Variety key to Altech's success

Johannesburg - JSE-listed telecommunications group Allied Technologies' (Altech's) wide portfolio of services has been key to sustaining growth in a tough environment, an analyst says.

"Altech is trying to provide converged communication services and has a very focused approach, even though it is involved in a number of sectors in the market," said Frost & Sullivan ICT industry analyst Lindsey Mc Donald.

The comments come as Altech reported an 11% revenue increase to R9.1bn from R8.2bn for the year to end-February on Thursday. Operating profit rose 32% to R874m, and net asset value per share increased by 15% to 2 328c. A dividend of 323c per share was declared, representing a 12% increase.

Altech, a member of the Allied Electronics (Altron) Group, is involved in the telecommunications, multimedia and information technology industries and owns brands like vehicle-tracker Netstar and service provider Autopage Cellular.

Altech's purchase of internet service provider Lateral Technology Concepts is an example of its increasing portfolio of services, Mc Donald said.

Technology Concepts offers a full range of internet service provider (ISP) products, services and solutions which are developed and managed in-house. With this acquisition, Altech is able to offer services in the broadband internet sector.

Altech CEO Craig Venter told Fin24.com that Technology Concepts will focus on niche customers like corporate office parks and gated communities: "We can lay fibre to the 300 customers Technology Concepts has now - so that they don't have to rely on anyone else. We plan to lay fibre to all our clients."

The ISP will also service group companies like Altech and its parent Allied Electronics (Altron). "Altron has over 100 companies in the stable and Altech has 25," Venter said.

Altech subsidiary Autopage Cellular has reached the one-million subscriber mark. Technology Concepts will also be providing internet access to these subscribers.

Technology Concepts was attractive to Altech as it is a second-tier ISP, and because it was focused on corporate as opposed to consumer business, said Venter: "It's a profitable business, with exponential growth expected for this year and next. I know Wayne personally and I believe it's a top IT company, and the right fit for Altech."

Labelling the acquisition as mutually beneficial for both companies, Mc Donald said: "Technology Concepts will bring a level of expertise that Altech has not had previously.

"They are fantastic at understanding the back-end systems and taking the service to the market, while Altech is able to offer them the subscriber base," said Mc Donald. "The marriage of those capabilities creates a good platform for growth, and its something that can be replicated in markets such as Kenya or Nigeria."

"It gave us an opportunity to grow significantly quicker," says Technology Concepts CEO Wayne de Nobrega.

"We're like a best-kept secret, and the Altech brand associated with us allows us to move into the market space we probably deserve. We're expecting significant growth in the business over the next year or two."

The acquisition was effective post-year end; the purchase price allocation and all financial implications will only be reported in Altech's following financial year.

Altech will use its cash reserves to fund the maximum purchase price of R45m. An amount of R7.5m will be paid initially.

The remaining R37.5m will be released to Technology Concepts shareholders in terms of an earn-out mechanism over two years, if after-tax profit targets for the years ending February 2010 and 2011 are achieved.

- Fin24.com