is, for instance, working with local
in-country partners to develop new markets
in Africa, including Nigeria, Kenya and
Tanzania, while Altech Isis has identifi ed new
markets in the broadband space and it is
currently enhancing its products to capture
this potential. AAD has invested in technical
marketing skills and has engaged a business
development specialist to grow market
segments in the telesales division. Altech
UEC secured signifi cant contracts to supply
television set-top boxes into India and has
leveraged its African presence.
Bytes: While there is a greater or lesser
degree of dependence on certain customers
in specifi c operations, the single largest
customer in the aggregate in the normal
course represents less than 5% of total
group revenue. The top 10 customers
constitute approximately 28% of total group
revenue, while the top 20 represent
some 35%.
Rwanda Limited was awarded internet and
gateway licences, as well as a frequency
spectrum in the WiMax bands. Already, Altech
is installing a network in Kigali that will begin
distributing IP-based services over broadband
in the last quarter of 2008. The acquisition of
controlling interests in Kenya Data Networks
Limited (KDN), Swift Global (Kenya) Limited and
Infocom Limited has added markets in the
central African region to Altech’s portfolio.
Material issue
Expansion of customer base
Altron is continually looking for ways to expand
its customer base, not only to increase its
profi tability and market share, but also to
mitigate any potential risk posed by the loss of
a key contract or the possible reduction in
demand from an important customer.
As such, the company has formulated and rolled
out strategies to investigate, develop and grow
new customers at Altech, Bytes and Powertech.
Interventions differ depending on the nature of
the company’s business and the type of
customers required to ensure ongoing
sustainability:
Powertech: Powertech Transformers is
currently building and growing its
relationship with utility providers and
municipalities throughout sub-Saharan Africa
and opened offi ces in Kenya during the year.
Aberdare Cables has penetrated both the
formal and informal sector with cable sales
and has experienced an increase in its
formal customer stream. During the year
under review Aberdare Cables established
Aberdare Asia, operating out of offi ces in
Hong Kong. Powertech Industrial’s Crabtree
and Calidus operations expanded and
diversifi ed their product ranges to allow them
Strategic partners
Altech
Bytes
Powertech
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Partners
The fi rst of these relates to Altron’s ability to
provide its customers with reliable, timely and
consistent service. Any disruption of supply on
Altron’s side could severely impact the customer’s
business, leaving a gap wide open for the
competitor to take market share away from the
Altron group. For these reasons it is imperative
that the operations within Altron secure sound
supplier arrangements with more than one
supplier.
Supply of materials
Powertech Transformers is reliant on imported
resources for a high percentage of inputs such as
copper, core steel, transformer oil and insulation,
the availability of which is of the utmost
importance to the long-term sustainability of this
company. In order to mitigate the risk of being
dependent on one supplier only, Powertech
Transformers continually investigates alternative
sources for these raw materials and negotiates
supply contracts with reliable new suppliers.
For example, during the latter part of 2007
Powertech Transformers assessed a potential new
supplier of copper strip and is currently
negotiating a long-term supply agreement.
A second international supplier of transformer oil
is currently marketing its products in South Africa
and has been approved by both Powertech
Transformers and its major customer, Eskom.
Powertech Transformers has a year-long contract
in place with two suppliers of core steel and will
negotiate new contracts during the second and
third quarters of 2008. Powertech as a group has
also incorporated selected production processes
into its own operations in order to reduce its
dependency on certain suppliers.
Altech Netstar is exposed through its dependence
on imported components. When manufacturers
make changes to these parts, Altech Netstar
has to make related design changes without
interrupting its own manufacturing process. To
mitigate this risk and ensure that it is up to speed
with any planned component changes, Altech
Netstar’s technology team meets with suppliers
and manufacturers on a monthly basis.
Partners form an integral part of the success of
Altron and its group companies, helping to ensure
that the company has access to the raw materials,
services, technology and resources required to
deliver high-quality products. In addition, partners
play an important role in helping the company to
meet its transformation targets in terms of the dti
CoGP relating to enterprise development and
preferential procurement.
The most material issues relating to partners that
affect the Altron group differ from one operation to
the next, but there are certain issues that are
common to all businesses within Altron. These
include:
securing continuity of supply of materials and
resources critical to businesses’ operation;
mitigating the effect of foreign direct imports
and ‘dumping’ into the markets in which the
businesses operate;
global mergers and acquisitions affecting
supply; and
transformation through enterprise development
and preferential procurement.
Management of partner relationships
The Altron group has a purchasing and export
council responsible for assessing all aspects of
procurement throughout the group. The export
council takes into consideration aspects such as
the procurement criteria specifi ed in the dti CoGP,
BBBEE legal requirements, local and foreign
content issues as well as any other risks which
may be appropriate and which are reported to the
Altron risk management committee.
How we manage our relationships with our partners
at the level of the material issues identifi ed is
described in each of the subsections that follow.
Material issue
Securing continuity of supply
Outlining the issue
The issue of securing continuity of supply can be
further divided into two key areas, namely the
supply of materials and the supply of energy.
Securing continuity of supply
Foreign direct imports and dumping
Mergers and acquisitions
Transformation through preferential procurement
New markets derived from better partnerships
Altech UEC implemented a four-
pronged strategy to ensure
sustainability in a global market,
which includes:
capping local manufacturing
volumes;
increasing automation to
improve effi ciency and quality;
engaging with contracted
manufacturers; and
establishing an offshore
sourcing and logistics hub for
procurement and supply chain
fl exibility.
During the year, Altech UEC
designed, developed and
produced a prototype of a brand
new product in cooperation with
new offshore partners. The hybrid
digital video recorder project was
completed in a record time, and
cost less than 60% of what it would
have cost were it to have been
conducted with local partners.
Altech UEC won a signifi cant
export order for the product just
two weeks later.
AltronAnnual Report 200856
Partners continued
Supply of energy
As a supplier of electric cables to every sector
of the economy, Aberdare Cables is signifi cantly
affected by the current disruption in energy
supply.
Government’s proposed electricity rationing
programme will cut usage by 10% in the
industrial sector, thereby affecting Aberdare
Cables’ most important customers. This
electricity supply rationing could also result in
Aberdare Cables’ customers reducing their
number of projects and developments, the
consequence of which could be a reduced
demand for a number of cable voltages and
designs.
The electricity crisis received immediate and
high-level attention from all senior members of
Aberdare Cables’ customers team. With its
extensive local and branch network, the
company is well positioned to provide clients
and manufacturing units with assistance and
up-to-date information on the electricity supply.
Although Eskom’s capital expansion programme
is taking shape, it has predicted a limited
electricity supply over the next fi ve years.
Aberdare Cables is in the process of developing
meaningful indicators to measure its
effectiveness during this diffi cult period.
Material issue
Foreign direct imports and dumping
As a local company Altron is committed to the
development of the South African economy and
supports the government’s AsgiSA (Accelerated
Shared Growth Initiative of South Africa), Jipsa
(Joint Initiative on Priority Skills Acquisition) and
Millennium Development goals. It does not
support grey imports or the practice of
‘dumping’. Subsidies, questionable supply chain
stewardship and economies of scale often result
in such foreign direct imports being sold at a
much lower cost than is currently available on
the local market, an issue which adversely
affects Altron subsidiaries operating in this
environment.
POWERTECH
The threat of low-cost imports to DPM’s market
share is signifi cant. Unit manufacturing and
input material costs in Brazil, Russia, India and
China (BRIC) are lower than in South Africa. In
addition, certain local market conditions such as
skills shortages and unreliable power supply
have the potential to negatively affect DPM’s
competitiveness when compared to these
foreign countries.
DPM plans to visit trade shows in BRIC countries
to gather information on best practices. They
also share knowledge and experience gained
with other Altron purchasing managers.
Powertech Industrial’s Crabtree business is
heavily dependent on its wholesaler distribution
channel. This company is engaged in cost-
reduction initiatives in its manufacturing
processes that include the relocation of certain
assembly operations to Lesotho. It is also
redesigning certain products to reduce their
material cost.
ALTECH
Examples in the Altech group of combating risk
include ACS improving its service and quality
while investigating ways to reduce the cost of
card manufacture and AAD highlighting its key
differentiators through a vigorous customer
engagement process. These include the fact
that it obtains quality products directly from the
original source; can offer supply chain and
value-added solutions; is registered as
Restriction of Hazardous Substances (RoHS)
compliant; and that its components are fully
traceable. AAD also engages in sourcing
lower-cost components and quality fi nished
products in order to remain competitive.
Material issue
Mergers and acquisitions
Relationships with partners and suppliers can be
adversely affected if the ownership of partner
companies changes as a result of mergers or
acquisitions. Such events are outside of Altron’s
Power saving = Cost saving
Bytes Document Solutions (BDS), the
Xerox operation has experienced fi rst
hand how saving energy can translate
directly into cost savings for the
company. Three years ago, BDS
started to instal ECG (electronic
control gear) lighting throughout its
main building. While the old lighting
system used four fl uorescent tubes,
the new one only uses three but it
provides more light. This has allowed
BDS to dispose of 25% of its existing
lights, and has resulted in cost savings
which more than covers the initial
investment in the new system.
In addition, the initial lighting audit
carried out on the new system gave
an 18 000 hour guarantee on the
fl uorescent tubes and a 50 000 hour
guarantee on the electronic control
gear. To date, virtually none of the
tubes or ECG’s have failed, meaning
further savings for BDS on labour,
lamp and ballast costs.
BDS light switches have, for the past
10 years, also been equipped with
timers and override switches. The
timers switch the lights off auto-
matically at the end of the working
day and anyone wishing to work late
simply has to use the override switch
to turn the lights back on. This has
resulted in further signifi cant energy
and cost savings.
Altron power saving initiative
Mindful of its responsibility to save
energy, the Altron group has
implemented Powersave@Altron, a
group-wide energy-saving project,
aimed at creating awareness, action
and saleable solutions. See this report,
under the environment section on
page 77 for more detail.
AltronAnnual Report 2008 57
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FINANCIAL STATEMENTS
control but they can affect agreements that were
in place before the merger or acquisition took
place. New owner companies often have
long-established relationships with different
suppliers, partners and customers, some of
which could be in competition in the market and
better positioned to meet the new needs of the
customer rather than Altron or its subsidiaries. In
such situations, having the best product offering
and the latest technology at the most competitive
rate becomes more critical than ever.
POWERTECH
Powertech IST experienced two such incidents
during 2007. The company developed
opportunities at Telkom and Neotel with the
Cramer operational software suite, negotiating
a position as the local value-added reseller for
USA-based Cramer in South Africa. However,
Cramer was then acquired by Amdocs, an
Israeli-based company that has representation
in South Africa. Fortunately, Powertech IST was
able to reach a negotiated settlement whereby it
can continue to offer its services to Telkom via
the Amdocs local entity, ASAJE, and remain the
local supplier of Cramer to Neotel.
Powertech IST also developed opportunities at
Eskom and many other smaller industrial clients
as the local value-added reseller of the MAXIMO
asset management software suite from MRO,
another USA-based company. MAXIMO was
acquired by IBM which has representation in
South Africa. However, the local IBM entity
fortunately does not have MAXIMO skills and it
was agreed that Powertech IST would continue
to be a value-added reseller for the product.
Material issue
Transformation through preferential
procurement
Altron recognises the power of preferential
procurement and the development of small to
medium black-owned enterprises to bring about
meaningful transformation within the company
and the broader ICT industry. The issue of
preferential procurement has a direct bearing on
Power supply crisis – risks and opportunities for Altron
Opportunities
Increased demand for backup power, gensets, battery systems and solar systems
Co-generation opportunities for alternative power supplies/sources
Demand-side management systems and products to reduce consumption
Upgrade of substations and network investment in infrastructure.
Risks
Production interruptions
Slower demand due to reduced new development activity and lower GDP
International perceptions
Effect of electricity increases on infl ation and therefore the macro economy.
Ronel Eksteen, Bytes Business Park facilities manager and Kleinbooi Mashiye, assistant, at the solar powered security fence at Bytes Business Park.
AltronAnnual Report 200858
Partners continued
Pambili Document Solutions is an enterprise development company in the BDS supply chain.
Training at Bytes People Solutions.
POWERTECH
DPM recently underwent an Empowerdex
evaluation and was awarded a Level 3
contributor (AA rating), which represents a
signifi cant improvement from the Level 5 rating
attained in an earlier evaluation. DPM’s affi rmative
procurement is currently at 13.66% but it is
actively working towards meeting the Altron
target of 30% for 2009. As DPM’s own system for
extracting BBBEE information on suppliers is
onerous and prone to error, in future DPM will
utilise Altron’s Everest system to extract this
information.
As part of its strategic preferential procurement
objectives, each Powertech IST divisional head
has the responsibility not only to select suitable
BBBEE suppliers for local procurement, but also
to assist current suppliers in achieving the
targets set out by the dti. Unfortunately the nature
of Powertech IST’s business is such that a large
portion of its equipment needs to be imported
and, as such, it monitors its preferential
procurement performance based on local
procurement according to the discretionary
procurement principle. Based on this
measurement, Powertech IST currently spends
around 12% of its procurement budget on
BBBEE companies and the objective is to
increase this to 25% in the next two years.
BYTES
Bytes scores particularly high when it comes
to preferential procurement. Over 50% of
its R1.2 billion procurement spend is on
empowerment purchases, the majority of which
are sustainable in the long term. With the advent
of the new dti CoGP, Bytes has evaluated its
BBBEE position and set tough fi ve-year targets
(see table) and will focus particularly on increasing
procurement from black female-owned SMMEs.
the long-term sustainability of Altron’s operations.
As part of the broader transformation agenda,
preferential procurement guided by the Altron
group’s internal charter, Transformation Vision
2012, which acts as a blueprint for achieving set
targets for sustainable transformation across all
of the dti CoGP. In developing the framework,
Altron has considered national guidelines,
sectoral empowerment charters and
applicable legislation.
No business can survive without access to
customers and in the past it has been particularly
diffi cult for small black-owned businesses to
break into the corporate market. Large
companies often have onerous procurement
procedures that make it extremely diffi cult for
new businesses with little experience to get onto
preferred supplier lists. By reducing the barriers
to entry, preferential procurement by large
companies such as Altron plays a vital role in
helping these businesses to gain access to large
customers that will help them to grow.
ALTECH
During the year under review Altech Netstar
spent 66% of its procurement spend with
black-owned small, medium and micro
enterprises (SMMEs). During the year ahead it
will concentrate on procuring goods and services
from more black female-owned suppliers
wherever possible.
ACS uses BBBEE-rated suppliers wherever
possible, and makes extensive use of Altron’s
Everest Supplier Rating List, which monitors the
BBBEE status of supplier companies to the Altron
group on a monthly basis. Similarly, AAD
continually assesses the BBBEE status of its
suppliers and replaces non-compliant companies
with those that are compliant.
Bytes 2006 Score 2007 Score 2008 Target
Procurement 7.5 11.9 15
Enterprise development 10 15 15
AltronAnnual Report 2008 59
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Employees
Material issue
Skills attraction, development and
retention
Outlining the issue
The skills shortage facing South Africa has
affected the ICT sector particularly hard. It
is exacerbated by the high demand for
such skills within the ICT sector which
means that, in addition to fi nding new
talent, companies are fi nding it increasingly
diffi cult to retain the skilled people they
already employ.
This issue is also addressed through the Altron
nomination committee, the remuneration
committee, the transformation committee and
the HR committees. See corporate governance
report, page 95.
A variety of solutions
Altron recognises the complex nature of the
skills shortage problem and is therefore
committed to addressing the challenge on a
number of fronts. Interventions across the
Altron group companies include programmes
aimed at retaining talented staff, attracting
new talent from outside the Altron group and
developing potential talent from within. In
addition, the Altron chief executive takes an
active interest in the country’s skills shortage
and drives certain skills development
initiatives that will benefi t not only Altron,
but the ICT and power electronics sectors
as well.
Skills training and development at
Powertech
The Powertech Leadership Process aims at
developing future leaders from the middle and
upper management level, thereby ensuring
leadership succession planning. The Powertech
IST Human Capital Development Programme
includes schools outreach, university bursary
and internal employee development
components.
Skills attraction, retention and development
as well as employment equity (EE) are material
employee issues common across all Altron
subsidiaries.
As such, Altron’s various operations have
invested in a number of initiatives aimed at
developing critical skills, transforming the
organisation from the inside through skills
development targeted at historically
disadvantaged groups, and attracting and
retaining black employees to meet EE targets.
Management of employee relationships
Dedicated human resources (HR) divisions
operate throughout the Altron group.
The Altron group policy manual regulates
the employment of all employees as well
as prevailing legislation such as the
Employment Equity Act, Skills Development
Act, The Labour Relations Act as well as
other broad-based BEE Acts.
At Aberdare Cables, which employs about
half of Powertech’s total staff complement, all
hourly paid employees are covered by
collective bargaining agreements such as:
Schedule F of the Main Agreement for the
Iron Steel and Metallurgical Industry; and
through a Centralised Bargaining
Forum (CBF).
Some 60% of all employees at Aberdare Cables
are members of a trade union, but more
specifi cally, 80% of all hourly paid employees
are members of a trade union. At all Altron
companies, the most senior corporate manager
responsible for employee relations and union
negotiations is a member of the executive team.
Disciplinary and grievance procedures are in
place and set out in the group-wide Altron policy
manual. These are communicated to all
employees when they are employed.
The nature of our engagement with our
employees depends on the specifi c issue
concerned and is described in more detail in
the sections that follow.
Issues within this section
Skills attraction and retention
Employment equity
Transformation through skills development
Powertech – Aberdare Cables
Number of strike days for 2006/7
was 5
Financial cost of industrial action
was R1 million
AltronAnnual Report 200860
as a result, Altech Netstar has employed
a training manager to head up a skills
development division, reporting directly to
the management committee. During the
year, Altech Netstar commissioned
independent consultants to conduct an
analysis of training facilities and
procedures. One area for improvement
highlighted by this analysis has resulted in
a new training strategy, launched in line
with best practices, that will be rolled out
during 2008. The company also plans to
conduct a staff satisfaction survey, the
fi ndings of which will be used to implement
changes to boost morale, reduce staff
turnover and increase performance.
Management and succession planning at
Altech Autopage Cellular
Altech Autopage Cellular offers staff study
loans to encourage them to further their
education and skills training, and during the
year nominated 40 of its employees to
attend courses at the Altech Academy.
It also held various leadership and
management development courses,
including Management for Greatness and
The Nine Conversations in Leadership.
Succession planning has been identifi ed as
an area for improvement and Altech
Autopage Cellular will focus its attention on
this issue during the 2008 fi nancial year.
Bytes
The Bytes group also carried out critical
skills remuneration adjustments during the
year under review. This forms an important
part of Bytes’s ongoing skills retention
strategy. Surveys of market trends in
remuneration are carried out on a regular
basis and where they show Bytes to be
below-average in certain areas pertaining
to key skills, Bytes makes the necessary
adjustments.
Powertech Transformers has invested in
programmes to develop and train electrical
designers and transformer winders, two of
its key resources. An in-house winding
training centre established in 2007 has
seen trainee winders complete 273
windings to date, while Powertech
Transformers has also appointed a number
of technology engineers-in-training, junior
designers, trainees and mechanical
engineers-in-training, all of whom will
embark on a comprehensive experiential
training programme early in 2008. From
2009 Powertech Transformers plans to
recruit fi ve electrical designer trainees
each year.
Powertech Batteries has also established
learnerships and graduate trainee
programmes in order to address the skills
shortage issue. While these initiatives
focus on the important development of
managerial talent, Powertech Batteries
recognises the need to develop skills at the
level of the shop fl oor as well.
Rewarding skills at Altech
Altech conducts independent salary
benchmarking surveys and where necessary
makes adjustments to ensure that it is able to
motivate and retain key skills. The Altech
group prioritises the retention of its core skills
by benchmarking salaries with the market’s
upper percentile earnings bracket.
Responding to staff surveys at Altech
Netstar
The call centre-based industry in which
Altech Netstar operates is characterised by
a high staff turnover rate and the company
has embarked on a number of initiatives
to curb this trend and retain key skills.
Information gathered during exit-interviews
revealed that staff were looking for
increased development opportunities and,
Employees continuedThe Altech Academy – a new standard for skills development
During the year under review Altech
made signifi cant progress in its skills
development strategy with the
establishment of a fully accredited
education facility for employees.
Known as the Altech Academy, the
facility’s courses will be tailored to
meet the specifi c skills requirements
of the company. It will initially be
administered through the Da Vinci
Institute for Technology Management,
a higher education institution that
focuses on post-graduate business
management studies, but the
company aims to develop further
partnerships with other institutions and
universities for specialised
programmes.
The Academy offers courses on four
levels:
Foundation programmes range
from personal development to
training in job-specifi c skills to
provide a foundation on which
employees will be able to build
their careers.
Practical general management
programmes that help employees
to fi ll in the gaps in their knowledge
and expertise.
Senior- and middle-management
development programmes provide
formal education and training.
Executive development
programmes expose executives to
new concepts and tools based on
a global view of business.
The Academy will also play an
important role in establishing
Altech as a preferred employer,
providing evidence to prospective
employees of the commitment
Altech has to invest in the
development of its people.
AltronAnnual Report 2008 61
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Material issue
Employment equity
All Altron group companies have set targets
for EE in line with those outlined by the dti
CoGP. Although most companies within
the Altron group score relatively high on
EE targets within the lower occupational
levels, there is room for improvement at
middle and senior-management levels.
Internal skills development initiatives aimed
at historically disadvantaged employees
(discussed in the next section) go a long
way towards helping the company achieve
EE targets, but they are not the only
strategy employed. The group actively
recruits historically disadvantaged
individuals (HDIs) externally as well and
reports monthly at management committee
meetings on EE as part of the broader
transformation issue
As part of the EE plan submitted to the
Department of Labour annually, Altech
Netstar has committed to improving its
EE scores, particularly at the senior and
top management levels where the current
percentages are very low. Altech Netstar’s
recruitment policy highlights the importance
of employing black men and women, both
able-bodied and those with disabilities, who
meet the requirement as specifi ed in the
job description. The introduction of a
succession and career planning policy with
clear targets linked to EE goals will boost
Altech Netstar’s ability to meet future
EE targets. At Altech Autopage Cellular,
the lower occupational levels are well
represented in terms of EE but the higher
levels within the organisation remain a
challenge. Altech Autopage Cellular is
actively sourcing disabled EE candidates
through its affi liation with Bytes and has
appointed a recruitment agency that
specialises in disabled placements to its
preferred supplier list.
Prof Ray Marcus (chairman of the Da Vinci Institute) and Johan Klein (Altech’s executive for HR and the Altech Academy’s director of studies).
The production of workforce diversity is central to employment equity.
AltronAnnual Report 200862
Altron group workforce (SA)
Male Female
TotalSA
work-force
% blackrepre-
sen-tation
%female
blackrepre-
sen-tation
Abled Disabled* Abled Disabled
African Coloured Indian White African Coloured Indian White African Coloured Indian White African Coloured Indian White
Senior top management — — — 2 — — — — — — — 1 — — — — 3 — —
Other top management 8 5 3 82 — — — 6 2 — 1 6 — — — — 113 16.81 2.65
Senior management 12 16 23 286 — — — 1 8 6 8 51 — — — — 411 17.76 5.35
Middle management – professionally qualifi ed and specialists 176 205 124 919 1 1 2 7 65 38 67 307 1 — 1 2 1 916 35.54 8.98
Junior management – academic qualifi ed and skilled technicians 1 165 544 441 1 275 19 5 2 9 488 224 292 710 3 — 1 3 5 181 61.46 19.46
Semi-skilled and discretionary decision-making 1 278 309 62 111 18 8 — 2 362 125 65 192 10 1 — 3 2 546 87.90 22.11
Unskilled and defi ned decision-making 843 84 64 28 10 2 — 1 280 34 56 13 1 — — — 1 416 97.03 26.20
Total permanent workforce 3 482 1 163 717 2 703 48 16 4 26 1 205 427 489 1 280 15 1 2 8 11 586 65.33 18.46
*Disabled – as per defi nition in the Disability Act
This report should be the same as your EEA2 Report as far as possible. If it is not, you need to be able to justifi y the differences to the verifi cation agency.
Table refl ecting total Altron group employee complement
Altech Bytes Powertech Corporate Total
Permanent South African 2 535 3 968 5 000 83 11 586
Non-permanent 985 223 100 — 1 308
Total SA operations 3 520 4 191 5 100 83 12 894
Offshore operations 691 243 389 — 1 323
Total Altron group 4 211 4 434 5 489 83 14 217
Employees continued
AltronAnnual Report 2008 63
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FINANCIAL STATEMENTS
ALTECH
Altech UEC invested R1.4 million in staff training and development initiatives during the year, which were attended by 465 black males and 140 black females. It granted three bursaries to black males and plans to develop more learnerships for black supervisors and foremen in its Durban and Randburg manufacturing plants.
AAD meets 100% of its semi- and unskilled EE targets for HDIs but only 20% of the approximately 600 graduates it requires for more senior levels will come from HDI groups. AAD therefore uses a combination of internal training and external recruitment and has implemented junior management level learnerships to develop HDI employees for possible promotion into middle management in the medium to long term.
Altech Netstar places emphasis on succession planning for senior positions, identifying and developing suitable HDI candidates from its existing talent pool.
Altech Autopage Cellular is considering employing a group of disabled black learners who have completed call centre learnerships at Bytes.
Altech Isis introduced a learnership programme and enrolled 10 new black female tertiary students.
BYTES
Bytes People Solutions has been at the forefront of disabled learnership training in the industry, training 100 disabled learners since 2004. Since this company completed its fi rst end-user computing learnership for people with disabilities, it went on to develop the skills of a second group and is already interviewing candidates for a third intake. Upon completion of the learnership, candidates receive an NQF 3 qualifi cation in End User Computing, which makes them fully computer literate in various Microsoft applications and ideal candidates for administrative positions.
Bytes collaborates with Altech and Powertech to secure workplace experience for as many learners as possible as this increases their employability. To date, approximately 75% of the fi rst learner group have been employed permanently or on fi xed-term contracts, either within the Bytes group or with external companies. Bytes People Solutions, for example, employs three learners from this group in ERP, Finance and Skills Development. The qualifi ed learnerships have helped to triple the amount of disabled employees in this company, thus ensuring far greater compliance with BBBEE legislation and the Employment Equity Act.
Material issue
Transformation through skills development
Meeting EE targets is a vital part of internal transformation. However, the general skills shortage within the ICT and power electronics industries presents signifi cant challenges to meeting these targets through external recruitment alone, which is why Altron has placed such a high level of importance on internal skills development among historically disadvantaged employee groups. At a group level, the Altron Secretariat provides 6 to 12 months’ worth of practical training to talented black company secretarial students through its cadet scheme, while the corporate communications department offers similar learnerships that provide graduates with on-the-job experience. The Altron group also runs an Adult Basic Education and Training (ABET) Scheme for HDIs and, during the year, employees engaged in this programme completed a course and were awarded certifi cates in basic mathematics.
Aside from the dti CoGP, Altron complies with the relevant South African legislation pertaining to skills development and training. The Altron group has an Altron management services HR committee which coordinates and oversees the following activities:
Policies on employee training and development which are reviewed regularly and made available through periodic updates with employees.
The HR departments at the company’s various subsidiaries coordinate all employee training and development.
Relevant submissions made to the Department of Manpower from time to time.
The spend on skills development is as follows
Spend on skills learning programmes
Legal entity R000
Altron Corporate 279 506
Bytes 17 500 000
Altech 10 384 742
Powertech 35 079 246
Altron group 63 243 494
POWERTECH
DPM, spent 93% of its total R1.5 million on training HDIs and aligned its training programmes with the principles of the Learning Programme Matrix. The number of delegates participating in occupationally directed learning programmes almost doubled from 2007 to 2008 and DPM currently spends 2.59% of payroll on skills development, well ahead of the Altron group target of 1% for 2010.
A committee to drive change
Powertech Transformers’ equity and
development committee oversees
the combined issues of equality
and development, fostering a spirit
of consultation between employees
and the company, particularly in
respect of education and training
programmes. Through the equity
and development policy document,
it provides direction and guidance
on meeting the organisation’s
targets, while providing additional
input on social economic
development, qualifying small
enterprises and exempted micro
enterprises.
Powertech Transformers’ winding training centre in Pretoria.
Bytes People Solutions’ training centre at Midrand.
AltronAnnual Report 200864
Indirect empowerment – promoting the
ownership of sustainable black
enterprises by giving preference to
black suppliers in procurement, and by
actively helping black enterprises
through training, coaching, mentoring,
fi nancial and non-fi nancial support, as
well as improving the quality of life in
disadvantaged communities; and
Human resource and organisational
development – prioritising the refl ection
of the country’s demographic reality
throughout our entire group by
appointing, promoting, developing and
retaining black people, with emphasis
on women, people with disabilities and
the unemployed in the form of
learnerships.
A policy to take us forward
Altron’s commitment to BBBEE was initially
outlined in the Transformation Vision 2010
policy manual published in 2005. However,
following the achievement of our goals laid
out in that document, and the release of the
revised dti CoGP in February 2007, Altron
updated Vision 2010 to incorporate the
latest changes.
The implementation of BBBEE within the
Altron group is now driven by an updated
policy manual, namely Transformation
Vision 2012, which sets out the guidelines
and targets for transformation across all
Altron subsidiaries up to 2012. Altron’s
transformation strategy is founded on an
unwavering commitment to achieve a
workforce that is representative of the
demographics of the country, matching
available skills and business imperatives.
Recognising that sustainable changes take
time to implement, the company aims
initially to achieve a minimum compliance
level of at least a level 3 contributor, with
the ultimate goal of becoming a Level 1
contributor.
Extending our vision to 2012
Transformation is one of Altron’s key focus areas
and is driven by the company’s top leadership.
As a proud South African corporate citizen,
Altron is committed to playing a role in bringing
about meaningful transformation throughout the
Altron group and in the industry in which it
operates. Having embraced the principles of
transformation in the early 1990s, it remains ever
mindful of its responsibility to bring about
upliftment of historically disadvantaged
members of the community and to pave the way
for all racial groups to play a meaningful role in
the economy.
Altron welcomes the dti CoGP, gazetted in 2007,
which provide corporate citizens with guidance
and uniform measurement rules for BBBEE.
Beyond compliance
Altron believes that the survival of businesses in
South Africa will be determined by how well they
are able to adapt to the necessary socio-
economic changes currently taking place and,
apart from acknowledging the sound social and
economic reasons for implementing BBBEE, it
therefore views transformation as a business
imperative. The company recognises the many
business opportunities and benefi ts to be
derived from the increased participation of black
people in the country’s mainstream economy as
well as the ICT and power electronics sectors.
It also believes that its contribution to BBBEE will
only be sustainable if it is linked to strategic
growth areas. Therefore, by reconciling its
growth targets with the policy objectives of
BBBEE, the company will continue to facilitate
South Africa’s economic transformation through:
Direct empowerment – increasing the level of
black ownership of businesses and other
fi nancial assets, as well as raising the extent
to which black people, especially women,
youth, workers, rural communities and the
disabled, control enterprises;
Transformation
Issues within this section
Socio-economic development
Enterprise development
Founded in 1996 by a group of
leading black professionals, Pamodzi
Investment Holdings (Pty) Limited is a
multibillion-rand investment company
seeking to become a strategic black
equity partner of leading businesses
in key South African industries.
Pamodzi has built a solid reputation in
the private equity industry by bringing
strategic value to organisations and
generating high returns for all
stakeholders through commercial
astuteness and entrepreneurial
acumen.
Izingwe is an empowerment group that
has matured to become a signifi cant
investor in mining, engineering,
infrastructure development and
logistics. It is an active and long-term
shareholder in Powertech that makes
focused and value enhancing
interventions in its underlying
investments. Izingwe’s strategic
partnerships with leading companies
are critical to its investment strategy.
Our anchor partnerships with Pamodzi
within Altech, Kagiso within Bytes and
Izingwe within Powertech continue to
add signifi cant value along with the
contributions of our other
empowerment partners.
AltronAnnual Report 2008 65
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Transformation activities
Work is already under way across the Altron
group to build on the foundation of Vision 2010
and work towards the achievement of the goals
set out in the Vision 2012 document. Among the
activities being undertaken and plans for the
future, are the following:
Target setting
During the fi rst quarter of 2008, Transcom
started working with all companies in the Altron
group to translate Vision 2012 into actual
transformation targets with guidelines.
Interactions took the form of a series of round
table consultations with transformation
champions to help determine fi ve-year targets
on all areas of the dti CoGP. The executive
committee of Altron has approved realistic
targets for the various executives in the Altron
group ranging from Level 3 to Level 1 by 2012.
BBBEE performance will form part of the Altron
group’s ongoing performance management
indicators.
Consultation
Given the strategic importance of BBBEE
initiatives in the Altron group, whose successful
implementation depends on the resources within
Altron, the company recognises the importance
of engaging its internal stakeholders on the
issue of transformation. A change management
survey will be conducted by Transcom’s HR
subcommittee during 2008 to identify any
potential internal stumbling blocks to the
transformation process.
Adoption of Vision 2012
The transformation conference agreed on the
transformation path and targets going forward
and proposed certain resolutions to be adopted
by the Altron group in achieving these targets.
Subsequent to the conference, these resolutions
together with the Vision 2012, were approved
and adopted by the Altron executive committee
and the Altron board.
A committee to drive change
During 2007, the transformation committee
(Transcom) was reconstituted and a working group
appointed to steer the Altron group towards the
achievement of these targets and to coordinate the
initiatives of all group companies into a coherent
group BBBEE strategy.
Reporting to the Altron executive committee and
ultimately to the board, Transcom comprises
members of senior management and staff from
across the Altron group’s companies and is chaired
by Mr Onkgopotse Tabane, Group Executive:
Corporate Affairs. Various subcommittees have
been focused to oversee the implementation of all
dti CoGP. Its role is to accelerate the launch and
implementation of the Transformation Vision 2012
(Vision 2012), and has the following mandate
endorsed by the Altron executive committee:
promoting economic transformation in order to
enable meaningful participation of black people
in the economy;
achieving a substantial change in the racial
composition of ownership and management
structures and in the skilled occupations of
existing and new businesses;
increasing the extent to which communities,
employees, co-operatives and other collective
businesses own and manage existing and new
businesses and increasing their access to
economic activities, infrastructure and skills
training;
increasing the extent to which black women
own and manage existing and new businesses,
and increasing their access to economic
activities, infrastructure and skills training;
increasing employment of black disabled
employees;
promoting investment programmes that lead to
broad-based and meaningful participation in
the economy by black people in order to
achieve sustainable development and general
prosperity; and
empowering rural and local communities by
enabling them to gain access to economic
activities, land infrastructure, ownership and skills.
From a shareholder perspective,
Bytes SA has successfully
partnered with Kagiso, a respected
and reputable broad-based
empowerment group, which
currently owns 27% of Bytes SA.
Founded in 1993, Kagiso was
formed to fi nance and manage
grassroots projects aimed at
empowering women, the young and
the disabled of the country. Today
Kagiso remains one of the most
highly regarded NGOs in South
Africa, mainly because of its
working partnerships with civil
society, government and other
NGOs. Kagiso plays an active role
on the board of Bytes SA.
Altron’s Transcom under the chairmanship of Onkgopotse (JJ) Tabane is steering the group towards achieving its BBBEE targets.
AltronAnnual Report 200866
which is championed by a CSI subcommittee,
established as part of the Transcom.
Altron’s goal is to spend 1% of net profi t after
tax on CSI, but in doing so to take into account
company performance. This benchmark fi gure
includes both fi nancial as well as non-fi nancial
contributions to projects.
Projects are evaluated annually by means of
feedback from the benefi ciaries on the
progress and benefi ts of the project, on-site
visits, collection of relevant statistics and
formal research. After each project is
completed, it undergoes an evaluation and
audit in order to determine its impact and
long-term sustainability. In all such audits,
Altron places an emphasis on quantifying the
cash and in-kind contributions to projects.
CSI focus areas
Altron has divided its CSI spend into focus
areas that are informed by a value system that
incorporates the following principles:
CSI must be aligned with the vision and
mission of the business.
The company must ensure that its CSI
practitioners follow a professional
approach.
Training of these practitioners is essential
and is carried out both internally through
the CSI committee of the Transcom, and
externally through attendance of
conferences and workshops.
Projects which receive funding must ideally
be aligned with the core business of the
company.
CSI projects must be implemented in such
a way as to ensure that the benefi ciaries
are able to sustain the ongoing viability of
the project, ie in terms of training and
through ongoing support and guidance.
Focus areas are also aligned with certain
national development imperatives as
highlighted by government.
Training and communication
One of Transcom’s key priorities for 2008 is
transformation education, communication and
knowledge sharing in the form of workshops
and seminars for various BBBEE practitioners
handling various dti CoGP codes in order to:
create a knowledge community of
practitioners in the Altron group;
develop proposals/draft resolutions to be
considered and adopted by group
leadership regarding the implementation of
the imperatives of Vision 2012 and to share
best practice with each other as well as other
companies in the industry;
motivate and help each other to fi nd practical
solutions to everyday problems in the
implementation of transformation goals; and
monitor the implementation of Vision 2012.
Conclusion
Transforming Altron is not a matter of complying
with legislation, but playing our part in ensuring
the domestic economy grows meaningfully and
sustainably. In ensuring that we meet our Vision
2012 goals, BBBEE will henceforth form part of
our ongoing performance management,
thus integrating it into business planning and
performance measurement.
Material issue
Socio-economic development
Altron recognises its responsibility as a
corporate citizen towards its stakeholders and
the communities within which it operates.
Corporate Social Investment (CSI), incorporating
Socio-Economic Development (SED) as per the
dti CoGP, is a major cornerstone of good
corporate citizenship and forms an integral part
of the Altron group’s BBBEE, transformation,
corporate accountability and governance
programme.
In line with Vision 2012, the principles of
BBBEE and the dti CoGP have been taken into
account in the development of a CSI policy,
Transformation continuedAltron’s CSI Policy
Funding communities that are directly
involved with the Altron group’s
operations
Using a consultative approach and
facilitating sustainable wealth creation
and self-suffi ciency
Facilitating sustainable wealth creation
and self-suffi ciency
Managing the impact of the group’s
relations with the community and
environment
Measuring the effectiveness and
sustainability of CSI projects and
partnerships
Conducting CSI in a responsible and
innovative manner that benefi ts both
benefi ciary and donor
AltronAnnual Report 2008 67
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Job creation
Altron’s initiatives in job creation are divided into
two areas – those that fall under enterprise
development and preferential procurement as
part of the company’s supply chain, and those
that fall outside of the supply chain and which
are aimed at helping people to become
self-sustainable. It is this latter group to which
CSI funds are channelled.
Important projects in this focus area include the
Orion Wood Workshop and the Tshwane
Leadership Foundation. With the help of support
from Altron, the Orion Wood Workshop provides
disabled individuals with skills that allow them to
earn an independent living. Tshwane Leadership
Foundation also benefi ts one of society’s more
vulnerable groups through its outreach
programme to young girls and women who have
fallen victim to child traffi cking and prostitution.
With the help of support in operational costs
and capacity building, the foundation provides
the victims with life and vocational skills training
and the important opportunity of exposure to job
creation initiatives.
Community development and support
South Africa’s disadvantaged communities face
multiple challenges that result from poverty,
unemployment, crime and lack of infrastructure.
HIV/Aids poses a particular challenge, leaving
terminally ill patients in need of care, orphaned
children in need of food and shelter and families
in need of welfare assistance.
Altron’s Community Development and Support
portfolio is divided into:
health and social welfare – including primary
healthcare and welfare projects and
community Aids awareness programmes
aligned to government programmes; and
support for security and public safety
programmes – including training of
volunteers working at police stations,
providing equipment or outreach
programmes.
Underpinned by these principles, Altron’s
fi ve key social investment areas are:
Education and training;
Job creation outside the company
value chain;
Community development and support;
Conservation and environment; and
Arts, culture and sport.
Within each of these areas, the company
has selected various sub-categories that
form a logical fi t with its business.
Education and training
Education remains one of the biggest
challenges facing South Africa and is an
area where corporate investors can make
an enormous difference. The shortage of
such skills is underpinned by the poor
performance of high school learners in the
subjects of maths and science and the
associated lack of qualifi ed educators of
these subjects. This issue has been
highlighted by government as a key national
development imperative and one to which
Altron has paid particular attention in its
CSI programmes.
Education and training projects include
those that focus on:
the development of technology and
IT skills;
electronics and multimedia;
various engineering disciplines;
maths and science;
building and equipping of schools;
outreach programmes;
ABET; and
intern mentoring.
Skills development on the other hand
includes programmes that are aimed at
improving skills levels in communities with
the objective of assisting people in earning
a living and becoming self-suffi cient.
Arts and culture flagship project: East Rand School of the Arts
Battery Technologies provides
ongoing support to the East Rand
School of Arts (ERSA), where
learners’ progress was severely
hampered by a lack of basic
equipment that was critical to their
learning. By providing equipment,
materials, consumables and
infrastructure, the company has
contributed to the school’s
improved matric pass rate from
13.3% in 2003 to 75% in 2006.
Flagship project: Bridging the Digital Divide
Recognising the importance of
bridging the digital divide, Altron
has rolled out state-of-the-art multi-
media centres at schools in the
Western Cape, Gauteng and
KwaZulu-Natal. The project tracks
the pass rate of learners in each
school over time to establish
performance and the holistic nature
of these interventions ensures
that Altron’s investment has the
maximum possible impact and is
sustainable in the long term.
AltronAnnual Report 200868
Transformation continued
Flagship project: Urban greening
Powertech Batteries has partnered with schools in disadvantaged communities to plant thousands of trees in their communities during national Arbour Week. These trees also help to offset the damaging effect of carbon emissions which contribute to global warming.
enterprises which will deliver sustainable
employment and growth in the ICT and
electronic services sector.
ALTECH
Altech Netstar executes monthly payments to
its black-owned fi tment centres in the middle
of the month. Furthermore it plans to set up
a task team in 2008 to investigate further
enterprise development opportunities and the
possibility of introducing black female-owned
fi tment centres. Altech Autopage Cellular is
currently in the process of identifying partners
whose turnover is less than R5 million as this
qualifi es them automatically as Level 4
contributors. Once classifi ed, Altech Autopage
Cellular can begin allocating distribution and
channel development costs towards the
development of these qualifying enterprises. In
addition, Altech Autopage Cellular will
commence identifying all black-owned and
empowered SMMEs and begin processing
more favourable payment terms for them.
ACS has been using the services of Katlego
Global Logistics, a 100% black-owned
company, for all freighting and forwarding
requirements for the past fi ve years. ACS also
ensures that Katlego’s invoices are paid within
a 15- instead of 30-day period, as suggested
by the dti, as this assists the SMME with cash
fl ow and thereby contributes to its long-term
sustainability.
