Altech announces Annual Results

25 April 2012

Altech announces Annual Results:

News Highlights

South African and certain international operations perform to expectations
East and West Africa disappoint
- Currency fluctuations, high interest rates, increased competition and sharp drop in broadband prices affect results
- Fibre cable breaks and undersea cable breaks – government intervention sought
- Slow take-up for bank cards in Nigeria
Expansion opportunities outside of Africa
Future growth platforms identified

JSE listed Allied Technologies Limited (Altech) today announced the Group’s annual financial results for the year ended 29 February 2012.

While the Group’s revenue increased, operating profit was lower than that of the prior year mainly due to operations in East and West Africa experiencing tough trading conditions.

“Results from our East and West African operations were disappointing. However, we remain positive that the remedial measures that we have put in place in East Africa will have a positive effect in the future,” said Craig Venter, Altech CEO.

Other operations within the Group performed in line with expectations, with the majority reporting solid growth figures. Altech Multimedia returned to profit after several years of losses and six of the seven acquisitions made and joint ventures initiated during the past three years have shown satisfactory profit performances, with the remaining one, Altech Technology Concepts, having now been successfully integrated into Altech Autopage Cellular.

“While most operations within the Group performed to, or above 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.

Financial highlights for the year ended were as follows:

Revenue R9.97 billion
EBITDA before capital items R919 million
EBITDA margin 9.2%
Operating profit before capital items R649 million
Operating profit margin 6.5%
Profit before tax (excluding capital items) R590 million
Loss before tax (after capital items) R240 million
Adjusted HEPS 388 cents
Return on shareholders’ equity 21.2%
Annuity Income 83%
Balance sheet remains strong

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 increased its revenue due to an increase in value-added services and pre-paid voucher sales, with mobile and fixed data customer growth well up.

“Our continued focus on reducing operating costs in the business saw an overall reduction in operating expenditure over the period and we will continue to aggressively manage costs in order to mitigate margin erosion,” said Venter.

“Furthermore, our relationship with the Network Operators has been strengthened as we have concluded beneficial long-term agreements with three of the operators and agreements with the remaining two operators are at an advanced stage,” he added.

The Altech Netstar Group exceeded its profit expectations for the period and achieved a net growth in subscribers of 20,151 vehicles for the period. In addition, Netstar broke through the R1 billion revenue mark for the first time, with good prospects on the horizon, particularly in the government and state-owned enterprises market where a number of mid-sized tenders have been secured.

According to Venter, offshore growth for the Altech Netstar Group remains a priority and the technology partnership with Italy-based Octo Telematics has seen the Group heading for its target of 2,500 connections per month, with significant potential for the development of insurance telematics throughout Africa. Furthermore, Altech Netstar continues to look at international opportunities for potential business partners to increase the Group’s international footprint.

The Converged Services Division, which consists of Altech Alcom Radio Distributors, Altech Fleetcall and Altech Alcom Matomo, presented satisfactory results.

“Within the radio market, Altech Alcom Radio Distributors continued to perform well 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 and positive customer growth in the SADC region. At the same time, Altech Alcom Matomo saw an increase in revenue for the year, while Altech Fleetcall continued to increase its net billable connections by 8% year-on-year,” said Venter.

Operations in East Africa experienced a tough trading period with financial performance below expectations with a number of challenges, including currency fluctuations, high inflation rates and interest costs, sharp drops in broadband pricing, and network instability due to fibre and undersea cable breaks.

“We are busy restructuring our East African operations into a more regional focused business entity to provide regional unity and a single interface into key customers. This close collaboration between the regional operations is already having a positive impact on our business in the region,” said Venter.

“Furthermore, the recent completion of our Kampala–Kigali fibre link has closed the regional ring network for us, from Mombasa through Nairobi to Kampala to Kigali and back through Tanzania to Dar es Salaam. This provides us with a competitive advantage in that we are now able to offer our corporate customers improved high-speed connectivity and network resilience to all their sites and customers in the region,” he added.

