JSE-listed Allied Electronics (Altron) returned to profitability in the six months ended August 31, as it continued its focus on rigorous cost control, extracting efficiencies from its existing businesses and working capital management.

The engineering and technology group posted a total comprehensive profit for the period of R488-million, a turnaround from the loss of R293-million during the six months to August 2012.

The group had had a “tough past few years” mostly owing to the impact of the underperforming East and West African operations of subsidiary Allied Technologies (Altech), which had since been sold off.

Altron delivered normalised headline earnings a share of 91c for the six months, a 15% rise on the corresponding period the year before.

Basic earnings a share jumped to 82c in the interim period under review, from a loss a share of 5c in the comparable interim period in 2012.

However, earnings before interest, tax, depreciation and amortisation (Ebitda) declined 4%, from R860-million in the first half of the previous financial year, to R826-million during the six months ended August 31.

Revenue increased 6% to R13.4-billion for the six months, from R12.5-billion during the first half of last year.

Altron CEO Robert Venter commented that the first positive set of results after heavy losses gave an indication of the group’s future performance, with subsidiaries Bytes and Altech, which were integrated under the new Telecommunications, Multimedia and Information Technology (TMT) division, delivering double-digit growth.

The group merged Bytes and Altech into a more streamlined division after buying out the underperforming Altech unit for R1.8-billion early in August.

“Although the interim results only reflect one month under the new TMT structure, a lot of progress has been made with the integration of the Altech and Bytes businesses,” he said, adding that the next six months would see significant cost savings and streamlined operational benefits emerging from the restructure and asset transfers.

The Altron TMT group of subsidiaries delivered revenue of nearly R9.3-billion and Ebitda of R681-million, comprising the Bytes group with just over R4.1-billion revenue and Ebitda of R264-million and Altech with revenue of R5.1-billion and Ebitda of R417-million.

The Altech UEC unit produced particularly “excellent results” off the back of good set-top box (STB) sales into the rest of Africa, particularly East and West Africa, to cater for the continent’s transition from analogue broadcasting to digital terrestrial television (DTT), Venter noted.

Currently, no activity, in terms of DTT-enabled STB manufacturing and sales, was recorded in South Africa, as the nation’s own digital migration lagged on the back of continuing indecision and battles between broadcasters with regards to the encryption of DTT STBs.

However, normal STB, or decoder, sales to MultiChoice throughout Africa, including South Africa, had increased.

Altech UEC reported revenue of R966-million and Ebitda of R83-million for the six months to August 2013.

The business currently had an order book of over R2-billion.

ELECTRICAL ENGINEERING
Meanwhile, despite electrical engineering division Power Technology’s (Powertech’s) muted growth, owing to the slowdown in the building sector and earnings being hampered by underperformance within the Aberdare Cables business, the unit’s overall performance had improved from the second half of the prior year, said Venter.

The Powertech group recorded an increase in revenue to R4.2-billion and a decrease in Ebitda to R193-million during the period under review.

“A recovery and increase in activity seems to be emerging in the building and construction sector, which will positively affect the power electronics side of the group,” Venter said.

Powertech’s order book was “looking strong”, particularly for the transformers and cables businesses, as the company’s entrance into rail and renewable-energy projects gained momentum.

The group had eyed South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) as a strategic area for growth and had secured R300-million of orders for the service and supply of renewable-energy solutions for the first- and second-window REIPPPP projects.

Powertech would supply transformers, cables and industrial and system integrators to the turnkey contractors of the large solar and wind project bidders over the next few years.

The first phase of national rail projects were also expected to bear fruit in the second half of Altron’s financial year, with the company expecting to gain some traction in supplying key contractors to State-owned Passenger Rail Agency of South Africa and State-owned Transnet’s fleet renewal programmes, with tenders expected to be issued shortly or nearing adjudication.