East Africa boosts Altech’s profits

Altech East Africa will in the next three years be the core of Altech Group’s growth as it is expected to contribute 45% of the total profit, Craig Venter, the firm’s CEO revealed today when he announced the group’s interim results.

“..Altech East Africa is showing exceptional growth and already contributes 18% of the Altech group’s total operating profit, proving that it has been a very successful and sound investment. Altech East Africa, which perfectly complements our existing and successful group of companies, should contribute approximately 45% of Altech’s total profit over the next two to three years. It is definitely the growth engine for the Altech group,” Venter said as he announced the results for the six months ending 31 August 2009.

The company has increased its operating profit margin to 10% which has seen an surge in their profits by 17%.

Venter explained, “The results were underscored by various strategic acquisitions and alliances with emphasis particularly on the East African region. Annuity revenue remained a strong focus, increasing to 82%, previously 79%, of total revenue, and providing stability and exceptional profit for the group notwithstanding turbulent markets. Working capital management, stringent cost control and improved profit margins resulted in a strong balance sheet and impressive profitability.”

Financial highlights for the 6 month period are as follows:
• Revenue up to R4.7 billion
• 82% annuity revenue
• Operating profit up 17% to R479 million
• Operating income margin rose to 10% (2008: 9%)
• Profit after tax up 14% to R322 million
• Adjusted headline earnings per share up 13% to 304 cents per share
• Cash at R460 million
• Return on equity 29% (2008: 26%)

Altech increased its economic interest in Kenya Data Networks (KDN) from 51% to 60.8% by subscribing for additional non-voting ordinary shares and acquiring a minority shareholder’s voting ordinary shares. KDN is the leading data network infrastructure operator in Kenya, with a terrestrial fibre optic network spanning Kenya, Uganda, Rwanda and soon Tanzania and the DRC. The terrestrial fibre network will link the undersea cables, which land in Mombassa, to the landlocked countries in East and Central Africa.

“Altech was thrilled to increase its stake in KDN as it is our infrastructure pillar and the growth engine of the group. The additional USD39.5 million capital injection will be used to roll out the KDN network, further entrenching KDN as the key provider of broadband in East Africa,” said Venter.

Two East African submarine cables i.e. TEAMS and Seacom, will play a large strategic role at Altech. During the period, KDN acquired an 8.5% overall (10% of the Kenya share) stake in TEAMS, the submarine cable stretching from Kenya to the United Arab Emirates. Altech also entered into a strategic bandwidth alliance with Seacom, the submarine cable which links South and East African countries to their European and Asian counterparts.

The alliance saw Altech procuring two STM-16s from Seacom for 20 years, with the option to upgrade, within three years, to double this capacity, to an STM-64. Seacom in turn, purchased significant bandwidth capacity on the Altech East Africa terrestrial backbone network owned by KDN.

“The equity stake owned by KDN in TEAMS equates to an initial capacity of 10.2Gb per second. The addition of the 5Gb per second capacity purchased through the Seacom strategic alliance, results in Altech being one of the largest bandwidth suppliers on the continent. Significant bandwidth customers have already been secured with almost 70% of the Seacom capacity already on-sold. We expect the benefits of these transactions to bare fruit in the next six months and beyond,” said Venter.