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Altron's losses grow

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 03 May 2016
Altron HEPS are expected to swing to a loss of at least 140c, compared to a profit of 94c a year ago.
Altron HEPS are expected to swing to a loss of at least 140c, compared to a profit of 94c a year ago.

Altron has warned that losses from the company's multimedia division, Altech Autopage and a tough year for Powertech will see company earnings coming in at an even bigger loss than previously thought.

A trading statement warns headline earnings per share (HEPS) for the financial year ended 29 February are expected to be a loss of between 140c and 150c, compared to a profit of 94c in the previous corresponding period.

The company also expects a basic loss per share of between 255c and 265c, compared to a loss of 3c a year ago.

The losses are an escalation from a previous trading statement released on SENS on 14 March, which warned HEPS would be a loss of more than 90c, while a basic loss per share of over 170c was predicted.

Alton says its TMT division (telecommunications, multimedia and IT businesses) produced a strong performance but was unable to offset the decline in profit levels and significant losses incurred at Altech multimedia, Powertech and Altech Autopage (prior to its disposal).

Altron says management is in discussions and negotiations with various third parties to dispose of the troubled multimedia division.

"The multimedia division experienced significant losses due to a previously disclosed once-off inventory write-off and a material reduction in demand. During the year, it has undergone a rightsizing process, with associated costs, of closing most of its international operations and aligning its cost base with the lower demand levels," the company says.

The Altron Power division (Powertech) also continued to experience a deterioration in performance resulting in "substantial losses".

"Most of the businesses were affected by difficult macro-economic conditions, namely the worsened situation in the South African economy and the ongoing challenges created by a lack of demand from Eskom."

The transformers division posted "a substantial loss" as a lack of demand from Eskom for power transformers resulted in "an extremely challenging year" for the business. Altron is also looking for a buyer for this division and says negotiations with third parties are continuing.

Powertech has already entered into an agreement with global cable manufacturer, Hengtong, to dispose of its majority equity interest in Aberdare Cables. The transaction was approved by Altron shareholders on 22 April, but is still awaiting Competition Commission approval.

During the year, Altech Autopage successfully disposed of its post-paid GSM subscriber bases to MTN, Cell C and Vodacom, and has received a significant portion of the purchase consideration to date.

The group says it continues to make progress regarding the implementation of its new strategic direction, including the disposal of non-core businesses, realising cash to reduce the Altron group's borrowings and transitioning from a family-managed business to an independent management structure.

When looking at the results of the company's continuing operations, HEPS are expected to be between 8% and 15% lower than the previous year, but should still come in at a small profit. Basic earnings per share will likely drop as much as 20%.

The entire Powertech group, Altech Autopage, Altech Multimedia and Altech Node have all been classified as 'discontinued operations' for reporting purposes to give shareholders "an insight into the performance of the core and non-core operations within the Altron group".

The group says it "continues to pursue the disposal of non-core assets in line with its previously communicated strategy, particularly those operations in or exposed to the manufacturing sector" and there are various processes under way to achieve this goal.

The Altron share price was R5.60 at the close of trade on Friday. The stock has dropped over 58% in the last year but has risen by almost 2% since January.

Altron's annual financial results are expected to be announced on 18 May.

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