Altech under the microscope

JSE-listed Allied Technologies Limited (Altech, ALT) is set to face a barrage of difficult questions from investors when the group publishes its results for the financial year ended February 2012, on Wednesday (April 25).

Shares in Altech have declined as much as 19% in the past year, from a high of R65.62 in May 2011, to a current price of R53 on the JSE – not far off its year low of R51.49.

The group, which employes 3,580 people in SA and abroad, is involved in the design, development and convergence of telecommunications, multi-media systems and IT solutions.

Earlier this month, Altech advised that its headline earnings and adjusted headline earnings per share for the year ending February 2012 are expected to be between 24% and 30% lower than previously.

It 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. “With new management in place, we will get East Africa back on track,” Venter said at the time.

He also said that he hoped to turn Altech into a R20 billion operation within the next three to five years.

Altech said on April 13, 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.

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Altech under the microscope