Altron revenue rise likely from Bytes and Altech

Altron‚ which on Tuesday (8 October) reported a 4% increase in half-year headline earnings per share to 82c‚ bought out minority shareholders in Altech and delisted it to provide a single entry for investors in the Altron group of companies.

Altron has already moved the Altron and Altech businesses into one unit - Altron Telecommunications‚ Multimedia and Information Technology (TMT) - allowing for cost savings of up to R10m‚ which includes Altech's JSE listing and property duplication costs.

Altron believes the combination of Altech and Bytes under the Altron TMT division will help unlock new revenue streams‚ result in efficiencies and pool talent from the Bytes and Altech entities‚ which will spur new innovations and growth.

The TMT division recently won a cross-selling deal worth R90m.

Bytes, Altech integration

"Although the interim results only reflect one month under the new structure‚ a lot of progress has been made with the integration of the Altech and Bytes businesses‚" Altron's chief executive Robert Venter said.

He said discussions regarding other areas of cost savings were ongoing but no decision had yet been taken with regard‚ to among other things‚ headcount reduction in areas where there were duplication.

Venter said more significant cross-sell and cost-saving opportunities had already been identified.

"Key clients are realising significant value from cross-selling initiatives by providing them with a more complete portfolio of offerings. The combination of Altech IT and Bytes entities will increase cross-selling possibilities‚" he said.

Avior Research analyst Dirk Noeth sees possible synergies‚ but said it would take time to see how these add up.

Reorganise assets

He said the company would need to reorganise its assets as the market where Bytes and some operations of Altech operate was becoming increasingly competitive.

Altron's revenue for the six months to August increased 8% to R13.4bn. Altech maintained revenue at R5.1bn compared with the previous year. Normalised headline earnings increased 22% to R151m.

"Revenue at Altech Autopage was marginally down because of a decline in the voice environment and a cleanup of the subscriber base‚" Altron said.

Noeth said the overall performance of Altron was reasonably in line with expectations but the results were nothing special.

He said that Altech is still losing cash because of its subsidiary Altech Autopage is subsidising handsets for customers. The company spent R281m in the six months to August to subsidise its mobile customers. "There is no clear path of how the cash will be recovered‚" he said.

Farai Mapfinya‚ a research analyst and portfolio manager at Mvunonala Asset Managers‚ said the businesses in the Altron stable have not been able to fire on all cylinders all at the same time‚ which has made it a challenge to allocate capital in the share.

Bytes's revenue rose 18% to R4.1bn. Headline earnings for the Bytes group was up 14% to R133m.

Powertech reported revenues of R4.2bn slightly up from R3.9bn. Headline earnings for the Powertech group decreased 45% to R33m with a higher interest cost and an increased effective tax rate.

But earnings were negatively affected by reduced margins primarily as a result of under-performance from the Aberdare Cables business‚ although this division showed a marked improvement when compared with the second half of last year.

"While there was some marked improvement in both Altech and Powertech‚ we believe the divisions still face some difficulties in their operating environments‚" Mapfinya said