PRODUCTS AND SERVICES

Our commitment to delivering innovative and sustainable products and services to our customers and growing our business in new markets requires that we be at the forefront of technology.

To achieve this requires that we have the ability to package and deliver a unique set of end-to-end solutions to our customers, instead of only selling a single product or service.

Doing this effectively will give us an all-important first-mover advantage of our products, solutions and services.

THE MATERIAL FOCUS AREAS AND MATERIAL ISSUES THAT COULD AFFECT THE ALTRON GROUP’S PRODUCTS AND SERVICES

During the year under review the Altron group’s material focus areas for the products and services value driver remained the same. We have however combined product and service innovation and research and development (R&D) and intellectual property (IP) management into one material issue, as opposed to two separate material issues, as was the case in the previous report.

The potential risk and/or opportunity that the newly launched Altech Node, a brand new technology, presents for the group, resulted in it being added as a new material issue under product and service offerings.

In addition to the changes mentioned above, various factors have also influenced the levels of some of the material issues for the period under review. For year-on-year details of the changes refer to the table provided below:

Altron group Altron group
    rating rating
Material focus area Material issues 2014/15 2013/14
Innovation and research and development (R&D) Innovation, research and development (R&D) and intellectual property (IP) Product and service innovation
R&D and IP development
Product and service offerings Product and service solutions
Product quality, manufacturing and service efficiencies
Commoditisation and disintermediation
The Altech Node Not a material issue

Legend

Most material issue
Priority issue
Focus issue
Controlled issue

ACHIEVEMENTS

  • Bytes Systems Integration (BSI) provided revolutionary new biometric solar-powered voter registration technology, which doubles as census technology, for the Tanzanian government
  • Altech Netstar developed the Nano wireless stolen vehicle recovery unit and consolidated instrumentation devices that will, over time, replace multiple different devices, improving quality and maintenance
  • Altech Netstar developed the MobiTech solution which allows more efficient scheduling and improved productivity of the mobile installation function
  • Development of the Altech Node, the world’s first fully converged home gateway console
  • Uptake of Bytes Managed Solutions’ (BMS) branch transformation solutions across all major South African banks
  • To date, successful and on time delivery of Gauteng Broadband Network (GBN) commitments
  • BMS at proof of concept stage for self-checkout systems for retailers
  • Designated status for cabling
  • Introduction of new transformer products had good market penetration in Africa
  • Introduction of new product range to meet market requirements at Aberdare Cables’ Spanish operation
  • Powertech Batteries’ introduction of a new range of fully sealed maintenance-free batteries
  • Altron’s R&D spent increased from 184 million to R227 million.

CHALLENGES

  • Depth of financial resources required for research into state-of-the-art products and solutions
  • Finding opportunities to market the innovative technology that was combined to produce the Altech Node
  • Packaging the annuity services offered by Powertech Systems Integrators (PTSI) into readily saleable end-to-end solutions
  • Diversifying client base and markets for Altron Power.

IMPROVEMENTS

  • Altech Netstar expanded its products and services portfolio through its acquisition of FleetPro, specifically within its fleet and asset management solutions
  • Bytes People Solutions (BPS) increased the size of its business process outsourcing unit, through its acquisition of Inter-Active Technologies, which now makes up 60% of its offering
  • BMS upgraded its service management system to a world-class solution
  • Altron Power increased its focus on the development of value-adding end-to-end solutions that will provide annuity income
  • Closer partnerships with some international technology and equity partners within Altron Power.

DISAPPOINTMENTS

  • Impact of the slowdown on the economy on our customers, our business and our employees
  • Slower than expected uptake of the Altech Node through selected retail channels
  • Product manufacturing inefficiencies at Powertech Transformers
  • Lower demand for transformers from key customer
  • Lower than anticipated demand for DTT migration set-top boxes into Africa
  • Impact of load shedding on production at Altron Power’s manufacturing operations
  • Impact of fall in copper price and dramatic rise in lead prices affecting both Aberdare Cables and Powertech Batteries.

Innovation and research and development (R&D) in the Altron Group

It is essential that we protect our investment in innovation and R&D by rigorously protecting our intellectual property rights (IPR), which includes registering patents, designs, domain names and trademarks. We have in place sophisticated structures and procedures at group level to ensure our IPR are rigorously managed and protected. These structures are being expanded to ensure they cover our entire portfolio of companies. Our effective IPR portfolio management programme not only protects value creation but also mitigates the risk of encroaching on the IPR of other companies, or individuals, without paying the necessary royalties.

During the period under review we filed on average, two to three patents a month.

In the same period Altron created a centralised function to oversee and manage the entire IPR portfolio. This function includes identifying IPR at an early stage, managing the process with the legal firms and overseeing the commercialisation of the IPR portfolio.

