JSE-listed Altron saw revenue from continuing operations gain 7%, to R24.8 billion, in the year to February, but says it experienced margin pressures across most operations.
Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased 19%, to R1.6 billion, compared with last year. It made a profit for the year from continuing operations of R707 million, a 12% gain.
Powertech experienced revenue growth primarily out of the cables group on higher copper prices. Bytes continued to perform in line with expectations, with the UK businesses contributing significantly, and positive inroads being made into African markets.
"Our overall results were impacted by operating losses from the Altech African operations and a disappointing performance from Powertech in the second half of the year," says CEO Robert Venter.
Altech's overall results were negatively impacted by impairments, a loss on disposal and operating losses at its East and West African operations. However, after selling those operations, the "significant operating losses" of R205 million will not recur. Altech's remaining businesses performed in line with expectations.
Altech increased revenue 5%, to R10.4 billion, year-on-year, but EBITDA declined by 17%, to R765 million, and headline earnings per share dropped 23%.
Bytes reported a "pleasing" 15% increase in revenue to R7 billion, although the EBITDA increase was only a percent, to R531 million, as margins came under pressure. Headline earnings for the Bytes group remained flat, at R253 million.
"The IT industry is experiencing commoditisation, which is putting some pressure on margins. The business has reorganised in the new financial year, realigning and combining businesses in order to trim costs, align business units and further improve customer service.
"We will continue to look at niche acquisitions for Bytes in areas with specialised products and services, which yield higher margins," says Venter.
Altron declared a gross ordinary dividend of 60c per ordinary share, down from 92c a year ago, and a gross participating preference dividend of 60c per participating preference share, compared with 92c a year ago.
Opportunities for growth
Altron says the macro-economic environment remains challenging and highly volatile. "While there is growth in the local economy, there remains uncertainty around the future, due to a combination of global factors as well as the policy uncertainties in the local environment."
The group says emerging market currencies, particularly the rand, weakened, which will assist exports and provide some protection against direct foreign imports.
Altron says there are a number of initiatives underway that will deliver a lower cost base and improve the group's ability to service growing areas of the market. "Altron expects to see the benefits of these factors start to realise in the coming financial year."
It adds that margin erosion will be countered by expanding its product portfolio, implementing shared services, and lowering its cost base.
However, despite the challenges, there are "significant" opportunities for Altech in the convergence space; for Bytes to build on its strong performance of the last few years and expand its products and services as well as its presence in the public sector; and for Powertech within the electrical services, transport and renewable energy sectors.
Bytes is looking for opportunities to cross-sell opportunities within the Altron group, as well as expansion into Africa. At Powertech, various restructuring projects have been undertaken to reduce costs and refocus various businesses, which should improve results in the short term.
"Going forward, we will be looking at cross-selling opportunities throughout the group, but particularly between Bytes and Altech, which serve similar industries. Our capital allocation between businesses will receive careful consideration in order to extract maximum return on investment," says Venter.
Venter said consolidation of the core businesses within Altech was a priority with a focus on extracting synergies between Bytes and Altech, targeting organic expansion into Africa and investing in the renewable energy and public sectors. In addition, Altron plans to enhance its existing portfolio with bolt-on niche acquisitions in services and IP-intensive businesses, which typically provide larger barriers to entry and higher margins.
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