It’s been 50 years since Bill Venter, then a 33-year-old telecommunications engineer, founded Allied Electric, the company that would go on to become the Altron group.
Alongside publication of its results for the year ended February 2015, Altron — now headed by Venter’s son Robbie (55) — disclosed almost casually in its financial statements this week that it will “commence transitioning from a family-managed business to an independent management structure”.
For a group that has always been tightly controlled and operationally led by the Venter clan — Altron’s biggest subsidiary, Altron TMT, is headed up by Robbie’s younger brother, Craig (52) — this is a significant development.
But it comes as Altron turns in one of its worst financial performances ever. For the full year, headline earnings per share tumbled by 50% as pressures mounted on some of Altron’s biggest businesses, including Altech Autopage, Altech UEC and Powertech Transformers. Altron TMT’s Altech Node set-top box product, launched with great fanfare late last year, also proved to be a flop, costing the group millions.
Powertech Transformers was hit by reduced orders from Eskom, while Autopage felt the pressure of reduced mobile termination rates and the resultant margin squeeze from the mobile network operators. Altron will now sell Autopage’s mobile subscriber base back to the operators in deals that should bring in billions of rand and help reduce group debt.
As for the Altech Node, the group is on the verge of announcing a tie-up with a partner it hopes will create new demand. Robbie Venter says the product is technically excellent, but failed to set the retail channel alight.
The Node has three problems. The first is Altron hasn’t advertised it sufficiently aggressively – your average consumer doesn’t really know about it. Second, its content offering – at the price – is not good enough to take on DStv, the dominant market leader owned by MultiChoice. And lastly, it’s a product designed by engineers that arguably only engineers could love. It needs to be more user friendly.
The UEC business, meanwhile, which makes the Node, should start to turn the corner as digital terrestrial television projects in Africa, including South Africa, gather pace in the coming months and years. Weak demand from MultiChoice for set-top boxes has hit that business hard.
Uncertainty over the restructuring — and the future involvement of Robbie and Craig Venter in the group — is surely going to exercise Altron shareholders’ minds in the coming months, though at R14/share (45% down on a year ago), braver punters may reap rewards for investing now.
Craig Venter tells me that although the Venter family still exercises control over the group — by way of its 56% equity stake — he is keen to become less operationally involved. He explains that he’s been working 8am to 10pm days for years now and is keen to lessen his workload.
He’d rather be in a position where he can play more of an oversight role for the family’s investment than being involved actively in the day-to-day operational management of the business. After more than 15 years leading Altech, it’s hard to blame him.
Robbie’s family, meanwhile, lives overseas, so it’s easy to imagine he’d also welcome the opportunity to be less involved, though he hasn’t voiced such a desire publicly.
The two brothers, with their father, now 82, have met three times in the past 18 months to discuss the way forward, Craig tells me. Though they haven’t voiced as much, it seems likely that the pair will relinquish their positions sometime in the next couple of years, making way for new talent to rise to the top from within the group, or for external leaders to be hired.
“We are a second generation family business,” Robbie told analysts and investors this week. “Right now, there isn’t a third generation. So, in interests of shareholders, we have to consider that the next management wave of the Altron group will probably be independent and not family members given there is no succession in the family structure.”
If it happens, which now seems likely, it’ll mark the end of an era in South African business.
- Duncan McLeod is editor of TechCentral. Find him on Twitter
- This column is also published in the Sunday Times