Despite the disappointing financial performance of the group, Altron continues to see the value of investing in R&D initiatives. In the year under review the group’s R&D spend increased from R184 million to R227 million.

Product and service offerings in the Altron group

Innovation, R&D and IPR management is one way of differentiating ourselves from our competitors and addressing the risks of commoditisation, disintermediation and increased local and international competition.

The other way to differentiate ourselves is by offering a more comprehensive range of products and services and providing more customised end-to-end solutions for our customers. In addition, there are gains to be made by improving our product manufacturing and service efficiencies to deliver a more streamlined and effective solution.

Product and service solutions in the Altron group

The group’s focus on holistic solutions and an enhanced suite of services is not new to Altron. Altron has long recognised the importance of converged technology solutions and its ability to leverage the multiple offerings across its business. For specific product and services solutions refer to Altron TMT and Altron Power’s respective product and services solution section below.

During the period under review we finalised on average two to three patents a month

Product quality, manufacturing and service efficiencies in the Altron group

The quality of our products and services, and the efficiency with which they are manufactured and delivered, are further important differentiators in a highly competitive business environment. Improving efficiencies in its manufacturing operations has been and continues to be an important focus for Altron Power specifically.

To ensure we continue to deliver quality products and services and where possible, improve customer experience, the majority of companies within the Altron group continued to conduct regular formal and informal customer satisfaction surveys. Feedback from these surveys are used to improve our product quality and service efficiencies across the group.

Commoditisation and disintermediation in the Altron group

The risks commoditisation and disintermediation, posed to the group have increased from an issue not requiring a key focus to an area requiring specific attention. Refer to the two Product and Services value drivers for Altron TMT and Altron Power respectively for more detail on how commoditisation and disintermediation are managed within the group.

The Altech Node

The launch of the Altech Node brought its own set of risks and opportunities, which resulted in it becoming a new material issue under the Altron group’s, and specifically Altron TMT’s, product and service offerings.

Both Altron and Altron TMT’s profitability was impacted by the launch of, and a lower than expected take up of, the Altech Node entertainment and home automation system by the retail channel. Altron TMT is well advanced in exploring alternative opportunities and routes to market for the Altech Node.

For more detail on the Altech Node refer to the section below under Altron TMT.

THE MATERIAL FOCUS AREAS AND MATERIAL ISSUES THAT COULD AFFECT ALTRON TMT’S PRODUCTS AND SERVICES

Altron TMT operates in an increasingly competitive business environment, which is rapidly being transformed by technological developments and new entrants into the marketplace. If Altron TMT is to retain its existing customers and grow its business in new markets it needs to be at the forefront of the next technology breakthrough. To counteract the commoditisation of technology products and the risk disintermediation presents, it is essential for Altron TMT to differentiate itself through value adding end-to-end solutions and innovative new products.

Every year the group reviews and where necessary updates it material issues. Major changes to Altron TMT’s material issues included the addition of the Altech Node as a most material issue and product quality, manufacturing and service efficiencies becoming a priority issue. For more changes to the rest of Altron TMT’s material issues refer to the table below.

Altron TMT Altron TMT
    rating rating
Material focus area Material issues 2014/15 2013/14
Innovation, R&D and intellectual property management Innovation, R&D and intellectual property management Innovation management
R&D and IP development
Product and services offerings Product and service solutions Converged service offerings
Product quality, manufacturing and service efficiencies Not a material issue
Commoditisation and disintermediation
The Altech Node Not a material issue

Legend

Most material issue
Priority issue
Focus issue
Controlled issue

Altron TMT developed a roadmap for the year under review, which has five different work streams, each with its own focus areas that were included in last year’s integrated report. The work stream that applies to our product and services value driver aimed to achieve sales enablement and cross- and up-sell by focusing on:

  • prevention of revenue slowdown during the integration of Altech and Bytes into Altron TMT;
  • incubating initiatives to increase revenue through cross-selling and up-selling opportunities that will be facilitated by the new organisational structure; and
  • leveraging relationships in key accounts across the group.

