Altron subsidiary Altech is now the owner of the second-largest amount of bandwidth on the continent, second only to Telkom, the company says.
The unit has also surpassed Altron division Powertech in terms of contribution to profit as falling copper prices and a decline in volume took their toll, says Altron CEO Robbie Venter.
Venter was speaking at the company's results presentation for the half-year to August this month. He says: “Powertech has moved from being the primary contributor to profit”.
The cabling unit contributed 41% of revenue and 48% of operating profit last year, while this year it added 33% to revenue and only 19% to profit.
However, the group as a whole has seen revenues decline, and operating profit and headline earnings have also taken a knock. Turnover dropped 8%, to R12 billion, while operating profit was down 28%, to R951 million, and headline earnings per share lost 51%, to 93c.
Venter says: “If we didn't have Altech, our numbers would certainly have been a lot worse than what they are”.
Go East
Altech accounts for 39% of revenue, and 65% of operating profit compared with a year ago, when it added 34% to revenue and 36% to profit. The division reported revenue 4% higher, to R4.7 billion during the period, with adjusted headline earnings per share 13% better, at 304c.
CEO Craig Venter attributes this growth to the unit's East African operations delivering growth. Its East African operation has now laid 6 000km of ducted fibre across Kenya and in Uganda, Rwanda, the Democraic Repblic of Congo and Tanzania.
Craig Venter says the company has full network licences - including international gateway licences - in these five counties. “What we were trying to fight for in SA, we've go here,” he adds.
The company's local operations, such as Altech UEC, Altech Netstar and Altech Autopage Cellular performed satisfactorily.
Craig Venter says the company is growing its operating margins, has a strong balance sheet and is taking advantage of opportunities such as the switch over to digital signal globally that will require people to buy set-top boxes in order to watch television.
Altech also aims to benefit from liberalisation of the telecoms market in SA, and is pondering rolling out a network similar to that in Kenya. “There is nothing stopping us replicating that in a more liberalised South African market.”
No volatility
CEO David Redshaw says the company has seen the effects of slowing spend from clients in the retail and financial services sector.
Redshaw says the company's annuity results remain solid, and the unit expects a better second half as it is improving performance in some divisions.
The worst
Powertech CEO Norbert Claussen says: “It's a case of the good, the bad, and the ugly,” when referring to the units results in comparison with the rest of the company.
He says the first half of the year was difficult, and Powertech faced falling copper prices and declining volumes. As a result, the company has seen a 60% fall off in volumes year-on-year.
Powertech reported a 26% decline in revenue, to R3.98 billion, and a 75% fall in operating profit, to R136 million. Claussen says there are projects out there, but these are taking time to come to fruition and the company expects another challenging six months ahead.
Robbie Venter says, however, that Bytes and Powertech can both benefit from internal sales to the East African unit, with Powertech in a position to provide cabling and Bytes to provide software.
He says the company has seen tentative signs of recovery in the economy, and construction projects should start picking up towards year-end, which bodes well for a stronger second half.
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