the power of - ShareData · the power of three 3 ... Papers, Bytes Specialised Solutions, Bytes Managed Services, ... mobile communications, contact and call centre solutions

the power of three3effi ciency + growth + consolidation

ANNUAL REPORT 2009

Contents

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 our commitment 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.

Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa) (Registration number 1947/024583/06)

What drives our growth 1

Financial highlights and summary 2

Corporate structure 4

Six-year financial review 6

Geographical highlights 8

Strategic philosophies 12

Group overview

Board of directors 14Chairman’s statement 16

Executive committee 22

CE's review and Review of operations

CE’s review 24

Altech 30

Bytes 34

Powertech 38

Chief financial officer’s report 42

Sustainability report 48

Management of sustainability 50Table of material issues 52

Value-added statement 55

Customers 57

Partners 61

Employees 64

Transformation 71

Environment 77

GRI content index 85

Shareholder analysis 86

Corporate governance report 90

Remuneration report 112

Financial statements and Administration

124

Directorate profile 206Letter from the chairman 213Altron notice of annual general meeting 214Explanatory notes – annual general meeting

219

Forms of proxy 221Corporate data 223

1

annual report 2009 www.altron.com

What drives our growthin 2009 and beyond

» Altron has entered a period of consolidation. Following the conclusion of a number of substantial acquisitions, our strategic focus is to extract the anticipated synergies and returns and while we concentrate on cost-effi ciencies and working capital management we will build on the solid foundation established over the prior years to ensure our future sustainability.

CORE VALUES

Sustainable development

Teamw

ork AccountabilityIn

nova

tion

C

usto

mer

s

Broad-based black economic empowermentand transformation

Tran

spar

ency

Co

nsid

erin

g th

e ne

eds

of a

ll st

akeh

olde

rs

Best business practice

Environmental conservation

Corporate governance

three3

consolidation + cost-effi ciency + sustainability

2


Financial highlightsfor the year ended 28 February 2009

8.4

9.5

9.0

10.3

10.3

9.0

EBITDA margin (%)

090807060504*

135 15

3 178

250

339

277

Diluted adjusted headlineearnings per share (cents)

090807060504*

10 0

45 12 2

06 13 9

13 17 1

26

21 4

31 24 7

68

Revenue (Rm)

090807060504*

847

1 15

4

1 25

3

1 76

3

2 20

9

2 23

7

EBITDA (Rm)

090807060504*

*Not restated for effect of IFRS.

3


Financial summaryas at 28 February 2009

Divisional contributionas at 28 February 2009

February 2009R millons

February 2008R millions

%change

Revenue 24 768 21 431 16

EBITDA 2 237 2 209 1

EBITDA margin (%) 9.0 10.3

Operating profit 1 799 1 937 (7)

Adjusted diluted HEPS (cents) 277 339 (18)

Intangible amortisation in operating income 104 40

Revenue

Powertech 39% R9 593 m

R9 164 m

R6 038 m

Altech 37%

R738 m

R1 062 m

R427 m

R266 m

R342 m

R207 m

R46 m

Bytes 24%

EBITDA

Powertech 33%

Altech 47%

Bytes 19%

Headline earnings

Powertech 31%

Altech 40%

Corporate and 5%financial R10 mCorporate and 1%financial

Bytes 24%

4


Corporate structureour group structure and nature of business

altech + bytes + powertech

TelecommunicationsAltech Autopage Cellular, Altech Supercall Cellular, Altech Mobile Direct, Altech Mobile Express – sales, distribution and services provision for cellular network operators. Altech Netstar – the largest stolen vehicle recovery (SVR) business in South Africa, Altech Netstar Fleet Solutions and ComTech – providers of advanced management systems for logistics management.

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

Multi-Media and Electronics

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

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

Information Technology

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

Converged Services

Altech Stream Rwanda – a broadband network operator utilising the Xiacom solution, a city-wide WiFi/WiMax, mesh network.

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

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

Altech Infocom (Uganda) – provides internet service provider and IT services, including the design and implementation of virtual private networks. It offers fi xed wireless broadband, internet access via WiMax access equipment.

Shareholding: 62%

Altron, through its principal subsidiaries,

Allied Technologies Limited,

Bytes Technology Group (Pty) Limited and

Power Technologies (Pty) Limited, operates in the

telecommunications, multi-media,

information technology and

power electronics industries.

Revenue R9.2bn 11%

EBITDA R1 062m 40%

EBITDA margin 11.6% 9.2%

Adjusted headline earnings per share 592c 15%

*Altron and Altech are JSE-listed companies.

» See pages 30 – 33

*

*

5


= three strong

businesses3

Power ElectronicsAberdare Cables, Alcobre (Portugal), Swanib Cables (Namibia), Technology Integrated Solutions (TIS), Powertech Transformers, Desta Power Matla, Powertech Batteries, Dynamic Battery Services (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 » 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

TelecommunicationsCBi-electric Aberdare ATC Telecom Cables (including Lambda Cables), Cables de Comunicaciones (Spain), Battery Technologies, Rentech, Powertech IST, TIS » Copper and optical fibre telecommunication cables and accessories » Data cable systems, solar systems » Access network systems » Radio solutions » Operational support software

Bytes Technology Group – International OperationsBytes Technology Group UK (Software Services, Document Solutions), Bytes Botswana, Bytes Namibia, Bytes Mozambique, Bytes Mauritius – Microsoft licensing, Microsoft certifi ed solution provider, provision of software asset management solutions, Xerox production and offi ce products, document and print solutions. Supply of Xerox and Alcatel equipment to 26 African countries, directly and through a dealer network. Presence established in Saudi Arabia and Dubai.

Bytes Technology Group South Africa (Bytes SA)Bytes Document Solutions (incorporating LaserCom and NOR Papers, Bytes Specialised Solutions, Bytes Managed Services, Bytes Communication Systems (incorporating Intelleca), Bytes Systems Integration, Bytes Outsource Services, Bytes People Solutions, Bytes Healthcare Solutions – Xerox offi ce and production products and related services, document management services, paper, consumables, NCR ATM and point-of-sale products, Teradata database solutions, Alcatel-Lucent PABX solutions including LAN-based telephony, mobile communications, contact and call centre solutions and services, unifi ed messaging solutions, “break and fi x” services, maintenance and support, remote monitoring of computer facilities, network and solutions management, Microsoft licensing, workforce management solutions, network solutions, software sales, development, implementation and application maintenance, SAP implementation, IT infrastructure products and services, people solutions and training, transaction switching services, practice management and informatics solutions for the healthcare industry.

Shareholding: 100% Shareholding: 100%

Revenue R9.6bn 20%

EBITDA R738m 28%


Adjusted diluted headline earnings R270m 47%

Revenue R6.0bn 16%

EBITDA R427m 3%


Adjusted diluted headline earnings R220m 2%

» See pages 34 – 37 » See pages 38 – 41

6


Six-year financial review

2009 2008 2007 2006 2005 2004*R millions R millions R millions R millions R millions R millions

INCOME STATEMENT

Revenue 24 768 21 431 17 126 13 913 12 206 10 045

Operating profit 1 799 1 937 1 528 1 040 963 718Financial income 184 182 132 112 100 145Financial expense (292) (89) (56) (53) (62) (26)Profit from associates 3 4 4 32 24 9Capital items (21) (90) (38) (54) (90) (139)

Profit before taxation 1 673 1 944 1 570 1 077 935 707Taxation (524) (625) (481) (326) (339) (255)

Profit after taxation 1 149 1 319 1 089 751 596 452

Attributable to minority interest 314 300 284 257 148 148

Attributable to Altron equity holders 835 1 019 805 494 448 304

Headline earnings 861 1 072 793 529 445 379

Dividends paid 490 331 216 176 143 117

BALANCE SHEETAssets

Property, plant and equipment 2 221 1 264 954 905 848 671Intangible assets 2 437 1 502 844 773 925 462Associates and other investments 278 314 254 228 453 183Rental finance advances 73 86 77 90 75 189Deferred taxation 230 196 182 118 112 113Cash and cash equivalents 2 108 2 116 1 613 2 152 1 520 2 004Other current assets 6 234 5 501 4 526 3 271 3 022 2 447

Total assets 13 581 10 979 8 450 7 537 6 955 6 069

Equity and liabilitiesShareholders’ equity 4 873 4 469 3 528 2 931 2 679 2 489Minority interest 1 427 877 1 218 1 103 964 1 082

Total equity 6 300 5 346 4 746 4 034 3 643 3 571

Non-current loans 1 157 940 321 297 716 277Current loans 415 229 65 238 59 247

Loans 1 572 1 169 386 535 775 524

Non-current liabilities 189 107 68 46 83 41Bank overdraft 928 33 24 — — —Current liabilities 4 592 4 324 3 226 2 922 2 454 1 933

Total equity and liabilities 13 581 10 979 8 450 7 537 6 955 6 069

*Not restated for effect of IFRS due to practical constraints.

DefinitionsEarnings – Attributable earnings as disclosed in the income statement.Total assets – Property, plant and equipment, investments and loans together with current assets.Borrowings – All interest-bearing liabilities.Operating assets – Total assets less investments, loans, deferred tax and cash.Capital employed – The total of total equity and borrowings.Operating profit – is stated before capital items.

7


2009 2008 2007 2006 2005 2004*R millions R millions R millions R millions R millions R millions

RATIOS AND STATISTICSEarningsBasic earnings per share (cents) 266.0 356.7 287.0 176.4 162.0 111.5Headline earnings per share (cents) 274.5 375.3 282.8 189.2 161.7 138.1Dividend proposed per share (cents) 119.0 156.0 118.0 78.0 63.0 52.0Headline dividend cover (times) 2.3 2.4 2.4 2.4 2.6 2.7Ordinary shares in issue (millions)– at year end 102 102 94 94 94 94– weighted average 102 95 94 94 94 94Participating preference shares in issue (millions)– at year end 212 210 186 188 184 180– weighted average 212 191 186 186 182 179

ProfitabilityOperating profit to revenue (%) 7.3 9.0 8.9 7.5 7.9 7.1EBITDA 2 237 2 209 1 763 1 253 1 154 847EBITDA to revenue (%) 9.0 10.3 10.3 9.0 9.5 8.4Return on shareholders’ equity (%) 18.3 24.7 23.0 18.2 16.8 16.0Return on capital employed (%) 22.9 29.7 29.8 22.8 21.8 17.5Return on operating assets (%) 16.6 23.2 23.9 20.6 19.8 19.1Return on net assets (%) 23.0 30.3 30.5 23.8 22.5 18.1

FinancialBorrowings ratio (%) 25.0 21.9 8.1 13.3 21.3 14.7Current ratio 1.4:1 1.7:1 1.9:1 1.9:1 1.9:1 2.0:1Acid test ratio 1.0:1 1.2:1 1.2:1 1.4:1 1.4:1 1.5:1Net asset value per share 1 550.0 1 431.2 1 260.5 1 039.6 962.6 907.0

SharesNumber of shareholders– ordinary shares 3 869 3 316 1 600 1 738 1 616 1 202– participating preference shares 8 483 8 019 3 848 3 396 2 916 2 722Price:earnings ratio (times)– ordinary shares 7.0 13.1 15.8 13.5 9.6 8.0– participating preference shares 7.0 12.7 14.9 11.9 9.5 8.1Market value per share at year end (cents)– ordinary shares 1 915 3 700 4 478 2 550 1 555 1 105– participating preference shares 1 920 3 600 4 200 2 250 1 538 1 125

OtherConsumer price index (percentage increase) 8.6 9.8 5.7 3.9 2.6 0.7Production price index (percentage (decrease)/increase) 7.3 11.3 11.3 4.7 2.6 0.5Number of permanent employees 13 407 12 909 11 871 11 874 11 800 10 712

DefinitionsAcid test – The ratio of current assets excluding inventories to current liabilities.Net asset value per share – Shareholders’ equity divided by the number of shares in issue at year end.Borrowings ratio – The percentage of borrowings (including bank overdraft) to total equity.EBITDA – Operating profit before interest, tax, depreciation and amortisation.Current ratio – The ratio of current assets to current liabilities.Return on capital employed – The percentage of operating profit to capital employed.Headline dividend cover – Headline earnings per share divided by dividends proposed per share.Return on operating assets – The percentage of operating profit to operating assets.Market value per share – The sellers’ price quoted by the JSE Limited.Return on shareholders’ equity – The percentage of attributable earnings to shareholders’ equity, adjusted for net capital items and translation

gains/losses.Price:earnings ratio – The market value per share divided by the headline earnings per share.Return on net assets – The percentage of profit before tax, excluding finance costs and capital items to net assets.

8


Geographical highlightswhere we operate

1 11

4

2 07

3

1 82

7

1 58

9

2 36

8

2 18

6

Comparative (Rbn)

20092008

PowertechBytesAltech

South Africa

Revenue gauge (%)

Exports Foreign operations▲13.3%▼ ▲37.3%▼ ▲17.3%▼

EUROPE

Portugal,France, Spain

UK

SOUTHERN AFRICASouth Africa, Botswana, Mauritius, Mozambique, Namibia, Swaziland

WEST AND EAST AFRICANigeria, Tanzania, Zambia, Kenya

INDIA

ASIA

Malaysia

AUSTRALIA

Sydney

Operational presence

Export destinations

– Altech

– Bytes Technology Group

– Powertech

Key:

CHINA

Hong Kong

9


Global footprint

» Contribution from foreign revenue and exports grow to 25% of total revenue

» Altech global footprint now into 14 countries

» Altech Stream East Africa is established following Altech’s acquisition of a 51% controlling interest in three subsidiaries of the Sameer ICT Group in Kenya. The operation now includes a group of interconnected telecoms companies into a group-managed portfolio and incorporating Kenya Data Networks (KDN), Swift Global (Kenya), Infocom and Altech Stream Rwanda

» Bytes rated the largest Microsoft licence distributor and leading Xerox concessionaire in the United Kingdom

» Powertech Transformers East Africa has been trading for more than a year and supports the sales and marketing efforts of Powertech Transformers and Desta Power Matla in East and sub-Saharan Africa

Battery Technologies has established a presence in both Nigeria and Tanzania and has signed a framework agreement with a leading operator for standby power solutions across Africa

» Altech UEC India increases its order book substantially

» Altech NamITech West Africa broadens customer base to include major network operators in West Africa

» Powertech’s cable businesses in the Iberian Peninsula came under pressure, especially in Spain where the world economic conditions impacted the building and construction industry

South Africa

» Powertech companies to benefit from infrastructure spend expected to continue over the medium term

» The group’s telecoms cable joint venture with Reunert is benefiting from the liberalisation of the local telecommunications market as operators look to build their own fixed-line networks

» Increased presence in a more liberalised SA connectivity market and capitalising on focused opportunities through Altech’s I-ECNS and ECS licences

» The alternative power supply market opens opportunities for the group, with Strike Technologies providing generators to mining customers and Rentech supplying its innovative solar traffic lights solutions

» Convergence in IT and telecoms businesses pursuing broadband opportunities, with a view to creating a powerful market offering in terms of a full service solution

» Altech acquired Technology Concepts in line with its converged services strategy

» The digitisation of the South African terrestrial television signal presents a significant opportunity for Altech’s multi-media sector

10


» For our group this is a period of consolidation, focus on

cash fl ow generation, strict working capital management

as well as internal cost effi ciencies, without prejudicing our

ability to react to the upswing when markets turn.

= the power to

consolidate3altron + growth

11


Gro

up o

verv

iew

12


Strategic philosophies

» All groups showing positive growth in annuity income as percentage of total revenue

» Annuity income increased to over R10 billion for the year under review

» Achieved more than 40% of revenue from annuity fl ows

Annuity incomePercentage of revenue (%)

30

35

40

45

50

Feb 09Feb 08Feb 07

Income mix (Rbn)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Feb 09Feb 08Feb 07

Annuity incomeOther revenue

Value-added service

Annuity revenue

Ownership of intellectual property rights

Strategicalliances

International expansion in niche markets

Market leadership/critical mass

Quality of income

Superior human capital

Broad-based black economic empowerment

Increase Shareholder

Value

Investor proposition

Gro

up o

verv

iew

13


Performance on strategic philosophies

Strategic philosophy 2008 performance Future plans

1. International expansion in

niche markets

» In 2008 revenue from foreign operations and exports grew to 25% of total revenue (see pages 8 and 9 for more details)

» The group’s strategy is to maintain its contribution from foreign revenue and exports at more than 25% of total group revenue

» Further expansion in East, West and sub-Saharan Africa is planned through each of Altech, Bytes and Powertech

» Altech UEC plans further global expansion, particularly in India and China

2. Strategic alliances

» Technology partnerships and customer alliances remain a focus for the group. For more details see the Altron sustainability report page 61

» Long-term contracts are in place between Altech Autopage Cellular and the network operators

» Long-term technology alliances and distribution agreements with international partners maintained

» Key customer alliances expanded

3. Ownership of intellectual property rights

» Altech continues to invest in R&D» Alternative power solutions businesses established in

Powertech» Ongoing IPR investment throughout the operations

» Continue to develop intellectual property and encourage innovation, particularly through training programmes at Altech Academy

4. Annuity income » Annuity income increased to over R10 billion with more than 40% annuity income throughout the group (see slide on page 12 of this report)

» Altech has increased its annuity income contribution to 79% of total revenue

» Bytes and Powertech continue to focus on growing these income streams

» The target for the group remains at >50% of its total revenue being annuity in nature

5. Value added services

» Powertech’s strategy of complementing its existing product range with value added services commenced with the acquisition of IST

» Altech acquired Technology Concepts to enhance its broadband offerings

» Bytes Document Solutions acquired NOR Paper to extend its service offering

» Bytes Communication Systems acquired Intelleca

» Look to develop value-added-services out of existing businesses and selectively pursue compelling investment opportunities to enhance the group’s value-added offerings

6. Broad-based black economic empowerment

» Altron achieved an overall score of 65.30%, or Level 4 recognition, compared with last year’s score of 54.85%

» Altron was listed in the Financial Mail/Empowerdex Top Empowerment Companies 2009 Survey, with an overall placement of 32 (a 17-place improvement on the previous year) and came first in the General Industrials sector in the Top 200 Companies ratings

» For more detail on our progress in terms of B-BBEE, see page 72 of the sustainability report

» The implementation of the Altron Transformation Vision 2012 guidelines to meet the group’s B-BBEE targets in the operations continues

7. Superior human capital

» Altron was ranked number six in the Financial Mail/Empowerdex Top Empowerment Companies 2009 Survey in terms of Skills Development

» Altech Academy has 98 participants» Bytes bursary scheme» Leadership Development Programme established through

the Altron Young Presidents’ Club» Powertech Leadership Process offers leadership courses

through formal institutions

» Ongoing commitment to skills development

8. Quality of income » Ten year compound annual growth rate in revenue, earnings and dividends in double digits

» Maintain our track record on long-term growth

9. Market leadership/ critical mass

» Continued group-wide focus on market leadership through investment in research and development as well as bolt-on acquisitions to increase product offerings

» Maintained market leader status in a number of key markets in which we operate

» Altech’s East African broadband acquisitions achieve leading market share in the region

14


Board of directors

Dr WP (Bill) Venter

Date of birth: 29 July 1934 (74)

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

Titles: » Non-executive chairman of Altron and Bytes

» Non-executive director of Altech, Bytes and Powertech, former chairman of the CSIR, and past director of AMIC Limited and Nedcor Bank Limited

» Member of the Altron nomination committee and remuneration committee

Joined the Altron board in 1980.

RE (Robert) Venter

Date of birth: 7 May 1960 (49)

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

Titles: » Chief executive of Altron» Non-executive director of Altech,

Bytes and Powertech and various other group companies

» Chairman of the Altron executive committee

» Member of the Altron risk management committee


MC (Myron) Berzack

Date of birth: 30 May 1949 (60)

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


AMR (Alex) Smith

Date of birth: 12 January 1969 (40)

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

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

» Non-executive director of Altech, Bytes, Powertech and various other group companies

» Member of the Altron executive committee and risk management committee


DNM (Dawn) Mokhobo

Date of birth: 30 October 1948 (60)

Qualifi cations: BASocSci, UNIN; Programme in Strategic Transformation, Graduate School of Business (Stellenbosch)

Title: » Independent non-executive director of Altron


N (Norbert) Claussen

Date of birth: 10 December 1960 (48)

Qualifi cations: BEng (Stellenbosch); MEng (UP); MBA (UCT); PrEng (ECSA)

Titles: » Executive director of Altron» Chief executive offi cer of Powertech » Director of Powertech Transformers,

Aberdare Cables and Powertech Industries» Member of the Altron executive committee

and risk management committee


Dr PM (Penuell) Maduna

Date of birth: 29 December 1952 (56)

Qualifi cations: 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


PL (Peter) Wilmot

Date of birth: 13 March 1940 (69)Qualifi cations: CA (SA)


» Chairman of the Altron audit committee» Member of the Altron remuneration

committee and risk management committee


From left:

Gro

up o

verv

iew

15


CG (Craig) VenterDate of birth: 4 July 1962 (46)

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

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

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

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


» Member of the world-wide Young Presidents’ Organisation (YPO)


MJ (Mike) Leeming

Date of birth: 26 October 1943 (65)

Qualifi cations: BCom (Rhodes); MCom (Wits); FIBSA (Wits); FCMA; AMP (Harvard)


» Chairman of the Altron risk management committee

» Member of the Altron audit committee and nomination committee


JRD (Jacob) ModiseDate of birth: 9 September 1966 (42)

Qualifi cations: BCom (Wits); BAcc (Wits); CA(SA); MBA (Wits); AMP (Samford); AMP (Harvard)


» Chairman of the Altron remuneration committee

» Member of the Altron audit committee» Executive chairman of Batsomi

Investments (Pty) Limited


PMO (Peter) CurleDate of birth: 19 May 1946 (63)

Qualifi cations: MA (Oxon)

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

Corporate Finance» Member of the Altron executive

committee

Rejoined the Altron board in 1997.

NJ (Norman) AdamiDate of birth: 12 August 1954 (54) Qualifi cations: BBusSci (Hons) (UCT); MBA (Wits)


» Member of the Altron audit committee and remuneration committee


Dr HA (Harold) SerebroDate of birth: 12 October 1938 (70) Qualifi cations: MBBCh (Wits); MD (Rand); FCRP (Canada); FACP (USA); PhD (Economics) (hc) (UFS)

Titles: » Senior Altron executive director» Non-executive 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

» Trustee of the Sexwale Family Foundation


PD (David) RedshawDate of birth: 29 January 1942 (67)

Qualifi cations: BA (Hons) (Birmingham); ACMA

Titles: » Executive director of Altron» Chief executive offi cer of Bytes» Non-executive director of Bytes UK» Member of the Altron executive committee

and risk management committee


BJM (Barbara) MasekelaDate of birth: 18 July 1941 (67)

Qualifi cations: BA (cum laude) (Ohio University)


» Member of the Altron nomination committee


See detailed CVs on pages 206 to 212.

From left:

16

Chairman’s statement

Dr Bill Venter Chairman


Introduction

The past year has arguably been among the toughest we have endured

in several decades with our results being adversely impacted by the

challenging economic environment and the parlous state of global fi nancial

markets.

The global downturn created by the international credit crisis resulted

in the collapse of many stock markets and has had a severe impact on

commodity prices. International recessionary conditions have since become

prevalent in many developed and developing countries worldwide.

Regrettably, our energy cables business in Powertech – one of the largest

operations in Altron – has been particularly affected by the signifi cant

slowdown in the building and construction industry and the sudden fall in

copper prices during the second half of the year. This led to a signifi cant

drop in the operating profi t at Powertech, which in turn impacted the

whole group.

The expectation is, however, that government’s focus on infrastructure

spend to create economic growth and jobs, will hopefully create an

environment conducive to demand for Powertech’s diverse range of

products and services.

Altron’s focus on convergence, through the further development of

broadband technologies and the adoption thereof by consumers, will open

Gro

up o

verv

iew

17


» Altron’s focus on convergence, through the further development of broadband technologies and the adoption thereof by consumers, will open up new opportunities for Altech. In particular, our investment by Altech in the Sameer ICT Group in East Africa is performing well and offering exciting opportunities.

Altron’s view of sustainable growthSustainable growth is driven by a long-term commitment to:

» our identifi ed mission and strategy;

» continually improve effi ciencies;

» growing organically through its partnerships;

» invest in our people and our businesses;

» grow by seeking appropriate acquisitions in our chosen sectors.

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.

up new opportunities for Altech. In particular, our investment by Altech in the Sameer ICT

Group in East Africa is performing well and offering exciting opportunities. Altech is also

seeking investment opportunities in several international undersea cable projects that

will service the East Coast of Africa and will substantially reduce the cost of international

connectivity of businesses in this region.

Local fi nancial institutions have come under pressure due to the combined effect of

the international fi nancial crisis and higher bad debt charges. As a result, margins on

supplier business into this sector are under pressure and there is a tendency to delay

and even cancel projects which has impacted the Bytes group to some extent.

Our diversifi ed portfolio of products and services has been a key factor in sustaining our

performance during these diffi cult times. Even so, we have moved into the new fi nancial

year cautiously, while maintaining the fi nancial fl exibility to adapt quickly and make

effective capital deployment decisions should the need for expansion or essential

acquisitions arise.

Results

Our results closely refl ected those outlined by the board in our trading statement issued

in February. Despite challenging market conditions, we were pleased to record an

increase in revenue to R24.8 billion, representing a 16% increase over the previous year.

Unfortunately, as a result of various factors discussed and primarily the performance of

Powertech, our adjusted diluted headline earnings per share declined by 18%.

18


Chairman’s statement continued

Looking ahead to the next six months, we believe it is certainly going to be difficult,

necessitating that we keep a tight rein on our debtors, manage our working capital

more cleverly, watch our expenses and ensure that we are highly efficient in all areas

of our business.

In this regard we have continued to make essential investments in the technology and

infrastructure arena that will enhance our ability to keep on diversifying our group in our

chosen areas of activity and assist us in providing improved returns and above-average

growth over the long term.

Sustainability

Altron has always subscribed to the credo of delivering maximum value to our

shareholders, but certainly not at any cost to the business, the community or the

environment. It is for this reason that we pride ourselves on our sustainability track

record over the years as is evidenced by our triple-bottom line reporting set out in this

report.

I am especially delighted that Altron has recently become the first listed company in

South Africa to be independently accredited vis-à-vis its corporate governance structures

and practices. Altron received a gold class rating and as such has improved on its silver

award of the previous year.

This once again reinforces my view that we must never lose sight of our vision which has

stood us in such great stead for the past 44 years. We remain committed to our core

principles, culture and values that drive our business each day.

Transformation

Transformation remains one of the key focus areas for our group and, in this regard,

significant progress has been achieved by our various group companies during the year.

I am pleased to report that Altron’s rating in the Financial Mail/Empowerdex Top

Empowerment Companies Survey for 2009 indicated that we have indeed made

significant progress in our broad-based black economic empowerment (B-BBEE) drive,

and these issues are dealt with in more depth in our sustainability report.

Overall, the group’s strategy towards transformation is to strive to achieve the targets

set out in our Transformation Vision 2012 document. We believe that transforming our

group companies is not simply a matter of complying with legislation, but forms part of

our long-established strategic philosophy in assuring our group’s future sustainability.

Altron continues to place increased focus on its B-BBEE board representation and, since

February 2008, has appointed Barbara Masekela, the former SA ambassador to France

and the US, as well as business-woman, Dawn Mokhobo, to its board. Gauteng

entrepreneurs, Zakhele Sithole and Moses Sindane, were, in turn, appointed to the Altech

board. I am pleased to welcome them all to the Altron family and am delighted to note

their significant contribution to our decision-making processes.

» Altron has recently become the first listed company in South Africa to be independently accredited vis-à-vis its corporate governance structures and practices.

Gro

up o

verv

iew

19


Our people

The development of our people remains a key priority, especially given the severity of

the global skills shortage in both the IT and engineering fields. Consequently, we are

paying particular attention towards ensuring that we attract and retain the best skills in

the industry.

During the year, Altron undertook a comprehensive review of all of its skills development

training initiatives. This resulted in the launch of a leadership development programme

offered to the Altron Young Presidents’ Club to ensure that executive training at this

senior management level is aligned with the longer-term strategic skills requirements of

the group. In partnership with the Altech Academy, Altron now offers Altron YPC

members a two-year leadership development programme, culminating in a master’s

degree in the Management of Technology and Innovation.

The Altech Academy, which enjoyed its inaugural year during 2008 with 98 students,

plays a critical role in meeting skills pipeline requirements for Altech as well as the

group. Bytes Peoples Solutions also continues to make a valuable contribution to skills

development in the Bytes group and has had particular success with its black learner

programme.

Our stakeholders

Altron’s customers, suppliers, business partners, as well as our other stakeholders,

remain the mainstay of our business and are central to the sustainability of many of

our operations.

The environment

Altron values the importance of environmental sustainability as an important part of

triple bottom line corporate responsibility. In quantifying how our business impacts the

environment, we are guided by a number of independently commissioned audits,

international standards, the JSE SRI Index and the requirements of the Global Reporting

Initiative’s G3 framework.

Outlook

It is not clear when the current, difficult economic situation will improve, but it seems

likely that conditions will continue at least over the medium term as both market and

consumer confidence is expected to remain weak. Uncertainty remains in the local

economy in light of the post-election socio-political situation and future economic

policies of our new government. However, initial indications in this regard appear

positive.

» The development of our people remains a key priority, especially given the severity of the skills shortage in both the IT and engineering fields.

20


Chairman’s statement continued

Naturally, there is a measure of deep anxiety about where the world of business is

headed, and this is understandable and appropriate. However, we are confident that our

group is well positioned to meet the tough challenges ahead. In fact, one of our key

strengths is to timeously recognise and participate in major transitions in the fast-

changing world of technology, especially in the ICT sector. We intend to adapt quickly

and efficiently to benefit our bottom line and future prospects.

Exciting developments are taking place in many of the sectors in which we operate

and we will leverage off these opportunities to grow our group. Tough times inspire

companies to take a closer look at themselves and our group is certainly no exception.

We are already assessing our entire portfolio to see where services can be shared and

knowledge pooled.

Our executive team, under the capable leadership of our chief executive, Robbie Venter,

is pursuing every avenue to consolidate our businesses, control expenses, focus on cash

flow and working capital management, concentrate on niche markets, work smarter and

improve productivity. Robbie and his team are to be thanked for their astute and

professional leadership of the group in these difficult times. I firmly believe that when

the economy rebounds, we will be well prepared to capitalise on our financial strength,

our market leadership and the competence of the Altron people with their passion to

serve as well as their commitment to innovation.

Acknowledgements

On behalf of the board, I wish to express my deep and sincere appreciation to all of our

customers, employees, business partners and other stakeholders for their ongoing

support during a very difficult period in our history and for their continued belief in the

future sustainability of the group and its strong underlying businesses.

I would also like to take this opportunity of thanking members of the board for their

wise counsel during these very difficult times. They have brought significant strategic

Gro

up o

verv

iew

21


and commercial experience to our group. In this regard, it gives me great pleasure to

also welcome Norman Adami as an independent non-executive director to our board.

A public announcement was made during the year advising that I have decided to step

down as full-time chairman of Altron and become non-executive chairman. I will,

however, continue to serve as non-executive director and/or non-executive chairman on

various boards within the group and will remain a member of our nomination and

remuneration committees.

It behoves me to recognise over 30 years of dedicated service by our senior executive

director in the office of the chairman, Dr Harold Serebro, who has played a meaningful

role in building the Altron group into the leadership position that it holds today. He has

held directorships in Altron, Altech and Powertech and his expertise in global markets

has built the Altron group purchasing and export councils into the pre-eminent role

they currently hold, yielding revenue in excess of R2 billion from 76 countries

worldwide. On behalf of the shareholders, directors and staff of the Altron group,

we wish him well on his retirement later this year and greatly appreciate

his undertaking to assist the group, whenever it may be necessary in the future.

As founder of this group in 1965, it has always been an honour and a privilege to be an

integral member of our talented, passionate and dedicated team of people at Altron.

Despite the difficult economic scenario in which we find ourselves, I remain excited and

enthusiastic about what the future holds for this fine group.

Dr Bill Venter – Chairman

May 2009

» Exciting developments are taking place in many of the sectors in which we operate and we will leverage off these opportunities to grow our group.

22


Executive committee

RE (Robert) VenterAge: (49)

Chief executive of Altron

AMR (Alex) SmithAge: (40)

Chief fi nancial offi cer of Altron

S (Seara) Macheli-MkhabelaAge: (37)

Group executive: corporate affairs of Altron

From left:

Gro

up o

verv

iew

23


CG (Craig) VenterAge: (46)

Chief executive offi cer of Altech

N (Norbert) ClaussenAge: (48)

Chief executive offi cer of Powertech

PD (David) RedshawAge: (67)

Chief executive offi cer of Bytes

PMO (Peter) CurleAge: (63)

Group executive: corporate fi nance

From left:

24


Robert Venter Chief Executive

Chief executive’s review

Introduction

Developments in the global credit environment, which surfaced in the mid to latter

part of 2008, affected economies across the board and resulted in a signifi cant

decline of stock market valuations and commodity prices leading to recession in

many countries and a widespread liquidity crisis.

Altron and the South African economy were not immune to the global turmoil. This

was refl ected in a satisfactory fi nancial performance for our group in the fi rst half

of the year but followed by a disappointing second half as the full impact of these

economic conditions was felt.

Locally, the macro-economic environment exacerbated the international crisis.

The protracted cycle of high interest rates resulted in material declines in demand

for our companies supplying products to the building and construction sector

which, coupled with the rapid decline in commodity prices, negatively impacted our

Powertech business which showed a decline in profi ts when compared to the prior

year. Our Bytes business reported a steady performance in line with the prior year

but did suffer from deferrals in IT expenditure and pricing pressures primarily

from its fi nancial institution and retail clients. On a more positive note, our

Altech subsidiary, which is underpinned by a high proportion of annuity income,

performed well and showed double-digit profi t growth.

CE’s

rev

iew

25


Financial overview

For this year’s annual report, we have included a chief financial officer’s report for

the first time. This will provide a detailed analysis of our group’s financials.

Consequently, I shall provide a more summarised overview of the 12 months ended

28 February 2009.

Revenue for the year under review achieved good growth of 16% reaching

R24.8 billion. The constituents of this growth were both organic (8.2%) and

acquisition related (7.4%). As a result of significant non-recurring charges relating

to inventory write downs in our energy cables business following the rapid

reduction in the copper price and a deteriorating business environment, earnings

before interest, tax, depreciation and amortisation (EBITDA) margins declined from

10.3% to 9.0%. This resulted in EBITDA increasing by 1% from R2.21 billion to

R2.24 billion. As a result of lower finance income and additional shares in issue

relating to the acquisition of the Bytes minorities in January 2008, adjusted

diluted headline earnings per share declined by 18% compared to the prior year.

Adjusted diluted headline earnings per share takes headline earnings per share

and accounts for the dilutive impact of the various broad-based black economic

empowerment transactions throughout the group. A further adjustment to exclude

5.0

6.3

10.2

7.4

Organic and acquisitionrevenue growth (%)

OrganicAcquisition

AltronPower-tech

BytesAltech

6.2

10.1

9.5

8.2

» The markets we are operating in are substantially changed from those of only 12 months ago. This requires a different approach to managing our business which is being emphasised throughout the group.

Revenue for the year grew by 16% to R24.8 billion. This constitutes 8.2% organic and 7.4% acquisition-related revenue growth.

26


Chief executive’s review continued

amortisation of intangibles arising out of acquisitions is then made. Management

considers adjusted diluted headline earnings per share to be the measure that

best reflects our overall performance.

Altron’s cash position improved strongly in the second half to R1.2 billion, although

this is some R913 million down on the prior year following the R1.9 billion invested

in the growth of our group through acquisitions and capital expenditure. Our

strong balance sheet allowed us to maintain our dividend cover declaring a

dividend of 119 cents per share.

Focus areas

The markets we are operating in are substantially changed from those of only

12 months ago. This requires a different approach to managing our business

which is being emphasised throughout the group. One of the most challenging

aspects of managing in the current economic environment is the lack of visibility

of the immediate future and how that impacts decisions that need to be taken.

Given this uncertainty, the group will focus on areas where it has the ability to

exercise some direct control.

These include among others:

» Management of the cost base – all costs are coming under careful scrutiny in

order to ensure that the group is as lean as possible, without prejudicing our

ability to react to the upswing when markets turn;

» Working capital management – “cash is king” in these times and significant

time and effort will continue to be directed at managing and minimising the

investment in working capital;

» Focused capital expenditure – all capital expenditure requests are carefully

evaluated to ensure that they are essential to the business unit and will deliver

immediate returns;

» Fully integrating recent acquisitions – all efforts will continue to be directed

at ensuring that the group’s acquisitions are delivering on their potential and

that the maximum synergies are extracted; and

» Capacity alignment – ensuring that our production capacity is appropriate

given the reduced-demand environment.

The low visibility in certain key markets such as the building and construction

industry, the price of commodities and the impact of the credit crunch on our

52

63

78

118

156

119

Dividends declared (cps)

090807060504*

17.5

21.8 22

.8

29.8

29.7

22.9

Return on capitalemployed (%)

090807060504*


CE’s

rev

iew

27


customers has forced Aberdare Cables to take some significant actions in terms of

managing its working capital, scaling down on factory production, mothballing

certain facilities and consolidating other production sites. Significant progress

towards these actions had been made by year end. These steps are expected to

enable this operation to meet the changing demand environment in which it now

operates.

Other challenges for Powertech include the expected slow recovery in the housing

market, customer access to funding and increasing import competition, particularly

from China and India.

The delays and cancellations of significant projects in retail and financial services

are impacting a number of businesses, especially in our Bytes group. This remains

a challenge and requires significant action in terms of cost efficiencies and

consolidation at operational level.

The lack of key engineering and IT skills in the marketplace is ongoing and the

group remains focused on skills development and retaining scarce skills. Our

progress is detailed in our sustainability report on page 64.

Operational highlights

Notwithstanding the challenges we faced during the second half of the year, there

were significant operational highlights during the year. These included among

others:

» The investment by Altech in the Sameer ICT Group in East Africa which is

performing above expectations – good profit margins are enhancing Altech’s

overall profitability and offering a number of exciting opportunities for further

growth.

» Altech Autopage Cellular produced higher-than-expected margin levels and

good revenue growth. Although consumer demand is still evident at this

company, it is showing signs of maturation and focus has been directed to

growth from the data side of the business where subscribers have risen to

74 000 of a total base that now exceeds one million subscribers.

» Altech Netstar Fleet Solutions and ComTech are performing well ahead

of expectations both in terms of revenue growth and profitability. Although

Altech Netstar Stolen Vehicle Recovery (SVR) has been impacted by the

dramatic decline in new car sales and potential credit risk of its consumer

customer base, the SVR business is performing satisfactorily under tough

conditions and showed growth on the prior year.

16.0 16

.8 18.2

23.0 24

.7

18.3

Return on shareholders’equity (%)

090807060504*

907 96

3 1 04

0

1 26

1 1 43

1 1 55

0Net asset valueper share (cents)

090807060504*


28


Chief executive’s review continued

» The successful export drive at Altech UEC is resulting in significant unit growth in

the Indian and Asian markets.

» Bytes UK Software Services reported record results off a high base and Bytes

Managed Services and Bytes Healthcare Solutions both excelled in a difficult

environment.

» Bytes Document Solutions (BDS) performed particularly well over the past year,

reflecting increased machine placements, and an improving level of value-

added document services which now constitute the major part of its business.

The acquisition of NOR Paper, which has produced excellent results, augurs

well for the coming year.

» Powertech Transformers and Desta Power Matla performed above

expectations. Government’s focus on infrastructure spend to create GDP

growth and employment, as well as deliver on election promises, continues

to create an environment conducive to demand for transformer products.

This is expected to remain robust in the medium term.

» Powertech Batteries recorded an exceptional year with good revenue growth

and enhanced profitability following recent capital expenditure. It continues to

benefit from supplying the replacement market driven by the expanded pool

of vehicles created by rising car sales in recent years.

Strategic achievements

Altron’s strategic philosophies continue to steer the group in terms of growth and

sustainability. During the review period, we have measured our success against

targets set in the previous year and we report on this in the investor proposition

section. However, there are a number of key achievements that warrant emphasis,

including our long-term objective to move up the telecommunications value chain.

Through Altech’s majority holding in the telecommunications businesses of the

Sameer ICT Group in Kenya, substantial progress towards this objective has been

made and has proved financially beneficial. Other achievements include our group

capitalising on increased exposure to the infrastructure market through the

Powertech IST and Powertech Transformers acquisitions.

Increasing the contribution of annuity based income to our total revenue is

another key strategic focus of the group and during the year under review, Altron

increased annuity income to over R10 billion which represents more than 40% of

total group revenue now being annuity based. Altech has increased its annuity

income contribution to 79% of total revenue and Bytes and Powertech continue to

focus on growing these income streams.

Corporate activity

The following significant transactions

and corporate developments took place

during the year under review:

» The acquisition by Altech of a 51%

controlling interest of the Sameer ICT

Group in East Africa for US$75 million,

effective 1 March 2008

» The acquisition by Powertech of the

50% equity interest it did not already

own in ABB Powertech Transformers

from ABB for R320 million, effective

1 April 2008

» The disposal by Powertech of

Yelland Control to Omron Europe BV

for R75 million, effective 1 April 2008

» The acquisition by Bytes of

Intelleca for R115 million, effective

1 April 2008

» The acquisition by Bytes of NOR Paper

for up to R164 million, effective

1 July 2008

» The sale to Kagiso of a further

22% equity interest in Bytes SA for

R198 million, effective 1 July 2008.

