Johannesburg - As a slowdown in the energy cables industry hits JSE-listed electronics company Allied Electronics Corporation's (Altron's) earnings margins, the company looks set to save costs wherever necessary.
"These times call for a period of consolidation, focus on cash-flow generation, strict working capital management and internal cost efficiencies," said Altron CEO Robbie Venter.
Altron, through its three subsidiaries - Allied Technologies (Altech), Bytes Technology Group and Power Technologies (Powertech) - is invested in the telecommunications, multimedia, information technology and power electronics industries.
On Tuesday, the company reported a 16% increase in revenue to R24.8bn for the year to end-February 2009. Earnings before interest, tax, depreciation and amortisation (Ebitda) increased 1% to R2.2bn. The Ebitda margin decreased by 1.3% to 9%, and adjusted diluted headline earnings per share dropped by 18% for the year under review.
"This (Ebitda) decline was predominantly due to the challenges faced by the energy cables business within Powertech," said Altron.
Powertech's businesses include the delivery of high-quality technical equipment, support and engineering expertise for the creation, management, distribution, storage and use of electricity across industries.
"The downturn in the building and construction industry and the unprecedented and rapid decrease in the copper price during the latter part of the year had a negative impact on certain operations," said Venter.
Empowerment move at Bytes
Powertech's revenue grew by 20% to R9.6bn in the prior year, but Ebitda margins reduced to 7.7% from the 12.8% achieved last year partly as a result of once-off non-recurring charges relating to inventory write downs and retrenchment costs. This resulted in a 28% Ebitda decline to R738m.
But Venter is confident Powertech's cable business may turn around.
"Our focus over the last six months has been on reducing working capital and controlling costs, and we believe that we are now well positioned to take advantage of an upturn in demand and business opportunities as they arise", said Venter.
The remaining Powertech businesses performed above expectations, especially Powertech Transformers and Powertech Batteries, said Venter.
IT company Bytes Technology Group grew its revenue by 16% to R6bn, and Ebitda increased by 3% to R427m.
"The contribution from Bytes SA has reduced after Kagiso Strategic Investments, a black empowerment partner, exercised its option to acquire a further 22% equity interest in Bytes from 1 July 2008," said Venter.
Although a smaller portion of earnings is attributable to Altron, Bytes' performance was roughly in line with the prior year. "This reflects a challenging environment," said Venter.
Altech, a telecommunications, multi-media and information technology firm, appears to be the star performer of the three subsidiary companies. Its revenue increased 11% to R9.2bn, operating profit improved 32% to R874m and adjusted headline earning per share grew 15% to 592c/share.
"We had an excellent year from Altech due to its successful strategy in East Africa, good performances from its larger operations and its strong annuity base," said Venter.
"We expect the challenging economic environment to continue over the medium term as market confidence remains weak and uncertainty continues," he said.
However, he remains confident that the Altron group is well positioned to take advantage of any improvement in the economic environment given the remedial actions that have been put in place.
- Fin24.com