Listed electronics giant Altron will invest as much as R1.8 billion over the next three years as the company seeks more growth outside of its current operations.
Altron has the cash it needs to invest in growing its business to spur top line growth. It ended the year to February with R1.25 billion in the bank, and its operations generated R1 billion. Some of its cash will be spent on acquisitions, as all three of its subsidiaries are actively on the hunt for companies to buy out in SA, Africa and abroad.
CEO Robert Venter says the group will spend about R600 million a year on capital investments over the next two to three years, which could amount to as much as R1.8 billion. Last year, capital spend totalled R751 million, driven mostly by Altech's investments into data cables in East Africa.
Altron yesterday reported its full-year results and said revenue gained 2%, to R22.8 billion, but top line gains were held back as several areas in SA's economy didn't pick up as fast as others.
Venter says the company is focusing on growing revenue, and gains will filter through to the bottom line as it has stripped costs down to a minimum. However, he says the company needs new revenue streams to bolster revenue growth.
Altron spent about R600 million on capital items during the year as it invested in growing the business, says Venter. He expects to invest the same amount over the next two to three years, which could see it spend as much as R1.8 billion in infrastructure.
The bulk of the investment is likely to be spent through its largest subsidiary, Altech, which has invested heavily in a network in East Africa. Venter says Bytes Technology Group is services-focused and doesn't require much in the way of capital investment, and Powertech will spend about R150 million over the next two to three years.
Big spender
Stripping out spending at Powertech and negligible investments into Bytes, the bulk of the investment will be spent by Altech. Altech's investments will be made into East Africa and at its set-top box subsidiary, Altech UEC, says Venter.
UEC is the largest decoder manufacturer in SA with about 60% of the current market, says Venter. However, competition is increasing and new players are gearing up to manufacture, so UEC must secure its position, he adds.
Venter says the potential market in SA is nine million boxes, but Africa offers a budding market of 100 million decoders. He says UEC wants to benefit from the potential market and will gear up to take advantage of the continent's shift to digital.
SA expects to turn analogue television broadcast off at the end of 2013, in line with other countries in the Southern African Development Community region.
In East Africa, Altech will continue spending on its network to continue to roll out connectivity. Historically, its 62% owned subsidiary Altech has not been a big capital spender, but the move into Africa changed the company's spending profile, says Venter.
Altech is present in several African countries, but its biggest operation is through Kenya Data Networks. It has spent a large amount on gaining capacity on the two East African undersea cables, Seacom and The East African Marine System.
Venter says Altech has become more capital intensive and needs to invest for the long-term. Last October, Venter said Altron would spend about R400 million over the next few years through Altech.
In addition to Altech's investments, Altron's wholly-owned subsidiary Powertech is investing in a bid to cut the costs of production, says Venter.
Powertech, which focuses on the power and electricity sector, will invest around R150 million over the next two to three years, he notes. The company has previously spent money on its cables business, but will now focus on the transformer side, which ties in with Eskom's build programme.
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