Post year end

» The acquisition by Altech of Fleetcall,

effective 1 March 2009, for

R40 million which could increase to

a maximum of R75 million depending

on the achievement of future profit

targets

» The disposal by Altech of Altech

NamITech’s South African operations

to Gemalto for approximately

R79 million, with an effective date

of 1 April 2009

» The acquisition by Altech of

Technology Concepts for R7.5 million

which could increase to a maximum

of R45 million subject to certain

profit levels being achieved.

CE’s

rev

iew

29


We have also increased our foreign revenue and exports to 25% of total revenue and

established a substantial footprint in our chosen global markets.

Our strategic alliances with international “best of breed” companies continue to expand,

while our existing relationships with companies such as MTN, Vodacom, Xerox, NCR,

Teradata, Arrow Electronics, Motorola, Microsoft, ABB, General Electric and others have been

strengthened.

From a broad-based black economic empowerment (B-BBEE) perspective, our internal

charter, Vision 2012, was successfully launched and progress against our targets is being

measured on an ongoing basis. It was pleasing for our group to improve its ranking on the

Financial Mail/Empowerdex Top 200 Empowerment Companies for 2009 to number 32

overall in South Africa. Our progress during the year in terms of our B-BBEE transformation

is outlined in the sustainability report.

Outlook

The challenging economic environment is expected to continue over the short to medium

term as market confi dence remains weak and uncertainty continues. These times call for a

period of consolidation, focus on cash fl ow generation, strict working capital management,

as well as maximising internal cost effi ciencies. Various opportunities for growth in East

Africa, coupled with continued medium-term demand for infrastructure, and our strong

base of annuity income are expected to drive an improved performance in the year ahead.

Conditions for the fi rst half of the new fi nancial year will be particularly challenging,

especially given the high base of the comparative period in the prior year. However, the

board is confi dent that the Altron group is well positioned to take advantage of any

improvement in the current economic environment, given the remedial actions that have

been put in place.

Acknowledgements

I would like to thank the people of Altron for their support and the constructive way they

have been embracing the challenges posed by the current economic climate. To our

customers, suppliers and partners, your contribution to Altron is immeasurable and we

thank you for your ongoing support. Finally, to the chairman and the board of directors:

thank you for your wise counsel and also to my executive committee for their dedication

in driving Altron forward.

RE Venter – Chief Executive

May 2009

Infrastructure spend

Integration of acquisitions and launching of new ventures

Technology convergence

Global footprint

Key growth drivers for the group

30


Review of operations

Altech

Altech delivered a strong set of results for the financial year ended 28 February 2009,

with adjusted headline earnings per share growing by 15% to 592 cents per share.

Revenue increased by 11% to R9.2 billion from R8.2 billion in the prior year. Operating

profit improved by 32% to R874 million with a significantly improved operating

margin of 9.5%. Net asset value per share increased by 15% from 2 026 cents to

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

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

Annuity income increased to 79% of the total revenue in 2009 and foreign and export

revenue increased by 56% from R1 billion in 2008 to R1.6 billion. Altech concluded the

year with a strong balance sheet reflecting net cash of R911 million, notwithstanding

substantial acquisition and investing activity totalling in excess of R1 billion.

Contribution to Altron revenue

37%

Contribution to Altron EBITDA

48%

79%annuity income contribution to revenue

56%increase in export and foreign revenue

31


Rev

iew

of

oper

atio

ns

Telecommunications

Wireless Communications

Altech Autopage Cellular was awarded licences to own and develop its own

telecommunications network. The company recorded strong growth of 195 945 gross

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

connections to pass the landmark 1 million subscriber level compared to 917 000

subscribers in the prior period. The prepaid subscriber base continues to grow steadily,

up 17% on previous year levels.

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

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

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

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

subscriber base has reached 74 000 (from 41 000 in the previous year) and is rising

steadily.

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

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

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

allowing customers to purchase ‘off the shelf’ fixed-line, voice and data products.

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

and IT company, Technology Concepts. Despite operating in a competitive market,

almost two thirds of Technology Concepts’ business is based on annuity income. This

acquisition is expected to lead to significant synergies.

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

by high interest rates and the impact of new credit legislation, Altech Netstar, South

Africa’s largest vehicle tracking company and leader in stolen vehicle recovery (SVR),

proved its resilience and continued to deliver strong results. The company now

manages a subscriber base in excess of 473 000 vehicles in the Altech Netstar Group,

with the value of protected vehicles exceeding R6 billion.

New regional offices were established in East London, Newcastle and Richards Bay,

and satellite offices set up in Welkom, Kimberley and George, further enhancing

Altech Netstar’s national presence. In a joint venture with ITIS Holdings plc of the

United Kingdom, Altech Netstar Traffic is nearing the completion of the testing phase,

and has already been awarded the first stage of the Johannesburg Road Agency’s

traffic project. This initiative enables Altech Netstar Traffic to provide a range of traffic

» Altech concluded the year with a strong balance sheet reflecting net cash of R911 million, notwithstanding substantial acquisition and investing activity totalling in excess of R1 billion.

32


Review of operations continued

information services to subscribers using advanced technology and systems developed and

provided by ITIS internationally. Altech Netstar Fleet Solutions has recorded outstanding

results. Following several notable contract awards against more established competitors, its

subscriber base has increased to over 52 000, almost double the level of the prior year.

Altech Alcom Matomo provides a number of radio and telemetry products and solutions

for various customers. The company again recorded a solid performance, reflecting good

management of multiple-year contracts and an expanded network of clients in South Africa

and further afield.

The R540 million project for the South African Police Service (SAPS) in Gauteng is effectively

completed. The company is now implementing a range of projects for police services in

neighbouring countries and significantly upgrading the City of Cape Town’s communications

network, and fulfilling orders for the national power utility and certain municipalities.

Unfortunately, the company was unsuccessful in its bid for the SAPS Eastern Cape tender, but

remains committed to the upcoming SAPS KwaZulu-Natal tender.

Altech Alcom Radio Distributors recorded a commendable performance and was again named

as Motorola’s top distributor for Europe, Middle East and Africa.

Broadband sales continued to rise, reflecting steady demand for these robust internet protocol-

based digital radio links for digital networks. The introduction of the digital radio range,

augmented by proprietary application software for efficient personal and vehicle tracking, is

presenting numerous opportunities for further growth.

Converged Services and Connectivity

The acquisition of 51% of the Sameer Group’s ICT assets has been a significant success, rapidly

forging a group of interconnected telecommunications companies, Altech Stream East Africa,

into a group-managed portfolio that is on track to meet expectations.

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

growth in the East African ICT sector and further developments in the KDN fibre network. This

growth is expected to continue, supported by KDN’s strengthened position as the infrastructure

provider of choice in Kenya after winning the total network rollout of the new GSM entrant and

other significant contracts. The company has opened a subsidiary, Africa Digital Networks

Limited, based in the Democratic Republic of Congo.

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

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

capacity to the entire East African community. KDN will be an 11% shareholder in the Kenyan

government TEAMS undersea fibre cable project. This will provide additional landing points as

well as redundancy.

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

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

where it will provide last-mile connectivity and value-added services to ICT markets in Kenya.

Infocom is the leading internet service provider brand in Uganda and is recognised as a

technologically strong services entity. In addition, it holds very attractive telecommunications

infrastructure and service licensing rights within Uganda. Infocom is well positioned to generate

strong revenue and income from distributing the pending undersea data cable capacity to

Uganda, and also provides the vital link between KDN and Altech Stream Rwanda.

33


Rev

iew

of

oper

atio

ns

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

granted the necessary internet and gateway licences in June 2007. By year-end, the business had

completed the rollout of an outdoor WiFi network for consumers and a WiMax network for corporate

customers, both covering most of Kigali, the capital city. The company is well positioned to achieve

market leadership in Rwanda through the distribution of undersea bandwidth capacity and

interconnect facilities.

Multi-media and Electronics

At Altech UEC the benefits of sustained investment in developing advanced technologies and products

were reflected in decoder production doubling to nearly two million units. Exports to India and Australia

are growing strongly.

Building on the success of the dual-view PVR launched in the prior period, which rapidly saw more

than 640 000 sold around the globe, Altech UEC will launch the high-definition PVR during 2009.

In addition to increasing South African sales, the company has received orders for high-definition PVRs

to the Middle East.

Continuing this sterling record of innovation, Altech UEC completed development of MediaGate, which

allows the user to download a movie from a kiosk onto a flash drive, and then play it at home through

a low-cost Internet Protocol (IP) set-top box. Ahead of the proposed South African Digital Migration

programme, Altech UEC has developed a terrestrial set-top box and is participating in trials for both the

SABC and pay-TV operators.

Arrow Altech Distribution’s response to difficult economic conditions and consistent performance

from all the company’s technology groups resulted in a solid operational performance for the year.

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

potential in the short to medium term.

Technology (information technology)

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

ground-breaking real-time converged customer care and billing product. To meet market demand, the

company has increased its systems integration capability, entrenching its position as a reputable

supplier of turnkey business support systems in South Africa and Africa.

Altech Isis France has improved its trading performance for the period under review. The company is

actively exploiting synergies within the Altech group, and addressing opportunities in other geographic

territories.

Altech NamITech West Africa located in Lagos, Nigeria, manufactures prepaid cellular vouchers for all

five major telecommunications operators in the country and is currently producing over 75 million

prepaid vouchers per month. Several sizeable contracts were secured in 2008.

The company was successful in lobbying to have a 5% of turnover excise duty proposed by the Nigerian

government removed, effective from January 2009. In 2009, the company will expand its product lines

by adding the capability to supply initialised and personalised chip card products to both

telecommunications operators and financial institutions.

Continuing the trend of recent years, Altech Card Solutions delivered excellent results for the period.

Point-of-sale and PIN pad solutions for leading financial institutions are progressing on schedule, and

additional orders have already been received for the next two financial years. Growth in the electronic

security division has exceeded all expectations for the year.

34



Bytes

Bytes’ results came under pressure, largely due to the impact of the international

fi nancial crisis on its fi nancial services and retail sector customers. Revenue grew by

a satisfactory 16% to R6 billion, however EBITDA growth of only 3% to R427 million

refl ected the pricing pressures and competitive environment in the IT market.

Notwithstanding, this, Bytes performed reasonably, particularly when compared to

some of its competitors in the industry. Adjusted diluted headline earnings were in line

with those reported last year, however, at headline earnings and attributable profi t

level the contribution from Bytes SA to Altron reduced following the exercise of

Kagiso’s option to acquire a further 22% equity interest in Bytes with effect from

1 July 2008.The economic slowdown and pressure on fi nancial services institutions in

particular have led to project delays and cancellations, impacting a number of Bytes’

local businesses. Nevertheless excellent performances were delivered by Document

Solutions and Managed Services, with Outsource Services and Healthcare Solutions

producing strong results.

16%increase in revenue to R4 billion



24%

19%

35


Rev

iew

of

oper

atio

ns

» Bytes’ results remained steady despite pressure in some of the sectors that the group serves.

Bytes UK

In the United Kingdom, Bytes Software Services performed exceptionally well,

producing record results. The company continues to provide volume software

licensing solutions for Microsoft as well as other software publishers such as IBM,

Symantec, Oracle, Citrix and Adobe to corporate and public sector organisations.

A pleasing factor during the year was the sustained increase in new customers

secured.

The Xerox businesses in the UK underperformed, particularly from the last calendar

quarter of 2008, due to both the deterioration of the UK economy and certain

internal issues which have now been addressed.

In order to optimise cost and processing effi ciencies, the back offi ce functions

of the various Xerox businesses are being consolidated and streamlined with those

of the software business. A management restructuring of its three separate Xerox

businesses, Planfl ow, Vantage and Xclusive, has been undertaken with the

intention of delivering certain synergies and economies of scale which are expected

to contribute to a much-improved performance in the coming year.

Bytes SA

Bytes Document Solutions (BDS), the exclusive distributor of Xerox equipment in

South Africa and 26 African countries, reported outstanding results both in terms

of revenue which improved by 28% and profi ts which increased by 18%. The

results were signifi cantly enhanced by the acquisition of NOR Paper, effective

1 July 2008. This acquisition exceeded expectations both in terms of its fi nancial

contribution and in extending BDS’s customer base.

The objective of BDS to diversify the business in order to become less dependent

on one single supplier has largely been achieved during the year. The Xerox

dependent component now represents approximately 60% of the BDS revenue

stream, meaningfully down from previous years.

Partly due to the Xerox catalogue of equipment offering being more competitive,

BDS signifi cantly grew its market share, both in terms of units and value.

According to independent research the increase achieved by BDS (Xerox)

substantially outstripped that of any of its competitors.

The document services and outsourcing division delivered a steady year although

a number of its largest customers were involved in reorganisation exercises which

36



dampened revenue growth within key account portfolios. Although the volume of documents

printed increased significantly, in the laser-printing bureau, margin pressures were experienced.

Bytes Managed Services (Bytes MS), a workspace management and equipment maintenance

organisation, performed strongly despite challenging trading conditions. Operating profit was

improved with margins being sustained, essentially on the back of improved processes, a

constant focus on operating efficiencies and various initiatives undertaken. In order to further

counter pressures on margins, proactive service solutions and other innovative actions continue

to be implemented.

Bytes MS has over 90 service points throughout South Africa and supports over 600 000 OEM

devices on warranty and over 350 000 on maintenance contract. Being able to provide any

customer with a reliable service on a national basis, as well as in certain neighbouring

countries, positions Bytes MS as the leading provider in its field of operation.

Bytes Outsource Services (BOS), a services company focusing on infrastructure and call centre

outsourcing, has shown good growth during the year under review and has been able to renew

all its existing contracts during retendering processes. This has ensured that all contracts up for

renewal during the year have been extended for periods ranging from three to five years.

Annuity-based income, representing over 75% of all anticipated revenue over the next few

years, has thus been secured.

Further business generated within the existing call centre operation, will improve the return on

the infrastructure investment made over the past three years. New clients were secured at

regular intervals throughout the year and the transition of these services has generally been

well controlled.

The significant and sudden change in economic conditions has seen a renewed interest in

outsourcing and ‘off-shoring’ as a cost-saving mechanism, particularly in US, UK and Europe-

based entities. This presents BOS with significant opportunities in the second half of 2009 and

into 2010.

Bytes Specialised Solutions (BSS) is the exclusive distributor for NCR and Teradata products

and solutions in South Africa and selected neighbouring countries. The company markets,

supports and maintains enterprise-wide information products and services. It delivers

Enterprise Intelligence and Intelligent Self Service solutions that are driven by the needs of

markets that typically serve a large base of consumers.

BSS experienced challenging market conditions in light of low transaction volumes in its retail

ATM annuity business. This factor, coupled with certain operational challenges, has led to a

re-examination of the business model, resulting in a new approach and strategy which is

expected to ensure its sustainability. An unfavourable rand/dollar exchange rate and the effect

of the economic meltdown, resulted in a postponement of new equipment purchases by various

customers, most of whom operate in the financial services and retail sectors.

In spite of a disappointing performance in the past year, BSS is starting the new financial

year with a good order book of over R40 million in the NCR Solutions business unit.

Bytes Healthcare Solutions (BHS) (formerly DHS) grew its revenue during the past year,

notwithstanding static membership numbers in most medical schemes. Med-e-Mass, the

healthcare software unit, increased its licensed customer base to 9 100 practitioners. Medical

claim volumes processed by Digital Healthcare Switch grew marginally and averaged just

37


Rev

iew

of

oper

atio

ns

over six million transactions per month. Both operations were profitable and recorded their

highest revenue and operating margins since the formation of the business in 2001.

The company’s new switching and claims processing system, became fully operational during

the year. Med-e-Mass successfully launched a financial transaction solution in partnership with

Altech Card Technologies and Nedbank.

The company’s business venture in Saudi Arabia was formally constituted and registered during

the year under review under the name DHS Arabia Limited. A Saudi-based office-automation

and communications technology business, Nasco Limited, is the company’s 50% equity partner.

Bytes People Solutions (BPS) is the group’s internationally accredited education, training, skills

development and people consulting arm. Although BPS’s results came under pressure this year,

predominantly due to significant power cuts during the first half, it remains an industry leader

that has built a credible track record over more than a decade by providing innovative human

capital resource solutions and services to a large number of blue-chip companies throughout

southern Africa.

As a primary driver in the area of skills development, more than 400 learners were trained in IT

and related skills and placed in various companies during the year. In particular, the skills

development aspect of B-BBEE initiatives is offered on an outsourced basis.

Bytes Systems Integration (BSI) experienced a difficult year, particularly as its offerings are

most susceptible to the economic downturn. Facing potentially tough sales conditions ahead,

BSI’s management has undertaken various cost-saving measures in order to ensure increased

profitable growth. The Axapta ERP division was disposed of at the end of the financial year, while

the Enterprise Content Management division was closed during the period.

The Advanced Technology Services networking business continued to do well, with the NetApp

storage division recording a good year with satisfactory growth in its annuity income. The

SAMRAS municipal software business, with a client base of over 35 municipalities, returned

satisfactory results, while the Microsoft Solutions and Process Management and Control units

performed to budget. Kronos, the human capital management business, performed satisfactorily

with some large clients secured in the Dubai region. The software integration business, in

conjunction with sister company IST and Arivia.kom has been awarded a 12-month project by

Eskom worth approximately R150 million.

Bytes Communication Systems (BCS) offers services including IP and legacy voice equipment,

unified communications, mobile communications, customer interaction centres, structured

cabling, LAN-WAN data networks and infrastructure, and a comprehensive range of after-sales

and managed services. During the year, BCS finalised the acquisition of contact centre and

customer interaction experts, Intelleca. The year, however, presented many operating challenges,

particularly given that Intelleca’s main target market includes corporate clients who were most

significantly affected by the rapid economic downturn. Notwithstanding this, the alignment of

the two companies’ products and services has significantly broadened the BCS solutions offering,

as well as extended its customer base.

The company has managed to secure a contract with Bombela to deploy the full telephony

solution for the Gautrain, and has been selected as the communications provider of choice by

Thales to implement the communications requirements for the cargo area of the new King Shaka

Airport in KZN.

38



Powertech

Powertech produced disappointing results, predominantly due to the challenges

experienced by its major contributor, Aberdare Cables. While most of the remaining

Powertech businesses continued to perform well, the impact on Aberdare Cables of the

significant slowdown in the building and construction industry as a whole, coupled

with the sudden fall in copper prices during the second half, led to a significant drop in

EBITDA at Powertech. Revenue grew strongly by 20% to R9.6 billion from R8 billion in

the prior year. However, EBITDA declined by 28% from R1 029 million to R738 million.

EBITDA margins reduced to 7.7% from the 12.8% achieved last year, partly as a result

of once-off non-recurring charges relating to inventory write downs due to the

dramatic fall in copper prices, and restructuring costs at Aberdare Cables. The

remainder of the Powertech operations produced satisfactory results showing growth

on the prior year.

20%revenue growth to R9.6 billion


39%


33%

39


Rev

iew

of

oper

atio

ns

» Most of Powertech’s businesses performed well but the group’s results were impacted by the challenges experienced at Aberdare Cables.

Powertech Cables

Although Aberdare Cables experienced a strong first half of the year, the

slowdown in demand during the second half of the year was more dramatic than

anticipated. Aberdare Cables’ power cables business was struck by a confluence of

three negative factors. Firstly, there was a dramatic contraction in the building and

construction industry, which forms approximately 50% of Aberdare Cables’ market.

Secondly, there was a destocking of the distribution channel, which further

restricted demand. Thirdly, the unprecedented fall in the copper price from around

US$9 000 per ton to US$3 000 per ton compounded the first two factors as well

as leading to inventory write downs on our stockholdings. Each of these factors

negatively impacted gross margins, but the business also suffered from lower

production volumes, resulting in factory underrecoveries, negatively impacting the

operating margins. This resulted in Aberdare Cables taking dramatic action in order

to rightsize the business for the new demand environment. This has included a

significant reduction in production time, extended shutdowns over holiday periods

and rationalisation of the businesses, the mothballing of certain facilities and a

significant reduction in headcount. Our focus over the last six months has been on

reducing working capital and controlling costs and we believe we are now well

positioned to take advantage of future business opportunities.

Powertech Transformers

Powertech Transformers has performed well despite the changing market

conditions marked by decreased demand in the building and construction as well

as the mining sectors which negatively affected the Desta Power Matla (DPM)

operation but were able to maintain its profit margins. The requirement for power

transformer products from Eskom and the municipal market remained at

acceptable levels although competition has increased from overseas suppliers.

Volatility in raw material prices and supply of, among others, core steel, copper,

transformer insulation and transformer oil continued to impact operations and due

to short supply the availability of these materials created challenges in ensuring

availability for plant usage. DPM has received a Level 2 contributor rating for its

broad-based black economic empowerment indicators through Empowerdex rating

agency. Powertech Transformers are also in the process of finalising empowerment

into the company’s structure at shareholder level.

40



Powertech Batteries

Powertech Batteries experienced an exceptionally good year with strong revenue growth and

enhanced profitability as a result of the recent capital expenditure programme. It continues to

benefit from the expanded car pool created by the previous year’s increased car sales.

The automotive replacement market remained buoyant throughout the year and important

market share gains were made by Powertech Batteries. The severe cutbacks made by the

automotive OE market had a lesser impact which was offset by the group’s presence in the

replacement market. The offshore automotive replacement operation performed satisfactorily,

achieving its profitability targets.

Battery Technologies reported good results based predominantly on its growth in sub-Saharan

Africa. The business divisions in the local telecommunications sector have been equally strong

and the new product solution developments in respect of hybrid power systems have found

wide acceptance in the markets in which it operates.

Rentech developed successful new products in respect of solar-powered traffic lights.

The modernisation and automation of the automotive factory at the Port Elizabeth plant is

nearing completion. The first phase of the project, a fully automatic, continuous positive line,

was commissioned at mid-year and has yielded satisfactory results in terms of quality of

output, efficiencies and cost-savings. The second phase consisting of a pair of high-speed, fully

automatic, assembly lines is in the final phases of commissioning and handover to production.

Powertech Industrial Group

Crabtree Electrical Accessories SA (Crabtree) reported an increase in revenue and profit

compared to the prior year due to initiatives implemented during the year under review. In

particular, the standby power business exceeded expectations and strong performances were

delivered by the retail and lighting divisions. Despite strong competition from imports, the

company maintained its leading position in its core market.

The second half of the year saw a marked deterioration in the building industry, especially in

the residential sector and this materially affected the demand for Crabtree’s products. The

necessary steps have been taken to lessen the impact of the current conditions which are

expected to prevail in the medium term.

Strike Technologies substantially exceeded its revenue and profit targets mainly due to the

performance by its newly established energy solutions business, which includes the provision

of standby power. Potential for significant growth arises for both Strike Technologies and

Powertech Energy Solutions (PES) from the increased focus on energy conservation by utilities

and their customers.

Powertech Calidus’ continuing underperformance has resulted in a management restructuring.

The company’s core markets, principally the rail transportation and transformer industries, are

expected to generate satisfactory demand in the next 12 months, albeit accompanied by some

restrictions on material supply from overseas principals.

Tridonic.Atco SA, the lighting ballast business, had a steady year improving its performance

marginally. However, the market remains extremely competitive.

41


Rev

iew

of

oper

atio

ns

Powertech Systems Integrators

Powertech IST continues to perform somewhat below expectations, mainly due to difficult trading

conditions experienced by the Telecoms division. The economic slowdown as well as delays in

project work has negatively impacted this operation although it has showed some improvement

during the second half of the first full-year reporting period since Powertech acquired five of the

seven businesses of IST Group (Pty) Limited, effective from 1 September 2007.

The postponed projects (which is expected to continue this year) and new initiatives resulted in a

number of good prospects for Powertech IST. The order book on 1 March 2009 (orders in hand, to

be executed during 2009) is already at a substantial portion of the budget for this year.

Powertech IST Data was hit the hardest by postponed projects at Eskom and strategy changes

at Telkom SA. Many of the prospects are gaining momentum already and IST Data expects much

improvement during this year.

Powertech IST Energy delivered a strong performance partly as a result of the current energy

crisis, as well as the expansion of the business from telecontrol and protection systems to turnkey

substations and turbine control systems. The electrical power infrastructure projects will continue

to be the basis of this division’s performance.

Powertech IST Otokon made a remarkable recovery after funds for Eskom’s Demand Side

Management projects dried up, some key senior staff were lost, and the co-generation projects

were postponed. The division ended up delivering an EBITDA that is marginally lower than budget.

It starts the new financial year with a healthy order book and prospect pipeline.

Powertech IST Telecom’s access network solutions and power back-up systems performed

satisfactorily under difficult market conditions in the telecom operator sector. Its endeavours to

grow in the Value Added Telecommunication Services sector were costly and have not come to

fruition yet resulting in a less than satisfactory performance. The business has been refocused and

realigned for operational efficiency.

Powertech IST Industrial has completed some major projects and made good progress in the

Environmental Pollution Control sector over the past three years. Its first large contract offshore for

the refurbishment of electrostatic precipitator installations in Mali is nearing completion.

Technology Integrated Solutions (TIS) has been integrated into the Powertech System Integrators

division from 1 March 2008 and has reported improved results compared to the prior year. Orders

on hand to be executed during 2009 indicate a continuation of the growth for the year. TIS

consists of TIS Energy, a division specialising in accessories for power networks; TIS Electronics,

a harness design and manufacturing company, that specialises in wire and cable products; TIS

Projects that operates in the electrical power and telecommunication network design and building

industry, including all infrastructure for power and telecommunication lines, equipment installation,

commissioning and maintenance. TIS Solutions is a new division focusing on network auditing,

high-level training and network testing in the field of electrical transmission and distribution

networks. TIS Telecom is the core business of this division that supplies connectivity accessories for

telecommunication copper and fibre optic networks.

42

Chief fi nancial offi cer’s report


Alex Smith Chief Financial Offi cer

Introduction

This report is intended to provide some additional insight into the fi nancial

performance of the Altron group for the year under review. The report needs to be

read in conjunction with the consolidated annual fi nancial statements presented

on pages 126 to 205.

Results of the current fi nancial year

The fi nancial year ended 28 February 2009 was really one of two very different

halves. During the fi rst half of the year, the group experienced favourable trading

conditions with each of the sub-groups producing good growth off what was

already a strong base. The global fi nancial crisis and the rapid decline in the

macro-economic environment coincided with our half year and had a pronounced

effect on the second-half results. The impact was most dramatically felt in our

Powertech energy cables business, but several of our other businesses were also

affected.

Macro-economic factors

Decline in commodity prices

Commodity prices in general have substantially declined since August 2008, with

the group being signifi cantly exposed to the rapid decrease in the copper price.

Copper is a key input into our energy cables business, comprising between 60%

and 90% of the value of a power cable. The unprecedented collapse in the price

Chie

f fi

nanc

ial o

ffic

er’s

rep

ort

43


» Altron has experienced considerable growth in the balance sheet due to several acquisitions, as well as a significant investment in capital expenditure. As a result, total assets have increased by some 24% to R13.6 billion and net asset value per share has increased by 8% to R15.50.

of copper in September and October 2008 left the group holding substantial copper stocks

valued at considerably higher prices than market value. This also had a negative effect on

demand, since traders reduce their orders to the minimum while prices are declining.

The decline in commodity prices also had a dramatic effect on the mining industry in South

Africa which forms an important component of our customer base. The lower prices have

reduced the number of feasible projects in this sector, and consequently the projected capital

expenditure into the future.

Funds liquidity

Access to funding became considerably tighter following the events of last September and has

undoubtedly constrained growth in many of the sectors which the group serves. The building

and construction sector, which had already been impacted by high local interest rates as well

as last year’s power outages, was particularly affected. This sector is one of the largest

contributors to Powertech’s revenue.

The liquidity crisis has also meant that financial institutions, which are served by various Bytes

companies, are facing much more challenging times than they have experienced in the last few

years. This has resulted in margin pressure on suppliers into that sector, as well as the deferral

of significant investments, particularly in the information technology arena.

Financial performance

Altron’s results were significantly impacted by these factors, which were principally reflected in

the reduction in the group’s EBITDA margin from 10.3% to 9.0% and EBITDA increasing by only

44


Chief financial officer’s report continued

1% to R2.2 billion. This reduction in margin was disappointing, but reflected the significant once-off

charges and subdued second-half performance by Powertech as well as margin pressure at Bytes,

offset by the margin enhancement at Altech from its East African acquisitions.

The revenue growth achieved was pleasing given market challenges. From a group perspective,

approximately half of Altron’s revenue growth came from acquisitions concluded during the

year and half from organic revenue growth, with a similar trend demonstrated in each of the

subholding groups. Powertech’s organic growth of 9.5% was largely driven by an exceptional

first-half performance – the second half actually saw a contraction, largely as a result of lower

revenue out of Aberdare Cables.

The EBITDA margin at Powertech saw a significant decline from 12.8% in the prior year to

7.7% in the current year. This included once-off expenses that occurred in the second half

of the year, comprising three elements, namely:

» the fall in the copper price required inventory write downs of R130 million, which translated

to both direct writeoffs and a lower gross profit as we reduced our inventory levels;

» the impact of the destocking of the distribution channel added a further cost of around

R78 million in terms of lost gross margin on sales and production variances on lower

volumes through our facilities; and

» incurring restructuring costs of around R20 million in the energy cables business as

Powertech rightsized the operation to the lower levels of demand in the current market.

The balance of the decline is attributed to the lower levels of demand in the energy cables

market and its impact on the operational leverage of the business. In analysing the results,

it is important to look at the first half/second half split for Powertech since the turning-point

broadly coincided with our interim reporting and the once-off costs highlighted above, occurred

exclusively in the second half of the year.

The other key feature in the results for the current year was the change from net investment

income of R93 million to a net financing cost of R108 million. This R201 million swing accounts

for 46 cents of the reduction in Altron’s headline earnings per share. This movement was

caused primarily by the large investment in acquisitions that the group made in the past

18 months. These included the R550 million Powertech IST acquisition in September 2007,

which was fully funded by debt; as well as the US$75 million Altech East Africa acquisition,

the R320 million Powertech Transformers acquisition and the R252 million of Bytes acquisitions

that were all funded out of cash resources. Furthermore, we saw investment into working

capital caused by the high activity in the first half of the financial year, which was only

normalised in January and February this year.

Capital items were down on the last financial year, as a result of two goodwill impairments

taken by the group. Intelleca had a disappointing year due to project delays, resulting in a

R50 million goodwill writedown, though the magnitude of the writedown was amplified by the

change in market conditions between a year ago and the current environment. Despite the

writedown, we believe in the future value of the business based on its intellectual property and

a sound management team.

2 93

3

3 10

8

3 32

1

3 45

9 3 99

4

4 24

8

4 53

7

4 62

7

Altech (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

1 71

2

1 75

8

1 96

3

2 12

5

2 83

6

2 35

0

3 27

9

2 75

9

Bytes (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

2 30

5

2 16

2

3 04

6

3 24

3

4 21

1

3 80

5

5 36

3

4 23

0

Powertech (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

Revenue

Chie

f fi

nanc

ial o

ffic

er’s

rep

ort

45


Powertech incurred a R40 million writedown of goodwill in the IST Telecoms division for similar

reasons. However, the group assessed the IST business as a whole in looking at the investment

case, and if the goodwill impairment test had been done at that level, then there would have

been no impairment, since other areas of the business have outperformed expectations. After

the goodwill impairment there is still approximately R400 million of goodwill on the balance

sheet in respect of IST. These two impairments were offset by a R58 million profit on the

disposal of Yelland Control by Powertech in April 2007, as well as a R28 million gain on the

disposal of two properties in the Aberdare group.

The trading factors outlined above resulted in a decline in diluted adjusted headline earnings

per share of 18% to 277 cents. This parameter adjusts for the dilutive effect of the various

B-BBEE transactions that have yet to fully vest in the group, as well as the amortisation of

intangibles arising on acquisitions – an amount that has become material in light of the

significant acquisitions concluded during the past 18 months.

Financial position

Altron has experienced considerable growth in the balance sheet due to several acquisitions, as

well as a significant investment in capital expenditure. As a result, total assets have increased

by some 24% to R13.6 billion and net asset value per share has increased by 8% to R15.50.

The Powertech Transformers’ and Altech’s East African operations that were recently acquired,

are both relatively capital-intensive and this has significantly increased our investment in

non-current assets. In total, our acquisitions during the year added R1.5 billion to non-current

assets, while there was a further R1 billion invested in capital expenditure. This level of capital

expenditure is significantly higher than the group has incurred previously and can be attributed

to the extensive investment into the fibre optic network in East Africa, as well as substantial

investments into the cables business to rationalise and improve the efficiencies of the

manufacturing facilities.

These events were the primary causes of the reduction of R913 million in the net cash position

and the increase in the borrowings position, resulting in a net borrowed position of some

R392 million. Gearing has been introduced in a conservative manner and despite the change

in the availability of funding, does not present any material risk to the group.

Net cash and cash equivalents of R1.2 billion is after offsetting overdrafts of approximately

R928 million at the current year-end. Altech centrally manages its cash position, while the

cash position of Bytes and Powertech are actively managed through Altron’s centralised

treasury in order to minimise leakage arising from cash and overdraft balances in different

areas of the group.

The additional investment in working capital of some R232 million for the year represented

a net investment of 21 days, compared to the 17 days achieved in the previous year. There

were pleasing reductions in inventory days and debtor days, but these were offset by the

reduction in creditor days, chiefly as a result of virtually no copper purchases in January and

February as inventories were reduced in the cables business. The reduction in inventory and

250

235

289

284 30

6

358

409

465

Altech (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

128

154

157 16

8

170

195

177

174

Bytes (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

127 15

3

272

366

429

485

542

28

Powertech (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

*

Operating profit

* Includes once off charges estimated at R228 million.

46


Chief financial officer’s report continued

debtor days was slightly less than expected due to some payment delays on a couple of large

debtors, as well as higher inventories in the Bytes group as the Document Solutions business

unit took advantage of some favourable pricing on hardware from Xerox. Working capital

continues to be a major focus area in all operations and Altron’s target will be to return to the

net 17 days position achieved at 29 February 2008.

Key risks

Access to funding

Despite tight funding conditions in the local market, we do not foresee any material refinancing

risk given the strong operational cash flows that the group generates. The only significant

refinancing risk that the group faces is the IST acquisition funding of R550 million, though this

will only occur in September 2010. Given the group’s strong cash flows, it is unlikely that the

full amount will require refinancing.

In the course of a financial year we often require some form of short-term working capital

funding and this is made available to us through various uncommitted facilities with several

local and international banks. Due to our financial strength and good credit standing we have

been able to access these facilities, even through the height of the liquidity crisis. However,

should there be any significant deterioration in the global liquidity position, this could present

a risk to the group, and consideration is being given to securing committed facilities from our

bankers. This situation is regularly and closely monitored by Altron’s finance and treasury

department.

Commodity price movements/foreign exchange movements

The volatile environment in which we operate today is most evident in commodity prices and in

the movements in foreign exchange rates, both areas where the group faces risks. The group’s

policy is not to speculate in these areas and the risks are managed as follows:

» Foreign exchange exposures, where there is no natural hedge available, are hedged

immediately through the use of forward exchange contracts. This is achieved centrally

through Altron Treasury in order to leverage off our purchasing power, and is effectively

monitored and controlled to ensure compliance with exchange control regulations.

Compliance with our policies is monitored both by Altron’s internal audit department and

the external auditors.

» Our largest exposure to commodity prices is in respect of the copper utilised in energy

cables. For sales into the formal sector such as Eskom and the municipalities, Powertech

passes on the copper price risk to the customer. However, for sales into the informal sector,

such as to electrical wholesalers, we carry the risk on copper price movements. Hedging of

copper purchases is not an option due to the way the external market price adjusts to

changes in the copper price. Consequently, risk in this regard is managed through

minimising the length of time between the raw material purchase and the finished

goods sale.

Closing three-month copper price (US$)

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

Feb-

08M

ar-0

8Ap

r-08

May

-08

Jun-

08Ju

l-08

Aug-

08Se

p-08

Oct-

08No

v-8

Dec-

09Ja

n-09

Feb-

09

R/US$ exchange rate (rand)

5

6

7

8

9

10

11

12

Mar08

Feb09

Jan09

Dec08

Nov08

Oct08

Sep08

Aug08

Jul08

Jun08

May08

Apr08

Chie

f fi

nanc

ial o

ffic

er’s

rep

ort

47


Credit risk on debtors

Although there is an increased risk of default by trade debtors in the current economic climate,

to date we have not experienced any adverse consequences in this regard.

In order to manage this risk as effectively as possible, we have tightened our credit lending

criteria, particularly in those areas where we are exposed to consumers. As a result,

Altech Autopage Cellular is now rejecting around 45% of applications. Powertech makes use of

credit guarantee insurance in respect of sales to non-blue-chip and non-governmental debtors.

Credit sales and debtor balances will continue to be closely monitored and managed going

forward, both from the perspective of minimising the risk of bad debts and maximising

collections.

Conclusion

The second half of the last financial year was an extremely challenging one and we do not

anticipate any relief in this regard in the short term. However, we are a well-diversified group

of companies, with a strong balance sheet and a culture of stringent financial control.

I would like to thank all of the financial and administrative staff around the group for their

sterling efforts in the last year and, in particular, for all their hard work in delivering these

financial results and this annual report.

Alex Smith – Chief Financial Officer

May 2009

102 11

2

111 12

5

124

164

156

186

Altech (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

39

72

55

70

64

106 11

3

94

Bytes (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

72

98

170

245 27

5 302 32

4

(58)

72

98

170

245 27

5 302 32

4

*

Powertech (Rm)

H209

H109

H208

H108

H207

H107

H206

H106

Headline earnings

*Includes non-recurring charges estimated at R164 million.

48


» Sustainable growth is underpinned by values and people

and reflected in the care we take with our customers and

our commitments – in equal measure.

= the power to grow

sustainability3altron + people

Sust

aina

bilit

y re

port

49


50


The diverse nature of Altron’s businesses means that the Altron group has

a wide range of impacts in various areas of sustainability. These include:

the business environment which affects shareholders, customers, suppliers,

partners and employees; the South African transformation environment

which relates to the dti Codes of Good Practice (dti CoGP); and the natural

environment.

The purpose of this report is to examine more closely the impacts which the

Altron group has on the environment and the stakeholder groups with which it

interacts. It seeks to provide balanced and transparent reporting on the most

material sustainability issues affecting the long-term survival and success of

the business.

Altron establishes its most material sustainability issues through a number of

avenues. The risk management committee identifies strategic risks, reviews

their impact, assesses the probability of occurrence and monitors the

effectiveness of existing controls. Further to this process, each Altron group

company interacts with customers, suppliers, government and regulators,

community and environmental interest groups and other stakeholders both

during the normal course of business, as well as in the ways described in the

treatment of each material issue in this report. Information qualifying the

Sustainability report – Management of sustainability

For questions regarding this report, contact

Corporate Communications

Salomé Brown – Group Executive: Corporate [email protected]

011 645 3604

Secretarial and administration

Andrew Johnston – Group Company [email protected]

011 645 3609

Contents

Management of sustainability 50

Table of material issues 52

Value-added statement 55

Awards 56

Customers 57

Partners 61

Employees 64

Transformation 71

Environment 77

GRI content index 85

Shareholder analysis 86

About this reportAltron’s previous sustainability report was published in its 2008 annual report. This year’s report covers the South African operations of Altron and its subsidiaries for the financial reporting period from 1 March 2008 to 28 February 2009. It concentrates on the major operations that contribute most significantly to the Altron group. These include Altech, Altech Card Solutions, Altech UEC, Arrow Altech Distribution , Altech Isis, Altech Autopage Cellular, Altech Netstar, Altech Alcom Matomo, Bytes, Bytes Systems Integration, Bytes Document Solutions, Bytes Specialised Solutions, Powertech, Powertech Transformers, Powertech Batteries, Powertech Calidus, Aberdare Cables, Battery Technologies, Crabtree Electrical Accessories SA, Desta Power Matla, Renergy Technologies and Strike Technologies.

During the period under review, Altech acquired a 51% controlling interest in certain digital network operations of the Sameer ICT Group in Kenya, Powertech acquired the 50% equity interest it did not already own in ABB Powertech Transformers, and Bytes acquired Intelleca and NOR Paper. Reporting on sustainability issues at these companies is included in this report insofar as policy and governance is concerned. Targets and measurement against indicators will only be available for the next reporting period.

While issues of governance and sustainability are managed at Altron’s overseas companies in much the same way as in Altron’s local operations, these are not covered in this report. Neither does this report include the social or environmental performance of the group’s supply chain partners, other than those issues pertaining to the dti Codes of Good Practice (dti CoGP) regarding preferential procurement as well as the responsibility of waste and recycling with contracted partners.

While many individual components qualifying various aspects of sustainability in this report have been assured by external agencies, taken as a whole, this report has not been externally assured. We have a very developed and mature internal audit department that also performs an important oversight role, as well as making recommendations for continual improvement in a number of important governance indicators across the triple bottomline. While we have sought to present a balanced and factually accurate view of our most material issues, in some areas our systems are not yet complete. We look to obtain external assurance of this report within the next two years.

Sust

aina

bilit

y re

port

51


materiality of issues is fed to responsible line management, HR management and

environmental officers for the appropriate assessment and response. In October 2008,

managers from across the Altron group met to discuss the relative importance of

sustainability issues to the group in a process facilitated by sustainability specialists,

Trialogue. These form the basis of this report.

Altron risk management

Altron categorises sustainability issues into those that affect the entire Altron group

and those that affect specific operations. Issues of group-wide relevance are dealt with

centrally at group level, while other issues are managed by the operations to which

they pertain.

The Altron risk management committee conducts regular appraisals with the relevant

parties, providing a link between the operational management and board responsibility

of sustainability issues, and ensuring that steps are implemented to identify, evaluate

the financial implications of and mitigate the risks associated with these issues.