The aim of this roadmap was to leverage organic and inorganic growth opportunities, develop solutions and enter more profitable revenue streams. To support our efforts to address our key material issue of product and service solutions some of the initiatives we focused on included the following:

Focus What we achieved
New municipal regulations regarding financial accounting practices The South African Municipal Resource Administration System (SAMRAS) is a locally developed, fully integrated and Generally Recognised Accounting Practice (GRAP) compliant Financial Management System, designed to meet the specific needs of the South African local authority and municipality.
Fleet management and telematics Altech Netstar acquired FleetPro, a range of market leading fleet and asset management solutions, and introduced Altech Netstar insurance telematics solutions.
Innovative multimedia and secure content delivery mechanisms and the large-scale production of set-top boxes We developed the Altech Node, the world’s first fully converged home gateway console. We geared up for large-scale production of set-top boxes, however, delays in a key customer’s roll-out of digital terrestrial television in Africa resulted in the postponement of orders and stock accumulation.
E-commerce platform, evolving from the various assets that Altech and Bytes have in card processing and personalisation, point of sale (POS) terminal management, transaction switching and healthcare transaction processing Bytes Managed Solutions (BMS) is at a proof of concept (POC) stage with a range of time-saving self-checkout systems for retailers and is developing solutions that will transform branch banking.
Security management – various aspects of security, including but not limited to biometrics, ID verification, border security and cyber security management Bytes Systems Integration (BSI) produced revolutionary new solar-powered voter registration technology, which doubles as census technology for the Government of Tanzania. It captures details of voters in remote areas and produced a voting key card, which can only be used once for each eligible voter. Because the card is the only item required to vote it simplifies the voter registration process.
‘Smart cities’ and municipalities The Gauteng Broadband Network (GBN) project, which is due to be completed in 2019, is worth R1,2 billion. Numerous schools, hospitals and clinics have been connected at broadband speeds and have much better internet applications available.
Various forms of machine-to-machine communication as a key growth area Up to 44 000 smart pre-paid electricity meters have been installed so far in the Western Cape, allowing municipalities to manage demand remotely, for example, it allows the municipality to switch geysers and pool pumps off remotely when the grid is under stress. The recent announcements by Eskom proposed a larger rollout of pre-paid meters throughout the country. In the Altech Node, a function has been included that allows the it to control light switches, smart plugs, motion sensors, etc. remotely, based on scheduling or alerts.
Leveraging our international partnerships/agreements and the ability to do systems integration at scale to continue to deliver solutions to customers Joint contract between Altech Collab and Huawei to secure the GBN and an additional R120 million Huawei value-adds. Altech Radio Holdings (ARH) working with Hytera is deploying advanced digital two-way radios for our customers. Altech Fleetcall has begun the migration to a digital network, using Hytera. The Tanzanian government voter registration system, developed by BSI, leveraged relationships of at least eight different international partners in building the solution.

Innovation, R&D and intellectual capital management in Altron TMT

Altron TMT operates in an environment, which is not only extremely competitive, but where our ability to innovate is critical to our long-term sustainability. It is therefore essential that we invest in innovation and R&D that creates unique, commercially competitive products with the potential to create significant value for our stakeholders.

The importance of innovation and R&D for the group cannot be overstated. Altron TMT has always had a strong culture of developing innovative products and services, as explained in more detail in the section below. Altron TMT’s ongoing commitment to R&D and IPR development is evident from the investments made year on year. Altron TMT increased its R&D spent from R161 million in 2014 to R204 million.

Our commitment to contribute to South Africa’s need for home-grown intellectual property (IP) will help the country make the transition to a modern, knowledge-based economy that creates well paid jobs and attracts foreign investors.

It is also part of our short-, medium- and long-term strategy to seek out and acquire companies rich in IP that either fit well with our existing IP or will contribute to our development of disruptive technology that will either displace an established technology and shake up the industry, or create a completely new industry. An example of this is the acquisition by BSI of Brand New Technologies (BNTech), now known as Identity Management Solutions (IDM), a leading provider of identity management products and solutions, specialising in protecting, securing and validating identities. The combination of BSI’s existing offerings with those of BNTech resulted in the development of the revolutionary new voter registration solar-powered technology for the Tanzanian government and the supply of 22 000 of these devices, which double as census technology. This technology has the potential for sale to governments throughout Africa.

Altech Netstar, having previously recognised the need to reposition itself in an increasingly competitive market invested in developing new products and business opportunities that would increase its competitiveness and allow it to enter new, more profitable business areas. During the year under review it successfully filed 14 patents for the new technologies it has developed and is in the process of applying for an additional 21 patents.

One of these, the Nano, a very affordable wireless stolen vehicle recovery unit with a three-year battery life, positions Altech Netstar well for providing fleet management at a very affordable monthly fee. Another innovative solution is MobiTech, an electronic handheld fitment device. The device provides technicians with their work schedules for the day, can scan barcodes, allows technicians to write on the screen, reports their arrival at clients, can take photographs of the vehicle before and after an installation. This technology protects Altech Netstar against any customer comebacks on damage to their vehicles and also gets the details of a licence disk using the barcode scanner. All this information is transmitted to the company’s back office. Some of the many benefits of MobiTech, which is used by all Altech Netstar’s technicians, include providing stock control management, productivity management and efficiencies in terms of the shortest route travelled to the customer. While Altech Netstar developed the product for its own use it is a product that is very marketable to any fitment/repair businesses using mobile technicians.