POWERTECH
Powertech Transformers helped develop
Mdluli Sharp offi ce business, by investing
management time, training and equipment, and
assisting with various operating costs. In
Gauteng, DPM sources critical sub-assemblies
and raw materials such as radiators and tanks
from Ikusasa and Thaleka and paper-covered
copper wire from Matla Wire Systems.
Powertech IST has embarked on developing
small ESCOs (energy services companies)
through the transfer of skills.
Conservation and the environment
With environmental concerns and global warming
playing an increasing role in policy-making
throughout the world, Altron recognises its
responsibility to ensure that environmentally
sensitive areas are conserved and that all South
Africans benefi t from the rich natural heritage that
is inherent to the country. Altron’s involvement
within its Conservation CSI portfolio includes:
environmental awareness and clean-up
projects;
support of conservation initiatives and
organisations carrying out important
conservation work such as the World Wildlife
Fund and the De Wildt Cheetah programme;
and
disaster relief programmes during times of
fl ood and drought.
Arts, culture and sport
Arts, culture and sport play an important role in
creating hope among disadvantaged
communities, sustaining ideas and nurturing
leadership skills, particularly among young
people. Sport provides children with a healthy
pastime that keeps them occupied after school
and fosters the development of tolerance,
teamwork and discipline, while arts and culture
help to preserve and express South Africa’s rich
cultural heritage.
Recognising the important role that arts, culture
and sport have to play in developing a well-
rounded child, Altron supports various
developmental programmes that help to train and
nurture new talent and teams from historically
disadvantaged communities. The company
selects projects on the basis of their ability to
affi rm and promote all aspects of South African
culture, artistic expression and sporting codes.
Material issue
Enterprise development
Altron is committed to investing in the
development of small to medium black-owned
Bytes enterprise development programme
BSS has a strong enterprise
development programme that includes
helping ABSA with its rural and
township-based “banking the
unbanked” Mzansi programme. This
programme is expected to deliver
4 000 kiosk-based ABSA support
services to the unbanked population,
thereby meeting the 2010 targets
in the Financial Sector Charter.
A signifi cant portion of these kiosks
will have ATMs supplied and serviced
by BSS. The company is also involved
in the provision of some 2 000 ZOC
(Zionist Church/Orlando Pirates/Kaiser
Chiefs) containers into townships and
communities countrywide, which will
contain ATMs supplied and serviced
by BSS. Empowerdex has confi rmed
that all of these activities qualify as
enterprise development initiatives
and equate to around R12.5 million
per annum spend on enterprise
development. This equates to 6.8%
of the 2006/2007 net profi t after tax,
giving Bytes the full 15 points in terms
of the dti CoGP.
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BYTES
Bytes regards the placement of automatic teller
machines (ATMs’) and ATM service delivery to
the unbanked market as a key differentiator in its
enterprise development strategy. Bytes has
helped to accelerate the development and
sustainability of 109 small black enterprises by
introducing ATMs into their businesses and
providing fi nancial and operational support. This
innovative project also makes a signifi cant
contribution towards “banking the unbanked” as
required in the Financial Sector Charter, and
supports the banking sector’s Mzansi
programme.
BDS has for many years engaged in various
enterprise development initiatives that remain
ongoing and are valued in excess of 3% of net
profi t after tax each year. These include:
The outsourcing of previously in-house
business services, including gardening,
canteen and security services, to BBBEE
companies. BDS not only awards contracts
to these suppliers but also assists them with
rental, telephones, water and lights, and
ongoing training expenses.
Internal transfer of skills and ongoing training
to former employees who have been
provided the opportunity to start their own
small enterprises.
Since 1999 BDS has helped to develop
12 BBBEE business partners who sell and
maintain Xerox equipment as resellers.
Establishing BBBEE joint venture companies
with black partners, to support specifi c
sectors of the BDS market.
Supporting academic research
The Bill Venter/Altron Literary Award dates back 19 years and helps to promote research in tertiary
education that is published in a book form. It is presented annually to tertiary education recipients
who have made an outstanding contribution to research, and alternates between contributions to
the humanities and natural sciences each year. This award, prized as much for its signifi cant
monetary value as for its prestige, went to Prof Norman Owen-Smith of the University of the
Witwatersrand in 2007 for his book entitled Adaptive Herbivore Ecology.
Sports Flagship Project: FIFFA Kids Tournament
Altech Autopage Cellular has an ongoing investment in providing hundreds of young soccer players from underprivileged communities with new soccer kit. Its sponsorship of the FIFFA (Football Inspired Foundation For Africa) Kids Tournament gives South African children the opportunity to compete against soccer teams from around the world.
R245 000
R5 916 800
R1 538 400
R6 225 170
Community development and support
Sports, arts and culture
Environment
Education
CSI SpendCSI spend per focus area 2007
AltronAnnual Report 200870
Environment
conveniently grouped them into fi ve focus
areas:
Climate change.
The need to comply with environmental
legislation, offshore standards, regulatory
environment and protocols.
Pollution and emissions.
Energy usage and reduction of peak
demand.
Environmental impact of products and
services.
Systems to manage our environmental
impact
At the level of each of Altron’s operations, key
environmental aspects of each operation have
been identifi ed and their impacts have been
evaluated. All signifi cant aspects and impacts
are identifi ed and logged in the ‘aspect
register’ kept available for this purpose at each
relevant operational site. The information is
then converted into a structured database for
evaluation and reporting.
Measurable objectives and targets are
established annually at management level, and
set out in the Environmental Management
System (EMS) documented at each relevant site,
as per ISO 14001. The EMS documents
including full procedures, records and work
instructions, provide a record for the annual
audit of our environmental performance. For the
purposes of internal reporting and management
review, regular environmental internal audit/risk
assessments are conducted and a management
review meeting is held monthly. While most of
Altron’s wholly owned subsidiaries do report on
quantitative data for key environmental impacts,
there is as yet no central database where this
data and performance against targets is
collected and collated. The Altron group is
currently extending its information management
system, Everest, to facilitate group management
of our environmental impact.
No environmental auditing/screening of
suppliers/contractors is done by the
Altron operates in sectors that were traditionally
regarded as having a low impact on climate
change. Recent research has shown, however,
that the digital technology industry, for example,
is responsible for 2% of global CO2 emissions,
the same share as the airline industry. Recent
evidence has also shown that businesses across
all sectors are exposed to the risks and
opportunities of climate change.
Locally and internationally, increasing costs of
energy are creating a strong business case for
energy savings. The need for sustainable energy
supply and energy effi ciency provides Altron
with a unique opportunity to market products,
services and the corporate brand in a carbon
constrained economy.
Altron has complied in all material aspects to all
relevant environmental legislation and there are
no fi nes, convictions or material clean-ups
necessary or outstanding.
Material issues identifi ed
Altron is committed to understanding its impact
on the environment, the associated risks its
operations pose to the environment and the
related economic opportunities that may be
exploited. The fi rst step is to understand the
material issues facing the company with regard
to the environment. Guidance in identifying
these has come historically from a number of
sources, including:
the legal and regulatory frameworks existing
in South Africa and other areas of jurisdiction
over the company’s operations;
the ISO 14001 standard for environmental
management systems;
the GRI’s G3 indicators;
the JSE’s SRI Index; and
independently commissioned reports,
such as MS Alexander and Associates’
compliance report for Altron group
operations.
While the frameworks above would indicate
a multitude of issues, the company has
Issues within this section
Climate change
Compliance with legislation
Pollution and emissions
Energy use and effi ciency
Environmental impact of products and services
AltronAnnual Report 2008 71
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investors, calls for disclosure of investment-
related information concerning the risks and
opportunities due to climate change, and
Altron is among the list of companies around
the world targeted by this project. Company-
specifi c risks and opportunities are:
Physical risks – increased occurrences
of storms and fl oods or the devaluation
of land as a result of climate change is
expected to have a direct physical
impact on the company.
Regulatory risks – companies are
experiencing a sharp increase in both
traditional legislation, such as permits
and energy-effi ciency requirements for
products and processes; and market-
based regulation, such as carbon taxes,
emissions-trading schemes and fuel
tariffs. These risks have particular
implications for large capital outlays on
projects with long life times.
Reputational risks – the perception that
a company may be failing to address
climate-change risks can cause a drop
in consumer confi dence and brand
value.
Litigation risks – although currently not
a major risk, increasing stakeholder
pressure increases the risk of litigation.
Economic opportunities – Altron can
benefi t directly not only from the sale of
products and services in the energy
effi ciency arena (assisted by the rising
cost in energy), but also from the various
carbon markets that have been created
worldwide, including the World Bank’s
carbon credit trading guarantee and the
United Nations Framework Convention
on Climate Change’s (UNFCC) Clean
Delivery Mechanism that awards tradable
credits for certifi ed emission reductions
(CERs) related to projects specifi cally
undertaken in developing nations that
reduce carbon-related emissions.
company at this time. However, the two main
suppliers (Fry’s Metals and Chemical
Initiatives) of raw materials to Powertech
Batteries are both ISO 14001 accredited.
Other suppliers, although not ISO 14001
accredited, are required to provide a written
commitment to the relevant operations that
they will conduct their business in an
environmentally friendly manner.
The various Altron group environmental
policies are displayed on internal notice
boards and are available on the relevant
operations’ websites. Training has been
provided for all key personnel who are
involved with the implementation and
maintenance of the EMS. Selected
employees have been trained as
environmental auditors and all employees
and contractors receive induction training,
which includes elements of the environment.
Material issue
Climate change
Recognising the gravity of the issue of
climate change, Altron commissioned
PricewaterhouseCoopers to assist the
company in drafting a climate change
position paper to guide the Altron group’s
response to the issue.
This paper was tabled at the Altron risk
management committee meeting on
30 April 2008. The climate change position
paper sets out how Altron is responding
to the challenge of climate change. This
includes a commitment to reducing energy
consumption and GHG emissions and
efforts to fi nding alternatives to the current
reliance on fossil fuels in the company’s
products and services. A summary of this
paper follows:
Identifying risks associated with
climate change
The Carbon Disclosure Project (CDP), an
international initiative backed by institutional
What is climate change?
Climate change can be defi ned as
the destabilisation of the earth’s
climate system caused by an
increase in the concentration of
atmospheric greenhouse gases
(GHGs). The earth’s atmosphere
contains GHGs, which trap a
certain amount of short-wave
radiation from the sun and
re-radiate it back to earth. In
essence, these gases act like a
blanket, and keep the earth at a
stable temperature. However, it is
now widely believed that human
activities have caused an increase
in these GHGs, and consequently
an increase in global warming.
Jack
Hoc
hfel
d
AltronAnnual Report 200872
reduce emissions. This represents a real
opportunity to generate further income as
a CDM project.
Certain Powertech companies are well
positioned to address the needs of a future
carbon-constrained economy. Divisions
such as Rentech (solar panels) and
Crabtree (home automation solutions) can
market their products as energy effi cient
and low in carbon content, and increase
revenue and sales.
ALTECH
Altech’s major emissions arise from
production (Altech UEC and Altech
NamITech), service solutions in the form of
electricity consumption at call centres and
servers, and transport and logistics, which
are currently dependent on fossil fuel.
Altech is planning to carry out an
investigation into the climate change risks,
major GHG emission sources and
opportunities for developing low-carbon,
energy-effi cient products within the Altech
group in both the manufacturing and
service lines of business.
BYTES
Bytes acknowledges that although it is not
a manufacturing company, it is a high
energy consumer through both electricity
consumption (from servers, offi ces and call
centres), and fossil fuels (from back-up
energy generation, distribution networks
and travel). While energy effi ciency
products are already being implemented,
Bytes acknowledges that further
opportunities exist to improve on its
energy-effi ciency, especially in the data
centre environment.
Bytes has a strong association with
Xerox, being the largest reseller of Xerox
products in the UK and the exclusive
agent in South Africa and southern Africa.
Current status
Although Altron would not be regarded as
a signifi cant contributor to climate change
in terms of direct GHGs, the company
acknowledges that its normal business
activities consume signifi cant amounts of
energy, thereby contributing to increasing
levels of atmospheric GHGs.
There are signifi cant sources of greenhouse
gas emissions, such as in the specifi c
manufacturing lines in the Altron group, that
represent both a risk and an opportunity in
terms of climate change. Furthermore, as a
leading supplier of products and services
to the power industry, Powertech is ideally
positioned to leverage off the growing
demand for low-carbon, energy-effi cient,
products.
POWERTECH
Sulphur hexafl uoride (SF6) identifi ed in the
production process at Powertech Batteries,
as well as in Powertech Transformers, has
a global warming potential 23 900 times
that of CO2 and consequently is regarded
as a major source of greenhouse gas for
Powertech. But by eliminating leaks and
removing/reusing SF6 before maintenance
and decommissioning, Powertech can
avoid signifi cant GHG emissions, the basis
of a profi table Clean Development
Mechanism (CDM) project.
Powertech Transformers is the most
advanced Altron subsidiary in terms of
responding to climate change and has
reported on its GHG emissions, implemented
energy saving targets, and has embedded
energy effi ciency in its products and services.
They have recognised that climate change
is both a risk and an opportunity and have
responded to this by promoting energy-
effi cient products. Furthermore, Powertech
Transformers is assessing the switch from coal
to natural gas for its boiler burner to further
Environment continued
Commitment to the Global Compact
The Global Compact brings
companies together with UN
agencies, labour and civil
society to advance social and
environmental principles. As a
signatory to the Global Compact,
Altron commits to aligning its
operations and strategies with 10
universally accepted principles in
the areas of human rights, labour,
the environment and anti-
corruption.
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Bytes is a high energy consumer of electricity from servers, offi ces and call centres.
The recommendations received include:
determining the carbon footprint (GHG
inventory) for the Altron group of companies;
identifying and assessing carbon risks and
opportunities;
developing an Altron group climate change
strategy;
establishing feasible emission reduction
targets and potential carbon-trading
initiatives; and
maintaining an internal GHG reporting
system and subsequently improving external
reporting of emissions on a continuous basis.
Altron’s response to the issue of climate change
will be reviewed at board level and an
appropriate board member will be assigned
responsibility to investigate and progress the
continuation of this initiative.
Material issue
Compliance with environmental
legislation, offshore standards,
regulatory environment, protocols
Compliance with various environmental protocols
and standards is in many instances not only a
legal obligation, but is also a useful way for
companies to benchmark their environmental
performance against best practices and world
trends. Altron group companies comply with
environmental legislation where applicable and
in many instances have been proactive about
commissioning independent external
environmental audits on operations that have
a potentially high environmental impact. Such
audits go a long way towards helping these
Altron group companies to identify potential
problem areas and take the necessary steps
to rectify any issues.
While Xerox has already certifi ed its GHG
emissions, set reduction targets and
contributed regularly to the CDP, it does not
report on emissions associated with Bytes.
Bytes itself does not quantify or report on
its GHG emissions.
The way forward
Altron acknowledges the signifi cance of
climate change and the causes thereof
through industry’s production and
consumption of fossil fuels, primarily to
produce energy, but resulting in the
emission of GHGs, leading to climate
change.
Altron believes that climate change is
signifi cant both globally and locally and
fully supports the intentions of international
agreements such as the United Nations
Framework Convention on Climate Change.
Altron acknowledges and believes that a
strategy to address the issue of climate
change cannot be seen in isolation and
must be integrated with the sustainable
development strategies of the Altron group
as a whole. Altron acknowledges that in
order to understand its impact on climate
change effectively, and to assess the
opportunities for carbon trading realistically,
a baseline quantifi cation of its GHG
emissions (carbon footprint) should be
developed. Altron will work towards
ensuring that the carbon footprint is
developed at its operating companies.
A long-term carbon management strategy
will consequently be developed in response
to and in association with the carbon
footprint assessment of the Altron group.
AltronAnnual Report 200874
Environment continued
Name ISO 9001: 2000 ISO 14001 Other
AAD Certifi ed Compliant but not accredited as it handles no hazardous substances
ROHS compliant (the European standard for removal of harmful substances)
Altech NamITech Certifi ed. Compliant with Europay MasterCard, Visa, as well as Verisign specs and standards
All scrap metals are being disposed of to third parties under controlled and compliant conditions
—
Altech Netstar — — 70% of components received lead-free
Altech UEC Certifi ed System had been updated for ISO 14001 compliance. Audit is being awaited
ROHS compliant
WEEE compliant
Aberdare Cables Certifi ed Standford Road (Port Elizabeth) and Pietermaritzburg operations – ISO 14001 certifi ed.
Gauteng operation in process of implementing ISO 14001 – target date March 2009
BASEC/ISO 9001 compliant
Powertech Transformers
Certifi ed Certifi ed ISO 18001 certifi ed
DPM Cape Town Certifi ed Certifi ed ISO 18001 certifi ed
DPM Booysens Certifi ed — —
Powertech Batteries Certifi ed Certifi ed Ford Q1, VDA 6.1 and TS 16949s (motor vehicle industry standards)
Crabtree Certifi ed Expected end of 2010 —
Battery Technologies Certifi ed Expected end of 2010 SONCAP approved for exports to Nigeria
Bytes Systems Integration
Certifi ed — —
Bytes Managed Services
Certifi ed — —
AltronAnnual Report 2008 75
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Overall, both companies’ rating was satisfactory,
indicating that although some control
weaknesses were identifi ed which require
minor improvements, such weaknesses, taken
together or independently, do not signifi cantly
impair the overall system of internal control.
Key fi ndings from the report include suggestions
that Calidus obtain an ISO 14001 certifi cation by
the end of 2009, a recommendation which the
company has plans to carry out. (Details of the
fi ndings pertaining to Crabtree are dealt with
alongside under Pollution and Emissions.)
Powertech Batteries has identifi ed lead
exposure and contamination, acid exposure
and electricity consumption as its most
material environmental issues. Lead acid
batteries contain sulphuric acid and
aggressive and toxic substances which are
harmful to the environment and to the health of
people who are subject to high levels of
exposure. In order to mitigate the risks relating
to lead, Powertech Batteries ensures that
environmental reports are regularly obtained
from independent assessment consultants.
Reporting on environmental issues is given the
highest level of importance. Powertech
Batteries’ policy with regard to lead is to
minimise the exposure of the same to the
environment, its employees and incidental or
casual contact. Its policy in regard to acid is to
prevent low pH contamination of the
environment and humans. Our policy in regard
to electricity consumption is to reduce our
costs to the fullest extent possible.
Battery Technologies is in the process of
pursuing ISO 18001 accreditation and it is
expected that Powertech Batteries Port Elizabeth
will have achieved accreditation by the end of
January 2009. Those sites that are not
ISO 18001-certifi ed and low-impact sites, are
controlled by local management with oversight
through frequent reports conducted by
independent assessment authorities. These sites
are, however, ISO 9001 accredited.
POWERTECH
Powertech Transformers commissioned external
audits by accredited bodies during the year
and is both ISO 14001 and ISO 18001-certifi ed.
The company also has a third-party certifi ed
ISO 14001 EMS in place for Pretoria West.
DPM’s Cape Town operation is also third-party
ISO 14001 certifi ed and management regularly
reviews any issues raised by the Altron internal
audit function, external audit groups and
customer audits. Due to space constraints and
the condition of equipment, DPM’s management
does not believe it will be possible for the
company’s Booysen’s operation to obtain
ISO 14001 certifi cation and thus proposes to
relocate the operation to a new, more suitable
site that will comply with the ISO standards.
During 2007, Calidus and Crabtree
commissioned MS Alexander and Associates,
an independent consulting fi rm, to conduct an
environmental compliance report on both
operations. These reports established:
whether the companies have successfully
identifi ed any pertinent environmental risks;
whether such risks are being successfully
addressed;
whether environmental management systems
are in place; and
The overall status and rating of the
operations compared to both local and
international standards.
The report covered the full ambit of
environmental issues including noise pollution,
ISO 14001, executive policy statement, legal
permits, international agreements and
protocols, hazardous substances, chemicals
used/stored, emissions to the atmosphere,
rehabilitation (remediation of property), waste,
illumination, complaints or criminal charges,
water, toxic waste and radio active
substances, major hazardous installations
(MHi), dust, fi re spread, PCBs, clean-up
costs, sustainability, and emergency planning.
Energy solutions at Strike
Powertech Energy Solutions (PES),
a division of Strike, provides
standby power solutions in the form
of diesel generators. It recently
secured a R113 million contract to
supply 45MW of energy to a large
mining house.
AltronAnnual Report 200876
Jose Simoes, Business Development Manager (left), and Derick Deyzel, Divisional Executive of Retail ATM (right), from Bytes Specialised Solutions with the UPS system.
Environment continued
equipment and oils. The PCB leakages from
DPM’s transformer storage tanks into the soil
occurred prior to the chemicals being banned.
However, DPM has worked closely with the
Department of Water Affairs to monitor and
manage the situation. DPM has also sampled oil,
well and groundwater samples at its other
premises in order to determine if similar
leakages may have occurred.
The comprehensiveness of this monitoring
and management programme is evident in the
fact that DPM was granted its ISO 14001
accreditation.
Heavy metal plume at DPM’s Booysens plant
The Booysens plant underwent a similar study
and although there was no evidence of any
PCBs in the ground samples, heavy metals were
detected. These are thought to be more related
to mining activities than transformer operations
but management has adopted a proposal to
monitor the movement of the plume at the plant.
Transformer oil spillages
From time to time each plant has minor
transformer oil spillages but these are of no
major signifi cance. Each such incidence is
recorded and preventative measures taken.
Oil seepage plume at Powertech Calidus
The MS Alexander & Associates
environmental compliance report carried out
at Calidus highlighted the fact that there has
been gradual seepage of oil on the ground
workshop area, leading to a plume of about
3 metres in diameter. This is not a major spill
but still requires clean-up, which Calidus is
attending to. The report further suggested
that Calidus educate all supervisors and
managers on how to safely clean and contain
spillages and plans are in place to train all
employees about the impact of spillages, on
the environment and on human lives. Calidus
has also made budgetary plans to purchase
additional spill kits.
ALTECH
To comply with European Community
requirements, including RoHS and Waste
Electrical and Electronic Equipment (WEEE)
directives, Altech UEC had eliminated all lead
and harmful substances used in its production
processes.
Material issue
Pollution and emissions
Pollutions and emissions are identifi ed through
the environmental auditing processes that
Altron has in place at operations that display a
high exposure to these risks. Data on the most
pertinent risks is collected annually in order to
measure the trends in our performance over
time. The current results, compared with
previous years’ performance, are tabulated in
table E.16 of the 2007 environmental survey
conducted for our submission to the JSE SRI
Index (see Appendix C on page 89).
A summary of pollutions and emissions, as well
as the company’s response to them follows:
DPM’s shot-blasting plant
In its tanks manufacturing division, DPM’s
shot-blasting plant is fi tted with separating
equipment to minimise emissions to the
atmosphere while the emissions from zinc
spraying fumes and dust are trapped using a
water curtain. At the tank cleaning facility, acid
is neutralised and discharged only once it
meets the standards set out by the Department
of Water Affairs. Any areas where oil fi lling of
transformers takes place are adequately
insulated to avoid oil penetration.
Polychlorinated biphenyls (PCBs) at DPM’s
Cape Town premises
During the certifi cation audit for ISO 14001
accreditation, polychlorinated biphenyls (PCBs)
were discovered in the ground soil system of its
Cape Town premises. PCBs are oil-like chemicals
and before their toxic nature was discovered,
they were widely used as insulation in electrical
Bytes partners with Absa to turn crisis into opportunity
Retail ATM, a division of Bytes
Specialised Solutions, responsible for
placement and management of Retail
ATMs for Absa, transformed a
signifi cant business risk into a new
stream of revenue. During an eight-
month pilot, the company developed
a power supply unit that is driven
by specially designed batteries
developed by Battery Technologies in
the Powertech group. These batteries
provide an uptime far exceeding
normal battery packs and similar
conventional UPS systems.
AltronAnnual Report 2008 77
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eliminated by a change in processes for
which Powertech Batteries has committed
R50 million.
Sulphuric acid seepage risk at Powertech
Batteries
At Powertech Batteries an epoxy fl oor coating,
which is a mixture of ‘silicone sand’ and a
sealant, is applied in the charge room areas
as well as in other areas where smaller
quantities of sulphuric acid are used. The
coating prevents any seepage into the
subterranean soil and water and is either
completely stripped off once a year (during
shutdown) or carefully repaired where the
coating has been breached.
Material issue
Energy usage and effi ciency
Energy usage and effi ciency is identifi ed
through the environmental auditing processes
at Powertech and measured separately at
each of its operations. Data is collected
annually in order to measure the trends in
performance over time. The current results,
compared with previous years’ performance,
are tabulated in table E.13 of the 2007
environmental survey conducted for our
submission to the JSE SRI index (see
Appendix C on page 89). A summary of our
initiatives to reduce our energy usage and
increase the overall energy effi ciency
throughout Altron follows:
Powersave@Altron: Meeting our
collective responsibility to save
energy
Altron recognises that every South African
stakeholder, from big industry and corporates
to small companies and individuals, has the
responsibility to save energy and reduce the
demand on power. As such, the Altron group
has implemented Powersave@Altron, a
group-wide energy-saving awareness
programme.
Heavy metal seepage at Crabtree in Wadeville
At Crabtree in Wadeville, the MS Alexander &
Associates environmental compliance report
found that lead powder, containing lead
stearate, tribasic lead sulphate and kulubrite,
is seeping from the waste disposal skip into
the stormwater system when it rains. Better
storage will help to solve the problem, which
is currently being caused by the skip being
over-full and Crabtree has taken immediate
action to dispose of the waste in a less
haphazard manner. The lead waste is also
being removed to an area away from the
stormwater drain system. Crabtree is in the
process of implementing systems to have
drain sampling conducted on a regular basis,
which will enable it to immediately identify and
control any future seepage of any kind into
the stormwater system.
Sulphuric acid emissions and pollution risks at
Powertech Batteries
Powertech Batteries uses two hazardous
substances, sulphuric acid and lead, during
the manufacture of lead acid batteries. The
handling of the acid causes continual minor
spillages which if not correctly controlled can
detrimentally affect the environment by
polluting the soil and subterranean water
systems under the concrete fl oor. Sulphuric
acid vapour emissions and lead seepage are
also environmentally detrimental. Recognising
its responsibility to mitigate such risks,
Powertech Batteries spent R130 000 on
upgrading the scrubber systems at its battery
factories in Port Elizabeth, which will reduce
sulphuric acid atmospheric emission.
Lead oxide dust and lead vapour at Powertech
Batteries
Lead oxide dust is being extracted into bag
houses following a R1.6 million capital
expenditure on automotive dust extraction at
the plant. There are plans for lead vapour
from conventional grid casting to be
Rentech combats theft of solar units
Theft of solar units has been a
considerable obstacle to their
expansion in South Africa. Rentech
has now harnessed international
technology from its supply partner
Uni-Solar, to produce solar modules
designed to be glued to a surface
in such a way that an attempt to
remove a unit will damage it
irreparably. Telkom is using these
modules, sticking up to four at a
time onto a metal backing sheet,
which means that if thieves want to
make off with the solar modules,
they need to be geared up to move
a unit that is 2.8m long and 1.6m
wide and can weigh up to 60kg.
State-of-the-art technology stores
the energy produced by the solar
modules in a maintenance-free
battery through a maximum power
point tracking charge controller.
some of these units are being used
to power traffi c lights during
periods of load-shedding.
Solar powered traffi c lights at intersections in Johannesburg supplied by Rentech.
AltronAnnual Report 200878
Environment continued
Material issue
Environmental impact of products and
services
Altron is in the interesting position that it markets
products and services that have both a positive
and negative impact on the environment,
presenting the Altron group with both risks and
opportunities. Waste is identifi ed through the
environmental auditing processes at Powertech,
and a number of indicators have been identifi ed
that relate to this issue. These are measured
separately at each of the company’s operations.
Data is collected annually in order to measure
the trends in our performance over time. The
current results, compared with previous years’
performance are tabulated in table E.14 of the
2007 environmental survey conducted for our
submission to the JSE SRI Index (see
Appendix C on page 89). A summary of our
initiatives to reduce our waste and improve
recycling or recovery throughout Altron follows:
POWERTECH
Powertech IST provides products and solutions
that contribute towards sustainable development
and sound environmental management. These
include off-gas fi ltration, fl ue gas cleaning,
process gas conditioning and compressed air
and other gaseous processes in the fl uid
systems sphere. Other solutions include the
treatment of industrial water to remove pollutants
which render the water suitable for re-use as
industrial or potable water.
Products and services from Powertech IST
Otokon
Powertech IST Otokon has expertise in energy
management and has fl ourished as a market
leader in providing demand-side management
services, with specialisation in process and
production rescheduling, compressed air and
cooling systems, industrial and residential hot
water control, co-generation and heat recovery
and motor systems. This company also plays a
key role in helping Eskom fi nding solutions to
decrease energy demands.
Reporting to the risk management committee,
a task team steered by Altron’s CE and other
key executives and members of senior
management, has determined three
objectives:
To create power-saving awareness among
all staff members.
To motivate and activate Altron group
companies to have their businesses
audited and the necessary energy-
effi cient changes applied in order to save
on their electricity costs and in this way to
qualify for Eskom’s rebate programme.
To create a basket of energy-saving
solutions which will be marketed internally
and externally.
In addition to the group-wide energy-saving
initiatives, Altron subsidiary companies are
making their own contribution to the reduction
of energy consumption.
POWERTECH
Powertech Transformers has replaced all its
factory lights with more energy effi cient
lighting, while Powertech IST has committed
to reducing power consumption by 15% –
20% and has embarked on a programme to
retro-fi t its entire premises with electronic
ballasts for its fl uorescent lights and to install
motion sensors that will ensure lights are
switched off automatically if nobody is
present in the building.
Powertech Batteries has invested R2 million
in the installation of power factor correction
equipment at its Port Elizabeth factory, which
has resulted in signifi cant reduced peak
consumption and the power factor rating has
increased from 0.7 to a new level of 0.9.
ALTECH
All of the Altech operations have invested in
additional standby generating capacity to
reduce their respective dependency on
Eskom power.
Hydrogen Fuel Cell System by Powertech IST
Powertech IST introduces the
GenCore 5 kW Fuel Cell System to
southern Africa from Plugpower Inc in
the USA. Over 500 of the GenCore
Fuel Cell systems are currently in the
fi eld in the United States, Turkey, the
United Kingdom, Asia, Europe and
over 40 systems in South Africa.
Installations are providing back-up
power for telecommunication networks
(fi xed line and wireless) and industrial
uninterruptible power supply
applications.
A fuel cell is an electrochemical
device, with virtually no moving parts,
that converts chemical energy directly
into electricity. Heat and pure water
are the only by-products. It produces
silent and clean direct current
electricity, like a battery. The inputs
required are hydrogen and air, while
the environmentally friendly outputs
are electrical power, heat and water.
There is no noise, no vibration and no
pollution.
AltronAnnual Report 2008 79
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ALTECH
Altech UEC’s packaging material waste is
recycled through a service provided by
Mondi, while steel waste is collected for
recycling by the Reclamation Group.
Hazardous waste is disposed of through
Wastetech, which issues Altech UEC with
certifi cates of safe disposal. Altech UEC
recycles its plastic waste and, in compliance
with European standards (RoHS and WEEE),
also recycles 66% of all decoders (such
fi gures are weight-determined).
Altech NamITech is in the process of
conducting a pilot project, issuing 10 000
corn-based biodegradable cards to one of its
major banking customers for evaluation and
approval, in order to establish potential
usability and market acceptance by their
client base. At ACS, any waste material that
cannot be recycled is disposed of using
specialist waste disposal companies
compliant with environmental best practices.
Recycling and saving water at Powertech
Batteries
In the past year, Powertech Batteries has
focused on recycling and water-saving
initiatives. It conducted a feasibility study on
water bath charging in its industrial plant, which
could result in a saving of 66 kilolitres of water
per day. The study on lead oxide waste paste
and water in the industrial battery plant has
been completed and a system of paste
recovery, which prevents wastage and further
treatment of lead oxide, has been devised. The
lead oxide is used in a damp waste format in the
downstream process, which reduces paste
wastage, water wastage and effl uent
neutralisation wastage by some 80% to 90%.
Wooden pallets which are subject to high
degrees of waste contamination are being
phased out in favour of reusable plastic pallets,
and Powertech Batteries has achieved a
conversion rate of approximately 25% in this
regard.
Around 160 tonnes of Powertech Batteries’ lead
waste is reclaimed and recycled while its liquid
effl uent is treated and discharged into the
municipal sewer. About 80 bags of personal
protective equipment are sent to landfi ll per
month with a licensed hazardous waste
contractor. Plastic is reclaimed and recycled
and all plastic wrapping and contaminated
wooden pallets are treated as hazardous waste
and disposed of accordingly. Powertech
Batteries’ scrap collection rates are at an all-time
high, with 100% of the scrap in respect of sales
concluded during the months of December
2007 and January 2008 being collected.
This rate of collection is monitored by SABMA
(South African Batteries Manufacturing
Association) which reports that this is the
highest achievement among all international
battery manufacturers.
Scrap battery recycling at Powertech Batteries, through its Willard brand
Powertech Batteries has embarked
on a scrap battery recycling
programme to raise funds for
planting indigenous trees in
disadvantaged communities.
Working in partnership with Food
and Trees for Africa, Powertech
Batteries is therefore not only
helping to offset its carbon footprint
by planting trees that naturally
reduce carbon dioxide in the
atmosphere and therefore control
global warming, but is also uplifting
local communities through urban
greening. The lead-acid batteries
are recycled in a multi-phase
process that creates lead ingots
from the lead grids and oxide
and plastic pellets from the
plastic parts. Old battery acid is
processed and treated to become
either water which is released into
the sewerage system, or sodium
sulphate, and odourless white
powder used in laundry detergent,
glass and textile manufacturing.
AltronAnnual Report 200880
Health and safety
aspects are monitored during monthly
safety inspections.
Employees play an active role in H&S in
the Altron group and SHE is an indicator
on every employee scorecard. H&S
representatives are appointed from the
workforce and all employees participate
in risk assessment via safety meetings
and mission-directed work-team
meetings, which form part of a monthly
SHE committee meeting. Security
personnel are contracted to guard access
to the Altron group premises and provide
protection of personnel and assets. There
is also security on all manufacturing
operations which includes CCTV
monitoring.
In addition, employees and their family
members who have been affected by
crime have access to counselling, where
required, through the employee
assistance programme. Powertech
Transformers has introduced the
Employee Wellness Programme run by
Procare which provides a service to
employees including those affected by
crime, while clinics and healthcare
departments are on hand at Aberdare
Cables to assist employees and refer
them to specialist support agencies
where necessary.
Altron’s internal audit department, in
conjunction with independent consultants,
MS Alexander & Associates, reports back to
the relevant risk management committees
on H&S risks throughout the Altron group.
POWERTECH
During 2007, Powertech Transformers
achieved one million man-hours without
a single lost-time injury. This company
(including DPM) has ISO 18001
certifi cation and all operations have H&S
committees in place, which champion the
broad spectrum of internal H&S matters.
Material issue
Internal Health and Safety
Altron takes the Health and Safety (H&S) of
all its employees very seriously, with the
CEO of each of the operations taking
ultimate responsibility for this issue. It is
guided by an internal H&S policy that covers
the entire Altron group. Each operation
within the Altron group complies with
the Occupational Health and Safety
Act (OHASA).
Management of H&S at Altron
Altron’s H&S systems include
comprehensive training, targets, risk
identifi cation, monitoring of performance
indicators, employee representation and
access to counselling. H&S is integrated
into line management responsibility as
part of their key performance areas. Line
and senior managers are appointed in
terms of section 16 of the OHASA Act.
Staff receive H&S training which
includes representation training, hazard
identifi cation and incident investigation.
A safety induction programme is targeted
at new employees and the company
conducts ongoing general safety
awareness training. Each year, fi rst-aiders
and fi re fi ghters are trained and Safety,
Health and Environment (SHE)
representatives appointed and trained.
Selected employees have been trained
as auditors in preparation for the
implementation of the ISO 18001 System.
The entire Powertech Batteries operation
will be assessed prior to the implementation
of ISO 18001 in October 2007.
The Altron group conducts regular
monitoring of key H&S performance
indicators (KPIs) which include frequency
rate, reportable injury-free frequency rate
and an occupational clinic report. The
engineering manager monitors the SHE
manager’s KPIs bi-annually and all safety
Issues within this section
Internal health and safety
HIV/Aids
Targets for H&S improvements
Maintain compliance through safety
audits and periodic safety inspections.
Internal and external audits, SHE
meetings and inspections.
A target of October / November
2008 has been set for full certifi cation
of the OHASA 18001 H&S System
(Powertech Batteries).
Incident rate, body part injuries,
implementing ISO 18001 by
March 2006 (Aberdare Cables).
Performance data for OHASA
CompanyAnnual DIFR
Annualsick rate
No of fatalities
Bytes Communica-tion Systems
Zero ±15% 1 (heat attack – not at work)
Bytes Corporate Services
None 29 man days
None
Bytes Document Solutions
None 4 563.5 man days (Jan to Dec 2007)
None
Bytes Healthcare Solutions
None 963 man days
None
Bytes Managed Services
None 3 637.5 man days (Jan to Dec 2007)
5 (4 car accidents and1 heart attack)
Bytes Systems Integration
None 31% None
AltronAnnual Report 2008 81
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potential biological effects of lead are
constantly monitored, and Powertech
Batteries has a range of additional
investigations which are conducted when
lead is suspected of causing ill health.
Education and counselling sessions
ensure that employees are thoroughly
familiar with the sources of lead in the
workplace, the potential dangers of
exposure and the importance of
biological monitoring and medical
surveillance. Precautionary measures are
emphasised, including the use of
personal protective equipment and
adherence to environmental,
housekeeping and personal hygiene
practices. In addition, meticulous training
is conducted on disposing of waste
material containing lead and cleaning
sites at which lead or material containing
lead has been used, handled or
processed. Powertech Batteries’ SHE
manager conducts regular rotational visits
and assists in the upgrading of any
non-compliant operations.
ALTECH
Apart from Altech UEC and Altech
NamITech, most of Altech’s other
operations pose a relatively low H&S risk
due to the fact that they are not
manufacturing in nature. However, Altech
still lists employee H&S as a key priority.
H&S committees with nominated
representatives and trained on-site
fi rst-aiders champion employee H&S
issues. Altron conducts regular H&S
audits on Altech and the Altech group
companies receive regular visits from the
Altech Risk Manager. All new employees
receive induction training which includes
an H&S component.
During the year Altech UEC trained fi ve
new fi rst-aid practitioners, using externally
accredited training contractors. This
increases the number of qualifi ed fi rst-
During the year, SABS conducted H&S
audits and no signifi cant issues were
raised.
At DPM, internal safety auditors and the
Altron internal audit department carried
out H&S audits. These highlighted the fact
that the Booysens plant is conducting
shot blasting, zinc spraying and painting
activities in areas not conducive for these
processes, an issue that will be rectifi ed
with the relocation to new premises.
DPM communicates to employees
regularly on SHE matters through briefi ng
sessions given by supervisors, various
training sessions given by the SHEQ
department and general communication
by plant general managers during
business briefi ng sessions.
Crabtree has identifi ed certain areas
where noise levels are over 85dB. These
are clearly demarcated and Crabtree
enforces the use of personal protective
equipment (PPE) in all such areas
to protect employees from damage
to hearing and hearing loss.
At Powertech Batteries, hazardous
substances such as lead and
sulphuric acid are present in varying
concentrations. Powertech Batteries has
developed rigorous procedures for
monitoring blood-lead levels in those
employees who are exposed to lead while
working. These include annual tests in
non-lead areas to monthly monitoring of
employees working in lead areas. If an
employee’s blood-lead level exceeds
legal limits, explicit mitigation steps are
immediately instituted. These include
removing the affected worker from the
lead area, investigating the possible
source and notifying the appropriate
co-workers and safety representatives.
No employees are returned to the lead
area until their blood-lead levels are well
below the stipulated threshold. The
Performance
H&S performance at Aberdare Cables
Disabilityinjury
frequency rate Sick rate
PMB 1.5% 3%
PE 3.03% 3.3%
Gauteng 0% 3.21%
Greenhills 0% —
Edenvale 0% .014%
H&S performance at Powertech
Per-formance data
Total No of workers
2006/2007
2005/2006
Annual disabling injury rate
3 294 (Powertech factory workers) 0.9 1.2
Annual sickness rate
3 294 (Powertech factory workers) 4.2 3.6
No of fatalities 0 0
Employee educational and counselling sessions form part of induction processes.
AltronAnnual Report 200882
Health and safety continued
Material issue
HIV/Aids
Addressing direct impacts of HIV/Aids
While previously relying on government
published HIV/Aids statistics to gauge the
impact of HIV/Aids on its businesses, Altron has
come to recognise the necessity of conducting
an in depth study of prevalence rates across its
diverse operations. Whereas in the past,
operations have had ad hoc policies and
programmes in place including voluntary
counselling and testing, Altron aims to provide
guidance at group level to operations in terms of
policy and practices for addressing HIV/Aids,
and has consequently embarked on a major
study of the impact of HIV/Aids across all its
operations.
Working in conjunction with Aurum Institute of
Health Research, a not-for-profi t public benefi t
organisation that conducts research and
supports companies in assessing and mitigating
the impact of HIV/Aids, Altron is developing a
phased approach to managing this impact that
will consist of both a study of the actual
prevalence and impact of HIV and Aids on its
business, and assessing the effect of HIV on key
suppliers and market groups.
This project commenced in March 2007 and
made the following fi ndings and
recommendations in 2008:
Findings:
– Prevalence in Altron is estimated between
5% and 11%.
– Economic impact is predicted to vary
between 0.4% of payroll in Bytes to 1,1% in
Powertech.
– The direct risks in Altron are manageable
and HIV does not currently pose a direct
threat to the business operations in any of
the three sub-holding groups.
– The most signifi cant risks are likely to take
the form of supply chain disruptions, loss
of skilled individuals and HIV risks in
customer bases.
aiders to 25 and there are plans to increase the
number of employees trained in fi re-fi ghting to 47.
At Altech NamITech, an occupational doctor and
nursing sister have been contracted to provide
on-site services to employees, including HIV and
Aids support services.
At Altech Netstar, the key occupational H&S risk
area is the helicopter recovery service. In June
2007, a helicopter crashed on take-off and the air
tracker sustained severe injures that required
more than 60 days off duty. In all such incidents a
full enquiry is carried out in accordance with fl ight
safety legislation to establish the cause of the
accident and counselling provided for affected
employees. In November 2007, there was an
accident in which two people were injured but no
deaths were reported.
