Altech’s African adventure progresses, profits up by 34%

Allied Technologies Limited (Altech) today announced remarkable half-year results for the period ended 31 August 2008. Revenue increased by 13% to R4.5 billion, the company’s operating profit increased by 34% to R409 million and headline earnings per share was up by 19% to 261 cents.

Altech Chief Executive Officer, Craig Venter commented that the company’s continued strong balance sheet and net asset value of 1 974 cents underpinned the group’s expansion strategy, with notable progress in several areas having been made during the half-year, particularly in Africa.

Venter commented “One of the key developments of the period was the ruling by the Pretoria High Court on the 29th of August, in favour of Altech entitling the group to have its existing valued-added network services (VANS) licence converted into an individual electronic communications network service (I-ECNS) licence”. Venter went on to say, “Although the Minister of Communications has subsequently brought an application for leave to appeal the decision, which Altech will be opposing, Altech feels not only vindicated to have been pioneers in attempting to break competitive ground in what has long been a closed playing field, but is also confident that the ruling will be upheld”.

Undoubtedly one of the highlights of the period is Altech’s significant growth despite the current economic conditions, as the group remains focused on its global expansion strategy. Venter says “Altech has achieved excellent results despite the fact that both local and international economic trends have been depressed and turbulent”.

Venter added that the local Telecommunications division also contributed extensively to the group’s interim results, having exceeded far beyond the expected profit targets which emanated from various transactions and partnerships. Venter says “Altech Autopage Cellular’s recent distribution agreement with Neotel as well as our recent partnership with Kulula fits perfectly with the company’s business strategy and long history of independence”. Venter added that through Mobile Portability, Altech Autopage Cellular achieved a net gain of 10 000 subscribers and that the current number of total subscribers is approaching the 1 million mark.

Meanwhile, Altech Netstar recorded a Stolen Vehicle Recovery (SVR) subscriber base of nearly 500 000 subscribers, enabling it to retain its status as South Africa’s leading vehicle tracking company. The merger of Altech Netstar Fleet Management Services and ComTech into Altech Netstar Fleet Solutions is now a formidable player in the fleet management tracking arena with approximately a 20% market share. Venter mentioned that the company has signed an agreement with London Stock Exchange listed ITIS investments of the United Kingdom, to provide traffic management information, and that a joint venture, Altech Netstar Traffic, has been formed to capitalise on this opportunity.

Venter elaborated, “We envisaged the current traffic congestion and the potential traffic chaos that could be related to the 2010 FIFA World Cup as an excellent opportunity to partner with one of the world’s leading traffic management and information providers”.

Venter also stated that the launch of ‘Altech Netstar Guardian’ had proved very fruitful to the group and is progressing well in the personal tracking market.

Venter described the Multi-media division’s results as pleasing with Altech UEC having achieved satisfactory results. He went on to say that Altech UEC continued to invest substantially in research and development with new set-top box products being released, particularly in foreign markets. Venter says, “We are confident that the Indian market will continue to grow substantially considering that significant customers have already been secured and we anticipate rapid and considerable growth in the region”. On the local playing field, Venter stated that significant inroads have been achieved and that Altech UEC is well positioned to potentially participate in the government’s digitisation plan which involves volumes of 7 million set-top boxes over a 3 year period.

In addition Altech Alcom Matomo, Altech Alcom Radio Distributors and Arrow Altech Distribution all achieved pleasing results for the period under review.

Venter stated that the Information Technology division contributed substantially to the group’s overall performance and that the group’s investments in both East and West Africa were proving to be exceptionally profitable. Altech NamITech West Africa increased its production to over 100 million pre-paid cellular vouchers per month, servicing all 5 major operators in the Nigerian market.

On reporting on Altech East Africa, Venter commented “Altech concluded an equity investment in the Sameer ICT group which includes Kenya Data Networks; Swift Global and Infocom Limited”. Venter added “This investment has placed Altech East Africa as the leading data operator in the region and has supported Altech’s globalisation strategy, in particular, our focus on the African continent”. He added that the company is uniquely positioned to capitalise on international connectivity via undersea fibre optic cables, which should become available next year. In line with the above, Altech has secured a 10% equity stake in the Kenyan government’s undersea fibre optic cable initiative called ‘TEAMS’. The existing and new inter-country fibre optic cable networks of the companies in Altech Stream East Africa will be used to connect customers in ‘landlocked countries’ to international communications networks, relieving their dependence on slow and expensive satellite connectivity.

Despite Altech’s aggressive expansion strategies, Venter concluded that stringent cost controls and enhanced efficiencies contributed to the company’s growth over the past six months in order to not only meet, but to outperform its profit targets.

On the human capital front, Altech released its updated Transformation Vision 2012 initiative. Venter says “This sets out enhanced broad based black empowerment targets for each Altech group company, which have been integrated into management performance assessments as measurable indicators and will underpin the competitiveness and continued success of our group”.

In closing Venter stated that he was particularly pleased with the group’s growth in operating margin that had increased from 7.7% in the previous year to the current 9%. “With our strong order book, and with annuity revenue now representing 77% of the group’s turnover, coupled with the liberalisation and deregulation of the telecommunications sector, positions Altech for continued real growth during the second half of the financial year”, concluded Venter.