Detailed legal reports are tabled at Altron risk management committee meetings, to

which the head of Altron legal is an invitee. The transformation committee chairman

reports into the risk management committee, providing information on the group’s

compliance with B-BBEE requirements. The risk management committee chairman sits

on and is a member of the Altron audit committee and provides feedback on any

material risks and potential liabilities which may require the making of provisions or

the tabling of contingent liabilities in the balance sheet.

The chairmen of the audit and risk management committees table their findings at

board meetings, bringing to the attention of the Altron board all material

sustainability risks and issues, and highlighting the relevant remedial plans that need

to be put into place, as necessary.

Applying this methodology, we have arrived at a range of stakeholder-related issues

that include issues that are not strictly sustainability issues as defined by the triple

bottom line (social, environmental, or economic) but are nonetheless critical to

the sustainability of the business. This report represents therefore an attempt at

integrating sustainability reporting into the mainstream consciousness of the business,

whereby sustainability issues can stand alongside traditional business issues in terms

of importance and management attention.

Guidelines and standards

The following guidelines and standards were consulted in compiling this report:

» The King Report on Corporate Governance for South Africa – 2002 (King II), forming the basis of Altron’s self-evaluation independently verified by Corporate Governance Accreditation (Pty) Limited (CGA), in association with the Institute of Directors (IOD)

» The JSE SRI (JSE Limited Social Responsibility Investment) Index

» The Global Reporting Initiative’s (GRI) guidelines and indicators (G3 edition), against which Altron declares itself at a C application level (for the full index, see www.altron.com/sustainability 2009/index.asp

» The dti CoGP, independently assessed and certified by the rating agency, Empowerdex

52


Sustainability report – Table of material issues

Chapter Material issue Stakeholders affected Current status and responsePage

reference

Corporate governance report

Integration of corporate ethics

Shareholders, employees, customers, suppliers, regulatory bodies

The Altron code of ethics and code of conduct are now aligned with the corporate gifts and entertainment policy, and all donations to political parties have to be approved by shareholders. No donations were made to political parties during the period under review.

110

Customers Meeting the evolving needs of customers

Customers, shareholders, employees

Our policy is to instil a culture of innovation through rewards and recognition programmes that identify and encourage innovators.

57

Expansion of the customer base

Customers, shareholders, employees

Altron regards the economic downturn as an opportunity to gain market share for the continued sustainability of the business. Foreign revenue and exports equal 25% of total revenue.

57

Customer service Customers, shareholders, employees

We are improving the accuracy of customer monitoring systems, and the effectiveness of our response to areas of customer dissatisfaction.

58

Liberalisation of the telecommunications market

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

Following Altech’s successful court action, liberalisation of the market has begun and the industry now awaits regulation by ICASA for obtaining access to scarce spectrum for broadband communication services.

59

IT risk Customers, shareholders, employees

Created the Altron Information Management Council to manage inherent IT risk within the organisation.

59

Partners Maintaining key agency/principal relationships

Suppliers, customers, shareholders

We are working hard to fulfi l our part in agreements where technical resource targets need to be met and generally staying abreast of rapid technological changes.

61

Maintaining product quality from outsourced suppliers

Suppliers, customers, shareholders

Quality standards are defi ned in service level agreements and controls are in place to monitor quality of products against international industry standards.

63

Foreign direct imports and dumping

Suppliers, customers, shareholders, government

We constantly research the market to ensure that local supply partners are competitive with best international practice.

63

Sust

aina

bilit

y re

port

53



reference

Employees Skills attraction, development and retention

Employees, prospective employees, shareholders, government

Our total investment in skills training during 2008 amounted to R56 million, representing an average of R5 085 per employee.

64

Human rights in operations outside of South Africa

Suppliers, partners, distributors

Altron monitors operations in areas vulnerable to human rights abuses to ensure compliance with international human rights standards.

68

Health and Safety Employees, customers An independent audit is conducted quarterly to monitor health and safety risks throughout the group. No signifi cant accidents or injuries were reported, and there were no fatalities.

68

HIV/Aids Employees, their families and communities related to Altron

Research into the potential risk of HIV/Aids throughout the group showed a prevalence rate of between 5% and 11%. Our policy upholds the rights of all employees to care and protection against discrimination.

69

Transformation Transformation at Ownership level

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

The group scored 11.46 out of 20 in terms of Ownership on the dti CoGP (compared with 8.9 last year), and most companies have been brought over the 25.1% B-BBEE ownership threshold.

73

Transformation through Management Control

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

Altron scored 2.62 out of 10 for Management Control against 4.4 last year, representing our greatest challenge across the dti CoGP. Board representation has improved this past year.

73

Transformation through Employment Equity (EE)

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

EE is one of Altron’s most diffi cult transformation challenges and the group currently scores 5.1 out of a possible 15 points for this code (against 4.46 last year).We are driving the implementation of EE plans across the group.

73

Transformation through Skills Development

Historically disadvantaged employees, prospective employees in the value added statement, including shareholders, government

Altron scores 11.9 out of a possible 15 points for skills development on the B-BBEE scorecard compared to 4.46 last year. High-potential employees are being targeted for career development.

74

54


Sustainability report continued


reference

Transformation(continued)

Transformation through Preferential Procurement

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

Altron scores 14.2 out of 20 for preferential procurement on the B-BBEE scorecard, up from 12.6 last year. Verifi cation of suppliers’ B-BBEE status has improved, but more work needs to be done to increase spend on black-owned and black female-owned enterprises.

74

Transformation through Enterprise Development

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

Altron scores its full 15 points for this element of the scorecard. Altech is addressing challenges in specifi c companies within its stable.

75

Transformation through Socio-Economic Development (SED)

Communities that relate to Altron, society at large and government

Altron scores its full fi ve points for SED, meeting its target of 1% of NPAT.

75

Environment Carbon footprint All stakeholders to the business

PWC contracted to conduct an environmental impact assessment and calculate the carbon footprint of the entire group.

79

Pollution and emissions All stakeholders to the business

Progress is being monitored at all Powertech operations as well as at other high impact companies in the group by external consultants. There were no signifi cant incidents in the review period.

82

Energy effi ciency All stakeholders to the business

Altron’s energy consumption was 115 030 473 KwH. Savings are being made to reduce consumption by 10% without affecting operations, as per the government’s electricity rationing plan.

83

Product responsibility All stakeholders to the business

Several companies with consumer products have assessed the potential impacts of their products and devised solutions to ensure that they do not harm society at large, or the environment at any point in their life cycle.

84

Sust

aina

bilit

y re

port

55


Sustainability report – Value-added statement

Value added statement – for the year ended 28 February 2009The 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.

2009 2008

Rm % Rm %

Revenue from continuing operations 24 768 21 431

Paid to suppliers for material and services (19 068) (16 299)

Value added 5 700 5 132

Income from investments* 187 186

Total value created 5 887 5 318

Value distribution

Employees 3 533 60 3 053 57

Capital providers 937 16 584 11

Finance costs 292 89

Dividends to Altron shareholders 490 331

Dividends to minority shareholders in subsidiaries 155 164

Central and local government 614 10 688 13

Company taxation 505 591

Secondary taxation on companies 61 54

Rates and taxes; licences and levies 42 33

Skills development levy 6 10

Subsidies granted by the government — —

Corporate social investment (CSI)** 62 1 53 1

Reinvested in the group to maintain and develop operations 741 13 940 18

Depreciation and amortisation 438 272

Retained profit 345 688

Deferred taxation (42) (20)

5 887 100 5 318 100

Value added ratios

Number of employees*** 13 366 12 909

Revenue per employee (Rand) 1 853 060 1 660 160

Value created per employee (Rand) 440 446 411 961

Corporate social investment – percentage of profit after tax 5.4 4.0

* Income from investments include interest received, dividend income and share of associates’ profits. **CSI includes education, training and social upliftment projects.***These are permanent group employees.

Employees 60%

Capital providers 16%

Central and local government 10%

CSI 1%

Reinvestment 13%

Employees 57%

Capital providers 11%

Central and local government 13%

CSI 1%

Reinvestment 18%

2009

2008

56


The following awards were received during the reporting period:

2008

» Altron received a Merit Award for its 2008 Annual Report in the Mid Cap category of the

Institute of Chartered Secretaries SA and the JSE Limited Annual Report Awards

» Altron became the first company in South Africa to be awarded a Gold certificate for

corporate governance by Corporate Governance Accreditation (CGA) – having achieved a

score in excess of 80%

» Xerox received the National Medal of Technology, the highest honour awarded by the

President of the USA to leading innovators

» Altech won the award for ‘Best Reporting and Communications’ in the General/Industrial

category of the 2008 Investment Analyst Society of South Africa Awards

» Cables de Comunicaciones Zaragoza (CDC) won the 2008 Aragon Business Excellence

Award, criteria for which are based on the European Excellence Model and the Quality

Award of the European Foundation of Quality Management (EFQM)

» The Manufacturing, Engineering and Related Services SETA (MerSETA) selected Desta Power

Matla and Aberdare Cables as Top 300 training companies in the country

» Dr Bill Venter, founder and Chairman of the Altron group, received the 2008 Picmet

Leadership in Technology Management Award.

2009

» Altron improved its ranking from “adequate” to “good” in the 2009 Ernst & Young

Excellence in Corporate Reporting Survey

» Bytes Document Solutions was named Xerox ‘Partner of the Year’ and won the ‘Productivity

through Partnership’ award

» Dr Bill Venter received a Lifetime Achiever Award at the Technology Top 100 (TT100) Awards

» Altech took top honours in the 2008 TT100 Johannesburg Stock Exchange Limited Award

for Excellence in the Management of Technology, Innovation and People

» Altron was ranked the number one company in the General Industrials sector and was

ranked number 32 overall in South Africa with a score of 65.30% (up from number 49 in

2008) in the FM/Empowerdex Top 200 Empowerment Companies ratings for 2009. This

positions the company as a Level 4 contributor

» Altron also formed part of the top ten companies and was ranked number six overall in

South Africa for Skills Development, with a score for this indicator of 11.9%.

Sustainability report – Awards

Dr Venter (left) celebrates his lifetime achiever award with Craig Venter, Minister Mangena and Robbie Venter at the Technology Top 100 Awards

Sust

aina

bilit

y re

port

57


Sustainability report – Customers

Customers are the mainstay of the Altron group and it is a business imperative that

the companies understand and respond to their needs, providing them with the latest

technologically-advanced products and offering outstanding customer service.

Different companies face different customer issues within the Altron group. The most

material issues affecting Altron and its operations are:

» Meeting the evolving needs of customers

» Expansion of the customer base

» Customer service

» Liberalisation of the telecommunications market

» IT risk

» Maintaining key agency/principal relationships.

Meeting the evolving needs of customers

The Altron group operates in a rapidly evolving technology sector, and keeping abreast

of the latest technological developments is crucial to being able to meet the changing

expectations of customers. In most instances the issue is managed at a strategic level

by the board and implemented operationally within each Altron group company.

Generally, the group’s policy is to instil a culture of innovation through rewards and

recognition programmes that identify and encourage innovators. Success is measured

by tracking customer retention, growth of business per customer and renewal of

contracts.

Operations where evolving customer needs are most dynamic include Altech

MediaVerge, Altech Isis, Altech NamITech West Africa, Altech Card Solutions (ACS) and

various operations within the Powertech stable.

Individual examples of initiatives and successes are discussed in more detail on the

web at www.altron.com/sustainability2009/index.asp

Expansion of the customer base

The health of the Altron group’s customer-driven business relies, among other issues

such as customer service, on expanding the customer base to increase revenue and

decrease over dependency on a small group of customers. This is particularly true

during the current tough economic climate. The efforts invested in customer expansion

will now not only see the company through the diffi cult period, but will stand it in good

stead when market conditions improve.

» The Altron group operates in a rapidly evolving technology sector, and keeping abreast of the latest technological developments is crucial to being able to meet the changing expectations of customers.

58



Initiatives and examples:

» Altech Netstar (Netstar) has recently launched a new Auto-Dialer system which allows the

company to automatically contact all clients two months prior to contract expiration in

order to retain their business, or up-sell new products to them. Current local market share

is 40%

» Netstar is exploring potential opportunities in the largely untapped Brazilian vehicle

tracking market

» Altech Netstar Fleet Solutions has increased its market penetration from 8% to 15%

in 15 months, largely from consolidation through acquisitions

» During the six months since operations began in India, Altech UEC has delivered

700 000 set-top boxes

» ACS is nurturing the slowly evolving African market, making a start in Lagos, Nigeria.

» Altech Alcom Radio has grown export revenue by 18% and Altech Alcom Matomo enters

Angola and the DRC

» Altech Stream East Africa laid in excess of 3 800 km fi bre in Kenya with customer demand

equalling supply

» The energy crisis has created opportunities for Powertech to expand into new renewable

energy markets. Rentech, for example, is currently a dominant player in the area of solar

photovoltaic energy systems, such as for traffi c light management

» Crabtree Electrical Accessories SA’s (Crabtree) automation product range is being actively

marketed and is also being developed as an energy-management tool for commercial and

industrial application

» During the year Aberdare Cables employed a dedicated market development manager

whose sole focus is to expand the business into Africa beyond the SADC region

» Battery Technologies has established a presence in both Nigeria and Tanzania and has

signed a framework agreement with a major mobile telecom operator in Africa and the

Middle East, for standby power solutions across the region.

Customer service

In the economic downturn, outstanding customer service is a key differentiator of

competitiveness. Altron’s group companies focus on maintaining a high standard of customer

service in order to attract new customers and retain existing ones, but the performance across

group companies has been uneven.

Customer service at Altech Autopage Cellular (AAC)

While AAC is rated by Hellopeter.com (an independent portal that logs complaints and

compliments) as being similar to its peers in terms of compliments and complaints the

company recognises the need for it to improve on responses to queries relating to billing/

accounts as well as feedback to customers. AAC is working at improving its customer service

levels across a number of areas, including network billing errors, unresolved queries, delays in

repairs and customers’ misunderstanding of product contract terms. Additional capacity is

being created in the call centre and work is under way to combine the AAC and Netstar

customer call centres to achieve better service levels. Customer service is also a key

performance area for the measuring of employee bonuses to be paid, if any.

Sust

aina

bilit

y re

port

59


Examples of initiatives at other Altron group companies include the following:

» At Netstar, the MD receives daily customer service statistics and monthly reports on service

trends, holding divisional managers personally accountable for service standards within their

departments. Customer service at Netstar has improved signifi cantly. Some 94% of calls are

answered within 20 seconds (up 4% on the previous year). This is a world-class service

standard and comparable with the leading international call centres (the industry norm is 80%

of calls answered in 20 seconds). The future focus will be on ensuring all customer interactions

are professional and friendly

» An independent consultant contacts Bytes Document Solutions’ (BDS) customers to gain

feedback on the sales experience. Monthly reports are relayed back to staff informing the

company on trends relating to post-buying, post-service and customer loyalty

» Powertech Transformers assesses and reviews on-time delivery (OTD) and quality standards for

all delivered products on a monthly basis. OTD and test failure rates have improved, but remain

board-level items. The company holds monthly meetings with the Eskom Transformer Steering

Committee to discuss, among others, OTD, fi eld failures and other improvements.

Achieving progress in the quality of customer service relies on the accuracy of customer monitoring

systems, particularly of independent and impartial customer satisfaction surveys. This information

serves to direct improvements in the entire chain, from product innovation to the training of staff

at the customer interface.

Liberalisation of the telecommunications market

During the year under review Altron, through Altech, played a pioneering role in motivating the

liberalisation of the telecommunications industry. In August 2008, the High Court

ruled in favour of AAC’s entitlement to have its existing value added network

services (VANS) licence converted into an individual electronic communications

network service (I-ECNS) licence. This much-anticipated ruling enables Altech to

develop and operate its own telecommunications network and represents a

signifi cant step forward in the liberalisation of the telecommunications industry in

South Africa. Deregulation will encourage competition and benefi t customers by

providing them with a broader range of services and reduced rates in voice and data

services.

The signifi cant delays in the legal process, which took three years in total, also allowed existing

incumbents to entrench their market position. Further delays are expected while ICASA works to

create a fair mechanism for new entrants to obtain scarce spectrum for broadband communication

services. Altech therefore took a strategic decision to focus on niche opportunities in internet

service provision in South Africa.

IT risk

IT risk is governed by the newly formed Altron Information Management (IM) Council.

The IM Council’s role is to establish a company-wide risk framework and set of risk policies detailing

the group’s approach to the management of inherent IT risk within the organisation. Individual

companies now have the following predefi ned baseline set of policies from which to manage IT risk

into the future:

» In 2007 Netstar committed to launching an Auto-Dialler to increase effi ciency. The dialler was launched in test-mode in June 2008, and went live in August 2008. Since its implementation, the closing ratio (sales made to leads received) average is around 90%, and the average time to call a customer from the time of receiving the lead is less than 10 minutes.

60



» Applications control policy

» Data storage and retention policy

» End-user policy

» IT continuity policy

» Security policy

Internal audit (where it is linked to the areas covered in the policies) will assess compliance

with these policies, better preparing companies for audits. Individual companies are now clear

on expectations from holding companies with respect to risk management. Due to the evolving

nature of technology and the increasing risk of threats, the IT risk policies will be reviewed on

an annual basis. The next review is scheduled for October 2009.

Compliance with policy will be managed via bi-annual self-assessments completed by the

business and independent audit reviews completed by internal audit. The results of these

reviews will be assessed by the IM Council and if required, identified risks, or areas of non-

compliance will be managed

directly with the group

company concerned. The first

self-assessment cycle will

report on the year ending

28 February 2009.

The King III draft report

released recently included an

increased focus on IT risk and

governance. The IM Council

will review these

requirements and identify

appropriate processes to

ensure alignment of the

group with the additional

requirements with respect

to IT in the new report.

Technology concepts acquired

In April 2009, Altech acquired 100% of Technology Concepts, an internet service

provider (ISP) and information technology company. Altech plans to leverage off its existing footprint to scale up Technology

Concepts by introducing new internet services to AAC’s one million corporate and

retail clients. The acquisition enhances AAC’s ability to provide data services to its voice cellular subscribers, and represents a response to the convergence of voice and

data in the telecoms arena and the increasing demand for bundled services.

Altech will also continue to explore more broad-based telecommunications

opportunities in East Africa, where it can establish itself as an industry leader.

» Passionate about educationFrom left: Prof N Barney Pityana, vice chancellor and principal of Unisa, Robbie Venter, chief executive of Altron, Ursula Burns, Xerox chief executive officer, and Prof Ihron Rensburg, vice chancellor and principal of the University of Johannesburg

Sust

aina

bilit

y re

port

61


Sustainability report – Partners

» How the group companies select and interact with partners infl uences the quality of product and service delivery and the continuity of supply.

The Altron group’s partners are integral to its ability to conduct business, providing

the raw materials, services, technology and product components that help the

group to deliver on customer requirements. How the group companies select

and interact with partners infl uences the quality of product and service delivery as

well as the continuity of supply.

Apart from the B-BBEE issues of preferential procurement and enterprise

development, which are reported on in the transformation section, the most

material sustainability issues regarding partners are:

» securing continuity of supply

» maintaining product quality from outsourced suppliers

» foreign direct imports and dumping.

Maintaining key agency/principal relationships

Our partnerships with suppliers are of critical importance. The Altron group seeks

to nurture long-term relationships with established suppliers with whom it can

have close, ongoing interaction to ensure that its supply needs and expectations

are met. Partnerships are built on trust and performance, both of which are

continuously tested in our business relationships, with a view to making sure all

parties are contributing and gaining benefi ts.

Altech

Component and product supply has become a less signifi cant issue for Altech as its

manufacturing operations are relatively small. Altech Autopage Cellular’s (AAC)

ability to continue to service its customers relies on agreements with major

network operators, and fi ve-year renewals are in place.

Altech engages on an ongoing basis with suppliers and partners. One of its biggest

challenges involves staying ahead of rapid technological changes in certain of its

business areas and selecting the most appropriate suppliers to help it adapt to

such changes. In this regard, Altech has agreements that provide its subsidiary

companies with access to suppliers’ future plans and ‘roadmaps’.

62



Our partners

Bytes

A number of companies within the Bytes stable have active partner programmes:

» Bytes Communication Systems (BCS) is a premium partner of Alcatel Lucent, for

voice, data, contact centres and communication applications. The most important

issues in the contract with Lucent require BCS to meet specifi c technical resource

targets and revenue targets. BCS ensures that it meets these targets each year in

order to maintain its preferred partner status

» Bytes Document Solutions (BDS) has a partnership relationship with Xerox, a

multinational company specialising in desktop printers and multifunction offi ce

systems to high-speed colour presses, outsourcing and digital imaging. Through

this partnership BDS is one of the largest suppliers of technology, hardware and

services specialising in document management and distribution in South Africa as

well as 24 sub-Sahara African countries. BDS is the exclusive and largest

distributor of Xerox products, services and supplies and has operated in South

Africa since 1964

» Bytes Specialised Solutions (BSS) is the exclusive distributor of NCR and Teradata

products and solutions in South Africa and selected neighbouring countries. The

business crafts the majority of its solutions and services offerings by adding value

to core NCR and Teradata solutions and services. BSS’s partnership with NCR is for

the supply of ATMs, while it offers business analytics and data warehousing

through its partnership with Teradata. BSS offers the full extent of Teradata’s

enterprise intelligence and analytical solutions with the ability to create a single

view of the business

» Bytes Systems Integration (BSI) also has partnership agreements with

Microsoft, Cisco, Network Appliance, HP, SAP, Kronos, Metastorm and others

» Bytes UK has a signifi cant partnership with Microsoft and is currently the largest

distributor of Microsoft products in the UK

Powertech

Worldwide demand for transformer boards has been overwhelming, and although

suppliers have increased their production capacity, ensuring reliable supply remains

a challenge for Powertech Calidus. The operation continuously sources and audits

international suppliers to ensure that is has an alternative supply pipeline. It also

strives to reduce its dependency on traditional principals by expanding its product

range within the insulation product offering to include, for instance, furnace and

generation markets.

Strategic partners

Sust

aina

bilit

y re

port

63


Powertech Transformers has a technology agreement with ABB, allowing the company to

maintain its leadership position through access to ABB’s leading technology for power

transformers.

Maintaining product quality from outsourced suppliers

Quality standards from outsourced suppliers is mainly an issue within the Altech stable, which

has service level agreements with suppliers in India and China. To ensure the quality of

incoming products, our operations make use of statistical process control methodologies,

involving the sampling of a percentage of products and testing them against an agreed

threshold of error or defect. While established world-standards are used as the benchmark

in this process, the diverse nature of the different business operations makes it diffi cult to

establish a generalised ‘norm’ for quality. Quality standards are dealt with upfront when

defi ning service level agreements.

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

to be recalled. The company has product warranty clauses in place, and has agreed levels of

quality and conformity with its Chinese suppliers to prevent repeat incidents.

Foreign direct imports and dumping

Foreign direct imports and dumping practices mean Desta Power Matla’s (DPM) competitors

can offer price discounts to customers, threatening the operation’s market share. The sales and

marketing manager is responsible for keeping the company abreast of imports and possible

dumping, but management’s fi rst priority is always to thoroughly investigate and establish the

causes for any loss in market share. The company will continue to use local supply partners in

line with its B-BBEE commitment, but will also investigate new relationships to ensure that it

sources at the lowest possible price. During the year, management visited trade shows in BRIC

countries, where unit manufacturing costs are lower, to gather market intelligence on best

practices and to share the knowledge and experience gained, with other Altron group

purchasing managers.

Strong competition from cheap imports was experienced by Crabtree Electrical Accessories SA

in the Powertech Industrial Group. However, the company maintained its leading position in its

core market and remains a brand respected for its quality and reliability.

Network agreements

64


Sustainability report – Employees

Altron employs 10 844 full-time and 1 424 temporary/contract people in its South

African operations, and 2 522 people in its international operations. All forms of

engagement and interactions with employees are guided by the Altron Policy

Manual, and the group companies comply with the relevant employment

legislation, including among others the Basic Conditions of Employment Act, the

Labour Relations Act, the Employment Equity Act and the Skills Development Act.

Each subholding group has a dedicated Executive: Human Resources, while Human

Resources managers are responsible for employee issues at the operational level.

Considering that the Altron group operates in a wide range of industry sectors, the

responsibility for dealing with employees and unions rests with the most senior

corporate manager in each operation. Across the group, only one third of

employees (4 538) are below management level, by far the most being in the

Powertech group. Altogether 46% of these employees are members of unions.

For the Altron group, measured across all employees, the unionisation rate is

15.8%. There was no strike action during the period under review.

A Grievance Procedure and Disciplinary Procedure is set out in the Altron Policy

Manual and made available to all employees upon their joining the group, and

via the intranet. Depending on the issue at hand, Altron engages with employees

in a variety of different ways and through various channels.

The most material sustainability issues affecting employees are:

» Succession planning

» Skills attraction, development and retention

» Health & Safety

» HIV/Aids

» Human rights in operations outside of South Africa.

Skills attraction, development and retention

Skills shortages in the Technology, Media and Telecommunications (TMT)

and Information and Communication Technology (ICT) sectors are a global

phenomenon and present a signifi cant sustainability challenge for all technology

companies, including Altron. The annual supply of ICT-trained graduates from

tertiary education institutions falls far short of industry demand for such skills.

In addition, there is a global shortage of existing ICT talent, which makes it diffi cult

for companies to retain such skills at market-related remuneration packages.

Sust

aina

bilit

y re

port

65


Approach, governance structure and reporting

Altron addresses skills shortages on three fronts: development of internal and external skills

pipelines; attraction of top talent through best-practice employment policies; and retention of

existing talent through a combination of career development programmes, remuneration

benchmarking and fast-tracking of critical skills.

The Altron chief executive takes an active interest in the country’s ICT skills shortage and

contributes to industry debate and skills development initiatives that will benefit both the

Altron group and the ICT sector as a whole. The Altron Management Services HR committee

oversees the group’s skills development, attraction and retention activities, which are also

influenced by the Altron remuneration, nomination and transformation committees. The Altron

group complies with all relevant South African legislation pertaining to skills development and

training, including the dti CoGP, and makes annual submissions to the Department of Labour.

Internally, its strategy is outlined in the Altron Policy Manual, which covers the issues of

education, training and development. HR executives in each of the subholding groups drive the

specific skills development, attraction and retention initiatives at the operational level.

Investment in training

The Altron group budgets 2% of its payroll towards B-BBEE skills development, plus 1% of

payroll to Sector Education and Training Authority (SETA) skills development, for a total of

3% of payroll. This compares with the dti CoGP target of 4%. The total invested in skills

development for the year under review amounted to R56 million, averaging R5 085 per

employee. Altron group companies actively follow the skills development process set out by the

relevant SETAs responsible for implementing the National Skills Development Strategy (NSDS)

for the sector.

Each division has an appointed skills development facilitator and submits an annual Workplace

Skills Plan (WSP) to the relevant SETA. Following implementation of the WSP, a summary report

is submitted of skills development and training completed. Considering the different

requirements for different industries, the Altron group does not use a single metric to manage

employee performance. Different companies establish key performance areas and employees

across the group receive regular performance and career development reviews.

Spend on skills learning programmes

Legal entity R

Bytes 24 092 045

Altech 9 641 968

Powertech 22 912 753

Altron group 56 646 766

» YPC leadership development programme

The Altech Academy, launched in 2007, enrolled 98 students in 2008, playing a critical role in meeting skills pipeline requirements for Altech as well as the Altron group at large. It offers certificate, diploma, masters and doctorate qualifications in critical skills areas, including project management, management of technology and innovation, key account management and systems engineering.

To read about the highlights for the year see www.altron.com/sustainability2009/index.asp

» The Altech Academy

During the review period, the da Vinci Institute in association with the Altech Academy devised a two-year leadership development programme that leads to a masters degree in Management of Technology and Innovation. After a rigorous selection process, Altron selected 10 Altron Young Presidents’ Club (AYPC) candidates from various operations and race groups across the group to enrol for this degree. Successful candidates will work towards growing into future leadership positions, providing Altron with a strong pipeline of future leaders, improved continuity within its senior ranks and a powerful incentive for young leaders to stay with the group. (For further detail, see www.altron.com/sustainability2009/index.asp).

66



Altron group workforce (SA)

Occupational levels

Male

Abled Disabled

African Coloured Indian White African Coloured Indian White

Senior top management 4 1 3 47 — — — —

Other top management 4 5 9 106 — — — 1

Senior management 25 14 44 298 — — — 1

Middle management – professionally qualified and specialists 124 92 154 768 1 2 2 6

Junior management – academic qualified and skilled technicians 1 119 448 428 1 230 25 7 4 25

Semi-skilled and discretionary decision-making 1 323 496 72 120 22 3 1 0

Unskilled and defined decision- making 887 115 59 35 12 2 0 1

Total permanent workforce 3 486 1 171 769 2 604 60 14 7 34

Table reflecting total Altron group employee complement

Altech Bytes PowertechCorp incl

AIMS Total

Total permanent workforce per entity 2 599 4 419 4 736 119 11 873

Total temporary workforce 1 029 310 70 5 1 414

Total South African workforce 3 628 4 729 4 806 124 13 287

Total offshore workforce 882 340 312 — 1 534

Total Altron workforce 4 510 5 069 5 118 124 14 821

Altron group skills development

Headcount – category B,C & D

Male

Abled Disabled


Total learnerships 278 56 47 19 46 5 — —

Total apprenticeships 62 4 — 7 — — — —

Experiential trainees 41 2 — — — — — —

Amount spent

Spend on learning programmes for the year 27 202 708 — — 10 371 536 1 251 803 — — 16 339

Training and development department costs

Total skills development spend 27 202 708 — — 10 371 536 1 251 803 — — 16 339

Sust

aina

bilit

y re

port

67


Female

Total SA workforce

% black represen-

tation

% female black

represen-tation

Abled Disabled


1 1 — 1 — — — — 58 17.24 3.45

5 0 6 12 — — — — 148 19.59 7.43

19 8 24 73 — — — — 506 26.48 10.08

42 29 55 243 — 1 — — 1 519 33.05 8.36

563 231 304 710 5 1 — 4 5 104 61.42 21.63

444 172 76 231 6 2 — 3 2 971 88.08 23.56

318 59 50 15 13 1 — — 1 567 96.75 28.14

1 392 500 515 1 285 24 5 — 7 11 873 66.90 20.52

Female

Total

Abled Disabled


224 12 16 6 99 3 — 1 812

11 — — — — — — — 84

10 2 — — — — — — 55

12 205 274 — — 2 217 313 1 879 015 — — 2 777 55 146 766

6 692 638

12 205 274 — — 2 217 313 1 879 015 — — 2 777

68



Human rights in operations outside South Africa

The Altron group upholds the human rights of employees as put forward by the

United Nations Global Compact, and has aligned its operations and strategies with

universally accepted principles in the areas of internationally proclaimed human

rights and labour.

In South Africa, these principles are enshrined in the Constitution and policed by labour

legislation, with which the group fully complies. However, in countries outside South

Africa, this may not necessarily be the case. In such instances, Altron recognises that it

has a duty to protect the human rights of employees, wherever they are in the world.

Altech UEC, for example, has identifi ed poor labour practices as a potential problem in

China. The company has a strict policy of zero-tolerance of any human rights abuses

and demands written reports, reviewing all personnel documents and CVs of appointed

or contracted staff, and audits of the working environment to ensure that they comply

with recognised international human rights standards.

(For more detail on this issue see www.altron.com/sustainability2009/index.asp).

Health and safety

The health and safety of all employees is a serious issue for the Altron group and the

Altron chief executive takes ultimate responsibility for the group’s performance against

key health and safety indicators. Health and safety is guided by an internal health and

safety policy that covers the entire Altron group. Each group company also complies

with relevant occupational health and safety legislation, standards and certifi cation

(OHASA).

Health and safety is integrated into the responsibility of line management throughout

the Altron group. In accordance with the Occupational Health and Safety Act (OHASA),

most of our operations have health and safety managers and Safety, Health and

Environment (SHE) committees which meet on a monthly basis. Health and safety

representatives are appointed from the workforce and all employees participate in risk

assessments via safety meetings. SHE representatives have been appointed and

trained as per the requirements of the OHASA Act, while selected employees have been

trained as auditors in preparation for the implementation of the OHASA 18001 H&S

System. A safety induction programme forms a standard part of the group’s general

training in safety awareness.

The Altron group conducts regular monitoring of key health and safety performance

indicators (KPI), including injury frequency rate and occupational clinic report. The

engineering manager monitors the SHE manager’s KPIs bi-annually, and all safety

aspects are monitored during monthly safety inspections. Altron’s internal audit

department, in conjunction with independent consultants, MS Alexander & Associates,

reports back to the relevant risk management committees on health and safety risks

throughout the Altron group. There were no signifi cant accidents or injuries at Altron’s

operations during the year under review and neither were there any fatalities.

Sust

aina

bilit

y re

port

69


Contact centres take centre stage

Bytes People Solutions has long been managing IT learnerships for the Altron group, and in 2008 decided to test the contact centre learnerships market. From a large number of enthusiastic young people who attended the assessment and interview sessions, 50 learners, including six disabled individuals, started the training course. In late October 2008, Altech Autopage Cellular (AAC) provided the fi rst group of 20 learners with workplace experience. They were exposed to a number of different areas and gained insight into the world of business. Although it was the fi rst time that AAC participated as a workplace provider, it exceeded all expectations in mentoring and coaching the learners. In February 2009, the second group of 20 Contact Centre Support learners started their workplace experience with the expectation that they develop their communication and customer relations skills to such an extent that AAC either employs them or recommends them for permanent employment elsewhere.

In the previous reporting period, it was noted that exposure to lead and sulphuric acid were still

issues of concern. The threat of lead poisoning has largely been eliminated through the

R1.6 million installation of bag houses for the extraction of lead oxide at Powertech Batteries.

Sulphuric acid has been addressed in the manner referred to on page 83 of this report.

Nonetheless, education and training is ongoing to ensure that employees are familiar with the

sources of lead in the workplace, and the potential dangers of exposure. Training is also

conducted on the disposal of hazardous waste material at sites where lead, or material

containing lead, has been used, handled or processed.

(For more detail on this issue, see www.altron.com/

sustainability2009/index.asp).

HIV/Aids

The Altron group recognises the serious threat that the HIV/Aids

pandemic poses to the economy and the nation as a whole. In 2007,

it contracted the Aurum Institute of Health Research, a not-for-profi t

public benefi t organisation, to conduct research and assess the

potential risk of HIV/Aids throughout the group. In addition, it was decided that it would be

prudent to reassess the threat posed by HIV/Aids every three to fi ve years. In the interim, data

collection and monitoring would continue on a limited basis to ensure that the impact of HIV/

Aids was not increasing to a greater extent than had been predicted by the impact study.

Some indicators that are being monitored on an ongoing basis include the following:

» Absenteeism (where available – to track morbidity)

» Deaths – being compared to actuarial tables considered representative in this industry

» Medical diagnoses and drug prescriptions – highlighting any trends that could be considered

indicative of an underlying, early-stage HIV epidemic.

We are confi dent that the collection of this information will enable us to ensure that HIV/Aids is

not posing a threat to the profi tability of the Altron group and, more importantly, continues to

have limited impact on the lives of our employees. This information will also be included in the

review of the previous work that will be conducted every three years and will improve the

accuracy of future studies.

Company response

Altron’s fi rst step has been to develop a group-wide HIV/Aids policy. The purpose of the policy is

to establish guidelines for management and human resource departments in dealing with

HIV-positive employees, and to provide for programmes aimed at reducing the risk of

HIV/Aids among employees.

It affi rms that:

» Employees with HIV/Aids will be protected against unlawful discrimination and practices

» HIV-positive status should not constitute a reason to preclude any person from employment

» Employee benefi ts depend on the rules and requirements of the relevant funds and schemes

which may change from time to time

» The fi ndings of the Aurum report were made available in 2008 and show a prevalence of between 5% and 11% across the Altron group. The results of the study showed that HIV/Aids did not currently pose a material threat to the operations of the group but that specifi c risk areas existed that warranted further investigation.

70



» Reasonable precautions should be taken to ensure confidentiality regarding the HIV/Aids

status of any employee.

Following further recommendations from external consultants, Altron is this year embarking on

phase two of its response, undertaking an evaluation of certain of its key suppliers to ensure

that adequate systems are in place to ensure that there are no disruptions to the supply chain.

Small companies are often particularly vulnerable to the impact of HIV/Aids and do not have

the resources to provide either counselling, testing or care for those who are HIV-positive.

Disruptions at these suppliers could impact operations at Altron, particularly in Powertech

where delays are likely to be most costly.

Associated with the above, Altron will be conducting assessments of individual operations

within the Powertech group, as well as of higher risk units situated in provinces such as

Gauteng and KwaZulu-Natal.

(For full details on this issue and impact on specific subsidiary companies and operations see

www.altron.com/sustainability2009/index.asp).

Sust

aina

bilit

y re

port

71


Sustainability report – Transformation

» Achievement This year, the group achieved

an overall score of 65.30% or Level 4 Recognition, compared with last year’s score of 54.85%.

B-BBEE executive summary matrix

BEE PARTNER

Altech Pamodzi 25% Altech Information Technologies

Platina Venture Holdings 30% Alcom Matomo

Bytes Kagiso Strategic Investments 27% BTG SA

TR Nkosi and others 30% Ithuba Lethu Document Solutions

Powertech Izingwe Capital 30% Aberdare Cables

Izingwe Capital 25% Powertech IST

Kagiso Ventures Limited 25% Battery Technologies

Mahogany Capital 25.01% Powertech Industrial Group (Pty) Limited

Power Matla 25% Desta Power Matla

Achievement

Altron measures the group’s transformation progress against the Department of

Trade and Industry’s Codes of Good Practice (dti CoGP). This year, the group

achieved an overall score of 65.30%, or Level 4 Recognition, compared with last

year’s score of 54.85%. The company was also listed in the Financial Mail/

Empowerdex Top Empowerment Companies 2009 Survey, with an overall placement

of 32 (a 17-place improvement on the previous year) and came fi rst in the General

Industrials sector in the Top 200 Companies ratings. In terms of Skills Development,

Altron was ranked number six in the top ten with a score of 11.9% for this indicator.

» The recipients at Altron head offi ce for long service awards are from left, front row: Wilheminah Makamo, receptionist at AMS (10 yrs), Carol Mimana of the facilities team (fi ve yrs), Sophie Mashinini of the facilities team (10 yrs), Genny Walsh, group treasurer (10 yrs) and Pat Thomas, chairman’s offi ce (20 yrs).

Back row from left: Jenny Morris, executive assistant to the chairman (10 yrs); Edward Mpange, driver (20 yrs); Cathy le Grange, fi nancial administrator (fi ve yrs); Kenneth Khoza, gardener (fi ve yrs); Pieter Lourens, accountant (10 yrs) and Grant Rogerson, group executive: corporate relations (30 yrs)

72



» During the year under review, Altron moved from a policy-making to an implementation phase in its transformation journey. The focus is now on the implementation and achievement of goals at the operational level.

Strategy and approach

The group’s transformation strategy is encapsulated in the Transformation Vision 2012 policy

document which is aligned with the dti CoGP. It outlines implementation guidelines to assist

the group’s operations in meeting their targets against the scorecards for each of the dti CoGP.

The strategy is carried out by the Altron board, together with a transformation committee

(Transcom) comprising members of senior management and transformation representatives

from each major operation.

Engagement

The policy was formally launched to all employees and stakeholders and adopted by the board

and senior management in August 2008. To ensure a thorough understanding of the dti CoGP

across the group, Altron has embarked on an extensive programme to educate and train

management and transformation practitioners within its operations.

During the first quarter of 2008, Transcom began working with all companies in the Altron

group to translate Vision 2012 into transformation targets. Interactions took the form of a

series of round-table consultations with transformation champions to help determine five-year

targets for all areas of the dti CoGP. In addition, we have published our Vision 2012 targets and

our progress to key customers (See www.altron.com/sustainability2009/index.asp).

Towards implementation

The managing directors of the various group operations are responsible for achieving targets

and a portion of any management bonus is paid out only on the achievement of these.

A transformation committee within each operation receives feedback from line management

on B-BBEE progress, and this information is fed through to the group Transcom by the various

operational transformation committee members.

Altron Empowerdex 2009 dti CoGP Scorecard

Element Weighting Total score 2009 Total score 2008

Ownership 20% 11.50% 8.90%

Management control 10% 2.60% 4.44%

Employment equity 15% 5.10% 4.46%

Skills development 15% 11.90% 4.46%

Preferential procurement 20% 14.20% 12.58%

Enterprise development 15% 15% 15%

Socio-economic development 5% 5% 5%

Total B-BBEE score 100% 65.30% 54.84%

All operations at Altech, Powertech and Bytes were audited by rating agency Empowerdex.

Sust

aina

bilit

y re

port

73


Highlights, challenges and the way forward

Altron scores particularly well in preferential procurement (14.2 out of 20), enterprise development

(15 out of 15) and socio-economic development (5 out of 5). However, its ownership (11.5 out of

15) and skills development (11.9 out of 15) scores have shown the most improvement.

However, areas of challenge still remain to improve our performance under management control,

where Altron scores only 2.6 out of 10, and particularly on the black executive director and senior

top management elements.

Powertech Transformers faces a business risk with a key customer, Eskom, which requires that its

suppliers be at a Level 4. In response, Powertech Transformers is restructuring ownership, control

and top management, as well as developing enterprise joint ventures and increasing training

spend.

Ownership

Altron scored 11.46 out of 20 in terms of the ownership code against the dti CoGP, compared to

8.9% last year. The Altron group now has an empowerment shareholder in each of its subholding

groups. Kagiso Strategic Investments owns 27% of Bytes Technology Group SA, Pamodzi

Investment Holdings owns 25% of parts of Altech, and Izingwe Holdings has a 30% shareholding

in Powertech’s Aberdare Cables. Powertech has other empowerment partners throughout its

operations: Kagiso Ventures has a 25% equity stake in Battery Technologies, Mahogany Capital,

a black female-owned company, has a 25.01% equity interest in the Powertech Industrial Group

and Power Matla, a 25% equity stake in Desta Power Matla.

