JSE-listed Allied Technologies (Altech) said on Thursday that it continued working towards solutions for its underperforming East and West African operations.
The group, which has been weighed down by the operations over the past 18 months, was confident that good headway has been made since the 2011 financial year-end.
CEO Craig Venter, speaking at Altech’s 2012 financial year interim results presentation, said that significant corporate involvement and the implementation of internal remedial measures in 51%-owned Altech East Africa visibly improved operations, but the financial performance was not yet seen.
The company has initiated formal processes to find a partner for the historically profitable division, as Venter believed that this would accelerate the turnaround. He pointed out that the operations brought in profit of R30-million in the first year of entry and another R100-million the year after, but the “wheels came off” in the third year.
Venter outlined a number of factors contributing to the lower performance, including management challenges and high staff turnover, as well as poor customer service and network reliability issues leading to loss of key customers.
The parent company also based key decisions on inaccurate and nonfactual information provided by East Africa’s management.
Further, he said, former management failed to adapt to the group’s strategy, management controls and governance were not adhered to and project management, execution and quality controls were insufficiently implemented.
Venter said that Altech had installed a new management team, which was making headway.
He also pointed to the group’s underestimation of the risks involved in entering a new geographical area and new area of activity, as well as the capital- and labour-intensiveness of the business.
“The network operations in East Africa continue to be challenged; however, there have been some positive improvements with regard to network stability and data centre performance over this period [six months to August 2012],” he said.
Meanwhile, Altech was disposing of its 75% shareholding in the struggling greenfield start-up operation Altech West Africa, in Nigeria.
The West African operation, which was started in 2005 and was highly profitable for five years, underperformed during the past 18 months on the back of increased competition in the low-priced nonsecure paper recharge voucher market and a reduction in demand for secure recharge vouchers.
The firm was further impacted by delays in receiving customer requirements for plastic-chip card products, high top and senior management turnover, unanticipated product technology changes, the Nigerian government’s prohibition on imports of recharge vouchers and the expiration of the company’s pioneer tax status.
The sale of the operation, which was deemed noncore within the Altech group, would be earnings enhancing and the proceeds of the sale would be redeployed into high-growth areas within the Altech portfolio.