Allied Electronics Corporation (Altron) says the tough economic climate has hit it hard during the first four months of the year.
And the situation is not expected to get any better, as the company says the "current economic environment continues to remain challenging and unpredictable". It does not expect a short-term recovery.
In the medium- to long-term, spend on infrastructure should benefit the group, but the slowdown in mining and construction will hamper Altron in the short-term, it says in a trading statement.
"As a result, the Altron group continues to focus on cost control, working capital management and integrating our recent acquisitions," the listed group says.
Powertech has suffered from a slowdown in demand from the construction sector, which has impacted its power cables, distribution transformers and industrial battery businesses. Altron says further corrective action is required.
"Our power cables business has also suffered from pricing pressures in the market as a result of an excess of supply over demand, which has depressed operating margins," it says. As a result, Powertech is trading well below expectations.
Bytes is being hampered by cost controls in businesses that have resulted in deferred, and in some cases, cancelled orders. It is also facing pricing pressure as costs move up internationally. Bytes is also trading below expectations.
Not all bad
However, subsidiary Allied Technologies (Altech) says it sees exciting opportunities for growth in the broadband and value-added network services sectors in East Africa.
In a business update issued this morning, on the Stock Exchange News Service, the listed company says it is "making progress" despite the tough economic conditions.
In the year to February, the company said revenue was up 11%, to R9.164 billion, while operating profit was up 32%, to R874 million. Earnings per share were up 35%, to 569c, and adjusted headline earnings up 15%, to 592c.
The group says it is benefiting from the fact that annuity income amounts to more than 79% of revenue, as well as an emphasis on improving margins, keeping costs down and bettering cash flow.
Altech says revenue and operating profit has increased as a result of "good performance from operations combined with the benefit of recent acquisitions".
Last year, the company spent R650 million on a stake in Kenya`s Sameer ICT Group, which brought with it a controlling stake in three divisions. The deal, which became effective last March, gave Altech a 51% stake in Kenya Data Networks, Swift Global (Kenya) and Infocom.
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Altron faces challenging year
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