On Wednesday (26 September), the group reported a R420 million loss in results from operating activities for the six month period ending August 2012, from a R283 million profit in 2011.
Revenue increased by 6.8% to R5.2 billion and its operating profit before capital items was 13.5% lower than that of the prior period, mainly due to losses incurred in Altech’s operations in East and West Africa.
“Apart from East and West Africa, the operations within Altech performed to expectations, with Altech UEC returning to a more acceptable profit level.
“Taking into account the continued losses in East and West Africa, the Board has decided to further impair the goodwill and carrying values of certain property, plant and equipment and intangible assets within its East and West African operations. Principally due to these impairments, there was a loss before tax of R485 million,” Altech said.
Altech West Africa (AWA) was incorporated and commenced business in Nigeria in 2005, and produces cash recharge vouchers for the cellular network operators in Nigeria. More recently, the company commenced the manufacture of plastic card products for Nigerian banks and other clients.
“AWA has been highly profitable for most of the period since its inception, but became loss-making during the last 18 months, due to a reduction in demand for its secure recharge vouchers (as opposed to cheaper non-secure products made by other suppliers) and delays in the up-take of plastic chip cards by banks,” Altech said in a statement, noting further that its “pioneer industry” tax-free status expired recently.
The group said that taking into account the above factors, the costs involved in maintaining Altech management control of AWA from South Africa, additional investment required to enhance its production facilities, and the fact that AWA’s product area is non-core to the Altech group, it reached an agreement to dispose of its 75% interest.
“The effective date will be the first day of the month following the fulfilment of the conditions precedent,” Altech said.
At close of play on the JSE, shares in Altech slumped 6.67% to R42.