Altech Netstar’s substantial investment in R&D over the past three years in the insurance telematics field, which facilitates usage based insurance, yielded a product which engages with the end user through a mobile application (app) that we believe is a world first.

BMS has already carried out its first proof of concept of a range of time-saving self-checkout device for retailers, which include monitoring and analysis of customer behaviour to ensure the right controls are in place to prevent potential theft.

Despite the difficult year it had, Altech Multimedia (AMM) continued to invest in R&D, prioritising projects with the greatest potential for success. This investment resulted in AMM becoming world leaders in terms of its development of the latest technology known as highly efficient video compression (HEVC) technology, which by reducing the satellite capacity and time required by up to 60%, substantially reduce satellite usage costs. Because of its ability to cut costs this technology is in great demand. AMM’s first solution has already been sold to a national broadcaster in Chile and Selevision in Saudi Arabia.

AMM was also responsible for developing the Topaz system, which is the content management and billing system developed for inclusion in the Altech Node.

Product and service offerings in Altron TMT

We are operating in an environment where the speed to market of new product developments requires constant innovation and reinvention to stay ahead of our competitors. Not only are our customers under financial pressure but the competitive landscape also changes overnight as new competitors appear.

To remain competitive we need to develop improved technology, stay abreast of new technology, provide better offerings to our clients, diversify into new business streams, and address the convergence of telecommunications and information technology.

Altron TMT continues to review, improve and implement new technology and service offerings in an attempt to stay ahead of our competitors and to ensure we deliver on clients’ expectations.

Product and service solutions in Altron TMT

To remain competitive Altech Netstar, expanded its products and services portfolio through its investment in FleetPro, a leading fleet and asset management solutions provider. This acquisition has established a strategic platform for Altech Netstar that allows it to offer its customers a comprehensive range of market leading fleet asset management solutions and position itself as a technology leader in fleet management. It now provides a complete range of tracking products and services using proprietary GPS, GSM and satellite tracking technology.

BSI’s identity management business unit is the leader in South Africa in the development of biometric solutions. Its development of a solution to voter registration for the Tanzanian government, which is discussed under the Innovation and R&D section of this report, has added an innovative and very marketable product to its current range of biometric solutions and identity life cycle management systems, which are used by both banks and government departments. The rapid growth in the use of biometrics bodes well for the future of this business unit, which is already very profitable.

BSI’s main opportunities for future growth lie in its biometrics and human capital management business units

BSI is also a major provider of workforce management products and services, and in particular physical human capital management technology to the retail, health, manufacturing, construction and hospitality industries. Its exclusive representation of Kronos, a market leader in this field, gives BSI a competitive edge in this market.

BSI’s ability to provide exceptionally high quality information technology outsourcing solutions for major corporations, municipalities and government departments, resulted in Illovo Sugar, which has operations throughout Africa, signing its fourth five-year outsourcing contract with BSI this year.

BSI’s main opportunities for future growth lie in its biometrics and human capital management business units. Its provisioning of infrastructure through its advanced technology services and network operations business units faces a number of challenges, which include competition from cloud solutions.

AMM operates locally and globally in Africa, Latin America, the Middle East, Australia and the Asia Pacific region. Having invested in extra capacity, mainly to meet the expected demand for digital terrestrial television (DTT) in both South Africa and Africa, AMM suffered a major setback. This setback came when a major customer’s roll-out of terrestrial television in Africa, which required a significant number of DTT units, incurred delays in both Kenya and Nigeria. This resulted in orders being put on hold and stock being held by AMM.

The BPS career campus has been a big growth area for the business during the year under review with 1 700 people, 60% women and 15% people with disabilities, on their external learnership programme

The market for set-top boxes is becoming commoditised, margins are low and Chinese competitors have entered the African market quite aggressively. AMM, having recognised the need to diversify using its multimedia skills, but expanding its approach, began looking for alternative business opportunities in a number of different industries. These included the automobile, home automation and electrical, education and gaming industries. This process has already resulted in a number of opportunities including the first orders for its new lotto terminals, which are much smaller and more powerful than existing terminals. The more profitable niche opportunities it wishes to exploit include the opportunity to manufacture tablets and infotainment centres for the automobile industry.

Another avenue it is exploring, together with BPS, is the use of the Altech Node’s capabilities to deliver content to classrooms via satellite rather than using terrestrial bandwidth. This is particularly relevant in rural areas where the lack of access to bandwidth hampers the delivery of content.

BPS provides both professional talent management services and business process outsourcing (BPO) services. The post year-end acquisition of Inter-Active Technologies, resulted in BPO now making up 60% of BPS’s product and service offerings. BPS further increased its market share, footprint and capabilities in the call centre space significantly through the acquisition of Inter-Active Technologies.