In April 2008, an accident occurred at the Rand
Airport in which both the pilot and air tracker were
killed. Investigations into the cause of the accident
are still under way. While the responsibility for
these incidents lies with the subcontracted
company, National Airways Corporation (NAC),
Altech Netstar nonetheless views these incidents
and ongoing safety with utmost concern. All pilots
are currently undergoing competency tests
administered by an independent authority.
Altech Autopage Cellular uses external suppliers
to train and provide information sessions to staff
on H&S issues. Audits are carried out on a regular
basis, the most recent of which was conducted on
the company’s older building. While the results of
this audit are still pending, Altech Autopage
Cellular has embarked on a revamp of the
building and the completion of a new building has
gone a long way to rectifying staff overcrowding
issues at the old site.
Altech’s operations subscribe to all OHASA H&S
requirements and have monthly safety committee
meetings where all issues are discussed, minutes
taken and decisions acted upon.
Air response agreement
Altech Netstar has entered into an air
response agreement with the National
Airways Corporation (Pty) Limited
(NAC) in terms of which they provide
a 24 hour airborne reaction service.
NAC provides the pilots and aircrafts
to Altech Netstar and bears full
responsibility for the safety of the
aircraft and crew, despite Altech
Netstar branding.
AltronAnnual Report 2008 83
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
education and awareness effort. This was
done by way of a workshop with senior
management during which the origins,
magnitude and projected outcome of the
epidemic were discussed. Future efforts
were discussed and decided upon.
The training of peer educators by Epicentre
and the provision of training kits followed
this workshop.
Initiatives
Powertech Transformers
The occupational health clinic at Powertech
Transformers follows international safe work
standards to prevent transmission,
including a needlestick protocol as well as
antiretrovirals (ARVs) on site. This goes for
the fi rst aiders as well. Powertech
Transformers has an ongoing education
programme that displays posters and other
training aids around the worksite. This
programme culminates on 1 December
each year with a voluntary counselling and
testing campaign. The peer educators that
were trained three years ago will be
retrained in 2008.
Medical, nursing and counselling services
are available on certain sites. Medical aids
have established disease management
programmes and provide ARVs and
prophylactic drugs. Immune boosting
meals called e-pap are provided by various
subsidiary companies.
Sponsoring community-based care
Altron sponsors the publication of an
annual Aids guide for distribution across
the country. Altron also provides an annual
sponsorship to SA Medical Foundation
and Somerset Hospital for treatment, care
and support. See also The Altron Group In
Social and Enterprise Development Report
on the Altron website www.altron.co.za.
Recommendations: Altron should:
– undertake an evaluation of its
suppliers to ensure that adequate
systems are in place to ensure that
there are no disruptions, particularly
at Powertech;
– assess higher risk units situated in
provinces such as Gauteng and
KwaZulu-Natal;
– formulate a comprehensive HIV/Aids
policy to be adopted across the Altron
group; and
– monitor absenteeism rates as this can
highlight increasing prevalence and
identify individuals who may benefi t
from a wellness programme or other
intervention.
Altron is formulating a response based on
these fi ndings and recommendations, but
will also be informed by international best
practice and the dti CoGP. Local guidelines
studied include NEDLAC, Anglo American,
Goldfi elds, and other leading employers in
heavy industry.
Awareness
Various operations have established
HIV/Aids committees represented by
management, unions and the workforce.
Activities predominantly focus on education
and awareness programmes. A Knowledge,
Attitudes and Practices (KAP) survey was
performed by the National Institute
Community Development and Management,
an external service provider in conjunction
with the Sociology Department of the VISTA
University. The fi ndings were presented to
the workforce and played a signifi cant role
in raising awareness. Further education and
awareness efforts were focused to address
the gaps identifi ed by the KAP survey.
A second external service provider,
Epicentre, was contracted to add to the
AltronAnnual Report 200884
Appendix A
Index to issues identified by the JSE SRI
Social, environmental and other ethical (SEE) issues/risks Relevance and significance
Reference in report
Compliance with impending or potential laws/regulations
Relevant and significant. Legal compliance and risks are reported on bi-annually at both the Altron risk management and audit committee levels. Detailed reports setting out all litigation at Altron, Altech, Bytes and Powertech group levels are tabled at these meetings. A report evidencing such legal compliance and litigation matters is available on request.
46 – 47,95 – 96,
100, 103 – 105
Product quality/recall Relevant and significant. Comprehensive quality assurance programmes and certifications are in place throughout the Altron group to ensure that the risk of a product recall is mitigated. Insurances are in place to cover the group in the event that a recall is necessary.
Product-related litigation Relevant but not significant. n/a
Reputation issues linked to supply chains
Relevant but not significant. The number of retail goods supplied by the Altron group is minimal.
n/a
Reputation issues linked to NGO/community campaigns
Not applicable. n/a
Reputation issues linked to human rights
Not applicable. n/a
Bribery/corruption Relevant and significant. Our approach is detailed in the corporate code of conduct as contained in the Altron policy manual. The same standards applied to South Africa apply to our foreign operations.
46 – 47
Occupational health and safety Relevant and significant. We are guided by the regulations prescribed in terms of OHASA.
80 – 82
Attraction and retention of skilled/key employees
Relevant and significant. The loss of key skills throughout the Altron group has been identified as a material risk.
59 – 60
Impact on workforce of HIV/Aids
Relevant but not significant. An independent study has been conducted by the Aurum Institute of Health on the prevalence and incidence of HIV/Aids on the Altron group. See the commentary under HIV/Aids.
82 – 83
Risk of major negative environmental events
Relevant and significant. These risks are separately reported on by an independent consultant MS Alexander & Associates and detailed reports provided at risk management committee meetings as well as via the Altron internal audit department. ISO14001 systems are in place throughout the Altron group and corrective and remedial action plans frequently implemented to obviate against any environmental degradation.
70 – 77
Risks or opportunities from future carbon emissions restrictions
Relevant but not significant. A position paper has been drafted by PricewaterhouseCoopers addressing these issues from an Altron group perspective.
71 – 73
Risks or opportunities from developing sustainable products/processes
Relevant and significant. See Altron Products and Services Guide at www.altron.co.za
See Sustainability report 39 – 84
In respect of social, environmental and other ethical (SEE) challenges, risks and opportunities, Altron monitors potential liabilities and
takes appropriate action to mitigate against these risks. As and when liabilities occur, these are addressed at the appropriate forums
and in the appropriate manner ie in annual financial statements, risk management committee reports, etc and the necessary and
appropriate disclosures made to shareholders either in terms of the media or the annual report.
AltronAnnual Report 2008 85
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FINANCIAL STATEMENTS
2007 Environmental Survey (for JSE SRI Index)
E12. ECO-EFFICIENCY
The following data can be used as denominators to produce eco-efficiency ratios (GRI 2.8). This data relates to the same operations as
the data on energy, waste emissions, etc. requested in the next tables E13 – E16. Data has been included for the last three reporting
years for the companies in the Altron group with the highest environmental impact.
Company-wide Units 2004/5 2005/6 2006/7
Volume of production or services Aberdare Cables – copper tonnes 34 000 38 000 48 000
Powertech Transformers – MVA 4 557 6 983 6 055
Altech – decoders/set-top boxes 595 000 723 000 853 000
Number of FTE (full-time equivalents)
Calidus 102 114 113
Floor space area Aberdare Cables – m2 112 000 112 000 112 000
Powertech Transformers – m2 47 500 47 500 47 500
Calidus – m2 7 500 7 500 7 500
Altech N/C N/C N/C
Turnover Aberdare Cables – Rm 1 400 1 800 3 100
Calidus – R’000 80 107 87 717 106 823
Operations covered Units 2004/5 2005/6 2006/7
Volume of production or services Powertech Batteries – battery cells 1 602 175 1 577 293 1 505 843
Number of FTE (full-time equivalents)
Powertech Batteries520 537 516
Floor space area Powertech Batteries – m2 55 669 55 669 55 669
Turnover Powertech Batteries – R’000 454 035 466 278 492 771
Appendix B
AltronAnnual Report 200886
Appendix B continued
E13. ENERGY DATA
The table below contains absolute figures for different divisions separately, particularly where denominators are in different units.
GRI ref. Indicator Units % coverage 20004/05 2005/6 2006/7 Target
EN3 Energy use Powertech Batteries – KWh 53 418 610 39 331 437
Aberdare Cables – MWh 44 240 51 071 57 904
Powertech Transformers – GJ 100 68 771 68 715 69 119
DPM – kg 561 708 400 000
Calidus – KWh 100 85 000 91 000 105 000 100 000
Altech – KWh 100 250 000 475 000 306 250 Rationalise with
ISO 14001 in 2nd quarter
of 2008
EN8 CO2 (tonnes) Powertech
Batteries – Tonnes 45 642.35 32 085.03
Powertech Transformers – Tonnes 100 3 088 3 072 3 004
EN30 Other
AltronAnnual Report 2008 87
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FINANCIAL STATEMENTS
E14. WASTE DATA
Data is provided in the form of absolute figures as well as percentages of product. Different divisions are listed separately, noting the
specific units of the denominators.
GRI ref. Indicator Units % coverage 2004/5 2005/6 2006/7 Target
EN11 Waste generation (total tonnes)
Aberdare Cables – Tonnes 100 100 6 800 9 300
Powertech Transformers – Tonnes 100 2 999
DPM – kg 6 000 4 000
Calidus – Tonnes 100 266 294 326 290
Altech – Tonnes 100 1100 1180 2007: +/- 1400
=/- 1200 rationalise in Q2 of 2008
with ISO 14001
to landfill (%) Aberdare Cables 40 39 39 35
Altech 20 25 20 300 200
to incineration (%) Altech 10 15 10 0 10
to energy recovery (%)
EN11 recycled or reused (%)
Powertech Batteries – kg 3 550 266 3 686 333 3 330 290
Aberdare Cables – % 30 31 33 38
DPM – kg 12 500
Altech 70 65 70 85 90
EN31 Hazardous waste generation
Aberdare Cables – Tonnes 15 14 13 10
Powertech Transformers – Tonnes 144
DPM – Tonnes 2 500 1 500
Other Aberdare Cables – Tonnes 15 16 15 15
AltronAnnual Report 200888
Appendix B continued
E15. WATER USE DATA
Data is listed for the different divisions separately, noting changes to the units of denominators for the different activities.
GRI ref. Indicator Units % Coverage 20004/05 2005/6 2006/7 Target
EN5 Water consumption (m3)1
Powertech Batteries – m3 174 521 124 447
Aberdare Cables – Megalitres 100 251 234 248 255
Powertech Transformers – m3 100 24 705 28 357 29 342
Altech – k
1 760 1 880 20 312
Looking at savings as
part of ISO
DPM – k 12 756
Calidus – k 100 9 215 9 777 15 574 15 000
Other
1Sum of all freshwater used, excluding cooling water.
E16. AIR EMISSION DATA
GRI ref. Indicator Units % Coverage 20004/05 2005/6 2006/7 Target
EN10 NOx Powertech Batteries – Tonnes 174.51 120.80
Altech – Tonnes n/a n/a n/a n/a n/a
SOx Powertech Batteries – Tonnes 372.32 257.73
Altech n/a n/a n/a n/a n/a
EN9; EN30
VOC Powertech Transformers – Tonnes 100 27 37 44
Altech – litres 200 0 0 0
Particulate matter Powertech Batteries – Tonnes 14 270.87 9 878.44
Other
AltronAnnual Report 2008 89
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Appendix C – GRI content index
Altron is self declaring a C-level of application. The following table lists the GRI indicators that apply.
G3 Indicator Description Page/s
Str
ateg
y
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
16, 20 – 24
Org
anis
atio
nal p
rofil
e
2.1 Name of the organisation 2
2.2 Primary products, brands, and/or services 2 – 3
2.3 Operational structure of the organisation 2 – 3
2.4 Head office location IBC (203)
2.5 Number of countries where Altron operates, and names of countries with major operations relevant to the sustainability issues covered in this report
8 – 9
2.6 Nature of ownership and legal form 2 – 3
2.7 Markets served 2 – 3
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
6212 – 13, 44, 12912 – 13160
2.9 Significant changes in the reporting organisation during period under review N/A
2.10 Awards received during the reporting period 41
Rep
ort s
cope
and
bou
ndar
y
3.1 Reporting period 40
3.2 Date of most recent previous report 40
3.3 Reporting cycle 40
3.4 Contact details for further information about this report 41
3.5 Process for: determining materiality process for prioritising topics in the report identifying stakeholders expected to use this report
45
3.6 Report boundary 40
3.7 Limitations on the scope or boundary of the report 40
3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities and outsourced operations 40
3.12 GRI table 89
Gov
erna
nce
4.1 Governance structure of the organisation 95 – 107
4.2 Indicate whether the chairman is also an executive officer, and if so, reasons for this arrangement 97
4.3 Number of independent and/or non-executive members 97
4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the board 51, 107
4.14 List of stakeholder groups engaged by the organisation 45
4.15 Basis for identification and selection of stakeholders with whom to engage 45
Per
form
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
44 – 45
EC7 Procedures for local hiring and proportion of senior management hired from the local community 61, 105
EN10 Percentage and total volume of water recycled and reused 88
EN23 Total number and volume of significant spills 70
EN26 Initiatives to mitigate environmental impacts of products and services and extent of impact mitigation 70 – 73, 78 – 79
EN30 Total environmental protection expenditures and investments by type n/a
LA3 Benefits provided to full-time employees that are not provided to part-time or temporary employees 110 – 111
LA7 Rates of injury, occupational diseases, lost days, absenteeism and fatalities 80, 81, 82
LA8 Education, training, counselling, prevention and risk-control programmes in place to assist workforce members, their families or community members, regarding serious diseases
81, 82
LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings
59, 60, 63
LA13 Composition of governance bodies in terms of diversity and breakdown of employees per category according to gender and other relevant indicators of diversity
62
AltronAnnual Report 200890
Altron shareholder analysis – compiled by Verify Solutions utilising the company’s transfer secretaries’ records as at 29 February 2008
Shareholder spread – ordinary shares
Number ofshareholdings % Number of shares %
1 – 500 shares 1 234 37.21 279 986 0.26
501 – 1 000 shares 613 18.49 502 605 0.48
1 001 – 5 000 shares 970 29.25 2 380 803 2.25
5 001 – 10 000 shares 178 5.37 1 344 221 1.27
10 001 – 50 000 shares 213 6.42 5 010 093 4.74
50 001 – 100 000 shares 42 1.27 3 055 750 2.89
Over 100 000 shares 66 1.99 93 095 673 88.11
3 316 100.00 105 669 131 100.00
Distribution of shareholders – ordinary shares
Number ofshareholdings % Number of shares %
Banks 38 1.15 2 068 867 1.96
Close corporations 51 1.54 77 376 0.07
Endowment funds 20 0.60 345 698 0.33
Holding company 1 0.03 50 630 527 47.91
Individuals 2 363 71.26 13 551 123 12.82
Insurance companies 20 0.60 4 373 057 4.14
Investment companies 21 0.63 4 691 681 4.44
Medical aid schemes 9 0.27 77 294 0.07
Mutual funds 120 3.62 9 855 918 9.33
Nominees and trusts 413 12.46 2 788 851 2.64
Other corporations 47 1.42 205 983 0.20
Private companies 82 2.47 1 245 589 1.18
Public companies 8 0.24 55 340 0.05
Repurchased shares 1 0.03 3 246 469 3.07
Retirement funds 122 3.68 12 455 358 11.79
3 316 100.00 105 669 131 100.00
Shareholder analysis
AltronAnnual Report 2008 91
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Shareholder spread – participating preference shares
Number ofshareholdings % Number of shares %
1 – 500 shares 4 421 55.13 662 934 0.28
501 – 1 000 shares 971 12.11 750 658 0.32
1 001 – 5 000 shares 1 591 19.84 3 684 743 1.55
5 001 – 10 000 shares 321 4.00 2 360 659 0.99
10 001 – 50 000 shares 405 5.05 9 422 132 3.97
50 001 – 100 000 shares 97 1.21 6 793 920 2.86
Over 100 000 shares 213 2.66 213 863 231 90.03
8 019 100.00 237 538 277 100.00
Distribution of shareholders – participating preference shares
Number ofshareholdings % Number of shares %
Banks 56 0.70 11 831 359 4.98
Close corporations 90 1.12 182 146 0.08
Endowment funds 51 0.64 778 863 0.33
Holding company 1 0.01 16 775 627 7.06
Individuals 6 291 78.45 15 900 311 6.69
Insurance companies 46 0.57 17 352 759 7.30
Investment companies 39 0.49 22 846 812 9.62
Medical aid schemes 14 0.17 533 182 0.22
Mutual funds 221 2.76 57 173 871 24.07
Nominees and trusts 758 9.45 9 019 033 3.80
Other corporations 53 0.66 274 885 0.12
Private companies 148 1.85 1 054 727 0.44
Public companies 9 0.11 41 870 0.02
Repurchased shares 2 0.03 27 698 875 11.66
Retirement funds 240 2.99 56 073 957 23.61
8 019 100.00 237 538 277 100.00
AltronAnnual Report 200892
Shareholder analysis continued
Stock exchange performance during the past six years
2008 2007 2006 2005 2004 2003
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Ordi-nary
Partici-pating
pre-ference
Market value per share (cents)
– at year end 3 700 3 600 4 478 4 200 2 550 2 250 1 555 1 538 1 105 1 125 820 750
– highest 5 600 5 100 5 000 4 500 2 610 2 350 1 725 1 665 1 150 1 150 900 890
– lowest 3 500 3 320 2 350 2 100 1 460 1 385 1 100 1 099 740 680 740 720
Number of shares traded (000s) 14 496 89 796 9 023 68 696 20 079 49 069 18 879 49 903 6 634 23 504 7 604 22 980
Value of shares traded (R’000) 654 634 3 866 991 271 172 1 965 779 398 947 903 016 254 339 649 083 61 880 19 927 61 542 179 560
Total volume traded as % of total issued shares 13.72 37.8 9.28 32.2 20.7 23.1 19.4 23.9 6.8 11.5 7.8 11.4
Shareholder spread
Ordinary shares Participating preference shares
Numberof share-holdings %
Numberof shares %
Numberof share-holdings %
Numberof shares %
Public 3 307 99.73 42 387 086 40.12 8 007 99.86 186 412 344 78.48
Non-public 9 0.27 63 282 045 59.88 12 0.14 51 125 933 21.52
AltronAnnual Report 2008 93
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FINANCIAL STATEMENTS
Major shareholders holding 2% or more of the company’s listed ordinary shares as at 29 February 2008
Numberof shares %
Biltron (Pty) Limited 50 630 527 47.91
Venter, WP 8 694 070 8.23
Public Investment Corporation 7 411 052 7.01
Old Mutual 5 013 247 4.74
Altron Finance (Pty) Limited 3 246 469 3.07
Liberty Group 2 942 411 2.78
Investment Solutions 2 233 692 2.11
Major shareholders holding 2% or more of the company’s listed participating preference shares as at 29 February 2008
Numberof shares %
Public Investment Corporation 28 911 738 12.17
Altron Finance (Pty) Limited 27 698 875 11.66
Old Mutual 22 514 038 9.48
Biltron (Pty) Limited 16 775 627 7.06
Liberty Group 14 697 698 6.19
Nedbank Group 13 196 553 5.55
Investment Solutions 9 091 604 3.83
Sanlam 8 969 539 3.78
Venter, WP 6 246 731 2.63
Investec 5 232 303 2.20
AltronAnnual Report 200894
Shareholder analysis continued
Holders of participating preference shares are entitled to
receive financial statements, notices of general meetings
and other reports issued by Altron from time to time.
No resolution for the voluntary winding up of Altron or the
creation of shares ranking in priority to or pari passu with the
participating preference shares may be passed, unless the
participating preference shareholders have given their prior
consent thereto at a separate class meeting of the
participating preference shareholders.
Bonus or capitalisation awards
Holders of participating preference shares are entitled to
participate in any bonus or capitalisation issues or other offer
of securities made to the holders of the ordinary shares on
the basis that, in respect of each participating preference
share so held, the holder thereof will be offered or entitled to
receive such number of participating preference shares or
like securities having the same voting rights as the particular
preference shares on a basis and terms relative to each
ordinary share.
Distribution of assets
Holders of participating preference shares are entitled to
participate in any offer or distribution of assets made by
Altron to ordinary shareholders. The offer or distribution in
terms thereof in respect of each participating preference
share shall be on the basis and terms relative to each
ordinary share.
Winding up
Holders of participating preference shares are entitled on
winding up to receive out of the surplus assets in priority to
the holders of the ordinary shares, payment of the nominal
value per participating preference share. Thereafter, once the
ordinary shares have received a distribution of the equivalent
nominal value per participating preference share, each
participating preference share shall rank equally with the
ordinary shares in any surplus then remaining.
Variation of rights
The rights attaching to the participating preference shares
may be varied only with the prior consent thereto at a
separate class meeting of the participating preference
shareholders.
Summarised terms of the participating
preference shares
Altron has two securities listed on the JSE Limited (JSE),
namely ordinary shares and participating preference shares.
The ordinary and participating preference shares, other than in
respect of voting, rank pari passu for earnings and dividends.
The participating preference shares have been classified by the
JSE Limited as an “N” share, due to their lower voting rights.
Accordingly, both classes of shares must be taken into account
when determining the market capitalisation of Altron. The terms
of the participating preference shares are summarised below:
Par value (nominal value)
The participating preference shares have a par value of
0.01 cent per share while the ordinary shares have a par value
of 2 cents per share.
Earnings and dividends
The participating preference shares rank pari passu with the
ordinary shares in terms of earnings and dividends.
Voting
Holders of participating preference shares may attend general
meetings of the company but may only vote in the following
circumstances:
Where no dividend on the participating preference shares in
respect of any financial year has been declared and paid
within six months of the end of the financial year.
Upon the winding up of Altron.
The resolution before the meeting involves the disposal
of the whole or substantially the whole of the undertaking
of the company or the whole or the greater part of the
assets of the company.
The resolution before the meeting directly affects the rights
attaching to the participating preference shares.
Where dividends remain in arrears and unpaid for more
than six months.
Otherwise in accordance with Altron’s articles of association.
In such circumstances, a holder of the participating preference
shares will be entitled on a poll, to that proportion of the total
votes of Altron which the aggregate of the nominal value of the
participating preference shares held by him bears to the
aggregate nominal value of all the shares in Altron.
AltronAnnual Report 2008 95
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SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Altron corporate governance report
communication to stakeholders on non-financial issues, and our
endeavours to influence suppliers and contractors to improve
their own non-financial performance. We are also pleased to
have improved our ranking (from 33 to 28) and overall score
in the second annual Accountability Rating, which assesses
South African companies’ sustainability practices across
the dimensions of strategy, governance, performance
management, stakeholder engagement and public disclosure.
In 2007 Bytes, our wholly owned subsidiary was voted best
annual report in its sector, acknowledging that company’s
strong management and reporting standards.
Compliance
The requirement to uphold the principles of discipline,
independence, responsibility, fairness, social responsibility,
transparency and accountability of directors to all stakeholders
is entrenched in Altron’s internal controls and policy procedures
governing corporate conduct. In assessing the practices and
conduct of the group, two factors have been balanced:
Entrepreneurial freedom to take business risks and
initiatives leading to superior levels of performance and
return on shareholders’ investment.
Conforming to corporate governance standards, which can
impose constraints on management.
Within these guidelines the board has provided entrepreneurial
leadership to the company within a framework of prudent and
effective controls which enables risk to be assessed and
managed.
Independent rating of compliance with King II
The board is satisfied that Altron has made every practical
effort to comply with all material aspects of King II during the
review period, and these are reviewed regularly to incorporate
changes and developments in this field. Following the internal
self-assessment conducted by Altron in 2006 as to its levels of
compliance with corporate governance principles and
standards, the company engaged Corporate Governance
Accreditation (Pty) Limited (CGA) in 2007 to provide an
independent corporate governance rating and accreditation of
Altron and Bytes. This was successfully completed in 2007,
resulting in Altron and Bytes becoming the first companies in
South Africa to be independently accredited by CGA, and the
only companies on the JSE to be independently rated.
Introduction
From its humble beginnings as a small family owned
electronics firm with five employees in 1965, Altron has grown
to become Africa’s leading diversified high-technology group.
It now has an annual turnover exceeding R21 billion, maintains
a strong balance sheet, and has more than 14 000 employees
in over 150 companies and associates on five continents.
Notwithstanding this exponential growth, Altron has remained
a family-centric business with a strong culture of kinship. In
fact, the group’s success is attributable, in large measure, to
the commitment that has come from family ownership and the
personal passion and business continuity this has brought.
But our growth and success has required more than this:
meticulous attention to detail, careful cost control, and prudent
stewardship of our capital have all helped create value. At the
same time, our flexibility and ability to innovate keep us at the
leading edge of technology.
Despite strong family ties and our bias towards
entrepreneurship and action, the Altron group ensures that
it implements prudent and transparent corporate governance
procedures, in line with leading practice both locally and
abroad. We are also committed to ensuring that the interests
of Altron’s management are aligned with those of all its
shareholders, and are acutely aware of the need to be
accountable to and to communicate more fully with a far
broader range of our stakeholders in society.
To this end, our corporate governance report now provides
a more detailed account of both the financial and the range of
non-financial risks to which the group is exposed. We have also
embraced a number of management processes that reflect our
commitment to an integrated view of environmental, social and
economic considerations that affect, or are affected by, our
businesses. Accordingly, since 2005 we have been augmenting
and improving the information contained in our sustainability
report, to better reflect the Global Reporting Initiative’s
recommendations on sustainability reporting, as well as our
unique operating context in South Africa.
Our ongoing commitment and improvement in respect of
triple-bottom-line issues is reflected in two broad-based
measures of sustainability performance in South Africa.
Since 2004, when Altron first qualified for the JSE’s Social
Responsibility Investment (SRI) Index, we have incrementally
improved our performance and ranking in terms of our
AltronAnnual Report 200896
Altron corporate governance report continued
Approach
Leadership
The board supports the long-term sustainability of corporate
capital, balanced economic, social and environmental
performance and due consideration of legitimate stakeholder
involvement. The detailed responsibilities of the board, as set
out in its charter (initially approved in April 2002 and revised
and adopted by the board annually since February 2006),
include the duty to:
exercise objective, informed judgement on the business
affairs of the group;
determine and monitor the implementation of strategic plans
and financial, environmental and social objectives;
ensure that a system of policies and procedures is in place
and maintained and that suitable governance structures
exist to ensure the efficient and prudent stewardship of
the group;
ensure Altron complies in all material respects with all
relevant laws, regulations and codes of practice;
review and evaluate business risks regularly and ensure
comprehensive, appropriate internal controls are in place;
define levels of authority, reserving specific powers for itself
and delegating other matters to the chief executive;
continually monitor the exercise of delegated authority;
ensure an appropriate balance of power and authority on
the board so that no one person or block of persons has
unfettered power; and
identify and monitor non-financial aspects relevant to the
company’s business and ensure that the company acts
responsibly towards stakeholders with a legitimate interest
in its affairs.
Accountability
The board takes overall responsibility for the success of the
company. Its role is to exercise leadership and sound
judgement in directing the company to achieve sustainable
growth and to act in the best interests of stakeholders.
Results of independent rating of Altron and Bytes
The CGA-led concept has now been accepted by the
Institute of Directors. Further uptake will see the
development of a governance index. CGA is a world-first,
combining an internal tool with an external verification
process, thus enabling a board and its office bearers to be
fully informed of their responsibilities and duties. It also
provides a transparent window to all shareholders and is a
unique platform for full corporate governance accreditation.
All areas of governance are covered by the gap analysis
including, board functions, composition, roles and duties;
duties and responsibilities of executive and non-executive
directors, chairmen and CEOs; board committee
governance; risk management, internal and external audit;
and the full spectrum of integrated sustainability issues
including environmental, social responsibility, ethics,
diversity, BBBEE and HIV/Aids issues.
Altron obtained a result of 79% placing it at the top end
of the Silver Awards scale (between 65% and 80%) while
Bytes achieved a result of 67% thereby also attaining
Silver status.
Particular areas that the report highlighted as requiring
attention were:
Stakeholder relationships – The disclosure of voting issues
by institutional investors and their ability to influence
corporate strategy.
Integrated sustainability: – In order of priority, the main area
of weakness identified was that of issues relating to
corporate ethics.
In response to the CGA process, Altron has run a check on all
the items that were noted in the exception report. The two
issues noted above are dealt with in the sustainability report
included in this document (see pages 51 and 45 to 46
respectively). The company is satisfied that no material issues
were identified, and those that were have, for the most part,
been dealt with since the report. Altron will again be audited
by CGA in June/July 2008 to ascertain to what extent it has
improved upon its corporate governance structures and
processes.
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Particular areas of responsibility for the chairman include
strategic planning, relationships with principals, government
and customers, group economic empowerment, corporate
relations, top-level contact with regulatory bodies, and advice
and guidance on local and overseas acquisitions.
This level of involvement by the chairman is considered
essential by the board, given the intrinsic knowledge and
experience the chairman brings to bear in the effective running
of the board and guidance to the operational team. The
chairman’s duties are governed by a formal board-approved
mandate regulating the terms of reference of his office, and
this is reviewed from time to time when appropriate.
Operational management of the group is the responsibility of
the chief executive, Robert Venter. His responsibilities include,
among others, developing and recommending to the board a
long-term strategy and vision for the organisation that will
generate satisfactory stakeholder value, developing and
recommending to the board annual business plans and
budgets that support the organisation’s long-term strategy,
and managing the affairs of the organisation in accordance
with its values and objectives, as well as the general policies
and specific decisions of the board.
3. Directors
The non-executive directors bring value and insight to the
board. They are individuals of high calibre and integrity and
provide a depth of wisdom based on knowledge and
experience on a wide range of issues. The composition of the
board ensures a balance of power and authority, and negates
individual dominance in decision-making processes.
The non-executive directors have no fixed term of appointment
and no service contracts with Altron. Letters of appointment
confirm the terms of their service. Their fees are independent
of the group’s financial performance and they receive no share
options or bonuses.
Executive directors are bound by the standard terms and
conditions of employment for all Altron employees where their
notice periods are short-term, not exceeding 60 days. Directors
are subject to retirement by rotation and re-election by
shareholders at least once every three years under article 16 of
the articles of association. In this regard the Altron nomination
committee is active in annually assessing the performance of
those directors standing for re-election and makes formal
recommendations to the board and shareholders in this regard.
Transparency
Full and timeous disclosure of information to stakeholders is
prescribed by various policies governing communication and
conduct with stakeholders. During 2006 a formal disclosure
policy was approved by the Altron board (and subsequently
updated in February 2008), which regulates the nature, content
and timing of all disclosures of price-sensitive and non-price-
sensitive information to the investment community and
stakeholders.
Board structure and related matters
The board’s charter sets out its role, composition, materiality
levels, delegation of authority, proceedings at meetings,
director induction as well as composition and role of board
committees. The board charter is reviewed annually to ensure
its continued compliance with local and international best
practices and changes to the South African regulatory
environment.
1. Composition
Consistent with the company’s board charter, Altron has a unitary
board, constituted to both lead and control the company. Of the
14 serving directors, six are independent non-executive directors
(ie directors that are independent of management and free from
any business or other relationship which could materially interfere
with the exercise of their independent judgement), one is
non-executive and seven are executive directors. During the
period under review Ms Barbara Masekela was appointed as an
independent non-executive director to the Altron board and
Ms Diane Radley resigned as chief financial officer to take up the
position of Group Finance Director of Old Mutual SA (Pty) Limited.
2. Chairman and chief executive
In line with best practice, the roles of chairman and chief
executive are separate. The board is led by Dr Bill Venter,
founder and former chief executive of the group.
The chairman presides over meetings of the board, guiding the
integrity and effectiveness of the board governance process.
This includes ensuring that no individual dominates the
discussion, that relevant discussion takes place, that the
opinions of all directors relevant to the subject under
discussion are solicited and freely expressed and that board
discussions lead to appropriate decisions.
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Board and director responsibilities – members interact highly
effectively, board acts in a cohesive and responsible
manner. Policies are regularly reviewed and updated.
The chief executive is articulate, attentive and responsive,
while the other board members are competent and available
when needed for advice.
Board culture and relationships – there is a sense of
collegiality, minority views are respected and senior
management shows sufficient courtesy to the board.
Similar to the board evaluation, Altron’s board conducted a
committee evaluation (an exercise over and above the
self-evaluation exercises conducted by each of the committees
earlier in the year). Responses indicated that the various
committees function effectively with regard to competency,
teamwork, governance and reporting. Areas of weakness
included the paucity of independent non-executive directors
and black female appointees. Also of concern is the Altron
audit committee’s oversight of the subholding companies’
(both public and private) audit committees which can affect the
Altron financial performance. As a result of the recent
enactment of the Corporate Laws Amendment Act, the Altron
audit committee resolved to assume the role and
responsibilities of the Bytes and Powertech audit committees
with the latter companies establishing financial review and risk
management committees which will report in at both the
subholding company and at the Altron audit committee level.
The areas of non-compliance identified by the board are
receiving attention and where appropriate have been remedied.
5. Company secretary
All directors have access to the advice and services of the
group company secretary who is responsible to the board for
ensuring compliance with procedures and applicable statutes
and regulations. To enable the board to function effectively, all
directors have full and timely access to all information that may
be relevant to the proper discharge of their duties and
obligations. This includes information such as corporate
announcements, investor communications and any other
developments which may affect Altron or its operations.
The office of the group company secretary is responsible for
facilitating this access.
To avoid conflicts of interest, board members must disclose
their interests in material contracts involving the group,
including shareholdings in Altron as well as any other
directorships. Board members must recuse themselves when
participation in deliberations or decision-making processes
could in any way be affected by vested interests.
4. Effectiveness of the board
The board evaluates its own effectiveness at least every two
years or more often if required by board changes, and
underwent a self-evaluation exercise in 2007. The self-
evaluation, completed by all 14 board members, examined six
areas, the findings of which can be summarised as follows:
Strategy and planning – generally believed to be clear,
understandable and appropriate for the markets in which
the group operates. Strategic planning has improved with
more interaction between executive and non-executive
directors. One suggestion was to focus more on direction
and less on ‘financials’, and for the chief executive’s report
to review key strategic issues.
Board structure and role – generally satisfied with spread of
talent, effective performance and involvement in major
business decisions. While delineation of roles was found to
be clear, a recommendation for consideration is the possible
reduction of executive representation on the main board,
while increasing the non-executive component, preferably
with independent non-executive directors. Further
recommendations included appointing additional black
directors to the board and ensuring a well-articulated
succession planning policy for the chairman and the
remaining executive directors.
Meeting processes – found to be excellent, effective and
professional. Of concern is the overload of statutory and
governance issues, resulting in less time available for
business.
Performance monitoring – generally believed that financial,
business and compliance systems are in place and
regularly monitored. There is a clear understanding of
Altron’s business risk, although an annual debate at board
level around risk as distinct from at a risk management
committee level would be valuable.
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director of the JSE and several other listed entities presented a
seminar to the group’s directors entitled “Leisurenet – lessons
to be learnt”.
The group company secretary is responsible for the functions
specified in section 268(G) of the Companies Act, of 1973
(as amended) (the Act). All meetings of shareholders,
directors, and board sub-committees are properly recorded as
per the requirements of section 242 of the Act. The removal of
the group company secretary would be a matter for the board
as a whole.
6. Board meetings
A minimum of four board meetings and two strategic sessions
are scheduled per financial year. Additional board meetings
may be convened when necessary. Four board meetings and
two strategy sessions were held during the past financial year.
The accompanying table details the attendance by each
director at board and strategic meetings during the year
under review:
All directors, executive and non-executive, may liaise with the
group company secretary on agenda items for board meetings.
Where appropriate, the directors may also consult with
independent professionals and advisors, at Altron’s expense.
The group company secretary provides counsel and guidance
to the board, individually and collectively, on their powers and
duties. He is also responsible for the development of director
training. All new directors are appropriately inducted to Altron
by the group company secretary and sponsor, which includes a
briefing on their fiduciary and statutory duties (including without
limitation the JSE Listings Requirements) and responsibilities as
well as two- to three-day induction visits to group operations
around South Africa. In addition, ongoing support and
resources are provided to directors in order to enable them to
extend and refresh their skills, knowledge and understanding
of the group. Professional development and training is provided
through regular updates on changes and proposed changes in
laws and regulations affecting the group or its businesses and
professional and skills training. During 2007, Nigel Payne a
Attendance at meetings
Director
Board Strategy
2007 2008 2007
May Aug Oct Feb Aug Nov
Dr WP Venter (chairman) ¸ ¸ ¸ ¸ —3 ¸
RE Venter ¸ ¸ ¸ ¸ ¸ ¸
MC Berzack ¸ ¸ ˚ ¸ —3 ¸
N Claussen ¸ ¸ ¸ ¸ ¸ ¸
PMO Curle ¸ ¸ ¸ ¸ ¸ ¸
MJ Lamberti ¸ ¸ ¸ ˚ —3 ¸
MJ Leeming ¸ ¸ ¸ ¸ —3 ¸
Dr PM Maduna ¸ ¸ ¸ ¸ —3 ¸
BJM Masekela —1 —1 —1 ¸ —1 —1
JRD Modise ¸ ¸2 ¸ ¸ —3 ¸
PD Redshaw ¸ ¸ ¸ ¸ ¸ ¸
Dr HA Serebro ¸ ¸ ¸ ¸ —3 ˚
CG Venter ˚ ¸ ˚ ¸ ¸ ¸
PL Wilmot ¸ ¸ ¸ ¸ —3 ¸
˚ Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.1 Appointed to the Altron board on 1 February 2008.2 Participated by way of teleconference.3 This strategy session excludes the non-executive director component of the board including the office of the chairman.
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Altron corporate governance report continued
– performing any internal audit or internal audit outsourcing
services for Altron or any of its relevant subsidiaries;
– performing any valuations on any business assets of
Altron, or any of its relevant subsidiaries, for which the
external auditors will be required to subsequently issue
an audit opinion;
– the provision of corporate finance advice, assistance or
services to Altron or any of its relevant subsidiaries;
– providing any legal or information technology (design or
implementation) consulting services to Altron or any of its
relevant subsidiaries; and
– conducting any due diligence exercises for and on behalf
of Altron or any of Altron’s relevant subsidiaries which
utilise Altron’s external auditors for audit-related services.
The permitted and/or qualified non-audit-related services
which the external auditors are permitted to render to Altron
include:
– tax compliance services in relation to and for and on
behalf of Altron;
– assurance-related work, but excluding implementation
consulting work which results in an impairment of the
external auditors’ independence, and
– opinion work not relating to or associated with any of the
prohibited services referred to above;
provided, however, that the Altron audit committee must
preapprove any proposed contract with the external
auditors for the provision of such permitted and/or qualified
non-audit related services to Altron and provided further that
these permitted and/or qualified non-audit related services
do not exceed 10% of the total Altron group audit fee
agreed by the Altron audit committee for the financial year
in question.
Services rendered by the external auditors during the period
under review, and preapproved by the audit committee
(within the financial parameters prescribed by the
committee), comprised mainly compliance and other
assurance-based engagements, including opinion work not
relating to, or associated with, any of the prohibited services
referred to above.
Role – the committee has written terms of reference and its
responsibilities include among others:
– considering and nominating to the board, the appointment
and/or termination of the external auditors, including their
independence and objectivity;
7. Board committees
The board has established several committees in which
non-executive directors play an active and pivotal role.
All committees operate under board-approved terms of
reference which, with the exception of the executive
committee’s terms of reference, were reviewed and updated
in May 2007 to further align them with best practice. All
committees, except the executive committee, are chaired by
an independent non-executive director who also attends the
annual general meeting to respond to stakeholder queries.
Members of each committee, except the executive committee,
are re-elected every year at the first board meeting following
the annual general meeting. The chairmen of the committees
are, in conjunction with the board, elected by the members of
each committee and hold office for not more than five
consecutive years, unless sound reasons cause the nomination
committee and the board to determine otherwise.
7.1 Executive committee
Members – Robert Venter (chairman), Craig Venter,
David Redshaw, Norbert Claussen, Peter Curle and
Onkgopotse Tabane. The chief financial officer is also a
member of this committee, but this position is currently
vacant. The executive structure appears on page 10 to 11.
Composition and proceedings – the committee meets monthly
with additional meetings convened as and when necessary.
Role – it is responsible for the operational activities of
the group, developing strategy and policy proposals for
consideration by the board and implementing the board’s
directives. It has a properly-constituted mandate and terms
of reference which is reviewed from time to time.
7.2 Audit committee
Members – Peter Wilmot (chairman), Mark Lamberti,
Mike Leeming and Jacob Modise.
Composition and proceedings – both the chief financial
officer and Robert Venter (chief executive) are required to
attend committee meetings. The committee meets
periodically with the group’s external and internal auditors
and Altron’s executive management. It also determines and
carefully monitors the use of the external auditors for
non-audit related services, and is guided by a formal policy
that precludes the external auditors from providing services
which would impair audit independence. Prohibited services
include:
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made recommendations to Altron’s subholding companies’
audit committees regarding their composition with specific
reference to the proposals contained in the Corporate Laws
Amendment Act.
External auditors attend meetings by invitation. At the year-end
audit committee meeting the chairman ensures that senior
management and the external auditors are able to report back
to the committee chairman on the audit process both candidly
and independently of each other.
Three meetings are scheduled annually, with special meetings
called as required. The committee met three times during the
year under review.
Attendance at meetings
Members (and invitees)
Audit
2007 2008
May Oct Feb
PL Wilmot (chairman) ¸ ¸ ¸
MJ Lamberti ˚ ¸ ¸
MJ Leeming ¸ ¸ ¸
JRD Modise ¸ ¸ ˚
N Claussen ¸1 ¸1 ¸1
PD Redshaw ˚1 ˚1 ˚1
CG Venter ˚1 ˚1 ¸1
RE Venter ¸1 ¸1 ¸1
˚ Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.
1 Attends by invitation and is not a member of the audit committee.
The internal and external auditors have unlimited access to
the chairman of the committee. The internal audit department
reports directly to the audit committee and is accountable to
the chief financial officer on day-to-day matters.
The external auditors and the head of internal audit attend
Altron’s annual general meeting to answer any queries raised
by stakeholders.
Reappointment of independent auditors
At an Altron audit committee meeting held on 28 February
2008, the committee considered the independence of the
external auditors KPMG Inc in accordance with section 270A
of the Corporate Laws Amendment Act. In assessing the
independence of the external auditors, the audit committee
satisfied itself that KPMG Inc:
– determining the audit fee of the external auditors;
– considering and setting mandatory term limits on the period
the lead audit partner of the external auditors may serve
the company;
– confirming internal audit’s charter and audit plan;
– determining with the external auditors the nature and scope
of the audit and ensuring coordination where more than one
firm is involved;
– reviewing the risk areas of the company’s operations to be
covered in the scope of internal and external audits; and
– reviewing interim and annual financial statements before
submission to the board focusing on:
– any changes in accounting policies and practices
– major judgemental areas
– significant adjustments arising from the audit
– the going-concern statement
– compliance with accounting standards
– compliance with stock exchange and statutory
requirements
– reliability and accuracy of the financial information
provided by management and to other users of financial
information
– discussing any problems and reservations arising from the
year end audit and any related matters that the external
auditors may wish to discuss.
