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Altech consolidates, repositions its business

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Allied Electronics (Altron) has announced its intention to consolidate the business as it reported a 7% decrease in revenue to R13,3-billion for the six-month period ended 31 August 2015, with earnings before interest, tax, depreciation and amortisation (EBITDA) decreasing by 69% to R241-million.
“Although Altech Radio Holdings and our IT assets performed very well on a comparable basis, the group continued to experience significant adverse effects from four areas of the business, namely, Powertech Transformers, Altech Multimedia, Altech Autopage and Altech Node. In this regard, agreements have been signed to dispose of the subscriber bases of Altech Autopage. Also, the decision has been made to close the Altech Node operations with all closure costs taken at the half year,” says Robert Venter, chief executive of Altron.
Altech Radio Holdings performed exceptionally well as a result of the Gauteng Broadband Network project which is running on schedule with the scope being enhanced in the process.  There are some encouraging and significant projects in the pipeline.
Bytes UK, Bytes Secure Transaction Solutions and Bytes People Solutions were the stand-out performers in the IT division. While the Bytes UK results were enhanced by the depreciation of the Rand, the local currency results exceeded expectations as the business expanded its higher margin operations. Strong performances from the healthcare businesses (MediSwitch and Med-e-Mass) and Altech NuPay led to pleasing results in Bytes Secure Transaction Solutions, and Bytes People Solutions benefitted from its acquisition of Inter-Active Technologies, a call centre business.
Powertech Transformers saw a further decline in orders from Eskom which resulted in an unfavourable production mix and an under recovery in its factories. Altron is in the process of disposing of this business and as a result has categorised it as a discontinued operation.
Altech Multimedia was affected by the delay in the African Digital Terrestrial Television Migration (DTT) process. Although set-top box demand in South Africa remains at reasonable levels, the reduction in orders from the rest of Africa and the loss of the Samsung television assembly contract resulted in under recoveries in its factory. This has also resulted in a significant inventory obsolescence provision. Action has been taken to right-size this business and consolidate its international operations.
Altech Node continued to make operating losses during the period. A decision was taken to close the business with effect from 31 October 2015, although the technology will remain within the Altron group.
Altech Autopage operated in a difficult and challenging market while the sale of its GSM subscribers was being finalised. Sale agreements were concluded with three mobile network operators for an amount of R1,5-billion and announced on 23 September 2015. “We anticipate that all regulatory approvals will be achieved and migration of subscribers will be completed by February 2016,” says Venter.
Going forward, Venter says it is crucial that Altron reposition itself. “We have commenced with detailed actions to execute on our new strategy. The plan will focus the group, leverage the competitive advantage that we have in the IT and telecommunications space and limit our exposure to the manufacturing sector. In this regard, equity partners are being sought in the non-core businesses which will help us access new markets, technologies and capital. In some cases, an asset identified as non-core may result in an outright sale.”
Altron is also implementing various initiatives to reduce costs, such a consolidation of its three head offices into one and expansion of its shared services.
“Altron’s future-state will be a smaller, more agile group that is focused on its core IT assets. This will be a stable base from which to grow,” concluded Venter says.