Altech hit by East/West African operations

JSE listed Allied Technologies Limited (Altech, ALT) has advised that its headline earnings and adjusted headline earnings per share for the financial year ended February 2012 are expected to be between 24% and 30% lower than previously.

The group said these reductions are primarily due to continued poor results in Altech’s East and West African operations. “Altech Management is investigating remedial measures,” it said.

In 2011 the group reported revenue R9.7 of billion and an operating profit of R787 million.
Adjusted HEPS stood at 529 cents per share.

“Certain of the 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; network instability due to fibre breaks; and undersea cable breaks.”

“Exposure to currency fluctuations has been reduced, and steps are being taken to address certain underperformance issues. New management is focused on resolving operational and financial challenges and strengthening the positioning of the businesses in the region,” Altech said.

In January, Altech announced the resignation of Jeffrey Hedberg as COO of the group following mere months in the post. Hedberg had been appointed by Altech CEO, Craig Venter to head up the flagging operations in East Africa.

Altech said on Friday (April  13, 2012),  that a green-field start-up operation by Altech in Nigeria, Altech West Africa, was a strong profit performer for five years. Its recent trading performance on paper recharge vouchers was affected by mobile operators’ ability to offer cheaper alternatives.

In addition, its 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 has decided to impair fully the goodwill in respect of the West African operations and to impair the carrying value of the investment in the East African operations.  These impairments will result in a loss in basic earnings per share, which is expected to be between 281 cents and 302 cents compared to a profit of 216 cents the previous financial year,” the group said.

The other operations within Altech performed to expectations, it added.

Altech Multimedia returned to profit after several years of losses. “Six out of the seven acquisitions made and joint ventures initiated during the past three years have shown satisfactory profit performances and the remaining one has now been successfully integrated into Altech Autopage Cellular.”

“In addition, the three significant empowerment transactions implemented over the past 18 months, in Altech Multimedia, Altech Radio Holdings and Altech Netstar, have assisted the Altech Group in achieving Level 3 empowerment status,” it concluded.

Altech expects to publish its results on about April 25, 2012.

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Altech hit by East/West African operations