Altron has been hit by the lagging performance of its traditionally strongest subsidiary, Altech.
The group released its interim results for the six months ended 31 August 2010, reporting a 3% dip in revenue from R12,1bn to R11,7bn. However, the group marginally boosted profit, reporting an increase in earnings before interest, taxes, depreciation and amortisation (Ebitda) of 4%. Adjusted headline earnings per share grew by 5%.
Altech has been the group’s star performer for several years now. However, several once-off costs pushed the company’s operating profit contribution to the group down by 25%.
Altron CEO Robert Venter says Altech “experienced a difficult six months with a 12% decline in Ebitda, despite maintaining its revenue levels. This pressure was felt most noticeably in the East African businesses and Altech UEC.”
He says the Altech East African business faced a number of challenges during the first six months, many of which were once off in nature and are not expected to recur.
Despite the troubles Venter says the group still believes the medium-term opportunities in East Africa offer “substantial growth potential”.
While Altech looks to the next half year to improve performance, Altron’s two other subsidiary businesses, Bytes Technology Group and Powertech, have started to show signs of turning around.
Both businesses were heavily affected by the recession and at Altron’s interim results a year ago, Venter said the group would focus on bringing the businesses back on track.
Bytes grew its operational profit contribution to Altron by 32%, despite a decline in revenue. Venter attributes a dip in revenue from Bytes to the end of a Microsoft contract for the UK national health service.
Powertech, Altron’s infrastructure supplier, has also seen an improvement across its businesses with an increase in Ebitda of 23% compared to the same period last year. Powertech also saw lower revenue of 5%.
But Venter says the group is still feeling the effects of the global recession. “We expect the recovery in the economy to be slower than originally anticipated due to the deterioration of certain lead indicators and worrying signs we are seeing in the economies of some of South Africa’s key trading partners, most notably in Europe.”
He says the strength of the rand has also had an impact on Altron’s half-year performance. “Tight cost management remains a key focus area given the continued subdued activity levels in many of our businesses”, he says.
However, he says the second half of the year should be better for the group, especially with Altech promising better performance.
“The recovery in both Bytes and Powertech is expected to continue,” says Venter. — Staff reporter, TechCentral