ALLIED Electronics (Altron) will adopt a conservative approach to future expansion in Africa, the group said on Tuesday.
Altron reported a 4% decline in diluted headline earnings per share, to 78c, for the six months ended August 2012, from 82c a year ago. Its adjusted diluted headline earnings per share were 5% lower, at 87c from 92 cents previously.
The group’s revenue was 11% higher at R12.8bn but earnings before interest, tax, depreciation and amortisation (ebitda) decreased by 9% to R852m, while operating profit before capital items declined 7% to R586m.
The group said net finance expenses increased to R77m, from R29m in the prior year, as a result of increased borrowing levels on a high investment in working capital as well as higher interest rates on the loan funding to Altech East Africa.
Capital items increased significantly to R677m due to further impairment of asset carrying values at Altech East and West Africa.
The net effect was a consolidated loss before tax of R167m, after a profit of R561m previously.
Due to the substantial impairments, the group incurred a loss after tax of R372m. This was also affected by a significant increase in the effective tax rate as a result of the nonrecognition of various deferred tax assets on losses in the underperforming operations.
Altron said the group achieved good revenue growth, particularly at Bytes and Powertech, but also experienced margin pressure, compounded by the ongoing operating losses at the East and West African operations.
Powertech’s revenue growth was led by the cables group, with the local cable operations achieving an increase in volumes. Bytes continued to perform in line with expectations, coming off a high base, with the UK businesses contributing significantly, and inroads being made into African markets.
The overall results continue to be negatively affected by the African operations, while the South African businesses performed in line with expectations, it said.
The group said the macroeconomic environment remained challenging and highly volatile.
While there was growth in the local economy, uncertainty about the future remained, with much of this attributable to international markets, particularly the eurozone.
Emerging market currencies, particularly the rand, weakened and this would assist exports by providing some protection against foreign direct imports, the company said.
Looking ahead, the group said a number of significant initiatives were in progress to mitigate the challenges the group faced, though the benefits would likely materialise only in the new financial year.
The group’s focus would remain on bringing these initiatives to a conclusion, generating profitable revenue growth, maintaining strict cost control as well as improving working capital management.
The labour unrest in South Africa was severely affecting the economy and would hamper the group’s business, it said.
The group said it saw significant short- to medium-term business opportunities in the convergence of various technologies within Altech; in Bytes’ acquisition strategy; and, for Powertech, in the electrical services and renewable energy sectors.
There were also opportunities in Africa for all group companies, though Altron would a conservative approach.
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