While Altron expects some benefits to flow from its purchase of the Altech shares it did not own in the second half, the full process will take between 12 and 18 months to bed down.
In the first half of the year, to the end of August, Altron only benefited from one month of its increased stake in Altech. Altron paid about R1.8 billion to buy out the 39% it did not own in the company and delisted it on 20 August.
Altron CEO Robert Venter says the driver behind the move was to benefit from revenue growth opportunities as Altech and Bytes Technology Group will become one unit - TMT - which will be able to cross- and up-sell. He adds the elimination of unnecessary costs is a bonus.
So far, Altron is saving about R10 million a year because Altech is no longer listed, while property consolidation is trimming overheads by another R5 million a year, says Venter.
Much to do
Venter says there is much work ahead to get the new structure bedded down, a process he expects to take between 12 and 18 months. "The easy part is over; the hard part starts now...It's still early days."
Altron aims to remove overlaps between Bytes and Altech, and has already put a new management structure in place.
In the first six months of the year, Altech posted a recovery after being hit last year by issues in both its East and West African operations. It has since disinvested in Africa and reported flat revenue of R5 billion in the half year, despite the absence of income from those operations.
Altech's normalised headline earnings - which strips out the conversion of a loan from Kenya - grew 22% to R151 million. Bytes, which has been adhering to a 'follow your customer' strategy to grow in Africa, grew revenue 18% to R4 billion.
Bytes' headline earnings gained 14% to R133 million. Venter notes Bytes is coming off a high base.
Altron has not given up on Africa, despite Altech's exit, says Venter. He explains the strategy has now become more organic, and both Altech and Bytes will follow clients into the continent. "There's definitely work in Africa."
Revenue from Africa gained 22% during the first half, taking it to R500 million of Altron's R13.4 billion in turnover. Venter says Altron wants between 20% and 25% of revenue to come from outside South Africa in the next 18 months.
Currently, around a sixth of its revenue is generated from outside South Africa, which includes Bytes' UK operations.
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