Management control

Altron scored 2.62 out of 10 for management control against 4.44% last year, representing our

greatest challenge across the dti CoGP. The company has placed increased focus on its B-BBEE

board representation and during 2008 appointed Barbara Masekela and Dawn Mokhobo as

independent non-executive directors to the Altron board. Altech appointed Zakhele Sithole and

Moses Sindane to the Altech board. Through a governance review exercise, the mix between

non-executive and executive directors has been reviewed to create an appropriate balance.

Employment equity

Employment Equity (EE) is one of Altron’s most diffi cult transformation challenges and the group

currently scores only 5.1 out of a possible 15 points for this code. Areas that require urgent

attention include gender in the senior management element (current score is 0) and the black

disabled employee element (current score is 0.5%). The middle management element currently

scores 26.7%. Not having enough black middle and senior managers, and especially black female

middle and senior managers, will impact our ability to transform and meet the stringent Altron

2012 targets in many of our companies. Altron has devolved upon the senior management of each

company the responsibility for submitting an EE plan in accordance with the EE Act.

Pick of the crop

Aeromaritime International Management Services (AIMS) is one of the group’s best performing operations in terms of transformation, to our collective benefi t. Empowerdex has rated AIMS at AAA, or a Level 2 contributor, for the second consecutive year. This allows AIMS’ customers to claim 125% of their spend under preferential procurement for their own B-BBEE ratings.

74



All group companies have devised a human resource plan of action that

focuses on identifying and developing black individuals at all levels

within the group. While the approach of Altech, Bytes and Powertech

might differ slightly, the goals remain the same: to identify and

fast-track black individuals to junior, middle and senior management

positions using EE-centred skills development initiatives. Altech, Bytes

and Powertech’s key focus over the next three years will be to recruit

or promote black people, including black women, to senior management levels. In line with the

group-wide succession planning exercise, driven by the Altron board, we identify and develop

suitable black candidates through a transparent and formal procedure governed by the

nomination committee’s mandate and terms of reference, as well as by the Altron board

charter (see corporate governance report, item 7.5).

Transformation through skills development

Overall, Altron currently scores 11.9 out of a possible 15 points for skills development on the

B-BBEE scorecard. Many skills development areas, discussed above and in the employees

section of this report, are geared towards identifying and fast-tracking black individuals

through various programmes, for example those run by the Altech Academy

(see www.altron.com/sustainability2009/index.asp).

Powertech spent more than 3% of leviable payroll on skills development for critical and

technical core functions in 2008. Furthermore, Powertech focuses on management and

leadership training in association with the Gordon Institute of Business Science to provide

leadership training to middle and senior managers. To date, 32 employees have graduated

from this programme. Powertech Transformers established a world-class winder academy at

a cost of R3.5 million, where unskilled groups of six trainee winders are trained per 12-month

period on all winding types, to full competency, under actual production conditions, including

on-job training in other factory areas. Since opening in January 2007, the academy has

completed 485 windings, with no test failures, zero rework, and 100% on target delivery with

the best experienced, qualifi ed and dedicated trainers in the company – a true ‘centre of

excellence’ for Altron.

This year we will increase the number of companies in the group undergoing a skills audit.

A comprehensive plan to identify and develop internal talent is being developed throughout

the group in 2009. Key components include the identifi cation of high-potential employees,

succession management and workforce planning.

Each year the Altron secretarial department takes on a secretarial cadet, providing a practical

work environment where a wide range of secretarial functions can be experienced fi rst hand

(for further details, see www.altron.com/sustainability2009/index.asp).

Preferential procurement

Through preferential procurement, the Altron group aims to help create a vibrant black small,

medium and micro enterprise (SMME) sector, and to encourage procurement from companies

Engaging important stakeholders

In March 2009, Powertech’s transformation committee discussed transformation

concerns with Eskom and Telkom. Important issues raised included: skills retention, a

fl agship SED project for Powertech, and a standardised database for reporting. The

company will provide progress reports offering qualitative information that goes

beyond the scorecard numbers. The fi rst progress report was delivered in May.

Eskom’s view

As of 1 April 2009 Eskom will give priority to companies with an offi cial B-BBEE rating

according to the dti CoGP. For suppliers with less than a Level 4 rating, Eskom will set targets with timelines. Eskom expects its

suppliers to achieve in all areas of transformation, not only in equity. The focus has therefore shifted to

qualitative aspects, such as job creation and skills development.

Telkom’s view

Procuring goods and services from historically disadvantaged groups is a

business imperative for Telkom. Although Telkom’s tender process gives preference to

black empowered companies, the evaluation criteria are adjusted to suit each tender,

with the only non-negotiable requirement being a minimum of 25.1% black

ownership. The emphasis, however, is not on the actual shareholding but on the

economic participation of the individual shareholders. Telkom uses the ownership

requirement to drive transformation in the ICT industry, evaluating potential suppliers primarily on their performance against the

dti CoGP targets. Telkom will conduct independent forensic audits of suppliers’

B-BBEE credentials to prevent fronting.

» The year under review saw intense focus being placed on skills development as a vehicle for bringing about EE change within the group.

Sust

aina

bilit

y re

port

75


that are B-BBEE compliant. Altron gives preference to suppliers who are black or black women-

owned, value-adding suppliers and qualifying small enterprises (QSEs).

During the period under review, Altron showed an improvement of 1.62% on the previous year’s

preferential procurement score, bringing the total score to 14.2% (out of a possible 20%). Some

37% of the company’s overall procurement spend goes to preferential suppliers, with 9.9%

going to QSEs and emerging micro-enterprises (EMEs). Altron’s own policy of requesting the

B-BBEE status of suppliers, together with a more general industry-wide insistence on

verifi cation, has seen a marked increase in the number of companies that are B-BBEE rated,

making preferential procurement a far easier and smoother process. Among individual company

successes is the work of Bytes Specialised Solutions (BSS) in developing black SMMEs and EMEs.

Currently we are actively assisting 442 in number, up from 106 just two years ago.

Most of Powertech’s operations receive full points on preferential procurement, but some major

suppliers are not yet offi cially rated and could not be included in the scores for this year. This

situation will improve by next year. Work still remains to be done to increase spend on

black-owned and black female-owned enterprises, which currently only earn the company 6.7%

and 1.4% respectively on the scorecard.

Enterprise development

Altron supports emerging black businesses so as to ensure their sustainability over the long

term. The group offers management advice, guides new enterprises in fi nancial best practice

and provides assistance through advantageous payment terms, to mention a few. This not only

benefi ts historically disadvantaged members of society, but also provides Altron with reliable,

alternative procurement sources for many of its products and services.

Enterprise development is implemented by managing directors and line management at each

group company. While Altron scored the full 15 points for enterprise development for the year

under review, scoring was uneven, especially in the Altech stable. Altech’s operational

transformation committee has contracted external transformation consultants to help develop

guidelines to address the challenge.

To read about specifi c case studies such as the ATM development

business project supported by BSS and the VCM and Ikusas steel

suppliers initiative supported by DPM, as well as MWS a supplier

of paper-covered copper strip also supported by DPM (see

www.altron.com/sustainability2009/index.asp).

Socio-economic development (SED)

SED forms an integral part of Altron’s mainstream activities – both as a component of its

B-BBEE scorecard as well as a cornerstone of its corporate accountability and governance

programme. A CSI policy, incorporating SED, provides guidelines to group companies on how

best to implement SED elements of B-BBEE, details the selected focus areas in which Altron

makes SED investments and outlines the criteria for project selection. This policy is aligned

with the dti CoGP regarding SED.

» In 2008, all group companies committed to the target of 3% of net profi t after tax (NPAT) towards enterprise development activities.

Computer centres for Nombuso High School, KwaZulu-Natal

Altron has provided two state-of-the- art multimedia centres to the Nombuso High School in KwaNzimankwe, KwaZulu-Natal, including eight laptop computers and 48 desktop computers, as well as printing stations. Altron donated funds, equipment and time from its own CSI programme, as well as from partner customers and suppliers. The company has also trained three teachers to assist with computer applications technology classes, starting next year, and has also undertaken to sustain the technology for two years in terms of its CSI policy.

76



Altron scored the maximum five points on the B-BBEE scorecard for SED during the year under

review, and met its target spend of 1% of net profit after tax. In total, R12.4 million was

invested in various beneficiary projects across the group companies. Outlined on the web are

some of the flagship projects per operation (see www.altron.com/sustainability2009/index.asp).

Plans for this year include the following:

» Altech has approved R1.7 million for the construction of an Altech Netstar (Netstar)

Legacy Park in Tembisa, which will provide the local community with a sports park and

community centre

» Bytes has planned investment in a second KZN South Coast school. The Nombuso

Secondary School will receive computers for its two computer classrooms in 2009

» Powertech will be launching a flagship programme aimed at mathematics and science

proficiency at both school and university level

Grass roots soccer development

AAC’s soccer campaign supports grass roots soccer development initiatives in historically

disadvantaged communities. AAC provides underprivileged teams with soccer kits and

equipment, thereby investing in young talent and providing platforms for

community entertainment. During the year AAC sponsored the Ridge Casino’s soccer

festival, donating soccer team kits to 10 young teams. It also sponsored the

Soweto Easter Games for the third year in a row, donating 20 soccer team kits and

affording young talented players the opportunity to showcase their skills before

PSL club representatives.

Sust

aina

bilit

y re

port

77


Sustainability report – Environment

Altron recognises that managing the environmental impact of its businesses is an

important aspect of triple bottom line corporate responsibility. In quantifying how

its businesses impact the environment Altron is guided by independently

commissioned audits, international standards such as ISO 14001, local benchmarks

such as the JSE SRI Index, environmental elements of the GRI’s G3 index and the

relevant South African legal and regulatory frameworks. From the information

gathered, we are cognisant that the Powertech group has by far the largest

propensity for impacting the environment, and consequently many of the systems

and responses relate largely to this group’s operations.

ISO certification (environmental, health and safety) and achievements

for the reporting period

Name ISO 14001 ISO 18001 and other

Arrow Altech Distribution

Compliant but notaccredited as ithandles no hazardoussubstances

ROHS compliant (theEuropean standard forremoval of harmfulsubstances)

Altech Netstar 70% of components received lead-free

Altech UEC System has beenupdated for ISO 14001compliance. Audit has been undertaken and results are awaited for June 2009

ROHS compliantWEEE compliant

Aberdare Cables Standford Road(Port Elizabeth) andPietermaritzburgoperations –ISO 14001 certified.Gauteng operation – accreditation delayed*

BASEC certified ISO 18001 certified

*Delay of accreditation due to closure of Eloff Street plant and Aberdale Metallic Profiles.

» In quantifying how its businesses impact the environment, Altron is guided by independently commissioned audits, international standards, local benchmarks, the GRI’s G3 index and the South African legal and regulatory framework.

78



ISO certification (environmental, health and safety) and achievements for the

reporting period (continued)

Name ISO 14001 ISO 18001 and other

PowertechTransformers

Certified ISO 18001 certified

DPM Cape Town Certified ISO 18001 certified

Powertech Batteries Certified ISO 18001 certified

Battery Technologies Expected end of 2010 ISO 18001 certification expected end of 2010

Crabtree Expected end of 2010 ISO 18001 certification expected end of 2010

Powertech IST Certified ISO 18001 certified

The shaded cells show those companies within the group that achieved their ISO 14001 and/or their ISO 18001 certification in the year under review.

The Altron group’s most material environmental issues are:

» Carbon emissions

» Energy use and efficiency

» Pollution

» Environmental impact of products and recycling thereof.

The Altron group complies with all relevant environmental legislation and there were

no significant environmental incidents, and no fines or prosecutions during the year

under review.

The environmental aspects and impacts have been identified and logged at each site and this

information is captured into an Environment Management System (EMS), which details the

targets and objectives set by management on an annual basis. In line with the requirements of

ISO 14001 the EMS also provides a record for annual environmental performance audits. During

the year, Altron’s Everest information management system was extended to facilitate group

management of environmental impacts.

While Altron has established a philosophy and value system that underlies the group’s overall

responsibility towards the environment, individual operations develop their own approach and

policy according to their specific impacts on the environment. The overall status of the group’s

environmental health is fed to the group’s leadership via monthly reviews at individual company

management level, and in turn via the risk management committees at divisional level.

Internally, the operations are guided by Altron group environmental policies regarding waste,

pollution, product responsibility and energy efficiency. The Altron group conducts regular

The Riverine Rabbit Working Group

Created under the auspices of the Endangered Wildlife Trust (EWT), the

Riverine Rabbit Working Group is a project that combines sustainable environmental

and biodiversity conservation with job creation, training and skills development. Altron has again supported the effort to

rehabilitate degraded riparian zones in the Karoo, thus restoring environmental

systems and encouraging the return of the Riverine Rabbit to its natural habitat.

Altron is particularly encouraged by the holistic nature of the project, whereby the

historically disadvantaged community of Loxton is helping save the species. This is a

project that aims to:

1) uplift a community;

2) protect an endangered species;

3) improve degraded riparian vegetation to the benefit of the land owners; and

4) buffer a critical ecosystem in a semi-arid landscape against the possible impact of

climate change.

Sust

aina

bilit

y re

port

79


environmental risk assessments and holds monthly management review meetings, and further

oversight is provided by internal audit, which conducts regular environmental risk assessments.

External surveys on the status of compliance with environmental legislation, as well as

environmental impacts, are conducted by independent environmental consultants, M.S. Alexander

& Associates. Any additional issues not picked up by internal review are raised and presented to the

board on a quarterly basis. (A summary of the fi ndings can be found at www.altron.com/

sustainability2009/index.asp).

Carbon footprint

Altron recognises that there are signifi cant business benefi ts to be gained from implementing

a climate change policy, including cost savings from improved energy management, the security

of an uninterrupted power supply, and increased business opportunities from providing low-carbon

products and services.

Following the position paper on climate change drafted and adopted by the Altron board last year,

Altron embarked on a new journey towards formulating a policy for group-wide implementation.

External auditing fi rm, PricewaterhouseCoopers (PWC), ran workshops with management from the

various operations to provide an understanding of climate change and what it means to the

operations and to Altron specifi cally to explain carbon credits and how these can

be traded to generate revenue and to outline the methodology, approach and way forward for

calculating the Altron group’s carbon footprint. Altron also participated in the Carbon Disclosure

Project in South Africa, a worldwide project under the auspices of the United Nations to determine

and report carbon emissions.

Following this preparation process, PWC were contracted in 2008 to conduct an environmental

impact assessment and calculate the carbon footprint (GHG inventory) of the entire Altron group.

Data collection for the carbon footprint exercise was managed internally by Altron, with support and

advice provided by PWC. The following measurements were used to guide data collection:

» Direct measured or calculated production-related emissions (including fuel and electricity usage)

» Air travel

» Car Travel (taking into account total fuel use, type of fuel, distance travelled, average fuel

effi ciency of vehicle and highway versus city traffi c effi ciency).

PWC compiled the results, providing Altron with the following picture of its carbon footprint:

Overview of Altron’s Carbon Footprint

Reporting period: 1 March 2008 to 28 February 2009 (base year assessment).

Operational boundary: Altron Head Offi ce, Altech (excluding international operations),

Bytes (excluding international operations, Bytes Healthcare Solutions, Intelleca and NOR Paper),

and Powertech (excluding Dynamic Battery Services (UK)).

Scope and emissions estimates: The ISO 14064-1 Greenhouse Gas (GHG) Standard and the

Greenhouse Gas Protocol were applied. Information included in the calculations included data

» Altron’s dedicated Carbon Footprint section on the group’s intranet

80



on distances travelled and types of vehicles in Altron’s business fleet and fuel use in the various

production processes and services rendered, to determine the scope 1-direct emissions (those

that Altron has direct control over the use of). Whereas, the calculation of scope 2 and 3

(indirect emissions) included data on electricity consumption, paper use and flights taken for

business purposes, due to a lack of available data for road travel (ie, kilometres travelled by

employees to perform Altron’s business), this estimate was omitted from the base year

assessment.

Total carbon emissions: The carbon footprint is estimated at 132 481 metric tonnes of carbon

dioxide equivalents (CO2e), and the graph below (Figure 1) provides an indication of the Altron

group carbon footprint, broken down per business unit. Powertech, at 70%, is the most

significant contributor, followed by Bytes (16%), Altech (13%) and Altron head office (1%).

Total carbon emissions per source: Altron group’s greenhouse gas emissions were calculated

per source category and are reported according to scope:

Altron Metric tonnes CO2e %

Scope 1 direct emissions: fuel use, business fleet travel 12 297.6 9.3

Scope 2 indirect emission: electricity consumed in buildings owned 88 675.4 66.9

Scope 3 indirect emission: electricity used in leased buildings, paper consumption, business air travel 31 508.2 23.8

Total scope 1, 2 and 3 emissions for Altron group 132 481.2 100

Altron’s total greenhouse gas emissions per source are represented graphically in Figure 2. It is

evident that electricity consumption is the most significant contributor to Altron’s total carbon

footprint at about 87%, followed by business fleet travel at nearly 7%, fuel use and paper

consumption at nearly 3%, each and business air travel, which makes up just over 1%.

Carbon emissions per business unit: The contribution of each of Altron’s principal subsidiaries

to the total carbon footprint of 132 481 metric tonnes of CO2e is listed below:

Altron (head office) Metric tonnes CO2e %

Scope 1 direct emissions: fuel use, business fleet travel 17.0 1.1


Scope 3 indirect emission: electricity used in leased buildings, paper consumption, business air travel 243.5 15.2


93 2

61

20 7

73

16 8

44

1 60

3

CO2e (tonnes)

Altronheadoffice

AltechBytesPower-tech

2008 year

114

972

8 68

9

3 60

8

3 71

0

1 50

2

CO2e (tonnes)

Bus-iness

airtravel

Papercon-

sump-tion

Fueluse

Bus-inessfleet

travel

Elec-tri-city

2008 year

» Figure 1 Total greenhouse gas emissions in

metric tonnes CO2e for Altron group,

split per business unit for the March 2008 to February 2009 reporting year.

» Figure 2 Total greenhouse gas emissions in

metric tonnes CO2e for Altron group,

split per emission source for the March 2008 to February 2009 reporting year.

Sust

aina

bilit

y re

port

81


Altech Metric tonnes CO2e %





Bytes Metric tonnes CO2e %


Scope 2 indirect emission: electricity consumed in buildings owned 0.0 0.0



Powertech Metric tonnes CO2e %





At present (May 2009) Certified Emission Reduction (CER), also known as “carbon credits” are

trading at about €15/tonne. Therefore, the Altron group’s total carbon footprint of

132 481 metric tonnes of CO2e was assigned a monetary value of roughly R23 060 000

(converted at R11.60 for €1) and represents the rand value required to offset Altron’s carbon

footprint.

The carbon footprint estimate of 132 481 metric tonnes of CO2e represents a fair reflection

of Altron’s carbon footprint for the base year assessment. Full reliance was placed on data

provided by Altron and its subsidiaries, as no data verification or audit procedures were

conducted by PricewaterhouseCoopers prior to analysis and carbon footprint calculations.

A robust carbon management strategy for Altron would contribute significantly to identifying

risks associated with GHG constraints in the future, and indentifying opportunities in energy

reduction, cost-saving and potential to participate in carbon trading markets.

The setting of GHG targets and the effective management of all greenhouse gas emissions data

leads to a more accurate and complete carbon footprint calculation. A standardised carbon data

management system for the whole Altron group will ensure that the recording and collection of

data is done efficiently, roles and responsibilities for data collection and collation are defined,

targets for effective mitigation strategies are set, and emission reduction projects are managed.

82



Pollution and emissions

As the major manufacturing group of Altron, Powertech actively manages, among others,

environmental impacts, hazardous waste, air and water pollution and emissions from its

operations. Surveys conducted at all Aberdare Cables manufacturing plants in 2008 identifi ed

certain minor air pollution problem areas, which have been addressed with the installation of

additional extraction units. Follow-up surveys confi rmed that the operation is now compliant

with South African and United Nations legislation.

In June 2008 it appointed a new group SHERQ manager and changed the group and site SHERQ

structure to integrate all aspects of safety, health, environment, risk and quality.

Emissions from Powertech Transformers underwent routine measurements during the year

under review and were found to comply with legal limits. No signifi cant incidents of water, air

or soil pollution occurred. Dust emissions from grit-blasting and shot-blasting operations are

controlled by fi lters. Boiler emissions are monitored and are within legal limits. Bunds and

storm water oil separators have been constructed to contain oil spills. Storm water effl uent is

regularly monitored and has been found to be compliant with legislation. Soil pollution by oil

spills on customers’ sites is cleaned up immediately by a specialist company, contracted by

Powertech Transformers. The clean-up procedure and soil rehabilitation meets legal

requirements.

Waste management is well defi ned. Waste is separated at source and all recyclable scrap is

recycled. Hazardous waste disposal meets the Department of Water Affairs and Forestry’s

(DWAF) minimum requirements.

Last year we highlighted polychlorinated biphenyls (PCBs) which were discovered during the

ISO 14001 certifi cation audit at Desta Power Matla’s (DPM) Epping plant. The company worked

closely with the Department of Water and Energy Affairs to

manage the situation and was granted its ISO 14001 accreditation.

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.

In line with its commitment made last year to monitor oil seepage at its plant, Powertech

Calidus purchased additional spill kits and replenishes them on a continual basis, if and when

they are used.

» Aberdare Cables is drawing up a new, comprehensive emissions and pollution policy in line with international best business practice, which will go beyond compliance with the National Environmental Management: Air Quality Act, 2004.

Sust

aina

bilit

y re

port

83


Last year we reported that lead powder was seeping from the waste disposal skip at Crabtree

Electrical Accessories SA (Crabtree), in Wadeville, into the stormwater system when it rained.

The lead waste has been removed to an area away from the stormwater drain system and

drain sampling is being conducted on a regular basis. This has ensured that the seepage is

no longer occurring.

In line with plans outlined last year, Powertech Batteries spent R130 000 on upgrading the

scrubber systems at its battery factories in Port Elizabeth to reduce sulphuric acid atmospheric

emissions. It has further committed R50 million to eliminate lead

vapour from conventional grid casting. The project is progressing and

new equipment has been installed.

At Powertech Batteries, groundwater and soil was monitored for

contamination, and the latest results were all clear of sulphuric acid.

Fume emission scrubbers are currently being upgraded to minimise

contamination risks. During the year the operation compiled a plan

to address any contamination at its Ophirton facility; if found, such

contamination can now be traced back to its source, which is likely to be from past operations

or from other businesses in the area.

Energy-effi ciency

Government’s electricity rationing programme demands that the industrial sector cuts

electricity usage by 10% – a direct impact on Altron’s businesses. The company is fully

committed to reducing its energy consumption, and its group-wide Powersave@Altron initiative

continues to educate and inform employees and operations on how to be more energy-

effi cient. During the year under review Altron’s energy consumption was 115 030 473 KwH.

This year the group will be concentrating on reducing or eliminating the unnecessary use of

offi ce equipment, lighting systems, computers, heating and cooling systems. A formal reporting

‘pack’ will be developed alongside the evaluation of Eskom’s Baseline Proposal.

Altron’s most signifi cant energy-usage comes from companies in the Powertech stable. Some

initiatives to improve energy-effi ciency include the following:

» Aberdare Cables is working with Eskom and the municipalities to establish a controlled

“on demand” energy reduction programme

» Aberdare Cables has introduced ‘recorders’ to monitor monthly energy consumption more

accurately. Benchmarking against incomplete historical data is proving a challenge

» Formal and ad hoc checks of energy-usage are carried out as part of the group SHERQ

internal audit programme, and energy control forms part of the monthly management

meetings

» Energy discussions take place at the SHERQ committee meetings, and energy graphs and

targets are updated monthly and made available on the company intranet

» Powertech IST Otokon has developed PowerStatus™ as part of its energy management

software suite.

» Battery Technologies Battery Technologies reduce carbon

production by introducing hybrid power schemes to applications running on Diesel-Electric generators. Using this technology allows such generator systems to run more effi ciently and greatly reduces the carbon that they produce. Integrating this with Renergy Technologies’ (Rentech) solar photovoltaic systems further reduces carbon emissions, as the combination of the two technologies allows freedom to balance the economic/environmental trade-off. Examples of photovoltaic traffi c management systems by Rentech can be found at several intersections in Johannesburg where the traffi c lights are run purely on solar energy and batteries – the best known example being the Grayston/Rivonia Road, Sandton intersection. The use of solar power is zero-carbon emitting and it can be used with traditional energy resources to reduce overall carbon footprints.

» Powertech Batteries manages battery waste by collecting and replacing batteries on a ‘one-to-one’ exchange. It has maintained a collection rate of over 100% in the automotive industry, and has increased its collection rate to 100% in the industrial markets (up from 40% to 50%).

84



Product responsibility

In pursuit of cradle-to-grave responsibility, Powertech has assessed the potential impacts of its

products and devised solutions to ensure that they do not harm society at large, or the

environment at any point in their life cycle. Following up on issues raised last year, we can

report the following:

» Aberdare Cables has undertaken to discontinue the use of pesticides on cable drums with

immediate effect, and is investigating alternatives that are not harmful to the environment

» Powertech Batteries commenced devising a long-term strategy to ensure ‘cradle to grave’

stewardship of batteries, eventually ensuring its products can be traced through the raw

materials used, until they are recycled

» Powertech Batteries is promoting battery collection and recycling in other parts of Africa in

which it operates, and where necessary engages third parties to process the batteries.

Performance fi gures for the management of waste and recycling are contained in the detailed

report on www.altron.com/sustainability2009/index.asp

Conclusion

This report has categorised its impacts into 23 material issues which we currently believe to

pose the greatest impact on the long-term sustainability of our businesses. Since our last

report – for the prior year – some issues have become more important, while others, being

largely resolved, are now less material to the group. Clearly sustainability is not a fi nite

challenge that fi nds a quick resolution, but a responsibility that will demand continuous

engagement, adaption of policy, new indicators of performance and innovative approaches,

in order to mitigate impacts and progress our goals.

Where our vision and targets are clear, such as our mission to transform against the dti CoGP,

the Altron group has made steady and sure progress. In other areas, we are still working on

management systems and measurement protocols, essential tools and navigational markers

required to help us progress on this journey. We are committed to sound and sustainable

practices in all aspects of our business, balancing – in these straightened economic

circumstances – the rigours of cost containment, effi ciencies, and sound business practices with

the expectations of all our stakeholders. Next year, as we improve our ability to manage

sustainability, so will the quality of our reporting improve. More indicators will be defi ned and

we will report more accurately on our progress against the most material issues affecting the

Altron group.

Completing our report on social, environmental and economic impacts (the triple bottom line)

is Altron’s detailed corporate governance report, which follows on page 90.

Sust

aina

bilit

y re

port

85


Sustainability report – 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, medium and long term, particularly with regard to managing the key challenges associated with economic, environmental and social performance

18

Org

anis

atio

nal p

rofil

e

2.1 Name of the organisation Inside front cover

2.2 Primary products, brands and/or services 4 – 5

2.3 Operational structure of the organisation 4 – 5

2.4 Head office location 223

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 4 – 5

2.7 Markets served 4 – 5; 30 – 41

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

5064 – 676 – 76 – 7172

2.9 Significant changes in the reporting organisation during period under review n/a

2.10 Awards received during the reporting period 56

Rep

ort s

cope

and

bou

ndar

y

3.1 Reporting period 50 – 51

3.2 Date of most recent previous report 50 – 51

3.3 Reporting cycle 50 – 51

3.4 Contact details for further information about this report 50

3.5 Process for:» determining materiality» process for prioritising topics in the report» identifying stakeholders expected to use this report

50 – 51

3.6 Report boundary 50 – 51

3.7 Limitations on the scope or boundary of the report 50 – 51

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities and outsourced operations 50 – 51

3.12 GRI table 85

Gov

erna

nce

4.1 Governance structure of the organisation 90 – 111

4.2 Indicate whether the chairman is also an executive officer and, if so, reasons for this arrangement 94 – 95

4.3 Number of independent and/or non-executive members 94

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the board 90

4.14 List of stakeholder groups engaged by the organisation 52 – 54

4.15 Basis for identification and selection of stakeholders with whom to engage 50 – 51

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

55

EC7 Procedures for local hiring and proportion of senior management hired from the local community 64 – 67

EN10 Percentage and total volume of water recycled and reused n/a

EN23 Total number and volume of significant spills 78, 82 – 83

EN26 Initiatives to mitigate environmental impacts of products and services and extent of impact mitigation 77 – 84

EN30 Total environmental protection expenditures and investments by type 77 – 84

LA3 Benefits provided to full-time employees that are not provided to part-time or temporary employees 66; 112 – 119

LA7 Rates of injury, occupational diseases, lost days, absenteeism and fatalities 68 – 70

LA8 Education, training, counselling, prevention and risk-control programmes in place to assist workforce members, their families or community members regarding serious diseases

64 – 70

LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

64 – 65 74 – 75

LA13 Composition of governance bodies in terms of diversity and breakdown of employees per category according to gender and other relevant indicators of diversity

66 – 67

86


Altron shareholder analysis – compiled by VACO utilising the company’s transfer secretaries records as at 27 February 2009

Shareholder spread – ordinary shares

Number of shareholdings % Number of shares %

1 – 500 shares 1 358 35.10 323 280 0.30 501 – 1 000 shares 775 20.03 639 583 0.61 1 001 – 5 000 shares 1 201 31.04 2 913 771 2.76 5 001 – 10 000 shares 205 5.30 1 530 110 1.4510 001 – 50 000 shares 236 6.10 5 369 320 5.0850 001 – 100 000 shares 39 1.01 2 802 907 2.65Over 100 000 shares 55 1.42 92 090 160 87.15

3 869 100.00 105 669 131 100.00

Distribution of shareholders – ordinary shares


Banks 26 0.67 789 884 0.75Close corporations 65 1.68 98 800 0.09Endowment funds 35 0.90 339 198 0.32Holding company 1 0.03 50 630 527 47.91Individuals 2 809 72.60 14 619 612 13.84Insurance companies 24 0.62 6 268 983 5.93Investment companies 22 0.57 1 191 715 1.13Medical aid schemes 5 0.13 24 185 0.02Mutual funds 114 2.95 12 043 786 11.40Nominees and trusts 487 12.59 2 016 247 1.91Other corporations 43 1.11 67 421 0.06Private companies 103 2.66 1 405 771 1.33Public companies 9 0.23 63 901 0.06Repurchased shares 1 0.03 3 246 469 3.07Retirement funds 125 3.23 12 862 632 12.18

3 869 100.00 105 669 131 100.00

Sustainability report – Shareholder analysis

Stock exchange performance during the past six years

2009 2008

OrdinaryParticipating

preference OrdinaryParticipating

preference

Market value per share (cents)

– at year-end 19.15 19.20 3 700 3 600

– highest 43.90 42.40 5 600 5 100

– lowest 1 830 1 775 3 500 3 320

Number of shares traded (000) 18 506 96 723 14 496 89 796

Value of shares traded (R000) 616 580 2 928 417 654 634 3 866 991

Total volume traded as % of total issued shares 17.51 40.36 13.72 37.8

Sust

aina

bilit

y re

port

87


Shareholder spread – participating preference shares


1 – 500 shares 4 344 51.21 668 815 0.28 501 – 1 000 shares 1 122 13.22 880 738 0.37 1 001 – 5 000 shares 1 933 22.79 4 544 975 1.90 5 001 – 10 000 shares 360 4.24 2 649 426 1.1010 001 – 50 000 shares 434 5.12 9 673 834 4.0450 001 – 100 000 shares 95 1.12 6 768 581 2.82Over 100 000 shares 195 2.30 214 471 370 89.49

8 483 100.00 239 657 739 100.00

Distribution of shareholders – participating preference shares


Banks 45 0.54 7 114 163 2.97Close corporations 89 1.05 157 005 0.06Endowment funds 73 0.86 1 198 709 0.50Individuals 6 610 77.92 16 150 701 6.74Insurance companies 53 0.62 33 853 018 14.13Investment companies 41 0.48 2 559 201 1.07Medical aid schemes 12 0.14 304 518 0.13Mutual funds 210 2.48 70 770 483 29.53Nominees and trusts 887 10.46 8 125 406 3.39Other corporations 54 0.64 92 923 0.04Private companies 148 1.74 12 178 304 5.08Public companies 10 0.12 54 870 0.02Repurchased shares 2 0.02 27 704 013 11.56Retirement funds 247 2.91 59 061 117 24.64Share trust 2 0.02 333 308 0.14

8 483 100.00 239 657 739 100.00

2007 2006 2005 2004

OrdinaryParticipating




preference

4 478 4 200 2 550 2 250 1 555 1 538 1 105 1 125

5 000 4 500 2 610 2 350 1 725 1 665 1 150 1 150

2 350 2 100 1 460 1 385 1 100 1 099 740 680

9 023 68 696 20 079 49 069 18 879 49 903 6 634 23 504

271 172 1 965 779 398 947 903 016 254 339 649 083 61 880 19 927

9.28 32.2 20.7 23.1 19.4 23.9 6.8 11.5

88



Shareholder spreadOrdinary shares Participating preference shares

Number of shareholdings %

Number of shares %

Number of shareholdings %

Number of shares %

Public 3 860 99.77 42 441 608 40.16 8 470 99.85 195 139 887 81.42

Non-public 9 0.23 63 227 523 59.84 13 0.15 44 517 852 18.58

Major shareholders holding 2% or more of the company’s listed ordinary shares as at 27 February 2009

Number of shares %

Venter WP 59 324 597 56.14

Public Investment Corporation 7 383 898 6.99

Old Mutual 4 807 987 4.55

Altron Finance (Pty) Limited 3 246 469 3.07

Investment Solutions 2 745 603 2.6

Major shareholders holding 2% or more of the company’s listed participating preference shares as at 27 February 2009

Number of shares %

Old Mutual 34 059 775 14.21

Public Investment Corporation 31 148 916 13.00

Altron Finance (Pty) Limited 27 704 013 11.56

Venter WP 16 397 832 6.84

Nedbank Group 14 663 365 6.12

Investment Solutions 11 405 865 4.76

Liberty Group 7 334 318 3.06

Sanlam 6 498 021 2.71

Momentum 4 937 217 2.06

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.

Sust

aina

bilit

y re

port

89


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.

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

participating 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.

90


Corporate governance report

Introduction

Management accepts the rights of Altron’s shareholders as the true owners of the company

and understands its own role as trustees on behalf of the shareholders. Corporate governance

provides guidance and oversight as the company seeks to find a balance between conformance

with governance principles and superior levels of performance in terms of a sustainable return

on shareholders’ investments.

Following guidance from the 2002 King Report on Corporate Governance for South Africa

(King II), the company has created an open environment for institutional activism and we

actively manage and report on the non-financial aspects of the company’s performance

through the sustainability report. In 2008, Altron again qualified for the JSE’s Social

Responsibility Investment (SRI) Index.

Engagement with shareholders and investors

In accordance with our commitment to ensure that the interests of Altron’s management are

aligned with those of all its shareholders, we manage a dedicated programme to engage with

analysts, investors and individual shareholders. This includes, among others, providing timeous,

accurate announcements and circulars to shareholders in accordance with the JSE Listings

Requirements.

When the company is not in a closed period, there is ongoing interaction between the executive

management team and a wide range of institutional investors and analysts. These interactions

take the form of one-on-one meetings held mostly on request by the institutional investors or

the analysts. Twice a year the group’s results are presented to the investor community in

Johannesburg and in Cape Town. During the full-year and half-year presentations in 2008,

these presentations were webcasted live and have since been stored on the website.

The Altron chief executive and chief financial officer also presented at a number of investor

conferences during the year and have spent some time in the UK where various interested

investors were met. Regular contact is maintained with our investor community who receive

all the media releases and other relevant company publications.

Further initiatives during the year under review included a two-day workshop at Bytes Park

in Midrand in February this year when analysts and key investors were invited to hear

presentations from each of the group’s major subsidiaries, as well as a visit to Old Mutual and

the PIC in Cape Town to canvass their opinion on the proposed adoption of amended articles of

association, and a new long-term incentive scheme for the group.

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 covered in the notice of meeting.

Every effort is made to encourage attendance and participation, including a personal invitation

from the chairman to each shareholder in the annual report to attend the annual general

meeting.

Corp

orat

e go

vern

ance

rep

ort

91


Every year, Altron seeks to gain structured feedback from analysts regarding its performance and management of the business, and again

engaged an independent firm (College Hill) to conduct an analyst poll on the company. This review rated 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. Altron will again be conducting an analyst perception audit in June/July this year after the release

of the year-end results. We have mandated Brunswicks to conduct this year’s audit.

Summary of 2008 analyst feedback to investor-related questions

Issue Analyst perceptions Company response

The investment case » Generally bullish» Need to dispose of Altech NamITech

» Altech disposed of Altech NamITech SA to Gemalto

with effect from 1 April 2009

Corporate structure » Take out Altech minorities » Collapse ‘N’ shares into ordinary shares

and create liquidity » Sell Altech NamITech

» It remains Altron’s long-term plan to consider acquiring Altech’s minorities

» Not envisaged in the medium to long term as the Venter family retain control of the Altron group through the ordinary shares. Liquidity is created by the ‘N’ shares

» Completed – see comments above

Growth prospects » Limited interest in Bytes » Bytes remains a key component of Altron’s diversified portfolio of businesses and service offerings

» Powertech seen as short-term growth driver

» Powertech restructured to compete in the current demand environment. Continues to benefit from infrastructure-related projects in both the private and public sectors

» Altech medium- to long-term growth driver

» Altech continues to exploit broadband opportunities both locally and in East Africa

» Interim results will prove a barometer for future growth

» Global financial crisis and declining commodity prices negatively impacted Altron’s results for the full year, despite good interim results in 2008

» Call for an investor day » A two-day investor conference was held on 16 and 17 February 2009

Investor relations » More site visits required» The need to meet divisional managers» Altech needs to improve on investor

relations

» See comments above» Occurred at the Altron investor conference» Altech recently appointed external consultants to bolster

its investor relations department and programme

92


Corporate governance report continued

Issue Analyst perceptions Company response

Corporate governance » ‘N’ shares still an issue» Chairman – role, remuneration and title » The need for more independent directors

» See comments on previous page» On 1 March 2009 Dr Bill Venter assumed the role of

non-executive chairman of Altron having previously been a full-time chairman. This necessitated the chairman forfeiting approximately R1.3 million of his salary to align himself with market-related fees for chairmen

» Two additional independent non-executive directors were appointed in the last financial year, one of whom was a black female

» With the resignation of Mark Lamberti during the year, there are now 16 directors, seven of whom are executive, two are non-executive and the balance of seven are independent non-executive directors

» Barbara Masekela has been appointed as a member of the nomination committee and Norman Adami a member of the audit and remuneration committees

Progress on transformation

» Overall – transformation is not a problem – investor community happy. If any changes to be made increase black directors on boards

» Overall perception is satisfactory/good

» See above comments and sustainability report (Transformation)

» Altron ranked by Financial Mail/Empowerdex as number 1

in General Industrials sector and number 32 overall in SA for B-BBEE

» The Altron group is tracking towards the targets set out in its Transformation Vision 2012 document

Disclosure » Bytes and Altech could improve their disclosures, ie more transparency

» Investor day to get more information on

subsidiaries

» Altech and Bytes improved their disclosures to the investor community – the Altron investor conference being a case in point. This conference included presentations by each of the material subsidiaries of the group

» Altech, Bytes and Powertech each presented at Altron’s year-end results presentation while Altech held its own results presentation

» See comments on previous page

Impressions of company management

» Generally very positive» Some succession concerns with Altech’s

senior management

» COO appointed at Altech on 1 January 2008» Detailed succession planning policy implemented

Key issues facing the company

» Altech strategy » Slowdown in infrastructure spend and the

general industrial slowdown» Transformation » The sustainability of growth off a high

base» Illiquidity of share

» Altech has developed, among others, a comprehensive broadband strategy for East Africa

» Self-evident following the global financial crisis during the latter part of 2008

» The Altron group is tracking towards the targets set out in its Transformation Vision 2012 document

» Self-evident – see Altron trading statement issued in February 2009 and year-end results announcement

» See comments on previous page

Corp

orat

e go

vern

ance

rep

ort

93


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 has noted the new recommendations contained

in King III, tabled for comment in February this year, and will ensure that the appropriate

principles and guidelines are applied at the relevant time.

In 2008, the company engaged Corporate Governance Accreditation (Pty) Limited (CGA) to

again independently verify Altron’s corporate governance procedures and policies. CGA is

endorsed by the Institute of Directors which was largely responsible for driving the compilation

of King III. All areas of governance are covered by the gap analysis, including board functioning,

composition, roles and duties of executive and non-executive directors, chairmen of the board

and committees 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, B-BBEE and HIV/Aids issues.

We addressed the governance deficiencies recognised in 2007 and, as a result of this

continuous improvement, Altron became the first listed company in South Africa to be

independently accredited for its corporate governance and was awarded a Gold certificate by

CGA, achieving a score in excess of 80%. In response to the CGA process, Altron has run a check

on all the items that were noted in the exception report and 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.

For the past three years, an internal audit has been conducted on the secretarial departments

of both Altron and Powertech regarding all statutory forms and registers, as well as company

returns, with a “good” rating being obtained for the past two years by both entities. Altech and

Bytes were included in this process for the first time this year, with Bytes achieving a “good”

rating, and Altech a “corrective action required” rating.

The Altron board

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 are set out in its charter (initially approved in April

2002 and revised and adopted by the board annually since February 2006). The charter,

approved by the board, is contained in the board minute book and is provided to incoming

directors as part of their induction programme.

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.

