JSE-listed Allied Technologies’ (Altech’s) East and West African operations have again dented the company’s performance, contributing to a 24% decline in full-year earnings.
The company says in a statement that headline earnings and adjusted headline earnings per share for the year to February will be between 24% and 30% lower than in 2011.
In addition, because it has written down goodwill in its West African unit and the carrying value of its East African operations, basic earnings per share are expected to show a loss of between 281c and 302c.
For the last financial year, Altech reported revenue of R9.65 billion and basic earnings per share of 216c. Headline earnings per share, which strip out exceptional items, were 488c.
Altech’s lower earnings have affected Allied Electronics Corporation’s (Altron’s) basic earnings per share. Altron, which has a majority stake in Altech, says basic earnings per share for the full year will be between 65% to 75% lower, because of “significant impairments” in Altech’s East and West African operations.
Altech says in a statement that the reductions are mostly due to “continued poor results in Altech’s East and West African operations”. Management is “investigating remedial measures,” it says.
In September last year, Altech CEO Craig Venter announced he had replaced the entire management team at its East African operation, after yet another disappointing reporting period. For the six months to August, the unit reported revenue down from R258 million to R173 million, while operating profit dropped by R51 million to R1 million.
Despite the change in management, some of Altech’s East African units saw a “tough” trading period and financial performance was below expectations. The challenges it faced included currency fluctuations, high inflation costs, sharp drops in broadband pricing, as well as network instability because of fibre and undersea cable breaks.
The listed company says its exposure to currency fluctuation has been trimmed and steps have been taken to tackle underperformance. New management is “focused” on resolving operational and financial challenges, says Altech.
No tax break
Altech West Africa, which had been profitable since launch five years ago in Nigeria, has been hit, because of increased competition and a change in its tax status. Altech has decided to impair the company’s goodwill.
In its trading update, Altech says the unit’s trading performance, on paper recharge vouchers, was hampered by mobile operators offering cheaper alternatives. Its pioneer tax status has also come to an end and there is no longer a ban on importing recharge vouchers, which has increased competition.
Altech’s other operation performed as expected. The company will publish its results on 25 April.