Altron corporate news
ALTRON’S INTERIM RESULTS IMPACTED BY RECESSIONARY CONDITIONS
Tuesday, October 06, 2009
Following a challenging six months, Altron’s interim financial results for the half year ended 31 August 2009 represent the difference between what Altron believes was the bottom of the cycle compared to the peak in the first half of last year.
The group’s revenue declined by 8% from R13.2 billion to R12.1 billion compared to the prior period with EBITDA reducing by 28%. EBITDA margins showed a reduction from 10.0% to 7.9%. For the six months period under review, the group’s adjusted diluted headline earnings per share declined by 44%, as a result of lower finance income and greater earnings attributable to minorities due to the increased contribution from Altech East Africa as well as the Powertech Transformers empowerment transaction.
Robert Venter, Chief Executive of Altron said: “Our group interim results came under pressure predominantly due to Powertech being impacted by lower demand levels and strong pricing pressures compared to the peak levels they experienced during the first half of last year. Altech, on the other hand, improved its EBITDA significantly on the back of a strong annuity income base and the higher profitability levels achieved from strategic local acquisitions as well as its investments in East Africa.”
“In fact, Altech defied the recession by reporting very good results for the first six months with operating profit improving by 17%, EBITDA by 19% and adjusted headline earnings per share by 13%. Altech’s operating margin improved to a pleasing 10.1% reflecting good profitability levels at most of its operations and its profitable recent acquisitions. In addition, this was aided by the elimination of the Altech NamITech South Africa losses following its sale earlier this year.”
Venter said Altech had been active from a corporate activity perspective during the period under review, increasing its investment in Kenya Data Networks (KDN), forming a strategic alliance with Seacom for the mutual purchase of bandwidth as well as acquiring a 8.5% stake in The East Africa Marine System Limited (TEAMS) cable for an amount of US$11 million. This was complemented by Altech’s acquisition of Nupay, Fleetcall and Technology Concepts.
According to Venter a number of factors resulting from the recessionary conditions and that have been evident in the local and UK markets since this time last year, negatively affected operating margins at both Powertech and Bytes during the first half. These included, among others, the significant slowdown in building and construction activity, the pressures being felt by the mining industry and the financial services sectors as well as broad margin pressure in the information technology sector.
The impact of the contraction in volumes and the reduction in the copper price is evident in the 26% reduction in Powertech’s revenue and more dramatically in the operating profit line, which declined by 75%, with the operating margin reducing from 10.1% to 3.4%. This reduction includes a significant foreign exchange loss of R55 million.
In terms of the effect of the appreciation of the rand, Venter said that the group’s operations were all negatively affected causing a R96 million foreign exchange loss for the group compared to a gain of R36 million in the comparable prior period.
Venter said the lower expenditure by both the retail and financial sectors showed in the group’s IT operations. The Bytes operating margin reduced from 5.4% to 3.5% resulting in a 32% decline in operating profit and a decrease in EBITDA of 25%.
“The challenging market conditions required us to remain focused on internally driven programmes such as cost reduction, working capital management and a cautious approach to further capital expenditure and acquisitions. In this regard, we have progressed significantly in terms of our initiatives to streamline the Powertech operations to excel when markets recover.”
“Through working capital management the cables operation released about R250 million from its investment in working capital while the group decreased net capital working days overall to 19 days from 21 days, releasing R127 million on a consolidated basis,” said Venter.
“During the second quarter, we started to see a gradual improvement in our businesses which is consistent with recent economic data that indicates that the bottom of the economic cycle may have been reached with some signs of recovery. Compared to the first half, I therefore expect an improved performance in the second half, although I believe that demand levels will remain depressed compared to those seen at the peak of the cycle. We have reduced the cost base significantly and this positions us well as markets recover,” said Venter.
Ends/…..
Issued on behalf of: Allied Electronics Corporation Limited (Altron)
For more information:
Robert Venter
Chief Executive
Telephone: 011 645 3663
Salomé Brown
Group Executive: Corporate Communications
Cell: 083 233 1333
| Page updated: 2 September, 2008 | » Return to top |