The BPS career campus has been a big growth area for the business during the year under review with 1 700 people, 60% women and 15% people with disabilities, on their external learnership programme.

These learnerships are in ICT and service areas such as contact centres. The majority of the people in learnerships are women and about 25% of the people on the learnership programmes are disabled.

BPS already provides contact centres for key customers, which it customers rate very highly. It also intends developing a contact centre career campus to support skills development for the BPO sector in general and is also looking at venturing into the profitable area of offshoring.

Our ability to provide solutions rather than only products through collaboration among our business units resulted in Altech Collab and our strategic partner, Huawei, securing a contract with the Passenger Rail Agency of South Africa (PRASA) to supply a digital radio communication system for its passenger trains and associated infrastructure. The Huawei GSM-Rail technology provides a wireless digital communications system, which enables improved communication quality and reliability between train operators and control centres on approximately 1 200 kilometres of commuter rail network.

The dramatic deflation in voice and data charges over the past few years has placed increased pressure on mobile network operators and this pressure has been passed on to resellers, such as Altech Autopage. Also consumers, under pressure as a result of the slow growth in our economy, are spending less. Both of these issues have impacted Altech Autopage. As a result, Altron TMT has taken a decision to dispose of Altech Autopage’s GSM subscriber bases and consequently this business has been classified as a discontinued operation. Negotiations regarding the disposal of Altech Autopage are at an advanced stage and is expected to be finalised in the latter part of the year.

In future Altech Autopage customers with post-paid contracts will be serviced directly by the networks. Bytes Secure Transaction Solutions (BSTS) will service our pre-paid subscribers, our pre-paid airtime vending through ATMs and Eyenza and pre-paid electricity vending. The web development and mobile application development that formed part of Altech Autopage has moved to Bytes Universal Systems (BUS). This includes the completion of the Vodacom online project mentioned earlier. Bytes Systems Integration (BSI) has absorbed the provision of internet services to business and bulk APN data services. Altech Netstar, through its service provider agreements with the mobile network operators for the provision of data SIM cards will facilitate Altron TMT’s strategy.

Product quality, manufacturing and service efficiencies in Altron TMT

During the previous financial year AMM enhanced its product quality and manufacturing capability through its investment in technology. To facilitate its entry into the manufacture of infotainment equipment for the automobile industry, it obtained certification to the international standard TS 16949, which is the international automobile quality standard. These investments paid off as AMM won the Technology Top 100 Award Business Awards Programme (TT100) for excellence in the management of innovation and the TT100 Award for excellence in the management of systems.

Customer service is key for BMS as it supports in excess of 1,2 million devices in more than 46 500 locations throughout sub-Saharan Africa. One of the service challenges BMS faced this year was a technology issue with equipment provided by one of its strategic partners. This affected its customers’ ability to service their customers and resulted in its call rate doubling in connection with this particular product, before the problem was identified and resolved by the original equipment manufacturer.

The company’s focus in the new financial year will include appointing a strategic customer manager to focus on ensuring BMS becomes more customer focused in its interactions, in particular its customer interface at senior levels, and moving its services system onto a new platform, which will allow it to further improve its already high standard of service delivery.

Altron TMT established key account executives (KAE) who are responsible for managing customer relationships and adding value both to our customers and Altron TMT by finding opportunities to upsell and cross-sell the offerings of our various businesses as end-to-end solutions. They are also responsible for ensuring that the internal stakeholders responsible for the delivery of solutions to the customer meet their commitments and monitoring customer service levels. While we are still bedding down this initiative we have seen an improvement in the revenues from a number of accounts managed by key account managers. We have also gained cross-sell business as a result of the ability of the business development division and the key account managers to draw on a number of Altron TMT business units to provide solutions. Two examples of this type of business are the Gauteng Broadband Network and the Passenger Rail Agency of South Africa (PRASA) contract discussed in more detail in this section.

Commoditisation and disintermediation in Altron TMT

Commoditisation remains a major challenge for the Bytes operations. To address the material issue of commoditisation and disintermediation, BMS focus this year has been on realigning its business for growth, which included the sale of its retail ATM business. BMS also reinforced, redesigned and simplified its business processes, which has made it much easier for customers to see where and how BMS can add value to their businesses.

BMS, who is the exclusive distributor of NCR products in South Africa, also works with a number of strategic technology partners to design, provide, support and maintain end-to-end technology solutions and the related services that enable medium to large businesses to effectively deliver their offerings to their customers. The industries in which they operate include financial services (retail banking and ATMs), infrastructure, retail (point of sale) and petroleum (point of sale and forecourt services).

