JSE listed Allied Technologies Limited (Altech) today announced the Group’s interim results for the six months ended 31 August 2011.
“The first half of the financial year showed results below our expectations, particularly from our operations in East Africa. However, we are pleased to report that nearly all other operations within the Group performed to, or above, expectations and we remain optimistic that the second half of the financial year will show an improvement,” said Craig Venter, Altech CEO.
“Our strong presence across the Telecommunications, Multi-media and Information Technology sectors is unique to the South African environment. I know of no other corporate that has all three divisions within one group. This presence, together with our strong annuity income at 83% of total revenue, our stringent cost controls and capital management, and our positive cash position and Balance Sheet, effectively spreads risk and enables us to take advantage of opportunities as they arise,” continued Venter.
“During the reporting period we introduced a number of innovative new products and services into the market and made some strategic acquisitions, both locally and internationally, that will enable us to take advantage of new market trends as they arise. At the same time, I have a strong executive team in place that will focus on our East African footprint and enhance the profitability that emanates from these businesses,” said Venter.
Financial highlights for the year ended were as follows:
Operating profit before capital items
Operating profit margin
Profit before tax (PBT)
Return on shareholders' equity
Continued strong balance sheet
The Telecommunications and Wireless Communications Division, which consists of Altech Autopage Cellular, Altech Technology Concepts and Altech Netstar, performed as predicted. This division contributes 71% of group revenue and 76% of group profit.
During the period Altech Autopage Cellular increased its revenue and profits due to an increase in value-added services and pre-paid voucher sales.
“While the mobile market remains exceptionally competitive with aggressive price movements across all product segments, positive signs have appeared with an increase in consumer activity in the various channels,” said Venter.
“Results from Altech Technology Concepts were below expectation, although its Tier-1 network became available to the market in February 2011. While we received excellent customer feedback on this next generation network’s quality, resiliency and back-up capacity; significant costs were incurred and the focus now is to increase revenue by expanding the network’s distribution capacity, both directly and indirectly, over the next two years,” said Venter.
The Altech Netstar Group exceeded its profit expectations for the period, with a significant focus on developing value-added services around the division’s fleet management offering and the launch of the insurance telematics service in association with the world leader Octo.
“Offshore growth within the Netstar Group remains a key objective and we are currently considering various opportunities in Latin America. The opening of a new licensed operation in the Ivory Coast, as well as a joint venture in Mozambique, underscores our commitment to the development of a wider footprint in Africa,” said Venter.
The Converged Services Division, which consists of Altech Alcom Radio Distributors, Altech Fleetcall and Altech Stream East Africa, presented diverse results.
“Within the radio market, Altech Alcom Radio Distributors continued to perform, as we saw an increase in digital mobile radio sales and the division’s unit sales exceeded the same period last year, largely driven by improved pricing strategies and marketing initiatives. At the same time, Altech Fleetcall continued to increase its net billable connections by 8% year-on-year,” said Venter.
Altech East Africa experienced a tough trading period with financial performance below expectations and a concerted effort is being made to correct this under-performance. This has resulted in Altech changing the ongoing management team responsible for these particular activities.
“East Africa presented us with a number of challenges, not least of which was our exposure to foreign exchange currency fluctuations. While we have reduced our exposure to these fluctuations, we have also implemented a number of turnaround strategies to correct the underperformance of our operations in the region. New management has been appointed and while there will be a strong focus on resolving the existing operational and financial challenges, there will also be a number of actions to strategically strengthen the positioning of the businesses in the region. The opportunities for growth remain; execution is now the clear imperative,” said Venter.
The Multi-media and Electronics Division, which consists of Altech UEC and Arrow Altech Distribution, met all financial expectations for the period.
While the country awaits more movement on the part of Government with regard to digital migration, Altech UEC continues to export terrestrial set-top boxes (STBs) to African and Australian markets and is gearing up to meet local demand for STBs with the recent opening of its new hightechnology STB manufacturing facility. An African digital technology manufacturing first, the 13 500m2 state-of-the-art facility will enable Altech UEC to produce more than 300 000 STB units per month.
“The building of the factory was not only to gear up for the anticipated demand for locally produced STBs, but also as part of a wider strategy to enable Altech UEC to extend its manufacturing capabilities and remain a world class digital set-top box manufacturing and software solutions operation,” said Venter.
“Coupled with this, our recent 100% acquisition of SetOne GmbH, a German-based distribution, logistics, STB repair and servicing business, unlocks synergies with Altech Multimedia and enhances our ability to diversify Altech Multimedia’s income streams by growing its international business footprint and reducing its reliance on locally generated business. This is in line with the Altech Group’s strategy to increase non-SA revenue and profits,” said Venter.
The Information Technology Division, which consists of Altech ISIS, Altech West Africa, Altech Card Solutions and Altech NuPay, showed satisfactory results, with the South African businesses showing good results, while the West African business underperformed due to delayed deliveries and a temporarily overstocked position at a key customer.
“Our focus for West Africa remains on driving cost efficiencies. In addition, we are expanding the division’s product lines to include the supply of initialised and personalised chip-card products to the Nigerian telecommunications network operators and financial service providers. We expect to see an improved performance as we assist in the Nigerian government’s drive to transition the banking and retailing market segments from a cash-based transacting model to a card-based model,” said Venter.
Commenting on the way forward, Venter said that the second six months’ performance would be an improvement on the first half, as certain adverse factors which were specific to the period will not recur and due to the fact that a number of interventions had been put into place to ensure profitability from all operations.
“As a whole, the majority of our operations in South Africa are performing well ahead of our profit expectations, despite the continuing adverse economic conditions. Of concern are our operations in East Africa where we have not performed to the standards that were originally set by ourselves. We have subsequently implemented a number of strategic initiatives, as well as management changes, at both Group and divisional level to address these issues and we expect to see their positive impact in the months to come,” he said.
“Our objectives remain the same – we will continue to defend our revenues and margins in all our existing businesses; we will continue to transform our business model to capture growth opportunities; we will continue to improve our customer orientation and commercial focus; and we will ensure strong top management involvement in all our operations,” concluded Venter.