Despite the prevailing economic uncertainties, electrical, electronics and information technology group Altron says it plans to shift its focus from efficiency improvements and cost control to restoring top-line growth, which it aims to achieve through the acquisition of new customers and businesses, as well as by delivering new products and services.

CEO Robert Venter indicated that most of the acquisition opportunities were likely to arise in the technology, multimedia, telecoms and information technology market segments, in which its Altech and Bytes units operated.

But the JSE-listed group would also “not hesitate” in pursuing prospects associated with its Powertech subsidiary, which operates within the electrical engineering environment.

The group ended the interim period to August 31, 2011, with cash of R617-million, which Venter said provided it with sufficient flexibility to pursue yet more acquisitive growth.

The focus at Powertech, however, was on turning around its troubled Aberdare Cables business, which experienced a 76% contraction (to R26-million) in earnings before interest, tax, depreciation and amortisation (Ebitda) in the six months to August 31, 2011. The cable unit’s revenue fell by two percent to R2.03-billion when compared with the same period last year.

But its three-year order book had recovered to R950-million and Venter reported that the second quarter had been an improvement on the first. He was, thus, convinced that the worst was over for the South Africa portion of the business, with yet more pain anticipated from Spain and Portugal.

Copper stockholding levels had been reduced to between six weeks and two months as a “hedge” against commodity price volatility and capacity utilisation had returned to between 65% and 70%. However, Venter acknowledged that Powertech was unlikely to return to its peak Ebitda contribution of 2008 and the first half of 2009 until private building and construction recovered – a scenario that remained a distant prospect.

Turning around Aberdare and Altech’s troubled East African operations were receiving priority attention, as these represented low-hanging fruit for improving the group’s immediate earnings prospects for the business.

Altron reported marginally lower revenue of R11.5-billion for the interim period to August 31, but its Ebitda decreased by 6% to R932-million from R988-million in the comparative period last year. Its headline earnings a share fell 16% to 83c from 99c.

For the first time, Bytes emerged as the group’s biggest contributor, increasing its Ebitda by 19% to R246-million, despite its revenue having decreased by 6% to just under R3-billion. In the prior three years, Altech had been the largest contributor and prior to that Powertech had underpinned group earnings.

Venter argued that Altron’s diversified portfolio was providing it with a “certain amount of resilience” in volatile market conditions, while its cost-saving efforts, which were calculated at R1-billion over the past three years, had also cushioned it from the worst.

“The strategic focus now, however, is on profitable revenue growth,” Venter stressed, adding that the group was well positioned to take advantage of any upside that the economy might offer in the coming six months.

Despite the underperformance of some of its African businesses, Altron’s African expansion also remained “a priority”.
 

To subscribe to Engineering News's print magazine email subscriptions@creamermedia.co.za or buy now.