One of the ways BMS is adding value to its financial services customers is by developing solutions that will allow banks to transform their branches. These solutions provide an end-to-end value chain that will improve client service through improved transactional service levels and will free up branch staff to focus on providing consulting and sales service.

In addition, BMS established two additional business units during the year under review with the aim of diversifying its product and services offerings and addressing the challenge presented by commoditisation. These include a business that provides modular data centre solutions, which are in keeping with the trend away from building large data centres. One of these units has already been installed at a client during the year under review. It is anticipated that during the new financial year it will also be introducing a number of new solutions in the financial services sector and undertaking a proof of concept of a solution that will optimise the cash management supply chain. BMS is confident that it is going into the new financial year in a much stronger position in terms of its ability to deliver and execute is vast range of products and service offerings.

The creation of the Altech Node resulted in the registering of over 40 patents over the course of the development of this technology

Bytes Document Solutions (BDC) previously consisted of four business units, the largest being the Xerox business with BDS being the exclusive distributor of Xerox products in South Africa and 26 African countries; NORPaper, a paper merchant selling office paper requirements, specialised paper, environmental and graphic arts paper, which remains part of BDS; LaserCom, a print bureau, which was disposed of in December 2014 and the fourth business, PaperGeni, which prints the rolls for teller, ATM, point of sale and cash register machines, which was sold after the year-end. The disposal of these businesses now allows BDS to focus on its core business activities, which is in line with the group’s overall business strategy, minimising the risk of commoditisation and disintermediation.

By being able to provide its customers with both the Xerox print technology and paper certified for use in Xerox printers, BDS is able to differentiate itself from businesses that only provide one of these services. In addition, instead of simply providing our corporate customers with a printer and servicing the printer, we now offer our customers a range of managed print services. We proactively manage their fleet of printers and they pay us a cost per copy. Through software utilised by Xerox, BDS is able to remotely monitor these printers, take any necessary action and contact customers if necessary. BDS established a contact centre three years ago to support its managed print services offering. Using Equitrac software our customers can allocate the spent on machines to different departments or cost centres. To add further value to our customers BDS offers document analytics, work flow management, which helps clients print less copies, the digitisation and storage of information and remote printing from a mobile device to a printer of your choice.

The progress that Altron TMT’s business units/divisions have made towards reducing the risks and seizing the opportunities that will allow it to achieve sustainability through its products and services value driver, has positioned it well to continue building on its efforts to diversify and create a range of sustainable product and service solutions. The company is hopeful that the work its divisions have put into providing value adding solutions, will go some way to neutralising the risks we face from commoditisation, disintermediation and global competition. We will also continue to make every effort to differentiate our offerings through superior service delivery, product quality and innovation.

The Altech Node

The take up of the Altech Node, when first launched, was disappointing. Although sales are still not what we expected we have seen a steady improvement in sales numbers post year-end. To address this situation Altron TMT’s discussions regarding alternative opportunities and routes to market for the Altech Node are well advanced.

The Altech Node, the result of collaboration between eight Altron TMT companies, provides the following in home automation and entertainment options:

  • A 1TB hard drive containing around 70 premium movies on transactional view on demand (TVOD) and 400 recent movies on subscription view
  • Access to sport update packages, documentaries and weekly business update packages content by satellite
  • Content is regularly updated via satellite and viewers do not pay for movie downloads and can access content immediately
  • Multiple users can access different content simultaneously on various devices
  • Voice over Internet protocol (VoIP) telephony and almost free on-net calling
  • Full wireless internet functionality allows browsing on TV sets and turns the Altech Node into a Wi-Fi hotspot
  • Allows for the viewing of YouTube content, through a player called “YouTube Leanback” that is integrated into the Altech Node
  • The instant e-commerce platform offers the ability to make payments using the Eyenza e-wallet to shop, buy electricity, order takeaways, buy gift cards and pay for municipal and utility services
  • A home automation and energy management console using Zigbee enabled peripheral devices
  • Home surveillance capabilities.

The creation of the Altech Node resulted in the registering of over 40 patents over the course of the development of this technology.