The Multi-media and Electronics Division, which consists of Altech Multimedia and Arrow Altech Distribution, performed as expected for the period, with Arrow Altech Distribution achieving its strategic growth objective of 30% market share for the fiscal and delivering all-time record sales and operating profit since its formation in 1999.

At the same time, Altech Multimedia, which encompasses Altech UEC South Africa, Altech UEC Australia and Altech Multimedia Europe (including Altech SetOne), continues to make rapid progress in transforming the business from a manufacturing focused business to one encompassing the complete life cycle management of multimedia service delivery.

“Altech Multimedia’s service capabilities are now well established in our African, European and Australian markets for major broadcast customers as evidenced by the recent R400 million three-year contract we concluded with Australian-based FetchTV for the supply of set-top boxes to Bahrain, Saudi Arabia, Malaysia and Australia,” said Venter.

“In addition, Altech UEC has responded to the South African government’s recent Request For Information for the manufacture of an estimated 9 million set-top boxes when the country migrates to digital terrestrial television and with the recent opening of our new manufacturing facility in KwaZulu-Natal, we are well positioned to cater for government’s requirements,” added Venter.

The Information Technology Division, which consists of Altech ISIS, Altech West Africa, Altech Card Solutions, Altech NuPay and Altech Swisttech, performed as expected, with the South African businesses showing good results, while the West African business underperformed due to increased competition in the low-priced non-secure paper recharge voucher market. In addition, Altech West Africa’s five year “pioneer“ tax status in Nigeria recently ended and the Nigerian Government has lifted the prohibition on imports of recharge vouchers, leading to increased competition.

“Altech Card Solutions turned in an exceptional performance for the year and has successfully integrated the Eyenza Mobile Money acquisition into its operations. Altech ISIS once again exceeded expectations and has expanded its customer base, both locally and regionally, with new business analysis services. Altech NuPay exceeded budget for the period as a result of good sales of their pre-paid PIN-based product, and Altech Swisttech’s strategy of expanding into providing lifestyle, gaming and bespoke mobile applications has resulted in the awarding of a number of client contracts,” said Venter.

“On the whole, our operations in South Africa and some international operations are performing well despite the continuing adverse economic conditions. Of concern are our operations in East Africa and we have implemented a number of strategic business initiatives, as well as management changes, to address these issues. With respect to West Africa, we are in negotiations to dispose of our shareholding in this operation,” he said.

Altech has also embarked on an internal multi-year project to identify and implement future growth platforms in order to achieve on its growth targets in a significantly more demanding environment. The project focuses on a number of key strategic areas including identifying areas where efficiencies can improve, better alignment of group-wide IT services, the optimisation and monetisation of existing group assets, and the identification of incremental growth areas across the group.

“Our objectives for the future remain the same – we will continue to defend our revenues and margins in all our 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,” he added.

“I am fortunate to have an exceptionally skilled and capable management team at both group and operational level, and along with the support and expertise of the Altech Board, I am confident that we will overcome the current challenges and move forward positively,” concluded Venter.

-ENDS-

Notes to Editors:
About Allied Technologies Limited
Allied Technologies Limited (Altech) is listed on the Johannesburg Stock Exchange (JSE). The company focuses on the Telecommunications, Multi-media and Information Technology (TMT) industries and employs more than 3 580 employees in South Africa and abroad.
As a leading South African multi-billion rand group, Altech is involved in the design, development and convergence of Telecommunications, Multi-media systems and IT solutions.

For further information please contact:
Craig Venter
Chief Executive Officer: Altech
Tel: +27 11 715 9004
Cell: +27 83 236 8000
E-mail: cventer@altech.co.za

and/or

Shenanda Janse van Rensburg
Group Executive: Marketing, PR & Communications - Altech Head Office
Tel: +27 11 715 9031
Mobile: +27 84 777 1977
Email: sjvrensburg@altech.co.za