AST Group has warned that there will be a one-off impact on headline earnings for the current financial year as a result of selling, closing and absorbing businesses in its underperforming e-Ventures.
Headline earnings are also expected to be affected by taking action in Australia to resolve and contain profitability issues there, it says in a quarterly update to shareholders.
However, the group has moved to reassure shareholders that the core South African businesses, which make up more than 90% of its revenue base, are performing well, meeting or exceeding expectations.
"AST`s initial strategy was to exploit the Internet by providing start-up capital to promising new businesses," it says. "This strategy has delivered mixed results, with some of these investments taking longer to realise because of slower adoption rates in SA.
As a result, AST has reviewed the performance of these e-Ventures against its required pay-back period. Some of these businesses have been absorbed into AST`s core operations, some have been closed and others with longer payback periods are being sold."
It says that operating losses and closure costs will result in a one-off expense for the current financial year of not more than R20 million.
It has also acted to limit the impact of the underperformance of the Australian operations.
The group recently announced the reversal of the Red Rock Consulting acquisition and the closure of the Australian head office in Sydney, with the Australian units now reporting to SA.
"Although both Australian units remain profitable with net positive cash flows, their contribution this year will be sharply lower than expected," it says.
"The AST Group`s core businesses are performing well and we are now focusing predominantly on organic growth from these operations.
"AST has achieved critical mass in all strategic areas of its business model. In the core business units, revenues have met or exceeded our expectations. The group`s delivery reputation and customer partnerships within our targeted industry segments, position us well to increase revenues while maintaining our margins going forward."
The AST share price, which lost 10c to close at 100c yesterday, was up 7c at 107c on the JSE late this morning.
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