Self-assessment exercise
Following the self-assessment exercise conducted in 2007, the
recommendations whereof were reported on in the 2007 annual
report, the audit committee has:
convened a third audit committee meeting annually to update
members on changes in accounting standards and other
emerging issues such as, among others, the audit committee
and auditor requirements prescribed in the Corporate Laws
Amendment Act and the proposed Companies Bill;
endorsed management’s decision to appoint Deloitte Tip-Offs
Anonymous – a dedicated and independent whistleblowing
programme, which has proved successful to date;
reviewed the proposed amended Altron group code of
conduct, as well as satisfied itself that executive management
regularly monitors compliance with the code;
endorsed management’s decision to implement Project
Everest, which has had the effect of measuring the group’s
financial performance in real time and against budgets; and
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An internal fraud hotline has enabled Altron associates and
employees to anonymously report suspected irregularities and
has proved an effective tool over the last four years. Throughout
the group, reported fraud remained at six incidents over the
reporting period, but representing a threefold increase in net
loss (net of recovery) to nearly R1.2 million compared to the
previous year. Incidents of theft reduced from 77 to 59, but the
net loss almost doubled to R3 million for the year compared
to the 2007 financial year. An aggressive drive to reinforce
our code of conduct and the ethics of the group has been
launched. In addition, from 1 March 2007, the Deloitte Tip-Offs
Anonymous independent hotline was introduced, which further
strengthened the group’s internal controls.
Altron tracks the number of crimes committed against the group
by outside parties, including hijackings and break-ins. During the
year under review, hijackings increased from one in the previous
year to seven, break-ins increased from four to six, while armed
robberies increased from seven incidents in the previous year
to 11. The total net loss from all incidents (internal and external)
doubled to
R5 million compared to the previous year.
As reported previously, PricewaterhouseCoopers had in 2005
performed an independent assessment of the effectiveness of
the Altron internal audit department, finding it to comply with
the Standards for the Professional Practice of Internal Auditing
as issued by the Institute of Internal Auditors and highly
commending it on its professionalism.
7.3 Remuneration committee
Members – Jacob Modise (chairman), Myron Berzack,
Peter Wilmot, Mark Lamberti and Dr Bill Venter.
Composition and proceedings – the committee comprises a
majority of independent non-executive directors.
Robert Venter (chief executive) has right of attendance at
committee meetings and the chief financial officer attends by
invitation. No executives participate in discussions on their
own remuneration and benefits. Two meetings are scheduled
annually with special meetings called as required. The
committee met twice during the year under review.
Role – this committee, in consultation with executive
management, ensures that the group’s directors and
senior executives are fairly rewarded for their individual
contributions to overall performance and are inline with
the Altron remuneration philosophy.
does not hold a financial interest (either directly or indirectly)
in Altron;
does not hold a position, either directly, or indirectly, that
gives the right or responsibility to exert significant influence
over the financial or accounting policies of Altron;
is not economically dependent on Altron, having specific
regard to the quantum of the audit fees paid by Altron and
its subholding companies to KPMG Inc during the period
under review in relation to its total fee base;
does not provide consulting or non-audit services to Altron or
its subholding companies which fall outside of the permitted or
qualified non-audit-related services as specified in the policy
for the use of the external auditors for non-audit-related
services and which could compromise the external auditors’
independence (see page 119 of the financial statements); and
including the individual registered auditors who undertake
the audit, do not have personal or business relationships of
immediate family, close relatives, partners, either directly or
indirectly, with Altron and its subholding companies.
Accordingly, the Altron audit committee is satisfied that
KPMG Inc is independent as contemplated by South African
independence laws and the applicable rules of the
International Federation of Accountants (IFAC), and nominated
the reappointment of KPMG Inc as registered auditors for the
2008/9 financial year. On 29 February 2008, the Altron board,
subject to shareholder approval, re-appointed KPMG Inc and
Mr MCA Hoffman, as the independent registered audit firm and
individual registered auditor of Altron respectively.
Internal controls and internal audit
Internal controls comprise methods and procedures adopted by
management to assist in achieving the objectives of
safeguarding assets, preventing and detecting error and fraud,
ensuring the accuracy and completeness of accounting records
and preparing reliable financial statements. The group’s
approach is detailed in the directors’ report on page 119
dealing with the approval of annual financial statements.
The internal audit function serves management and the board
by performing independent evaluations of the adequacy and
effectiveness of group companies’ controls, financial reporting
mechanisms and records, information systems and operations
and provides additional assurance on safeguarding group
assets and financial information.
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7.4 Risk management committee
Members – Mike Leeming (chairman), Norbert Claussen,
David Redshaw, Dr Harold Serebro, Onkgopotse Tabane,
Craig Venter, Robert Venter and Peter Wilmot.
Composition and proceedings – the committee has two
scheduled meetings each year and met twice during the
year under review.
Role – As the objective of risk management is to identify,
assess, manage and monitor risks to which the business
is exposed, Altron’s selected approach involves identifying
strategic risks, reviewing their impact, assessing the
probability of occurrence and monitoring the perceived
effectiveness of existing controls.
In understanding the risk universe, both the impact and
probability of risk are ranked on a nine-point scale: from
‘catastrophic’ to ‘negligible’ in relation to the impact and from
‘negligible’ to ‘confidently expected’ for probability. Inherent
risk is ranked similarly to the impact of risk while control
effectiveness is measured as either ‘good’, ‘satisfactory’,
‘corrective action required’ or ‘deficient’.
Depending on the value of the residual risk exposure,
management will then decide on its acceptability. If considered
high, an action plan – stipulating the responsible person,
required action and timeframe – will be put in place to reduce
the level of risk to a more acceptable level.
Self-evaluation exercise
The risk management committee conducted a self-evaluation
exercise during 2007. The committee believes that its
composition, frequency of meetings and authority are adequate
and that it operates in an atmosphere of openness and trust. It
identified increased monitoring of environmental risks and
opportunities, as well as the formulation of a group policy
regarding health and safety, as areas to be addressed going
forward. Its recommendation to establish an independent fraud
hotline has been addressed through the implementation of the
Deloitte Tip-Offs Anonymous fraud hotline.
Areas addressed consequent to the evaluation, included:
increased the number of independent assurers the group
engages with to verify risks ie:
– MS Alexander & Associates and
PricewaterhouseCoopers – environmental
– CGA – Corporate Governance
– Aurum Institute for Health Research – HIV/Aids
– Empowerdex – BBBEE
Self-assessment exercise
During 2007, the committee conducted a self-assessment
exercise to review its functioning and effectiveness.
The committee is satisfied that it has provided adequate
disclosure to shareholders, determined remuneration levels that
are sufficient to attract, motivate and retain senior executives of
Altron, and that performance-related elements of remuneration
constitute a large proportion of total remuneration packages.
Areas for improvement identified through the self-evaluation
included ongoing training on remuneration best practices and
trends to assist the committee in dealing with and negotiating
increasingly complex, performance-driven reward packages.
The committee will also continue to address succession
planning throughout the group in the next financial year.
In making improvements, the committee has:
satisfied itself that the remuneration packages of its senior
executives are market related. Several independent
consultants are used to benchmark these packages;
confirmed that the levels of funding of the Altron Group
Pension Fund and Altron Medical Aid are adequate
and appropriate;
agreed that non-executive directors should not be awarded
share options as this could compromise their independence
vis-à-vis the company;
reconsidered the methodology of payment of non-executive
directors’ fees by looking at introducing an attendance fee
component as opposed to solely a retainer; and
reconstituted the committee so that a majority of its
members are now independent non-executive directors.
Attendance at meetings
Members (and invitees)
Remuneration
2007 2008
May Feb
JRD Modise (chairman) ¸ ¸
MC Berzack ¸ ¸
MJ Lamberti —2 ¸
Dr WP Venter ¸ ¸
PL Wilmot ¸ ¸
RE Venter ¸1 ¸1
1 Has right of attendance but is not a member of the audit committee.2 Appointed to the Altron remuneration committee on 8 August 2007.
For further details on the remuneration of Altron’s executives
see the remuneration report on page 108.
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Altron corporate governance report continued
Several of the risks identified in the list above are described in
detail in the sustainability report, included within the pages of
this document. Those not dealt with in the sustainability report
are summarised hereunder:
Eskom’s electricity supply constraints
The group has been preparing for standby power in many of
its businesses over the last few years and the necessary
alternative power supplies have, for the most part, been
installed. At the same time the power crisis has created
opportunities and resulted in demand from businesses for
standby power solutions. In this regard the newly acquired IST
business in Powertech and Powertech Batteries, as well as the
newly established Powertech Energy Solutions business, have
played a major role in providing alternative power solutions with
meaningful orders received to date.
This risk is dealt with more comprehensively in the sustainability
report.
Human capital
The exodus and shortage of key skills within the South African
economy has necessitated the group initiating several projects
to attract, motivate and retain key skills. Again, this risk is dealt
with more comprehensively in the sustainability report.
Performance of sub-holding companies
In recent years, the Altron group has been growing off an
extremely high profit base which has placed pressure on the
group going forward in terms of growing its businesses
organically. As a result thereof, this has necessitated the group
considering strategic acquisition opportunities in order to
sustain the high profit base. Key acquisitions concluded
recently include among others a controlling interest in three
subsidiaries of the Sameer ICT Group within Altech, IST Group
(Pty) Limited and ABB’s 50% stake in Powertech Transformers
within Powertech and several acquisitions within the
Bytes group.
RSA dependency versus offshore exposure
The group has mitigated against its high dependency on the
South African economy by pursuing a policy of offshore
expansion into niche sectors where the group has extensive
experience. To this end, Bytes and Altech have concluded a
number of offshore acquisitions, while the group’s export
performance is driven by a dedicated export council.
bolstered the internal audit department to now include
production and environmental audits, as well as statutory
audits on the secretarial records;
improved and drafted guidelines on business and IT
continuity including where the responsibilities lie;
established a reputable independent fraud hotline with
Deloitte; and
adequately reported to stakeholders on the group’s material
risks as contained in the 2007 Altron annual report.
Attendance at meetings
Members (and invitees)
Risk
2007
April Oct
MJ Leeming (chairman) ¸ ¸
PL Wilmot ¸ ¸
N Claussen ¸ ¸
OJJ Tabane —1 —1
PD Redshaw ¸ ˚
Dr HA Serebro ¸ ¸
CG Venter ¸ ¸
RE Venter ¸ ˚
˚ Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.
1 Appointment to the risk management committee on 1 March 2008.
Material risks and opportunities facing the group
Altron defines material risks and opportunities as those that
have the potential to impact on shareholder value. The major
consolidated risks identified by the board during the review
period included:
Eskom’s electricity supply constraints and load shedding;
human capital ie skills shortages in certain areas of the
business;
performance of subholding companies and future growth
opportunities;
RSA dependency versus offshore exposure;
management structures;
progress in relation to broad-based black economic
empowerment;
dependence on Powertech/Aberdare Cables;
capacity constraints;
security of supply of key raw materials; and
political risk.
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to capacity constraints in being able to deliver the end product
or services to the customer within the specified deadlines.
The group has combated this risk by investing heavily in
increasing capacity in recent years, particularly within its
manufacturing operations, including developing and
retaining key skills as referred to under the section entitled
human capital above.
Security of supply of raw materials
This risk is particularly relevant to the Powertech group of
companies. Powertech mitigates this risk by developing
relationships with key suppliers, identifying alternative sources
of supply as well as continuously improving its supply chain
management, logistics and distribution network. Powertech has
also ensured its costs are controlled in its manufacturing
processes to enable it to remain competitive.
Political risk
South Africa is currently in a period of political transition.
The uncertainty which inevitably accompanies change is in
itself an operational risk for the group’s businesses, particularly
with regard to relationships with offshore principals and
suppliers, as well as general confidence in the country’s
economy.
7.5 Nomination committee
Members – Dr Penuell Maduna (chairman), Myron Berzack,
Mike Leeming and Dr Bill Venter.
Composition and proceedings – The committee comprises
a majority of non-executive directors and was established
during the 2004/5 reporting period. Robert Venter (chief
executive) has right of attendance at committee meetings.
There is no formal meeting schedule for this committee,
which meets as and when required. The committee met
once during the year under review.
The appointment of directors is a transparent and formal
procedure governed by the nomination committee’s
mandate and terms of reference as well as by the Altron
board charter. Factors influencing the selection process
include skills, knowledge and qualifications: these are
examined against the backdrop of Altron’s strategies.
Availability, number of external board appointments,
diversity, demographics and experience in relevant
sectors are also considered.
The group has set a target of generating 25% of its revenue
offshore, either through exports or its international operations.
During 2007, offshore revenue accounted for approximately
23% of the group’s total revenue, which translated to an
operating profit (excluding exports) of approximately
R211 million (11%).
Management structures
One of the risks posed to the group is the lack of depth of
resources at the senior management level. Aside from placing
pressure on the incumbents, the risk to the group is the
probability of the incumbent failing to identify business,
strategic or financial risks as a result of not having two sets
of eyes to cast over the respective area of responsibility.
The group is mindful of this risk and the succession planning
policy has been designed around addressing this facet of the
business.
Broad-based black economic empowerment
The need to comply with among others the dti’s Codes of Good
Practice has become a business and economic imperative for
conducting business in South Africa. This section is dealt with
more comprehensively in the accompanying sustainability
report.
Dependence on Powertech
During the past two financial years, the Powertech group has
been responsible for contributing in excess of approximately
50% of Altron’s profits. The board has identified this as being a
risk to the sustainability of the group, given among others the
cyclical nature of businesses within particular sectors. This risk
has to some extent been mitigated against by concluding
certain key acquisitions throughout the group during the period
under review. These have included inter alia the acquisition by
Altech of a controlling interest in three subsidiaries of the
Sameer ICT Group in Kenya and the acquisition by Powertech
of the IST Group (Pty) Limited and ABB’s 50% shareholding in
Powertech Transformers.
Capacity constraints
With risk comes opportunities and the Altron group has been
instrumental in capitalising on opportunities in depressed and
underdeveloped markets. However, this has placed pressure
on the group to deliver products and services in real time and
according to stringent deadlines. In turn this has translated
AltronAnnual Report 2008106
Altron corporate governance report continued
whether or not they comply with the Codes including
suggesting corrective actions;
– aligning the Altron Transformation Vision 2012 document with
the Codes as well as with relevant sectoral charters; and
– determining a strategy and road map for future
compliance by the group with the Codes and other
broad-based black economic empowerment legislation.
While the company is guided by this legislation, it has set
itself its own internal strategic transformation goals, which
it believes best serve the future sustainability of the Altron
group.
CORPORATE CODE OF CONDUCT
The Altron code of conduct is endorsed and guided by the
boards of Altron, Altech, Bytes and Powertech and commits all
employees to the highest standards of behaviour. The code
sets out the expected behaviour of all employees in their
dealings with the group’s stakeholders. A detailed code of
conduct forms part of the Altron group policy manual and
outlines Altron’s ethos. 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 beyond reproach.
This code was reviewed by the Altron audit committee in
February 2008 and was amended to bring the same in line with
best business and corporate governance practices.
ETHICS CAMPAIGN
During 2006/7 Altron launched a prominent group-wide
campaign designed to re-emphasise and facilitate
understanding of the ethical values that underpin the Altron
code of conduct. The campaign emphasised that each and
every employee has a responsibility to report any unethical
behaviour of which they become aware, regardless of who is
perpetrating it. In order to protect individuals, and with the
agreement of the Altron audit committee, Altron contracted
Deloitte Tip-Offs Anonymous to provide an independent hotline
through which anyone in the group can report unethical
behaviour.
With the full and visible support of the Altron executive
committee, the corporate communications team rolled out full
details of this service through poster campaigns, brochures
Role – The committee is responsible for identifying and
evaluating suitable potential candidates for appointment to
the board as well as succession planning. It does not have
the authority to appoint directors, which is a board function.
A formal succession planning policy has been finalised and
is being implemented throughout the group. The committee
also makes recommendations to the board on the suitability
of directors due to retire by rotation being put forward for
re-election at the annual general meeting.
Attendance at meetings
Members (and invitees)
Nomination
2007
August
Dr PM Maduna (chairman) ¸
MC Berzack ¸
MJ Leeming ¸
Dr WP Venter ¸
RE Venter ¸¹
1 Has right of attendance but is not a member of the nomination committee.
7.6 Transformation committee
Members – this is a subcommittee of the Altron executive
committee. Transformation champions representing each
subholding group sit on the Altron transformation committee.
Composition and proceedings – the transformation
committee was established five years ago and has
continued to drive economic transformation and broad-
based black economic empowerment across the group.
Role – following the successful transition from Vision 2010 to
Vision 2012, whereby the blueprint for transformation within
Altron was updated to include the new dti Codes of Good
Practice (the Codes) into the company’s strategic
transformation objectives, the committee’s mandate has
been extended to develop a practical implementation plan
and guidance manuals to ensure uniform application of the
empowerment vision across the group.
Despite the ongoing uncertainty at government level between
the validity of the industry sector charters and the Codes, the
committee nonetheless is engaged in several projects, namely:
– auditing the entire group’s operations to determine
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Altron recognises the importance of shareholder attendance at
annual general meetings. We believe this presents an important
opportunity for shareholders – institutional and individual – to
raise issues and participate in discussions relating to items in
the notice of meeting. Every effort is made to encourage this
attendance and participation which includes a personal
invitation from the chairman to each shareholder in the annual
report to attend the annual general meeting.
During the period under review, Altron engaged an
independent firm to conduct an analyst poll on the company.
Analysts were asked to rate Altron in terms of its quality of
management, leadership, strategy, earnings growth potential,
sustainability of earnings, liquidity, dividend policy, cost
controls, corporate governance and investor communications.
A detailed account of the results of this research is contained in
the Stakeholder Engagement section on page 49.
SHARE DEALINGS
Altron and its subholdings have approved written policies on
directors’ dealings in securities. These require all relevant
directors who wish to deal in Altron or its subholdings’
securities to obtain prior written clearance from any two of the
following senior executives – the chairman, chief executive or
chief financial officer. The same restriction applies to the group
company secretary. The chairman requires prior written
clearance from the non-executive chairman of the Altron audit
committee and group company secretary.
The group operates closed periods as defined in the JSE’s
Listings Requirements. These periods are communicated to
directors, officers and employees in the group policy manual and
a specific policy for directors. In addition, special electronic and
printed notices advise staff of imminent closed periods. During
these periods, the group’s directors (including associates),
officers and employees may not deal in the securities of Altron or
Altech as the case may be. Additional closed periods are
enforced, when required, in terms of corporate activities.
and training sessions. The reporting line is an important tool in
both monitoring and stamping out unethical behaviour in the
group and has been set up in line with current best practices in
this field.
COMMUNICATING WITH SHAREHOLDERS AND INVESTORS
The importance of clear and direct communication with
shareholders and analysts is crucial as we enter a drive to
sustain our growth, in raising their understanding of the group’s
strategy, operational and financial performance, management
and prospects.
Altron has a dedicated programme for facilitating regular
communication between the executive management team and
a wide range of institutions and investors. This includes among
others providing timeous, accurate announcements and
circulars to shareholders in accordance with the JSE Listings
Requirements. In addition, regular contact with domestic and
international institutional shareholders and analysts is
maintained through investor road shows, presentations and
liaison with major shareholders. Altron’s proactive investor
relations programme furthermore includes the following
activities over the financial year:
Annual site visits to group companies where presentations
are delivered to analysts and fund managers by managing
directors of operations throughout the group. In 2007 an
analyst presentation was held at Bytes in Midrand and visits
were undertaken to other group subsidiaries.
Our management team hosts, together with our sponsor
Investec, bi-annual presentations in Cape Town and
Johannesburg to afford fund managers an opportunity to
interact with management.
During the year the management team undertakes UK
roadshows to present to potential international investors.
Our chief executive and chief financial officer also attend
various conferences, both locally and in the UK, where they
address or interact with potential investors.
In addition to our investor relations website, we ensure
ongoing communication regarding pertinent performance
through regular e-mail communication.
Regular one on one meetings are held with analysts by our
chief executive and chief financial officer in order to assist
analysts with strategic and financial aspects of the
business.
AltronAnnual Report 2008108
Remuneration report
These policies and practices are regularly reviewed. Altron
keeps abreast of and is guided by international best practice
benchmarks with regard to executive remuneration (such as
those contained in, among others, the Association of British
Insurers (ABI) Guidelines on Executive Remuneration Policies
and Practices).
Membership
The remuneration committee is comprised mostly of
independent non-executive directors and is chaired by
Jacob Modise (independent non-executive). Other members
are Mark Lamberti, Myron Berzack, Peter Wilmot and Altron
chairman, Dr Bill Venter. The latter appointment is consistent
with the changes made to the 2003 Combined Code (UK)
which allows the chairman of the company to sit on the
remuneration committee.
The chief executive has right of attendance at meetings unless
deemed inappropriate and the chief financial officer attends
meetings by invitation, but neither participates in discussions
on their own remuneration.
The group company secretary, Andrew Johnston, acts as
secretary to the remuneration committee.
Terms of engagement – chairman and other non-executive
director members
The board annually assesses the composition of the committee
to ensure that it continues to operate effectively, and on the
recommendation of the nomination committee re-elects
members at the first board meeting following the annual
general meeting. The chairman of the committee is appointed
by the members of the committee in conjunction with the board
and holds office for five consecutive years whereafter he/she is
obliged to step down from the position unless the board
believes it appropriate for the chairman to remain in office
beyond his/her initial term.
The current chairman, Jacob Modise, was appointed as
chairman of this committee on 1 February 2006.
Composition and proceedings
The committee meets bi-annually, unless additional meetings
are required. During the review period, the committee met
twice.
Remuneration report
Altron’s approach towards remuneration aims to ensure that an
appropriate balance is achieved between the interests of
shareholders and providing attractive and appropriate
remuneration packages to executives. The remuneration
practices of the group have been structured to be competitive
in the rapidly evolving industry in which we operate and to
ensure that the group can attract, motivate and retain the high
calibre of people with above industry average ability and
leadership potential needed to effectively run the group and its
subsidiary companies.
With effect from 1 March 2007, the Altron group adopted a total
cost of employment (TCOE) philosophy for all salaried
employees as opposed to the cash package approach
adopted in prior years. In essence this means that salary and
bonus increases expressed as a percentage are based on
TCOE as opposed to the cash element only.
REMUNERATION PHILOSOPHY AND POLICIES
Altron’s philosophy is to set appropriate remuneration levels
to attract, retain and motivate the calibre of directors and
executives needed to run the group and its subsidiaries
successfully, while aligning their interests with those of
shareholders over the short, medium and long term. The
overall philosophy is to ensure that executive directors are
fairly rewarded for their individual contribution to the group’s
operating and financial performance in line with its corporate
objectives and business strategy, and that this reward is
aligned with industry and market benchmarks.
The group policy for each executive director prescribes a
remuneration package based on TCOE. This is made up of a
cash portion, an ability to earn a cash bonus, long-term
incentives through participation in share incentive schemes
or similar instruments, pension contributions, medical aid
benefits and optional benefits.
The objective is to establish a level of guaranteed pay that is
competitive with the upper quartile level for similar
companies. The variable element, in particular the short-term
incentives, is intended to provide superior general pay
opportunities based on overall corporate performance, as
well as individual reward for individual performance.
Long-term incentives have been based on multiples of TCOE
and are structured to align with shareholders’ interests.
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Areas for improvement identified as a result of the 2007/8
self-evaluation included the need for ongoing training on
remuneration best practices and trends. With the ever-
changing dynamics of the global economy and shifting
employee expectations, training will assist the committee in
dealing with and negotiating increasingly complex,
performance-driven reward packages. During the review period
the committee were regularly appraised on recent trends
regarding senior executive pay practices and received frequent
articles and updates on, among others, policy and practice
affecting non-executive directors’ remuneration, international
remuneration trends and practices and remuneration
committees, including the governance thereof.
A further consideration identified by the remuneration
committee as a result of the self-evaluation exercise conducted
in 2007, included the need to continue to focus on succession
planning throughout the group. During the review period a
formal policy on succession planning was adopted by the
board, and a diligent exercise conducted at both Altron and
each of its subholdings to identify at least two potential
successors for each key executive and senior manager position
throughout the group. This process is reviewed bi-annually and
has been made a standing item on each nomination committee
meeting agenda.
Service contracts
Executive directors are subject to Altron’s standard terms and
conditions of employment where notice periods are between
30 and 60 days. In line with the provisions of the Companies
Act of 1973 (as amended), group policy prevents any director
from being compensated for loss of office.
Advisors
The committee regularly consults with a range of external
independent advisors on market information and remuneration
trends as well as other advice necessary to fulfil its
responsibilities. These include among others, 21st Century
Business and Pay Solutions, The Hay Group, and PE Corporate
Services SA (Pty) Limited. In addition, the committee frequently
reviews remuneration and board best practice reports
published by Spencer Stuart and PricewaterhouseCoopers. It
also considers the views of the chief executive, Robert Venter,
on the remuneration and performance of his colleagues on the
Altron executive committee.
Executive directors’ salaries
The remuneration committee reviewed and revised the TCOE
packages of executive directors at its meeting in February
Role
The committee operates under a board-approved mandate and
terms of reference, updated in the prior period and aimed at:
ensuring that Altron’s directors and senior executives are
fairly rewarded for their individual contributions to group
performance. Packages are structured to be competitive
with the upper-quartile level of peer companies and market
benchmarks, in order to attract, motivate and retain the high
calibre of skilled professionals the group requires to ensure
its continued success, and to compete both locally and
internationally;
ensuring that Altron’s remuneration strategies and
packages, including short- and long-term incentive plans,
are based on performance and are appropriately
competitive;
recommending the level of non-executive directors’ fees to
the board, after receiving input from the executive directors
and market surveys, for ultimate approval by shareholders;
balancing the interests of shareholders with the financial
and commercial viability of the group; and
scrutinising all other benefits and other financial
arrangements to ensure they are justified, market-related
and disclosed in a transparent manner.
Altron’s listed subsidiary, Altech has its own remuneration
committee which reviews and recommends remuneration and
related awards for its executive directors and senior
management, to the Altech board and within the parameters of
group policies. Remuneration packages of those executives of
Altech, Bytes and Powertech who are also members of the
Altron executive committee, are, once determined at the
subholding level, submitted to the Altron remuneration
committee for noting and confirmation.
Self-evaluation
During the period under review, the committee resolved to
conduct self-assessment exercises into its effectiveness every
other year as opposed to annually.
The committee believes it has provided adequate disclosure to
shareholders, characterised by substance over form. It is
satisfied that performance-related elements of remuneration
constitute a large proportion of total remuneration packages,
that the remuneration levels determined by the committee are
sufficient to attract, motivate and retain senior executives of
Altron, and that it has established a formal and transparent
policy and procedure for determining executive director
remuneration.
AltronAnnual Report 2008110
Remuneration report continued
TCOE. Other executive directors and executive committee
members may earn between 45% – 65% of their TCOE.
Group and subsidiary financial performance targets include:
headline earnings per share growth;
return on net assets;
return on equity; and
cash generation.
These targets vary according to individual company needs. In
all cases, 60% of the bonus is based on financial objectives
with the balance relating to strategic and personal
performance, benchmarked against identified and
predetermined key performance indicators.
These key performance indicators include responsibility for,
among others:
Group strategy – driving and implementing it, monitoring
progress and ensuring all executives are aligned to it;
Performance management – instilling a performance and
“familiness” culture;
Growth – driving the growth strategy into new market
segments and geographical areas; and
Succession planning and talent management – identifying
new and skilled/semi-skilled talent for the business and
maximising existing talent, all while being mindful of
succession planning throughout the group and managing
the transformation agenda.
During February 2008, the remuneration committee resolved
that in respect of the 2008/9 financial year 70% of the executive
committee members’ performance bonuses will be based on
financial objectives, with 30% relating to the attainment by each
member of certain predetermined key performance indicators.
It is envisaged that between 10% – 20% of the 30%
discretionary component will be assigned to the achievement
of predetermined broad-based black economic empowerment
targets for each executive’s area of responsibility.
At its meeting in May 2007, the remuneration committee
reviewed the performance of executives participating in the
bonus plan against their agreed targets. Within these
parameters, and subject to meeting the noted criteria, bonuses
were approved. Performance measures are stringently
monitored and penalties imposed in cases where targets
are missed.
Share option schemes
As a vehicle for linking reward to executive performance over
the longer term, Altron’s share option scheme grants options to
all senior employees within Altron, Bytes and Powertech. Grants
2008. The packages of executive directors were compared to a
market information survey on companies of similar size and
structure and adjusted to reflect levels compared to the
upper-quartile segment of the survey.
Altron follows the provisions of the King Code of Corporate
Practices and Conduct relating to executive directors’
remuneration, and is further guided by the ABI Guidelines on
Executive Remuneration Policies and Practices. The
overarching principles that the remuneration committee has
applied during 2007 towards executive remuneration, and
those which it intends to continue applying, are as follows:
To ensure remuneration drives the overall key business
strategies and create a strong, performance-orientated
environment, so as to align the interests of management
with the interests of shareholders.
To provide a competitive remuneration package in the
upper-quartile of the market taking into account appropriate
benchmarks such as market rates of executives of
companies of a similar size and scope to attract, motivate
and retain the exceptional quality individuals the group
requires to sustain its growth.
To use such benchmarks and comparisons with caution,
recognising the risk of an upward ratchet of remuneration
levels with no corresponding improvement in performance.
To make a significant percentage of potential maximum
reward conditional on both short-term and long-term
performance. These rewards include an annual bonus plan
and share-based incentives, ie conditional rights, in order to
align the executive directors’ interests closely with those of
the shareholders.
To establish an appropriate balance between fixed and
variable remuneration which is based on targets that are
relevant, verifiable and stretching.
To take into account pay and employment conditions
elsewhere in the group, especially in setting annual salary
increases.
To actively seek to understand shareholder preferences as
it pertains to remuneration and disclosure thereof.
Annual incentive plans
Executive directors and Altron executive committee members
participate in an annual bonus plan that rewards the
achievement of group and subsidiary financial performance, as
well as strategic and personal performance objectives agreed
with the Altron chief executive. All objectives are approved
beforehand by the remuneration committee. Under this plan,
the chief executive may earn a bonus of up to 75% of his
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Fund and Altron Medical Aid and satisfied itself that both were
solvent and did not pose a risk to any of the group’s employees
or retirees.
Other benefits
In addition to the benefits which executive directors receive as
part of their TCOE packages, they also receive a death-in-
service benefit.
Non-executive directors’ fees
The fees of non-executive directors are recommended by the
remuneration committee, confirmed by the executive director
component of the Altron board, and approved by shareholders
at the annual general meeting. Fees for the 2007/8 financial
year were reviewed and revised in February 2007, with the
basic annual non-executive director fee set at R105 000.
Altron’s policy on remuneration for non-executive directors is
that this should be:
fee based;
market related (having regard to fees paid and number of
meetings attended by non-executive directors of companies
of similar size and structure to Altron and operating in
similar sectors); and
not linked to share price or Altron performance.
Altron non-executive directors do not receive bonuses or share
options, recognising that this can create potential conflicts of
interest which can impair the independence which non-
executive directors are expected to bring to bear in decision-
making by the board.
Annual fees for membership of the various committees for the
review period were:
Audit committee:
– chairman
– member
R72 500
R34 000
Nomination committee:
– chairman
– member
R13 000
R13 000
Remuneration committee:
– chairman
– member
R55 000
R34 000
Risk management committee:
– chairman
– member
R55 000
R27 500
have historically been made annually to maintain an overall cap
of 8.5 x base salary for the chief executive and 6.5 – 7.5 x
base salary for Altron executive committee members. As a
result of adopting TCOE, the aforesaid multiples have been
reduced to 7 x TCOE for the chief executive and 5.3 – 6.4 x
TCOE for Altron executive committee members. Share options
and conditional rights granted under the current scheme may
be exercised after three years and vest in equal tranches in
years 3, 4 and 5. These options and conditional rights lapse
after a six-year period. The share option scheme includes
options granted under a previous scheme which is in run-off
and has an expiry period of no later than 2012. Additional
options or conditional rights, based on both corporate and
individual performance, may be granted annually to ensure that
the multiple of TCOE parameter reflects increases in TCOE.
The salient features of the conditional rights scheme include
awarding eligible participants’ rights to acquire shares subject
to meeting future vesting conditions. Each conditional right will
have an award price equal to the closing price of a share on
the day preceding the award of that conditional right. The
vesting conditions attaching to conditional rights will be
specified in advance, and the conditional rights only vest based
on meeting the vesting conditions, namely the achievement of
preset performance targets. These targets relate to headline
earnings per share growth.
The quantum of shares that can be acquired may vary,
depending on the extent to which performance targets are met.
If a participant ceases to be an employee as a result of his
resignation or dismissal on the grounds of misconduct, poor
performance or breach of his employment contract, all
conditional rights (both vested and unvested) awarded to the
participant will lapse with immediate effect.
Pensions
During the year, the relevant group companies made
contributions for executive directors to the Altron group pension
fund. The rate of contribution is 12%, based on the pensionable
salary of these individuals. The value of contributions for each
executive director appears in the summary of directors’
emoluments on page 112.
None of the non-executive directors of Altron contributed to
any group pension fund during 2007 or had any accrued
pension fund benefits in the Altron Group Pension Fund at
29 February 2008.
At its meeting in February 2008, the remuneration committee
assessed the levels of funding of the Altron Group Pension
AltronAnnual Report 2008112
Remuneration report continued
DISCLOSURE OF DIRECTORS’ EMOLUMENTS
Non-executive directors Subsidiaries Altron
2008 Total
R’000
2007Total
R’000
Fees for services as directors
MC Berzack 152 152 137
MJ Leeming 207 207 187
MJ Lamberti 159 159 125
JRD Modise 194 194 175
Dr PM Maduna 118 118 107
DC Mpofu — — 50
BJM Masekela 9 9 —
PL Wilmot 353 239 592 520
353 1 078 1 431 1 301
R’000
Full-time directorsBasic salary
Perform-ance
related bonuses
(Accrued)
Share option
expense#
Allow-ances
Definedcontri-bution
pensionpayments
Otherbenefits
2008Total
Chairman
Dr WP Venter 3 409 — — 120 — 1 648 5 177
Executive
Dr HA Serebro 1 181 — — 91 — — 1 272
RE Venter 4 439 4 331 1 682 108 609 — 11 169
DC Radley 2 723 — 876 140 381 — 4 120
CG Venter 3 407 2 659 1 409 262 459 — 8 196
PD Redshaw 2 930 2 288 2 003 — 424 192 7 837
PMO Curle 1 849 1 232 860 127 264 — 4 332
N Claussen 2 275 2 100 1 037 198 332 — 5 942
22 213 12 610 7 867 1 046 2 469 1 840 48 045
R’000
Full-time directorsBasic salary
Perform-ance
related bonuses
(Accrued)
Share option
expense#
Allow-ances
Definedcontri-bution
pensionpayments
Otherbenefits
2007Total
Chairman
Dr WP Venter 3 249 — — 120 — 1 947 5 316
Executive
Dr HA Serebro 1 158 — — 90 — 8 1 256
RE Venter 3 714 2 875 1 472 120 446 156 8 783
DC Radley 2 411 1 645 783 120 289 25 5 273
CG Venter 2 845 2 020 1 275 262 341 185 6 928
PD Redshaw 2 663 1 832 1 222 — 320 176 6 213
PMO Curle 1 687 998 815 127 202 56 3 885
N Claussen 1 941 1 506 802 198 233 23 4 703
19 668 10 876 6 369 1 037 1 831 2 576 42 357
#IFRS 2 income statement expense in respect of options granted to directors.
AltronAnnual Report 2008 113
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
DIRECTORS’ OPTIONS
EntityPurchase
dateStrikeprice
Balance1 Mar2007 Awarded Lapsed Exercised
Exercisedate
NetgainsR’000
Exerciseprice
Balance29 Feb
2008Expiry
date
CG Venter Altech 18/4/2000 12.80 53 178 53 178 24/4/2007 2 951 68.30 — Apr 10
Altech 14/3/2002 20.35 37 734 37 734 9/5/2007 1 814 68.43 — Mar 08
Altech 31/8/2004 32.25 63 500 63 500 Aug 10Altech CRI 15/12/2005 50.99 337 100 337 100 Dec 11Altech CRI 22/11/2006 57.75 53 775 53 775 Nov 12Altech CRI 21/1/2008 49.00 94 092 94 092 Feb 14
DC Radley Altron 1/10/2002 7.25 625 267 625 267
22/6/2007and
3/12/2007 23 743 45.22 — Oct 12
Altron 27/7/2004 11.20 134 100 89 400 44 700 31/7/2007 1 551 45.90 — Jul 10Altron CRI 9/2/2006 22.50 477 520 477 520 — Feb 12Altron CRI 22/11/2006 30.75 67 338 67 338 — Nov 12
N Claussen Altron 1/10/2002 7.25 19 600 19 600 Oct 12
Altron 27/7/2004 11.20 115 100 115 100 Jul 10Altron CRI 9/2/2006 22.50 466 190 466 190 Feb 12Altron CRI 22/11/2006 30.75 151 560 151 560 Nov 12Altron CRI 28/2/2008 35.50 46 295 46 295 Feb 14
PD Redshaw Bytes 14/8/2000 4.50 646 843 646 843 5/8/2007 7 115 15.50 — Aug 07
Bytes 26/9/2001 2.90 166 667 166 667 — Sep 08
Altron 14/1/2008 6.66 72 609 Conversion 72 609 Sep 08
Bytes 10/10/2002 3.85 100 000 100 000 — Oct 09
Altron 14/1/2008 8.84 43 565 Conversion 43 565 Oct 09
Bytes 20/8/2004 5.58 477 100 477 100 — Aug 11
Altron 14/1/2008 12.80 207 849 Conversion 207 849 Aug 11Bytes CRI 15/2/2006 11.56 1 234 000 1 234 000 — Feb 12Altron CRI 14/1/2008 26.54 537 592 Conversion 537 592 Feb 12Altron CRI 27/2/2008 35.00 281 500 281 500 Feb 14
PMO Curle Altech 14/3/2002 20.35 3 334 3 334 23/5/2007 159 68.00 — Mar 08
Altech 31/8/2004 32.25 40 000 40 000 Aug 10Altech CRI 15/12/2005 50.99 219 460 219 460 Dec 11Altech CRI 22/11/2006 57.75 20 232 20 232 Nov 12
RE Venter Altron 28/6/2000 4.85 534 650 117 900
31/7/2008and
25/1/2008 4 378 41.98 416 750 Jun 10
Altron 1/10/2002 7.25 90 734 90 734
21/6/2007 and
25/1/2008 3 338 44.04 — Oct 12
Altron 27/7/2004 11.20 368 500 122 833 25/1/2008 3 504 39.73 245 667 Jul 10Altron CRI 9/2/2006 22.50 837 360 837 360 Feb 12Altron CRI 22/11/2006 30.75 156 186 156 186 Nov 12Altron CRI 25/2/2008 35.00 381 457 381 457 Feb 14
CRI – conditional rights.
* PD Redshaw’s Bytes share options and conditional rights were converted to Altron participating preference share options and conditional rights as a result of the Bytes scheme of arrangement. These were converted in accordance with the swap ratio of 0.43565.
AltronAnnual Report 2008114
Financial statements
In terms of section 268G(d) of the Companies Act, 1973, as
amended, we certify that, to the best of our knowledge and
belief, the company has lodged with the Registrar of
Companies for the financial year ended 29 February 2008,
all such returns as are required of a public company in terms
of the Companies Act, 1973, as amended, and that all such
returns are true, correct and up to date.
Altron Management Services (Pty) Limited
Secretaries
per: Andrew Johnston
Group Company Secretary
5 May 2008
Certificate from the company secretaries
Certificate from the company secretaries 114
Independent auditor’s report 115
Directors’ report 116
Accounting policies 120
Balance sheet 128
Income statement 129
Statement of changes in equity 130
Cash flow statement 132
Property, plant and equipment 133
Intangible assets, including goodwill 134
Associates and other investments 136
Rental finance advances 137
Deferred taxation 139
Inventories 140
Trade and other receivables, including derivatives
140
Assets and liabilities classified as held-for-sale
142
Cash and cash equivalents 142
Share capital and premium 143
Reserves 149
BBBEE transactions 150
Loans 151
Empowerment funding obligation 154
Provisions 155
Trade and other payables, including derivatives
155
Retirement benefit plans 156
Acquisition of subsidiaries 158
Revenue 160
Operating profit before capital items 160
Capital items 161
Financial income 161
Financial expense 162
Share of profit from associates 162
Taxation 162
Earnings per share 163
Dividends proposed 165
Commitments and contingent liabilities 165
Post balance sheet events 166
Financial risk management 166
Related party transactions 171
Judgements made by management 172
Standards and interpretations in issue but not yet effective
172
Notes to the cash flow statement 174
Associates, other investments and joint ventures Annexure 1
Segment information Annexure 2
Allied Electronics Corporation Limited 184
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
115Altron
Annual Report 2008
and fair presentation of the financial 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 management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, these financial statements present fairly, in all
material respects, the consolidated and separate financial
position of Allied Electronics Corporation Limited at 29 February
2008, and its consolidated and separate financial performance
and consolidated and separate cash flows for the year then
ended in accordance with International Financial Reporting
Standards, and in the manner required by the Companies
Act of South Africa.
KPMG Inc.
Registered Auditor
per MCA Hoffman
Chartered Accountant (SA)
Registered Auditor
Director
85 Empire Road
Parktown, South Africa
5 May 2008
To the members of Allied Electronics Corporation Limited
We have audited the group annual financial statements and the
annual financial statements of Allied Electronics Corporation
Limited, which comprise the balance sheets at 29 February
2008, and the income statements, the statements of changes in
equity and cash flow statements for the year then ended, and
the notes to the financial statements, which include a summary
of significant accounting policies and other explanatory notes,
and the directors’ report set out on pages 116 to 188.