94



Transparency

Full and timeous disclosure of information to stakeholders is prescribed by various policies governing

communication and conduct with stakeholders. During the year under review, Altron updated its

formal disclosure policy, 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. During the past year the charter was amended to contain a detailed procedure

for any member of the board to follow in the event that he/she wishes to seek external

independent advice at the cost of the company.

Composition of the board

During the past two years, as a result of analyst perception audits, observations and comments

made at the annual general meetings, three major issues have consistently been raised

concerning Altron, namely the lack of black female board members, the preponderance of

executive, rather than non-executive directors, and the long-term role of the chairman as a

full-time chairman. Significant progress has been made in addressing these issues with Barbara

Masekela being appointed to the Altron board on 1 February 2008 and Norman Adami and

Dawn Mokhobo being appointed to the Altron board on 3 November 2008. All three of these

directors are independent non-executive directors.

Consistent with the company’s board charter, Altron has a unitary board, constituted to both

lead and control the company. Of the 16 serving directors, nine are classified as non-executive

directors, of whom seven are independent (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), and seven are executive directors. Four of the

independent non-executive directors are black directors and of those, half are black women.

Chairman and chief executive

In line with best practice, the roles of chairman and chief executive are separate. On 1 March

2009, the role of Dr Bill Venter, founder and former chief executive of the group, changed from

full-time chairman to non-executive chairman, following his successful guidance of the

transition process that has seen his son Robert Venter take over the running of the business as

chief executive. To ensure substance over form, remuneration consultants were engaged to

establish an appropriate level of remuneration for the non-executive chairman. This material

change in both the function and remuneration of the chairman is fully supported by the

remuneration committee, the nomination committee and the board.

Corp

orat

e go

vern

ance

rep

ort

95


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.

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. 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.

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. 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.

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 participating in deliberations or decision-making

processes that could in any way be affected by vested interests.

96



Effectiveness of the board

The board evaluates its own effectiveness every two years – or more often if circumstances

require – last completing this exercise in 2007/8. This self-evaluation exercise examines six key

areas: strategy and planning, board structure and role, meeting processes, performance

monitoring, board and director responsibilities, and board culture and relationships. Self-

evaluation questionnaires are currently with all 16 board members for completion, the findings

of which (and remedial steps taken, if any) will be reported to shareholders in the 2010 annual

report. In addition to the board evaluation, Altron’s board members are also conducting an

evaluation of each board committee (an exercise over and above any self-evaluation exercises

conducted by each of the committees).

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.

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.

Counsel and guidance is provided to the board on their powers and duties, individually and

collectively, by the group company secretary. 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 to laws and

regulations affecting the group or its businesses and professional and skills training. During

2008, Keith Rayner, an independent consultant and expert in the fields of corporate

governance, JSE Listings Requirements and related aspects of the Companies Act, presented a

series of talks to the group’s directors on various topical issues affecting directors, notably the

JSE Listings Requirements, insider trading and governance.

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 subcommittees 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.

Corp

orat

e go

vern

ance

rep

ort

97


The group company secretary is well versed in most aspects of corporate governance, having

been an active member of the accounting and auditing task force of the King Committee

responsible for the drafting of King III. His involvement with the King Committee has facilitated

Altron and its board remaining at the cutting edge of best practices and procedures in the field

of corporate governance.

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. Six board meetings and two

strategy sessions were held during the past financial year. The accompanying table details the

attendance by each director at board meetings held during the year under review:

Attendance at meetings

Director

Board

2008 2009

Mar# May Aug Oct Nov# Feb

Dr WP Venter +

RE VenterNJ Adami —1 —1 —1 —1 —1

MC BerzackN ClaussenPMO CurleMJ LeemingDr PM MadunaBJM MasekelaJRD ModiseDNM Mokhobo —1 —1 —1 —1 —1

PD RedshawDr HA SerebroAMR Smith —2 —2

CG VenterPL Wilmot

# Special board meetings.

Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.+ Dr WP Venter was away on business overseas and was unable to attend this unscheduled special board meeting. He did

however provide his comments to the meeting by way of a written paper which he compiled following the special Altech board meeting held on 13 March 2008, which he had attended regarding the identical business as the special Altron board meeting.

1 Appointed to the Altron board on 3 November 2008 (same date as meeting).2 Appointed to the Altron board on 1 August 2008.

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 were

reviewed and updated during the period under review to align them further 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 shareholder queries.

98



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.

Executive committee

» Members – Robert Venter (chairman), Norbert Claussen, Peter Curle, David Redshaw,

Alex Smith and Craig Venter. Subsequent to the financial year-end, the board resolved

to appoint Seara Macheli-Mkhabela as Group Executive: Corporate Affairs of Altron.

Seara Macheli-Mkhabela will join the Altron executive committee on 1 June 2009. The

executive committee structure appears on pages 22 to 23.

» Composition and proceedings – The committee meets monthly with additional meetings

convened as and when necessary

» Role – The committee 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.

Audit committee

» Members – Peter Wilmot (chairman), Norman Adami, Mike Leeming and Jacob Modise

» Composition and proceedings – Both Alex Smith (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:

– 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

– dispensing 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

– 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.

Corp

orat

e go

vern

ance

rep

ort

99


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

– 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 20% 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 prior year, and preapproved

by the audit committee (within the financial parameters prescribed by the committee),

comprised mainly compliance and other assurance-based engagements, as

listed below:

– Preparation and submission of tax returns, compliance services and company

deregistration – R25 200

– Certification fees payable under the management services agreements – R67 900

– Undertaking an import/export audit (two contracts) – R300 000

– Preparation and submission of a tax return and tax computation to the Hong Kong

Inland Revenue Department – R45 850

– Advice regarding the conversion to new accounting pronouncements in Spain

– R77 400

– Procedures to verify a company dividend yield – R20 000

– Procedures of the SMECP in terms of the dti regulations – R50 000

– Verification of royalty payable and the issuing of a royalty report – R10 000

– Review of export documentation – R100 000

– General tax advice and compliance – R645 000

– Assistance in understanding when an entity can apply hedge accounting under new

Spanish law – R103 200

– Audit of import rebate credit certificates in terms of the requirements of the

International Trade and Administration Commission of South Africa – R100 000.

These services, totalling R1.55 million, represent 7% of the total group audit fee for the

period under review, less than half the 20% limit prescribed.

With effect from 1 March 2008, the Altron audit committee was appointed as the

formal audit committee of both Bytes and Powertech, as contemplated in the Corporate

Laws Amendment Act. Peter Wilmot and Mike Leeming, both independent non-

executive directors of Altron and members of the Altron audit commitee, chair the

Bytes and Powertech financial review and risk committees respectively.

100



» 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

– 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

– reviewing half-year results 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 to management and

other users of financial information

– satisfying itself regarding the experience and expertise of Altron’s finance director

– discussing any problems and reservations arising from the year-end audit and any

related matters that the external auditors may wish to discuss

– addresses the section 269, 270A and 300A requirements set out in the Corporate Laws

Amendment Act, as pertains to Bytes and Powertech.

External auditors attend meetings by invitation. At the year-end audit committee meeting the

chairman ensures that senior management and the external auditors as well as internal audit

are able to report back to the committee chairman and members 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.

In the year under review, the audit committee conducted an evaluation of the effectiveness

of the external auditors. The findings of the evaluation of the six major areas of responsibility

of the external auditors were as follows:

Corp

orat

e go

vern

ance

rep

ort

101


» Audit planning – rated between “meets objectives/requirements” to “excellent”. Management

was given the opportunity to provide input, the external auditors were generally responsive,

and the “materiality” used for the audit was explained to the audit committee

» Technical abilities, audit process/outputs and quality control – rated towards “exceeds

objectives” and “excellent”. Eight key performance areas received highly positive comments,

while there was only one area of concern: The external auditors fail to adequately present

and explain their internal quality control procedures, standards and processes to the audit

committee as well as demonstrate their compliance therewith*

» Business insight – participants felt that the external auditors demonstrated a comprehensive

understanding of Altron’s systems and businesses in general, as well as an excellent

knowledge of Altron’s internal controls and reliance on internal audit

» Consultancy abilities – It was found that KPMG Inc had demonstrated themselves to be

extremely professional and technically competent

» Independence – rated extremely high. It was found that the external auditors maintained

independence, integrity and objectivity, clearly articulating their independence credentials,

and complied rigorously with Altron policy governing the use of external auditors for

non-audit-related services

» General observations reflected that the external auditors:

– contributed significant value-add to Altron’s businesses

– complied with the dti CoGP (and are a level 3 contributor)

– understood well the audit committee and its chairman’s expectations

– maintained an open dialogue with the audit committee (particularly demonstrated in the

impairment of the Altech NamITech goodwill).

*Company response: At the February 2009 audit committee meeting, the external auditors demonstrated their internal quality control procedures, standards and processes, as well as compliance therewith. In addition, both the audit committee mandate and the compliance checklist for the audit committee have subsequently been updated to ensure that these matters are addressed and verified by the committee and the external auditors at the appropriate time during the year.

The audit committee is currently conducting a self-evaluation exercise into its effectiveness and

will be reporting its findings to shareholders in the 2010 annual report.


Members (and invitees)

Audit

2008 2009

Apr Oct Feb

PL WilmotNJ Adami —1 —1 —1

MJ LeemingJRD ModiseRE Venter 2 2 2

N Claussen 2 2 2

PD Redshaw 2 2 2

AMR Smith 2 2 2

CG Venter 2 2 2

Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.1 Appointed as a member to the audit committee on 15 April 2009.2 Attends by invitation and is not a member of the audit committee.

102



The internal and external auditors have unlimited access to the chairman of the committee.

The internal audit department reports directly to the audit committee and is also responsible

to the chief financial officer on day-to-day matters.

The external auditors and the head of internal audit attend Altron’s annual general meeting

to answer any queries raised by stakeholders.

Re-appointment of independent auditors

At an Altron audit committee meeting held on 26 February 2009, 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 services to Altron or its subholding companies

which fall outside 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 99 of this report)

» including the individual registered auditors who undertake the audit, does 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 the South Africa Independence laws and the applicable rules of the

International Federation of Accountants (IFAC), and nominated the re-appointment of KPMG Inc

as registered auditors for the 2009/10 financial year. On 27 February 2009, the Altron board,

subject to shareholder approval, re-appointed KPMG Inc and Mr Mark Hoffman, the audit

partner, as the independent registered auditors of Altron.

The Altron audit committee also considered and satisfied itself that KPMG Inc and its advisors

are registered on the JSE Register of Auditors as contemplated in paragraph 3.86 of the JSE

Listings Requirements.

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 129 dealing with

the approval of annual financial statements.

Corp

orat

e go

vern

ance

rep

ort

103


The internal audit function serves management and the board by performing independent

evaluations of the adequacy and effectiveness of group companies’ controls, financial reporting

mechanisms and records, information systems and operations, and provides additional assurance on

safeguarding group assets and financial information. The removal of the head of internal audit would

be a matter for the board as a whole.

Throughout the group, detected fraud decreased from 6 to 3 incidents over the reporting period, but

represented a more than threefold increase in value of nearly R3.8 million compared to the previous

year. However, a full recovery was made in the case of one incident involving R3.6 million, resulting in

a net loss (net of recovery) of R167 000.

Incidents of theft increased from 59 to 75, with the net loss increasing by 35% to R4 million for the

year compared to 2008. An aggressive drive to re-enforce Altron’s code of conduct, and the ethics of

the group received impetus with the introduction of the Deloitte Tip-Offs Anonymous independent

hotline from 1 March 2007, further strengthening 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 7 in the previous

year to 8, break-ins increased from 6 to 10, while armed robberies decreased from 11 incidents in

the previous year to 6. The total loss from all incidents (internal and external) increased from

R5.08 million to R7.85 million, before insurance recoveries.

PricewaterhouseCoopers is due to perform an independent assessment of the effectiveness of the

Altron internal audit department early in 2010. Their last assessment, performed in 2005, found the

Altron internal audit department complied 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.

Remuneration committee

» Members – Jacob Modise (chairman), Norman Adami, Myron Berzack, Dr Bill Venter and

Peter Wilmot

» 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 three times 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 in line with the Altron remuneration philosophy.

Self-assessment exercise

In February 2009, following a two-year cycle, the committee conducted a self-assessment exercise to

review its functioning and effectiveness. Questions for assessment help determine that 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.

104



Overall, the findings of the remuneration committee assessment revealed an extremely positive

result with participants recording that only minor improvements were required to the

functioning and effectiveness of this committee.

The members and invitees appeared to demonstrate a sound appreciation for the need and

benefits of having a remuneration committee and displayed that they had applied their minds

to answering the questions contained in the self-assessment.

From a committee perspective, the three major focus areas to address in the future include:

» the relevance (or not) of discussing and debating pension fund and medical aid benefits

and group life cover at remuneration committee meetings

» tabling the directors’ and officers’ insurance cover at remuneration committee meetings

for noting

» the need to remain abreast of remuneration best practices and recent trends in

remuneration practices including the circulation of remuneration publications to members

of the committee and board.

Furthermore, the committee has, during the year:

» 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 introducing

an attendance fee component as opposed to solely a retainer

» reconstituted the committee so that a majority of its members are now independent

non-executive directors.



Remuneration

2008 2009

Apr Oct Nov Feb

JRD ModiseNJ Adami —1 —1 —1 —1

MC BerzackDr WP Venter 2

PL WilmotRE Venter 3 3 3 3

AMR Smith —4 4 4 4

Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.1 Appointed as a member to the remuneration committee on 15 April 2009.2 Participated by way of teleconference.3 Has right of attendance but is not a member of the remuneration committee.4 Attends by invitation and is not a member of the remuneration committee. Commenced attending meetings from

1 August 2008.

For further details on the remuneration of Altron’s executives see the remuneration report on

page 112.

Corp

orat

e go

vern

ance

rep

ort

105


Risk management committee

» Members – Mike Leeming (chairman), Norbert Claussen, David Redshaw, Dr Harold Serebro,

Alex Smith, 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 committee last conducted a self-evaluation exercise during 2007, and will again

conduct a self-evaluation later this year, to be reported on next year. The committee believes

that its composition, frequency of meetings and authority are adequate and that it operates

in an atmosphere of openness and trust.

Over the last number of years, the group has made a concerted effort to engage an increasing

number of independent assurers to verify the risks. These included the following:

– MS Alexander & Associates and PricewaterhouseCoopers – Environmental

– CGA – Corporate Governance

– Aurum Institute for Health Research – HIV/Aids

– Empowerdex – B-BBEE

– College Hill, Ince and Brunswicks – shareholder/analyst perception audits.

106



Furthermore, the risk management committee has:

» formed the Altron Information Management (IM) Council, established with the dual purpose

of ensuring sound information technology (IT) governance and effective collaboration

between group companies. Immediate focus areas are as follows:

» IM strategy development

– Innovation

– Standards definition

– Policy setting

– Procurement

– Risk management

– Group projects and platforms

– Skills development

» established a reputable independent fraud hotline with Deloitte

» adequately reported to stakeholders on the group’s material risks as contained in the 2008

Altron annual report.



Risk

2008

Apr Oct

MJ LeemingN ClaussenPD RedshawDr HA SerebroAMR Smith —1

RE VenterCG VenterPL Wilmot

1Appointed as a member to the Altron risk management committee on 4 August 2008.

Submitted apologies and was granted a leave of absence in terms of the company’s articles of association.

Corp

orat

e go

vern

ance

rep

ort

107


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 accompanying table lists the major consolidated risks identified by the

board at the end of the review period and the section of the report where they are dealt with

more comprehensively:

Strategic risks Report section

Political uncertainty Chairman statement and CE review

Access to funding CFO report

Performance of individual operating companies

CE review, CFO report and operational review

Compliance to regulatory environment Corporate governance report andsustainability report – relating to various material issues

Human capital skills shortage Sustainability report

B-BBEE structure – meeting EE targets Sustainability report

Lean management structure Corporate governance report (succession planning)

Dependence on Powertech/Aberdare CE review

Stakeholder relationships Sustainability report – relating to various material issues

RSA dependency Geographical highlights

Capacity constraints CE review and operational review

Succession planning Corporate governance report (nomination committee)

Loss of key agency/principal relationships Operational review and sustainability report

108



Nomination committee

» Members – Dr Penuell Maduna (chairman), Myron Berzack, Mike Leeming, Barbara Masekela

and Dr Bill Venter

» Composition and proceedings – The committee comprises a majority of independent,

non-executive directors and was established during the 2004/5 reporting period. It is

deemed appropriate, from a corporate governance perspective, that the committee be

chaired by an independent non-executive director, as opposed to Dr Bill Venter, the non-

executive chairman of Altron, considering the Venter family’s interest and close involvement

in the company and its operations. 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,

and 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

» Role – The committee is responsible for identifying and evaluating suitable potential

candidates for appointment to the board as well as succession planning. Altron regards the

role of this committee as vital to the development of a diverse leadership, representative of

all race groups and in accordance with both the spirit of and the targets set out in the dti

Codes of Good Practice. Employment equity at middle and senior management levels remains

a key challenge across the group. The activities of this committee therefore form an integral

part of Transformation Vision 2012 for identifying and developing leadership talent.

A sophisticated succession planning policy has been finalised and is being implemented

throughout the group. This formal policy covers the entire leadership structure, from

executive to management level. The procedure for succession planning is conducted

bi-annually at each of the three subholding groups and includes such items as:

– the identity and profile of the incumbent, such as age, etc

– potential successors to the position, from both internal and external sources

– the grade for the position, qualifying potential for mobility

– assessment of the development requirements for both the incumbent and the successor

– the schedule describing the timing of succession for each post.

Initiatives such as the two-year leadership development programme (drawn from the Altron

Young Presidents’ Club and run by the da Vinci Institute in association with the Altech

Academy) form part of this overall strategy.

While the committee does not have the authority to appoint directors – a board function – it

does also make 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.

Corp

orat

e go

vern

ance

rep

ort

109




Nominations

2008

June

Dr PM MadunaMC BerzackMJ LeemingBJM Masekela —1

Dr WP VenterRE Venter 2

1 Appointed as a member to the nomination committee on 4 August 2008.2 Has right of attendance but is not a member of the nomination committee.

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 whether or not they comply with the

Codes including suggesting corrective actions

– aligning the Altron Transformation Vision 2012 document with the Codes (exercise

completed) as well as with relevant sectoral charters

– 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 serves the future sustainability of the Altron group.

110



Corporate ethics

The issue of corporate ethics is one that receives attention from the highest level of

management within Altron, with the chief executive being ultimately responsible for

implementing the code of ethics.

The Altron risk management committee regularly assesses the company’s vulnerability and

risks associated with bribery and corruption. Altron is aware that it operates in countries that

have been identified as high-risk environments for bribery and corruption, including Kenya,

Lesotho, Mozambique, Nigeria and Uganda. Other risk areas include the company’s involvement

in various government contracts that may require government licensing.

Corporate code of conduct

The Altron code of conduct (inside front cover) is endorsed and guided by the boards of Altron,

Altech, Powertech and Bytes 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 last reviewed by the Altron audit committee in February 2009 and was amended

to bring the same in line with best business and corporate governance practices. Of particular

note: the code is now aligned with the corporate gifts and entertainment policy, and all

donations to political parties have to be approved by shareholders. No donations were made

to political parties during the period under review.

Corporate gifts and entertainment policy

During the period under review, Altron released a new corporate gifts and entertainment policy,

which was circulated to all managers and employees. This policy embraces the Prevention and

Combating of Corrupt Activities Act of 2004, and sets out clearly and prescriptively the

boundaries that define corrupt activities in terms of the giving and receiving of gifts and/or

entertainment. The policy defines categories of gifts and entertainment and describes the

approvals required, as well as the immediate or ultimate vested authority responsible.

Procedures for reporting criminal behaviour and disciplinary action are also set out in the policy

and employees are encouraged to report any such behaviour to the Deloitte Tip-Offs

Anonymous hotline.

Corp

orat

e go

vern

ance

rep

ort

111


On employment, Altron employees receive the Altron policy manual which includes a corporate

code of conduct. Copies of all relevant policies regarding corporate ethics are made available on

the Altron intranet, and an ongoing employee awareness campaign makes use of posters, the

in-house publication Profile and staff magazines to highlight the issue. Similar marketing

channels are used to publicise the group’s whistle-blowing hotline. This confidential fraud

hotline is independently managed by Deloittes which, together with the Altron internal audit

department and the relevant subholding group security officers, monitors Altron’s compliance

with ethical practice.

Incidences of criminal activity reported and dealt with by the Altron group during the period

under review are detailed above under ‘Internal controls and internal audit’ on page 103.

Share dealings

Altron and its subholding companies 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.

112


Remuneration report – 2008/2009

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-average industry 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.

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 mainly of independent non-executive directors and

is chaired by Jacob Modise (independent non-executive). Other members are Norman Adami,

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.

Remuneration philosophy and policiesAltron’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, 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.

113


Rem

uner

atio

n re

port

The current chairman, Jacob Modise, was appointed as chairman of this committee on

1 February 2006.

Subsequent to the resignation of Mark Lamberti from the committee in July 2008, Norman

Adami, an independent non-executive director of Altron, was appointed as a member of the

Altron remuneration committee on 15 April 2009.

Composition and proceedings

The committee meets bi-annually, unless additional meetings are required. During the review

period, the committee met three times.

The committee chairman reports formally to the board on its proceedings after each meeting

of the committee and attends the annual general meeting to respond to any questions from

shareholders regarding the committee’s areas of responsibility.

Role

The committee operates under a board-approved mandate and terms of reference, updated

during the review 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

» 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.

114


Remuneration report continued

Self-evaluation

During the period under review, the committee conducted a self-assessment exercise into its

effectiveness. These exercises are conducted by the committee every other year and provide

members with the opportunity to identity areas of weakness (and strength) regarding their

functioning and to implement and adopt appropriate remedial measures to address

weaknesses.

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.

Areas for improvement identified as a result of the 2008/2009 self-evaluation included:-

» the relevance (or not) of discussing and debating pension fund and medical aid benefits

and group life cover at remuneration committee meetings

» tabling the directors’ and officers’ insurance covers at remuneration committee meetings

for noting

» the need to remain abreast of remuneration best practices and recent trends in

remuneration practices including the circulation of remuneration publications to members

of the committee and board.

With the ever-changing dynamics of the global economy and shifting shareholder and employee

expectations, training will assist the committee in dealing with and negotiating increasingly

complex, performance-driven reward packages. During the review period the committee was

regularly appraised by Mabili Consulting on recent trends regarding senior executive pay

practices which formed the basis of the new incentive schemes approved by shareholders on

11 May 2009. The committee also received frequent articles and updates on, among others,

policy and practice affecting non-executive directors’ remuneration, international remuneration

trends and practices as well as remuneration committees, including the governance thereof.

A further consideration identified by the remuneration committee as a result of the self-

evaluation exercise conducted during the review period, included the need to continue to focus

on succession planning throughout the group. During 2008/2009 a formal policy on succession

planning was adopted by the board, and a diligent exercise conducted at both Altron and each

of its subholding groups 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 and severance arrangements

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.

115


Rem

uner

atio

n re

port

Altron’s policy when terminating the services of an individual for operational reasons is

to pay a minimum of two weeks of the annual TCOE for each completed year of service.

Altron aims to apply the above policy to all employees, including Altron executive directors,

but is subject to negotiation in special circumstances.

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, Mabili Consulting, 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.

During the review period and following the resignation of Diane Radley, the erstwhile chief

financial officer of Altron, Spencer Stuart assisted Altron in identifying and interviewing

potential successors for this position.

Except for proferring advice and guidance on remuneration-related matters and Spencer Stuart

assisting Altron in identifying a potential successor for the chief financial officer position at

Altron, none of the aforementioned remuneration consultants have any other connection with

or interest (whether economic, financial or otherwise) in Altron.

Executive directors’ remuneration

The remuneration committee reviewed and revised the TCOE packages of executive directors at

its meeting in February 2009. 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 the 2008/2009 financial year towards executive remuneration,

and those which it intends to continue applying, are as follows:

» to ensure remuneration drives the overall key business strategies and creates 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

116



» 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 which satisfies itself that the performance

criteria utilised are relevant, stretching and designed to enhance shareholder value. Under this

plan, the chief executive may earn a bonus of up to 75% of his TCOE. Other executive directors

and executive committee members may earn between 55% to 65% of their TCOE.

Group and subsidiary financial performance targets include:

» headline earnings per share growth

» return on operating assets

» return on equity

» a discretionary portion equal to 30% of their bonus which includes specific key performance

areas and stretch targets for each executive to attain.

These targets vary according to individual company needs. In all cases, 70% 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 the following:

» 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

» Succession planning and talent management – identifying new and skilled/semi-skilled

talent into the business and maximising existing talent, all while being mindful of succession

planning throughout the group and managing the transformation agenda.

117


Rem

uner

atio

n re

port

During February 2009, the remuneration committee resolved that in respect of the 2009/2010

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. Between 10% and 20% of the 30% discretionary

component is assigned to the achievement of predetermined broad-based black economic

empowerment targets for each executive’s area of responsibility.

At its meeting in May 2008, 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. Annual

performance bonuses are not guaranteed, they are discretionary and vary according to each

individual’s performance achievement. Performance measures are stringently monitored and

executives are penalised in cases where targets are missed.

The remuneration committee recently, in conjunction with remuneration consultants, amended

Altron’s annual incentive plan to ensure that the same aligns with best practice and that

executive directors and senior management who outperform stretch targets are appropriately

rewarded subject to stipulated capping limits.

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 have historically been made annually to maintain an overall cap of 8.5 x base salary for

the chief executive and 6.5 to 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 to 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.

118



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.

During the review period, the remuneration committee, in conjunction with remuneration

consultants engaged in an exercise to review and amend Altron’s long-term incentive plan.

Areas which the committee focused on in designing a new share incentive plan included

inter alia the following:-

» Ensuring that a significant proportion of executive directors remuneration is structured so

as to link rewards to corporate and individual performance, thereby aligning their interests

with the shareholders

» Limiting the effects of dilution of shareholders’ equity and on the participation of individuals

in the scheme

» Structuring the new scheme to include phased grants and the award of grants on a sliding

scale according to performance

» Awards to be granted will be conditional on meeting specified performance criteria. The

greater the level of the potential award, the more stretching and demanding the

performance criteria will be. Total Shareholder Return (TSR) relative to a suitable index

and/or peer group will be considered as part of the performance criterion

» Measuring the performance criteria over a period of 3 to 6 years in order to motivate

participants to achieve sustained improvements in financial performance.

Further details in respect of this new share incentive plan were included in the circular posted

to shareholders on or about 17 April 2009 seeking approval from shareholders of the plan at

the general meeting to be held on 11 May 2009.

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 120.

None of the non-executive directors of Altron contributed to any group pension fund during

2008 or had any accrued pension fund benefits in the Altron Group Pension Fund at 28 February

2009.

At its meeting in February 2009, the remuneration committee assessed the levels of funding and

benefits of the Altron Group Pension Fund and Medical Aid Scheme and satisfied itself that both

were solvent and did not pose a risk to any of the group’s employees or retirees.

119


Rem

uner

atio

n re

port

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 2008/2009 financial year were

reviewed and revised in February 2008, with the basic annual non-executive director fee set

at R115 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)

» 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.

At Altron’s annual general meeting to be held on 14 July 2009, shareholders will be required

to approve the non-executive director fees set out in the notice of annual general meeting on

page 217 of this annual report. The board has resolved that with effect from 1 September

2009, non-executive directors’ fees, will in future, be split between an annual retainer and an

attendance fee component.

Annual fees for membership of various committees for the review period were:

Audit committee

– chairman

– member

R80 000

R37 500

Nomination committee

– chairman

– member

R60 000

R14 500

Remuneration committee

– chairman

– member

R60 000

R37 500

Risk management committee

– chairman

– member

R60 000

R30 000

120



Disclosure of directors’ emoluments

R’000Non-executive directors Subsidiaries Altron

2009Total

2008 Total

Fees for services as directorsMC Berzack 167 167 152MJ Leeming 45 227 272 207MJ Lamberti 79 79 159JRD Modise 213 213 194Dr PM Maduna 175 175 118NJ Adami 38 38 —DNM Mokhobo 38 38 —BJM Masekela 123 123 9PL Wilmot 60 263 323 592

105 1 323 1 428 1 431

R’000

Full-time directors Basic salary

Performancerelated

bonuses(Accrued)

Share optionexpense# Allowances

Definedcontribution

pensionpayments

Otherbenefits

2009Total

ChairmanDr WP Venter 3 306 — — 120 — 1 419 4 845

ExecutiveDr HA Serebro 1 032 — — 85 — — 1 117RE Venter 4 931 1 901 2 462 108 682 — 10 084AMR Smith* 1 222 691 92 30 148 — 2 183CG Venter 3 837 3 913 1 585 262 517 — 10 114PD Redshaw 3 139 1 441 1 450 — 460 264 6 754PMO Curle 2 043 1 933 790 127 290 — 5 183N Claussen 2 522 582 1 120 198 365 — 4 787

22 032 10 461 7 499 930 2 462 1 683 45 067

R’000

Full-time directors Basic salary

Performancerelated

bonuses(Accrued)

Share optionexpense# Allowances

Definedcontribution

pensionpayments

Otherbenefits

2008Total

ChairmanDr WP Venter 3 409 — — 120 — 1 648 5 177

ExecutiveDr HA Serebro 1 181 — — 91 — — 1 272RE Venter 4 439 4 331 1 682 108 609 11 169DC Radley 2 723 — 876 140 381 — 4 120CG Venter 3 407 2 659 1 409 262 459 — 8 196PD Redshaw 2 930 2 288 2 003 — 424 192 7 837PMO Curle 1 849 1 232 860 127 264 — 4 332N 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

#IFRS 2 income statement expense in respect of options granted to directors.

*Appointed 1 August 2008

121


Rem

uner

atio

n re

port

Directors’ options

EntityPurchase

date

Strikeprice

R

Balance1 March

2008 Awarded Lapsed ExercisedExercise

date

Netgains

R’000

Exerciseprice

R

Balance28 Feb

2009Expiry

date

CG Venter

Altech 31/08/04 32.25 63 500 63 500 Aug 10

Altech CRI 15/12/05 50.99 337 100 337 100 Dec 11

Altech CRI 22/11/06 57.75 53 775 53 775 Nov 12

Altech CRI 20/02/08 49.00 94 092 94 092 Feb 14

AMR Smith

Altron CRI 09/02/06 22.50 58 400 58 400 Feb 12

Altron CRI 22/11/06 30.75 1 508 1 508 Nov 12

Altron CRI 26/02/08 35.00 32 766 32 766 Feb 14

N Claussen

Altron 27/07/04 11.20 115 100 115 100 Jul 10

Altron CRI 09/02/06 22.50 466 190 466 190 Feb 12

Altron CRI 22/11/06 30.75 151 560 151 560 Nov 12

Altron CRI 28/02/08 35.50 46 295 46 295 Feb 14

PD Redshaw

Altron 14/01/08 6.66 72 609 72 609 08/05/08 2 220 37.23 — Sept 08

Altron 14/01/08 8.84 43 565 43 565 08/05/08 1 237 37.23 — Oct 09

Altron 14/01/08 12.80 207 849 207 849 05/06/08 5 654 40.00 — Aug 11

Altron CRI 14/01/08 26.54 537 592 537 592 Feb 12

Altron CRI 27/02/08 35.00 281 500 281 500 Feb 14

PMO Curle

Altech 31/08/04 32.25 40 000 26 666 13/06/08 and

20/10/08 471 49.91 13 334 Aug 10

Altech CRI 15/12/05 50.99 219 460 219 460 Dec 11

Altech CRI 22/11/06 57.75 20 232 20 232 Nov 12

RE Venter

Altron 28/06/00 4.85 416 750 307 962 19/06/08 10 643 39.41 108 788 Jun 10

Altron 27/07/04 11.20 245 667 245 667 Jul 10

Altron CRI 09/02/06 22.50 837 360 837 360 Feb 12

Altron CRI 22/11/06 30.75 156 186 156 186 Nov 12

Altron CRI 25/02/08 35.00 381 457 381 457 Feb 14

CRI – conditional rights.

122


= the power to stay

focused3altron + effi ciency

» Our current key focus areas are the management of the cost

base and working capital, capital expenditure, the integration

of recent acquisitions and aligning operational capacity.

Fina

ncia

l sta

tem

ents

123


124


In terms of section 268G(d) of the Companies Act, 1973, as

amended, we certify that, to the best of our knowledge and belief,

the company has lodged with the Registrar of Companies for the

financial year ended 28 February 2009, 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

Andrew Johnston – Group Company Secretary

4 May 2009

Financial statements

Certificate from the company secretaries

Certificate from the company secretaries 124Independent auditor’s report 125Directors’ report 126Accounting policies 130Balance sheet 138Income statement 139Statement of changes in equity 140Cash flow statement 142Property, plant and equipment 143Intangible assets, including goodwill 144Associates and other investments 147Rental finance advances 147Deferred taxation 149Inventories 150Trade and other receivables, including derivatives 151Assets and liabilities classified as held-for-sale 153Cash and cash equivalents 153Share capital and premium 154Reserves 160B-BBEE transactions 161Loans 162Empowerment funding obligation 166Provisions 166Trade and other payables, including derivatives 167Retirement benefit plans 168Acquisition of subsidiaries 170Revenue 172Operating profit before capital items 172

Capital items 173Financial income 173Financial expense 174Share of profit from associates 174Taxation 174Earnings per share 175Dividends proposed 177Commitments 177Post-balance sheet events 178Financial risk management 178Related-party transactions 184Judgements made by management 185Standards and interpretations in issue but not yet effective 186Cash generated by operations 190Dividends received from associates and other investments 190Taxation paid 190Acquisition of subsidiaries 190Proceeds on disposal of subsidiary 191Proceeds on disposal of property, plant and equipment 191Other investing activities 191Subsidiaries’ equity contributions from minorities 191

Associates, other investments and joint venturesAnnexure

1Segment information Annexure

2Allied Electronics Corporation Limited 200

Fina

ncia

l sta

tem

ents

125


Independent auditor’s report

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 28 February 2009,

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 as set out on pages 126 to 129.

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 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 28 February 2009, 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 KPMG Crescent

Chartered Accountant (SA) 85 Empire Road

Registered Auditor Parktown

Director Johannesburg

4 May 2009

126


The directors have pleasure in submitting the annual financial

statements of the Altron group for the year ended 28 February 2009.

NATURE OF BUSINESS

Altron is an investment holding company. Its principal subsidiaries,

Allied Technologies Limited (“Altech”), Power Technologies

(Proprietary) Limited (“Powertech”) and Bytes Technology Group

(Proprietary) Limited (“Bytes”), are invested in the power electronics,

telecommunications, multi-media and information technology

industries.

FINANCIAL RESULTS

Group attributable earnings for the year ended 28 February 2009 were

R835 million (2008: R1 019 million), representing earnings per share

of 266 cents (2008: 357 cents). Headline earnings per share were at

275 cents (2008: 375 cents).

Full details of the financial position and results of the Altron group are

set out in these financial statements.

DIVIDENDS

The following dividends were declared in respect of the year ended

28 February 2009:

» Ordinary dividend No 61 of 119 cents per share

(2008: 156 cents)

» Participating preference dividend No 15 of 119 cents per share

(2008: 156 cents).

It remains Altron’s policy to declare dividends annually at the time of

announcing the 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 203, while particulars of the associate companies, joint ventures

and other investments are provided in Annexure 1 on page 192.

The attributable interest of the group in the profits and losses of its

subsidiaries for the year ended 28 February 2009 is:

2009 Rm

2008 Rm

Aggregate amount of profit after taxation 1 284 1 401

Aggregate amount of losses after taxation 132 84

CORPORATE ACTIVITY DURING THE YEAR

SAMEER ICT GROUP

On 1 March 2008, Altech acquired 51% of the issued share capital of Kenya Data Networks Limited, Swift Global (Kenya) Limited and Infocom Limited from Sameer ICT Limited in Kenya for a maximum combined purchase consideration of US$75 million. A further US$10.2 million was injected into these businesses in order to fund capital projects.

ABB POWERTECH TRANSFORMERS

On 1 April 2008, Powertech acquired 50% of the share capital of ABB Powertech Transformers from ABB South Africa for a purchase consideration of R320 million. The transaction was unconditionally approved by the Competition Authorities.

YELLAND CONTROL

Effective 1 April 2008, Powertech disposed of the Yelland Control business as a going concern to Omron Electronics (Pty) Limited for a purchase consideration of R75 million.

INTELLECA VOICE AND MOBILE

Bytes Technology Group South Africa (Pty) Limited, trading through its Bytes Communication Systems division, purchased Intelleca Voice and Mobile, a provider of contact and call centre solutions for an amount of R115 million. The effective date of the acquisition was 1 April 2008.

BYTES SA: KAGISO

On 1 July 2008, Kagiso exercised its option to acquire a further 22% equity interest in Bytes SA for a purchase consideration of R198 million. Kagiso now owns 27% of the issued share capital of Bytes SA.

NOR PAPER

Bytes Technology Group South Africa (Pty) Limited, trading through its Bytes Document Solutions division, purchased NOR Stationery Wholesalers and NOR Paper with effect from 1 July 2008. NOR specialises in the distribution of imported as well as locally sourced speciality paper and paper products. The purchase price was R115 million with an additional maximum consideration of R49 million subject to the achievement of certain profits within the 12-month period ending 30 June 2009.

CORPORATE ACTIVITY AFTER BALANCE SHEET DATE

FLEETCALL

On 1 March 2009 and following the unconditional approval by the Competition Authorities, Altech acquired 100% of the issued share

Directors’ report

To the members of Allied Electronics Corporation Limited

Fina

ncia

l sta

tem

ents

127


capital of Fleetcall (Pty) Limited for a purchase consideration of R75 million of which R35 million will be held in escrow pending the company achieving certain profits over the following financial year.

ALTECH NAMITECH SOUTH AFRICA

Effective 1 April 2009, the Competition Authorities unconditionally approved the disposal by Altech of the Altech NamITech South African operations to Gemalto in France for a purchase price linked to the businesses’ net asset value of approximately R79 million. These operations comprised all business activities of the commercialisation, manufacturing and personalisation of secure and non-secure, chip and chipless cards for the telecommunications, financial services, government, utility, security and retail markets, recharge vouchers, as well as related packaging and fulfilment services.

LATERAL TECHNOLOGY CONCEPTS

Effective 1 April 2009, Altech acquired 100% of the issued share capital of Lateral Technology Concepts (Pty) Limited for a total consideration of R45 million, of which R7.5 million was paid upfront and R37.5 million is being held in escrow to be paid to the vendors subject to achieving certain earn-outs over the following two financial years.

SHARE CAPITAL

Full details of the authorised, issued and unissued capital of the company at 28 February 2009 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 15 518 130 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, 14 July 2009. At that meeting, shareholders will be asked to place 5% of the unissued ordinary and participating preference shares under the control of the directors. Shareholders will also be asked to waive their pre-emptive rights in favour of the directors to allot and issue ordinary and/or participating preference shares for cash as and when suitable circumstances arise.

DIRECTORATE

Appointments

1 August 2008 Mr AMR Smith

3 November 2008 Mr NJ Adami

3 November 2008 Ms DNM Mokhobo

Resignations

18 July 2008 Mr MJ Lamberti

Subsequent to the financial year end and with effect from 1 March 2009, Dr WP Venter’s role at Altron changed from being a full-time chairman to a non-executive chairman.

In terms of the company’s articles of association, Messrs AMR Smith, NJ Adami and DNM Mokhobo retire and Messrs N Claussen, PMO Curle and RE Venter retire by rotation. All the retiring directors are eligible and available for election/re-election. Their profiles appear on pages 206 to 212.

SECRETARIES

Altron Management Services (Pty) Limited act as secretaries to the company. The secretaries’ business and postal addresses appear on page 223 of this annual report.

SEGMENTAL REPORTING

Segmental information is included in this annual report as part of the operational reviews and shareholders are referred to annexure 2 on pages 196 to 199.

Attributable headline earnings contributions to Altron were as follows:

2009Rm

2008Rm

Altech 342 288

Bytes 207 170

Powertech 266 577

Corporate, financial services and eliminations 46 37

DIRECTORS’ INTERESTS

At 28 February 2009 the present directors of the company held direct and indirect interests, including family interests, in 59 979 697 of the company’s issued ordinary shares (2008: 60 035 576 ordinary shares) and 16 813 839 of the company’s issued participating preference shares (2008: 23 432 336). Details of shares held per individual director are listed below. A total of 3 420 369 participating preference share options and conditional rights are allocated to directors in terms of the company’s employee share schemes.

128

Directors’ report continued


2009Direct beneficial Direct non-beneficial

Name of director Ordinary sharesParticipating

preference shares Ordinary sharesParticipating

preference shares

Dr WP Venter 8 694 070 5 241 731 — —RE Venter — 90 732 — —MC Berzack — 302 690 — —PD Redshaw — 8 713 — —Dr HA Serebro 627 600 1 555 — —MJ Leeming 2 500 — — —

Indirect beneficial Indirect non-beneficial



preference shares

Dr WP Venter 31 263 527 34 055 19 367 000* 11 122 046* Dr HA Serebro 22 500 1 010 — —MJ Leeming 2 500 1 307 — —PL Wilmot — 10 000 — —

* 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.

2008Direct beneficial Direct non-beneficial



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



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 —

* Chairman and director, Dr WP Venter, through his family and related trusts, is the controlling shareholder of the company.

† 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.

RESOLUTIONS

The company passed and registered one special resolution on 24 July 2008, 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 11 August 2008, approving the acquisition by Altech or any of its

subsidiaries of Altech’s shares.

At subsidiary level, Bytes passed and registered three special resolutions on 26 May 2008, converting the company from a public to a private

company, adopting new articles of association and changing the name of the company to include “Proprietary” before “Limited”.

