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It seems the whole has the potential to be more than the sum of its parts for Altech. The group houses several companies that have the potential to create opportunities for each other and directors intend to see more of that happening in the future. Rethinking and realigning the group will also be the task of new COO Jeffrey Hedberg, who recently left Telkom, where he served as interim CEO. Now Hedberg is at Allied Technologies [JSE:ALT] and has growth on his agenda.
Last week Altech posted results for the year to end-February. The group grew turnover to R9,7bn from R9,2bn the year before. However, operating profit was down, from R933m to R787m. But Altech raised its dividend by 5% to 356c/share. That means its investors get a 6% yield on their investment via dividends, which should keep the faith despite lower profits. Full return on shareholders’ equity is 22%.
CEO Craig Venter says the results were good, all things considered. “We’ve had a shortfall in East Africa, but if you look at the group – Autopage, Netstar, UEC – it had turned around into a profit from what was forecast to be a R35m loss.”
UEC is of particular interest, as it produces decoders used in digital terrestrial television, which the entire world is moving to as it replaces older analogue standards. Venter says the switch to digital is on track. “We’ve supplied 68 000 decoders into the Australian digital migration already,” adding the South African market should also start to pick up in that regard.
But “big deal” growth should come from East Africa, where Altech has invested heavily in telecoms infrastructure via its Kenya Data Networks (KDN) subsidiary. Altech has also invested in undersea cable projects.
Venter says East Africa is still Altech’s growth engine, despite the shortfall. “The demand in that area is significant. The competition has heated up,” he says.
The ongoing price war in Kenya stands to benefit Altech, as it essentially will result in more traffic being sent over its networks. “If there’s competition between Safaricom, Vodafone and Bharti Airtel, that’s great for us,” Venter says. “We’ve just signed a three-year agreement with Bharti. We have some local competitors, but it’s not the reason why the figures are down. The figures are down mainly through foreign exchange translation between the Kenyan shilling and South African rand.”
Translational differences on forex are part of the price you pay for doing business in Africa, but Altech is working to change its position in that regard. For one, it’s considering raising debt for its business in Kenya despite being cash-positive. Venter says that will allow Altech to fund its East African operations in local currency and cut forex-related losses.
He also says we should expect some acquisitions soon. “We’ve got R450m in cash and R500m worth of treasury stock, so we’ve almost got R1bn rand we can use for acquisitions and other things going forward.”
And then there’s Hedberg. With his international experience as a CEO he joins Altech to drive things operationally – and provide guidance on potential acquisitions.
“He’s a global CEO, so he’s used to big businesses,” says Venter. “He’s been in the industry for 30 years, he’s got contacts overseas, he’s come across businesses in his career that are very attractive and might require funding and might want to be acquired by Altech. So I think you’re going to see some acquisitions over the next 12 to 18 months. I think he’s going to play quite a big role in globalising Altech even further.”
Venter says Hedberg sees the potential for doubling Altech’s size by combining its current assets in new ways and making some key acquisitions. Its new appointment, increased dividends and positive cash situation make Altech look very robust. Its future potential also appears massive, but a lot depends on how successful its strategy implementation is in East Africa.
Last week Altech posted results for the year to end-February. The group grew turnover to R9,7bn from R9,2bn the year before. However, operating profit was down, from R933m to R787m. But Altech raised its dividend by 5% to 356c/share. That means its investors get a 6% yield on their investment via dividends, which should keep the faith despite lower profits. Full return on shareholders’ equity is 22%.
CEO Craig Venter says the results were good, all things considered. “We’ve had a shortfall in East Africa, but if you look at the group – Autopage, Netstar, UEC – it had turned around into a profit from what was forecast to be a R35m loss.”
UEC is of particular interest, as it produces decoders used in digital terrestrial television, which the entire world is moving to as it replaces older analogue standards. Venter says the switch to digital is on track. “We’ve supplied 68 000 decoders into the Australian digital migration already,” adding the South African market should also start to pick up in that regard.
But “big deal” growth should come from East Africa, where Altech has invested heavily in telecoms infrastructure via its Kenya Data Networks (KDN) subsidiary. Altech has also invested in undersea cable projects.
Venter says East Africa is still Altech’s growth engine, despite the shortfall. “The demand in that area is significant. The competition has heated up,” he says.
The ongoing price war in Kenya stands to benefit Altech, as it essentially will result in more traffic being sent over its networks. “If there’s competition between Safaricom, Vodafone and Bharti Airtel, that’s great for us,” Venter says. “We’ve just signed a three-year agreement with Bharti. We have some local competitors, but it’s not the reason why the figures are down. The figures are down mainly through foreign exchange translation between the Kenyan shilling and South African rand.”
Translational differences on forex are part of the price you pay for doing business in Africa, but Altech is working to change its position in that regard. For one, it’s considering raising debt for its business in Kenya despite being cash-positive. Venter says that will allow Altech to fund its East African operations in local currency and cut forex-related losses.
He also says we should expect some acquisitions soon. “We’ve got R450m in cash and R500m worth of treasury stock, so we’ve almost got R1bn rand we can use for acquisitions and other things going forward.”
And then there’s Hedberg. With his international experience as a CEO he joins Altech to drive things operationally – and provide guidance on potential acquisitions.
“He’s a global CEO, so he’s used to big businesses,” says Venter. “He’s been in the industry for 30 years, he’s got contacts overseas, he’s come across businesses in his career that are very attractive and might require funding and might want to be acquired by Altech. So I think you’re going to see some acquisitions over the next 12 to 18 months. I think he’s going to play quite a big role in globalising Altech even further.”
Venter says Hedberg sees the potential for doubling Altech’s size by combining its current assets in new ways and making some key acquisitions. Its new appointment, increased dividends and positive cash situation make Altech look very robust. Its future potential also appears massive, but a lot depends on how successful its strategy implementation is in East Africa.
