JSE-listed Altech has agreed to sell its 75% stake in Altech West Africa as the entity requires additional investment and is costly to run from SA.
In a statement to shareholders this evening, Altech said that the company, which has been profitable for most of the time since inception, became loss-making in the past 18 months.
Altech explains that this was due to a reduction in demand for its secure recharge vouchers, as opposed to cheaper non-secure products made by other suppliers, and delays in the up-take of plastic chip cards by banks. In addition, its "pioneer industry" tax-free status expired recently.
The group this evening reported its interim results for the six months to August and said revenue increased 6.8% to R5.2 billion. Operating profit before capital items was 13.5% lower than that of the prior period, mainly due to losses incurred in Altech's operations in East and West Africa.
Headline earnings per share decreased 19% to 127c, from 156c. "Apart from East and West Africa, the operations within Altech performed to expectations, with Altech UEC returning to a more acceptable profit level," it said.
Due to continued losses in East and West Africa, the board decided to again impair goodwill and carrying values of certain property, plant and equipment and intangible assets within its East and West African operations, which was the main reason for a pre-tax loss of R485 million.
Altech West Africa (AWA) was incorporated and started business in Nigeria in 2005. It produces cash recharge vouchers for cellular network operators in Nigeria and has more recently started manufacturing plastic card products for Nigerian banks and other clients.
Altech says: "Taking into account the above factors, the costs involved in maintaining Altech management control of AWA from South Africa, additional investment required to enhance AWA's production facilities, as well as the fact that AWA's product area is non-core to the Altech group, Altech has reached agreement to dispose of its 75% interest in AWA."
Altech did not disclose the buyer of its majority stake, nor the purchase price.
In April, Altech CEO Craig Venter said selling out of West Africa would allow it to invest the proceeds in growth areas, says Venter. He added that the company is seeking higher margin value-added growth and wants to avoid commodity-based offerings.
The deal is subject to conditions.
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