ALLIED TECHNOLOGIES LIMITED 
By News Highlights:
- Group revenue increased by 4.7% to R10.4 billion
- Disposal of loss-making East and West Africa operations
- Altech Multimedia and Altech UEC revenue and profit increased significantly
- All other businesses (other than East and West Africa) performed as expected in tough trading environments
- Established a Business Development Division within the group to anticipate and address future growth opportunities as part of Altech's new streamlined TMT group structure
Huawei value added partner agreement pays off:
- R119 million contract secured with Passenger Rail Agency of South Africa
- R196 million three-year contract secured with South African Police Services
JSE listed Allied Technologies Limited (Altech) today announced the group's annual financial results for the year ended 28 February 2013. While the group's revenue increased, operating profit was lower than that of the prior year mainly due to losses incurred in Altech's operations in East and West Africa.
"Results from our East and West African operations were disappointing. However, with the disposal of these assets we are now in a position to unlock value from innovation and convergence through our remaining assets, and enhance our activity base by further exploiting our intellectual property," said Craig Venter, Altech CEO.
"Furthermore, the disposal of the East and West African operations will see the termination of operating losses of R165 million in East Africa and R39 million in West Africa, totaling R204 million," he added.
Other operations within the Altech Group performed to expectations, despite weak local and international economic conditions. Altech Multimedia in particular showed strong growth, with Altech UEC excelling, notwithstanding the delay in the rollout of digital terrestrial television in South Africa.
Financial highlights for the year ended were as follows:
- Revenue - R10.4 billion
- EBITDA - R765 million
- EBITDA margin - 7.3%
- Operating profit before capital items - R548 million
- Operating profit margin - 5.2%
- Profit before tax (excluding capital items) - R414 million
- Loss before tax (including capital items) - R1 044 million
- Adjusted HEPS - 290 cents
- Return on shareholders' equity - 31.5%
- Annuity Income - 82%
The Telecommunications, Wireless and Converged Services Division, which consists of Altech Autopage Cellular (including Altech Technology Concepts) and Altech Netstar, performed as expected.
During the period, Altech Autopage Cellular's revenue experienced a slight dip from the prior year due to the continuing decline in average revenue per user (ARPU), driven by increasing price competition among networks. However, a 12.5% growth in data subscribers and a significant reduction in customer churn was achieved during the period. Improvements in internal processes and customer service also had a mitigating effect on increased price competition.
"The deployment of an e-billing conversion programme resulted in significant cost savings and we will continue to focus on reducing operating costs in the business while continuing to improve customer service in order to maintain and expand our customer base," said Venter.
"Furthermore, the deployment of a sophisticated customer interaction management platform will see us expanding our points of presence to higher ARPU customers," he added.
The Altech Netstar Group increased total revenue for the period to R1,04 billion - despite operating in a market characterised by declining revenues per vehicle.
According to Venter, Altech Netstar concluded agreements with two new global hardware suppliers which resulted in cost reductions and improved service quality and features. Also, during the year, the Altech Netstar UBI (User Based Insurance) platform was completed and will be deployed into the insurance industry early in the new financial year.
The Converged Services Division, which consists of Altech Alcom Radio Distributors, Altech Fleetcall and Altech Alcom Matomo, saw a decline in turnover as a result of delays in the awarding of tenders at major customers. This was further exacerbated by disruptions related to the unrest in the mining and transport sectors.
Among the local subsidiaries of Altech Radio Holdings, Altech Fleetcall performed best following the launch of several new products, including a push-to-talk service. The business, which is a national trunked radio network operator, has also been successful at selling broadband products that offer simple diversification options.
"During the year we saw a number of significant contracts. This included a new three-year agreement between Altech Alcom Radio Distributors and Motorola that will result in expanded territories and more products. Furthermore, in March, Altech Radio Holdings and Huawei (a value added partner to Altech) jointly secured a R119 million contract with the Passenger Rail Agency of South Africa (PRASA) to provide digital signaling network technology for South Africa's major metropolitan areas, while Altech Alcom Matomo secured a R196 million three-year contract with police operations in Gauteng to maintain and upgrade the South African Police Service's TETRA radio network. Both these contracts bode well for future performance," said Venter.
The Altech Stream East Africa Group, which formed part of Altech's international converged services division, continued to suffer significant losses during the financial year. While the operation was profitable for two consecutive years after its acquisition in 2008, this was subsequently eroded by the need for significant capital investment, the collapse of international bandwidth selling prices in the region, local management challenges, the loss of key customers and interest and exchange rate volatility.
"On 28 February 2013 we concluded a transaction in which we realigned our East African network interests by injecting them into a strategic partnership with Liquid Telecommunications Holdings, thereby acquiring a minority 8.6% interest in Liquid and ending our losses in the region," said Venter.
"A significant benefit to Altech from this transaction is that we can now focus more intensely on our core competencies and return the Altech Group to a positive growth model as reflected in our traditional activities," he added.
The Multi-media and Electronics Division, which consists of Altech Multimedia (incorporating Altech UEC) and Arrow Altech Distribution, performed exceptionally well for the period.