Fina

ncia

l sta

tem

ents

129


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 among

others:

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 in so far 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 102 of the annual report),

determined the external auditors’ fees for the 2008/09 financial

year and nominated the external auditors for appointment for the

financial year ending 28 February 2010

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

2008/09 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

g) discharged those audit committee responsibilities specified in

section 270A of the Act, for and on behalf of Bytes and Powertech

h) held separate meetings with management, the internal auditors

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.

For further details in this regard, shareholders are referred to page 100

of the annual report.

Furthermore, on 26 February 2009 and in terms of paragraph 3.84 (h)

of the JSE Listings Requirements, the Altron audit committee conducted

an evaluation into the appropriateness of the expertise and experience

of Altron’s financial director. The committee can report that it has

satisfied itself that Mr AMR Smith possesses the appropriate expertise

and experience required of a financial director of a public listed

company. Mr Smith is a member of the Institute of Chartered

Accountants of Scotland.

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 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 28 February 2009

which appear on pages 126 to 205 were approved by the board and

signed on its behalf on 4 May 2009.

For: Allied Electronics Corporation Limited

Dr WP Venter – Chairman

RE Venter – Chief Executive

AMR Smith – Chief Financial Officer

130


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 28 February 2009 comprise the

company and its subsidiaries (together referred to as the “group”)

and the group’s interest in associates and jointly controlled entities.

STATEMENT OF COMPLIANCE

The consolidated 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

» Financial instruments 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 the reported amounts of assets, liabilities, income and

expenses. The estimates and associated assumptions are based on

historical experience and various other factors that are believed to

be reasonable under the circumstances, the results of which form

the basis of making the judgements about carrying values of assets

and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an

ongoing basis. Revisions to accounting estimates are recognised in

the period in which the estimate is revised if the revision only

affects that period, or in the period of the revision and future

periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRS that

have a 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 group’s accounting policies have been applied consistently by

all group entities.

BASIS OF CONSOLIDATION

Subsidiaries

Subsidiaries are those entities over which the group has the power to,

directly or indirectly, exercise control over the 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 over the

financial and operating policies. 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.

Fina

ncia

l sta

tem

ents

131


Goodwill

All business combinations are accounted for by applying the

“purchase method”. Goodwill represents amounts arising on the

acquisition of subsidiaries, associates and joint ventures. Goodwill

represents the difference between the cost of the acquisition and

the fair value of the identifiable assets, liabilities and contingent

liabilities acquired.

Goodwill is measured at cost less accumulated impairment losses.

Goodwill is allocated to cash-generating units and is tested

annually for impairment.

In respect of equity-accounted investees, the carrying amount of

goodwill is included in the carrying amount of the investment.

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 (B-BBEE)

transactions

B-BBEE transactions involving the disposal or issue of equity

interests in subsidiaries are only recognised when the accounting

recognition criteria have been met. Although economic and legal

ownership of such instruments may have transferred to the B-BBEE

partner, the derecognition of such equity interest sold or

recognition of equity instruments issued in the underlying

subsidiary by the parent shareholder is postponed until the

accounting recognition criteria have been 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, call deposits

and cash floats. 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.

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 are 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.

Furthermore, upon retirement, any member of the Altron Group Pension

Fund can purchase a defined benefit pension from the fund. The base

pension and subsequent increases based on weighted average

investment returns on funds, are guaranteed by the pension fund.

The projected unit credit method is used to determine the present value

of these defined benefit obligations, the related service cost and, where

applicable, the past-service cost.

132

Accounting policies continued


The fair value of plan assets is deducted from the present value of

the defined benefit obligation to the extent permitted by IAS 19 –

Employee benefits. Past-service costs are recognised as an expense on

a straight-line basis over the average period until the benefits become

vested. Past-service costs which are already vested, are expensed

immediately.

Actuarial gains and losses are recognised as income or expense if the

net cumulative unrecognised actuarial gains or losses at the end of

the previous financial year exceeded the greater of:

» 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

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 the risks and rewards of the asset.

Financial liabilites 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 financial instruments

The group uses derivative financial instruments to manage its exposure

to foreign exchange, interest rate 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,

interest rate swaps and metal futures contracts. Derivatives are

recognised initially at fair value; attributable transaction costs are

recognised in profit or loss when incurred. Subsequent to initial

recognition, derivatives are measured at fair value through the income

statement. Fair value is determined by comparing the contracted

forward rate to the present value of the current forward rate of an

equivalent contract with the same maturity date. However, where

derivatives qualify for hedge accounting, recognition of any resultant

gain or loss depends on the nature of the item being hedged.

Hedging

Where a derivative 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

Fina

ncia

l sta

tem

ents

133


adjusted against the initial measurement of the asset or liability. For

other cash flow hedges, the cumulative amount recognised in equity

is recognised in the income statement in the period when the

commitment or forecast transaction affects the income statement.

Where the hedging instrument or hedge relationship is terminated but

the hedged transaction is still expected to occur, the cumulative

unrealised gain or loss remains in equity and is recognised in

accordance with the above policy when the underlying transaction

occurs. If the hedged transaction is no longer expected to occur, 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.

Financial income and expense

Finance income comprises interest income on funds invested, dividend

income and changes in the fair value of financial assets at fair value

through the income statement, and gains on hedging instruments that

are recognised in the income statement. Interest income is recognised

as it accrues in the income statement, using the effective interest

method. Dividend income is recognised in profit or loss on the date that

the group’s right to receive payment is established, which in the case of

quoted securities is the ex-dividend date.

Finance expenses comprise interest expense on borrowings, unwinding

of the discount on provisions and other interest-free liabilities, changes

in the fair value of financial assets at fair value through the income

statement, impairment losses recognised on financial assets, and losses

on hedging instruments that are recognised in the income statement.

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 dates of the transactions. Monetary assets and liabilities

denominated in foreign currencies at the balance sheet date are

translated to the functional currency at the exchange rates ruling at

that date. Gains or losses on translation are recognised in the income

statement.

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 dates 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 or whenever there is an indication that

the asset may be impaired.

The recoverable amount is the higher of an asset’s fair value less 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 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

134



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 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. Capitalised development expenditure is measured 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, which have finite useful lives, are measured at cost less accumulated amortisation and impairment losses.

Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Amortisation

Amortisation is recognised in the income statement on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use, unless such lives are indefinite.

The estimated useful lives are as follows:

» Trade names, designs, patents and trademarks 3 to 10 years

» Customer relationships 1 to 10 years

» Distribution rights and licence agreements indefinite life

» Proprietary software 2 to 3 years

INVENTORIES

Inventories are measured at the lower of cost and net realisable value

taking into account market conditions and technological 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.

INVESTMENTS IN SUBSIDIARIES

Investments in subsidiaries are measured at cost, less accumulated

impairment losses.

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.

Fina

ncia

l sta

tem

ents

135


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 recognised in the income statement

on a straight-line basis over the period of the lease.

PROPERTY, PLANT AND EQUIPMENT

Owned assets

Property, plant and equipment are measured at cost less accumulated

depreciation and impairment losses. When components of an item of

property, plant and equipment have different useful lives, those

components are accounted for as separate items of property, plant

and equipment.

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 recognised in the income statetment over the lease period,

and the capital repayment, which reduces the liability to the lessor.

Subsequent costs

The group recognises in the carrying amount of an item of property,

plant and equipment the cost of replacing part of such an item when

the cost is incurred, if it is probable that additional future economic

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 recognised in the income statement for each category

of assets on a straight-line basis over their expected useful lives to

estimated residual values. Land is not depreciated.

The estimated useful lives are as follows:

» Buildings 20 to 50 years

» Plant and machinery 3 to 20 years

» Furniture and equipment 5 to 20 years

» Data infrastructure 8 years

» Motor vehicles 4 to 8 years

» IT equipment and software 2 to 8 years

» Leasehold improvements over remaining 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 be required to

settle the obligation, and where a reliable estimate can be made

of the amount of the obligation. Provisions are determined by

discounting the expected future cash 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 and fault rectification

A provision for warranties and fault rectification is recognised when

the underlying products or services are sold. The provision is based on

historical warranty and fault rectification data and a weighting of all

possible outcomes against their associated probabilities.

Retrenchments and restructuring

A provision for retrenchments and restructuring is recognised when

the group has approved a detailed and formal restructuring plan, and

the restructuring either has commenced or has been announced

publicly. Future operating costs are not provided for.

Contract losses

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.

136



SHARE-BASED PAYMENT TRANSACTIONS

Equity settled

The fair value of share options and deferred delivery shares granted

to employees is recognised as an employee expense with a

corresponding increase in equity. The fair value is measured at grant

date and expensed over the period during which the employees are

required to provide services in order to become unconditionally

entitled to the equity instruments. The fair value of the instruments

granted is measured using generally accepted valuation techniques,

taking into account the terms and conditions upon which the

instruments are granted. The amount recognised as an expense is

adjusted to reflect the actual number of share options and deferred

delivery shares that vest except where 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 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.

B-BBEE transactions

Where goods or services are considered to have been received from

B-BBEE 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, there is no continuing management involvement

with the goods and the amount of revenue can be measured reliably.

Revenue from services rendered is recognised in profit or loss in

proportion to the stage of completion of the transaction at reporting

date.

Fina

ncia

l sta

tem

ents

137


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 a finance 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 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 foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date. The effect on deferred tax of any changes in tax rates is recognised in the income statement, except to the extent that it relates to items previously charged or credited directly to equity.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable that the related tax 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 and participating preference 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 B-BBEE transactions that have not yet met the applicable accounting recognition criteria.

138


Balance sheetat 28 February 2009

GROUP

Notes2009

R millions2008

R millions

ASSETS

Non-current assets 5 239 3 362

Property, plant and equipment 1 2 221 1 264

Intangible assets, including goodwill 2 2 437 1 502

Associates 3 11 20

Other investments 3 267 294

Rental finance advances 4 73 86

Deferred taxation 5 230 196

Current assets 8 342 7 617

Inventories 6 2 364 2 130

Trade and other receivables, including derivatives 7 3 763 3 371

Assets classified as held-for-sale 8 107 —

Cash and cash equivalents 9 2 108 2 116

Total assets 13 581 10 979

EQUITY AND LIABILITIES

Total equity 6 300 5 346

Altron equity holders 4 873 4 469

Minority interest 1 427 877

Non-current liabilities 1 346 1 047

Loans 13 1 056 784

Empowerment funding obligation 14 101 156

Provisions 15 25 24

Deferred taxation 5 164 83

Current liabilities 5 935 4 586

Loans 13 404 213

Empowerment funding obligation 14 11 16

Bank overdraft 9 928 33

Provisions 15 160 81

Trade and other payables, including derivatives 16 4 138 3 903

Liabilities classified as held-for-sale 8 28 —

Taxation payable 266 340

Total equity and liabilities 13 581 10 979

Net asset value per share (cents) 1 550 1 431

Fina

ncia

l sta

tem

ents

139


Income statementfor the year ended 28 February 2009

GROUP

Notes2009

R millions2008

R millions

Revenue 19 24 768 21 431

Operating costs before capital items (22 969) (19 494)

Material and services consumed (18 764) (16 053)

Employees’ remuneration 20.3 (3 533) (3 053)

Depreciation and amortisation (438) (272)

Net change in inventories (234) (116)

Operating profit before capital items 20 1 799 1 937

Capital items 21 (21) (90)

Result from operating activities 1 778 1 847

Financial income 22 184 182

Financial expense 23 (292) (89)

Share of profit from associates 24 3 4

Profit before taxation 1 673 1 944

Taxation 25 (524) (625)

Profit for the year 1 149 1 319

Attributable to:

Minority interest 314 300

Altron equity holders 835 1 019

Basic earnings per share (cents) 26 266 357

Diluted basic earnings per share (cents) 26 248 310

Dividends per share (cents) – paid 156 118

– proposed 27 119 156

140


Statement of changes in equityfor the year ended 28 February 2009

Attributable to Altron equity holders

Foreign Premium/

Share currency discount on

capital and Treasury translation minority equity

premium shares reserve transactions

(note 10) (note 10) (note 11) (note 11)

Group R millions R millions R millions R millions

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 on available-for-sale investments — — — —

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)

Recognised income and expense

Profit for the year — — — —

Foreign currency translation differences — — 33 —

Fair value adjustment of joint venture on step acquisition — — — —

Cash flow hedging reserve — — — —

Statutory reserves of foreign subsidiaries — — — —

Fair value adjustments on available-for-sale investments — — — —

Transactions with shareholders

Dividends — — — —

Issue of share capital 18 — — —

Share-based payments — — — —

Subscription by minority shareholders on acquisition of subsidiary — — — —

Minority interest on acquisition of subsidiaries — — — —

Net subscription for 22% minority interest in Bytes SA — — — —

Changes in shareholding of subsidiaries — — — (28)

Balance at 28 February 2009 2 228 (299) 217 (1 383)

Fina

ncia

l sta

tem

ents

141


Attributable to Altron equity holders

Share-

Cash flow based

hedging payment Statutory Fair value Retained

reserve reserve reserves reserve earnings Minority Total

(note 11) (note 11) (note 11) (note 11) (note 11) Total interest equity

R millions R millions R millions R millions R millions R millions R millions R millions

— 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

— — — — 835 835 314 1 149

— — — — — 33 5 38

— — — 54 — 54 — 54

(14) — — — — (14) (1) (15)

— — 59 — (59) — — —

— — — (18) — (18) — (18)

— — — — (490) (490) (155) (645)

— — — — — 18 1 19

— 14 — — — 14 3 17

— — — — — — 79 79

— — — — — — 142 142

— — — — — — 155 155

— — — — — (28) 7 (21)

(15) 58 68 79 3 920 4 873 1 427 6 300

142


Cash flow statementfor the year ended 28 February 2009

GROUP

Notes2009

R millions2008

R millions

CASH FLOWS FROM OPERATING ACTIVITIES 646 1 304

Cash generated by operations 34 2 046 2 220

Interest received 171 160

Dividends received 35 16 28

Interest paid (276) (72)

Taxation paid 36 (666) (537)

Cash available from operating activities 1 291 1 799

Dividends paid

– to Altron equity holders (490) (331)

– to minority interest (155) (164)

CASH FLOWS UTILISED IN INVESTING ACTIVITIES (1 904) (1 532)

Acquisition of subsidiaries 37 (1 042) (619)

Proceeds on disposal of subsidiary 38 75 4

Proceeds on disposal of property, plant and equipment 39 78 27

Net repayment/(advance) of rental finance advances 2 (1)

Acquisition of property, plant, equipment and intangibles (1 008) (479)

Other investing activities 40 (9) (464)

CASH FLOWS FROM FINANCING ACTIVITIES 345 704

Loans raised 93 692

Proceeds on share issue 18 12

Subsidiaries’ equity contributions from minorities 41 234 —

(DECREASE)/INCREASE IN NET CASH AND CASH EQUIVALENTS (913) 476

Net cash and cash equivalents at the beginning of the year 2 083 1 589

Effect of foreign exchange translation on cash balances 10 18

NET CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 9 1 180 2 083

Fina

ncia

l sta

tem

ents

143


Land andbuildingsR millions

Plant andmachineryR millions

Data infra-structure,

motorvehicles,

furniture andequipment

R millions

IT equipmentand

softwareR millions

TotalR millions

1. PROPERTY, PLANT AND EQUIPMENT

Cost

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


Additions at cost 20 325 415 142 902


Disposals (19) (36) (32) (48) (135)

Disposals of subsidiaries — — (5) (2) (7)

Transfer to assets held-for-sale (11) (93) (14) (17) (135)



Depreciation and impairment losses


Depreciation for the year 12 102 42 76 232


Disposals (1) (64) (16) (69) (150)



Depreciation for the year 15 154 38 91 298

Impairment losses 1 11 — — 12


Disposals (2) (17) (25) (36) (80)

Disposals of subsidiaries — — (2) (2) (4)

Transfer to assets held-for-sale (5) (61) (4) (11) (81)



Carrying amount at 28 February 2007 220 437 173 124 954

Carrying amount at 29 February 2008 302 655 156 151 1 264


Notes to the group financial statementsfor the year ended 28 February 2009

144

Notes to the group financial statements continued

for the year ended 28 February 2009


2009R millions

2008R millions

1. PROPERTY, PLANT AND EQUIPMENT (continued)

Land and buildingsDetails of land and buildings are available, on request, for inspection at the registered office of the company.

Encumbered assetsCertain 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 114 14

Secured bank loans 413 189

527 203

Assets under constructionIncluded in the cost of assets are the following items of capital work in progress:

Plant and machinery 252 186

IT equipment and software 48 17

Data infrastructure and other equipment 387 3

687 206

Impairment lossesThe impairment losses relate to plant and machinery of businesses and divisions closed during the year or pending closure at year end.

Useful livesUseful lives are reflected under accounting policies on page 135.

GoodwillR millions

Customerrelationships

R millions

Trade names,designs,

patents andtrademarks

R millions

Distributionrights

and licenceagreements

R millions

Proprietarysoftware

R millionsTotal

R millions

2. INTANGIBLE ASSETS, INCLUDING GOODWILLCostBalance at 28 February 2007 1 087 43 66 26 10 1 232Additions at cost — — 4 — — 4Development costs capitalised — — — — 2 2Disposals (267) — — — — (267)Adjustments 2 — — — — 2Arising on business combinations and joint ventures 506 91 105 — 5 707Translation 66 2 4 — — 72

Balance at 29 February 2008 1 394 136 179 26 17 1 752

Development costs capitalised — — 106 — — 106Arising on business combinations 716 148 198 — — 1 062Translation (3) — (1) — — (4)

Balance at 28 February 2009 2 107 284 482 26 17 2 916

Fina

ncia

l sta

tem

ents

145


GoodwillR millions

Customerrelationships

R millions

Trade names,designs,

patents andtrademarks

R millions

Distributionrights

and licenceagreements

R millions

Proprietarysoftware

R millionsTotal

R millions

2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)

Amortisation and impairment losses

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


Amortisation for the year — 60 76 — 4 140

Impairment losses 90 — — — — 90

Translation — — (1) — — (1)



Carrying amount at 29 February 2008 1 244 89 137 22 10 1 502

Carrying amount at 28 February 2009 1 867 177 365 22 6 2 437

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 18.5% (2008: 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 CPI of 8% (2008: 6%). The group’s budgeted profit has historically been in line with actual performance.

Development cost capitalised

Development costs on designs capitalised with a carrying value of R57 million have not yet been brought into use. Impairment tests were conducted on the carrying values based on forecast contributory cash flows on the underlying products and did not reveal any apparent impairment.

146




2. INTANGIBLE ASSETS, INCLUDING GOODWILL (continued)

Impairment tests for cash-generating units containing goodwill

The following units have significant carrying amounts of goodwill (net of impairment losses):

2009R millions

2008R millions

Altech NamITech West Africa 332 306

Bytes Document Solutions 135 135

CS Holdings 107 107

Digital Healthcare Solutions 64 64

Xclusive Solutions 41 44

Vantage Business Systems 28 30

ComTech 30 18

IST 408 448

Swanib Cables 24 24

Kenya Data Networks, Swift Global (Kenya) and Infocom 471 —

Intelleca 26 —

NOR Paper 60 —

Powertech Transformers 69 —

Multiple units without significant goodwill 72 68

1 867 1 244

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.

For the purpose of impairment testing, goodwill is allocated to the operating divisions which represent the lowest level within the group at which the goodwill is monitored for internal management purposes. The impairment tests are prepared on the basis of forecast profits generated by the underlying cash-generating units.

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 the cost structure based on business plans.

Discount rates used in the discounted cash flow models are calculated using the principles of the capital asset pricing model, taking account of current market conditions. The resulting weighted average cost of capital is then compared to industry and regional averages to ensure reasonableness. Weighted average cost of capital rates used for the purposes of impairment tests ranged between 10% and 20% at year end depending on the territory in which the business operates and the business’ risk profile. Perpetuity growth rates applied ranged between 2% and 6%, depending on the territory in which the business operates.

Impairment losses

The carrying amounts of the IST Telecom and Intelleca business units were determined to be higher than their recoverable amounts, based on value-in-use, and impairment losses of R40 million and R50 million respectively were recognised, which were fully allocated to goodwill.

Useful lives

Useful lives are reflected under accounting policies on page 135.

Fina

ncia

l sta

tem

ents

147


2009R millions

2008R millions

3. ASSOCIATES AND OTHER INVESTMENTS

Associates 11 20

Other investments

Non-current loans receivable at amortised cost

Participation loan to Fintech Receivables 1 (Pty) Limited 2 27

Participation loan to Technologies Acceptances Receivables (Pty) Limited 217 192

Non-current available-for-sale investments at fair value

Preference shares in Fintech Receivables 1 (Pty) Limited 15 36

Preference shares in Technology Acceptances Receivables (Pty) Limited 26 26

Investment in Izingwe Aberdare Cables Investments (Pty) Limited 1 1

Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit 6 12

267 294

Refer to Annexure 1 for details.

4. RENTAL FINANCE ADVANCES

Assets at amortised cost

Present value of minimum lease payments receivable 126 128

Less: Current portion (note 7) (53) (42)

Non-current finance lease asset 73 86

Liabilities at amortised cost (included under loans)

Present value of minimum lease payments payable (note 13) 126 128

Less: Current portion (note 13) (53) (42)

Non-current finance lease liability 73 86

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 five years and bear interest at rates linked to the prime bank overdraft rate. The loans are secured by the underlying equipment sold.

The relationship between gross investment in the lease at the balance sheet date and the present value of 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 126 128

Interest receivable 25 29

Future minimum lease payments receivable 151 157

148




2009 2009 2008 2008

Future minimumlease payments

Present valueof minimum

lease paymentsFuture minimumlease payments

Present valueof minimum

lease payments

R millions R millions R millions R millions

4. RENTAL FINANCE ADVANCES (continued)

Non-derivative financial liabilities

Finance lease liabilities are payable as follows:

Less than 1 year 72 53 58 42

Between 1 and 5 years 79 73 99 86

151 126 157 128

2009R millions

2008R millions

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 126 128

The maximum exposure to, and concentration of, credit risk for finance lease assets at the reporting date by type of customer was:

Gross Gross

2009 2008

R millions R millions

Parastatals/government 48 28

Corporates 77 97

SMMEs 1 3

126 128

The maximum exposure to, and concentration of, credit risk for finance lease assets at the reporting date by geographical region was:

South Africa 126 128

All customers are subjected to stringent credit vetting. It is our experience that only large corporates and parastatal/government departments 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 balance sheet date was 5.93% (2008: 3.27%) of the total 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 17 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 (2008: Rnil).

Fina

ncia

l sta

tem

ents

149


4. RENTAL FINANCE ADVANCES (continued)

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:

28 February 2009Non-derivative financial assets

Carryingamount

R millions

Contractualcash flowsR millions

6 monthsor less

R millions

6 – 12months

R millions

1 – 2years

R millions

2 – 5years

R millions

Finance lease assets 126 151 38 34 57 22


Finance lease liabilities (126) (151) (38) (34) (57) (22)

28 February 2008 Non-derivative financial assets

Carryingamount

R millions

Contractualcash flowsR millions

6 monthsor less

R millions

6 – 12months

R millions

1 – 2years

R millions

2 – 5years

R millions

Finance lease assets 128 157 29 29 50 49


Finance lease liabilities (128) (157) (29) (29) (50) (49)

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.

2009R millions

2008R millions

5. DEFERRED TAXATION

5.1 Deferred tax movement

Balance at the beginning of the year (113) (152)

Charged to the income statement (42) (20)

Charged directly in equity (3) (2)

Acquisitions and disposals of subsidiaries 95 61

Translation differences (3) —

Balance at the end of the year (66) (113)

150




2009R millions

2008R millions

5. DEFERRED TAXATION (continued)

5.2 Deferred tax balances

Attributable to the following temporary differences recognised at the normal tax rate in South Africa of 28% (2008: 28%) or the normal tax rate for foreign jurisdictions unless otherwise indicated:

Property, plant and equipment 105 67

Intangible assets 122 26

Construction work in progress (3) 7

Prepaid expenditure 10 10

Receipts in advance (16) (37)

Receivables (30) (11)

Contract allowances 10 11

Provisions, accruals and allowances (127) (106)

Tax losses (111) (73)

Investments and other (19) 11

Share scheme recharge liabilities — (17)

Fair value adjustments (at 14%) 4 7

Secondary tax credits (at 10%) (11) (8)

(66) (113)

The above balance comprises:

Deferred tax liabilities 164 83

Deferred tax assets (230) (196)

(66) (113)

Tax losses

Estimated tax losses available for set-off against future taxable income 397 277

Applied to reduce deferred tax (397) (260)

— 17

6. INVENTORIES

Raw materials 890 749

Work in progress 356 278

Finished goods 949 875

Merchandise 139 189

Consumable stores 30 39

2 364 2 130

Inventories carried at cost 1 965 1 936

Inventories carried at net realisable value 399 194

2 364 2 130

Fina

ncia

l sta

tem

ents

151


2009R millions

2008R millions

7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES

Gross trade receivables 3 416 3 189

Less: Allowance for impairment losses (168) (115)

Less: Other allowances (29) (77)

Current portion of rental finance advances (note 4) 53 42

Derivative assets at fair value: used for hedging 11 54

Prepayments 188 47

Other receivables 292 231

3 763 3 371

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 3 416 3 189

The maximum exposure to credit risk for gross trade receivables at the reporting date by type of customer was:

Gross2009

R millions

Gross2008

R millions

Parastatals/government 583 429

Corporates 2 083 1 995

SMMEs 555 526

Individuals 195 238

3 416 3 189

The group’s exposure to parastatals and government has increased in the last year, primarily as a result of the increased infrastructure spend of these bodies, but also due to the Powertech Transformers acquisition. 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 require it, but collateral is obtained for other entities as security where possible. The group also makes use of credit risk insurance cover when appropriate. 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 at least annually.

The maximum exposure to credit risk for gross trade receivables at the reporting date by geographical region was:

South Africa 2 223 2 179

Rest of Africa 425 211

Europe 463 634

Rest of world 305 165

3 416 3 189

Most of the receivables outside of South Africa are in respect of our international operations which 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.

152




7. TRADE AND OTHER RECEIVABLES, INCLUDING DERIVATIVES (continued)

Impairment losses

The following table illustrates the relationship between aged debt and the impairment allowance:

2009Gross

R millions

2009Impairment

allowanceR millions

2008Gross

R millions

2008Impairment

allowanceR millions

Not past due 2 477 (8) 2 514 (3)

Past due 0 – 30 days 246 (1) 271 (1)

Past due 31 – 120 days 450 (55) 249 (24)

Past due 121 – 365 days 156 (55) 87 (22)

Past due 365+ days 87 (49) 68 (65)

3 416 (168) 3 189 (115)

Listings of overdue customer balances are reviewed monthly and reviewed against their credit terms/limits. Customers exceeding their credit terms/limits must settle their overdue balances before any further credit is extended. Appropriate action is taken to recover long overdue debts.

The movement in the impairment allowance in respect of trade receivables during the year was as follows:

2009R millions

2008R millions

Balance at the beginning of the year 115 96

Impairment loss recognised 63 69

Acquisitions of operations 2 —

Allowance utilised (12) (50)

Balance at the end of the year 168 115

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 4 48

– Cash flow hedge 6 —

Commodity forward contracts 1 6

11 54

Credit risk on derivative assets

The group limits its exposure to credit risk on derivative assets by only entering into forward contracts with counterparties that have a sound credit rating. Given these sound credit ratings, management does not expect any counterparty to fail to meet its obligations.

Fina

ncia

l sta

tem

ents

153


2009R millions

2008R millions

8. ASSETS AND LIABILITIES CLASSIFIED AS HELD-FOR-SALE

On 1 December 2008 the decision to sell NamITech SA, a division of NamITech IT (Proprietary) Limited, was taken and the operation was subsequently sold. The completion date for the transaction was 1 April 2009.

This operation does not constitute a discontinued operation.

Assets classified as held-for-sale

Property, plant and equipment 54 —

Inventories 19 —

Trade and other receivables 34 —

107 —

Liabilities classified as held-for-sale

Trade and other payables 28 —

28 —

9. CASH AND CASH EQUIVALENTS

Cash at bank 1 938 1 638

Cash floats 104 —

Cash on deposit 66 478

2 108 2 116

Bank overdraft (928) (33)

Net cash and cash equivalents per the cash flow statement 1 180 2 083

Credit risk

The group limits its credit risk exposure by investing only with financial institutions that have a sound credit rating. Management actively monitors these financial institutions’ ratings. As a result, management does not expect any counterparty to fail to meet its obligations.

Interest risk

The group limits its interest risk by managing the term of its deposits to coincide with possible changes to interest rates as determined by the Monetary Policy Committee of the South African Reserve Bank.

Currency risk

Currency risk positions are reflected in note 30.

154




GROUP AND COMPANY

2009Number

of shares

2008Number

of shares2009

R millions2008

R millions

10. SHARE CAPITAL AND PREMIUM10.1 Authorised

Ordinary shares of 2 cents each 247 500 000 247 500 000 5 5Participating preference shares of 0.01 cent each 500 000 000 500 000 000 — —

5 5

10.2 IssuedOrdinary sharesIn issue at the beginning of the year 105 669 131 97 174 115 2 2Issued in terms of the scheme of arrangement with Bytes shareholders — 8 495 016 — —

In issue at the end of the year 105 669 131 105 669 131 2 2

Less: Own shares acquired by subsidiary (3 246 469) (3 246 469)

Net ordinary shares 102 422 662 102 422 662

Participating preference sharesIn issue at the beginning of the year 237 538 277 213 654 725 — —Issued in terms of share schemes 2 119 462 1 773 142Issued in terms of the scheme of arrangement with Bytes shareholders — 22 110 410 — —

In issue at the end of the year 239 657 739 237 538 277 — —

Less: Own shares acquired by subsidiary (27 704 013) (27 698 875)

Net participating preference shares 211 953 726 209 839 402

Total number of shares in issue at the end of the year, net of own shares acquired 314 376 388 312 262 064

10.3 Share premiumBalance at the beginning of the year 2 208 833Share premium arising from the issue of shares in terms of:– Share schemes 18 12– Scheme of arrangement with Bytes shareholders — 1 363

Balance at the end of the year 2 226 2 208

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 2 228 2 210

10.5 Treasury shares

Ordinary shares and participating preference shares acquired by subsidiary at cost 299 299

Fina

ncia

l sta

tem

ents

155


2009Number

of shares

2008Number

of shares

10. SHARE CAPITAL AND PREMIUM (continued)

10.6 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 136 983 014 136 983 014

141 830 869 141 830 869

Participating preference shares

Shares reserved to meet the requirements of:

Allied Electronics Corporation Limited Share Trust 338 008 1 169 506

Altron Group Share Incentive Trust 1 176 065 2 375 374

Conditional Rights Scheme 10 285 152 11 039 018

Shares reserved for allocation under employee share schemes 15 518 130 14 458 257

Shares under the control of the directors until the forthcoming annual general meeting 233 024 906 233 419 568

260 342 261 262 461 723

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 88).

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 until the next annual general meeting.

156




ConditionalRights

Scheme

Allied ElectronicsCorporationShare Trust

AltronGroup Share

Incentive TrustTotal share

options

10. SHARE CAPITAL AND PREMIUM (continued)10.7 Employee share options – participating

preference sharesNumber 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 Number of options granted 148 790 — — 148 790 Number of options lapsed/forfeited/reinstated (862 707) (171 644) (174 312) (1 208 663) Number of options exercised (39 949) (659 854) (1 024 997) (1 724 800)

Number of options allocated at 28 February 2009 10 285 152 338 008 1 176 065 11 799 225

Of the 1 724 800 options exercised 39 949 relate to conditional rights exercised. Conditional rights are net settled and as a result only 13 013 shares were issued in satisfaction of those conditional rights. 421 598 options were exercised at the end of the previous year and were only listed during the current year.

10.8 The Altron Group Share Incentive Trust, Allied Electronics Corporation Limited Share Trust and the Conditional Rights SchemeThe details of rights outstanding at the financial year end are as follows:

Options and deferred delivery shares outstanding at 28 February 2009

Date grantedExercise price

per share

Allied Electronics CorporationShare Trust

Altron GroupShare Incentive

TrustConditional

Rights Scheme

5 March 1999 R5.25 93 62430 May 2000 R5.00 48 05628 June 2000 R4.85 163 34810 April 2001 R7.00 12 7807 June 2002 R7.40 20 2001 October 2002 R7.25 5 000

The following options are subject to IFRS 2:27 July 2004 R11.20 873 8349 February 2006 R22.50 3 097 64013 June 2006 R23.50 412 00023 November 2006 R30.75 671 55614 January 2008 R7.80 21 78314 January 2008 R12.80 275 44814 January 2008 R26.54 1 891 5444 February 2008 R36.10 603 91125 February 2008 R35.00 504 64527 February 2008 R35.00 2 041 70028 February 2008 R35.50 913 36628 July 2008 R34.50 108 79011 February 2009 R21.50 40 000

338 008 1 176 065 10 285 152

Fina

ncia

l sta

tem

ents

157



10.8 The Altron Group Share Incentive Trust, Allied Electronics Corporation Limited Share Trust and the Conditional Rights Scheme

Terms of schemes

Allied Electronics Corporation Limited Share Trust

The Allied Electronics Corporation Limited Share Trust is a ten-year scheme and is currently in run-off where the last of the options so granted are exercisable in June 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 for details of options held by directors.

10.9 Share-based payments

The number and weighted average exercise prices of share options accounted for under IFRS 2 are as follows:

Weightedaverage

exercise priceRand2009

Numberof options

(000s)2009

Weightedaverage


Number ofoptions

(000s)2008

Altech

Outstanding at the beginning of the year 50.39 3 404 50.39 3 312

Forfeited during the year 52.89 (344) 52.72 (352)

Exercised during the year 32.05 (121) 34.21 (53)

Granted during the year — — 50.28 497

Outstanding at the end of the year 50.79 2 939 50.39 3 404

Exercisable at the end of the year 612 100

The weighted average market price on exercised options was R49.06 (2008: R60.60).

Exercise prices on outstanding options at the end of the period ranged from R32.00 to R66.00 (2008: R30.00 to R66.00).

The weighted average remaining period to vesting on outstanding options at the end of the period was 14 months (2008: 23 months).

158





10.9 Share-based payments (continued)

Weightedaverage


Numberof options

(000s)2009

Weightedaverage


Number ofoptions

(000s)2008

Bytes

Outstanding at the beginning of the year — — 10.06 7 881

Forfeited during the year — — 11.56 (460)

Exercised during the year — — 4.71 (396)

Transferred to Altron scheme — — 10.27 (7 025)

Outstanding at the end of the year — —

Exercisable at the end of the year — —

The weighted average market price on exercised options was R15.40 in 2008.

In accordance with the scheme of arrangement with Bytes shareholders all outstanding options were transferred and converted to the Altron share option scheme in the previous year.

Altron

Outstanding at the beginning of the year 26.78 12 664 21.27 6 787

Forfeited during the year 29.45 (890) 22.23 (996)

Exercised during the year 8.46 (467) 20.07 (679)

Transferred and converted from Bytes scheme — — 23.57 3 061

Granted during the year 31.01 149 35.28 4 491

Outstanding at the end of the year 27.08 11 456 26.78 12 664

Exercisable at the end of the year 3 429 1 245

The weighted average market price on exercised options was R38.68 (2008: R37.48).

Exercise prices on outstanding options at the end of the period ranged from R7.80 to R36.10 (2008: R7.00 to R36.10).

The weighted average remaining period to vesting on outstanding options at the end of the period was 27 months (2008: 30 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 2007, options were assumed to be exercised midway between the vesting date and the expiry date. Subsequently, evidence indicated 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 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, and expire after six years.

Fina

ncia

l sta

tem

ents

159




Fair value and assumptions of share options granted

Fair value at grant date:

2009

Conditional rights Altron

Fair value at grant date (Rand) 4.01 to 9.00

Share price (Rand) 21.50 to 34.50

Exercise price (Rand) 21.50 to 34.50

Expected volatility 25.20% to 34.01%

Option life (years) 3 to 5

Dividend yield 4.52% to 7.26%

Risk-free interest rate 8.06% to 9.54%

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%

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 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.

Group

2009 2008


Employee expenses

Share options granted between 7 November 2002 and 28 February 2006 1 1

Conditional rights granted subsequently 22 21

(Income)/expense arising from share appreciation rights (8) 24

Total expense recognised as employee costs 15 46

Total carrying amount of cash-settled transaction liabilities 5 31

160






The fair value of the share appreciation rights at grant date is determined based on the Black-Scholes model. The fair value of the liability is remeasured at each balance sheet date and at settlement date. The model inputs at 28 February 2009 were as follows:

Altech Altech Altron Altron

2009 2008 2009 2008

Share price (Rand) 51.25 50.75 19.20 36.00

Exercise price (Rand) 32.25 32.25 11.20 11.20 and 12.80

Term (years) 0.4 0.4 to 1.4 0.4 0.4 to 1.4

Volatility 30% to 40% 31% to 44% 48% 24% to 27%

Dividend yield 5.60% 4.73% 8.13% 3.28%

Risk-free interest rate 8.07% 9.60% 8.07% 9.60%

2009R millions

2008R millions

10.10 Share-based payments expense arising on B-BBEE transactions

Arising on the acquisition of 25.1% of IST by Izingwe — 3

GROUP

2009 2008


11. RESERVES

11.1 Retained earnings 3 920 3 634

Are distributable and would be subject to secondary tax on companies.

11.2 Foreign currency translation reserve 217 184

Comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.

11.3 Premium/discount on minority equity transactions (1 383) (1 355)

Comprises the premium or discount on the subsequent purchase or sale of equity instruments in existing subsidiaries.

11.4 Cash flow hedging reserve (15) (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 58 44

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 68 9

Comprises the Capital Redemption Reserve Funds as well as legal reserves of a foreign subsidiary.

11.7 Fair value reserve 79 43

Comprises the cumulative net change in the fair value of available-for-sale investments, net of deferred taxation, until the investment is derecognised and the fair value adjustment of non-controlling equity instruments in business combinations achieved in stages.

Total reserves 2 944 2 558

Fina

ncia

l sta

tem

ents

161


12. B-BBEE TRANSACTIONS

The group has entered into the following material B-BBEE transactions:

12.1 Altech group – Altech Information Technology (Pty) Limited (Altech IT) – Pamodzi Investment Holdings (Pty) Limited (Pamodzi)

During the prior year the Altech group restructured its information technology businesses and simultaneously restructured its related B-BBEE holdings. This culminated in Pamodzi acquiring 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 was 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)

In 2004 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 which only fall away when the preference shares have been fully repaid.

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 to note 14).

During a previous financial year Powertech acquired a 10% equity interest in Izingwe Aberdare Cables for R1.3 million following the exit of one of the B-BBEE consortium shareholders (refer to Annexure 1). A diluted headline earnings adjustment of R28 million (2008: R81 million) has been calculated based on the recognition of the net 27% (90% of 30%) minority interest with settlement of the outstanding purchase price of R106 million (comprising the empowerment funding obligation net of excess cash deposits of R6 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 was recognised in the prior year 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)

In 2004 Bytes entered into an agreement with Kagiso to dispose of 5% of its equity interest in Bytes SA for a cash consideration fully funded by Kagiso and granted an option to Kagiso to acquire a further 22% equity interest in Bytes SA for R198 million. On 1 July 2008, Kagiso exercised its option over the 22% equity interest, following which Bytes SA performed a capital reduction of R198 million. This reduced the funding obligation associated with the exercise to R154 million, which was met through the issue of perpetual, non-cumulative preference shares to a financial institution, secured by a put option provided by Altron to the financial institution.

At a Bytes level the minorities are fully recognised, however, at an Altron level the special purpose vehicle in which the 22% equity interest is housed is consolidated in accordance with SIC 12 – Consolidation of special purpose entities. However, because there is no obligation to declare dividends or make capital repayments on the preference shares, these are classified as equity and therefore minority interests in the group accounts. Under accounting rules, the quantum of minority interest recognised is the greater of 22% of Bytes SA’s net asset value or the outstanding preference share capital and dividend receivable. In the current year the latter was greater and so a minority interest of R165 million has been recognised. While the preference share obligation is recognised as the minority interest, the earnings attributable to minorities is limited to the dividend receivable on the preference shares for that period, being R11 million for the eight months ended 28 February 2009. This resulted in R22 million of Bytes SA headline earnings and R11 million of Bytes SA earnings (after capital items) being re-recognised as earnings attributable to equity holders at the Altron level. The put option is valued at each balance sheet date and is reflected as a R2 million liability on Altron’s balance sheet at 28 February 2009.

A diluted headline earnings adjustment amounting to R7 million (2008: R33 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 for the four months to 30 June 2008 (refer to note 26.4).

