Altech looks east for new growth

Altech says that its partnership with Chinese firm Huawei has already started to bear fruit, and forms a core pillar of its growth strategy going forward.

Shares in Altech slumped for a second straight day on Thursday (25 April), having suffered heavy losses in reporting its financial results for the year ended February 2013.

By close of play, Altech declined R2.80 or 7.8% to R33.10, having dropped 5% on Wednesday and a long way off its 52 week best of R55.48.

Altech is currently in negotiations, along with its parent company Altron, which has fueled speculation that the former may delist from the JSE.

In August 2012, Altech signed a long term agreement with the ICT firm to provide products and services, including the distribution of smartphones and tablets.

Speaking at the company’s head office in Woodmead on Thursday (25 April), Altech CEO Craig Venter noted that, in March, Altech Radio Holdings and Huawei jointly secured a R119 million contract with the Passenger Rail Agency of South Africa (Prasa) to provide digital signaling network technology for South Africa’s major metropolitan areas.

Altech Alcom Matomo, meanwhile, secured a R196 million three-year contract with police operations in Gauteng to maintain and upgrade the South African Police Service’s TETRA radio network. “Both these contracts bode well for future performance,” said Venter.

The company head also pointed to a healthy order book of R632 million at the end of the financial period, and noted additional orders since year end, amounting to R1.06 billion.

East and West Africa

Venter said he was very “comforted” to see the last of its east and West Africa operations, which largely contributed towards the company’s heavy financial loss for the year ended February 2013.

The company head also pointed to a healthy order book of R632 million at the end of the financial period, and noted additional orders since year end, amounting to R1.06 billion.

From discontinued operations, following the disposal of its Telecommunication Network interests in East Africa, Altech pointed to a R1.54 billion loss from its operating activities, compared to a prior loss of R657 million.

“Results from our East and West African operations were disappointing. However, with the disposal of these assets we are now in a position to unlock value from innovation and convergence through our remaining assets, and enhance our activity base by further exploiting our intellectual property,” said Venter.

“Furthermore, the disposal of the East and West African operations will see the termination of operating losses of R165 million in East Africa and R39 million in West Africa, totaling R204 million,” he added.

Four pillars of growth

Venter indicated that Altech’s aim was to substantially increase group revenue within five years through four strategic pillars, namely: Insurance Telematics; Converged Services; its partnership with Huawei; and payment transactions through its new Eyenza Mobile Money service.

“Projects that have been launched during the year include insurance telematics solutions, the development of secure digital content devices, new payment instruments and solutions using e-Wallets and microfinancing opportunities,” Altech said.

Acquisitions

Venter said that Altech would let the dust settle over the next six to 12 months regarding potential acquisitions. He said that, following a “bad experience”, the group would be cautious.

However, he hastened to add that Altech’s previous success had stemmed from its entrepreneurial and acquisitive culture.

“It (East and West Africa) should not deter us from being acquisitive… we would have a guarded approach in terms of globalising, but we are not going to dampen our enthusiasm,” Venter said.

Looking ahead

“With Altech’s former East and West Africa operations having been sold, and with the termination of their losses going forward, I am confident that the Altech Group will again return to its normal pattern of profitable growth as a result of a renewed focus on our remaining assets and the innovation strategies that we are putting in place,” Venter said.

The CEO said that Altech’s cash balance would increase with no companies bleeding. “I envisage Altech returning to a strong cash company within the next 12 months,” he said as cash generated from continuing operations exceeded R1.05 billion.

More on Altech

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Altech expects to extend its losses

Altech climbs 4.5% on negotiation talks

Altech offloads West Africa operation

Altech disposes of East Africa ops

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Altech looks east for new growth