Directors’ responsibility for the financial statements
The company’s directors are responsible for the preparation
and fair presentation of these financial statements in
accordance with International Financial Reporting Standards
and in the manner required by the Companies Act of South
Africa. This responsibility includes: designing, implementing
and maintaining internal control relevant to the preparation and
fair presentation of financial 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 financial
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 financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation
Independent auditor’s report
AltronAnnual Report 2008116
Directors’ report
To the members of Allied Electronics Corporation Limited
The directors have pleasure in submitting the annual
financial statements of the Altron group for the year ended
29 February 2008.
NATURE OF BUSINESS
Altron is an investment holding company. Its principal
subsidiaries, Allied Technologies Limited (Altech), Power
Technologies (Pty) Limited (Powertech) and Bytes Technology
Group Limited (Bytes), are invested in the power electronics,
telecommunications, multi-media and information technology
industries.
FINANCIAL RESULTS
Group attributable earnings for the year ended 29 February
2008 were R1 019 million (2007: R805 million), representing
earnings per share of 357 cents (2007: 287 cents). Headline
earnings per share were at 375 cents (2007: 283 cents).
Full details of the financial position and results of the Altron
group are set out in these financial statements.
DIVIDENDS
The following dividends were declared in respect of the year
ended 29 February 2008:
Ordinary dividend number 60 of 156 cents per share
(2007: 118 cents).
Participating preference dividend number 14 of 156 cents
per share (2007: 118 cents).
It remains policy to declare dividends annually at the time of
announcing the Altron group’s results in May of each year.
SUBSIDIARIES, ASSOCIATE COMPANIES AND OTHER
INVESTMENTS
Particulars of the principal subsidiaries of the Altron group are
given on page 187 while particulars of the associate
companies, joint ventures and other investments are provided
in Annexure 1 on page 176.
The attributable interest of the group in the income and losses
of its subsidiaries for the year ended 29 February 2008 is:
2008R million
2007R million
Aggregate amount of profit after taxation 1 401 1 186
Aggregate amount of losses after taxation 84 97
ACQUISITION OF 0.82% OF BYTES ORDINARY SHARES
During the period under review and prior to the Bytes
scheme of arrangement, Altron took advantage of several
opportunities to purchase 0.82% of the issued share
capital of Bytes on the open market at a cost of
R21.9 million.
ACQUISITION OF 3.71% OF ALTECH ORDINARY
SHARES
During the period under review, Altron took advantage of
several opportunities to purchase 3.71% of the issued
share capital of Altech on the open market at a cost of
R186.5 million.
BYTES SCHEME OF ARRANGEMENT
On 11 December 2007, the High Court sanctioned the
Bytes scheme of arrangement whereby Altron acquired
42.3% of the ordinary share capital of Bytes that Altron
and its subsidiaries did not already own from all
shareholders of Bytes other than the Altron group in
accordance with and as contemplated by the Securities
Regulation Code on Takeovers and Mergers. In settlement
of the Bytes scheme consideration, Altron issued
8 495 016 Altron ordinary shares and 22 110 410 Altron
participating preference shares as consideration for the
Bytes ordinary shares. The listing of Bytes on the JSE
Limited was terminated on 15 January 2008.
IST GROUP
On 22 August 2007, the Competition Tribunal unconditionally
approved the acquisition of the IST Group (Pty) Limited by
Powertech for a purchase consideration totalling
R504 million. The five IST divisions acquired by Powertech
were Energy, Otokon, Data, Telecom and Industrial. The
Defence and Nuclear divisions were excluded from the
acquisition.
CABLES DE COMUNICACIONES ZARAGOZA
During the period under review, Powertech acquired the
25% minority shareholder interest in Cables de
Comunicaciones Zaragoza for an amount of 17.6 million
(approximately R74.2 million) from the company’s
management in Spain. A further 11 million was received by
the minority shareholders as a dividend. Cables de
Comunicaciones Zaragoza is a manufacturer of copper
telecommunications, instrumentation and railway signalling
cables serving the Spanish and European markets.
AltronAnnual Report 2008 117
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
DIRECTORATE
Appointments
1 February 2008 Ms BJM Masekela
Resignations
29 February 2008 Ms DC Radley
In terms of the company’s articles of association, Messrs
BJM Masekela, MJ Leeming, MC Berzack, CG Venter and
Dr PM Maduna retire by rotation. All the retiring directors are
eligible and available for re-election. Their profiles appear on
pages 189 to 193.
SECRETARIES
Altron Management Services (Pty) Limited act as secretaries to
the company. The secretaries’ business and postal addresses
appear on the inside back cover of this annual report
(page 203).
SEGMENTAL REPORTING
Segmental information is included in this annual report as part
of the operational reviews and shareholders are referred to
Annexure 2 on page 180 .
Headline earnings contributions to Altron were as follows:
2008R million
2007R million
Altech 288 236
Bytes 170 116
Powertech 577 415
Corporate 37 26
DIRECTORS’ INTERESTS
At 29 February 2008, the present directors of the company held
direct and indirect interests, including family interests, in
60 035 576 of the company’s issued ordinary shares
(2007: 59 881 073 ordinary shares) and 23 432 336 of the
company’s issued participating preference shares
(2007: 34 486 558). Details of shares held per individual
director are listed below. A total of 3 979 280 participating
preference share options and conditional rights are allocated to
directors in terms of the company’s employee share schemes.
COMTECH (PTY) LIMITED
On 27 June 2007, Altech concluded an agreement to acquire
fleet management company ComTech (Pty) Limited for Altech
Netstar Fleet Management Services for a purchase
consideration of up to R74.2 million. The Competition
Authorities unconditionally approved this acquisition on
1 January 2008.
SAMEER ICT GROUP
On 1 March 2008, Altech acquired a controlling interest in three
subsidiaries of Kenya’s Sameer ICT Group for
US$75 million. The transaction sees Altech acquire a 51%
controlling interest in Kenya Data Networks Limited, Swift
Global (Kenya) Limited and Infocom Limited.
ABB POWERTECH TRANSFORMERS
On 26 March 2008, the Competition Tribunal unconditionally
approved the acquisition by Powertech of the 50%
shareholding that it did not already own in its joint venture
company, ABB Powertech Transformers, from ABB South Africa
for a purchase consideration of R320 million.
SHARE CAPITAL
Full details of the authorised, issued and unissued capital of the
company at 29 February 2008 are contained in note 10 to the
financial statements.
Share schemes
Particulars relating to the Altron Group Share Incentive Trust
and The Allied Electronics Corporation Limited Share Trust are
set out in note 10 to the financial statements.
At the date of this report, a total of 4 847 855 ordinary shares
and 7 584 445 participating preference shares remain reserved
for the purposes of the company’s employee share schemes.
General authority to issue shares
The remaining unissued ordinary shares and participating
preference shares are the subject of a general authority
granted to the directors in terms of section 221 of the
Companies Act, 1973, as amended, and which authority
remains valid only until the next annual general meeting which
will be held on Tuesday, 15 July 2008. At that meeting,
shareholders will be asked to place 10% of the unissued
ordinary and participating preference shares under the control
of the directors. Shareholders will also be asked to waive their
pre-emptive rights in favour of the directors to allot and issue
ordinary and/or participating preference shares for cash as and
when suitable circumstances arise.
AltronAnnual Report 2008118
Directors’ report continued
2008
Direct beneficial Direct non-beneficial
Name of director Ordinary sharesParticipating
preference shares Ordinary sharesParticipating
preference shares
Dr WP Venter 8 694 070 6 246 731 — —
RE Venter — 90 732 — —
MC Berzack — 302 690 — —
PD Redshaw — 8 713† — —
Dr HA Serebro 627 600 1 555 — —
PL Wilmot — 3 971† — —
MJ Leeming 2 500 — — —
Indirect beneficial Indirect non-beneficial
Name of director Ordinary sharesParticipating
preference shares Ordinary sharesParticipating
preference shares
Dr WP Venter 31 263 527 34 055 19 367 000* 16 741 572*
Dr HA Serebro 8 379 1 010 — —
MJ Leeming 2 500 1 307† — —
MJ Lamberti — — 70 000 —
† Messrs Redshaw, Wilmot and Leeming obtained Altron participating preference shares in accordance with the Bytes scheme of arrangement, sanctioned by the High Court on 11 December 2007.
* Chairman and director, Dr WP Venter, through his family and related trusts, is the controlling shareholder of the company.
At the date of this report, these interests remain unchanged.
2007
Direct beneficial Direct non-beneficial
Name of director Ordinary sharesParticipating
preference shares Ordinary sharesParticipating
preference shares
Dr WP Venter 8 660 236 8 577 217 — —
MC Berzack — 401 332 — —
Dr HA Serebro 514 300 1 555 — —
MJ Leeming 2 500 — — —
RE Venter — 45 366 — —
Indirect beneficial Indirect non-beneficial
Name of director Ordinary sharesParticipating
preference shares Ordinary sharesParticipating
preference shares
Dr WP Venter 31 263 527 8 718 506 19 367 000* 16 741 572*
Dr HA Serebro 1 010 1 010 — —
MJ Leeming 2 500 — — —
MJ Lamberti — — 70 000 —
* Chairman and director, Dr WP Venter, through his family and related trusts, is the controlling shareholder of the company.
AltronAnnual Report 2008 119
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
For further details in this regard, shareholders are referred to
page 100 of the annual report.
APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS
The annual financial statements set out in this annual report
have been prepared in accordance with International Financial
Reporting Standards and are based on appropriate accounting
policies, which are supported by reasonable and prudent
judgements and estimates.
The directors of the company are responsible for the
preparation of the annual financial statements and related
financial information that fairly presents the state of affairs and
the results of the company and the Altron group.
The directors’ responsibility includes: designing, implementing
and maintaining internal control relevant to the preparation and
fair presentation of these financial 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.
The directors’ responsibilities also include maintaining
adequate accounting records and an effective system of risk
management.
These financial statements have been prepared on the going-
concern basis, since the directors have every reason to believe
that the company and the Altron group have adequate
resources in place to continue in operation for the foreseeable
future. The auditors have concurred with the directors’ going-
concern statement.
The auditors are responsible for reporting on whether the group
annual financial statements and separate parent annual
financial statements are fairly presented in accordance with the
applicable financial reporting framework.
The annual financial statements for the year ended 29 February
2008 which appear on pages 116 to 188 were approved by the
board and signed on its behalf on 5 May 2008.
For: Allied Electronics Corporation Limited
Dr WP Venter
Chairman
RE Venter
Chief executive
RESOLUTIONS
The company passed and registered one special resolution on
8 August 2007, approving the acquisition by the company or
any of its subsidiaries of the company’s shares.
At subsidiary level, Altech passed and registered one special
resolution on 18 July 2007, approving the acquisition by Altech
or any of its subsidiaries of Altech’s shares.
At subsidiary level, Powertech passed and registered one
special resolution on 18 October 2007, adopting new articles
of association.
Except for the above, no other special resolutions, the nature of
which might be significant to shareholders in their appreciation
of the state of affairs of the Altron group, were passed by the
company or its subsidiaries during the period covered by this
annual report.
AUDIT COMMITTEE
In terms of section 270 A(f) of the Corporate Laws Amendment
Act of 2006 (“the Act”), the Altron audit committee has
discharged all of those functions delegated to it in terms of the
Altron audit committee mandate and terms of reference, and
ascribed to it in terms of the Act.
During the period under review, the Altron audit committee:
a) met on three separate occasions to review inter alia the
year-end and interim results of the Altron group, as well as
to consider regulatory and accounting standard compliance
insofar as the same pertained to the audit committee and
the Altron group respectively;
b) considered and satisfied itself that the external auditors are
independent auditors (see page 101 of the annual report),
determined the external auditors’ fees for the 2007/8
financial year and nominated the external auditors for
appointment for the financial year ending 28 February 2009;
c) determined the non-audit-related services which the
external auditors are permitted to provide to Altron and
revised the policy for the use of the external auditors for
non-audit-related services. This included preapproving all
non-audit-related service agreements concluded between
Altron and the external auditors;
d) confirmed the internal audit charter and the audit plan for
the 2007/8 financial year;
e) ensured that the audit committee complied with the
membership criteria specified in the Act;
f) reviewed the Altron group’s code of conduct and
recommended changes thereto to the Altron board; and
g) held separate meetings with management and the external
auditors to discuss any problems and reservations arising
from the year-end audit and any related matters which
management and the external auditors wished to discuss.
AltronAnnual Report 2008120
Accounting policies
Allied Electronics Corporation Limited (the company) is a
South African registered company. The consolidated financial
statements of the company for the year ended 29 February
2008 comprise the company and its subsidiaries (together
referred to as the “group”) and the group’s interest in
associates and jointly controlled entities.
STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS), the interpretations adopted by the International
Accounting Standards Board (IASB) and the requirements of
the South African Companies Act.
BASIS OF PREPARATION
The annual financial statements are prepared in millions
of South African rands on the historical cost basis, except
for the following assets and liabilities which are stated at fair
value:
Derivative financial instruments
Investments classified 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 financial statements in conformity with IFRS
requires management to make judgements, estimates and
assumptions that may affect the application of accounting
policies and reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are
based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. 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 significant effect on the financial statements
and estimates with a significant risk of material adjustment in
the next year are discussed in note 32.
The accounting policies set out below have been applied
consistently to the periods presented in these consolidated
financial statements.
The 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 financial
and operating policies, so as to obtain benefits from their
activities.
In assessing control, potential voting rights that presently are
exercisable are taken into account.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
Associates
An investment in an associate is an investment in a company in
which the group exercises significant influence but not control.
The equity method of accounting for associates is adopted in
the group financial statements. In applying the equity method,
account is taken of the group’s share of accumulated retained
earnings and movements in reserves from the effective date on
which the enterprise became an associate and up to the
effective date of disposal.
Goodwill arising on the acquisition of associates is included in
the carrying amount of the associate and is treated in
accordance with the group’s accounting policy for goodwill.
Dividends received from associates are deducted from the
carrying value of the investment. Where the group’s share of
losses of an associate exceeds the carrying amount of the
associate, the associate is carried at no value. Additional losses
are only recognised to the extent that the group has incurred
obligations or made payments on behalf of the associate.
Joint ventures
Joint ventures are those enterprises over which the group
exercises joint control in terms of a contractual agreement.
Joint ventures are proportionately consolidated, whereby the
group’s share of the joint venture’s assets, liabilities, income,
expenses and cash flows are combined with similar items, on
a line-by-line basis, in the group’s financial statements from the
date the joint control commences until the date the joint control
ceases.
Eliminations on consolidation
Intragroup balances and transactions, and any unrealised
gains or losses arising from intragroup transactions, are
eliminated in preparing the consolidated financial statements.
Unrealised gains arising from transactions with associates and
joint ventures are eliminated to the extent of the group’s interest
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.
AltronAnnual Report 2008 121
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Goodwill
All business combinations are accounted for by applying the
“purchase method”. Goodwill represents amounts arising on
the acquisition of subsidiaries, associates and joint ventures. In
respect of business combinations that have occurred since the
IFRS transition date, 1 March 2004, goodwill represents the
difference between the cost of the acquisition and the fair
value of the identifiable assets, liabilities and contingent
liabilities acquired.
The group made an election in terms of IFRS 1 that in respect
of acquisitions prior to 1 March 2004, goodwill is included on
the basis of its deemed cost, which represents the amount
recorded under previous SA GAAP on 1 March 2004.
Goodwill is measured at cost less accumulated impairment losses.
Goodwill is allocated to cash-generating units and is tested
annually for impairment.
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 financial statements.
Accordingly, any premiums or discounts on subsequent
purchases of equity instruments from, or sales of equity
instruments to, minority interests are recognised directly in the
equity of the parent shareholder.
Broad-based black economic empowerment (BBBEE) transactions
BBBEE 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 BBBEE partner, the derecognition of such
equity interest sold or recognition of equity instruments issued
in the underlying subsidiary by the parent shareholder is
postponed until the accounting recognition criteria have been
satisfied. A dilution in the earnings attributable to the parent
shareholders (in the interim period) is adjusted for in the diluted
earnings per share calculation by an appropriate adjustment to
the earnings used in such calculation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and
form an integral part of the group’s cash management are
included as a component of cash and cash equivalents for the
purposes of the cash flow statement. Cash and cash
equivalents are measured at amortised cost in the balance
sheet.
CAPITALISATION OF BORROWING COSTS
Interest on borrowings to finance the construction of assets
that require a substantial period of time to prepare them for
sale or use, is capitalised up to the date that the assets are
substantially complete.
CAPITAL ITEMS
Capital items are items of income and expense relating to the
acquisition, disposal or impairment of property, plant and
equipment, investments, subsidiaries and intangible assets.
EMPLOYEE BENEFITS
Short-term employee benefits
The cost of all short-term employee benefits is recognised
during the period in which the employee renders the related
service. The accruals for employee entitlements to salaries,
performance bonuses and annual leave represent the amounts
which the group has a present obligation to pay as a result of
the employee’s services provided. The accruals have been
calculated at undiscounted amounts based on current salary
levels.
Retirement benefits
The majority of the group’s employees are members of the
Altron Group Pension Fund and Altron Group Provident Fund,
which are defined contribution funds.
After the acquisition of subsidiaries, certain employees
remained members of their previous funds. A number of these
are defined benefit plans. These industry-managed retirement
benefit schemes are dealt with as defined contribution plans as
the group’s obligations under the schemes are equivalent to
those arising in a defined contribution plan.
The group’s contributions to defined contribution funds are
charged to the income statement in the year they are incurred.
Defined benefit obligations
Certain members of the Altron Group Pension Fund who were
members prior to 1 September 1996 are entitled to a minimum
benefit equal to the previously provided defined benefit
pension.
The projected unit credit method is used to determine the
present value of these defined benefit obligations, the related
service cost and, where applicable, the past-service cost.
The fair value of plan assets is deducted from the present
value of the defined benefit obligation to the extent permitted
by IAS 19 – Employee benefits. Past-service costs are
recognised as an expense on a straight-line basis over the
average period until the benefits become vested. Past-service
costs which are already vested, are expensed immediately.
AltronAnnual Report 2008122
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 financial year exceeded the
greater of:
10% of the present value of the defined benefit 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 benefit 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 benefits
The group has an obligation to provide post-retirement medical
aid benefits to certain eligible employees and pensioners. This
obligation has been provided for in full.
FINANCIAL INSTRUMENTS
Measurement
Non derivative financial instruments are initially measured at fair
value, which includes transaction costs, except for those items
carried at fair value through profit or loss, when the group
becomes a party to the contractual arrangements as set out
below. Subsequent to initial recognition these instruments are
measured as set out below.
Derecognition
Financial assets are derecognised if the group’s contractual
rights to the cash flows from the financial assets expire or if the
group transfers the financial assets to another party without
retaining control or substantially all risks and rewards of the
asset.
Financial liabilities are derecognised if the group’s obligations
specified 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 classified as current assets
and are stated at fair value, with any resultant gain or loss
recognised in the income statement.
Other investments held by the group are classified as being
available-for-sale and are stated at fair value, with any resultant
gain or loss 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 instruments
The group uses derivative financial instruments to manage its
exposure to foreign exchange and commodity price risks
arising from operational, financing and investment activities.
The group does not hold or issue derivative financial
instruments for trading purposes.
Derivative financial instruments comprise foreign exchange
contracts and metal future contracts. Derivatives are initially
measured at fair value and attributable transaction costs are
recognised in profit or loss when incurred. Subsequent to initial
recognition they are measured at fair value. Fair value adjustments
are recognised in the income statement. Fair value is determined
by comparing the contracted forward rate to the present value of
the current forward rate of an equivalent contract with the same
maturity date. However, where derivatives qualify for hedge
accounting, recognition of any resultant gain or loss depends on
the nature of the item being hedged.
Hedging
Where a derivative financial instrument is designated as a
hedge of the variability in cash flows attributable to a particular
risk associated with a recognised asset or liability, a firm
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 financial instrument is recognised directly in equity in
the cash flow hedging reserve. Any ineffective portion of
changes in the fair value of the derivative is recognised
immediately in the income statement.
When the hedged firm commitment or forecast transaction results
in the recognition of a non-financial asset or a non-financial
liability, the cumulative amount recognised in equity up to the
transaction date is adjusted against the initial measurement of the
asset or liability. For other cash flow hedges, the cumulative
amount recognised in equity is recognised in the income
statement in the period when the commitment or forecast
transaction affects the income statement.
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FINANCIAL STATEMENTS
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 financial 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 financial liabilities are offset and the net
amount reported in the balance sheet when the company has a
legally enforceable right to set off the recognised amounts, and
intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
FOREIGN CURRENCIES
Foreign currency transactions
Foreign currency transactions are converted to the respective
functional currencies of group entities at the rates of exchange
ruling at the date of transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
translated to the functional currency at the rates ruling at that
date. Gains or losses on translation are recognised in the income
statement.
Financial statements of foreign operations
The assets and liabilities of all foreign operations, including goodwill
and fair value adjustments arising on 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 indefinite useful life
and intangible assets that are not yet available for use, the
recoverable amount is estimated annually.
The recoverable amount is the higher of an asset’s fair value
less costs to sell and its value in use.
In assessing value in use, the expected future cash flows from
the asset are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. An
impairment loss is recognised in the income statement whenever
the carrying amount of an asset exceeds its recoverable amount.
For an asset that does not generate cash inflows that are
largely independent of those from other assets the recoverable
amount is determined for the cash-generating unit to which the
asset belongs. An impairment loss is recognised in the income
statement whenever the carrying amount of the cash-
generating unit exceeds its recoverable amount. Impairment
losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill
allocated to the cash-generating units and then, to reduce the
carrying amount of other assets in the unit on a pro rata basis.
When a decline in the fair value of an available-for-sale financial
asset has been recognised directly in equity and there is objective
evidence that the asset is impaired, the cumulative loss that has
been recognised directly in equity is recognised in the income
statement even though the financial asset has not been
derecognised. The amount of the cumulative loss that is
recognised in the income statement is the difference between the
acquisition cost and current fair value, less any impairment loss on
that financial asset previously recognised in the income statement.
Reversal of impairment
A previously recognised impairment loss is reversed if there is an
indication that the impairment loss no longer exists and the
recoverable amount increases as a result of a change in the
estimates used to determine the recoverable amount, but not to an
amount higher than the carrying amount that would have been
determined (net of depreciation 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 classified as available-for-sale is not reversed
through the income statement. An impairment loss in respect
of goodwill is not reversed.
INTANGIBLE ASSETS
Goodwill
Refer to “Basis of consolidation” above.
Research and development
Expenditure on research activities, undertaken with the
prospect of gaining new scientific or technical knowledge
and understanding, is recognised as an expense as incurred.
Expenditure on development activities, whereby research
findings are applied to a plan or design for the production of
new or substantially improved products and processes, is
AltronAnnual Report 2008124
Accounting policies continued
capitalised if development costs can be measured reliably, the
product or process is technically and commercially feasible,
future economic benefits are probable and the group intends to
and has sufficient resources to complete development and to
use or sell the asset.
The expenditure capitalised includes the cost of materials,
direct labour and an appropriate proportion of overheads.
These items are stated at cost less accumulated amortisation
and impairment losses. Other development expenditure is
recognised as an expense as incurred.
Other intangible assets
Other intangible assets that are acquired by the group are
stated at cost less accumulated amortisation and impairment
losses.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other
expenditure is expensed as incurred.
Amortisation
Amortisation is charged to the income statement on a straight-
line basis over the estimated useful lives of intangible assets
unless such lives are indefinite.
Other intangible assets are amortised from the date they are
available for use. The estimated useful lives for the current and
comparative periods are as follows:
Trade names, patents and trademarks 5 to 10 years
Customer relationships 2 to 6 years
Distribution rights and licence agreements indefinite life
Proprietary software 3 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 first-in first-out and average
cost methods. Work and contracts in progress and finished
goods include direct costs and an appropriate portion of
attributable overhead expenditure based on normal production
capacity. 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 are classified as held-for-sale if their
carrying amount will be recovered principally through a sale
transaction, not through continuing use. These assets may be
a component of an entity, a disposal group or an individual
non-current asset. Upon initial classification as held-for-sale,
non-current assets and disposal groups are recognised at the
lower of carrying amount and fair value less costs to sell. Any
impairment losses arising are recognised in the income
statement as capital items.
A discontinued operation is a component of the group’s
business that represents a separate major line of business or
geographical area of operations or a subsidiary acquired
exclusively with a view to resale. Classification as a
discontinued operation occurs upon the earlier of disposal or
when the operation meets the criteria to be classified as
held-for-sale. When an operation is classified as a discontinued
operation, the comparative income statement and cash flow
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 classified as operating
leases. Payments made under operating leases are charged
against income on a straight-line basis over the period of the
lease.
PROPERTY, PLANT AND EQUIPMENT
Owned assets
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. When
components of an item of property, plant and equipment have
different useful lives, those components are accounted for as
separate items of property, plant and equipment.
Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.
Leased assets
Leases that transfer substantially all the risks and rewards of
ownership of the underlying asset to the group are classified
as finance leases. Assets acquired in terms of finance leases
are capitalised at the lower of fair value and the present value
of the minimum lease payments at inception of the lease, and
depreciated over the 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 finance cost, which is charged against income over the
lease period, and the capital repayment, which reduces the
liability to the lessor.
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FINANCIAL STATEMENTS
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 benefits embodied within the item
will flow to the group and the cost of such item can be
measured reliably. All other costs are recognised in the income
statement as an expense when incurred.
Depreciation
Depreciation is charged to the income statement for each
category of assets on a straight-line basis over their expected
useful lives to estimated residual values. Land is not
depreciated.
The estimated useful lives for the current and comparative
periods are as follows:
Buildings 20 to 50 years
Plant and equipment 3 to 20 years
Furniture and fittings 5 to 20 years
Motor vehicles 4 to 8 years
Software and IT systems 2 to 8 years
Leasehold improvements over period of lease
The depreciation methods, useful lives and residual values are
reassessed annually.
Gains and losses arising on the 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 outflow of economic benefits will occur, and
where a reliable estimate can be made of the amount of the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax discount rate that
reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
Warranties
A provision for warranties is recognised when the underlying
products or services are sold. The provision is based on
historical warranty data and a weighting of all possible
outcomes against their associated probabilities.
Restructuring
A provision for restructuring is recognised when the group has
approved a detailed and formal restructuring plan, and the
restructuring either has commenced or has been announced
publicly. Future operating costs are not provided for.
Onerous contracts
A provision for onerous contracts is recognised when the
expected benefits to be derived by the group from a contract
are lower than the unavoidable cost of meeting the obligations
under the contract.
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 conditional rights granted
to employees is recognised as an employee expense with a
corresponding increase in equity. The fair value is measured
at grant date and expensed over the period during which the
employees are required to provide services in order to become
unconditionally entitled to the equity instruments. The fair value
of the instruments granted is measured using generally
accepted valuation techniques, taking into account the terms
and conditions upon which the instruments are granted. The
amount recognised as an expense is adjusted to reflect the
actual number of share options and conditional rights 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.
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
AltronAnnual Report 2008126
Accounting policies continued
classified as equity settled in the financial statements of the
subsidiary, provided the share-based payment is classified as
equity settled in the consolidated financial 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 upon initial recognition, as follows:
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 to the extent vested. Where the recharge
amount recognised 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 deferred and recognised as dividend income
by the parent when settled by the subsidiary.
BBBEE transactions
Where goods or services are considered to have been received
from BBBEE partners as consideration for equity instruments of
the group, these transactions are accounted for as share-based
payment transactions, even when the entity cannot specifically
identify the goods or services received. This accounting policy
is applicable to equity instruments that had not vested by
1 January 2005 (as above).
RENTAL FINANCE ADVANCES
Rental finance advances to customers are supported by
finance leases and are stated at the outstanding capital
balances. The income earned is computed at the interest rates
inherent in each contract, applied to the capital balance
outstanding under such contract and is included in revenue.
REVENUE
Revenue 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 significant 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 and there is no
continuing management involvement in the goods.
Revenue from services rendered is recognised in profit or loss
in proportion to the stage of completion of the transaction at
reporting date.
Dividends are recognised when the group’s right to receive the
revenue is established.
Interest revenue is recognised on a time apportionment basis
that takes into account the effective yield on the investment.
SHARE CAPITAL
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity, net of any
tax effects.
Preference share capital
Preference share capital is classified as equity if it is non-
redeemable and any dividends are discretionary, or is
redeemable but only at the company’s option. Dividends on
preference share capital classified as equity are recognised
as distributions within equity.
Preference share capital is classified as a liability if it is
redeemable on a specific date or at the option of the
shareholders or if dividend payments are not discretionary.
Dividends thereon are recognised in the income statement
as interest expense.
Repurchase of share capital
When share capital recognised as equity is repurchased, the
amount of the consideration paid, including directly attributable
costs, is recognised as a deduction from equity. Repurchased
shares held by subsidiaries are classified as treasury shares
and presented as a deduction from total equity.
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 segments), which is subject to risks and rewards
AltronAnnual Report 2008 127
CHAIRMAN’SSTATEMENT
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OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
that are different from those of other segments. The primary
basis for reporting segment information is business segments
and the secondary basis is by significant geographical region,
which is based on the location of assets. The basis of segment
reporting is representative of the internal structure used for
management reporting.
Segment results include revenue and expenses directly
attributable to a segment whether from external transactions or
from transactions with other group segments.
Segment assets and liabilities comprise those operating assets
and liabilities that are directly attributable to the segment or can
be allocated to the segment on a reasonable basis.
TAXATION
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 financial 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 profit, and differences relating to investments in
subsidiaries and joint ventures to the extent that they will not
reverse in the forseeable 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 profits will be available against
which the unused tax losses and deductible temporary
differences can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
Secondary 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 and participating preference
shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary and participating preference
shareholders of the company by the weighted average number
of ordinary and participating preference shares outstanding
during the period. Diluted EPS is determined by adjusting the
profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary and participating
preference shares outstanding for the effects of all dilutive
potential ordinary and participating preference shares, which
comprise share options granted to employees and BBBEE
transactions that have not yet met the applicable accounting
recognition criteria.w
AltronAnnual Report 2008128
Balance sheet at 29 February 2008
GROUP
Notes2008
R millions2007
R millions
ASSETS
Non-current assets 3 362 2 311
Property, plant and equipment 1 1 264 954
Intangible assets, including goodwill 2 1 502 844
Associates 3 20 15
Other investments 3 294 239
Rental finance advances 4 86 77
Deferred taxation 5 196 182
Current assets 7 617 6 139
Inventories 6 2 130 2 013
Trade and other receivables, including derivatives 7 3 371 2 494
Assets classified as held-for-sale 8 — 19
Cash and cash equivalents 9 2 116 1 613
Total assets 10 979 8 450
EQUITY AND LIABILITIES
Total equity 5 346 4 746
Altron equity holders 4 469 3 528
Minority interest 877 1 218
Non-current liabilities 1 047 389
Loans 13 784 149
Empowerment funding obligation 14 156 172
Provisions 15 24 38
Deferred taxation 5 83 30
Current liabilities 4 586 3 315
Loans 13 213 65
Empowerment funding obligation 14 16 —
Bank overdraft 9 33 24
Provisions 15 81 66
Trade and other payables, including derivatives 16 3 903 2 940
Liabilities classified as held-for-sale 8 — 15
Taxation payable 340 205
Total equity and liabilities 10 979 8 450
Net asset value per share (cents) 1 431 1 261
AltronAnnual Report 2008 129
CHAIRMAN’SSTATEMENT
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OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
GROUP
Notes2008
R millions2007
R millions
REVENUE 19 21 431 17 126
Operating costs before capital items (19 494) (15 598)
Material and services consumed (16 053) (11 917)
Employees’ remuneration 20.3 (3 053) (2 728)
Depreciation and amortisation (272) (235)
Net change in inventories (116) (718)
Operating profit before capital items 20 1 937 1 528
Capital items 21 (90) (38)
Result from operating activities 1 847 1 490
Financial income 22 182 132
Financial expense 23 (89) (56)
Share of profit from associates 24 4 4
Profit before taxation 1 944 1 570
Taxation 25 (625) (481)
Profit for the year 1 319 1 089
Attributable to:
Minority interest 300 284
Altron equity holders 1 019 805
Basic earnings per share (cents) 26 357 287
Diluted basic earnings per share (cents) 26 310 250
Dividends per share (cents) – paid 118 78
– proposed 27 156 118
Income statement for the year ended 29 February 2008
AltronAnnual Report 2008130
Attributable to Altron equity holders
GROUP
Sharecapital and
premium(note 10)
R millions
Treasuryshares
(note 10)R millions
Foreign currency
translation reserve
(note 11)R millions
Premium/ discount on
minorityequity
transactions(note 11)
R millions
Balance at 28 February 2006 827 (222) 18 (92)
Recognised income and expense
Profit for the year — — — —
Foreign currency translation differences — — 56 —
Cash flow hedging reserve — — — —
Fair value adjustments — — — —
Transactions with shareholders
Dividends — — — —
Issue of share capital 8 — — —
Share-based payments — — — —
Changes in shareholding of subsidiaries — — — (1)
Purchase of own shares — (77) — —
Balance at 28 February 2007 835 (299) 74 (93)
Recognised income and expense
Profit for the year — — — —
Foreign currency translation differences — — 106 —
Release of foreign currency translation deficits on disposal — — 4 —
Cash flow hedging reserve — — — —
Fair value adjustments — — — —
Transactions with shareholders
Dividends — — — —
Issue of share capital 1 375 — — —
Share-based payments — — — —
Changes in shareholding of subsidiaries — — — (1 262)
Balance at 29 February 2008 2 210 (299) 184 (1 355)
Statement of changes in equity for the year ended 29 February 2008
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FINANCIAL STATEMENTS
Attributable to Altron equity holders
Cash flow hedging reserve(note 11)
R millions
Share-based
payments reserve(note 11)
R millions
Statutory reserves (note 11)
R millions
Fair value reserve
(note 11)R millions
Retained earnings (note 11)
R millionsTotal
R millions
Minority interest
R millions
Totalequity
R millions
(3) 3 9 34 2 357 2 931 1 103 4 034
— — — — 805 805 284 1 089
— — — — — 56 15 71
3 — — — — 3 2 5
— — — 1 — 1 1 2
— — — — (216) (216) (173) (389)
— — — — — 8 — 8
— 18 — — — 18 5 23
— — — — — (1) (19) (20)
— — — — — (77) — (77)
— 21 9 35 2 946 3 528 1 218 4 746
— — — — 1 019 1 019 300 1 319
— — — — — 106 27 133
— — — — — 4 3 7
(1) — — — — (1) — (1)
— — — 8 — 8 — 8
— — — — (331) (331) (164) (495)
— — — — — 1 375 — 1 375
— 23 — — — 23 5 28
— — — — — (1 262) (512) (1 774)
(1) 44 9 43 3 634 4 469 877 5 346
AltronAnnual Report 2008132
GROUP
Notes2008
R millions2007
R millions
CASH FLOWS FROM OPERATING ACTIVITIES 1 304 10
Cash generated by operations 34 2 220 799
Interest received 160 114
Dividends received 35 28 55
Interest paid (72) (38)
Taxation paid 36 (537) (531)
Cash available from operating activities 1 799 399
Dividends paid
– to Altron equity holders (331) (216)
– to minority interest (164) (173)
CASH FLOWS UTILISED IN INVESTING ACTIVITIES (1 532) (467)
Acquisition of subsidiaries and joint venture 37 (619) (86)
Proceeds on disposal of subsidiary 38 4 —
Proceeds on disposal of property, plant and equipment 39 27 27
Net (advance)/repayment of rental finance advances (1) 19
Acquisition of property, plant, equipment and intangibles (479) (240)
Other investing activities 40 (464) (187)
CASH FLOWS FROM FINANCING ACTIVITIES 704 (120)
Loans raised/(repaid) 692 (149)
Proceeds on share issue 12 8
Subsidiaries’ equity contributions from minorities 41 — 21
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 476 (577)
Cash and cash equivalents at the beginning of the year 1 589 2 152
Effect of foreign exchange translation on cash balances 18 14
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 9 2 083 1 589
Cash flow statement for the year ended 29 February 2008
AltronAnnual Report 2008 133
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Notes to the group financial statements for the year ended 29 February 2008
Land Plant Motor vehicles,
and and furniture and IT equipment
buildings machinery equipment and software Total
R millions R millions R millions R millions R millions
1. PROPERTY, PLANT AND EQUIPMENT
Cost
Balance at 28 February 2006 218 1 565 287 575 2 645
Additions at cost 14 75 81 53 223
Arising on business combinations 3 — 7 — 10
Arising on acquisition of joint venture 32 25 1 — 58
Disposals (9) (148) (54) (65) (276)
Transfer to assets held-for-sale (1) (4) (1) (1) (7)
Transfer to intangible assets — — — (24) (24)
Translation 64 38 42 (1) 143
Balance at 28 February 2007 321 1 551 363 537 2 772
Additions at cost 38 296 30 109 473
Arising on business combinations 57 10 20 21 108
Disposals (7) (60) (29) (79) (175)
Translation 18 93 5 8 124
Balance at 29 February 2008 427 1 890 389 596 3 302
Depreciation and impairment losses
Balance at 28 February 2006 57 1 093 178 412 1 740
Depreciation for the year 12 77 52 75 216
Impairment losses — 5 — — 5
Arising on business combinations 1 — 4 — 5
Disposals (1) (135) (35) (57) (228)
Transfer to assets held-for-sale (1) (3) (1) — (5)
Transfer to intangible assets — — — (23) (23)
Translation 33 77 (8) 6 108
Balance at 28 February 2007 101 1 114 190 413 1 818
Depreciation for the year 12 102 42 76 232
Arising on business combinations 1 2 13 18 34
Disposals (1) (64) (16) (69) (150)
Translation 12 81 4 7 104
Balance at 29 February 2008 125 1 235 233 445 2 038
Carrying amount at 28 February 2006 161 472 109 163 905
Carrying amount at 28 February 2007 220 437 173 124 954
Carrying amount at 29 February 2008 302 655 156 151 1 264
AltronAnnual Report 2008134
Notes to the group financial statements for the year ended 29 February 2008
continued
2008 2007
R millions R millions
1. PROPERTY, PLANT AND EQUIPMENT (continued)
Land and buildings
Details of land and buildings are available, on request, for inspection at the registered office of the company.
Encumbered assets
Certain property, plant and equipment, included in the above amounts, is encumbered as security for finance leases and secured bank loans (refer to note 13) as follows:
Finance leases 14 21
Secured bank loans 189 —
203 21
Assets under construction
Included in the cost of assets are the following items of capital work in progress:
Plant and machinery 186 43
IT equipment and software 17 12
Other equipment 3 11
206 66
Impairment losses
The impairment losses relate to the assets of businesses closed during the previous year.
Useful lives
Useful lives are reflected under accounting policies on page 125.
GoodwillCustomer
relationships
Trade names,patents andtrademarks
Distribution rights
and licenceagreements
Proprietarysoftware Total
R millions R millions R millions R millions R millions R millions
2. INTANGIBLE ASSETS, INCLUDING GOODWILL
Cost
Balance at 28 February 2006 1 008 26 8 24 6 1 072
Additions at cost — — 11 2 — 13
Development costs capitalised — — — — 4 4
Transfer from property, plant and equipment — — 24 — — 24
Adjustments (19) — — — — (19)
Arising on business combinations and joint ventures 86 17 18 — — 121
Translation 12 — 5 — — 17
Balance at 28 February 2007 1 087 43 66 26 10 1 232
Additions at cost — — 4 — — 4
Development costs capitalised — — — — 2 2
Disposals (267) — — — — (267)
Arising on business combinations 506 91 105 — 5 707
Adjustments 2 — — — — 2
Translation 66 2 4 — — 72
Balance at 29 February 2008 1 394 136 179 26 17 1 752
AltronAnnual Report 2008 135
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
GoodwillCustomer
relationships
Trade names,patents andtrademarks
Distribution rights
and licenceagreements
Proprietarysoftware Total
R millions R millions R millions R millions R millions R millions
2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)
Amortisation and impairment losses
Balance at 28 February 2006 281 9 3 4 2 299
Amortisation for the year — 12 6 — 1 19
Impairment losses 50 — — — — 50
Transfer from property, plant and equipment — — 23 — — 23
Translation — — (3) — — (3)
Balance at 28 February 2007 331 21 29 4 3 388
Amortisation for the year — 24 12 — 4 40
Impairment losses 86 — — — — 86
Disposals (267) — — — — (267)
Translation — 2 1 — — 3
Balance at 29 February 2008 150 47 42 4 7 250
Carrying amount at 28 February 2006 727 17 5 20 4 773
Carrying amount at 28 February 2007 756 22 37 22 7 844
Carrying amount at 29 February 2008 1 244 89 137 22 10 1 502
Adjustments to goodwill
A reduction of goodwill was made in the prior year in respect of tax losses and deductible temporary differences realised or recognised as deferred tax assets after the acquisition of a subsidiary that did not meet the recognition criteria of a deferred tax asset at acquisition. In the current year a portion of the tax losses was disallowed giving rise to a reduction in the recognised deferred tax asset of R2 million and a contra adjustment to goodwill.
Distribution rights and licence agreements
The group owns the rights to distribute Xerox equipment in 24 African territories. It paid an initial fee to acquire these rights. These distribution rights within Bytes Document Solutions are considered to have indefinite useful lives as these rights will automatically be renewed at no further cost upon the renewal of the group’s South African distribution agreement. Intangible assets with an indefinite useful life are tested for impairment annually and whenever there is an indication that the asset may be impaired. The cash flows emanating from this asset are discounted to their present value using the Bytes group’s weighted average cost of capital of 15% (2007:15%). In determining the future cash flows, management uses the approved budgeted profit after tax in year one to be derived from this asset and this is escalated for the next four years by the anticipated CPIX of 6% (2007: 5%). The group’s budgeted profit has historically been in line with actual performance.
Proprietary software
The Bytes group is replacing its existing healthcare switching technology with enhanced technology and has capitalised R2 million of its development cost in the current year (2007: R4 million). The new technology was commissioned in the current year and no further costs will be incurred on the development of this technology.
Through the acquisition of IST, software utilised in the demand-side management business, to the value of R3.5 million, was recognised as an intangible asset in accordance with IFRS 3.
AltronAnnual Report 2008136
Notes to the group financial statements for the year ended 29 February 2008
continued
2008 2007
R millions R millions
2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)
Impairment tests for cash-generating units containing goodwill
The following units have significant carrying amounts of goodwill:
Altech NamITech 306 332
Bytes Document Solutions 135 135
CS Holdings 107 105
Bytes Healthcare Solutions 64 64
Xclusive Solutions 44 40
Vantage Business Systems 30 28
ComTech 18 —
IST 448 —
Swanib Cables 24 —
Multiple units without significant goodwill 68 52
1 244 756
Description of impairment tests and key assumptions
Impairment tests are conducted on an annual basis using a discounted cash flow valuation model on the basis of value-in-use.