THE MATERIAL FOCUS AREAS AND MATERIAL ISSUES THAT COULD AFFECT ALTRON POWER’S PRODUCTS AND SERVICES

Despite the challenging year Altron Power experienced it did not lose its focus on developing new solutions that will provide it with annuity income and product offerings that will allow it to enter new markets both in South Africa and the rest of Africa. It also focused on product quality in its manufacturing operations and improving manufacturing efficiencies. These efforts resulted in the overall improvement of Altron Power’s product and service material focus areas. Refer to the table below for more detail on the changes in rating of material issues for Altron Power:

Altron Power Altron Power
    rating rating
Material focus area Material issues 2014/15 2013/14
Innovation, R&D and intellectual property management Innovation, R&D and intellectual property management
Product and service offerings Product and service solutions
Product quality, manufacturing and service efficiencies
Commoditisation and disintermediation
The Altech Node Not applicable Not applicable

Legend

Most material issue
Priority issue
Focus issue
Controlled issue

This has been an extremely difficult year for Altron Power’s operations, during which they have been seriously affected by the impact of the decline in both the South African and global economies, however, the greatest impact of all has been the significant drop in orders from its key customer Eskom. The major reduction in capital projects in the mining and construction industries has also had a negative impact on the order books of Aberdare Cables, Powertech Systems Integration (PTSI) and Powertech Transformers.

To ensure its ongoing sustainability Altron Power’s operations are actively searching for new ways to fill its order books. Altron Power started by clearly defining their customer base and their markets and deciding where they would focus. Altron Power’s operations are also moving away from, wherever possible, simply providing products to providing turnkey solutions that will also deliver annuity income. Progress has been made in this regard specifically in Africa, with Powertech QuadPro being successful with turnkey projects for substations in Africa.

A great deal of work has been and is being done on developing turnkey type solutions and forming the strategic partnerships that will allow Altron Power to deliver state-of-the-art competitive solutions in South Africa. The flattening of Altron Power’s structure, which included the disbanding of the Africa division, returned the responsibility for growth into Africa to its operations. We now have the opportunity to focus on a potential area for growth for our individual operations that could help them fill their order books.

Altron Power’s operations continued to invest R23 million, similar to the investment in 2014, in developing products and solutions to meet market requirements

While the current structure of Altron Power does not facilitate effective cooperation between its operations, the progress we are making in this regard is facilitating the development of turnkey solutions throughout the group. PTSI has been able to work across the Altron group and is cooperating with Altron TMT business units on potential projects.

Innovation, R&D and intellectual property management in Altron Power

R&D in the Altron Power environment requires extensive investment and in many cases it is more cost-effective for its operations to partner with international companies who have the depth of financial resources to undertake this type of research. With this in mind it has increased its focus on strategic partnerships that will give it access to state-of-the-art solutions and it expects the effort it has invested in this regard to bear fruit in the new financial year.

Despite the difficulties it experienced during the year under review Altron Power’s operations continued to invest R23 million, similar to the investment in 2014, in developing products and solutions to meet market requirements.

The ability of the experienced engineers at Altron Power’s innovation hub at Powertech Transformers has resulted in the development of a number of new product lines for the transport, mining and heavy metal industries together with shunt reactors for Eskom. Through PTSI, Altron Power is also developing opportunities for annuity income streams.

Further development of the Aberdare Cables’ Edac cable, which is now known as the Safer CNE (concentric neutral and earth), is intended to discourage cable theft and prevent illegal connections to the power supply. The theft of power is currently coming at a major cost to Eskom and the municipalities. This product was developed in accordance with specifications agreed with Eskom. The cable was developed using a combination of different metals, encased in galvanised steel, as a conductor and it is yellow in colour to distinguish it from other copper cables, which is intended to discourage cable theft. It also has a tape inside containing a serial number, which will allow it to be identified if it is stolen. To prevent illegal power connections it was designed to make it impossible to drive a nail into the cable and connect another wire illegally.

Aberdare Cables plans to patent the cable it develops, which will not only protect its IP, but will mean specific Aberdare Cables’ products can be specified in tenders.

Crabtree has a products council, which is responsible for looking at how the company can renew its existing product range to make them cheaper, better and faster. It also focuses on how it can use innovation to apply its existing knowledge to the design and production of new products. It follows international trends and uses its renovation and innovation skills to ensure its products keep up with the latest trends. To be able to compete in the affordable housing market it imports product suited to this market from Vietnam.

Product and services offerings in Altron Power

Economic difficulties have seen Altron Power increase its focus on developing new solutions, particularly service solutions that could become a source of annuity income from both existing and new markets.

Product and services solutions in Altron Power

During the year Powertech Transformers introduced new product lines, which included arc furnace transformers for the ferrochrome industry, on-board locomotive transformers for rail transportation and shunt reactors for Eskom. In addition, renewable energy transformers for wind and solar applications were also introduced.

Aberdare Cables has supplied the cable for the train sets being built for PRASA in Brazil and in 2016 it will also provide the cable for the train sets to be built in South Africa. Approximately 32 kilometres of cable is used in each locomotive. The expansion of South Africa’s ports will require a considerable quantity of cable, which Aberdare Cables could provide as a designated supplier.

Aberdare Cables has also developed cables specifically for use in solar energy projects. The requests for proposals (RFP) for renewable energy projects issued by government all require the use of local content, where it is available. This is a great opportunity for Aberdare Cables.