162




2009 2008


13. LOANS

13.1 Non-current loans

Interest-bearing loans at amortised cost

Rental finance liabilities (note 4) 126 128

Finance lease liabilities 110 14

Secured bank loans 348 146

Loans from minority shareholders 20 23

Unsecured bank loans 674 634

Deferred purchase considerations 153 9

Loan from joint-venture partner 3 29

Non-interest-bearing loans at amortised cost

Spanish Government loans — 14

Subscription shares to be allocated 26 —

1 460 997

Less: Payable within one year shown as current loans (404) (213)

Total non-current loans 1 056 784

13.2 Current loans

Current portion of interest-bearing loans at amortised cost

Current portion of rental finance liabilities 53 42

Current portion of finance lease liabilities 25 11

Current portion of secured bank loans 143 36

Current portion of unsecured bank loans 28 77

Current portion of deferred purchase considerations 153 4

Current portion of loan from joint-venture partner 3 29

Current portion of non-interest-bearing loans at amortised cost

Current portion of Spanish Government loans — 14

Current portion of long-term loans 404 213

Fina

ncia

l sta

tem

ents

163


13. LOANS (continued)

Terms and debt repayment schedule

The terms and conditions of outstanding loans were as follows:

28 February 2009 29 February 2008

Currency

Nominal interest

rateYear of

maturity

Face value

R millions

Carrying value

R millions

Face value

R millions

Carrying value

R millions

Secured

Rental finance liabilities ZAR Linked to prime 2009 – 2013 151 126 157 128 Finance lease liabilities ZAR Linked to prime 2009 – 2013 148 110 15 14 Secured bank loan ZAR Prime less 1.25% 2009 – 2016 35 35 37 37 Secured bank loan ZAR Prime less 2.5% 2009 – 2013 108 102 28 28 Secured bank loan NGN Nigerian prime 2009 – 2010 49 49 81 81 Secured bank loan EUR Euribor + 1% 2011 122 122 — — Secured bank loan KES 12% – 12.5% 2009 – 2011 40 40 — —Unsecured Unsecured bank loans GBP 6.6% 2008 — — 50 50 Unsecured bank loans GBP 7.74% 2008 — — 34 34 Unsecured bank loans ZAR JIBAR + 0.95% 2010 550 550 550 550 Loans from minority shareholders ZAR 12.3% No fixed term 20 20 23 23 Spanish Government loan EUR 0.0% 2008 — — 14 14 Loan from joint-venture partner ZAR Prime 2009 3 3 29 29 Deferred purchase considerations USD 2.2% 2009 104 104 — — Deferred purchase considerations ZAR 13.0% 2009 49 49 9 9 Unsecured bank loans ZAR 13.0% 2012 115 115 — — Unsecured bank loans EUR 3.3% 2009 4 4 — — Unsecured bank loans ZAR 13.0% 2010 5 5 — — Subscription shares to be allocated ZAR 0.0% 2009 26 26 — —

1 529 1 460 1 027 997

Security

Bank loans are secured by property, plant and equipment with a book value of R413 million (2008: R189 million) and current assets with a book value of R137 million (2008: R101 million).

Finance lease liabilities are secured by equipment with a book value of R114 million (2008: R14 million).

Rental finance liabilities are matched by reciprocal rental finance receivables (refer to note 4).

Finance lease liabilities

Finance lease liabilities are payable as follows:


Future minimum

lease paymentsR millions

Present value of minimum


Future minimum lease payments

R millions

Present value of minimum


Less than 1 year 43 25 14 11

Between 1 – 5 years 105 85 4 3

148 110 18 14

164





Liquidity risk

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements:

28 February 2009 Currency

Carryingamount

R millions

Contractual cash flows

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


Rental finance liabilities ZAR 126 151 38 34 57 22 —

Finance lease liabilities ZAR 110 148 22 20 42 64 —

Secured bank loan ZAR 35 56 4 4 7 21 20

Secured bank loan ZAR 102 152 32 15 26 79 —

Secured bank loan NGN 49 59 — 47 12 — —

Secured bank loan EUR 122 129 15 15 29 70 —

Secured bank loan KES 40 46 28 8 10 — —

Unsecured bank loans ZAR 550 649 33 33 583 — —

Loans from minority shareholders ZAR 20 30 — 4 4 22 —

Loan from joint-venture partner ZAR 3 3 3 — — — —

Deferred purchase considerations USD 104 107 107 — — — —

Deferred purchase considerations ZAR 49 51 51 — — — —

Unsecured bank loans ZAR 115 142 19 19 38 66 —

Unsecured bank loans EUR 4 4 4 — — — —

Unsecured bank loans ZAR 5 6 — — 6 — —

Subscription shares to be allocated ZAR 26 * — — — — —

1 460 1 733 356 199 814 344 20

*To be settled by issue of equity.

29 February 2008 Currency

Carryingamount

R millions

Contractual cash flows

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


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 loans 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

Fina

ncia

l sta

tem

ents

165



Interest rate risk

Profile

At the balance sheet date the interest rate profile of the group’s interest-bearing loans was:

Carrying amount

2009 2008


Variable-rate instruments

Financial liabilities

ZAR 1 115 818

GBP — 84

NGN 49 81

Euro 126 —

KES 40 —

USD 104 —

1 434 983

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 currency rates, remain constant. The analysis is performed on the same basis as used in 2008.

Profit or loss

100 bp 100 bp

increase decrease


28 February 2009

Variable-rate loans (14) 14

29 February 2008

Variable-rate loans (10) 10

Currency risk

The principal and interest on certain borrowings is denominated in currencies that match the functional currencies of the underlying operations of the group, primarily GBP, but also KES and NGN. Accordingly currency risk does not arise from these financial instruments.

Currency risk positions on borrowings that do not match the functional currencies of the underlying operations of the group, primarily USD and Euro, are reflected in note 30.

2009 2008


Borrowing facilities

In terms of the articles of association the borrowing powers of the group are unlimited.

Unutilised banking facilities 2 336 2 418

166




2009 2008


14. EMPOWERMENT FUNDING OBLIGATION

At amortised cost

Opening balance 172 172

Interest accrued 11 16

Repayments (71) (16)

112 172

Current portion (11) (16)

101 156

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 cash flowsR 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

28 February 2009 Rand 112 144 9 10 21 87 17

29 February 2008 Rand 172 235 12 13 28 111 71

Interest rate risk

The dividends on the preference shares bear an indicative interest rate of 9.61% (2008: 9.61%). This interest rate has been fixed for the period of the funding and is not subject to variation as market rates alter.

Contractlosses

R millions

Retrenchments and

restructuring costs

R millions

Warranties and fault

rectificationR millions

Post-retirement

medical aidbenefits

R millionsTotal

R millions

15. PROVISIONS

Long-term provisions — — 13 11 24

Current portion included in current liabilities 22 4 55 — 81

Total provisions at 29 February 2008 22 4 68 11 105

Provisions raised during the year 8 33 55 — 96

Acquisition of subsidiaries 11 — 29 1 41

Disposals of subsidiaries — — (1) — (1)

Provisions utilised/released during the year (6) — (49) (1) (56)

Total provisions at 28 February 2009 35 37 102 11 185

Long-term provisions — — 14 11 25

Current provision included in current liabilities 35 37 88 — 160

35 37 102 11 185

Refer to accounting policies for a description of provisions.

Fina

ncia

l sta

tem

ents

167


2009 2008


16. TRADE AND OTHER PAYABLES, INCLUDING DERIVATIVES

Trade payables 3 305 3 280

Derivative liability at fair value: used for hedging 98 35

Payroll liabilities 250 176

VAT accrual 13 69

Receipts in advance 472 343

4 138 3 903

(a) Trade payables

Management of liquidity risk

The group has negotiated favourable credit terms with suppliers which enables 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.

Carrying amounts

R millions

6 months or less

R millions

6 – 12 months

R millions

1 – 2 years

R millions

2 – 5 years

R millions

Estimate of when revenues are expected to be earned on these receipts:

28 February 2009 472 302 146 22 2

29 February 2008 343 156 146 25 16

2009 2008


(c) Derivative liability at fair value

Derivative liability at fair value includes:

Forward exchange contracts used for fair value hedging 66 10

Forward exchange contracts used for cash flow hedging 6 —

Interest rate swaps used for cash flow hedging 22 —

Commodity forward contracts 2 25

Put option in respect of Bytes SA/Kagiso preference share funding (refer to note 12.4) 2 —

98 35

168




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% (2008: 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 R149 million (2008: R125 million).

Multi-employer plans

Post-acquisition of subsidiaries, certain employees remained members of their previous funds. A number of these are 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 R41 million (2008: R42 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. Furthermore, upon retirement, any member 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, are 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.

2009 2008

Defined benefit plans R millions R millions

17.1 Value of obligationsFair value of plan assets 2 435 2 228 Present value of funded obligations (2 615) (2 101)

(Deficit)/surplus (180) 127 Unrecognised actuarial losses 180 — Unrecognised due to paragraph 58 limit — (127)

(Liability)/asset recognised in the balance sheet — —

17.2 Components of income statement expenseCurrent service cost (58) (70)Interest cost (268) (154)Expected return on plan assets (limited by paragraph 58) 334 213 Change in paragraph 58 limit 127 (26)Actuarial (loss)/gain recognised (132) 26

3 (11)

17.3 Reconciliation of unrecognised actuarial gain/loss Unrecognised actuarial loss at the beginning of the year — 58 Actuarial gain on liabilities (780) (39)Actuarial loss/(gain) on assets 1 092 (45)Actuarial (loss)/gain recognised (132) 26

Unrecognised actuarial loss at the end of the year 180 —

17.4 Reconciliation of paragraph 58 limit Paragraph 58 limit at the beginning of the year (127) (101)Change in paragraph 58 limit during the year 127 (26)

Paragraph 58 limit at the end of the year — (127)

Fina

ncia

l sta

tem

ents

169


2009 2008


17. RETIREMENT BENEFIT PLANS (continued)17.5 Reconciliation of defined benefit obligation

Defined benefit obligation at the beginning of the year 2 101 1 983 Fund credits of defined benefit members previously reflected under defined contribution fund allocation 1 120 —Service cost 58 70 Interest cost 268 154 Benefits paid (197) (67)Employee contributions to defined contribution fund credits subject to defined benefit underpin 11 —Transfers from defined contribution fund 34 —Actuarial gain (780) (39)

Defined benefit obligation at the end of the year 2 615 2 101

17.6 Reconciliation of fair value of plan assetsAssets at market value at the beginning of the year 2 228 2 084 Fund credits of defined benefit members previously reflected under defined contribution fund allocation 1 120 —Expected return on assets 334 223 Contributions due 58 54 Company contribution holiday granted (50) (43)Benefits paid (197) (67)Transfers from/(to) defined contribution fund 34 (68)Actuarial (loss)/gain (1 092) 45

Assets at market value at the end of the year 2 435 2 228

Plan assets comprise:

Local equities 59% 54%Bonds 15% 20%International investments 21% 16%Cash and other 5% 10%

17.7 Expected 2010 contributionsService cost 61 Interest cost 222 Expected return on assets (217)Amortisation of unrecognised actuarial loss/gain —

Net periodic defined benefit pension expense 66

17.8 Principle actuarial assumptions % %

Discount rate 8.50 8.50

Inflation rate 5.00 5.25

Salary increase rate 6.00 6.25

Expected return on assets 8.95 10.50

Pension increase allowance 3.33 5.25

Actual return on the Altron Group Pension Fund (23.00) 13.27

170




17. RETIREMENT BENEFIT PLANS (continued)In performing the current year actuarial calculation, the fund credits of defined contribution members with minimum benefits have been presented as part of the defined benefit asset and liability analysis presented above in order to better reflect the defined benefit effects of such arrangements. The comparative actuarial analysis excluded such fund credits from the defined benefit fund analysis, however this did not have an effect on the net surplus or unrecognised gains/losses of the defined benefit fund.

Actuarial losses on assets in the current year comprise the differential between expected returns and actual returns for the year. Actuarial gains on obligations primarily comprise the decrease of defined contribution members’ fund credits following the negative actual return on investments for the year, partially offset by minimum benefit arrangements, as well as the realignment of expected pension increases of defined benefit members, previously aligned with expected inflation, to affordability relative to investment returns in accordance with the fund’s practice and policy.

Unrecognised actuarial losses were within the 10% corridor margin and accordingly no amortisation of the loss has been recognised. The Pension Fund Act, 1956, as amended, precluded the group from accessing the benefit of any surplus assets in previous years without the specific consent of the trustees of the fund in the form of employer contribution holidays. Accordingly the surplus was not recognised on the group’s balance sheet. The group was granted a contribution holiday on the defined contribution plan for the five months ended 28 February 2009 in lieu of surpluses accumulated on the defined benefit plans (2008: six months ended 31 October 2007). The contribution holiday was made available to all participating group employer companies.

18. ACQUISITION OF SUBSIDIARIES

Bytes group

During the year the Bytes group acquired a number of operations, namely Planflow – 1 March 2008, Intelleca – 1 April 2008 and NOR Paper – 1 July 2008 for an aggregate consideration of R301 million of which R49 million is deferred.

In the year to 28 February 2009 these acquisitions contributed R329 million to revenue and R15 million to the consolidated profit after tax. If the acquisitions had occurred on 1 March 2008, group revenue and net profit after tax before allocations would have increased by a further R117 million and R16 million respectively.

The goodwill arising is primarily attributable to the market dominance of some of the businesses and the human capital acquired.

Recognised Fair value Carrying

values adjustments amount

R millions R millions R millions

Non-current assets 13 85 98

Current assets 149 — 149

Non-current liabilities (1) (26) (27)

Current liabilities (57) — (57)

Net identifiable assets and liabilities 104 59 163

Goodwill arising on acquisition 138

Total consideration 301

Less cash and cash equivalents in subsidiaries acquired (5)

Less deferred purchase consideration (49)

Cash outflow from the group on acquisition 247

Powertech group

On 1 April 2008 the Powertech group acquired the remaining 50% of Powertech Transformers (Pty) Limited that it had not previously owned for a consideration of R320 million.

In the year to 28 February 2009 the acquisition of the remaining 50% contributed R814 million to revenue and R44 million to the consolidated profit after tax. If the acquisition had occurred on 1 March 2008, group revenue and net profit after tax before allocations would have increased by a further R54 million and R4 million respectively.

The goodwill arising is attributable to the human capital acquired and the regional market dominance of the business acquired.

Fina

ncia

l sta

tem

ents

171


18. ACQUISITION OF SUBSIDIARIES (continued)Recognised Fair value Carrying

values adjustments amountR millions R millions R millions

Non-current assets 110 166 276 Current assets 891 15 906 Non-current liabilities (2) (51) (53) Current liabilities (562) — (562)

Net identifiable assets and liabilities 437 130 567 Attributable to minorities (42) (23) (65)

Net attributable assets and liabilities 395 107 502 Goodwill arising on acquisition 69

Total consideration 571 Less fair value of existing joint venture interest applied to business

combination (251) Less cash and cash equivalents in subsidiaries acquired (71)

Cash outflow from the group on acquisition 249

Altech group On 1 March 2008 the Altech group acquired from Sameer ICT Limited (Sameer) 51% of the issued share capital of Kenya Data Networks Limited (KDN), Swift Global (Kenya) Limited (Swift) and Infocom Limited (Infocom).The purchase price of US$75 million was allocated as follows:– US$68 million for the shares in KDN.– US$5 million for the shares in Swift.– US$2 million for the shares in Infocom.Of the total purchase price of US$75 million referred to above an amount of US$10 million has been held in escrow, to be released to the vendors of the shares concerned against the achievement of an aggregated combined profit after taxation of at least US$11.7 million for the 12 months ended 28 February 2009. The warranted profits were achieved.In addition the Altech group and Sameer injected new capital of US$20 million into the three companies acquired, of which 51% was provided by the Altech group and the remaining 49% was provided by Sameer. Therefore the Altech group’s total investment was US$85.2 million comprising the purchase price of US$75 million and the cash injection of US$10.2 million.The goodwill arising is attributable to the market dominance of the businesses in their regions and the human capital acquired.On 1 March 2008 and 31 March 2008 the group acquired 100% of the Altech Netstar franchises in Witbank and Bloemfontein respectively.

Recognisedvalues

R millions

Fair valueadjustments

R millions

Carryingamount

R millions

Non-current assets 317 158 475 Current assets (including capital subscription proceeds) 269 — 269 Non-current liabilities (190) (42) (232) Current liabilities (132) — (132)

Net identifiable assets and liabilities 264 116 380 Attributable to minorities (129) (49) (177)

Net attributable assets and liabilities 135 67 203 Goodwill arising on acquisition 499

Total consideration 702 Less deferred purchase consideration (82)

Consideration paid in cash 620 Less amount paid for subscription shares and received by subsidiary companies (82) Less cash and cash equivalents in subsidiaries acquired (3)

Cash outflow to the group on acquisition 535

172




18. ACQUISITION OF SUBSIDIARIES (continued)

In the year to 28 February 2009 these acquisitions contributed R449 million to revenue and R101 million to the consolidated profit after tax. If the Bloemfontein acquisition had occurred on 1 March 2008, group revenue and net profit after tax before allocations would have increased by a further R1 million and R0.2 million respectively. These amounts have been calculated using the group’s accounting policies and by adjusting the results of the subsidiaries to reflect amortisation on the fair value adjustments to intangible assets from 1 March 2008, together with consequential tax effects.

Altron Corporate

Effective 1 July 2008, Altron Finance (Pty) Limited acquired the remaining 50% of the interest in Aerotime International Management Services (Pty) Limited it did not already own for a cash consideration of R7.5 million. The acquisition resulted in goodwill of R1 million being recognised.

The acquisition of the remaining 50% did not result in additional group revenue as all services are rendered to group companies and no additional profits after tax accrued to the group.

GROUP

2009 2008


19. REVENUE

Goods sold 16 869 14 950

Services rendered 7 859 6 451

Rental finance income 40 30

24 768 21 431

20. OPERATING PROFIT BEFORE CAPITAL ITEMS

Is stated after taking account of the following items:

20.1 Auditors’ remuneration

Audit fees 30 24

Fees for other services 2 3

32 27

20.2 Directors’ remuneration

Refer to remuneration report on page 112 45 49

20.3 Employee remuneration (including directors’ remuneration)

Salaries and wages 3 328 2 840

Share-based payments – equity-settled (note 10.9) 23 22

Share-based payments – cash-settled (note 10.9) (8) 24

Retirement and provident funds 190 167

3 533 3 053

20.4 Share-based payments expense arising on B-BBEE transactions (note 10.10) — 3

20.5 Fees paid

Managerial fees 13 24

Technical, consultancy and administration 203 127

216 151

Fina

ncia

l sta

tem

ents

173


2009 2008


20. OPERATING PROFIT BEFORE CAPITAL ITEMS (continued)

20.6 Foreign exchange gains/(losses)

Gains 193 97

Losses (121) (63)

Forward exchange contracts – fair value adjustments (19) 30

53 64

Being:

Realised 22 52

Unrealised 31 12

20.7 Net increase in provisions 40 1

20.8 Operating lease chargesProperty 159 118 Plant, equipment and vehicles 67 38 Additional cost of straight-lining of leases 4 7

230 163

20.9 Research and development expenditure 120 128

21. CAPITAL ITEMSImpairment of goodwill (90) (86)Goodwill adjustment on reversal of at acquisition tax losses — 2 Foreign currency translation reserve released on disposal — (7)Net gain/(loss) on disposal of businesses 58 (1)Net gain on disposal of property, plant and equipment 23 2 Impairment of property, plant and equipment (12) —

(21) (90)

22. FINANCIAL INCOMERecognised in profit or lossInterest income on financial assets carried at amortised cost 171 160 Dividend income on available-for-sale financial assets 13 22

184 182

Recognised directly in equityNet change in fair value of available-for-sale financial assets — 8 Fair value adjustment of joint venture on step acquisition 54 — Foreign currency translation differences for foreign operations 38 133

92 141

Recognised in:Fair value reserve 54 8 Translation reserve 33 106 Minority interest 5 27

92 141

174




2009 2008R millions R millions

23. FINANCIAL EXPENSERecognised in profit or lossInterest expense on financial liabilities measured at amortised cost 295 89 Change in fair value of cash flow hedges transferred from equity (3) —

292 89

Recognised directly in equityNet change in fair value of available-for-sale financial assets 18 — Net effective portion of change in fair value of cash flow hedges 15 1

33 1

Recognised in:Fair value reserve 18 — Hedging reserve 14 1 Minority interest 1 —

33 1

24. SHARE OF PROFITS FROM ASSOCIATES Attributable earnings 3 4

25. TAXATION25.1 Taxation charge

Current tax – current year 522 591 Deferred tax – current year (25) (25) – change in rate of taxation — 4 Adjustment to prior years – current tax (17) — – deferred tax (14) (4)

466 566 Secondary tax on companies – current tax 61 54 – deferred tax (3) 5

Income tax expense per income statement 524 625

25.2 Reconciliation of effective tax rate % % South African normal tax rate 28.0 29.0

Adjusted for:Disallowable expenditure 1.6 1.0 Goodwill impaired and adjusted 1.5 1.4 Non-taxable income (1.4) (2.1)Capital gains tax rate differential (0.5) — Foreign tax rate differential 0.3 — Income from associates (0.1) (0.1)Temporary differences not raised 0.3 — Change in rate of taxation — 0.2 Prior year adjustments (1.9) (0.2)

(0.2) 0.2 Secondary tax on companies 3.5 3.0

Net increase 3.3 3.2

Effective tax rate 31.3 32.2

Fina

ncia

l sta

tem

ents

175


2009 2008

GrossNet of tax and

minorities GrossNet of tax and

minorities


26. EARNINGS PER SHARE

26.1 Reconciliation between earnings and headline earnings

Earnings attributable to Altron equity holders 835 1 019

Adjustments for:

Impairment of goodwill 90 87 86 50

Goodwill adjustment on utilisation of at acquisition tax losses — — (2) (2)

Deferred tax assets reversed on at acquisition tax losses — — — 2

Foreign currency translation reserve released on disposal — — 7 4

Net (gain)/loss on disposal of businesses (58) (49) 1 1

Net gain on disposal of property, plant and equipment (23) (21) (2) (2)

Impairment of property, plant and equipment 12 9 — —

Headline earnings 861 1 072

Headline earnings per share (cents) 275 375

2009 2008

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) 343 207 408 310 828 840 Effect of own shares held at the beginning of the year (30 945 344) (30 945 344)Effect of shares issued in April 379 947 — Effect of shares issued in June 952 129 393 923 Effect of shares issued in August 43 735 209 830 Effect of shares issued in September 37 054 — Effect of shares issued in December (36 335) 143 083 Effect of shares issued in January — 5 017 283 Effect of shares issued in February 2 126 12 422

Weighted average number of shares 313 713 390 285 660 037

26.3 Reconciliation between number of shares used for earnings per share and diluted earnings per shareWeighted average number of shares 313 713 390 285 660 037 Dilutive options 2 140 212 3 153 490

Weighted average number of shares (diluted) 315 853 602 288 813 527

R millions R millions26.4 Reconciliation between earnings attributable to Altron equity holders and fully diluted

earnings are as follows:Earnings attributable to Altron equity holders 835 1 019 Dilutive earnings attributable to B-BBEE minorities in subsidiaries (44) (118)Additional earnings attributable to dilutive options at subsidiary level (17) (14)Minority interest in adjustments 8 7

Fully diluted earnings 782 894

176




2009 2008

Net of tax Net of tax

Gross and minorities Gross and minorities


26. EARNINGS PER SHARE (continued)26.5 Reconciliation between headline earnings attributable to

Altron equity holders and fully diluted headline earningsHeadline earnings 861 1 072 Dilutive earnings attributable to B-BBEE minorities in subsidiaries (41) (39) (118) (116)Additional earnings attributable to dilutive options at subsidiary level (17) (11) (17) (11)

Fully diluted headline earnings 811 945

Diluted headline earnings per share (cents) 257 327

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 861 1 072 Amortisation of intangibles arising on business combinations 104 63 40 22 Expenses associated with proposed purchase of minorities in subsidiaries — — 13 9 IFRS 2 charge on B-BBEE transactions — — 3 3

924 1 106

Adjusted headline earnings per share (cents) 295 387

26.7 Reconciliation between diluted headline earnings and adjusted diluted headline earnings Diluted headline earnings 811 945 Amortisation of intangibles arising on business combinations 104 63 40 22 Expenses associated with proposed purchase of minorities in subsidiaries — — 13 9 IFRS 2 charge on B-BBEE transactions — — 3 3

874 979

Adjusted diluted headline earnings per share (cents) 277 339

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 that have a dilutive effect.Fully diluted earnings and diluted headline earnings have been calculated in accordance with the methodology prescribed in 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 for the four months prior to the exercise of the said option, effective 1 July 2008.

Fina

ncia

l sta

tem

ents

177


26. EARNINGS PER SHARE (continued)

– The recognition of the deferred sale of a 30% interest in Aberdare Cables to the Izingwe Consortium based on the assumption that the outstanding purchase price will be settled in cash for R106 million (comprising the empowerment funding obligation net of excess cash deposits of R6 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 recognition of the deferred sale of a 30% interest in Altech Alcom Matomo to Platina Venture Holdings (Pty) Limited based on the assumption that the internally financed purchase price will be settled in cash of R13 million, adjusted for the dilutive effect of the option at the Altech Alcom Matomo level.

– The earnings effect of dilutive options at Allied Technologies Limited level.

2009 2008R millions R millions

27. DIVIDENDS PROPOSED

Ordinary dividend number 61 of 119 cents (2008: 156 cents per share) 122 160

Preference dividend number 15 of 119 cents (2008: 156 cents per share) 252 327

374 487

28. COMMITMENTS

28.1 Capital expenditure

Contracts for capital expenditure not provided for in the financial statements 357 64

Capital expenditure authorised but not contracted for 158 47

515 111

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 agreements

At the balance sheet date the group had outstanding commitments under non-cancellable operating leases which fall due as follows:

Within one year

Property 123 117

Plant, equipment and vehicles 48 54

171 171

One to five years

Property 330 324

Plant, equipment and vehicles 58 26

388 350

Thereafter

Property 50 104

Total 609 625

178




29. POST-BALANCE SHEET EVENTS

29.1 Acquisition of 100% interest in Fleetcall (Pty) Limited (Fleetcall)

Altech has signed agreements to acquire 100% of the issued share capital of Fleetcall on 1 March 2009.

The maximum purchase price is R75 million which is payable as follows in cash:

– First tranche: R40 million;

– Second tranche: R35 million payable on achievement of warranted profits.

Fleetcall is the only trunked two-way radio operator in South Africa.

29.2 Acquisition of 100% interest in Lateral Technology Concepts (Pty) Limited (Technology Concepts)

Altech has signed agreements to acquire 100% of the issued share capital of Technology Concepts on 1 April 2009.

The maximum purchase price is R45 million which is payable in cash as follows:

– Initial payment of R7.5 million; and

– The remaining maximum amount of R37.5 million to be paid in terms of an earn-out mechanism based on after tax profit targets for the years ending February 2010 and February 2011 being achieved.

Technology Concepts is an established internet technology services business and corporate internet service provider.

This acquisition enhances Altech Autopage Cellular’s ability to provide data services to its voice subscribers, recognising the developing convergence of voice and data in the telecoms arena and the increasing demand for bundled services.

The purchase price allocations for each of these acquisitions will be performed during the 2010 financial year, which will identify any recognisable intangible assets and determine the quantum of any goodwill.

Carryingamount

R millions

The acquirees’ balance sheets for both acquisitions at the date of the acquisitions are as follows:

Non-current assets 11

Current assets 14

Non-current liabilities —

Current liabilities (10)

Net identifiable assets and liabilities 15

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.

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), Swedish krona (SEK) and Euros (Euro). 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 exchange risks. Transactions which create foreign currency cash flows are hedged with forward exchange contracts. Speculative use of financial instruments or derivatives is not permitted and none has occurred during any of the periods presented.

Fina

ncia

l sta

tem

ents

179


30. FINANCIAL RISK MANAGEMENT (continued)

30.1 Foreign currency risk (continued)

The group’s exposure to foreign currency risk was as follows:


Foreign amount Foreign amount

SEK GBP Euro USD GBP Euro USD

Millions Millions Millions Millions Millions Millions Millions

Other investments — — — — — 2 1

Trade and other receivables 62 — 8 54 — 7 12

Cash and cash equivalents — — 2 18 — 2 5

Loans — — (10) (10) — — —

Trade and other payables — (13) (21) (47) (10) (47) (23)

Gross balance sheet exposure 62 (13) (21) 15 (10) (36) (5)

Forward exchange contracts 10 13 14 (5) 10 38 15

Net exposure 72 — (7) 10 — 2 10

2009 2008

Averagerate

Closingrate

Averagerate

Closingrate

The following significant exchange rates were used for the conversions of foreign operations and transactional balances:

British pound 15.19 14.53 14.21 15.58

Euro 12.44 12.87 9.94 11.78

US dollar 8.73 10.16 7.10 7.84

Nigerian naira 0.07 0.07 0.06 0.06

Swedish krona 1.26 1.13 1.06 1.27

Kenyan shilling 0.12 0.12

Sensitivity analysis

A 1% strengthening/weakening in the rand against the following currencies at 28 February 2009 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 2008.

The movement in other currencies are not material to the business and consequently are not elaborated on any further.

Profit orloss

strengtheningR millions

Profit orloss

weakeningR millions

28 February 2009 British pound — — Euro 0.9 (0.9)US dollar (1.0) 1.0Swedish krona (0.8) 0.8

29 February 2008British pound — — Euro (0.2) 0.2 US dollar (0.8) 0.8

180





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)

2009 2008

Foreign Rand Foreign Rand

amount amount amount amount

Millions Millions Millions Millions

British pounds 13.0 205.7 10.4 148.6

US dollars (4.5) (16.0) 38.4 289.1

Euros 13.7 181.6 14.5 151.8

Swedish krona 10.3 13.2 24.8 28.5

Canadian dollars — 0.2 — —

Swiss francs 2.7 23.7 1.8 11.8

Japanese yen 6.6 0.8 5.1 0.4

409.2 630.2

Comprising foreign exchange contracts:

– to pay 959.1 958.3

– to receive (549.9) (328.1)

409.2 630.2

Value of contracts at mark-to-market 347.2 668.4

Derivative asset at fair value (refer to note 7) 10 48

Derivative liability at fair value (refer to note 16) (72) (10)

Contracts in respect of forecast transactions

The group has entered into certain forward exchange contracts included above, which do not relate to specific items appearing on the balance sheet, but were entered into to cover foreign commitments not yet due. The contracts will be utilised for purposes of inventory procurement and sales during the following year.

– to pay 97 110

– to receive — —

97 110

Fina

ncia

l sta

tem

ents

181



30.3 Commodity contracts

Commodity forward contracts are entered into to hedge the variability in the price of forecast raw material purchases in respect of 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) and the fixed for floating interest rate swap arrangement referred to below:

Cash flow hedge

An interest rate swap was entered into on 3 November 2008 in which variable interest was swapped for fixed interest on R500 million of the unsecured R550 million bank loan (refer to note 13). The group hedged its interest rate risk on the bank loan by swapping the three-month JIBAR (variable rate) with a 10.51% fixed rate.

The fair value of the interest swap at year end was a R22 million liability. A net amount of R16 million has been recognised in equity as a deferred hedging loss.

Fair value sensitivity analysis

A decrease of 100 basis points on the three-month JIBAR rate at the balance sheet date would have increased the fair value liability by R7 million and decreased equity by the same amount before tax. A decrease of 100 basis points would have had an equal but opposite effect.

Liquidity analysis

The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur and impact profit or loss.

2009

Carryingamount

R millions

Expectedcash flowsR millions

6 monthsor less

R millions

6 – 12months

R millions

1 – 2years

R millions

22 22 5 9 8

182





30.5 Credit risk

Credit 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 are 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 equivalents

The group limits its exposure to credit risk by only investing in liquid investments and only with counterparties that have a sound credit rating. Given these sound credit ratings, management does not expect any counterparty to fail to meet its obligations.

Deposits and cash balances are all maintained at reputable financial institutions. Cash management is performed by central corporate treasury.

Guarantees

The group’s policy is to provide financial guarantees only to wholly owned subsidiaries. At 28 February 2009 no third-party guarantees were outstanding (2008: 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:

– R3 125 million overdraft facility that is unsecured. Interest payable is linked to the prime interest rate.

30.7 Fair values

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate that value:

Cash and short-term investments

The carrying amount approximates fair value because of the short maturity of those instruments.

Available-for-sale investments

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.

Trade and other receivables/payables

The fair value of trade and other receivables/payables is estimated as the present value of future cash flows discounted at the market rate of interest at the reporting date.

Foreign currency contracts

The fair value of foreign currency contracts (used for hedging purposes) are marked-to-market by comparing the contracted forward rate to the present value of the current forward rate of an equivalent contract with the same maturity date.

Fina

ncia

l sta

tem

ents

183



30.7 Fair values (continued)

Interest rate swap contracts

The fair value of interest rate swaps is based on discounted estimated future cash flows based on the terms and maturity of the contract and using market interest rates for a similar instrument at reporting 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:

2009 2008

11% 13%

Loans and borrowings

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:


Carrying Fair Carrying Fair

amount value amount value


Non-current loans receivable at amortised cost 219 219 219 219

Non-current available-for-sale investments at fair value 48 48 75 75

Rental finance advances 73 73 86 86

Trade and other receivables 3 752 3 752 3 317 3 317

Assets classified as held-for-sale 34 34 — —

Derivative assets at fair value: used for hedging 11 11 54 54

Cash and cash equivalents 2 108 2 108 2 116 2 116

Loans (1 461) (1 461) (997) (997)

Empowerment funding obligation (112) (100) (172) (157)

Bank overdraft (928) (928) (33) (33)

Trade and other payables (4 040) (4 040) (3 868) (3 868)

Derivative liability at fair value: used for hedging (98) (98) (35) (35)

Liabilities classified as held-for-sale (28) (28) — —

(422) (410) 762 777

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 2009 was 18.3% (2008: 24.7%).

Altron’s share capital consists of 105.7 million ordinary shares and 239.7 million participating preference shares. Management does not make any distinction between the two types of equity in managing the capital of the company.

184





30.8 Capital management (continued)

The group utilises share options in the form of conditional rights as a long-term retention mechanism for senior executives and other key employees. The conditional rights are linked to the headline earnings performance of the group so that the interests of existing shareholders and management are aligned. The award of conditional rights is in accordance with a matrix and is approved by the board’s remuneration committee.

The group does not have a 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 R656 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 147), associates and joint ventures (see Annexure 1) and with its directors (see page 112) and key management personnel (refer below).

2009 2008


31.1 Associates and joint ventures

Sale of goods and services to joint ventures 7 6

Sale of goods and services to associates 133 93

Services received from joint ventures 18 20

Interest earned from joint ventures — 1

Management fees earned from joint ventures — 2

Dividends received 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 128.

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 (Pty) Limited and Power Technologies (Pty) Limited.

The key management personnel compensations were as follows:

Short-term employee benefits, including salaries and bonuses 51 51

Post-employment benefits 4 3

Equity compensation benefits 8 9

63 63

31.4 Shareholders

The principal shareholders of the company are detailed in the analyses of shareholders on page 88 of the annual report.

Directors’ shareholdings are detailed in the directors’ report on page 128.

Fina

ncia

l sta

tem

ents

185


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 useful lives and residual values

The useful lives and residual values of property, plant, equipment and intangible assets are reviewed at each reporting date based on

current utilisation, prospects and market conditions.

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.

» Business combination purchase price allocations

On completion of an acquisition management undertakes a full purchase price allocation exercise. Tangible assets and liabilities and

contingent liabilities are fair valued. The business is reviewed and types of intangible assets are identified. These are then valued

according to established valuation techniques applicable to the type of intangible asset. Any excess of the purchase price over the value

of the business as determined above is allocated to goodwill. Independent external consultants are utilised on the larger acquisitions.

» Impairment of assets

The impairment of goodwill is tested at least annually. A discounted cash flow valuation model is used to calculate value-in-use. Future

expected cash flows are based on management forecasts, typically over a three year period, and thereafter a reasonable rate of growth

is applied based on current market conditions. Discount rates used are calculated using the principles of the capital asset pricing model

based on current market conditions. The resulting weighted average cost of capital is compared to industry and regional averages to

ensure reasonableness.

Property, plant and equipment, as well as intangible assets, are considered for impairment when conditions indicate that impairment

may be necessary. These conditions include economic conditions of the operating unit, as well as the viability of the asset itself. The

discounted cash 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 available-for-sale investments

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.

186




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 28 February 2009.

These include the following standards and interpretations that are applicable to the business of the group and have not been applied in

preparing these consolidated financial statements:

IFRS 2 amendment – Share-based Payment – Vesting Conditions and Cancellations

The amendments to the standard are effective for the group for the year ending 28 February 2010, with the restatement of

comparatives required. The amendment to IFRS 2 clarifies 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, with no restatement of comparatives

required. The principal amendments to IFRS 3 include:

– the requirement to expense all acquisition-related costs;

– recognition of fair value gains and losses in the income statement on interests in an acquiree at the time at which control is lost;

– recognition of all increases and decreases in ownership interests over an acquiree within equity while control is held;

– the option to recognise any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate

share of the net 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 5 – Non-current Assets Held-for-Sale and Discontinued Operations (Improvement to IFRSs 2008)

This amendment is effective for the group for the year ending 28 February 2010, with the restatement of comparatives required. IFRS 5

is amended to specify that for the sale of a subsidiary, all subsidiary assets and liabilities are classified as held-for-sale once the relevant

criteria are met. In addition, the amendment requires disclosure for discontinued operations by the parent when a subsidiary meets the

definition of a discontinued operation.

IFRS 7 – Financial Instruments: Disclosure


required. The amendments to IFRS 7 focus on enhancing disclosures over fair value measurements relating to financial instruments,

specifically in relation to disclosures over the inputs used in valuation techniques and the uncertainty associated with such valuations. In

addition, the amendments improve the disclosure surrounding liquidity risk. The principal amendments include:

– Fair value disclosures to be presented in terms of a fair value hierarchy. The hierarchy considers the extent to which information from

active markets is used in valuations;

– Maturity analysis for derivative financial liabilities does not need to be based on contractual maturities unless essential for an

understanding of the timing of cash flows;

– Additional guidance is provided on the inclusion of financial guarantee contracts in the liquidity maturity analysis; and

– A maturity analysis of financial assets is required if held as part of managing liquidity risk.

Fina

ncia

l sta

tem

ents

187


33. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE (continued)

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.

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 related to revenues, results and assets. The statement also requires more qualitative

disclosures, such as the types of products and services offered by each segment, geographical areas covered and major customers.

IAS 1 – Presentation of Financial 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, with no restatement of comparatives required. 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


required. The amendments to IAS 27 require changes in a parent’s ownership interest in a subsidiary that does not result in a loss of

control to be accounted for within equity as transactions with owners in their capacity as owners. At the time at which control is lost, a

parent shall derecognise all assets, liabilities and non-controlling interest at their carrying amounts. Any retained interest in the former

subsidiary is recognised at its fair value at the date control is lost. A gain or loss on the loss of control is recognised in 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 and any potential future losses attributable to group minorities with deficit balances.

IAS 27 and IFRS 1 – Consolidated and Separate Financial Statements and First Time Adoption of International Financial Reporting

Standards


required. In addition to the amendments with respect to first time adoption of IFRS, IAS 27 has been revised to require the recognition of

pre-acquisition dividends on investments in subsidiaries in the separate financial statements in the income statement. Additional

impairment considerations have also been provided in IAS 36 – Impairment of Assets. The amendment is not expected to have a

significant impact on the group’s results.

188





IAS 28 – Investments in Associates

The amendment to the standard is effective for the group for the year ending 28 February 2010, with no restatement of comparatives

required. The amendment clarifies that an investment in an associate shall be treated as a single asset for impairment testing. Therefore

an impairment loss recorded by an investor after applying the equity method is not allocated against any goodwill included in the equity

accounted investment balance. Such an impairment loss should be reversed in a subsequent period to the extent that the recoverable

amount of the associate increases. The amendment is not expected to have a significant impact on the results of the group.

IAS 32 and IAS 1 amendments – Financial Instruments: Disclosure and Presentation and IAS 1 Presentation of Financial

Statements – Puttable Financial Instruments and Obligations Arising on Liquidation

The amendments to the standards are effective for the group for the year ending 28 February 2010, with no restatement of

comparatives required. The amendment to IAS 32 requires the 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.

IAS 39 – Financial Instruments: Recognition and Measurement

The amendment to the standards is effective for the group for the year ending 28 February 2010, with the restatement of comparatives

required. The amendment to IAS 39 clarifies the following in relation to hedge accounting:

» inflation can only be designated as a hedged risk or portion if it is a contractually specified portion of the cash flows of the hedged

item

» the time value of a purchased option used as a hedging instrument may not be included as a designated component of the hedging

instrument; and

» a risk-free or benchmark interest rate portion of the fair value of a fixed-rate financial instrument will normally be separately

identifiable and reliably measurable, and hence may be hedged.

This amendment is not expected to have a significant impact on the group’s results.

IFRIC 9 and IAS 39 amendments – Reassessment of Embedded Derivatives

The amendments to the standards are effective for the group for the year ending 28 February 2010. These amendments require that an

entity assess whether an embedded derivative is required to be separated from a host contract when the entity reclassifies a hybrid

financial asset out of the fair value through profit or loss category. This amendment is not expected to have a significant impact on the

group’s results.

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.

Fina

ncia

l sta

tem

ents

189



IFRIC 16 (AC449) Hedges of a Net investment in a Foreign Operation

This interpretation is effective for the group for the year ending 28 February 2010, with no restatement of comparatives required. The

interpretation applies to all entities using net investment hedging for investments in foreign operations (subsidiaries, joint ventures,

associates or branches) and clarifies the following:

» A parent entity may not designate as the hedged risk the foreign exchange differences arising from converting the functional

currency of the foreign operation to the presentation currency of the group (ie an accounting exposure).

» The hedging instrument used to hedge the net investment in a foreign operation may be held by any entity or entities within the

group (except the foreign operation that itself is being hedged).

» The hedging instrument used to hedge a net investment in a foreign operation may be a derivative or non-derivative instrument,

or a combination of both.

» On disposal of a foreign operation the cumulative gain or loss on the hedging instrument that was determined to be an effective hedge

is reclassified from the foreign currency translation reserve to profit or loss in the consolidated financial statements of the parent.

This interpretation is not expected to impact the group’s results significantly.

IFRIC 17 Distributions of Non-cash Assets to Owners

This interpretation is effective for the group for the year ending 28 February 2010, with no restatement of comparatives required. This

interpretation gives guidance on the accounting for distributions of non-cash assets to the owners of an entity by the entity making the

distribution (for example, dividends in specie). If the fair value of the assets distributed exceeds their carrying amount, that difference

will be recognised in profit or loss – but only at the date of settlement. In many cases a liability for the distribution will be recognised

prior to that date at the fair value of the assets to be distributed.