The impairment tests are prepared on the basis of forecast profits generated by the cash-generating unit. Management forecasts typically cover a three-year period and thereafter a reasonable rate of growth is applied based on current market conditions. In assessing future cash flows management has used assumptions relating to the growth in the units’ market potential, new market opportunities as well as changes in manufacturing costs based on business plans. Discount rates used in the discounted cash flow models are based on price-earnings ratios of similar businesses in the same sector and of generally similar size.
Impairment losses
In view of the trading loss incurred by Altech NamITech South Africa, the directors concluded that the remaining carrying value of goodwill of R86 million attributable to these operations be fully impaired.
Useful lives
Useful lives are reflected under accounting policies on page 124.
GROUP
2008 2007
R millions R millions
3. ASSOCIATES AND OTHER INVESTMENTS
Associates 20 15
Other investments
Non-current loans receivable at amortised cost
Participation loan to Fintech Receivables 1 (Pty) Limited 27 27
Participation loan to Technology Acceptances Receivables (Pty) Limited 192 152
Non-current available-for-sale investments at fair value
Preference shares in Fintech Receivables 1 (Pty) Limited 36 36
Preference shares in Technology Acceptances Receivables (Pty) Limited 26 23
Investment in Izingwe Aberdare Cables Investments (Pty) Limited 1 1
Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit 12 —
294 239
Refer to Annexure 1 on page 176 for details.
AltronAnnual Report 2008 137
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
GROUP
2008 2007
R millions R millions
4. RENTAL FINANCE ADVANCES
Assets at amortised cost
Present value of minimum lease payments receivable 128 127
Less: Current portion (note 7) (42) (50)
Non-current finance lease asset 86 77
Liabilities at amortised cost (included under loans)
Present value of minimum lease payments payable (note 13) 128 114
Less: Current portion (note 13) (42) (37)
Non-current finance lease liability 86 77
Group entities sell certain document processing equipment to third parties on a finance lease basis. The lease asset arising is in turn financed by a reciprocal lease agreement with financial institutions.
The underlying loans receivable and payable are settled in monthly instalments over periods of up to six years and bear interest at rates linked to the prime overdraft rate. The loans are secured by the underlying equipment sold.
The relationship between the gross investment in the lease at the balance sheet date, and the present value of the minimum lease payments receivable at the balance sheet date, is as follows:
Non-derivative financial assets
Finance lease assets
Present value of minimum lease payments receivable 128 127
Interest receivable 29 23
Future minimum lease payments receivable 157 150
2008 Future
minimumlease
paymentsR millions
2008 Present value
of minimum lease
paymentsR millions
2007 Future
minimumlease
paymentsR millions
2007 Present value
of minimum lease
paymentsR millions
Non-derivative financial liabilities
Finance lease liabilities are payable as follows:
Less than 1 year 58 42 41 37
Between 1 and 5 years 99 86 96 77
157 128 137 114
AltronAnnual Report 2008138
Notes to the group financial statements for the year ended 29 February 2008
continued
2008 2007
R millions R millions
4. RENTAL FINANCE ADVANCES (continued)
Exposure to credit risk
The carrying amount of finance lease assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Finance lease assets 128 127
The maximum exposure to, and concentration of, credit risk for finance lease assets at the reporting date by type of customer was:
2008 2007
Gross Gross
R millions R millions
Parastatals/government 28 30
Corporates 97 95
SMMEs 3 2
128 127
The maximum exposure to, and concentration of, credit risk for finance lease assets at the reporting date by geographical region was:
South Africa 128 127
All customers are subjected to stringent credit vetting. It is our experience that only large corporates avail themselves of the document outsourcing services rendered by the group and hence there is a reduced risk of default. Lease payments are due 30 days after invoice. The percentage of delinquent leases at the balance sheet date was 3.27% of the total lease book. This compares to the historical average delinquency ratio of 4.44% of the lease book. In the event of a default on lease receivable payments the exposure to financial loss to the group is limited as the equipment is repossessed and resold.
In the 16 years that the group has been operating the document outsource model it has not incurred losses on default/ delinquency as the capital amount has always been recovered upon resale of the equipment. Accordingly no impairment allowance is maintained (2007: Rnil).
Exposure to liquidity risk
The following are the contractual maturities of finance lease assets and liabilities, including interest payments and excluding the impact of netting agreements:
29 February 2008Non-derivative financial assets
Carryingamount
Contractual cashflows
6 monthsor less
6 –12 months
1 – 2 years
2 – 5 years
Finance lease assets 128 157 29 29 50 49
Non-derivative financial liabilities
Finance lease liabilities (128) (157) (29) (29) (50) (49)
28 February 2007Non-derivative financial assets
Carryingamount
Contractual cashflows
6 monthsor less
6 – 12 months
1 – 2 years
2 – 5 years
Finance lease assets 127 150 28 28 46 48
Non-derivative financial liabilities
Finance lease liabilities (114) (137) (21) (20) (40) (56)
AltronAnnual Report 2008 139
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
4. RENTAL FINANCE ADVANCES (continued)
Exposure to interest rate risk
All finance leases are entered into on a back-to-back basis with financial institutions. The interest rate payable to financial institutions on the finance lease liability is equal to the rate being charged to the customer on the finance lease asset. These rates are automatically adjusted as and when the prime overdraft rate is amended. Accordingly the group does not have any exposure to interest rate risk as a result of these arrangements.
2008 2007
R millions R millions
5. DEFERRED TAXATION
5.1 Deferred tax movement
Balance at the beginning of the year (152) (97)
Charged to the income statement (20) (70)
Charged directly in equity (2) (5)
Transfer to assets held-for-sale — 1
Acquisitions and disposals of subsidiaries 61 20
Translation differences — (1)
Balance at the end of the year (113) (152)
5.2 Deferred tax balances
Attributable to the following temporary differences recognised at the normal tax rate in South Africa of 28% (2007: 29%) or the normal tax rate for foreign jurisdictions, unless otherwise indicated:
Property, plant and equipment 67 67
Intangible assets 26 2
Construction work in progress 7 —
Prepaid expenditure 10 7
Receipts in advance (37) (25)
Receivables (11) (9)
Contract allowances 11 1
Provisions, accruals and allowances (106) (89)
Tax losses (73) (70)
Investments and other (9) (22)
Share scheme recharge liabilities 17 —
Fair value adjustments (at 14%) (2007: 14.5%) (7) 6
Secondary tax credits (at 10%) (8) (20)
(113) (152)
The above balance comprises:
Deferred tax liabilities 83 30
Deferred tax assets (196) (182)
(113) (152)
Tax losses
Estimated tax losses available for set-off against future taxable income 277 362
Applied to reduce deferred tax (260) (244)
17 118
Attributable to minority interest — (2)
17 116
AltronAnnual Report 2008140
Notes to the group financial statements for the year ended 29 February 2008
continued
2008 2007
R millions R millions
6. INVENTORIES
Raw materials 749 639
Work in progress 278 316
Finished goods 875 849
Merchandise 189 180
Consumable stores 39 29
2 130 2 013
Inventories carried at cost 1 936 1 549
Inventories carried at net realisable value 194 464
2 130 2 013
7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES
Gross trade receivables 3 189 2 433
Less: Allowance for impairment losses (115) (96)
Less: Other allowances (77) (37)
Current portion of rental finance advances (note 4) 42 50
Derivative assets at fair value: used for hedging 54 11
Prepayments 47 35
Other receivables 231 98
3 371 2 494
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 3 189 2 433
The maximum exposure to credit risk for gross trade receivables at the reporting date by type of customer was:
2008 2007
Gross Gross
Parastatals/government 429 297
Corporates 1 996 1 480
SMMEs 526 503
Individuals 238 153
3 189 2 433
The group’s exposure to parastatals and government has increased in the last year, primarily as a result of the increased infrastructural spend of these bodies. This is not expected to increase the group’s credit risk profile.
The group generally deals with the larger corporates who have a sound credit standing. Collateral is generally not held for blue-chip companies as their payment history does not warrant it, but collateral is obtained for other entities as security where possible.
Credit risk in respect of corporates and SMMEs is controlled through the use of credit vetting agencies and the setting of credit limits by experienced personnel. Credit limits are typically reviewed annually.
The increase in the group’s exposure to individuals is a reflection of the growth in the group’s consumer businesses, principally Altech Autopage Cellular and Altech Netstar. Credit risk increases in this area as interest rates go up, but this is closely monitored by management.
AltronAnnual Report 2008 141
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)
The maximum exposure to credit risk for gross trade receivables at the reporting date by geographical region was:
2008 2007
Gross Gross
R millions R millions
South Africa 2 179 1 621
Rest of Africa 211 197
Europe 634 535
Rest of world 165 80
3 189 2 433
Most of the receivables outside of South Africa are in respect of our international operations who are experienced in managing their own local credit risk. As regards cross-border trade, credit risk is managed through the use of letters of credit and credit insurance as considered necessary.
Impairment losses
The following table illustrates the relationship between aged debt and the impairment allowance:
2008 2007
2008 Impairment 2007 Impairment
Gross allowance Gross allowance
R millions R millions R millions R millions
Not past due 2 514 (3) 1 865 (1)
Past due 0 – 30 days 271 (1) 263 (6)
Past due 31 – 120 days 249 (24) 185 (20)
Past due 121 – 365 days 87 (22) 72 (22)
Past due 365+ days 68 (65) 48 (47)
3 189 (115) 2 433 (96)
Listings of overdue customer balances are reviewed monthly and reviewed against their credit terms/limits. Any customer 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.
The movement in the impairment allowance in respect of trade receivables during the year was as follows:
2008R millions
2007R millions
Balance at the beginning of the year 96 129
Impairment loss recognised 69 8
Allowance utilised (50) (41)
Balance at the end of the year 115 96
Currency risk
Currency risk positions are reflected in note 30.
Derivative assets at fair value
Derivative assets at fair value include:
Forward exchange contracts used for hedging
– Fair value hedge 48 6
Commodity forward contracts 6 5
54 11
AltronAnnual Report 2008142
Notes to the group financial statements for the year ended 29 February 2008
continued
2008 2007
R millions R millions
7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)
Credit risk on derivative assets
The group limits its exposure to credit risk by only entering into forward contracts with counterparties that have a credit rating of at least A1 from Standard and Poor’s. Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.
8. ASSETS AND LIABILITIES CLASSIFIED AS HELD-FOR-SALE
On 24 October 2006 the decision to sell the group’s shareholding in Plato Computer Services Limited was taken and the operation was subsequently sold (refer to note 38). This operation did not constitute a discontinued operation.
Assets classified as held-for-sale
Property, plant and equipment — 2
Deferred taxation — 1
Inventories — 1
Trade and other receivables — 15
— 19
Liabilities classified as held-for-sale
Trade and other payables — 9
Bank overdraft — 6
— 15
9. CASH AND CASH EQUIVALENTS
Cash at bank 1 638 1 110
Cash on deposit 478 503
2 116 1 613
Bank overdraft (33) (24)
Net cash and cash equivalents per the cash flow statement 2 083 1 589
Credit risk
The group limits its credit risk exposure by investing only with financial institutions that have a minimum short-term
Standard and Poor’s rating of A1. Management monitors these financial institutions’ ratings on an active basis.
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 reflected in note 30.
AltronAnnual Report 2008 143
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
GROUP AND COMPANY
2008 2007 2008 2007
Number Number
of shares of shares R millions R millions
10. SHARE CAPITAL AND PREMIUM
10.1 Authorised
Ordinary shares of 2 cents each 247 500 000 247 500 000 5 5
Participating preference shares
of 0.01 cent each 500 000 000 500 000 000 — —
5 5
10.2 Issued
Ordinary shares
In issue at the beginning of the year 97 174 115 97 174 115 2 2
Issued in terms of scheme of arrangement with Bytes shareholders 8 495 016 — — —
In issue at the end of the year 105 669 131 97 174 115 2 2
Less: Own shares acquired by subsidiary (3 246 469) (3 246 469)
Net ordinary shares 102 422 662 93 927 646
Participating preference shares
In issue at the beginning of the year 213 654 725 212 322 502 — —
Issued in terms of share schemes 1 773 142 1 332 223 — —
Issued in terms of scheme of arrangement with Bytes shareholders 22 110 410 — — —
In issue at the end of the year 237 538 277 213 654 725 — —
Less: Own shares acquired by subsidiary (27 698 875) (27 698 875)
Net participating preference shares 209 839 402 185 955 850
Total number of shares in issue at the end of the year, net of own shares acquired 312 262 064 279 883 496
10.3 Share premium
Balance at the beginning of the year 833 825
Share premium arising from issue of shares in terms of:
– Share schemes 12 8
– Scheme of arrangement with Bytes shareholders 1 363 —
Balance at the end of the year 2 208 833
The issue price of shares issued in satisfaction of the scheme of arrangement with Bytes shareholders was measured in accordance with the market value of such shares on the effective date of the transaction in December 2007.
10.4 Total issued share capital and premium 2 210 835
AltronAnnual Report 2008144
Notes to the group financial statements for the year ended 29 February 2008
continued
2008 2007
Number of Number of
shares shares
10. SHARE CAPITAL AND PREMIUM (continued)
10.5 Unissued
Ordinary shares
Shares reserved for allocation under employee share schemes 4 847 855 4 847 855
Shares under the control of the directors until the forthcoming annual general meeting 136 983 014 145 478 030
141 830 869 150 325 885
Participating preference shares
Shares reserved to meet the requirements of:
Allied Electronics Corporation Limited Share Trust 1 169 506 1 835 480
Altron Group Share Incentive Trust 2 375 374 2 933 085
Conditional Rights Scheme 11 039 018 5 432 472
Shares reserved for allocation under employee share schemes 7 584 445 14 458 257
Shares under the control of the directors until the forthcoming annual general meeting 240 293 380 261 685 981
262 461 723 286 345 275
Shares reserved for allocation under employee share schemes that were approved at a previous general meeting of the members are reflected in the table above.
Terms of equity shares
Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company.
Participating preference shares
Holders of participating preference shares rank pari passu with the ordinary shares with regard to entitlement to dividends and the company’s residual assets. The shares have limited and diluted voting rights only in specific and limited circumstances (refer to page 94).
Treasury shares
The directors have a general authority to repurchase shares of the company not exceeding 20% of the company’s ordinary and/or participating preference issued share capital in any one financial year effective until the next annual general meeting.
AltronAnnual Report 2008 145
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Conditional Rights
Scheme
Allied Electronics Corporation
Limited Share Trust
Altron Group Share
Incentive Trust Total share
options
10. SHARE CAPITAL AND PREMIUM (continued)
10.6 Employee share options – participating preference shares
Number of options allocated at 28 February 2006 4 243 940 2 399 162 3 845 773 10 488 875
Number of options granted 1 240 352 — — 1 240 352
Number of options lapsed/forfeited/ reinstated (51 820) (54 708) (89 439) (195 967)
Number of options exercised — (508 974) (823 249) (1 332 223)
Number of options allocated at 28 February 2007 5 432 472 1 835 480 2 933 085 10 201 037
Options converted as a result of the Bytes scheme of arrangement 2 406 545 — 1 042 170 3 448 715
Number of options granted 4 491 435 — — 4 491 435
Number of options lapsed/forfeited/ reinstated (890 447) (38 648) (137 243) (1 066 338)
Number of options exercised (400 987) (627 326) (1 462 638) (2 490 951)
Number of options allocated at 29 February 2008 11 039 018 1 169 506 2 375 374 14 583 898
Of the 2 490 951 options exercised, 400 987 relate to conditional rights exercised. Conditional rights are net settled and as a result only 104 776 shares were issued in satisfaction of those conditional rights. A further 421 598 of the exercised share options had not been issued and listed at the year end and so are not included in issued share capital at that date.
AltronAnnual Report 2008146
Notes to the group financial statements for the year ended 29 February 2008
continued
10. SHARE CAPITAL AND PREMIUM (continued)
10.7 The Altron Group Share Incentive Trust, Allied Electronics Corporation Limited Share Trust and the Conditional Rights Scheme.
The details of rights outstanding at the financial year end are as follows:
Options and deferred delivery shares outstanding
at 29 February 2008
Date granted Exercise price
per share
Allied Electronics Corporation
LimitedShare Trust
Altron GroupShare
Incentive Trust Conditional
Rights Scheme
20 December 1996 R4.80 5006 March 1997 R5.05 3 600 12 January 1998 R8.30 20 000 15 September 1998 R3.49 296 328 26 January 1999 R4.70 39 400 5 March 1999 R5.25 201 404 30 May 2000 R5.00 95 572 28 June 2000 R4.85 475 462 10 April 2001 R7.00 17 040 7 June 2002 R7.40 20 200 1 October 2002 R7.25 418 225
The following options are subject to IFRS 2:1 April 2003 R7.00 13 668 11 December 2003 R10.00 10 000 27 July 2004 R11.20 947 168 9 February 2006 R22.50 3 420 830 13 June 2006 R23.50 412 000 23 November 2006 R30.75 709 194 14 January 2008 R6.66 218 771* 14 January 2008 R7.64 69 992* 14 January 2008 R7.80 21 783 14 January 2008 R8.84 43 565* 14 January 2008 R12.80 632 202 14 January 2008 R26.54 2 005 559 4 February 2008 R36.10 716 919 25 February 2008 R35.00 754 438 27 February 2008 R35.00 2 122 300 28 February 2008 R35.50 897 778
1 169 506 2 375 374 11 039 018
The awards dated 14 January 2008 are in respect of the conversion of Bytes share options into Altron participating preference share options in accordance with the terms of the Bytes scheme of arrangement. Existing share options were converted using the swap ratio of 0.43565 Altron participating preference shares for each Bytes ordinary share. The awards marked with the asterix represent old awards not subject to IFRS 2.
Terms of schemes
Allied Electronics Corporation Limited Share Trust
The Allied Electronics Corporation Limited Share Trust is a 10-year scheme and is currently in run-off where the last of the options so granted are exercisable in March 2012. It has a vesting period of three years from initial date of grant before the options may be exercised.
Altron Group Share Incentive Trust
The Altron Group Share Incentive Trust is a six-year scheme. The vesting period is three years from initial date of grant whereafter 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 the granting of the conditional rights, subject to meeting the vesting conditions.
Please refer to the remuneration report on page 113 for details of options held by directors.
AltronAnnual Report 2008 147
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Weighted average
exercise priceRand2008
Numberof options
(000s)2008
Weighted average
exercise priceRand2007
Numberof options
(000s)2007
10. SHARE CAPITAL AND PREMIUM (continued)
10.8 Share-based payments
The number and weighted average exercise prices of share options accounted for under IFRS 2 are as follows:
Altech
Outstanding at the beginning of the year 50.39 3 312 48.07 2 649
Forfeited during the year 52.72 (352) 49.45 (120)
Exercised during the year 34.21 (53) 30.00 (10)
Granted during the year 50.28 497 57.75 793
Outstanding at the end of the year 50.39 3 404 50.39 3 312
Exercisable at the end of the year 100 —
The weighted average market price on exercised options was R71.40 (2007: R60.60).
Exercise prices on outstanding options at the end of the year ranged from R30.00 to R66.00 (2007: R30.00 to R57.75).
The weighted average remaining period to vesting on outstanding options at the end of the year was 27 months (2007: 34 months).
Bytes
Outstanding at the beginning of the year 10.06 7 881 9.93 8 724
Forfeited during the year 11.56 (460) 11.56 (540)
Exercised during the year 4.71 (396) 3.63 (303)
Transferred to the Altron scheme 10.27 (7 025) — —
Outstanding at the end of the year — 10.06 7 881
Exercisable at the end of the year — 1 340
The weighted average market price on exercised options was R15.40 (2007: R12.57).
Exercise prices on outstanding options at the end of the previous year was R3.40 to R11.56.
In accordance with the scheme of arrangement with Bytes shareholders all outstanding options were transferred and converted to the Altron share option schemes.
Altron
Outstanding at the beginning of the year 21.27 6 787 19.58 5 679
Forfeited during the year 22.23 (996) 22.50 (52)
Exercised during the year 20.07 (679) 9.62 (80)
Transferred and converted from the Bytes scheme 23.57 3 061 — —
Granted during the year 35.28 4 491 28.34 1 240
Outstanding at the end of the year 26.78 12 664 21.27 6 787
Exercisable at the end of the year 1 245 17
AltronAnnual Report 2008148
Notes to the group financial statements for the year ended 29 February 2008
continued
10. SHARE CAPITAL AND PREMIUM (continued)
10.8 Share-based payments (continued)
The weighted average market price on exercised options was R37.48 (2007: R27.04).
Exercise prices on outstanding options at the end of the year ranged from R7.00 to R36.10 (2007: R7.00 to R30.75).
The weighted average remaining period to vesting on outstanding options at the end of the year was 30 months (2007: 33 months).
Share options granted before 7 November 2002 or vested before 1 January 2005 have not been accounted for under IFRS 2 in accordance with the provisions in IFRS 1 and IFRS 2.
The fair value of services received in return for share options granted is measured by reference to the fair value of the share options granted. The estimate of the fair value of the services received is measured using the Black-Scholes model. Up until the current year options were assumed to be exercised midway between the vesting date and the expiry date. Evidence now indicates that most options are exercised on or shortly after the vesting date and the assumptions have been adjusted accordingly.
There is no difference between the conditions of the options granted to key management and senior employees. All awards are made up of three equal tranches, which vest three, four and five years after grant date.
Fair value of share options and assumptions
Fair value at grant date:
2008
Conditional rights Altech Altron
Fair value at grant date (Rand) 10.12 to 12.04 7.83 to 10.08
Share price (Rand) 49.00 35.00 to 36.10
Exercise price (Rand) 49.00 35.00 to 36.10
Expected volatility 25.0% to 26.3% 21.3% to 24.2%
Option life (years) 3 to 5 3 to 5
Dividend yield 4.90% 3.27% to 3.37%
Risk-free interest rate 9.38% 9.32% to 9.46%
2007
Conditional rights Altech Altron Altron
Fair value at grant date (Rand) 13.88 to 15.37 5.27 to 5.86 8.14 to 8.83
Share price (Rand) 57.75 23.50 30.75
Exercise price (Rand) 57.75 23.50 30.75
Expected volatility 22.6% to 23.8% 19.4% to 19.9% 20.5% to 21.7%
Option life (years) 4.5 to 5.5 4.5 to 5.5 4.5 to 5.5
Dividend yield 3.62% 3.32% 2.54%
Risk-free interest rate 8.17% 7.95% 8.17%
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 financial year had a service condition attached. The new conditional rights scheme implemented in the 2006 financial year includes both a service 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 services received. There are no market conditions associated with any of the share option grants.
Employee expensesGROUP
2008 2007
R millions R millions
Share options granted between 7 November 2002 and 28 February 2006 1 3
Conditional rights granted subsequently 21 17
Expense arising from share appreciation rights granted 24 40
Total expense recognised as employee costs 46 60
Total carrying amount of cash-settled transaction liabilities 31 46
AltronAnnual Report 2008 149
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
10. SHARE CAPITAL AND PREMIUM (continued)
10.8 Share-based payments (continued)
The fair value of the share appreciation rights at grant date is determined using 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 29 February 2008 were as follows:
Altech Altech Altron Altron
2008 2007 2008 2007
Share price (Rand) 50.75 65.70 36.00 42.00
Exercise price (Rand) 32.25 32.25 11.20 and 12.80 11.20
Term (years) 0.4 to 1.4 0.4 to 2.4 0.4 to 1.4 0.4 to 2.4
Volatility 31% to 44% 11.9% to 23.1% 24% to 27% 15.1% to 25.7%
Dividend yield 4.73% 3.13% 3.28% 1.86%
Risk-free interest rate 9.60% 7.99% 9.60% 7.99%
2008 2007
R millions R millions
10.9 Share-based payments expense arising on BBBEE transactions 3 —
Arising on the acquisition of 25.1% of IST by Izingwe – refer to note 12.3.
GROUP
2008 2007
11. RESERVES R millions R millions
11.1 Retained earnings 3 634 2 946
Are distributable and would be subject to secondary tax on companies.
11.2 Foreign currency translation reserve 184 74
Comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.
11.3 Premium/discount on minority equity transactions (1 355) (93)
Comprises the premium or discount on the subsequent purchase or sale of equity instruments in existing subsidiaries.
11.4 Cash flow hedging reserve (1) —
Comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments relating to hedged transactions that have not yet occurred.
11.5 Share-based payments reserve 44 21
Comprises the net fair value of equity instruments granted to employees under share schemes expensed net of tax credits on deductible recharges in excess of expenses recognised.
11.6 Statutory reserves 9 9
Comprises the capital redemption reserve funds as well as legal reserves of a foreign subsidiary.
11.7 Fair value reserve 43 35
Comprises the cumulative net change in the fair value of available-for-sale investments, net of deferred taxation, until the investment is derecognised.
Total reserves 2 558 2 992
AltronAnnual Report 2008150
Notes to the group financial statements for the year ended 29 February 2008
continued
12. BBBEE TRANSACTIONS
The group has entered into the following material BBBEE transactions:
12.1 Altech group – Altech Information Technology (Pty) Limited (Altech IT) – Pamodzi Investment Holdings (Pty) Limited (Pamodzi)
During the year under review the Altech group restructured its information technology businesses and simultaneously restructured the related BBBEE holdings.
Pamodzi disposed of its 25.01% interest in Altech Data (Pty) Limited (Altech Data) and its 28% interest in Altech NamITech Holdings Limited for R49 million. The businesses of Altech Data (Altech Card Solutions and Altech ISIS) were then sold into NamITech South Africa (Pty) Limited and the name of the company changed to Altech Information Technology (Pty) Limited. Pamodzi then acquired 25.01% of the issued share capital in Altech IT for R19 million, which equated to 25.01% of the net asset value of the company at that date. Since the transaction was completed at fair value and settled in cash, no IFRS 2 charge arose and the transaction and the relevant minorities have been fully recognised. The net R30 million paid to Pamodzi has been reflected as a transaction with minorities, directly in equity.
12.2 Powertech group – Aberdare Cables (Pty) Limited (Aberdare) – Izingwe Aberdare Cables Investments (Pty) Limited (Izingwe Aberdare Cables)
Powertech entered into an agreement with Izingwe Aberdare Cables to dispose of 30% of its equity interest and shareholders’ loans in Aberdare. The purchase price was funded by redeemable preference shares issued to a financial institution. The financing arrangement includes certain put and call options to Altron and Powertech and includes a number of terms and conditions that need to be maintained or fulfilled before the risks attached to repayment of the loan fully transfer to Izingwe Aberdare Cables.
Although the rewards of ownership have fully vested in Izingwe Aberdare Cables, due to the requirements of the current accounting framework, the recognition of the disposal has been deferred in the financial statements until the obligation to repay the funding has been fully transferred to Izingwe. The funding obligation is consequently reflected as a liability of the group (refer note 14).
During the previous financial year Powertech acquired a 10% equity interest in Izingwe Aberdare Cables for R1.3 million following the exit of one of the BBBEE consortium shareholders (refer to Annexure 1). A diluted headline earnings adjustment of R81 million (2007: R61 million) has been calculated based on the recognition of the net 27% (90% of 30%) minority interest and the settlement of the outstanding purchase price of R160 million (comprising the empowerment funding obligation net of excess cash deposits of R12 million) adjusted for the dilutive effect of the option price at the Aberdare level (refer to note 26.4).
12.3 Powertech group – Powertech SA (Pty) Limited (Powertech SA) – Izingwe Investment Holdings (Pty) Limited (Izingwe)
Following the acquisition of IST by the Powertech group, the business of IST was sold to Powertech SA with the full purchase price being funded by borrowings. Izingwe acquired 25.1% of Powertech SA for an amount equal to the net asset value at that date. This 25.1% minority interest has been fully recognised as there are no conditional terms to their ownership of the shares. However, as Powertech SA incurred a loss for the current period there was no attribution of the loss to the minority interest.
A valuation was performed on the fair value of the shares acquired by Izingwe, and a charge of R3.1 million has been recognised in the group income statement in accordance with AC 503 and IFRS 2 (refer to note 20.4).
12.4 Bytes group – Bytes Technology Group South Africa (Pty) Limited (Bytes SA) – Kagiso Strategic Investments (Pty) Limited (Kagiso)
Bytes entered into an agreement with Kagiso to effectively dispose of 5% of its equity interest in Bytes SA for a cash consideration fully funded by Kagiso. In addition, Kagiso was granted options to acquire a further 22% equity interest in Bytes SA for R198 million. In the interim period Kagiso is entitled to 27% of the voting rights of the total issued share capital of Bytes SA in respect of the ordinary shares acquired and class B non-participative shares held by them. The class B shares are cancellable upon Kagiso exercising its options.
A diluted headline earnings adjustment amounting to R33 million (2007: R26 million) has been calculated based on the profit that would be attributable to the additional 22% shareholding adjusted for the dilutive effect of the option price at the Bytes SA level (refer to note 26.4).
AltronAnnual Report 2008 151
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
2008 2007
R millions R millions
13. LOANS
13.1 Non-current loans
Interest-bearing loans at amortised cost
Rental finance liabilities (note 4) 128 114
Finance lease liabilities 14 18
Secured bank loans 146 50
Loans from minority shareholders 23 30
Unsecured bank loans 634 —
Deferred purchase considerations 9 —
Loan from joint-venture partner 29 —
Non-interest-bearing loans at amortised cost
Spanish Government loans 14 2
997 214
Less: Payable within one year, shown as current loans (213) (65)
Total non-current loans 784 149
13.2 Current loans
Current portion of interest-bearing loans at amortised cost
Current portion of rental finance liabilities 42 37
Current portion of finance lease liabilities 11 8
Current portion of secured bank loans 36 19
Current portion of unsecured bank loans 77 —
Current portion of deferred purchase considerations 4 —
Current portion of loan from joint-venture partner 29 —
Current portion of non-interest-bearing loans at amortised cost
Current portion of Spanish Government loans 14 1
Current portion of long-term loans 213 65
AltronAnnual Report 2008152
Notes to the group financial statements for the year ended 29 February 2008
continued
13. LOANS (continued)
Terms and debt repayment schedule
The terms and conditions of outstanding loans were as follows:
29 February 2008 28 February 2007
Currency
Nominalinterest
rateYear of
maturity
Face value
R millions
Carrying value
R millions
Face value
R millions
Carrying value
R millions
Secured
Rental finance liabilities ZARLinked to
prime Various 157 128 137 114
Finance lease liabilities ZARLinked to
prime Various 15 14 19 18
Secured bank loan ZAR 13.3% 2017 37 37 — —
Secured bank loan ZAR 12.0% 2011 28 28 — —
Secured bank loan NGN 18.0% 2011 81 81 — —
Unsecured
Unsecured bank loan GBP 6.6% 2008 50 50 — —
Unsecured bank loan GBP 7.7% 2015 34 34 50 50
Unsecured bank loan ZAR 12.0% 2010 550 550 — —
Loans from minority shareholders ZAR 12.3%
No fixed term 23 23 30 30
Spanish Government loan EUR 0.0% 2008 14 14 2 2
Loan from joint venture partner ZAR 14.5% 2008 29 29 — —
Deferred purchase considerations ZAR 11.4% 2010 9 9 — —
1 027 997 238 214
Security
Bank loans are secured by property, plant and equipment with a book value of R189 million (2007: Rnil ) and current assets with a book value of R101 million (2007: Rnil).
Finance lease liabilities are secured by property, plant and equipment with a book value of R14 million (2007: R21 million).
Rental finance liabilities are matched by reciprocal rental finance receivables (refer to note 4).
AltronAnnual Report 2008 153
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
13. LOANS (continued)
Liquidity risk
The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements:
29 February 2008 Currency
Carryingamount
R millions
Con-tractual
cashflows
R millions
6 monthsor less
R millions
6 –12 months
R millions
1 – 2 years
R millions
2 – 5 years
R millions
More than
5 yearsR millions
Non-derivative financial liabilities
Rental finance liabilities ZAR 128 157 29 29 50 49 —
Finance lease liabilities ZAR 14 15 8 6 1 — —
Secured bank loan ZAR 65 101 4 6 17 60 14
Secured bank loan NGN 81 87 36 — 42 9 —
Unsecured bank loans GBP 84 85 64 14 7 — —
Unsecured bank loan ZAR 550 715 33 33 66 583 —
Loans from minority shareholders ZAR 23 26 — 3 3 20 —
Spanish Government loan EUR 14 14 7 7 — — —
Loan from joint-venture partner ZAR 29 32 17 15 — — —
Deferred purchase considerations ZAR 9 11 — 6 5 — —
997 1 243 198 119 191 721 14
28 February 2007 Currency
Carryingamount
R millions
Con-tractual
cashflows
R millions
6 monthsor less
R millions
6 – 12 months
R millions
1 –2 years
R millions
2 – 5 years
R millions
More than5 years
R millions
Non-derivative financial liabilities
Rental finance liabilities ZAR 114 137 21 20 40 56 —
Finance lease liabilities ZAR 18 19 5 5 9 — —
Unsecured bank loan GBP 50 55 8 14 33 — —
Loans from minority shareholders ZAR 30 35 — 10 3 22 —
Spanish Government loan EUR 2 2 1 1 — — —
214 248 35 50 85 78 —
AltronAnnual Report 2008154
Notes to the group financial statements for the year ended 29 February 2008
continued
13. LOANS (continued)
Interest rate risk
Profile
At the reporting date, the interest rate profile of the group’s interest-bearing loans was:
Carrying amount
2008 2007
R millions R millions
Variable-rate instruments
Financial liabilities ZAR 818 162
GBP 84 50
NGN 81 —
983 212
Cash flow sensitivity analysis for variable-rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) profit or loss by the amounts shown below for a period of one year compounded monthly. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis is performed on the same basis for 2007.
Profit or loss
100 bp increase R millions
100 bp decrease R millions
Effect
29 February 2008
Variable-rate loans (10) 10
28 February 2007
Variable-rate loans (2) 2
Currency risk
The principal and interest on borrowings is denominated in currencies that match the functional currencies of the underlying operations of the group, primarily GBP, but also Euro and NGN. Accordingly currency risk does not arise from these financial instruments.
2008 2007
Borrowing facilitiesR millions R millions
In terms of the articles of association, the borrowing powers of the group are unlimited.
Unutilised banking facilities 2 418 2 871
14. EMPOWERMENT FUNDING OBLIGATION
At amortised cost
Opening balance 172 173
Interest accrued 16 16
Repayments (16) (15)
Capital costs adjustment — (2)
172 172
Current portion (16) —
156 172
AltronAnnual Report 2008 155
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
14. EMPOWERMENT FUNDING OBLIGATION (continued)
Liquidity risk
The following are the contractual maturities of the empowerment funding obligation liability, including interest payments and excluding the impact of netting agreements:
Currency
Carryingamount
R millions
Contractual cashflows
R millions
6 monthsor less
R millions
6 –12 months
R millions
1 –2 years
R millions
2 – 5 years
R millions
More than5 years
R millions
29 February 2008 Rand 172 235 12 13 28 111 71
28 February 2007 Rand 172 251 8 8 25 95 115
Interest rate risk
The dividends on the preference shares bear an indicative dividend rate of 9.61% (2007: 9.61%). This interest rate has been fixed for the period of the funding and is not subject to variation as market rates alter.
Warranties Post retirement
and contract medical aid
losses benefits Total
R millions R millions R millions
15. PROVISIONS
Long-term provisions 28 10 38
Current portion included in current liabilities 66 — 66
Total provisions at 28 February 2007 94 10 104
Provisions raised during the year 53 1 54
Provisions utilised during the year (53) — (53)
Total provisions at 29 February 2008 94 11 105
Long-term provisions 13 11 24
Current portion included in current liabilities 81 — 81
94 11 105
Refer to accounting policies for a description of provisions.
2008 2007
R millions R millions
16. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVES
Trade payables 3 280 2 490
Derivative liability at fair value: used for hedging 35 27
Payroll liabilities 176 161
Vat accrual 69 45
Receipts in advance 343 217
3 903 2 940
AltronAnnual Report 2008156
Notes to the group financial statements for the year ended 29 February 2008
continued
16. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVES (continued)
(a) Trade payables
Management of liquidity risk
The group has negotiated favourable credit terms with suppliers, which enable the group to utilise its operating cash flow 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 risk
Most amounts owed in foreign currency are covered by foreign exchange contracts, (refer to note 30).
Interest rate risk
The group has no material exposure to interest risk as there are no suppliers that charge interest.
(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 monthsor less
R millions
6 –12 months
R millions
1 – 2 years
R millions
2 – 5 years
R millions
More than5 years
R millions
Estimate of when revenues are expected to be earned on these receipts: 156 146 25 16 —
(c) Derivative liability at fair value 2008 2007
R millions R millions
Derivative liability at fair value includes:
Forward exchange contracts used for fair value hedging 10 4
Commodity forward contracts 25 23
35 27
17. RETIREMENT BENEFIT PLANS
Defined contribution plans
The majority of the group’s employees are members of the Altron Group Pension Fund which is a defined contribution fund and is governed by the Pension Funds Act, 1956, as amended. The contribution rate of the employers is 10% (2007: 10%), calculated on the pensionable emoluments of members.
Additionally the group provides retirement benefits for certain of its employees through the Altron Group Provident Fund. The fund is a defined contribution fund and is governed by the Pension Funds Act, 1956, as amended. Contributions to the fund comprise between 8% and 20% of pensionable emoluments.
The group’s contribution to these funds amounted to R125 million (2007: R124 million).
Multi-employer plans
Post acquisition of subsidiaries, certain employees remained members of their previous funds. A number of these are defined benefit plans. These industry managed retirement benefit schemes are dealt with as defined contribution plans as the group’s obligations under the schemes are equivalent to those arising in a defined contribution plan.
The group’s contribution to these other funds amounted to R42 million (2007: R48 million).
Defined benefit plans
Members of the Altron Group Pension Fund who were members prior to 1 September 1996 are entitled to a minimum benefit equal to the previously provided defined benefit pension. Upon retirement, members of the Altron Group Pension Fund can purchase a defined benefit pension from the fund. The base pension and subsequent increases granted, based on weighted average investment returns on funds, is guaranteed by the pension fund.
The benefit plans disclosed below are only in respect of members with minimum entitlement benefits and retirees with purchased defined benefit pensions.
During the previous financial year the post-retirement medical assistance portion of the defined benefit plans was settled by transfer of entitlements with an enhancement to the applicable member’s defined contribution funds.
AltronAnnual Report 2008 157
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
2008 2007
R millions R millions
17. RETIREMENT BENEFIT PLANS (continued)
Defined benefit plans
17.1 Value of obligations
Fair value of plan assets 2 228 2 084
Present value of funded obligations (2 101) (1 983)
Surplus at year end (including unrecognised actuarial gains) 127 101
Unrecognised due to paragraph 58 limit (127) (101)
Asset recognised on the balance sheet — —
17.2 Components of income statement expense
Current service cost 70 90
Interest cost 154 93
Settlement cost of medical assistance reserve — 24
Contributions to underlying defined contribution plan funding and expected return on plan assets (limited by paragraph 58) (213) (166)
Income statement expense 11 41
17.3 Reconciliation of the net asset recognised on the balance sheet
Amount recognised at the beginning of the year — —
Unrecognised due to paragraph 58 limit at the beginning of the year 101 538
Net expense recognised in the income statement (11) (41)
Contributions (net of contribution holiday) 11 41
Current year movement on unrecognised asset due to paragraph 58 limit 26 (437)
Net asset at the end of the year 127 101
Unrecognised due to paragraph 58 limit at the end of the year (127) (101)
Amount recognised at the end of the year — —
17.4 Reconciliation of fair value of plan assets
Assets at fair market value at the beginning of the year 2 084 1 809
Expected return on assets 223 159
Contributions (net of contribution holiday) 11 41
Benefits paid (67) (50)
Actuarial (loss)/gain (including fund transfers and defined contribution plan contributions) (23) 300
Settlement cost – medical assistance — (175)
Assets at fair market value at the end of the year 2 228 2 084
17.5 Reconciliation of defined benefit obligation
Defined benefit obligation at the beginning of the year 1 983 1 271
Service cost 70 90
Interest cost 154 93
Actuarial (gain)/loss (39) 730
Benefits paid (67) (50)
Settlement cost – medical assistance — (151)
Defined benefit obligation at the end of the year 2 101 1 983
AltronAnnual Report 2008158
Notes to the group financial statements for the year ended 29 February 2008
continued
R millions
17. RETIREMENT BENEFIT PLANS (continued)
17.6 Expected 2009 contributions
Service cost 76
Interest cost 176
Expected return on assets (227)
Paragraph 58 limitations —
25
IAS 19 – Employee Benefits paragraph 58 only allows an asset to be recognised on the group’s balance sheet to the extent that economic benefits are available to the group in the form of refunds or reductions in future contributions.
The Pension Funds Act, 1956, as amended, precludes the group from accessing the asset in 17.1 above without specific consent from the trustees of the fund in the form of employer contribution holidays. Accordingly the surplus has not been recognised on the group’s balance sheet.
The group was granted a contribution holiday on the defined contribution plan for the six months ended 31 October 2007 in lieu of the surpluses accumulated on the defined benefit plans (2007: six months to 28 February 2007). The contribution holiday was made available to all participating group employer companies.
2008 2007
17.7 Principal actuarial assumptions
Discount rate 8.50% 8.00%
Inflation rate 5.25% 5.00%
Salary increase rate 6.25% 6.00%
Expected return on assets 10.50% 11.00%
Pension increase allowance 5.25% 5.00%
Actual return on the Altron Group Pension Fund 13.27% 29.40%
18. ACQUISITION OF SUBSIDIARIES
IST
With effect from 3 September 2007, Powertech acquired 100% of IST for a cash consideration of R504 million. IST is a technology and solutions-driven business that offers engineering solutions to its customers in the power utilities, telecoms, mining and material processing industries. In the year to 29 February 2008, IST contributed R248 million to revenue and a loss after tax of R20 million after the amortisation of intangibles and interest charges following the gearing introduced. If the acquisition had taken place on 1 March 2007, IST would have contributed revenue of R454 million and a loss after tax of R39 million for the year to 29 February 2008. In determining these amounts, management has used the group’s accounting policies and adjusted for the interest cost associated with the borrowings introduced as well as the amortisation charges, net of tax, assuming that the fair value adjustments and gearing had taken place on 1 March 2007.
Fair value of assets acquired
Carrying Fair value Recognised
values adjustments values
R millions R millions R millions
Non-current assets 64 133 197
Current assets 124 — 124
Non-current liabilities (93) (39) (132)
Current liabilities (133) — (133)
Net identifiable assets and liabilities (38) 94 56
Goodwill on acquisition 448
Total consideration 504
Less: Cash balances acquired (6)
Consideration paid in cash 498
AltronAnnual Report 2008 159
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
18. ACQUISITION OF SUBSIDIARIES (continued)
The recognised values were determined based on the requirements of the applicable IFRSs immediately before the acquisition. The fair value adjustments made relate to intangible assets identified on acquisition. In determining their fair values, the group applied discount rates of between 15.6% and 16.1% to the relevant forecast cash flows.
