Altron results marred by Altech impairments
Allied Electronics Corporation (Altron) on Tuesday (9 October) reported a loss after tax of R372 million for the six months ended August 2012, compared to a prior profit of R321 million due to substantial impairments incurred by its subsidiary, Altech.
While Altron’s revenue increased by 11% to R12.8 billion from R11.5 billion in the comparative period, earnings before interest, taxes, depreciation, and amortisation declined by 9% to R852 million from R932 million, reflecting an ebitda margin of 6.7%, down from the previous 8.1%.
Headline earnings per share dropped 2% to 81 cents, while adjusted diluted headline earnings per share declined by 5% to 87 cents.
Net finance expenses increased to R77 million from R29 million in the prior year as a result of increased borrowing levels on a high investment in working capital as well as higher interest rates on the loan funding into Altech East Africa.
Capital items rose significantly to R677 million due to further impairment of asset carrying values at Altech East and West Africa.
The net effect of the aforementioned resulted in a consolidated loss before tax of R167 million, the group said.
Altron, through its principal subsidiaries, Allied Technologies, Bytes Technology and Power Technologies, is invested in the telecommunications, multi-media, information technology and power electronics industries.
The group noted that the local IT market has shown strong growth in the first half of the year as businesses continue to invest in new technologies.
“Nevertheless, margins are under pressure due to the highly competitive nature of the sector, deflationary forces and the increasing commoditisation of IT products.
“Cloud computing is becoming an increasingly important feature of the IT sector which will present both opportunities and some threats to the Altron group,” it said.
While Altech reported a loss, Altron stressed that the group’s prospects would be significantly influenced by its ability to improve the results out of East Africa and the disposal of the West African operation. “The South African businesses remain solid,” it said.
Bytes reported an increase of 19% in revenue to R3.5 billion although ebitda declined by 1% to R244 million as margins came under pressure. “Headline earnings for the Bytes group improved by 7% to R117 million with the majority of operations performing commendably,” Altron said.
Powertech revenue increased by 11% to R4.2 billion, while ebitda improved by 6% to R247 million.
Headline earnings for the Powertech group increased by 11% to R60 million.
“These results were positively influenced by a much improved performance by the Powertech Cables group on more sustained volume levels, though this was offset by reduced contributions from the Powertech Transformers group and Powertech System Integrators,” Altron said.
Looking ahead, the group said that a number of significant initiatives are in progress to mitigate the challenges that the group currently faces, the benefits of which will likely only materialise in the new financial year.
“In this context focus will remain on bringing these initiatives to a conclusion, generating profitable revenue growth, maintaining strict cost control as well as improving working capital management.”
Altron said that the current labour unrest in South Africa is severely impacting on the economy and would hamper its business.
“Significant business opportunities in the short to medium term include the convergence of various technologies within Altech, Bytes’ acquisition strategy, and opportunities for Powertech within the electrical services and renewable energy sectors. Opportunities also exist, for all of the group companies within Africa, although a conservative approach will be adopted for expansion into this region,” it said.
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