AC 503 – Accounting For Black Economic Empowerment (BEE) Transactions amendments

These amendments are effective for the group for the year ending 28 February 2010, with no restatement of comparatives required. This

standard has been amended to align itself with the changes to the definition of vesting conditions and the accounting treatment of

non-vesting conditions in IFRS 2 – Share-based Payments. An entity should assess whether a BEE transaction includes service conditions,

performance conditions or non-vesting conditions, as these would impact the recognition and measurement of the associated IFRS 2 cost.

Should the BEE transaction not contain a service condition, the cost of the transaction is recognised immediately.


AC 504 – IAS 19 (AC 116) – The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction in the

South African Pension Fund Environment

This interpretation is effective for the group for the year ending 28 February 2010, with the restatement of comparatives required. This

interpretation focuses on the application of IFRIC 14 by employers in South Africa in relation to defined benefit funds. It deals with the

situation where a surplus in the fund, as determined by the actuarial valuation, is attributable, at the discretion of the trustees, to the

employer company, members of the fund or a combination of both.


IASB 2008 and 2009 annual improvements project

The amendments embodied in the IFRS 2008 improvement project are effective for the group for the year ending 28 February 2010.

As part of its annual improvements project the International Accounting Standards Board (IASB) made amendments to a number of

accounting standards. These amendments were primarily made to resolve conflicts and remove inconsistencies between standards, clarify

the status of application guidance in standards, clarify existing IFRS requirements, as well as conforming the terminology used in

standards with that used in other standards and to that more widely used. Management’s assessment of the 2008 improvements has not

revealed any material impact on the group’s results.

The 2009 IASB annual improvements project was published on 24 April 2009 with the amendments to IFRS embodied therein being effective

for the group for the year ending 28 February 2011. Management has not assessed the impact of the improvements in detail, but does not

expect any significant impact on the group’s results.

190




2009 2008


34. CASH GENERATED BY OPERATIONSOperating profit before capital items 1 799 1 937 Adjustments for:Depreciation and amortisation 438 272 Movement in provisions and other non-cash movements 41 15

Cash generated before movements in working capital 2 278 2 224

Increase in inventories (62) (38)Decrease/(increase) in trade and other receivables 13 (736)(Decrease)/increase in trade and other payables (183) 770

2 046 2 220

35. DIVIDENDS RECEIVED FROM ASSOCIATES AND OTHER INVESTMENTSDividends receivable at the beginning of the year 13 19 Attributable income per the income statement 16 22 Dividends receivable at the end of the year (13) (13)

16 28

36. TAXATION PAIDAmounts unpaid at the beginning of the year (340) (205)Amounts charged to the income statement (566) (645)Translation differences — 2 Amounts acquired in business combinations (26) (29)Amounts unpaid at the end of the year 266 340

(666) (537)

37. ACQUISITION OF SUBSIDIARIES Property, plant and equipment (450) (74)Intangibles – fair value adjustment (346) (201)Inventories (208) (59)Trade and other receivables (453) (127)Trade and other payables 447 167 Provisions 41 — Deferred tax 95 61 Net loans 188 82 Net cash (84) (12)Taxation 26 29 Goodwill arising on acquisition (716) (506)

Purchase consideration (1 460) (640)Minority interest on acquisition 142 — Less: Deferred purchase consideration 131 9 Less: Investment in associate applied to business combination 7 — Less: Fair value adjustment of existing joint venture interest applied to business combination 54 —

Cash paid (1 126) (631)Less: Cash acquired 84 12

(1 042) (619)

Refer to note 18 for details of acquisitions.

Fina

ncia

l sta

tem

ents

191


2009 2008


38. PROCEEDS ON DISPOSAL OF SUBSIDIARY

Property, plant and equipment 3 —

Inventories 6 —

Trade and other receivables 10 —

Trade and other payables (2) —

Assets classified as held-for-sale — 19

Liabilities classified as held-for-sale — (15)

17 4

Profit on disposal 58 —

Proceeds on disposal 75 4

Effective 1 April 2008, the group disposed of its investment in Yelland.

The total consideration of R75 million was settled in cash.

39. PROCEEDS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT

Carrying amount 55 25

Surplus on disposal 23 2

Proceeds on disposal 78 27

40. OTHER INVESTING ACTIVITIES

Acquisition of additional shares in existing subsidiaries (18) (411)

Net decrease/(increase) of loans to associates and other investments 9 (52)

Increase in investment in associates — (1)

(9) (464)

41. SUBSIDIARIES’ EQUITY CONTRIBUTIONS FROM MINORITIES

Capital introduced by minorities 234 —

234 —

192


Annexure 1Associates, other investments and joint ventures

Altron controlled Investment at cost lessinterest amounts written off

2009 2008 2009 2008% % R millions R millions

ASSOCIATE COMPANIES– UnlistedAeromaritime InternationalManagement Services (Pty) Limited * 50.0 — — Bytes Healthcare Solutions international operations 50.0 50.5 1 1Namibian Cables (Pty) Limited — 27.1 — —Alcon Marepha (Pty) Limited 49.9 49.9 1 1

2 2

Directors’ valuation based on a price-earnings ratio relevant to the sector within which the associates operate.

* The remaning 50% not already owned of Aeromaritime International Management Services (Pty) Limited was acquired on 30 June 2008 for a total consideration of R7.5 million (refer to note 18) and has been consolidated from that date.

OTHER INVESTMENTS– Unlisted Investments at fair value

Fintech Receivables 1 (Pty) Limited (preference share) (FR1) 3 24Technologies AcceptancesReceivables (Pty) Limited (preference share) (TAR) 25 25Izingwe Aberdare Cables Investments (Pty) Limited 10.0 10.0 1 1 Izingwe Aberdare Cables Investments (Pty) Limited – cash on deposit 6 12

Total 35 62

The fair values of FR1 and TAR are determined using the discounted cash flow method over a five to seven year period using discount rates of 12.0% to 18.0% (2008: 13.0% to 20.0%). 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 the group is precluded from fair valuing the equity of the underlying subsidiary.The FR1 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 R220 million (2008: R223 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 risk:The 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%.

JOINT VENTURES

2009 2008% %

ABB Powertech Transformers # 50.0Tridonic SA 50.0 50.0CBi electric Aberdare ATC Telecom Cables 50.0 50.0

# The remaining 50% not already owned of ABB Powertech Transformers was acquired on 1 April 2008 for a total consideration of R320 million (refer to note 18) and has been consolidated from that date.

Fina

ncia

l sta

tem

ents

193


Attributable share ofretained income Indebtedness Total investment

2009 2008 2009 2008 2009 2008R millions R millions R millions R millions R millions R millions

— 6 — — — 6— — — — 1 1— — — 3 — 38 8 1 1 10 10

8 14 1 4 11 20

12 23

Preference dividend receivable Indebtedness Total investment

12 12 2 27 17 63

1 1 217 192 243 218 — — — — 1 1

— — — — 6 12

13 13 219 219 267 294

267 294

194

Annexure 1 continued

Information in respect of interest in joint ventures, associates, FR1 and TAR


Information in respect of interest in joint ventures, associates, FR1 and TAR

Joint ventures* Associates* FR1 and TAR

2009 2008 2009 2008 2009 2008

R millions R millions R millions R millions R millions R millions

ABRIDGED BALANCE SHEETS

Non-current assets 211 375 18 14 760 719

Current assets (excluding cash) 275 908 2 44 49 67

Cash and cash equivalents 96 326 3 17 58 76

Current liabilities (127) (768) (6) (41) (34) (53)

Non-current liabilities (30) (63) — (4) (817) (799)

Equity 425 778 17 30 16 10

ABRIDGED INCOME STATEMENTS

Revenue 893 2 274 93 110 158 134

Expenditure (796) (2 033) (86) (96) (131) (102)

Profit before tax 97 241 7 14 27 32

Taxation (21) (73) (2) (4) (9) (11)

Profit for the year 76 168 5 10 18 21

*Joint ventures’ and associates’ figures are stated at 100% of the respective entity’s balance sheets and income statements.

Fina

ncia

l sta

tem

ents

195


NATURE OF BUSINESS

Bytes Healthcare Solutions international operations

Provides healthcare IT and e-Commerce solutions in Saudi Arabia and Namibia.

Alcon Marepha (Pty) Limited

Manufacturer of medium voltage power cable.

FR1 and TAR

Securitisation vehicles used to house leases predominantly 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).

Tridonic. Atco SA

Distributor of lighting control gear. Tridonic SA is a 50% joint venture with Tridonic (Austria).

CBi electric Aberdare ATC Telecom Cables

A telecom cable manufacturing joint venture with Reunert.

196


Consolidated Telecommunications

2009 2008 2009 2008


BUSINESS SEGMENTATION

Revenue

Goods sold 16 902 14 950 3 166 3 081

Services rendered 7 859 6 451 4 975 4 351

Rental finance income 40 30 — —

Inter segment revenue (33) — 64 30

Total segment revenue 24 768 21 431 8 205 7 462

Expenditure (22 531) (19 222) (7 217) (6 772)

Depreciation and amortisation (438) (272) (141) (49)

Segment operating profit/(loss) 1 799 1 937 847 641

Financial income 184 182 86 96

Financial expense (292) (89) (75) (60)

Share of profit from associates 3 4 — —

Profit before taxation and capital items 1 694 2 034 858 677

GEOGRAPHIC SEGMENTATION

Revenue by market 24 768 21 431 8 205 7 462

South Africa 18 753 16 519 7 048 6 685

Rest of Africa 1 994 1 219 503 122

Europe 3 196 3 095 513 597

Rest of world 825 598 141 58

Segment operating profit by location 1 799 1 937 847 641

South Africa 1 517 1 602 690 571

Rest of Africa 217 135 146 8

Europe 64 185 10 59

Rest of world 1 15 — 4

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.

Annexure 2Segment information – Income statement

Fina

ncia

l sta

tem

ents

197


Multi-media Information Corporate

and Electronics Technology and eliminations

2009 2008 2009 2008 2009 2008

R millions R millions R millions R millions R millions R millions

9 378 8 013 4 356 3 881 2 (25)

491 80 2 394 2 020 — (1)

— — 35 16 5 14

51 65 11 — (159) (95)

9 920 8 158 6 796 5 917 (153) (107)

(9 222) (7 167) (6 246) (5 401) 155 118

(182) (104) (112) (98) (3) (21)

516 887 438 418 (2) (10)

16 9 102 69 (20) 8

(168) (27) (108) (66) 58 65

3 4 — — — —

367 872 432 421 36 63

9 920 8 158 6 796 5 917 (153) (107)

7 768 6 272 4 089 3 669 (153) (107)

909 736 582 361 — —

606 640 2 077 1 858 — —

636 511 48 29 — —

516 887 438 418 (2) (10)

498 750 330 291 (2) (10)

8 59 63 68 — —

5 67 49 59 — —

5 11 (4) — — —

198


Annexure 2Segment information – Balance sheet

Consolidated Telecommunications

2009 2008 2009 2008R millions R millions R millions R millions

BUSINESS SEGMENTATIONASSETS Property, plant and equipment 2 221 1 264 795 277 Intangible assets 2 437 1 502 121 671 Associates and other investments 278 314 — — Rental finance advances 73 86 — — Inventories 2 364 2 130 284 296 Trade and other receivables 3 763 3 371 895 967 Assets classified as held-for-sale 107 — — —

Operating assets 11 243 8 667 2 095 2 211

Deferred tax assets 230 196 Cash and cash equivalents 2 108 2 116

Total assets per balance sheet 13 581 10 979

LIABILITIES Trade and other payables 4 138 3 903 1 420 1 281 Provisions 185 105 4 1

Non-interest-bearing liabilities 4 323 4 008 1 424 1 282

Non-current loans 1 157 940 Current loans 415 229 Bank overdraft 928 33 Taxation payable 266 340 Liabilities classified as held-for-sale 28 — Deferred tax liabilities 164 83

Total liabilities per balance sheet 7 282 5 633

GEOGRAPHIC SEGMENTATIONOperating assets 11 243 8 667 2 095 2 211

South Africa 9 325 7 341 1 069 1 825 Rest of Africa 1 052 243 755 — Europe 854 1 066 271 386 Rest of world 12 17 — —

Non-interest-bearing liabilities 4 323 4 008 1 424 1 282

South Africa 3 376 3 209 1 003 1 119 Rest of Africa 464 208 315 — Europe 468 572 106 163 Rest of world 15 19 — —

Capital expenditure 902 479 356 44

South Africa 553 431 38 43 Rest of Africa 311 31 302 — Europe 38 17 16 1 Rest of world — — — —

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 attributed 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, borrowings, provisions and liabilities held-for-sale.

Fina

ncia

l sta

tem

ents

199


Multi-media Corporateand Electronics Information Technology and eliminations

2009 2008 2009 2008 2009 2008R millions R millions R millions R millions R millions R millions

1 004 632 370 297 52 58 745 38 805 793 766 —

12 14 244 221 22 79 — — 73 85 — 1

1 656 1 501 423 333 1 — 1 688 1 363 1 128 1 014 52 27

— — 107 — — —

5 105 3 548 3 150 2 743 893 165

1 511 1 329 1 209 1 280 (2) 13 157 72 33 22 (9) 10

1 668 1 401 1 242 1 302 (11) 23

5 105 3 548 3 150 2 743 893 165

4 823 3 250 2 540 2 101 893 165 54 16 243 227 — —

216 265 367 415 — — 12 17 — — — —

1 668 1 401 1 242 1 302 (11) 23

1 525 1 164 859 903 (11) 23 33 91 116 117 — —

95 127 267 282 — — 15 19 — — — —

345 317 194 112 7 6

336 312 172 70 7 6 2 2 7 29 — — 7 3 15 13 — —— — — — — —

200


Balance sheetat 28 February 2009

COMPANY

Notes2009

R’0002008R’000

ASSETS

Non-current assets 3 220 144 3 189 461

Investment in subsidiaries 2 2 670 144 2 614 297

Amount receivable from subsidiary 2 550 000 550 000

Group share scheme recharge receivable 7 — 25 164

Current assets 241 940 229 116

Amounts receivable from subsidiaries 2 241 939 228 926

Cash at bank 1 190

Total assets 3 462 084 3 418 577

EQUITY AND LIABILITIES

Shareholders’ equity 2 890 241 2 849 366

Non-current liabilities

Loans 3 550 000 550 000

Current liabilities 21 843 19 211

Accounts payable 1 277 2 926

Current portion of loans 3 17 212 16 132

Derivative liability 5 1 775 —

Taxation payable 1 579 153

Total equity and liabilities 3 462 084 3 418 577

Fina

ncia

l sta

tem

ents

201


COMPANY

Notes2009

R’0002008R’000

Operating expenditure (676) (540)

Interest income on financial assets carried at amortised cost 76 745 34 119

Interest expense on financial liabilities measured at amortised cost (71 201) (31 371)

Change in fair value of derivative put option (1 354) —

Dividends received from subsidiaries 545 661 383 265

Net gain on disposal of property — 801

Profit before taxation 549 175 386 274

Taxation 6 (6 776) (796)

Profit for the year 542 399 385 478

COMPANY

R’000

Ordinaryshare

capital(Note 4)

Preferenceshare

capital(Note 4)

Share premium

(Note 4)

Share-basedpayment

reserveRetainedearnings

Totalequity

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

Profit for the year — — — — 542 399 542 399

Share-based payments — — — 18 321 — 18 321

Dividends paid — — — — (538 146) (538 146)

Share issue — — 18 301 — — 18 301

Balance at 28 February 2009 2 113 24 2 226 181 46 078 615 845 2 890 241

Income statementfor the year ended 28 February 2009

Statement of changes in equityfor the year ended 28 February 2009

202


Cash flow statementfor the year ended 28 February 2009

COMPANY

Notes2009

R’0002008R’000

Operating activities (6 546) 196 801

Cash utilised by operations (673) (540)

Interest received 75 643 16 646

Interest paid (70 121) (15 239)

Dividends received 545 661 383 265

Changes in working capital (1 649) 2 311

Proceeds on disposal of property — 851

Movement on loans with subsidiaries (11 911) 177 624

Cash available from operating activities 536 950 564 918

Dividends paid (538 146) (367 451)

Taxation paid 8 (5 350) (666)

Investing activities (11 944) (758 402)

Cash outflow on increase of investment in subsidiaries (11 944) (208 402)

Loan advanced to subsidiary — (550 000)

Financing activities 18 301 561 791

Proceeds on issue of shares 18 301 11 791

Loan raised — 550 000

Cash resources

Net cash (utilised)/generated (189) 190

Cash and cash equivalents at the beginning of the year 190 —

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 1 190

Fina

ncia

l sta

tem

ents

203


Notes to the financial statementsfor the year ended 28 February 2009

1. ACCOUNTING POLICIES

Please refer to the group accounting policies on pages 130 to 137.

2. INTEREST IN SUBSIDIARIES

Effective holdingShares at cost less

amounts written off Indebtedness

Issuedcapital

R millions2009

%2008

%2009

R’0002008R’000

2009R’000

2008R’000

Allied Technologies Limited 7 62 62 235 095 223 225 — —

Bytes Technology Group (Pty) Limited 737 100 100 2 016 937 2 016 863 — —

Power Technologies (Pty) Limited 411 100 100 249 869 249 869 568 575 567 473

Altron Finance (Pty) Limited – ordinary shares — 100 100 235 235 223 364 211 453

Altron Finance (Pty) Limited – preference shares 100 100 121 509 121 509 — —

Investment in subsidiaries – share-based payments 46 078 2 593 — —

Venopt (Pty) Limited * — 421 — — —

Other 3 100 100 — 3 — —

2 670 144 2 614 297 791 939 778 926

Less: Current portion disclosed as current assets 241 939 228 926

Non-current loans 550 000 550 000

Notes

The 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.* Special purpose entity owning 22% of Bytes Technology Group South Africa (Pty) Limited and beneficially owned by Kagiso Strategic Investments (Pty) Limited.

The entity is recognised as a subsidiary of the company by virtue of the put option issued in favour of a financial institution in respect of the preference share capital funding of the entity (refer to note 5).

2009R’000

2008R’000

3. LOANS

Unsecured bank loans 567 212 566 132

Current portion reflected as current liabilities (17 212) (16 132)

Non-current loans 550 000 550 000

The loan bears interest at the rate of JIBAR + 0.95% payable quarterly in arrear and the capital amount is repayable on 2 September 2010.

4. SHARE CAPITAL AND PREMIUM

Please refer to the group note 10 on page 154.

204


2009R’000

2008R’000

5. DERIVATIVE LIABILITY

Fair value at inception recognised as investment in subsidiary 421 —

Fair value adjustment recognised through income statement 1 354 —

Fair value at the end of the year 1 775 —

In terms of the Bytes B-BBEE transaction with Kagiso, Altron was required to write a put option to the financial institution in respect of the perpetual non-cumulative preference shares issued by Venopt (refer group note 12 on page 161).

The put option was initially recognised at fair value on the date that it was written. Subsequent to initial recognition, Altron measures the put option at its fair value at each balance sheet date and recognises the resulting fair value adjustment in the income statement.

The fair value of the put option is determined at each balance sheet date using a European option pricing model. The fair value assumptions utilised in the valuation of the option were as follows:

At balancesheet date

On initialrecognition

Underlying preference share value including dividends receivable R165 million R154 million

Risk-free interest rate (%) 8.06 9.54

Option life (years) 4.34 5

Dividend yield 70% of prime 70% of prime

Expected volatility (%) 30 28

The value of the put option changes in response to an underlying variable namely, the value of the preference shares, which is impacted by the dividend flows on the Bytes SA shares held by Venopt.

2009R’000

2008R’000

6. TAXATION

Current tax 1 550 796

Secondary tax on companies 5 226 —

6 776 796

% %

Reconciliation of rate of taxation

South African normal tax rate 28.0 29.0

Non-taxable income (27.8) (28.8)

Non-deductible expenses 0.1 —

Secondary tax on companies 0.9 —

Effective tax rate 1.2 0.2

Notest to the financial statements continued


Fina

ncia

l sta

tem

ents

205


2009R’000

2008R’000

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 155 to 157.

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

Deferred group share scheme recharge pending settlement — (20 169)

Cumulative equity-settled charge recognised by subsidiaries and receivable per balance sheet — 25 164

The fair value of the recharge receivable under the conditional rights scheme is determined based upon 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) 19.20 36.00

Exercise price (Rand) 21.50 to 30.75 22.50 to 30.75

Terms (years) 1.41 to 4.41 0.95 to 3.73

Volatility 30.00% to 48.00% 23.35% to 26.97%

Dividend yield 8.13% 3.28%

Risk-free interest rate 8.07% 9.6%

8. TAXATION PAID R’000 R’000

Taxation payable at the beginning of the year 153 23

Charge per income statement 6 776 796

Taxation payable at the end of the year (1 579) (153)

5 350 666

9. RELATED PARTIES

The company has a related party relationship with its subsidiaries (see note 3)

Dividends

The company received dividends from subsidiaries 545 661 383 265

Interest

The company received interest from subsidiaries 76 745 34 119

Shareholders

The principal shareholders of the company are detailed in the analyses of shareholders on pages 86 to 88 of the annual report.

Directors

The company has a related party relationship with its directors (see 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.

206


Directorate profile

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); C Eng (UK)

A UK chartered engineer and founder of Altron, through Allied Electric in 1965 and recipient of the Order of Meritorious Service (Gold), as

awarded by the State President of South Africa for his significant contribution to South Africa’s electronics industry.

Titles: » Non-executive chairman of Altron and Bytes

» Non-executive director of Altech, Bytes and Powertech, former chairman of the CSIR, and past director of AMIC Limited and Nedcor

Bank Limited


Experience: Some 44 years devoted to entrepreneurial endeavours and initiatives in the electronics, telecommunications and power electrical

industries, both in South Africa and offshore, firstly as design engineer then marketing manager at STC (SA) and thereafter chief executive and

latterly as chairman of the Altron group.

Dr Venter has played an important role in developing the South African electronics and electrical industry into the key component of the national

economy that it is today.

Awarded the Sunday Times Lifetime Achievement Award in 2006, and the Minister’s Technology Top 100 Lifetime Achiever Award in 2009, in

recognition of his significant contribution to technology development in South Africa.


RE (ROBERT) VENTER

Date of birth: 7 May 1960

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

Titles: » Chief executive of Altron

» Non-executive director of Altech, Bytes and Powertech and various other group companies

» Chairman of the Altron executive committee


Experience: Four years’ merchant banking experience in the United States, the latter part as Vice-President, Bear Stearns and Co. Inc

(1987 to 1990).

19 years’ experience in senior management positions in the Altron group (1990 to current), including chief executive officer of Aberdare Cables

(1993 to 1996), chief executive officer of Powertech (1994 to 2001) before joining Altron as chief executive (2001 to current).


Adm

inis

trat

ion

207


NJ (NORMAN) ADAMI

Date of birth: 12 August 1954

Qualifications: BBusSci (Hons) (UCT); MBA (Wits)


» Member of the Altron audit committee

» Member of the Altron remuneration committee

Experience: Norman is a South African-based senior executive with more than 15 years’ experience as a chief executive officer/managing

director of leading consumer product operations in the United States of America, South Africa, Africa and Latin America.

Norman’s experience as a chief executive officer/managing director includes three key assignments:

» Managing director, South African Breweries (1994 to 2003, Johannesburg)

» President and chief executive officer, Miller Brewing Company (2003 to 2006, Milwaukee)

» President and chief executive officer, SAB Miller Americas (2006 to 2007)

He is currently the chairman and managing director of SAB Limited in South Africa, a position which he assumed on 10 October 2008.

Previous board memberships include, among others, ABI (SA), SAB Limited, SAB Plc (London), Miller Brewing Co, SAB Miller Central America

(Honduras, El Salvador, Puerto Rico, Panama)/SAB Miller South America (Columbia, Peru, Ecuador).


MC (MYRON) BERZACK


Titles: » Non-executive director of Altron

» Chairman of Voltex Holdings

» Executive director of The Bidvest Group Limited and numerous subsidiaries thereof


Experience: 39 years’ experience in the cable manufacturing industry, 17 years’ experience in the electrical distribution industry.


208

Directorate profile continued


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 Powertech Transformers, Aberdare Cables and Powertech Industries


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.


PMO (PETER) CURLE


Qualifications: MA (Oxon)


» Executive director of Altech: Corporate Finance

» Member of the Altron executive committee

Experience: 39 years in merchant banking/corporate finance activities in South Africa and internationally.

Rejoined the Altron board in 1997, having previously served as an executive director from 1983 to 1986.

MJ (MIKE) LEEMING

Date of birth: 26 October 1943

Qualifications: BCom (Rhodes); MCom (Wits); FIBSA (Wits); FCMA; AMP (Harvard)


» Chairman of the Altron risk management committee

» Member of the Altron audit committee and nomination committee

Experience: Retired banker and a director of AECI Limited, Imperial Holdings Limited, Real Africa Holdings Limited and Woolworths

Holdings Limited.


Adm

inis

trat

ion

209


DR PM (PENUELL) MADUNA

Date of birth: 29 December 1952

Qualifications: Bluris (Unisa); LLB (Zimbabwe); LLM (Wits); HDip Tax Law (Wits); LLD (Unisa)


» Chairman of the Altron nomination committee

Experience: Former Deputy Minister of the Department of Home Affairs (1994 to 1996) and former Minister of the Departments of Minerals and

Energy (1996 – 1999) and Justice and Constitutional Development (1999 to 2004).

Attorney, notary and conveyancer. Visiting Scholar of Constitutional Law at Columbia University Law School (New York). Founder member of the

ANC’s Constitutional Committee.

Currently an active partner at Bowman Gilfillan Attorneys as well as a member of the executive committee at Bowman Gilfillan Attorneys and

a senior special advisor of Sasol Limited.


BJM (BARBARA) MASEKELA


Qualifications: BA (cum laude) (Ohio University)


» Member of the Altron nomination committee

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.

Barbara 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.


210



JRD (JACOB) MODISE

Date of birth: 9 September 1966

Qualifications: BCom (Wits); BAcc (Wits); CA (SA); MBA (Wits); AMP (Samford); AMP (Harvard)


» Chairman of the Altron remuneration committee

» Member of the Altron audit committee

» Executive chairman of Batsomi Investments (Pty) Limited

Experience: Currently chief executive officer of the Road Accident Fund and chairman of Batsomi Investment Holdings Limited. 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 and Touche.

Major directorships include Independent Regulatory Board of Auditors (IRBA), Blue IQ Holdings Limited, ARB Holdings Limited and Eskom

Holdings Limited. Serves as a trustee of the Nelson Mandela Children’s Fund.

Member of the South African Institute of Chartered Accountants and Association of Black Accountants of South Africa.

Previous board memberships include MTN, M-Net, Multichoice, The Premier Group and Tsogo Casino.


DNM (DAWN) MOKHOBO


Qualifications: BA (SocSci), UNIN; Programme in Strategic Transformation, Graduate School of Business (Stellenbosch)

Title: » Independent non-executive director of Altron

Experience: Dawn is one of South Africa’s leading managers and businesswomen, with a highly successful and pioneering career spanning the

public, private and parastatal sectors. Her talents and accomplishments were recognised in particular by her appointment as the first black

woman to the management board of Eskom, as executive director in charge of growth and development.

Prior to this, Dawn worked as a senior manager and senior general manager (human resources) for Eskom and as senior divisional health

education manager for the Anglo American Corporation.

Dawn’s talents and achievements have been widely recognised and acclaimed both locally and offshore. In 1993 she received the prestigious

South African Businesswoman of the Year award. In 1994 she was honoured with an invitation to serve as one of the independent electoral

commissioners who supervised the country’s first democratic elections. In 1995 she was invited by the Minister of Safety and Security to serve

as chairman of the high-powered promotions committee for the South African Police Service. In 1996, Dawn was nominated as the chairman of

the UN Special Committee of Experts appointed to address the global issue of women and senior economic decision-making.

Her board memberships include Engen Limited, Massmart Holdings Limited, Sabvest Limited and Partnership Investments (Pty) Limited.


Adm

inis

trat

ion

211


PD (DAVID) REDSHAW

Date of birth: 29 January 1942

Qualifications: BA (Hons) (Birmingham); ACMA


» Chief executive officer of Bytes

» Non-executive director of Bytes UK


Experience: 44 years in senior financial and general management positions.


DR HA (HAROLD) SEREBRO


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

Titles: » Senior Altron executive director

» Non-executive director of Altech

» Chairman of the Altron group purchasing and export councils


» Trustee of the State President Empowerment Award Programme and of the Duke of Edinburgh Trust

» Trustee of the Sexwale Family Foundation

Experience: 27 years (full-time) in the electronics industry with the Altron group and five years part-time training at Altron group culminating

in his appointment as a non-executive director of Powertech in 1981.


AMR (ALEX) SMITH

Date of birth: 12 January 1969

Qualifications: Bachelor of Laws (Hons) (Edinburgh); CA

Titles: » Chief financial officer and financial director of Altron

» Non-executive director of Altech, Bytes, Powertech and various other group companies


Experience: In 1991 Alex joined Price Waterhouse in Scotland initially as a trainee accountant progressing to assistant manager. He relocated

to South Africa in 1995 where he was employed as an audit manager with Price Waterhouse in Johannesburg until 1997.

Between 1997 and 2005, Alex was instrumental in assisting with the development of the Transaction Services department at

PricewaterhouseCoopers (PWC). As an associate director of PWC, Alex provided specialist transaction-related advice, principally related to due

diligence processes. Some of the transactions which Alex was involved in at PWC included the listing of South African Breweries (SAB) on the

London Stock Exchange, the acquisition of ABSA by Barclays Bank Plc, Standard Bank’s defence of the attempted hostile takeover by Nedcor

Bank and the acquisition of Miller by SAB.

Alex is a member of the Institute of Chartered Accountants of Scotland.


212



CG (CRAIG) VENTER


Qualifications: BSc (Econ) (UCLA); BA (Psychology) (UCLA); MBA (USC); MSc (Mgmt Science) (USC)


» Chief executive officer of Altech

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

of Altech

» Chairman of Altech’s executive committee, Altech Autopage Holdings, Arrow Altech Holdings, Altech Alcom Matomo, Altech Netstar

Fleet Solutions, Altech UEC Multi-Media and Altech Information Technologies


» Member of the world-wide Young Presidents’ Organisation (YPO)

Experience: 20 years in senior management positions in the Altech group.


PL (PETER) WILMOT

Date of birth: 13 March 1940

Qualifications: CA(SA)


» 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 and Touche. He is a director of Brait and a former director

of Edgars Consolidated Stores Limited, Allied Technologies Limited and Bytes Technology Group Limited.


213


Adm

inis

trat

ion

Letter from the chairman

Altron House

4 Sherborne Road

Parktown

2193

29 May 2009

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, 14 July 2009 at 09:30 in the main Boardroom, 5 Winchester Road, Parktown. 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 and head of internal audit will be present to respond to questions from shareholders.

The notice of meeting, which is set out on pages 214 to 218 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

214


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”)

Notice is hereby given that the sixty-third annual general

meeting of the shareholders of Altron will be held in the Main

Boardroom, 5 Winchester Road, Parktown, Johannesburg on

Tuesday, 14 July 2009 at 09:30 to conduct the following

business:

1. To receive, consider and adopt the annual financial

statements of the company and of the Altron group for the

year ended 28 February 2009.

2. To elect or re-elect directors in accordance with the provisions

of the company’s articles of association. Messrs AMR Smith,

NJ Adami and DNM Mokhobo, having been appointed as

directors pursuant to the previous annual general meeting,

are required to retire. Messrs N Claussen, PMO Curle and

RE Venter are required to retire by rotation. All retiring

directors are eligible and have offered themselves for election

or re-election respectively.

An abbreviated curriculum vitae in respect of each director

offering himself/herself for election/re-election is contained

on pages 206 to 212 of this annual report.

3. To re-appoint Messrs KPMG Inc as independent registered

auditors of the company, and to note that the individual

registered auditor who will undertake the audit during the

financial year ending 28 February 2010 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;

215


Adm

inis

trat

ion

» 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 206 to 212

» major beneficial shareholders – page 88

» directors’ interests in shares – page 128

» share capital of the company – page 154

Litigation statement

In terms of paragraph 11.26 of the JSE Listings Requirements,

the directors, whose names appear on pages 206 to 212 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 206 to 212 of this

annual report, collectively and individually accept full

responsibility for the accuracy of the information pertaining to

this special resolution and certify that, to the best of their

knowledge and belief, there are no facts that have been omitted

which would make any statements false or misleading, and that

all reasonable enquiries to ascertain such facts have been made

and that this special resolution contains all information required

by law and the JSE Listings Requirements.

Material changes

Other than the facts and developments reported on in this

annual report, there have been no material changes in the

affairs or financial position of the company and its subsidiaries

since the date of signature of the audit report and up to the

date of this notice.

The reason for and effect of this special resolution is to grant

the directors of the company a general authority in terms of the

Companies Act and the JSE Listings Requirements for the

repurchase by the company or a subsidiary of the company,

of the company’s shares.

216


Altron notice of annual general meeting continued

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.

» Issues in terms of this authority will not, in any financial

year, in aggregate exceed 5% of the number of ordinary

shares in the company’s issued share capital as at

28 February 2009;

» Issues in terms of this authority will not, in any financial

year, in aggregate exceed 5% of participating preference

shares in the company’s issued participating preference

share capital as at 28 February 2009, 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 5% 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-third annual general meeting.

» A paid press announcement giving details, including the

impact on net asset value and earnings per share, will be

published at the time of any such allotment and issue of

shares representing, on a cumulative basis within one year,

5% or more of the number of shares of that class in issue

prior to any such issues.

» That issues in the aggregate in any one financial year shall

not exceed 5% 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.

217


Adm

inis

trat

ion

7. ORDINARY RESOLUTION NUMBER 3: FEES OF NON-EXECUTIVE

DIRECTORS

That with effect from 1 September 2009 and in terms of article

15.6 of the company’s articles of association, the fees payable

to the non-executive directors for the ensuing 12-month period

be set as follows:

Proposed annual fee

Proposed annual

retainer

Proposed attendance

fee/meeting

Altron chairman R3 500 0001

Altron board member R70 000 R15 0002

Altron audit committee chairman R55 000 R15 000

Altron audit committee member R32 000 R 5 000

Altron remuneration committee chairman R35 000 R15 000

Altron remuneration committee member R30 000 R 5 000

Altron risk management committee chairman R35 000 R15 000

Altron risk management committee member R22 500 R 5 000

Altron nomination committee chairman R45 0003 R15 000

Altron nomination committee member R12 000 R 2 500

1 The chairman’s fee is on an all-inclusive basis.

2 The same fee is payable to those board members who attend special board meetings.

3 The nomination committee has historically only met once per annum.

8. ORDINARY RESOLUTION NUMBER 4: SIGNATURE OF

DOCUMENTS

That any one director or the secretaries of the company be

and they are hereby authorised to do all such things and sign

all documents and take all such action as they consider

necessary to implement the resolutions set out in the notice

convening 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.

218


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, 13 July 2009. 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

29 May 2009

TRANSFER SECRETARIES

Computershare Investor Services (Pty) Limited

70 Marshall Street

Johannesburg, 2001

(PO Box 61051, Marshalltown, 2107)

219


Adm

inis

trat

ion

Annual general meeting – explanatory notes

1. ADOPTION OF ANNUAL FINANCIAL STATEMENTS

At the annual general meeting, the directors must present the

annual financial statements for the year ended 28 February

2009 to shareholders, together with the reports of the directors

and the auditors. These are contained within the annual report.

2. ELECTION/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 since

the previous annual general meeting is similarly required to

retire and is eligible for election at the next annual general

meeting. Messrs AMR Smith, NJ Adami and Ms DNM Mokhobo

retire from the board in accordance with article 15.3 of the

company’s articles of association and Messrs N Claussen,

PMO Curle and RE Venter 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 election/re-election is contained on

pages 206 to 212 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

election/re-election of the directors listed above. It is the view

of the board that the election/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 election/re-election. Having considered the

inputs of the Altron nomination committee, the board

recommends the election/re-election of the retiring directors.

3. RE-APPOINTMENT OF INDEPENDENT AUDITORS

KPMG Inc has indicated its willingness to continue in office and

resolution 3 proposes among others the re-appointment of that

firm as the company’s auditors until the next annual general

meeting.

At an Altron audit committee meeting held on 26 February

2009, 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 sub-holding 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 sub-holding 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

129 of the directors report); and

» including the individual registered auditors who undertake

the audit, does 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

220


Annual general meeting – explanatory notes continued

Federation of Accountants (IFAC) and nominated the re-

appointment of KPMG Inc as registered auditors for the

2009/2010 financial year. On 26 February 2009, 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.

Furthermore, the Altron audit committee has, in terms of

paragraph 3.86 of the JSE Listings Requirements, considered

and satisfied itself that KPMG Inc the reporting accountant and

individual auditor are registered as such on the JSE Register of

Auditors, in compliance with section 22 of the JSE Listings

Requirements.

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 of its subsidiaries to be in a

position to repurchase the securities issued by the company

through the order book of the JSE, should market conditions and

the 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 held on 15 July 2008 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 proposed fees

payable to the company’s non-executive directors with effect

from 1 September 2009.

This resolution is recommended by the company’s board of

directors. 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 112 to 121

of this report.

Furthermore shareholders are referred to the announcement

published by Altron on SENS on 3 March 2009 advising that

with effect from 1 March 2009 Dr WP Venter’s role and

responsibilities at Altron would change from being a full-time

chairman to a non-executive chairman.

Pursuant thereto, Dr WP Venter has waived a portion of his

remuneration which he earned as a full-time chairman in order

to align his fee with market norms.

Altron’s remuneration committee is satisfied that having

engaged external remuneration consultants to review

Dr WP Venter’s fee relative to the market, and having

regard to the number of boards within the Altron group on

which Dr WP Venter will serve as either a chairman or

non-executive director, that his proposed annual fee is

consistent with the fees paid to chairmen of other public

listed companies in South Africa.

Adm

inis

trat

ion

221


Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa)(Registration number 1947/024583/06) (Share code: ATN) (ISIN: ZAE000029658)


FORM OF PROXY FOR THE SIXTY-THIRD ANNUAL GENERAL MEETING TO BE HELD IN THE MAIN BOARDROOM, 5 WINCHESTER ROAD, PARKTOWN, JOHANNESBURG ON TUESDAY, 14 JULY 2009 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,


the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the sixty-third annual general meeting of the company which will be held on Tuesday, 14 July 2009 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. Election/re-election of directors 2.1 Mr AMR Smith

2.2 Mr NJ Adami

2.3 Ms DNM Mokhobo

2.4 Mr N Claussen

2.5 Mr PMO Curle

2.6 Mr RE Venter

3. Re-appointment 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 2009

Signature

Assisted by me (where applicable)

NOTES1. 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 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, 13 July 2009 at 09:30.

ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.

222


Allied Electronics Corporation Limited(Incorporated in the Republic of South Africa)(Registration number 1947/024583/06) (Share code: ATNP) (ISIN: ZAE000029666)


FORM OF PROXY FOR THE SIXTY-THIRD ANNUAL GENERAL MEETING TO BE HELD IN THE MAIN BOARDROOM, 5 WINCHESTER ROAD, PARKTOWN, JOHANNESBURG ON TUESDAY, 14 JULY 2009 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 address

being the registered holder(s) of participating preference shares in the capital of the company do hereby appoint



the chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the sixty-third annual general meeting of the company which will be held on Tuesday, 14 July 2009 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-third 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 2009

Signature

Assisted by me (where applicable)

NOTES1. 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 (except 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 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, 13 July 2009 at 09:30.

ADDITIONAL FORMS OF PROXY ARE AVAILABLE FROM THE TRANSFER SECRETARIES ON REQUEST.

Adm

inis

trat

ion

223


SHAREHOLDERS’ DIARY

Financial year-end 28 February 2009

Annual general meeting Tuesday, 14 July 2009

Reports and financial statements

Preliminary reports and dividend

announcements (published) Tuesday, 5 May 2009

Annual financial statements

(mailed to shareholders) June 2009

Interim reports October 2009

Dividends

The following dividends are hereby declared for the year ended

28 February 2009:

» Ordinary dividend number 61 of 119 cents per share

(2008: 156 cents)

» Participating preference dividend number 15 of 119 cents per

share (2008: 156 cents).

The above dividends are payable as follows:

Last day of trading to qualify for

and participate in the dividend

(cum dividend): Friday, 26 June 2009

Trading ex dividend commences Monday, 29 June 2009

Record date Friday, 3 July 2009

Dividend payment date

(electronic and certificated) Monday, 6 July 2009

Dividend cheques in payment of these dividends to certificated

shareholders will be posted to shareholders on or about Monday,

6 July 2009. 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, 6 July 2009.

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,

26 June 2009. Share certificates may not be dematerialised or

rematerialised from Monday, 29 June 2009 to Friday, 3 July 2009,

both days inclusive.

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


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

CURRENCY

To facilitate the interpretation of this report by readers not familiar

with the South African rand, we provide the following conversion

guide:

At 28 February 2009 one rand was equal to:

2009 2008

£ 0.06880 0.06417US$ 0.0984 0.1275Euro 0.0777 0.0849Yen 9.6091 13.31

Corporate data

224


Our group of companies

ALLIED TECHNOLOGIES LIMITED POWER TECHNOLOGIES (PTY) LIMITEDBYTES TECHNOLOGY GROUP (PTY) LIMITED

BASTION GRAPHICS

Altron House

4 Sherborne Road

Parktown, 2193

(PO Box 981, Houghton, 2041)

South Africa

Telephone:

National (011) 645-3600


www.altron.com

Documents

the power of - ShareData · the power of three 3 ... Papers, Bytes Specialised Solutions, Bytes Managed Services, ... mobile communications, contact and call centre solutions