Altron focusing on consolidation

Johannesburg - South African electronics group Allied Electronic Corporation (Altron) on Tuesday reported a 21% decline in diluted headline earnings per share to 257c for the year ended February 2009 from 327c a year ago.

A dividend of 119c per share was declared, compared with 156c a year ago.

The group's revenue was 16% higher at R24.77bn on the back of strong sales from all three subsidiary companies - Altech, Bytes and Powertech, despite challenging market conditions. Profit for the year was down 13% to R1.15bn.

The group said in a statement that the results are in line with the trading statement issued in February this year.

Altron chief executive Robbie Venter said 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 within Powertech, which resulted in Altron's EBITDA increasing by only 1% to R2.24bn and adjusted diluted headline earnings per share declining by 18% for the year under review.

Commenting on the performances by its three subsidiaries, Venter said: "We had an excellent year from Altech which, due to its successful strategy in East Africa, good performances from its larger operations and its strong annuity base, resulted in adjusted headline earnings per share growth of 15%.

Bytes' results were roughly in line with the prior year reflecting a challenging economic environment. Powertech had a disappointing year, especially in the second half, as the building and construction industry contracted and commodity price declines required inventory write-offs within Aberdare Cables."

According to Venter, the rest of the Powertech businesses performed above expectations, especially Powertech Transformers and Powertech Batteries. In referring to the recently acquired Powertech IST, he said that the operation continues to perform broadly in line with expectations with over performance in the Industrial, Data and Energy divisions being offset by a disappointing performance from the Telecoms division.

"Altron's cash position improved strongly in the second half to R1.1bn, although this is some R913m down on last year as a result of the R1.9bn invested into the future growth of our group through acquisitions and capital expenditure. Our strong balance sheet allowed us to maintain our dividend cover on adjusted headline earnings per share, declaring a dividend of 119c per share," said Venter.

In terms of the business environment, Venter said that the fall in commodity prices has negatively affected mining companies spend, primarily through the deferral of projects while the global recession had led to tougher trading conditions in the Iberian and UK markets where the group operates.

In addition, the high interest rate environment had impacted the building and construction market as predicted in our half year interim statement. Although it is expected that the recent interest rate will stimulate the sector it will only be in late 2009 or early 2010.

Looking ahead, Venter said the group expects the challenging economic environment to continue over the medium term as market confidence remains weak and uncertainty continues.

"This outlook calls for our focus to remain on consolidation, cash flow generation, strict working capital management as well as internal cost efficiencies," he said.

Venter cautioned that conditions for the first half of the new financial year will remain challenging, especially given the high base of the comparative period in the prior year. However, he remains confident that the Altron group is well positioned to take advantage of any improvement in the current economic environment given the remedial actions that have been put in place.

- I-Net Bridge