Africa also offers a number of opportunities for Aberdare Cables, which sells its cable into Namibia, Lesotho, Swaziland, Botswana, the mines in Zambia and the DRC. It has a factory in Mozambique, which it plans to expand to meet the growing demand from Electricidade de Moçambique (EDM), the Mozambican electricity utility.

Aberdare Cables also developed a cable with a tougher outer sheath and a reflective coating, initially for the coal mining sector, however, considerable interest has been expressed by other mining houses which bodes well for future sales. The sheath reduces the amount of damage caused by forklifts and trucks driving over cables and the reflective coating means it is easy to see the cables in an underground mine. Both these features have helped to reduce down time on mines and as a result save costs.

Aberdare Cable’s Spanish operation, Cables de Comunicaciones (CDC), reinvented itself by developing new technology to address the changing demands of the marketplace. It now produces newly developed fibre optic and copper cables for use in telecommunication and rail industries throughout the world. This has resulted in the operation posting much better results that previous years.

The only two Altron Power businesses that operate in the retail sector are Crabtree and Powertech Batteries. Crabtree is the only truly local manufacturer of switches and sockets in South Africa. It is also the only manufacturer that can offer contractors the complete basket of electrical equipment they require when fitting out a new building with the necessary electrical fittings. Previously Crabtree formed part of Aberdare Cables but has been operating as a separate entity since June 2014.

In April 2015, South Africa's import tax on lead-acid batteries from non-European Union countries and SADC rose to 15%, following a decision by the International Trade Administration Commission (ITAC). The decision followed lobbying over an extensive period of time by the South Battery Manufacturers’ Association (SABMA), which represents all South African battery manufacturers.

The decision by ITAC to increase import duties on automotive lead-acid batteries from 5% to 15% is welcomed as a step in the right direction. In recent years the number of automotive lead-acid batteries imported into South Africa has increased significantly. The majority of the imports originate from South Korea and China where these manufacturers enjoy government support and cheap labour, as well as other economic advantages.

Product quality, manufacturing and service efficiencies in Altron Power

Powertech Transformers’ ability to respond to emergencies and provide backup service has promoted its brand image in Africa. Most of the work it does in Africa is related to turnkey projects. In Africa, Powertech Transformers has linked up with companies involved in rural electrification in Northern Mozambique and it is supplying small transformers produced in its Cape Town factory for these projects, in addition to exporting transformers to Ghana.

Aberdare Cables’ main drive, having already gone through a retrenchment exercises to save costs, is on being more efficient and more proactive in terms of what its customers need. To provide customers with high quality support, Aberdare Cables has a technical helpdesk manned by engineers.

To secure its supply of raw materials (copper and aluminium) Aberdare Cables, as a member of the Cable Association, is currently in discussions with the Industrial Development Corporation (IDC) regarding the possibility of purchasing a copper rod plant and an aluminium plant to secure a steady supply of copper and liquid aluminium for its industry.

Because PTSI’s control equipment is currently specified by Eskom this equipment is installed in every one of its substations. The quality and functionality of its products also gained PTSI sales of some of its earth fault protection equipment in North and South America, Australasia and Europe. Some of the enhancements PTSI made recently to its protection relay equipment, proved pivotal in securing some key orders in Africa.

During the year under review Powertech Batteries introduced a new range of fully sealed maintenance-free batteries in response to global trends and market demand. Further to the 24-month warranty premium products launched in 2013, this capability was rolled out to the rest of Willard and Sabat’s products in the first quarter of 2015. As part of its marketing campaign, Powertech Batteries also introduced a limited edition pink battery to promote the breast cancer awareness programme.

Crabtree invites its customers and potential customers on tours of their production facilities so they can observe the standards they work to.

Commoditisation and disintermediation in Altron Power

PTSI, an engineering services business, in addition to manufacturing and selling power electronics devices, including electricity meters, also provides the engineering services related to substation automation, protection and control, asset management, energy management and industrial applications. Its focus, which has been on completing projects, is now on service offerings that will be more enduring, provide annuity income and have a longer life cycle. Instead of simply providing customers with a device to monitor readings from electricity meters it now also offers a service around the intelligence gathered from this device that customers could use to help spread the electricity usage more efficiently across tariff periods. PTSI is providing this service in Nigeria.

To address commoditisation and disintermediation Aberdare Cables started an engineering services division through which it supplies and installs cables. It also manages customers’ cabling, which includes undertaking maintenance and repair work and the management of the customers’ cable stock. This would typically be for municipalities and power utilities. Aberdare Cables’ aim is to combine all these services and offer its customers end-to-end value adding solutions, using specialist subcontractors for the civil engineering work.