Goodwill arising was attributed to factors that did not meet the recognition criteria for intangible assets at the date of acquisition, being primarily the skills and knowledge of the personnel of the business.
The following other acquisitions were made during the year:
Date of acquisition
Purchase consideration
R millions
A controlling 50% interest in East Rand Document Solutions (Xerox dealership) March 2007 6
The entire shareholding in Mastermed (Switching technology) March 2007 10
The entire shareholding in Swanib Cables (Power Cable distributor) March 2007 43
The business of Mailing Facilities (Mailing services) June 2007 8
The entire shareholding in Netstar’s Rustenburg franchise (Onseller of Netstar services) August 2007 11
The entire shareholding of Papergeni (Envelope manufacturer) December 2007 5
The entire shareholding in ComTech (Fleet management services) January 2008 53
Total cost of shares, assets and liabilities 136
In the year to 29 February 2008, these acquisitions contributed R207 million to revenue and R18 million to the consolidated profit after tax. If the acquisitions had taken place on 1 March 2007, the acquired businesses would have contributed revenue of R298 million and profit after tax of R17 million for the year to 29 February 2008. In determining these amounts, management has used the group’s accounting policies and adjusted for amortisation charges, net of tax, assuming that the fair value adjustments had occurred on 1 March 2007.
Fair value of assets acquired
The above acquisitions had the following effect on the group’s assets and liabilities:
Carrying Fair value Recognised
values adjustments values
R millions R millions R millions
Non-current assets 13 64 77
Current assets 74 — 74
Non-current liabilities — (15) (15)
Current liabilities (58) — (58)
Net identifiable assets and liabilities 29 49 78
Goodwill on acquisition 58
Total consideration 136
Less: Deferred purchase consideration (9)
Less: Cash balances acquired (6)
Total cash consideration 121
The recognised values were determined based on the requirements of the applicable IFRSs immediately before the acquisition. The fair value adjustments made relate to intangible assets identified on acquisition. In determining their fair values, the group applied discount rates appropriate to each business to the relevant cash flows.
Goodwill arising was attributed to factors that did not meet the recognition criteria for intangible assets at the date of acquisition, being primarily the skills and knowledge of the personnel and relative market share of the businesses acquired.
AltronAnnual Report 2008160
Notes to the group financial statements for the year ended 29 February 2008
continued
GROUP
2008 2007
R millions R millions
19. REVENUE
Goods sold 14 950 11 539
Services rendered 6 451 5 540
Rental finance income 30 47
21 431 17 126
20. OPERATING PROFIT BEFORE CAPITAL ITEMS
Is stated after taking account of the following items:
20.1 Auditors’ remuneration
Audit fees 24 21
Fees for other services 3 1
27 22
20.2 Directors’ remuneration
Refer to remuneration report on page 112 49 44
20.3 Employee remuneration (including directors’ remuneration)
Salaries and wages 2 840 2 435
Share-based payments – equity settled (note 10.8) 22 20
Share-based payments – cash settled (note 10.8) 24 40
Retirement and provident funds 167 172
Medical aid and other — 61
3 053 2 728
20.4 Share-based payments expense arising on BBBEE transactions (note 10.9) 3 —
20.5 Fees paid
Managerial fees 24 18
Technical, consultancy and administration 127 93
151 111
20.6 Foreign exchange gains/(losses)
Gains 97 135
Losses (63) (73)
Forward exchange contracts – fair value adjustments 30 3
64 65
Being:
Realised 52 56
Unrealised 12 9
20.7 Net increase in provisions 1 24
AltronAnnual Report 2008 161
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
GROUP
2008 2007
R millions R millions
20. OPERATING PROFIT BEFORE CAPITAL ITEMS (continued)
20.8 Operating lease charges
Property 118 114
Plant, equipment and vehicles 38 25
Additional cost of straight-lining of leases 7 2
163 141
20.9 Research and development expenditure 128 114
(Comparative restated according to current definition of research and development expenditure)
21. CAPITAL ITEMS
Impairment of goodwill (86) (50)
Goodwill adjustment on reversal/(utilisation) of at acquisition tax losses 2 (19)
Foreign currency translation reserve released on disposal (7) —
Net (loss)/gain on disposal of businesses (1) 8
Net gain on disposal of property, plant and equipment 2 1
Net gain on disposal of property, plant and equipment and intangibles to the joint venture — 32
Impairment of property, plant and equipment — (5)
Fair value adjustment of assets held-for-sale — (6)
Profit on disposal of investments — 1
(90) (38)
22. FINANCIAL INCOME
Recognised in profit or loss
Interest income on financial assets carried at amortised cost 160 114
Dividend income on available-for-sale financial assets 22 18
182 132
Recognised directly in equity
Net change in fair value of available-for-sale financial assets 8 2
Fair value of cash flow hedges transferred to profit or loss — 5
Foreign currency translation differences in respect of foreign operations 133 71
141 78
Recognised in:
Fair value reserve 8 1
Hedging reserve — 3
Translation reserve 106 56
Minority interest 27 18
141 78
AltronAnnual Report 2008162
Notes to the group financial statements for the year ended 29 February 2008
continued
GROUP
2008 2007
R millions R millions
23. FINANCIAL EXPENSE
Recognised in profit or loss
Interest expense on financial liabilities measured at amortised cost 89 56
89 56
Recognised directly in equity
Fair value of cash flow hedges transferred to profit or loss 1 —
Recognised in hedging reserve 1 —
24. SHARE OF PROFITS FROM ASSOCIATES
Attributable earnings 4 4
25. TAXATION
25.1 Taxation charge
Current tax
– current year 591 497
Deferred tax
– current year (25) (73)
– change in rate of taxation 4 —
Adjustment to prior years
– current tax — (4)
– deferred tax (4) 12
566 432
Secondary tax on companies
– current tax 54 58
– deferred tax 5 (9)
625 481
25.2 Reconciliation of rate of taxation % %
South African normal tax rate 29.0 29.0
Adjusted for:
Disallowable expenditure 1.0 0.8
Goodwill impaired and adjusted 1.4 1.3
Non-taxable income (2.1) (3.0)
Utilisation of previously unrecognised tax losses — (1.0)
Income from associates (0.1) (0.1)
Change in rate of taxation 0.2 —
Prior year adjustments (0.2) 0.5
0.2 (1.5)
Secondary tax on companies 3.0 3.1
Net increase 3.2 1.6
Effective tax rate 32.2 30.6
AltronAnnual Report 2008 163
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
GROUP
2008 2008 2007 2007
GrossR millions
Net of taxand minorities
R millionsGross
R millions
Net of taxand minorities
R millions
26. EARNINGS PER SHARE
26.1 Reconciliation between earnings and headline earnings
Earnings attributable to Altron equity holders 1 019 805
Adjustments for:
Impairment of goodwill 86 50 50 29
Goodwill adjustment on utilisation of at acquisition tax losses (2) (2) 19 11
Deferred tax assets reversed on at acquisition tax losses — 2 — (9)
Foreign currency translation reserve released on disposal 7 4 — —
Net loss/(gain) on disposal of businesses 1 1 (8) (10)
Net gain on disposal of property, plant and equipment (2) (2) (1) (1)
Net gain on disposal of property, plant and equipment and intangibles to the joint venture — — (32) (36)
Impairment of property, plant and equipment — — 5 2
Fair value adjustment of assets held-for-sale — — 6 3
Profit on disposal of investments — — (1) (1)
Headline earnings 1 072 793
Headline earnings per share (cents) 375 283*
* The determination of headline earnings for the year ended 28 February 2007 has been restated following the issue of Circular 08/2007 on Headline Earnings. The income statement impact of the deferred taxation assets subsequently raised on tax losses not previously recognised in business combinations has now been excluded from headline earnings in accordance with the new circular.
GROUP
2008 2007
Number of shares
Number of shares
26.2 Reconciliation of weighted average number of shares
Issued shares at the beginning of the year (ordinary and participating preference shares) 310 828 840 309 496 617
Effect of own shares held at the beginning of the year (30 945 344) (27 556 961)
Effect of shares issued in March — 1 403
Effect of shares issued in June 393 923 24 058
Effect of shares issued/own shares acquired in August 209 830 (522 236)
Effect of shares issued/own shares acquired in November — (861 131)
Effect of shares issued/own shares acquired in December 143 083 (105 569)
Effect of shares issued/own shares acquired in January 5 017 283 (77 674)
Effect of shares issued/own shares acquired in February 12 422 (40 313)
Weighted average number of shares 285 660 037 280 358 194
AltronAnnual Report 2008164
Notes to the group financial statements for the year ended 29 February 2008
continued
GROUP
2008 2007
Number of shares
Number of shares
26. EARNINGS PER SHARE (continued)
26.3 Reconciliation between number of shares used for earnings per share and diluted earnings per share
Weighted average number of shares 285 660 037 280 358 194
Dilutive options 3 153 490 6 264 393
Weighted average number of shares (diluted) 288 813 527 286 622 587
26.4 Reconciliation between earnings attributable to Altron equity holders and fully diluted earnings R millions R millions
Earnings attributable to Altron equity holders 1 019 805
Additional earnings attributable to BBBEE minorities in subsidiaries (118) (87)
Additional earnings attributable to dilutive options at subsidiary level (14) (21)
Minority interest in adjustments 7 20
Fully diluted earnings 894 717
GROUP
2008 2007
Net of tax Net of tax
Gross and minorities Gross and minorities
R millions R millions R millions R millions
26.5 Reconciliation between headline earnings attributable to Altron equity holders and fully diluted headline earnings
Headline earnings 1 072 793
Additional earnings attributable to BBBEE minorities in subsidiaries (118) (116) (82) (69)
Additional earnings attributable to dilutive options at subsidiary level (17) (11) (26) (15)
Fully diluted headline earnings 945 709
Diluted headline earnings per share (cents) 327 247
26.6 Reconciliation between headline earnings and adjusted headline earnings
Adjusted headline earnings have been presented to demonstrate the impact of some once-off events and accounting charges on the headline earnings of the group. Headline earnings are reconciled to adjusted headline earnings as follows:
Headline earnings 1 072 793
Amortisation of intangibles 40 22 19 8
Expenses associated with proposed purchase of minorities in subsidiaries 13 9 — —
IFRS 2 charge on BBBEE transactions 3 3 — —
Fully diluted headline earnings 1 106 801
Adjusted headline earnings per share (cents) 387 286
AltronAnnual Report 2008 165
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
26. EARNINGS PER SHARE (continued)
Basic earnings per share is calculated by dividing the earnings attributable to Altron equity holders by the weighted average number of ordinary and participating preference shares in issue during the year.
Basic headline earnings per share is calculated by dividing headline earnings by the weighted average number of ordinary and participating preference shares in issue during the year.
For diluted earnings per share the weighted average number of shares is adjusted to assume conversion of all outstanding share options under the employee share option schemes, net of proceeds received on those options.
Fully diluted earnings and diluted headline earnings have been calculated in accordance with IAS 33 – Earnings per share on the basis that:
– Kagiso Strategic Investments (Pty) Limited exercised its full option on 22% of the shares in Bytes Technology Group South Africa (Pty) Limited, adjusted for the dilutive effect of the option price at the Bytes Technology Group SA level.
– The recognition of the deferred sale of a 30% interest in Aberdare Cables to the Izingwe Consortium based on the assumption that the purchase price will be settled in cash of R160 million (comprising the empowerment funding obligation net of excess cash deposits of R12 million), adjusted for the dilutive effect of the option price at the Aberdare level and after taking into account the 10% investment in the Izingwe Consortium by Power Technologies (Pty) Limited.
– The earnings effect of dilutive options at Allied Technologies Limited level.
GROUP
2008 2007
R millions R millions
27. DIVIDENDS PROPOSED
Ordinary dividend number 60 of 156 cents (2007: 118 cents per share) 160 111
Preference dividend number 14 of 156 cents (2007: 118 cents per share) 327 220
487 331
28. COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS
28.1 Capital expenditure
Contracts for capital expenditure not provided for in the financial statements 64 18
Capital expenditure authorised but not contracted for 47 43
111 61
This expenditure will be incurred in the ensuing year and will be financed from existing cash resources.Group companies have entered into contracts for certain business combinations that were effective after year end (refer to note 29).
28.2 Amounts outstanding under operating lease agreementsAt the balance sheet date the group had outstanding commitments under non-cancellable operating leases, which fall due as follows:
Within one year
Property 117 96
Plant, equipment and vehicles 54 35
171 131
One to five years
Property 324 286
Plant, equipment and vehicles 26 22
350 308
Thereafter
Property 104 151
Total 625 590
CONTINGENT LIABILITIES
Surety provided in respect of the liability of a Bytes Document Solutions dealer for its debt to a financing house — 6
AltronAnnual Report 2008166
Notes to the group financial statements for the year ended 29 February 2008
continued
29. POST-BALANCE SHEET EVENTS
Acquisition of 51% controlling interest in certain East African companies
With effect from 1 March 2008 Altech acquired a 51% controlling interest in the following entities that are involved in the provision of broadband and related services in Kenya, Uganda and Tanzania:
– Kenya Data Networks Limited, a full service data communications carrier, for US$68 million.
– Swift Global (Kenya) Limited, an internet service provider in Kenya that utilises gateway and network capacity provided by Kenya Data Networks, for US$5 million.
– Infocom Limited, a provider of internet and IT services in Uganda, for US$2 million.
Of the total purchase price of US$75 million, an amount of US$10 million is held in escrow as a deferred purchase consideration, dependent on the achievement of a combined profit after tax of at least US$11.7 million for the year ending 31 December 2008. This amount will be reduced proportionately to any shortfall on the warranted profit after tax.
Following the transaction, the shareholders injected a further US$20 million into the three companies in proportion to their shareholdings. As a result, Altech has injected a further US$10.2 million to fund expansion of the businesses.
The acquirees’ combined balance sheet at the date of acquisition is as follows:
Carrying
amount
R millions
Non-current assets 261
Current assets 119
Non-current liabilities —
Current liabilities (124)
Net identifiable assets and liabilities 256
Acquisition of the 50% of ABB Powertech Transformers not already owned by Powertech
With effect from 1 April 2008, Powertech acquired the remaining 50% of ABB Powertech Transformers (Pty) Limited that it did not already own for R320 million.
ABB Powertech Transformers manufactures distribution transformers, which it supplies primarily to Eskom and the municipalities.
Analysis of the balance sheet amounts acquired is as follows:
Carrying
amount
R millions
Non-current assets 42
Current assets 190
Non-current liabilities (1)
Current liabilities (90)
Net identifiable assets and liabilities 141
The purchase price allocations for each of these acquisitions will be performed during the 2009 financial year, which will identify the fair value of all assets and liabilities and any recognisable intangible assets with the balance being recorded as goodwill.
30. FINANCIAL RISK MANAGEMENT
Exposure to currency, interest rate, liquidity and credit risk arises in the normal course of the group’s business.
This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.
The board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework. The board has established the risk management committee, which is responsible for developing and monitoring the group’s risk management policies. The committee reports regularly to the board of directors on its activities.
AltronAnnual Report 2008 167
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
30. FINANCIAL RISK MANAGEMENT (continued)
The group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the group’s activities.
30.1 Foreign currency risk
Foreign exchange contracts are used as a means of reducing exposure to fluctuations in foreign exchange rates.
The group incurs currency risk as a result of transactions which are denominated in a currency other than the group entities’ functional currency in respect of purchases, sales and borrowings. The currencies giving rise to currency risk in which the group primarily deals are British pounds (GBP), US dollars (USD) and euros. The group entities hedge payables, receivables and borrowings denominated in foreign currencies.
The settlement of these transactions takes place within a normal business cycle. The group has clearly defined policies for the management of foreign currency risks. Transactions which create foreign currency cash flows are hedged with forward exchange contracts. No uncovered foreign exchange commitments exist at balance sheet date. Speculative use of financial instruments or derivatives is not permitted and no such use occurred during any of the periods presented.
The group’s exposure to foreign currency risk was as follows:
29 February 2008 28 February 2007
Foreign amount Foreign amount
GBP Euro USD GBP Euro USD
Millions Millions Millions Millions Millions Millions
Other investments — 2 1 — — —
Trade and other receivables — 7 12 2 2 7
Cash and cash equivalents — 2 5 — 1 4
Trade and other payables (10) (47) (23) (9) (16) (17)
Gross balance sheet exposure (10) (36) (5) (7) (13) (6)
Forward exchange contracts 10 38 15 8 14 11
Net exposure — 2 10 1 1 5
2008 2007
The following significant exchange rates were used for the conversion of foreign operations and transactional balances:
Averagerate
Closingrate
Averagerate
Closingrate
British pound 14.21 15.58 13.09 14.26
Euro 9.94 11.78 8.88 9.58
US dollar 7.10 7.84 6.97 7.26
Sensitivity analysis
A 1% strengthening/weakening in the rand against the net exposure to the following currencies at 29 February 2008 would have increased/(decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2007.
The exposure to other currencies is not material to the business and consequently is not elaborated on any further.
Profit or Profit or
loss loss
strengthening weakening
29 February 2008 Millions Millions
British pound — —
Euro (0.2) 0.2
US dollar (0.8) 0.8
28 February 2007
British pound (0.1) 0.1
Euro (0.1) 0.1
US dollar (0.4) 0.4
AltronAnnual Report 2008168
Notes to the group financial statements for the year ended 29 February 2008
continued
30. FINANCIAL RISK MANAGEMENT (continued)
30.2 Foreign exchange contracts
The principal or contract amounts of the foreign exchange contracts for trade payables, receivables and borrowings, including forecast transactions, at balance sheet date were:
Net foreign exchange contracts to pay/(receive)
2008 2007
Foreign Rand Foreign Rand
amount amount amount amount
Millions Millions Millions Millions
British pounds 10.4 148.6 8.3 117.1
US dollars 38.4 289.1 13.5 98.0
Euros 14.5 151.8 11.2 107.1
Swedish krona 24.8 28.5 9.4 9.9
New Zealand dollars — — — 0.2
Swiss francs 1.8 11.8 0.3 2.1
Japanese yen 5.1 0.4 2.0 0.1
630.2 334.5
Comprising foreign exchange contracts:
– to pay 958.3 762.1
– to receive (328.1) (427.6)
630.2 334.5
Value of contracts at mark-to-market 668.4 336.5
Derivative asset at fair value (refer to note 7) 48 6
Derivative liability at fair value (refer to note 16) (10) (4)
Contracts in respect of forecast transactions
The group has entered into certain forward exchange contracts, included above, which do not relate to specific items appearing on the balance sheet, but were entered into to cover foreign commitments not yet due. The contracts will be utilised for purposes of inventory procurement during the following year.
– to pay 110 68
– to receive — —
110 68
30.3 Commodity contracts
Commodity forward contracts are entered into to hedge the variability in the price of forecast raw material purchases including copper, aluminium and lead.
30.4 Interest rate risk
Financial assets and liabilities that are sensitive to interest rate risk are cash and cash equivalents, bank overdrafts, loans receivable/payable, and rental finance advances/liabilities. The interest rates applicable to these financial instruments are on a floating basis in line with those currently available in the market.
The group has no fixed rate financial assets or liabilities except for the empowerment funding obligation (refer to note 14).
AltronAnnual Report 2008 169
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
30. FINANCIAL RISK MANAGEMENT (continued)
30.5 Credit riskCredit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the group’s trade receivables, rental finance advances, commodity and 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 financial asset in the balance sheet.The group has no significant concentration of credit risk, with exposure spread over a large number of customers.The maximum exposure to credit risk arising from derivative financial instruments is the contractual amounts receivable in respect of foreign exchange contracts.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 specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified, based on the historical trends, adjusted for current economic conditions.
Cash and cash equivalentsThe group limits its exposure to credit risk by only investing in liquid investments and only with counterparties that have a credit rating of at least A1 from Standard and Poor’s. Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.Deposits and cash balances are all maintained at reputable financial institutions. Cash management is performed by a central corporate treasury.
Guarantees
The group’s policy is to provide financial guarantees only to wholly owned subsidiaries. At 29 February 2008 no third-party guarantees were outstanding (2007: none).
30.6 Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.
The group’s approach to managing liquidity risk is to ensure that sufficient liquidity is available to meet its liabilities when due.
The group ensures it has sufficient cash on demand or access to facilities to meet expected operational expenses for the next 12 months, including the servicing of financial 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:
– R2 418 million of borrowing facilities that are unsecured. Interest payable is linked to the prime interest rate.
30.7 Fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows:
29 February 2008 28 February 2007
Carrying Fair Carrying Fair
amount value amount value
R millions R millions R millions R millions
Non-current loans receivable at amortised cost 219 219 179 179
Non-current available-for-sale investments at fair value 75 75 60 60
Rental finance advances 86 86 77 77
Trade and other receivables 3 317 3 317 2 483 2 483
Assets classified as held-for-sale — — 15 15
Derivative assets at fair value: used for hedging 54 54 11 11
Cash and cash equivalents 2 116 2 116 1 613 1 613
Loans (997) (997) (214) (214)
Empowerment funding obligation (172) (157) (172) (157)
Bank overdraft (33) (33) (24) (24)
Trade and other payables (3 868) (3 868) (2 913) (2 913)
Derivative liability at fair value: used for hedging (35) (35) (27) (27)
Liabilities classified as held-for-sale — — (15) (15)
762 777 1 073 1 088
AltronAnnual Report 2008170
Notes to the group financial statements for the year ended 29 February 2008
continued
30. FINANCIAL RISK MANAGEMENT (continued)
30.7 Fair values (continued)
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and short-term investments
The carrying amount approximates fair value because of the short maturity of those instruments.
Investment securities and trading account assets
The fair values of some investments are estimated based on quoted market prices for those or similar investments. Unlisted equity investments are fair valued based on directors’ valuations using the discounted cash flow method.
Loan receivables/payables
Interest-bearing borrowings and receivables are generally at interest rates in line with those currently available in the market on a floating rate basis, and therefore the fair value of these financial 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 flows, discounted at the market rate of interest at the reporting date.
Foreign exchange contracts
The fair value of foreign exchange 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.
Interest rate used for determining fair value
The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve at the reporting date plus an adequate constant credit spread, and were as follows:
2008 2007
Loans and borrowings 13% 11%
30.8 Capital management
The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence 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 defined 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 2008 was 24.7% (2007: 23.0%).
Altron’s share capital consists of 105.7 million ordinary shares and 237.5 million participating preference shares. Management does not make any distinction between the two types of equity in managing the capital of the company.
During the year ended 29 February 2008, Altron acquired the balance of the Bytes shares it did not already own in exchange for 8.5 million ordinary shares and 22.1 million participating preference shares, thereby increasing the share capital and premium of the group by R1.4 billion. However, the transaction only increased the capital base of the company by some R328 million as the excess of the consideration over the net asset value acquired was taken as a debit to equity in accordance with the group’s accounting policy.
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.
AltronAnnual Report 2008 171
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
30. FINANCIAL RISK MANAGEMENT (continued)
30.8 Capital management (continued)
The group does not have a defined share buy-back 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 31 million treasury shares (see note 10) 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 financial year, which expires at the next annual general meeting, but adheres to a 10% limit on its holding of treasury shares.
Altron’s capital management is partially restricted by covenants given to lenders in respect of some borrowing obligations. In respect of borrowings totalling R710 million, the group’s net debt to EBITDA ratio is limited to two times, while tangible net asset value cannot reduce below R2 billion. In the event that these parameters were exceeded the lenders would be able to require immediate repayment.
There were no changes in the group’s approach to capital management during the year.
Refer to note 10 for a quantitative summary of authorised and issued capital.
31. RELATED-PARTY TRANSACTIONS
The group has a related-party relationship with its subsidiaries (see note 3 of the company’s financial statements on page 187), associates and joint ventures (see Annexure 1) and with its directors (see page 108) and key management personnel (refer below). 2008 2007
R millions R millions
31.1 Associates and joint ventures
Sale of goods and services to joint ventures 36 33
Services received from associates 20 20
Interest earned from joint ventures 1 —
Management fees earned from joint ventures 2 —
31.2 Directors
Details relating to directors’ emoluments and shareholdings in the company are disclosed in the remuneration report on page 112 and in the directors’ report on page 118.
31.3 Key management personnel
Key management personnel are defined as directors of the company and its principal subsidiary companies, Allied Technologies Limited, Bytes Technology Group Limited and Power Technologies (Pty) Limited.
The key management personnel compensations were as follows:
Short-term employee benefits, including salaries and bonuses 51 48
Post-employment benefits 3 3
Equity compensation benefits 9 6
63 57
31.4 Shareholders
The principal shareholders of the company are detailed in the analyses of shareholders on pages 90 to 93 of the annual report.
Directors’ shareholdings are detailed in the directors’ report on page 118.
AltronAnnual Report 2008172
Notes to the group financial statements for the year ended 29 February 2008
continued
32. JUDGEMENTS MADE BY MANAGEMENT
In preparing financial 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 have been raised at year end on income tax losses and temporary differences in certain subsidiaries based on current profit forecasts for the businesses.
Asset lives and residual values
The useful lives and residual values of property, plant, equipment and intangible assets are reassessed annually based on current utilisation, prospects and market conditions.
The useful life of the rights to distribute Xerox equipment in 24 African territories is considered to be indefinite as these rights will automatically be renewed at no further cost upon the renewal of the group’s South African distribution agreement.
Impairment of assets
The impairment of goodwill is tested at least annually. Property, plant and equipment, as well as intangible assets, are considered for impairment when conditions indicate that impairment may be necessary. These conditions include the economic conditions of the operating unit as well as the viability of the asset itself.
The discounted cash flow method is used, taking into account future expected cash flows, market conditions and the expected useful lives of the assets.
Post-employment benefit obligations
Post-retirement defined benefits are provided for certain existing and former employees (see note 17).
The actuarial valuation method used to value the obligations is the projected unit method. The assumptions used include a discount rate, inflation rate, salary increase rate, expected rate of return on assets and a pension increase allowance.
Fair value of investments available-for-sale
The investments in FR1 and TAR (refer to Annexure 1) have been designated as available-for-sale financial assets and as such have been fair valued using the discounted cash flow method.
Valuation of financial instruments
In note 30.7 a detailed analysis is given of the fair value methodologies applied.
33. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 29 February 2008 and have not been applied in preparing these financial statements.
IFRS 2 amendment – Share-based Payments – Vesting Conditions and Cancellations
The amendments to the standard are effective for the group for the year ending 28 February 2010. The amendments to IFRS 2 clarify 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 specifies 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 significantly.
IFRS 3 – Business Combinations
The amendments to the standard are effective for the group for the year ending 28 February 2011.
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 identifiable assets of the entity acquired;
– 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 financial statements will be a function of the number and value of any business combinations transacted after the effective date.
IFRS 8 – Operating Segments
This 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.
AltronAnnual Report 2008 173
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
33. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE (continued)
IFRS 8 – Operating Segments (continued)
Such components (operating segments) would be identified 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 relating 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 Statements
The 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 financial 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 reclassification of items in the financial 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 costs
This 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 on the group’s results.
IAS 27 – Consolidated and Separate Financial Statements
The amendments to the standard are effective for the group for the year ending 28 February 2011.
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 profit 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 deficit balance.
The effect on the financial statements will be a function of the number and value of transactions that result in the loss of control over subsidiaries after the implementation of the new standard.
IAS 32 and IAS 1 amendments – Financial Instruments: Preparation and IAS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation
The amendments to the standards are effective for the group for the year ending 28 February 2010.
The amendment to IAS 32 requires the classification of certain puttable financial instruments and financial 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 specific 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 significant impact on the group’s results.
IFRIC 12 – Service Concession Arrangements
The interpretation is effective for the year ending 28 February 2009.
Service concessions are contractual service arrangements whereby a government or other public sector entity grants contracts for the supply of public services such as roads, airports, prison, energy and water supply distribution facilities to private sector operators. This interpretation provides guidance on how service concession operators should apply existing IFRS to account for the obligations they undertake and the rights they receive in service concession arrangements. This standard is not applicable to the business of the group.
IFRIC 13 – Customer Loyalty Programmes
This 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 fulfilled. They may fulfil 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 significantly.
IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
This interpretation is effective for the group for the year ending 28 February 2009.
IFRIC 14 provides a clearer interpretation of the amount of a pension fund surplus that can be recognised as an asset. The availability of a refund of surplus or a reduction in future contributions (economic benefits) is determined based on the terms and conditions of the plan and any relevant statutory requirements.
Any changes in the defined benefit asset will be recognised immediately in profit or loss. The impact of this interpretation has not yet been assessed.
AltronAnnual Report 2008174
Notes to the group financial statements for the year ended 29 February 2008
continued
GROUP
2008 2007
R millions R millions
34. CASH GENERATED BY OPERATIONS
Operating profit before capital items 1 937 1 528
Adjustments for:
Depreciation and amortisation 272 235
Proceeds on closure of operations — 10
Movement in provisions and other non-cash movements 15 24
Cash generated before movements in working capital 2 224 1 797
Increase in inventories (38) (686)
Increase in trade and other receivables (736) (442)
Increase in trade and other payables 770 130
2 220 799
35. DIVIDENDS RECEIVED FROM ASSOCIATES AND OTHER INVESTMENTS
Dividends receivable at the beginning of the year 19 56
Attributable income per the income statement 22 18
Dividends receivable at the end of the year (13) (19)
28 55
36. TAXATION PAID
Amounts unpaid at the beginning of the year (205) (187)
Amounts charged to the income statement (645) (551)
Translation differences 2 2
Amounts acquired in business combinations (29) —
Amounts unpaid at the end of the year 340 205
(537) (531)
37. ACQUISITION OF SUBSIDIARIES AND JOINT VENTURE
Property, plant and equipment (74) (63)
Intangibles – fair value adjustment (201) (35)
Inventories (59) (13)
Trade and other receivables (127) (40)
Trade and other payables 167 41
Deferred tax 61 20
Net loans 82 —
Net cash (12) 2
Taxation 29 —
Goodwill arising on acquisition (506) (86)
(640) (174)
Costs — (1)
Less: Deferred purchase consideration 9 37
Less: Disposal of property, plant and equipment to joint venture — 22
Less: Surplus on disposal of property, plant and equipment to joint venture — 32
Cash paid (631) (84)
Less: Cash acquired 12 (2)
(619) (86)
Refer to note 18 for details of acquisitions.
AltronAnnual Report 2008 175
Notes to the group financial statements for the year ended 29 February 2008
continued
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
2008 2007
R millions R millions
38. PROCEEDS ON DISPOSAL OF SUBSIDIARY
Assets classified as held-for-sale 19 —
Liabilities classified as held-for-sale (15) —
4 —
Loss on disposal — —
Proceeds on disposal 4 —
39. PROCEEDS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
Carrying amount 25 48
Less: Assets disposed of to joint venture — (22)
25 26
Surplus on disposal 2 1
Proceeds on disposal 27 27
40. OTHER INVESTING ACTIVITIES
Acquisition of additional shares in existing subsidiaries (411) (53)
Net increase of loans to associates and other investments (52) (56)
Increase in investment in associates (1) (1)
Acquisition of treasury shares in Altron — (77)
(464) (187)
41. SUBSIDIARIES’ EQUITY CONTRIBUTIONS FROM MINORITIES
Proceeds on shares issued in subsidiaries — 14
Capital introduced by minorities — 7
— 21
AltronAnnual Report 2008176
Altron controlledinterest
2008 2007
% %
ASSOCIATE COMPANIES– UnlistedAeromaritime International Management Services (Pty) Limited 50.0 50.0 Bytes Healthcare Solutions international operations 50.0 — Namibian Cables (Pty) Limited 27.1 — Alcon Marepha (Pty) Limited 49.9 49.9
Directors’ valuation based on a price-earnings ratio relevant to the sector within which the associates operate.
OTHER INVESTMENTS
– UnlistedFintech Receivables 1 (Pty) Limited (preference share) (FR1)Technologies Acceptances Receivables (Pty) Limited (preference share) (TAR)Izingwe Aberdare Cables Investments (Pty) Limited 10.0 10.0 Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit
Total
Fair value of FR1 and TAR is determined using the discounted cash flow method over a five to seven year period using discount rates of 13.0% to 20.0% (2007: 9.4% to 15.4%). The directors’ valuation is equal to the fair value.
The carrying value of the investment in Izingwe Aberdare Cables Investments (Pty) Limited has not been reflected at fair value as accounting standards precluded the fair valuing of the equity of the underlying subsidiary.
The FRI and TAR loans are repayable when cash is available in accordance with a prescribed priority of payments.Cash on deposit held by Izingwe Aberdare Cables Investments (Pty) Limited can only be accessed for scheduled repayments of the empowerment funding obligation (refer to note 14).
Exposure to credit riskThe maximum exposure to credit risk for loans receivable at the balance sheet date was R223 million (2007: R183 million).TAR and FR1 are exposed to the risk of customers defaulting on their lease rental payments.All customers are credit vetted, credit is only extended to customers in accordance with the stipulations of the securitisation vehicle, and is effectively secured by the underlying assets. Bad debt experience is in line with expectations given the nature of the book.
Exposure to interest rate riskThe TAR participation loan notes earn a minimum interest rate of JIBAR plus 2.5% and a maximum interest rate of prime plus 6%. The FR1 participation loan earns interest at 15% with a variable return up to a maximum of 20%.
2008 2007JOINT VENTURES % %
ABB Powertech Transformers 50.0 50.0 Tridonic.Atco SA 50.0 50.0 CBi electric Aberdare ATC Telecom Cables 50.0 50.0
Annexure 1 Associates, other investments and joint ventures
AltronAnnual Report 2008 177
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
Investment at cost lessamounts written off
Attributable share of retained income Indebtedness
Totalinvestment
2008 2007 2008 2007 2008 2007 2008 2007
R millions R millions R millions R millions R millions R millions R millions R millions
— — 6 5 — — 6 5 1 — — — — — 1 — — — — — 3 — 3 — 1 1 8 5 1 4 10 10
2 1 14 10 4 4 20 15
23 25
Investmentsat fair value
Preference dividendreceivable Indebtedness
Totalinvestment
24 18 12 18 27 27 63 63 25 22 1 1 192 152 218 175 1 1 — — — — 1 1
12 — — — — — 12 —
62 41 13 19 219 179 294 239
294 239
AltronAnnual Report 2008178
Annexure 1 continued
Information in respect of interest in joint ventures, associates, FR1 and TAR
Joint ventures Associates FR1 and TAR
2008 2007 2008 2007 2008 2007
R millions R millions R millions R millions R millions R millions
ABRIDGED BALANCE SHEETS
Non-current assets 375 366 14 10 719 650
Current assets (excluding cash) 908 637 44 27 67 23
Cash and cash equivalents 326 65 17 17 76 134
Current liabilities (768) (408) (41) (29) (53) (37)
Non-current liabilities (63) (50) (4) (4) (799) (751)
Equity 778 610 30 21 10 19
ABRIDGED INCOME STATEMENTS
Revenue 2 274 1 165 110 94 134 234
Expenditure (2 033) (1 007) (96) (83) (102) (208)
Profit before tax 241 158 14 11 32 26
Taxation (73) (45) ( 4) (4) (11) (13)
Profit for the year 168 113 10 7 21 13
AltronAnnual Report 2008 179
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
NATURE OF BUSINESS
Aeromaritime International Management Services (Pty) Limited
Provides services of clearing for both imports and exports, international forwarding on both seafreight and airfreight, local and national
freight distribution and cross-border roadfreight to neighbouring countries in Africa.
Bytes Healthcare Solutions international operations
Provides healthcare IT and eCommerce solutions in Saudi Arabia and Namibia.
Namibian Cables
Distributor of telecom accessories and medium voltage power cables.
Alcon Marepha (Pty) Limited
Manufacturer of medium voltage power cable.
FR1 and TAR
Securitisation vehicles used to house leases predominately related to equipment sold by the group.
Izingwe Aberdare Cables Investments (Pty) Limited
Investment holding company with a 30% equity interest in Aberdare Cables (Pty) Limited (refer to note 12.2).
ABB Powertech Transformers
Manufacturer of power and distribution transformers. ABB Powertech is a 50% joint venture with ABB Sub-Sahara.
Tridonic.Atco SA
Distributor of lighting control gear. Tridonic.Atco SA is a 50% joint venture with Tridonic (Austria).
CBi electric Aberdare ATC Telecom Cables
A telecom cable manufacturing joint venture with Reunert.
AltronAnnual Report 2008180
Annexure 2Segment information – Income statement
Consolidated2008 2007
R millions R millions
BUSINESS SEGMENTATIONREVENUE Goods sold 14 950 11 539 Services rendered 6 451 5 540 Rental finance income 30 47 Inter segment revenue — —
Total segment revenue 21 431 17 126 Expenditure (19 222) (15 363) Depreciation and amortisation (272) (235)
Segment operating profit/(loss) 1 937 1 528 Financial income 182 132 Financial expense (89) (56) Share of profit from associates 4 4
Profit before taxation and capital items 2 034 1 608
GEOGRAPHIC SEGMENTATIONRevenue by market 21 431 17 126
South Africa 16 519 13 918 Rest of Africa 1 219 849 Europe 3 095 2 020 Rest of world 598 339
Segment operating profit by location 1 937 1 528
South Africa 1 602 1 371 Rest of Africa 135 54 Europe 185 94 Rest of world 15 9
Segment revenue and expenses
Revenue and expenses that are directly attributable to segments are allocated to those segments. Those that are not directly attributable to segments are allocated on a reasonable basis.
Inter segment transfers
Segment revenue, segment expenses and segment results include transfers between business segments and between geographical segments.
These transfers are eliminated on consolidation.
AltronAnnual Report 2008 181
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
TelecommunicationsMulti-media
and ElectronicsInformationTechnology
Corporateand eliminations
2008 2007 2008 2007 2008 2007 2008 2007R millions R millions R millions R millions R millions R millions R millions R millions
3 081 2 420 8 013 6 377 3 881 2 793 (25) (51) 4 351 3 545 80 80 2 020 1 915 — —
— — — — 16 27 14 20 30 7 65 77 — 6 (95) (90)
7 462 5 972 8 158 6 534 5 917 4 741 (106) (121) (6 772) (5 405) (7 167) (5 786) (5 401) (4 285) 118 113
(49) (28) (104) (97) (98) (106) (21) (4)
641 539 887 651 418 350 (9) (12) 96 57 9 10 69 54 8 11
(60) (5) (27) (29) (66) (73) 64 51 — — 4 2 — — — 2
677 591 873 634 421 331 63 52
7 462 5 972 8 158 6 534 5 917 4 741 (106) (121)
6 685 5 297 6 271 5 394 3 669 3 348 (106) (121) 122 54 736 392 361 403 — — 597 564 640 469 1 858 987 — — 58 57 511 279 29 3 — —
641 539 887 651 418 350 (9) (12)
570 490 750 595 291 298 (9) (12) 8 7 59 30 68 17 — —
59 40 67 19 59 35 — — 4 2 11 7 — — — —
AltronAnnual Report 2008182
Consolidated2008 2007
R millions R millions
BUSINESS SEGMENTATIONASSETS Property, plant and equipment 1 264 954 Intangible assets 1 502 844 Associates and other investments 314 254 Rental finance advances 86 77 Inventories 2 130 2 013 Trade and other receivables 3 371 2 513
Operating assets 8 667 6 655
Deferred tax assets 196 182 Cash and cash equivalents 2 116 1 613
Total assets per balance sheet 10 979 8 450
LIABILITIES Trade and other payables 3 903 2 955 Provisions 105 104
Non-interest-bearing liabilities 4 008 3 059
Non-current loans 940 321 Current loans 229 65 Bank overdraft 33 24 Taxation payable 340 205 Deferred tax liabilities 83 30
Total liabilities per balance sheet 5 633 3 704
GEOGRAPHIC SEGMENTATIONOperating assets 8 667 6 655
South Africa 7 341 5 880 Rest of Africa 235 167 Europe 1 066 597 Rest of world 25 11
Non-interest-bearing liabilities 4 008 3 059
South Africa 3 209 2 512 Rest of Africa 208 51 Europe 572 489 Rest of world 19 7
Capital expenditure 479 240
South Africa 431 213 Rest of Africa 29 20 Europe 17 7 Rest of world 2 —
Segment assets and liabilitiesSegment assets include operating assets used by a segment and consist principally of trade and other receivables, assets held-for-sale, inventories, investments, property, plant and equipment and intangible assets net of related allowances and provisions. While most such assets can be directly attributable to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis.Segment liabilities include all operating liabilities and consist principally of trade and other payables, provisions and liabilities held-for-sale.
