JSE-listed Altech is putting acquisitions on hold until it resolves the one entity that is dragging down company earnings.
The group this week reported its results for the six months to August and said that, while revenue grew 6.8%, to R5 million, its net profit was hampered by impairments at its East and West African operations.
Altech made a R586 million net loss after writing down East and West Africa to the tune of R676 million, which included around R300 million in impairments in international bandwidth in its East African operation.
CEO Craig Venter says he has put corporate activity on hold, while he focuses on sorting out the East African operations. The company has solved its West Africa issues, as it has agreed to sell its 75% stake to an unnamed party for an undisclosed amount.
Venter adds that the company's remedial action in East Africa has started to reflect in its operations, but it pains him that the results are not yet coming through in the numbers.
East Africa has had several problems over the past 18 months, including a previous management team that did not follow Altech's strict corporate governance protocol and a market that moved faster than the entity could keep up with.
On hold
Venter says he is focusing on the operation, which accounts for 4% of revenue, and will restore the unit to profitability before moving ahead with acquisitions. He says it would not be astute to acquire when the group is "fighting a fire" in East Africa.
In April, Venter said its vehicle-tracking subsidiary, Netstar, was close to buying out a company in Latin America, which would give it access to growth markets such as Argentina, Brazil, Colombia and Mexico. In September 2010, Altech was close to signing a deal, but walked away.
Venter says the discussions have not been turned off, and are continuing, but nothing will be sealed until Altech is back in the black. He could not provide a timeframe for when East Africa will return to profitability.
Netstar is one of Altech's largest subsidiaries and accounts for 10% of revenue and 44% of profit. If the deal under discussion goes through, Netstar will become the largest vehicle-tracking company in the world, Venter has said. Altech had been looking for an acquisition, but previously binned two deals over concerns that came up during due diligence.
Share