Altech profits take a dip

JSE listed ICT giant, Allied Technologies (Altech), posted a 6.8% increase in revenue in the six months ended August but operating profit came in lower than that of the previous comparable period mainly due to losses incurred in Altech’s operations in East and West Africa.

Altech CEO Craig Venter said “As announced at our Annual Results in April, we made a decision to sell our 75% interest in Altech West Africa. Following an intensive negotiation process we have entered into a binding agreement to dispose of our interest in the operation as its products are non-core to the Altech Group. The effective date of the transaction will be the first day of the month following the fulfillment of the conditions precedent. With respect to our East African operations, we have initiated discussions concerning the introduction of partners into these operations and will advise shareholders of progress in this regard, in due course”.

Financial highlights for the year ended were as follows:

  • Revenue                                                      R5.157 billion
  • EBITDA before capital items                      R372 million
  • EBITDA margin                                           7.2%
  • Operating profit before capital items           R256 million
  • Operating profit margin                               5%
  • Profit before tax (excluding capital items)  R590 million
  • Loss before tax (due to impairments)         R485 million
  • Adjusted HEPS                                           139 cents
  • Return on shareholders’ equity                   22.6%

“With respect to another partnership, we recently entered into a long-term Value Added Partner agreement with Huawei, a leading global information and communications technology company. Under the agreement, Altech will provide Huawei Enterprise products and services to customers and offer post-sales professional services and support in countries across Southern and East Africa. We are confident about this partnership and the value it will add to Altech in the future,” he said.

“While most operations within the Group performed to expectations, the imperative for our non-performing operations is to execute on the defined strategy for each operation to ensure that the Group as a whole meets its revenue and growth targets going forward,” Venter added.

The Telecommunications and Wireless Communications Division, which consists of Altech Autopage Cellular (including Altech Technology Concepts) and Altech Netstar, performed as predicted.

During the period, Altech Autopage Cellular’s operating profit increased by 3,7% while revenue increased only marginally due to the contraction of Global System for Mobile communications (GSM) airtime revenue and slower than expected Internet Service Provider (ISP) revenue growth. This has however, been mitigated by increased prepaid and Value Added Services (VAS) revenues.

GSM data remains strong with 26% subscriber growth on the previous period due to aggressive data pricing propositions in the market and GSM customer churn has been reduced to single digits in the reporting period due to tighter credit management, improved customer service and retention, and a focus on consumer growth in higher value channels.

“Our continued focus on expense management in the business will realise efficiencies and cost savings in the second half of the year to mitigate the pressure on gross margin. Coupled to this, the successful integration of Altech Technology Concepts into Altech Autopage Cellular will allow for further converged product launches across distribution channels to consumer and business customers in the second half of the year,” Venter said.

The Altech Netstar Group grew revenue by 4,0% compared to the prior period with a net growth in subscribers of 14,222, bringing the active base in South Africa to 538,838 vehicles.

According to Venter, potential joint venture partnerships in Africa have been identified and management is optimistic that these businesses can commence in the second half of the financial year.  Further inroads into Africa have been made with the signing of two global customers with respective operations in Burkina Faso and Guinea.  Altech Netstar has now expanded its customer base to 21 countries in Africa.

Good growth has also been achieved in the government market, with public bodies such as Potchefstroom Municipality, Ladysmith Municipality, the Gauteng Department of Agriculture, and the Tugela Water Board awarding business to Altech Netstar, while the implementation of a tender with a roads agency has commenced whereby Altech Netstar will be a supplier of traffic data to the main contractor.

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