Annexure 2 Segment information – Balance sheet
AltronAnnual Report 2008 183
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
TelecommunicationsMulti-media
and ElectronicsInformationTechnology
Corporateand eliminations
2008 2007 2008 2007 2008 2007 2008 2007R millions R millions R millions R millions R millions R millions R millions R millions
277 193 632 445 297 274 58 42 671 39 38 21 793 783 — 1
— — 14 11 221 115 79 128 — — — — 85 77 1 —
296 192 1 501 1 565 333 258 — (2) 967 576 1 363 1 091 1 014 807 27 39
2 211 1 000 3 548 3 133 2 743 2 314 165 208
1 281 1 001 1 329 864 1 280 1 030 13 60 1 9 72 61 22 29 10 5
1 282 1 010 1 401 925 1 302 1 059 23 65
2 211 1 000 3 548 3 133 2 743 2 314 165 208
1 825 643 3 250 2 905 2 101 2 124 165 208 — — 8 — 227 167 — —
386 357 265 217 415 23 — — — — 25 11 — — — —
1 282 1 010 1 401 925 1 302 1 059 23 65
1 119 793 1 164 857 903 797 23 65 — — 91 — 117 51 — —
163 217 127 61 282 211 — — — — 19 7 — — — —
44 48 317 92 112 91 6 9
43 45 312 90 70 69 6 9 — — — — 29 20 — — 1 3 3 2 13 2 — — — — 2 — — — — —
AltronAnnual Report 2008184
COMPANY
Notes2008
R’0002007
R’000
ASSETS
Non-current assets 3 189 461 1 049 103
Property 2 — 50
Investment in subsidiaries 3 2 614 297 1 042 837
Amount receivable from subsidiary 3 550 000 —
Group share scheme recharge receivable 7 25 164 6 216
Current assets 229 116 389 077
Amounts receivable from subsidiaries 3 228 926 389 077
Cash at bank 190 —
Total assets 3 418 577 1 438 180
EQUITY AND LIABILITIES
Shareholders’ equity 2 849 366 1 437 542
Non-current liabilities
Loans 4 550 000 —
Current liabilities 19 211 638
Accounts payable 2 926 615
Current portion of loans 4 16 132 —
Taxation payable 153 23
Total equity and liabilities 3 418 577 1 438 180
Balance sheet at 29 February 2008
AltronAnnual Report 2008 185
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
COMPANY
Notes2008
R’0002007
R’000
Operating expenditure (540) (223)
Interest income on financial assets measured at amortised cost 34 119 —
Interest expense on financial liabilities measured at amortised cost (31 371) —
Dividends received from subsidiaries 383 265 290 993
Net gain on disposal of property 801 —
Profit before taxation 386 274 290 770
Taxation 6 (796) —
Profit for the year 385 478 290 770
Income statement for the year ended 29 February 2008
Statement of changes in equity for the year ended 29 February 2008
R’000
Ordinary share
capital(Note 5)
Preferenceshare
capital(Note 5)
Sharepremium
(Note 5)
Share-basedpayment reserve
Retainedearnings
Totalequity
Balance at 28 February 2006 1 943 21 825 071 1 410 544 331 1 372 776
Profit for the year — — — — 290 770 290 770
Share-based payments — — — 7 096 — 7 096
Dividends paid — — — — (241 536) (241 536)
Share issue — — 8 436 — — 8 436
Balance at 28 February 2007 1 943 21 833 507 8 506 593 565 1 437 542
Profit for the year — — — — 385 478 385 478
Share-based payments — — — 19 251 — 19 251
Dividends paid — — — — (367 451) (367 451)
Share issue 170 3 1 374 373 — — 1 374 546
Balance at 29 February 2008 2 113 24 2 207 880 27 757 611 592 2 849 366
AltronAnnual Report 2008186
COMPANY
Notes2008
R’0002007
R’000
Operating activities 196 801 16 841
Cash utilised by operations (540) (223)
Interest received 16 646 —
Interest paid (15 239) —
Dividends received 383 265 290 993
Changes in working capital 2 311 119
Proceeds on disposal of property 851 —
Movement in loans with subsidiaries 177 624 (32 512)
Cash available from operating activities 564 918 258 377
Dividends paid 8 (367 451) (241 536)
Taxation paid (666) —
Investing activities (758 402) (25 374)
Cash outflow on increase of investment in subsidiaries (208 402) (25 374)
Loan advanced to subsidiary (550 000) —
Financing activities 561 791 8 436
Proceeds on issue of shares 11 791 8 436
Loan raised 550 000 —
Cash resources
Net cash generated/(utilised) 190 (97)
Cash and cash equivalents at the beginning of the year — 97
Cash and cash equivalents at the end of the year 190 —
.
Cash flow statement for the year ended 29 February 2008
AltronAnnual Report 2008 187
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
FINANCIAL STATEMENTS
COMPANY
2008R’000
2007R’000
1. ACCOUNTING POLICIES
Please refer to the group accounting policies on pages 120 to 127.
2. PROPERTY — 50
The property was disposed of during the year and consisted of stand portions 331 and 51 of farm, Turffontein 961R.
3. INTEREST IN SUBSIDIARIES
Issued Effective holding
Shares at costless amounts
written off Indebtedness
capital 2008 2007 2008 2007 2008 2007
R millions % % R’000 R’000 R’000 R’000
Allied Technologies Limited 3 62 57 223 225 48 541 — — Bytes Technology Group Limited 737 100 58 2 016 863 620 390 — —Power Technologies (Pty) Limited 411 100 100 249 869 249 869 567 473 — Altron Finance (Pty) Limited – ordinary shares — 100 100 235 235 211 453 389 077Altron Finance (Pty) Limited – preference shares — — — 121 509 121 509 — — Investment in subsidiaries – share-based payments 2 593 2 290 — —
Other 3 100 100 3 3 — —
2 614 297 1 042 837 778 926 389 077
Less: Current portion disclosed as current assets 228 926 389 077
Non-current loans 550 000 —
NotesThe above details are given in respect of interests in subsidiaries, where material. A full list of South African subsidiaries is available on request, at the registered office of the company. All subsidiaries are incorporated in South Africa.
2008 2007
R’000 R’000
4. LOANS
Unsecured bank loans at amortised cost 566 132 —
Current portion reflected as current liabilities (16 132) —
Non-current loans 550 000 —
The loan bears interest at the rate of JIBAR + 0.95% payable quarterly in arrears and the capital amount is repayable on 2 September 2010.
5. SHARE CAPITAL AND PREMIUM
Please refer to the group note 10 on page 143.
6. TAXATION
Current tax 796 —
Reconciliation of rate of taxation
% %
South African normal tax rate 29.0 29.0
Non-taxable income (28.8) (29.0)
Effective tax rate 0.2 —
Notes to the financial statements for the year ended 29 February 2008
AltronAnnual Report 2008188
Notes to the financial statements for the year ended 29 February 2008 continued
COMPANY
2008R’000
2007R’000
6. TAXATION (continued)
Unutilised STC credits amounting to R22.2 million (2007: R79.2 million) have not been recognised as deferred tax assets at 10% in the absence of a change to the existing dividend policy of the group, that would give rise to the utilisation of the STC credits.
7. GROUP SHARE-BASED PAYMENTS
Details of employee share options granted by the company are reflected in group notes 10.6 to 10.8 on pages 145 to 149. Options granted under the conditional rights scheme are subject to a recharge arrangement with participating subsidiaries upon exercise of the options by employees of those companies and have been accounted for as follows:
Group share scheme recharge receivable at fair value 45 333 20 096
Deferred group share scheme recharge pending settlement (20 169) (13 880)
Cumulative equity-settled charge recognised by subsidiaries and receivable per balance sheet 25 164 6 216
The fair value of the recharge receivable under the conditional rights scheme is determined using the Black-Scholes model. The fair value of the receivable is remeasured at each balance sheet date and at settlement date. The model inputs were as follows:
Share price (Rand) 36.00 42.00
Exercise price (Rand) 22.50 to 30.75 22.50 to 30.75
Terms (years) 0.95 to 3.73 3.5 to 5.2
Volatility 23.35% to 26.97% 20.54% to 23.50%
Dividend yield 3.28% 1.86%
Risk-free interest rate 9.6% 7.99%
8. TAXATION PAID
Taxation payable at the beginning of the year 23 23
Charge per income statement 796 —
Taxation payable at the end of the year (153) (23)
666 —
9. RELATED PARTIES
The company has a related-party relationship with its subsidiaries (refer to note 3).
Dividends
The company received dividends from subsidiaries 383 265 290 993
Interest
The company received interest from subsidiaries 34 119 —
Shareholders
The principal shareholders of the company are detailed in the analyses of shareholders on pages 90 to 93 of the annual report.
Directors
The company has a related-party relationship with its directors (refer to note 20 of the group accounts). Directors’ interests are disclosed in the directors’ report.
10. FINANCIAL RISK MANAGEMENT
Financial risk management and related disclosures have been dealt with in the group financial statements.
AltronAnnual Report 2008 189
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT ADMINISTRATION
Directorate profi le
DR WP (BILL) VENTER
Date of birth: 29 July 1934
Qualifications: 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); CEng (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
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 43 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. He is a Trustee of The Nelson Mandela Children’s Fund and a member of the Finance Committee.
Awarded the Sunday Times Lifetime Achievement Award in 2006 in recognition of his signifi cant contribution to South Africa and the
business community.
Joined the Altron board in 1980.
RE (ROBERT) VENTER
Date of birth: 7 May 1960
Qualifications: BSc (Econ) (UCLA); MBA (UCLA) Dean’s List
Titles: Chief executive of Altron
Director of Altech, Bytes, Powertech, Zetex plc
(formerly Telemetrix plc) and various other group
companies
Chairman of Aberdare Cables
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 – 1990).
18 years’ experience in senior management positions in the Altron group (1990 – current), including chief executive offi cer of Aberdare
Cables (1993 – 1996), chief executive offi cer of Powertech (1996 – 2001) before joining Altron as chief executive (2001 – current).
Joined the Altron board in 1997.
AltronAnnual Report 2008190
Directorate profile continued
MC (MYRON) BERZACK
Date of birth: 30 May 1949
Titles: Non-executive director of Altron
Chairman of Voltex Holdings
Executive director of The Bidvest Group Limited and
numerous subsidiaries thereof
Member of the Altron nomination committee and
remuneration committee
Experience: 37 years’ experience in the cable manufacturing
industry, 16 years’ experience in the electrical distribution industry.
Joined the Altron board in 1998.
N (NORBERT) CLAUSSEN
Date of birth: 10 December 1960
Qualifications: BEng (Stellenbosch); MEng (UP); MBA (UCT);
PrEng (ECSA)
Titles: Executive director of Altron
Chief executive officer of Powertech
Director of ABB Powertech Transformers, Aberdare
Cables and Powertech Industries
Member of the Altron executive committee and risk
management committee
Experience: Joined the Altron group in 1996 as the chief executive officer of Willard Batteries which expanded over five years to
become the Powertech Battery Group, comprising Willard Batteries, Dynamic Batteries, SABAT Batteries and Battery Technologies.
In March 2001, was appointed chief executive officer of Powertech. Since 1989, he has been a registered professional engineer with
the Engineering Council of South Africa.
Joined the Altron board in 2005.
PMO (PETER) CURLE
Date of birth: 19 May 1946
Qualifications: MA (Oxon)
Titles: Executive director of Altron
Executive director of Altech: Corporate Finance
Member of the Altron executive committee
Experience: 38 years in merchant banking/corporate finance
activities in South Africa and internationally.
Rejoined the Altron group in 1997, having previously served the
group in a senior executive capacity from 1979 to 1986.
Joined the Altron board in 1997.
AltronAnnual Report 2008 191
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT ADMINISTRATION
MJ (MARK) LAMBERTI
Date of birth: 4 August 1950
Qualifications: BCom (Wits); MBA (Wits); PPL (Harvard)
Titles: Independent non-executive director of Altron
Member of the Altron audit committee and remuneration
committee
Experience: In 1988 was appointed Managing Director of Makro. With
the successfully repositioned Makro as a base, he founded Massmart
in 1990 as a vehicle for multichain growth in food, liquor and general
merchandise distribution. Massmart was listed on the JSE Limited on 4 July 2000.
In 1984, Mark won the IMM Raymond Ackerman Marketing Director of the year award. In 2001 he was the winner of the Ernst & Young
South Africa’s Best Entrepreneur Award and was one of 22 finalists in the 2001 Ernst & Young World Entrepreneur competition.
Mark was also the 2001 winner of the Institute of Marketing Management’s Marketer of the Year award and in 2004 was named the
Italian – South African Businessman of the Year by the Italian South African Chamber of Commerce.
Currently the chairman of Massmart Holdings Limited and a non-executive director of Telkom SA limited.
Joined the Altron board in 2005.
MJ (MIKE) LEEMING
Date of birth: 26 October 1943
Qualifications: BCom (Rhodes); MCom (Wits); FIBSA (Wits);
FCMA; AMP (Harvard)
Titles: Independent non-executive director of Altron
Chairman of the Altron risk management committee
Member of the Altron audit and nomination committees
Experience: Retired banker and a director of AECI Limited, Imperial
Holdings Limited, Real Africa Holdings Limited and Woolworths
Holdings Limited.
Joined the Altron board in 2002.
DR PM (PENUELL) MADUNA
Date of birth: 29 December 1952
Qualifications: Bluris (Unisa); LLB (Zimbabwe); LLM (Wits);
HDip Tax Law (Wits); LLD (Unisa)
Titles: Independent non-executive director of Altron
Chairman of the Altron nomination committee
Experience: Former Deputy Minister of the Department of Home
Affairs (1994 – 1996) and former Minister of the Departments of
Minerals and Energy (1996 – 1999) and Justice and Constitutional
Development (1999 – 2004).
Attorney, notary and conveyancer. Visiting Scholar of Constitutional Law at Columbia University Law School (New York). Founder
member of the ANC’s Constitutional Committee.
Currently an active partner at Bowman Gilfillan Attorneys as well as a member of the executive committee at Bowman Gilfillan Attorneys
and a senior special advisor of Sasol Limited.
Joined the Altron board in 2004.
AltronAnnual Report 2008192
Directorate profile continued
BJM (BARBARA) MASEKELA
Date of birth: 18 July 1941
Qualifications: BA (cum laude) (Ohio University)
Titles: Independent non-executive director of Altron
Experience: Spent most of her life as a political activist working with
the ANC Observer Mission to the United Nations in New York and as
Secretary for Arts and Culture in Zambia. She was elected to the
National Executive Committee of the ANC, while serving as Nelson
Mandela’s Chief of Staff until 1994.
In 1995, Barbara was appointed as Ambassador to France and UNESCO. She subsequently joined the private sector and became
executive director for corporate communications and a member of the De Beers Consolidated Mines Board.
In 2003, President Mbeki appointed her Ambassador to the United States of America.
She continues to serve as a trustee of the Nelson Mandela Children’s Fund and is a board member of the MTN SA Foundation.
Previous board memberships include the Standard Bank of South Africa and the International Marketing Council.
Joined the Altron board in 2008.
JRD (JACOB) MODISE
Date of birth: 9 September 1966
Qualifications: BCom (Wits); BAcc (Wits); CA(SA); MBA (Wits);
AMP (Samford); AMP (Harvard)
Titles: Independent non-executive director of Altron
Chairman of the Altron remuneration committee
Member of the Altron audit committee
Executive chairman of Batsomi Investments (Pty) Limited
Experience: Past Chief Operating Officer of Johnnic Holdings Limited.
Prior to that he held various senior financial executive positions at Eskom, Teljoy and JCI. Qualified as a Chartered Accountant while
serving his articles at Deloitte & Touche.
Current board member of Independent Regulatory Board of Auditors (IRBA), Blue IQ Holdings Limited and Eskom Holdings Limited
and finance and audit committee of the Development Bank of South Africa. Serves on the Advisory Board of the Nelson Mandela
Children’s Fund and is chief executive officer of the Road Accident Fund.
Member of the South African Institute of Chartered Accountants and Association of Black Accountants of South Africa.
Previous board memberships include MTN and M-Net.
Joined the Altron board in 2003.
PD (DAVID) REDSHAW
Date of birth: 29 January 1942
Qualifications: BA (Hons) (Birmingham); ACMA
Titles: Executive director of Altron
Chief executive officer of Bytes
Non-executive director of Bytes UK
Member of the Altron executive committee and risk
management committee
Experience: 43 years in senior financial and general management
positions.
Joined the Altron board in 1991.
AltronAnnual Report 2008 193
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT ADMINISTRATION
DR HA (HAROLD) SEREBRO
Date of birth: 12 October 1938
Qualifications: 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 Empowerment Award Programme and of the Duke of Edinburgh Trust
Experience: 26 years in the electronics industry with the Altron group.
Joined the Altron board in 1995.
CG (CRAIG) VENTER
Date of birth: 4 July 1962
Qualifications: BSc (Econ) (UCLA); BA (Psychology) (UCLA);
MBA (USC); MSc (Mgmt Science) (USC)
Titles: Chief executive officer of Altech
Executive director of Altron
Director of Altech Netstar, Altech Autopage Cellular and
various other wholly owned subsidiaries of Altech
Chairman of Altech’s executive committee, Altech
Autopage Holdings, Arrow Altech Holdings, Altech Alcom
Matomo, Altech Netstar Fleet Management Services, Altech UEC Multi-Media and Altech Information Technologies
A member of the Altron executive committee and Altron risk management committee
A member of the worldwide Young Presidents’ Organisation (YPO)
Experience: 19 years in senior management positions in the Altech group.
Joined the Altron board in 1997.
PL (PETER) WILMOT
Date of birth: 13 March 1940
Qualifications: CA(SA)
Titles: Independent non-executive director of Altron
Chairman of the Altron audit committee
Member of the Altron remuneration committee and risk
management committee
Experience: Past deputy chairman of The Standards Advisory
Council of the International Accounting Standards Board, past
chairman of the SA Accounting Practices Board, past chairman of
SAICA and past chairman of Deloitte & Touche. He is a director of Brait and a former director of Edgars Consolidated Stores Limited,
Allied Technologies Limited and Bytes Technology Group Limited.
Joined the Altron board in 2001.
AltronAnnual Report 2008194
Altron House
4 Sherborne Road
Parktown
2193
30 May 2008
Dear Shareholder
ALLIED ELECTRONICS CORPORATION LIMITED (Altron) ANNUAL GENERAL MEETING
On behalf of the board of directors of Altron, I have pleasure in extending an invitation to you to attend Altron’s annual general meeting,
which will be held on Tuesday, 15 July 2008 at 09:30 in the Boardroom, Altech Corporate Offices, 79 Central Street, Houghton. If you
are unable to attend, please arrange to vote by proxy in accordance with the instructions on the proxy form.
The board recognises the importance of its shareholders’ presence at the annual general meeting. This is an opportunity for
shareholders to participate in discussion relating to items included in the notice of meeting. In addition, the chairmen of board-
appointed committees, senior members of management, as well as the external auditors will be present to respond to questions from
shareholders.
The notice of meeting, which is set out on pages 195 to 198 of the annual report, is accompanied by explanatory notes setting out the
effects of all proposed resolutions included in the notice.
I look forward to your presence at the meeting.
Yours faithfully
Dr Bill Venter
Chairman
Letter from the chairman
AltronAnnual Report 2008 195
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT ADMINISTRATION
Notice is hereby given that the sixty-second annual general
meeting of the shareholders of Altron will be held in the
Boardroom, Altech Corporate Offices, 79 Central Street,
Houghton, Johannesburg, on Tuesday, 15 July 2008 at
09:30 to conduct the following business:
1. To receive, consider and adopt the annual financial
statements of the company and of the Altron group for
the year ended 29 February 2008.
2. To re-elect directors in accordance with the provisions
of the company’s articles of association.
Ms BJM Masekela, having been appointed as a director
by the board during the year is required to retire.
Messrs MJ Leeming, MC Berzack, CG Venter and
Dr PM Maduna are required to retire by rotation.
All retiring directors are eligible and have offered
themselves for re-election respectively.
An abbreviated curriculum vitae in respect of each
director offering himself/herself for re-election is
contained on pages 189 to 193 of this annual report.
3. To re-appoint Messrs KPMG Inc as independent
registered auditors of the company, to authorise the
directors to fix the remuneration of the auditors for the
past year’s audit as reflected in note 20.1 of the annual
financial statements and to note that the individual
registered auditor who will undertake the audit during
the financial year ending 28 February 2009 is
Mr MCA Hoffman.
As special business, to consider and, if deemed fit, pass
with or without modification the following resolutions that
numbered 4 as a special resolution and those, numbered
5, 6, 7 and 8 as ordinary resolutions.
4. SPECIAL RESOLUTION NUMBER 1: GENERAL
AUTHORITY TO REPURCHASE SHARES
That the company or any of its subsidiaries be and they
are hereby authorised, by way of a general approval, to
acquire ordinary and/or participating preference shares
issued by the company, in terms of sections 85 and 89
of the Companies Act, No 61 of 1973, as amended (the
Companies Act), and in terms of the JSE Limited (the
JSE) Listings Requirements, being that:
any such acquisition of ordinary and/or participating
preference shares shall be effected through the
order book operated by the JSE trading system and
done without any prior understanding or
arrangement with the counterparty;
this general authority shall be valid until the
company’s next annual general meeting, provided
that it shall not extend beyond 15 (fifteen) months
from the date of passing of this special resolution
number 1;
an announcement will be published as soon as the
company or any of its subsidiaries have acquired
ordinary and/or participating preference shares
constituting, on a cumulative basis, 3% of the
number of ordinary and/or participating preference
shares in issue and for each 3% in aggregate of the
initial number acquired thereafter, in compliance with
paragraph 11.27 of the JSE Listings Requirements;
acquisitions of shares in aggregate in any one
financial year may not exceed 20% of the company’s
ordinary and/or participating preference issued
share capital, as the case may be, as at the date of
passing of this special resolution number 1;
ordinary and/or participating preference shares may
not be acquired at a price greater than 10% above
the weighted average of the market value at which
such ordinary and/or participating preference shares
are traded on the JSE as determined over the five
business days immediately preceding the date of
repurchase of such ordinary and/or participating
preference shares;
the company has been given authority by its articles
of association;
at any point in time, the company and/or its
subsidiaries may only appoint one agent to effect
any repurchase;
Altron notice of annual general meeting
Allied Electronics Corporation LimitedIncorporated in the Republic of South Africa(Registration number 1947/024583/06)(Share code: ATN) (ISIN: ZAE000029658)(Share code: ATNP) (ISIN: ZAE000029666)
(“Altron” or “the company”)
AltronAnnual Report 2008196
Altron notice of annual general meeting continued
Litigation statement
In terms of paragraph 11.26 of the JSE Listings Requirements,
the directors, whose names appear on pages 189 to 193 of
this annual report of which this notice forms part, are not
aware of any legal or arbitration proceedings that are pending
or threatened, that may have or had in the recent past, being
at least the previous 12 (twelve) months, a material effect on
the Altron group’s financial position.
Directors’ responsibility statement
The directors, whose names appear on pages 189 to 193 of
this annual report, collectively and individually accept full
responsibility for the accuracy of the information pertaining to
this special resolution and certify that, to the best of their
knowledge and belief, there are no facts that have been
omitted which would make any statements false or misleading,
and that all reasonable enquiries to ascertain such facts have
been made and that this special resolution contains all
information required by law and the JSE Listings Requirements.
Material changes
Other than the facts and developments reported on in this
annual report, there have been no material changes in the
affairs or financial position of the company and its subsidiaries
since the date of signature of the audit report and up to the
date of this notice.
The reason for and effect of this special resolution is to grant
the directors of the company or its subsidiaries a general
authority in terms of the Companies Act and the JSE Listings
Requirements for the repurchase by the company or a
subsidiary of the company, of the company’s shares.
The directors have no specific intention, at present, for the
company or its subsidiaries to repurchase any of the
company’s shares but consider that such a general authority
should be put in place should an opportunity present itself to
do so during the year which is in the best interests of the
company and its shareholders.
5. ORDINARY RESOLUTION NUMBER 1: CONTROL OF
AUTHORISED BUT UNISSUED SHARES
That the general authority granted to directors to allot and
issue the unissued ordinary and participating preference
shares of the company be renewed subject to the following
limitations:
The authority shall be valid until the date of the next
annual general meeting of the company, provided it shall
not extend beyond 15 (fifteen) months from the date of
this annual general meeting.
the company and/or its subsidiaries undertaking that
they will not enter the market to repurchase the
company’s securities until the company’s sponsor
has provided written confirmation to the JSE
regarding the adequacy of the company’s working
capital in accordance with Schedule 25 of the JSE
Listings Requirements;
the company remaining in compliance with the
shareholder spread requirements of the JSE Listings
Requirements; and
the company and/or its subsidiaries not repurchasing
any shares during a prohibited period, as defined in
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 fixed and full details of the programme have
been disclosed in an announcement over the
Securities Exchange News Service (SENS) prior to
the commencement of the prohibited period.
Before entering the market to effect the general
repurchase, the directors, having considered the effects of
the repurchase of the maximum number of ordinary and/or
participating preference shares in terms of the aforegoing
general authority, will ensure that for a period of 12 (twelve)
months after the date of the notice of annual general
meeting:
the company and the Altron group will be able, in the
ordinary course of business, to pay its debts;
the consolidated assets of the company and the Altron
group, fairly valued in accordance with International
Financial Reporting Standards, will exceed the liabilities
of the company and the Altron group;
the company and the Altron group’s ordinary and/or
participating preference share capital, reserves and
working capital will be adequate for ordinary business
purposes; and
the working capital of the company and the Altron
group will be adequate for the purposes of the business
of the company and the Altron group.
The following additional information, some of which may
appear elsewhere in the annual report of which this notice
forms part, is provided in terms of the JSE Listings
Requirements for purposes of the general authority:
directors and management – pages 189 to 193
major beneficial shareholders – page 93
directors’ interests in shares – page 118
share capital of the company – page 143
AltronAnnual Report 2008 197
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT ADMINISTRATION
share, will be published at the time of any such
allotment and issue of shares representing, on a
cumulative basis within one year, 5% or more of the
number of shares of that class in issue prior to any
such issues.
That issues in the aggregate in any one financial year
shall not exceed 10% of the number of shares of any
class of the company’s issued share capital less any
shares that may be issued during the financial year
arising from the exercise of share options in the
normal course.
That, in determining the price at which an
allotment and issue of shares will be made in
terms of this authority, the maximum discount
permitted will be 10% of the weighted average
traded price of the class of shares to be issued
over the 30 days prior to the date that the price
of issue is determined or agreed by the directors
of the company.
In terms of the JSE Listings Requirements, the
approval of 75% majority of the votes cast by
shareholders present or represented by proxy at this
annual general meeting will be required for this
authority to become effective.
7. ORDINARY RESOLUTION NUMBER 3: FEES OF
NON-EXECUTIVE DIRECTORS
That with effect from 1 March 2008 and in terms of
article 15.6 of the company’s articles of association,
the fees payable to the non-executive directors be set
as follows:
a) A board member, R115 000 per annum.
b) The audit committee chairman, R80 000
per annum.
c) An audit committee member, R37 500 per annum.
d) The remuneration committee chairman, R60 000
per annum.
e) A remuneration committee member, R37 500
per annum.
f) The risk management committee chairman,
R60 000 per annum.
g) A risk management committee member, R30 000
per annum.
h) The nomination committee chairman, R60 000
per annum.
i) A nomination committee member, R14 500
per annum.
Issues in terms of this authority will not, in any financial
year, in aggregate exceed 10% of the number of
ordinary shares in the company’s issued share capital
as at 29 February 2008.
Issues in terms of this authority will not, in any
financial year, in aggregate exceed 10% of
participating preference shares in the company’s
issued participating preference share capital as at
29 February 2008, provided that this limitation will not
apply to the issue of participating preference shares
in terms of any share incentive scheme and,
accordingly:
– in calculating the number of participating
preference shares issued in any financial year for
the purpose of determining whether the
aforementioned 10% threshold has been reached,
any participating preference shares issued in terms
of the rules of any share incentive scheme shall not
be included in that calculation; and
– the number of participating preference 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.
6. ORDINARY RESOLUTION NUMBER 2: GENERAL
AUTHORITY TO ISSUE SHARES FOR CASH
That subject to renewal of the general authority
proposed in terms of ordinary resolution number 1
above and in terms of the JSE Listings Requirements,
shareholders grant the directors a general authority for
the allotment and issue of ordinary and/or participating
preference shares in the capital of the company for cash
as and when suitable situations arise, subject to the
following limitations:
Any issue of securities shall be to public
shareholders as defined by the JSE Listings
Requirements.
This authority shall only be valid until the next annual
general meeting of the company but shall not endure
beyond the period of 15 (fifteen) months from the
date set down for the sixty-second annual general
meeting.
A paid press announcement giving details, including
the impact on net asset value and earnings per
AltronAnnual Report 2008198
Altron notice of annual general meeting continued
Shareholders holding dematerialised shares in their own
name, or who hold shares that are not dematerialised, and
who are unable to attend the annual general meeting and
wish to be represented thereat, must complete the relevant
form of proxy attached in accordance with the instructions
therein and lodge it with, or mail it to, the transfer
secretaries.
Forms of proxy should be forwarded to reach the
company’s transfer secretaries at the address given below
by not later than 09:30 on Monday, 14 July 2008.
The completion of a form of proxy will not preclude a
shareholder from attending the annual general meeting.
By order of the board
Altron Management Services (Pty) Limited
Secretaries
per: AG Johnston
Group Company Secretary
30 May 2008
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
8. ORDINARY RESOLUTION NUMBER 4: SIGNATURE
OF DOCUMENTS
That any one director or the secretary of the company
be and is hereby authorised to do all such things and
sign all documents and take all such action as they
consider necessary to implement the resolutions set
out in the notice convening this annual general
meeting at which this ordinary resolution will be
considered.
VOTING AND PROXIES
Ordinary and participating preference shareholders are
entitled to attend and speak at the annual general meeting
and, with the exception of special resolution number 1
where both ordinary and participating preference
shareholders are entitled to vote, only ordinary
shareholders are entitled to vote in respect of the
remaining resolutions.
Ordinary and participating preference shareholders may
appoint a proxy to attend, speak and, in respect of the
applicable resolution/s, vote in their stead. Shareholders
holding dematerialised shares but not in their own name
must furnish their Central Securities Depository Participant
(CSDP) or broker with their instructions for voting at the
annual general meeting should they wish to vote. If your
CSDP or broker, as the case may be, does not obtain
instructions from you, it will be obliged to act in terms of
your mandate furnished to it, or if the mandate is silent in
this regard, to complete the relevant form of proxy
attached. Unless you advise your CSDP or broker, in terms
of the agreement between you and your CSDP or broker by
the cut-off time stipulated therein, that you wish to attend
the annual general meeting or send a proxy to represent
you at the annual general meeting, your CSDP or broker will
assume you do not wish to attend the annual general
meeting or send a proxy. If you wish to attend the annual
general meeting or send a proxy, you must request your
CSDP or broker to issue the necessary letter of
representation to you.
AltronAnnual Report 2008 199
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT ADMINISTRATION
Annual general meeting – explanatory notes
3. REAPPOINTMENT OF INDEPENDENT AUDITORS
KPMG Inc has indicated its willingness to continue in
office and resolution 3 proposes among others the
reappointment of that firm as the company’s auditors
until the next annual general meeting.
At an Altron audit committee meeting held on
28 February 2008, the committee considered the
independence of the external auditors KPMG Inc in
accordance with section 270A of the Corporate Laws
Amendment Act. In assessing the independence of the
external auditors, the audit committee satisfied itself that
KPMG Inc:
does not hold a financial interest (either directly or
indirectly) in Altron;
does not hold a position, either directly or indirectly,
that gives the right or responsibility to exert
significant influence over the financial or accounting
policies of Altron;
is not economically dependent on Altron, having
specific regard to the quantum of the audit fees paid
by Altron and its subholding companies to KPMG Inc
during the period under review in relation to its total
fee base;
does not provide consulting or non-audit-related
services to Altron or its subholding companies which
fall outside of the permitted or qualified non-audit-
related services as specified in the policy for the use
of the external auditors for non-audit related services
and which could compromise or impair the external
auditors’ independence (see page 119 of the
directors report; and
including the individual registered auditors who
undertake the audit, do not have personal or
business relationships of immediate family, close
relatives, partners or retired partners, either directly
or indirectly, with Altron and its subholding
companies.
Accordingly, the Altron audit committee is satisfied that
KPMG Inc is independent as contemplated by the South
African independence laws and the applicable rules of
the International Federation of Accountants (IFAC) and
nominated the reappointment of KPMG Inc as registered
auditors for the 2008/9 financial year. On 29 February
2008, the Altron board, subject to shareholder approval,
reappointed KPMG Inc and Mr MCA Hoffman as the
independent registered audit firm and individual
registered auditor of Altron respectively.
1. ADOPTION OF ANNUAL FINANCIAL STATEMENTS
At the annual general meeting, the directors must
present the annual financial statements for the year
ended 29 February 2008 to shareholders, together with
the reports of the directors and the auditors. These are
contained within the annual report.
2. RE-ELECTION OF DIRECTORS
In accordance with the company’s articles of
association, one third of the directors 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. Ms BJM Masekela retires from the
board in accordance with article 15.3 of the company’s
articles of association and Messrs MJ Leeming,
MC Berzack, CG Venter and Dr PM Maduna retire by
rotation at the annual general meeting in accordance
with article 16.1 of the company’s articles of association.
An abbreviated curriculum vitae in respect of each
director offering himself/herself for re-election is
contained on pages 189 to 193 of this annual report.
The board of directors of the company has reviewed the
composition of the board against corporate governance
and transformation requirements and has recommended
the re-election of the directors listed above. It is the view
of the board that re-election of the candidates referred
to above would enable the company to:
responsibly maintain a mixture of business skills and
experience relevant to the company and balance the
requirements of transformation, continuity and
succession planning; and
comply with corporate governance requirements in
respect of matters such as the balance of executive,
non-executive and independent directors on the
board.
In addition, the performance of retiring directors was
formally evaluated. This process culminated in the
company’s board, on the recommendation of the Altron
nomination committee, considering whether the retiring
directors should be recommended for re-election.
Having considered the inputs of the Altron nomination
committee, the board recommends the re-election of the
retiring directors.
AltronAnnual Report 2008200
Annual general meeting – explanatory notes continued
4. SPECIAL RESOLUTION NUMBER 1: GENERAL
AUTHORITY TO REPURCHASE SHARES
The effect of special resolution number 1 and the reason
therefore is to grant the company or any of its
subsidiaries a general approval in terms of the
Companies Act, No 61 of 1973, as amended (the
Companies Act), for the acquisition by the company or
any of its subsidiaries of the company’s shares, which
general approval shall be valid until the earlier of such
next annual general meeting of the company or its
variation or revocation of such general authority by
special resolution at any subsequent general meeting of
the company, provided that the general authority shall
not extend beyond 15 months from the date of this
annual general meeting.
The directors are of the opinion that it would be in the
best interests of the company to extend such general
authority and thereby allow the company or any
subsidiary of the company to be in a position to
repurchase the securities issued by the company
through the order book of the JSE, should the market
conditions and price justify such an action.
5. ORDINARY RESOLUTIONS NUMBERS 1 AND 2:
CONTROL OF AUTHORISED BUT UNISSUED
SHARES AND GENERAL AUTHORITY TO ISSUE
SHARES FOR CASH
In terms of sections 221 and 222 of the Companies Act
the shareholders have to approve the placement of the
unissued shares under the control of the directors. The
existing authorities granted by the shareholders at the
previous annual general meeting on 13 July 2007 expire
at the following annual general meeting unless renewed.
The authorities will be subject to the Companies Act and
the JSE Listings Requirements. Ordinary resolution
number 1 requires a 50% majority of the votes cast by
shareholders present or represented by proxy at this
annual general meeting.
Ordinary resolution number 2 requires the approval of a
75% majority of the votes cast by shareholders present
or represented by proxy at this annual general meeting
in order for this ordinary resolution to become effective.
The directors consider it advantageous to renew these
authorities to enable the company to take advantage of
any business opportunity that may arise in future.
6. FEES OF NON-EXECUTIVE DIRECTORS
Shareholders are requested to approve the fees payable
to the company’s non-executive directors with effect
from 1 March 2008.
This resolution is recommended by the company’s
board of directors. Full particulars of all fees for the past
year as well as the process followed by the
remuneration committee in recommending board fees
are contained on pages 108 to 112 of this report.
AltronAnnual Report 2008 201
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT
ADMINISTRATION
Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06) (Share code: ATN) (ISIN: ZAE000029658)
(“Altron” or “the company”)
FORM OF PROXY FOR THE SIXTY-SECOND ANNUAL GENERAL MEETING TO BE HELD IN THE BOARDROOM, ALTECH CORPORATE OFFICES, 79 CENTRAL STREET, HOUGHTON, JOHANNESBURG, ON TUESDAY, 15 JULY 2008 AT 09:30 – FOR USE BY CERTIFICATED ORDINARY SHAREHOLDERS AND DEMATERIALISED ORDINARY SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY
Holders of dematerialised ordinary shares other than “own name” registration must inform their CSDP or broker of their intention to attend the annual general meeting and request their CSDP to issue them with the necessary authorisation to attend the annual general meeting in person or provide their CSDP or broker with their voting instructions should they not wish to attend the annual general meeting in person but wish to be represented thereat.
I/We(PLEASE PRINT)
of address
being the registered holder(s) of ordinary shares in the capital of the company do hereby appoint
1. or failing him/her,
2. or failing him/her,
the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the sixty-second annual general meeting of the company which will be held on Tuesday, 15 July 2008 at 09:30 for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at any adjournment thereof, and to vote for and/or against the resolutions and/or abstain from voting in respect of the shares registered in my/our name/s, in accordance with the following instructions:
NUMBER OF ORDINARY SHARES
For Against Abstain
1. Adoption of annual financial statements
2. Re-election of directors 2.1 Ms BJM Masekela
2.2 Mr MJ Leeming
2.3 Mr MC Berzack
2.4 Mr CG Venter
2.5 Dr PM Maduna
3. Reappointment of independent auditors
4. Special resolution number 1: General authority to repurchase shares
5. Ordinary resolution number 1: Control of authorised but unissued shares
6. Ordinary resolution number 2: General authority to issue shares for cash
7. Ordinary resolution number 3: Fees of non-executive directors
8. Ordinary resolution number 4: Signature of documents
Signed at on 2008
Signature
Assisted by me (where applicable)
Notes
1. An ordinary shareholder may insert the name of a proxy or the names of two alternative proxies of the ordinary shareholder’s choice in the space provided and any such proxy need not be a shareholder of the company. Should a proxy not be specified, this will be exercised by the chairman of the annual general meeting.
2. An ordinary shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. An ordinary shareholder’s instructions to the proxy must be indicated by inserting the relevant number of votes exercisable by the ordinary shareholder in the appropriate box(es). An ordinary shareholder or his proxy is not obliged to use all the votes exercisable by the ordinary shareholder, or to cast all those votes exercised in the same way, but the total of the votes cast and in respect whereof abstention is recorded may not exceed the total of the votes exercisable by the ordinary shareholder.
3. If any ordinary shareholder does not indicate on this instrument that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or give contradictory instructions, or should any further resolution(s) or any amendment(s) which may be properly put before the annual general meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit.
4. Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be attached to this form, unless previously recorded by the company or waived by the chairman of the annual general meeting.
5. This proxy form should be completed and returned to the company’s transfer secretaries, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to reach them by not later than Monday, 14 July 2008 at 09:30.
ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.
AltronAnnual Report 2008202
FORM OF PROXY FOR THE SIXTY-SECOND ANNUAL GENERAL MEETING TO BE HELD IN THE BOARDROOM, ALTECH CORPORATE OFFICES, 79 CENTRAL STREET, HOUGHTON, JOHANNESBURG, ON TUESDAY, 15 JULY 2008 AT 09:30 – FOR USE BY CERTIFICATED PARTICIPATING PREFERENCE SHAREHOLDERS AND DEMATERIALISED PARTICIPATING PREFERENCE SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY
Holders of dematerialised participating preference shares other than “own name” registration must inform their CSDP or broker of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the necessary authorisation to attend the annual general meeting in person.
I/We(PLEASE PRINT)
of
being the holder(s) of participating preference shares in the capital of the company do hereby appoint
1. or failing him/her,
2. or failing him/her,
the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the sixty-second annual general meeting of the company which will be held on Tuesday, 15 July 2008 at 09:30 and at any adjournment thereof, for the purpose of considering and, if deemed fit, passing, with or without modification the special resolution to be proposed thereat and to vote for and/or against the special resolution and/or abstain from voting in respect of the shares registered in my/our name/s, in accordance with the following instructions and otherwise to attend and speak for me/us at the sixty-second annual general meeting of the company and at any adjournment thereof.
NUMBER OF PARTICIPATING PREFERENCE SHARES
For Against Abstain
1. Special resolution number 1: General authority to repurchase shares
Signed at on 2008
Signature
Assisted by me (where applicable)
Notes
1. A participating preference shareholder may insert the name of a proxy or the names of two alternative proxies of the participating preference shareholder’s choice in the space provided and any such proxy need not be a shareholder of the company. Should a proxy not be specified, this will be exercised by the chairman of the annual general meeting.
2. A participating preference shareholder or his proxy is entitled to attendance at the annual general meeting, and to speak but not vote thereat (excepting in respect of special resolution number 1) in terms of the company’s articles of association. A participating preference shareholder will be entitled on a poll, to that proportion of the total votes of the company which the aggregate of the nominal value of the participating preference shares held by him/her bears to the aggregate nominal value of all the shares, both ordinary and participating preference shares, in the company.
3. If a participating preference shareholder does not indicate on this instrument that his/her proxy is to vote in favour of or against special resolution number 1, or any amendment thereto, or to abstain from voting, or give contradictory instructions, the proxy shall be entitled to vote as he/she thinks fit.
4. Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be attached to this form, unless previously recorded by the company or waived by the chairman of the annual general meeting.
5. This proxy form should be completed and returned to the company’s transfer secretaries, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), so as to reach them by not later than Monday, 14 July 2008 at 09:30.
Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06) (Share code: ATNP) (ISIN: ZAE000029666)
(“Altron” or “the company”)
ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.
CHAIRMAN’SSTATEMENT
CHIEF EXECUTIVE’SREVIEW
OPERATIONALREVIEW
SUSTAINABILITY REPORT ADMINISTRATION
AltechAnnual Report 2008 2038TH PROOF – ALTRON
Corporate data
CURRENCY
To facilitate the interpretation of this report by readers not
familiar with the South African rand, we provide the following
conversion guide.
At 29 February 2008 one rand was equal to:
2008 2007
£ 0.06417 0.07013
US$ 0.1275 0.1378
Euro 0.0849 0.1043
Yen 13.31 16.42
ADMINISTRATION
Business, secretaries and registered address
Altron House
4 Sherborne Road
Parktown, 2193
(PO Box 981, Houghton, 2041)
South Africa
Telephone: National (011) 645-3600
International 27 11 645-3600
Telefax: (011) 482-6489
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
South Africa
Telephone: National (011) 370-5000
International 27 11 370-5000
Telefax: (011) 370-5271/2
Auditors
KPMG Inc
Bankers
ABSA Bank Limited
FNB Corporate Bank (a division of FirstRand Bank Limited)
Nedbank, a division of Nedcor Bank Limited
The Standard Bank of South Africa Limited
Sponsor
Investec Bank
SHAREHOLDERS’ DIARY
Financial year-end Friday, 29 February 2008
Annual general meeting Tuesday, 15 July 2008
Reports and financial statements
Preliminary reports and dividend
announcements (published) Tuesday, 6 May 2008
Annual financial statements
(mailed to shareholders) June 2008
Interim reports October 2008
Dividends
The following dividends are hereby declared for the year
ended 29 February 2008:
Ordinary dividend number 60 of 156 cents per share
(2007: 118 cents).
Participating preference dividend number 14 of 156 cents
per share (2007: 118 cents).
The above dividends are payable as follows:
Last day of trading to qualify for
and participate in the dividend
(cum dividend) Friday, 20 June 2008
Trading ex dividend commences Monday, 23 June 2008
Record date Friday, 27 June 2008
Dividend payment date
(electronic and certificated) Monday, 30 June 2008
Dividend cheques in payment of these dividends to certificated
shareholders will be posted to shareholders on or about
Monday, 30 June 2008. Electronic payment to certificated
shareholders will be undertaken simultaneously.
Shareholders who have dematerialised their share certificates
will have their accounts at their Central Securities Depository
Participant or broker credited on Monday, 30 June 2008.
In the case of certificated shareholders, notice of any change
of address of shareholders must reach the transfer secretaries,
Computershare Investor Services (Pty) Limited, on or before
Friday, 20 June 2008. Share certificates may not be
dematerialised or rematerialised from Monday, 23 June 2008
to Friday, 27 June 2008, both days inclusive.
BASTION GRAPHICS