Growth in Altech Multimedia was achieved across all lines of business (consisting of devices, support services and system integrated solutions), both in Africa and internationally. Revenue increased to R1.8 billion, with Altech UEC South Africa and Altech Multimedia Europe being the top performers.
According to Venter, Altech UEC is successfully transforming its business model to balance the traditional device manufacturing business with a services and solutions based business.
"We saw significant growth in sales into Africa, Turkey and Australia. In addition, a new deal in Angola will see us supplying set-top boxes into that region. All of these initiatives will more than compensate for the delay in the rollout of digital terrestrial television in South Africa," said Venter.
"In total, 2.8 million set-top boxes were produced in South Africa during the year, contributing to a significant improvement in Altech Multimedia's EBITDA to R198 million compared to the previous year of R126 million.
Despite an excellent performance in 2012, Arrow Altech Distribution experienced a decline in revenue during 2013, resulting in an operating profit of R21.7 million. To mitigate the risk of short product cycles and the rapid development of substitute products, Arrow Altech Distribution has been focusing on streamlining their demand creation initiatives this year, resulting in an increase in design registrations which will result in market share growth in the next financial year. The business concluded three new supplier agreements with Murata, Cinterion and Microsoft during the year and received the Conlog Supplier of the Year Award for the second consecutive year.
The Information Technology Division, which consists of Altech ISIS, Altech West Africa, Altech Card Solutions, Altech NuPay and Altech Swisttech, performed as expected, with the South African businesses showing good results, while the West African business was sold with effect from 28 February 2013.
The division's revenue remained steady, with a small decline compared to the previous period. Operating profit declined mainly due to a loss of R39 million incurred by Altech West Africa due to a reduction in demand for its secure recharge vouchers and delays in the up-take of plastic chip cards. In addition, its pioneer tax status expired and barriers to imported competition were removed.
Altech Card Solutions and Altech ISIS were the most significant contributors to operating profit, with Altech ISIS renewing its managed retail and wholesale billing services contract with Digicel for a further two years. Altech NuPay also performed well, following accelerated growth in unsecured lending.
Altech Eyenza Mobile Money's e-Wallet solution was launched during the year under review and the business has signed up a number of affiliates. In the next financial year Altech Eyenza Mobile Money will launch an optional card coupled to its e-Wallet to attract new customers into the electronic transacting environment. This will become part of a longer term strategy to create a direct consumer interface for Altech Eyenza Mobile Money. Of strategic importance in this division was Altech's ability to increase its presence in the payment industry, positioning the group as a significant player in this field.
On the partnership front, Altech signed a long-term value added partner agreement with Huawei, the world's largest telecommunications equipment manufacturer. The agreement allows Altech to provide Huawei Enterprise products and services to customers and offer post-sales professional services and support in countries across southern and East Africa.
"This partnership extends our existing solutions in the enterprise market and will see us providing our customers with access to quality, affordable technology, supported by a partner that is well aligned with our focus on customer service and innovative technology solutions," said Venter.
Turning to innovation, Venter indicated that the aim was to substantially increase the Altech Group's revenue within five years.
"In order to achieve this, we have created three growth threads beyond organic growth in our existing businesses. The first is our strategic partnership with Huawei to expand our offerings and services. The second is an accelerated focus on opportunities through converged solutions. Lastly is our global telematics development to deliver both increased value to customers and geographical expansion," he said.
"The establishment of an Altech Growth Management Office is the first step in achieving this growth and will provide capacity and align the group's initiatives by inter alia developing a go-to-market strategy for new products and services," he added.
Projects that have been launched during the year include insurance telematics solutions, the development of secure digital content devices, new payment instruments and solutions using e-Wallets and microfinancing opportunities.
"On the whole, our operations in South Africa and some international operations performed well despite continuing adverse economic conditions. With Altech's former East and West Africa operations having been sold, and with the termination of their losses going forward, I am confident that the Altech Group will again return to its normal pattern of profitable growth as a result of a renewed focus on our remaining assets and the innovation strategies that we are putting in place.
Over the past 16 years the group has been acquiring and building a strong and competitive portfolio of businesses in the Telecommunications, Multi-media and Information Technology space. We are now in a position to unlock value from innovation and convergence through these assets, and enhance our activity base by further exploiting our intellectual property," concluded Venter.
-ENDS-
Notes to Editors:
About Allied Technologies Limited
Allied Technologies Limited (Altech) is listed on the Johannesburg Stock Exchange (JSE). The company focuses on the Telecommunications, Multi-media and Information Technology (TMT) industries and employs more than 3 580 employees in South Africa and abroad.
As a leading South African multi-billion rand group, Altech is involved in the design, development and convergence of Telecommunications, Multi-media systems and IT solutions.
For further information please contact:
Craig Venter
Chief Executive Officer: Altech
Tel: +27 11 715 9004
Cell: +27 83 236 8000
E-mail: cventer@altech.co.za
and/or
Shenanda Janse van Rensburg
Group Executive: Marketing, PR & Communications - Altech Head Office
Tel: +27 11 715 9031
Mobile: +27 84 777 1977
Email: sjvrensburg@altech.co.za
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