Allied Technologies (Altech) has beaten the prevailing economic downturn, with revenue for the year ended 28 February 2009 up 11% to R9,164-billion and operating profit growing 32% to R874-million.
"We are proud to have demonstrated resilience in the challenging global economic conditions," says CEO Craig Venter. "The results underscore our successful strategy of continued globalisation, particularly the progress made in the East African broadband and value-added network services markets. The Group remains perfectly positioned to capitalise on the sustained growth projected for broadband technology in Africa, across multiple technologies, services and geographies."
Altech announced earnings per share up 35% to 569 cents, adjusted headline earnings per share up 15% to 592 cents, dividends up 12% to 323 cents per share, and a return on shareholders' equity of 24%.
"The Altech Group's outstanding performance was mainly achieved by increasing annuity revenue to 79% of total revenue," says Venter. "Generally, it is perceived that annuity revenue businesses are better protected during difficult economic conditions. Consistency is also paramount in this environment. This is demonstrated by our 10 year compounded annual growth of earnings of 17%.
"Altech's has become global quite rapidly, with in excess of 17% of its earnings emanating from outside of South Africa. Our foreign earnings have increased by 56% over the last year."
Altech's operations generated in excess of R1-billion cash for the year. After a R650-million investment into East Africa and R385-million capital expenditure to further Altech's businesses, a cash balance of just under R1-billion was still available at year end. In the current climate Altech believes cash to be critical.
"Altech's strong balance sheet and robust cash position has allowed us to reward our loyal shareholders with a dividend of 323 cents per share," says Venter. "We have over the years been steadfast with our dividend payout which has shown steady growth over more than 10 years."
All businesses within the Altech Group reported pleasing results. Throughout the group, focus was placed on cost curtailment, margins and increase of annuity revenue streams.
"All companies within Altech performed well, but if I had to single out the superb performances, I would have to highlight Altech East Africa, Altech Netstar, Altech Alcom Motomo and Altech Autopage Cellular," says Venter.
Altech's strong African footprint and diversified product offering have been key factors in its continued strong performance, according to analyst Frost & Sullivan. The group's focus on emerging markets has allowed it to take advantage of the sustained demand for information and communications technologies in these regions.
"Altech's wide portfolio of services has been key to sustaining growth in a tough environment," says Frost & Sullivan ICT industry analyst Lindsey Mc Donald. "It offers services that are in high demand."
She believes that the acquisitions made by the group in East Africa are paying off handsomely. Frost & Sullivan expects the ICT sector in the region to continue to grow at between 15% and 20% annually for at least the next three years.
"Altech is in key countries like Kenya, Uganda and Rwanda, so it has the region well covered," Mc Donald says. "There are signs that East Africa is growing more volatile, but there will still be growth, especially once the global crisis subsides. As more international companies look to Africa for growth, Altech is already well established to offer the services they will be looking for."
The group's acquisition of Technology Concepts (TC) has also proved beneficial. It has helped Altech to consolidate some of the other ISP offerings it has to really gear its services towards business clients.
The ECNS license it has been granted in South Africa following the landmark court ruling in its favour will also open an important area of growth.
"To take full advantage of this license, Altech will however need to build additional infrastructure," Mc Donald cautions. "This will require additional finance, and the cost of borrowing money has increased. This increases the potential risk."
Mc Donald believes that the group's next step could well be to increase its presence in West Africa.
"It makes sense for the group to look at West Africa now," she says. "Although the business culture is quite different, it is still an emerging market and Altech will be able to leverage its existing expertise there."