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Altech Node drags Altron into quarterly loss

1 July 2015 News

A R60 million loss for JSE listed Allied Electronics Corporation’s (Altron) financial year ended 28 February 2015 has prompted the company to restructure its business.

According to chief executive, Robert Venter, “a mix of macro-economic and operational issues” impacted the group’s annual results. Altron’s revenue decreased by 1% to R27,6 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) by 23% to R1,4 billion. Headline earnings per share declined by 50% to 94 cents.

The Altech Node, a home TV console that falls under the telecommunications Altron TMT group, is partly to blame as it has not met sales expectations since its launch. Speaking to this failing, Venter said, “Although we acknowledge it is a startup business which still has the potential gain traction, initial sales of the Altech Node to the retail market were below expectation. Altron TMT is well advanced in exploring alternative opportunities and routes to market for this product.”

Besides the effect of the NUMSA strike, the multimedia businesses in Altron TMT were also affected by lower international orders as a result of a delay in African digital terrestrial television (DTT) migration. The business’ order book however strengthened significantly after year-end and the South African DTT rollout made progress.

Venter indicated that Altech Autopage is on the chopping block, saying “In Altron TMT, Altech Autopage experienced a tough market and ongoing mobile termination rate reductions which compelled us to make the decision in principal to dispose of the GSM subscriber base. Discussions are at an advanced stage to sell these subscribers and the non-GSM part of the business will be retained and housed within other operations.”

For its part, Altech Netstar performed well and has been developing new telematics and fleet products. Bytes Systems Integration expanded its biometrics offering, and Altech Radio Holding performed well off the back of the Gauteng Broadband Network contract.

Altron announced that profitability in the Altron Power division was adversely affected by a marked decline in orders from Eskom and strike action impacted the manufacturing businesses. Powertech Batteries performed satisfactorily given margins were under pressure due to an increasing lead price as well as ongoing competition from imports, while the System Integrators business struggled with delays in the start of various previously awarded projects coupled with weak order inflow. However, Powertech Quadpro, the turnkey substation business, made good inroads into Africa and in particular Zambia.

The group’s IT assets (which consists mainly of the previous Bytes businesses) continued to perform well, exceeding expectations. In particular Bytes UK, a Microsoft licensing and online security business, Bytes Universal Systems, a software business, and Bytes Secure Transaction Solutions stood out. The Xerox business in Bytes Document Solutions made a good recovery and Bytes Managed Solutions produced solid results despite some foreign exchange losses.

Going forward, Venter admitted that tough decisions need to be made to improve Altron’s performance, “We need to focus and streamline our group which will mean selling off some non-core assets and adapting our offering to our customers. We are certain that these steps, which will be taken in the near future, will benefit our stakeholders.”





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