Altech, lower margins knock Altron - TechCentral

Altech, lower margins knock Altron

Despite good revenue growth of 11% in the six months ended 31 August 2012, JSE-listed Altron’s profits have been pummelled due to margin pressure and writedowns at subsidiary Altech.

For the period, Altron reported operating profit before capital items of R586m, from R627m previously. However, the problems at Altech, in particular, forced the company into a R372m loss, from a profit of R321m in the same six-month period a year ago. Revenue was R12,8bn.

Bytes Technology Group and Powertech achieved good revenue growth, Altron says, but they also experience pressure on their margins. This pressure, combined with the ongoing losses at Altech’s East and West African operations, hit Altron hard.

“The macroeconomic environment remains challenging and highly volatile,” Altron says in notes accompanying its latest financial statements. “While there is growth in the local economy, there remains uncertainty around the future, with much of this uncertainty attributable to international markets, particularly the euro zone.”

The building and construction sector continued to show no real signs of recovery, the company says. However, demand in the electrical infrastructure market remained strong, led by spending by Eskom and some of the larger municipalities.

Bytes benefited from strong growth as businesses invest in IT. But margins are under pressure, Altron warns, due to the competitive nature of the sector, deflation and the commoditisation of IT products. “Cloud computing is becoming an increasingly important feature of the IT sector and will present both opportunities and some threats to the Altron group.”

For the six months, Bytes improved its revenue by 19% to R3,5bn. However, earnings before interest, tax, depreciation and amortisation (a measure of operating profit) declined slightly to R244m because of margin pressure. Headline earnings were up by 7% to R117m.

At Powertech, revenue rose by 11% to R4,2bn, with Ebitda up by 6% to R247m thanks to a good performance by Powertech Cables.

During the six-month period, Altron generated R851m in cash from operations, down from R926m a year ago due to lower profits. There was also a “disappointing” increase in working capital of R238m.  — (c) 2012 NewsCentral Media

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