Perfect storm hits Altron - TechCentral

Perfect storm hits Altron

Altron CEO Robbie Venter

Altron CEO Robbie Venter

Reduced demand for set-top boxes, poor sales of Altech’s much-hyped Node product, the loss of a television assembly business, tough trading conditions at Autopage Cellular and poor performance at Powertech are some of the problems that are being blamed for what looks set to be an annus horribilis for JSE-listed technology group Altron.

For the year ended 28 February 2015, Altron warns that normalised headline earnings per share could be as much as 55% lower than a year ago, while basic earnings per share — which incorporate various significant impairments — are expected to be as much as 110% lower.

The only bright spot has been its IT business, but this has not been enough to offset the problems elsewhere in the Altron stable.

Altron, which is controlled by the Venter family and led by CEO Robbie Venter, is now promising a new strategic direction, which will result in it shedding operations identified as not core and exploring equity and technology partnerships with global industry players in other areas of the business. Particular emphasis will be placed on significantly reducing central costs by creating a leaner management structure.

“The Altron TMT division (telecommunications, multimedia and IT) has experienced a decline in profit levels notwithstanding the strong performance of the IT businesses, which was insufficient to offset the deterioration in the telecoms and multimedia businesses,” Altron says.

Altron’s Multimedia division was “significantly impacted by a combination of reduced order intake in its core set-top box business in Africa, the loss of the Samsung TV assembly contract and the impact of the Numsa strike in July 2014”.

“The business, which has already undergone a significant rightsizing process, has seen its order book improve in recent months and has an encouraging pipeline of local and international prospects, including the South Africa digital migration programme.”

But the Altech Node, the set-top box entertainment and home automation platform launched with much fanfare last year, has tanked, the group says. “It has performed below expectations with regard to retail customer take-up. Altron TMT is well advanced in terms of exploring alternative opportunities for this business.”

In addition, an expected recovery in the performance of Altech Autopage did not materialise in the second half of the financial year.

The Altech Node has proved to be a flop

The Altech Node failed to wow consumers

Making matters worse, Altron’s Power division — its Powertech businesses — experienced a deterioration in their performance, resulting in a breakeven position at headline earnings level.

“Most of the businesses were affected by challenging macroeconomic conditions, namely the four-week Numsa strike in July, weak economic growth and the various challenges created by Eskom’s current position.”

At a corporate head office level, Altron also recorded a big decline in earnings, mainly because of increased interest costs associated with borrowings taken on to delist Altech from the JSE in the previous financial year.

Despite this, Altron says its balance sheet “remains resilient” and it “continues to be well inside its debt covenants”.

Altron is expected to publish its annual results on 13 May.  — © 2015 NewsCentral Media

8 Comments

  1. A perfect storm that was coming for a long time actually. Apart from BEE deals and Black management gigs or jobs for pals at Eskom there is scarcely a more overcrowded field than the telecomms sector. Just ask Telkom.
    I feel genuinely sorry for the Little People in the lower ranks who are now almost certainly going to be ‘downsized’ in the coming months through no fault of their own.

  2. The Emperor has no clothes... on

    Altron’s experience with Node is exactly what happens when you have what appears to be a very good product with bad marketing. If I was ‘joe public’ driving past a a Node billboard I have to ask myself WTF are they actually trying to tell/sell me?

  3. Still surprised at all the independent set top box focus and hype, no real differentiator. You either compete with and beat DSTV or you give people a good reason to own this and DSTV.

    Some vague value offering that does neither was always going to go down this road unfortunately.

  4. Tough life, but if you cannot innovate quick enough in the IT/tech market you will fail. How many other family owned businesses are effective in this market?

  5. Vusumuzi Sibiya on

    DStv had their usual competition killer response utilizing their Expolra which in the Telkom package offer; was better marketed, making more sense to ‘joe public’ and also making the Node look inferior when it is in fact a far superior product.

    The initial marketing approach with such products as the Node, is to have it available at the consumer’s home for a period of a week or so after a demo that has all the features showcased to the consumer… It would be so much easier to close the deal thereafter because the consumer will have had the time to experience the product’s value and realize how much more superior it actually is.

    It is no doubt, a longer sales process almost similar to “Kirby sales techniques” but that’s what was needed at first for the product to gain market traction and they just didn’t think the promotions & marketing through well enough; and just like the other guys that tried to take on DStv, they also didn’t preempt the response that a DStv would reply with.

    I don’t think its a lost cause for the product though… they just need to be realistic about expectations and make the investment in having direct sales teams that will be doing the demos to educate the consumer. Their happy customers will no doubt be their best referral and marketing drivers.

  6. The Emperor has no clothes... on

    Totally agree with you. I still think if they focused on it’s other capabilities and developed a decent suite of products – cameras, automation, control, etc. they would have a winning product with a massive USP.

  7. Vusumuzi Sibiya on

    In Telkoms April edition of best deals brochure which incidentally also has the free DStv Explora offer, there’s a Samsung Video Surveillance (DVR + 4 cameras) offer.

    There’s just so much more up-sells to the Node which can be showcased in the consumer’s home environment; all in one STB and these guys went the route of trying to market and sell it like a PVR decoder – when there’s much more in it that’s of real value.

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