JSE-listed Allied Technologies (Altech) was set to turn itself around as it exited the two operations that have weighed on the company’s performance over the past two years.

The group had “fulfilled what it said it would do” and disposed of its loss-making East and West African operations, CEO Craig Venter said at the group’s recent results presentation.

Moving forward, Altech’s financial performance and growth, which were stifled by the underperforming units during 2012/13, promised to be stable owing to the better-performing divisions, he said.

Altech disposed of its 75% stake in the struggling greenfield start-up operation, Altech West Africa, in Nigeria, under a vendor-funded structure delivering a rand-denominated preference share equivalent to $4.9-million.

The preference share carried a 6% coupon and was redeemable in eight equal yearly tranches starting in February 2016, Venter said.

The West African unit had cost Altech a R42-million loss on disposal and resulted in a R29-million impairment, as the unit was classified as held-for-sale, during the year ended February 2013. The disposal value amounted to R71-million.

The West African operation, which was started in 2005 and was highly profitable for five years, underperformed during the past two years on the back of increased competition in the low-priced nonsecure paper recharge voucher market and a reduction in demand for secure recharge vouchers.

Altech West Africa was further impacted on by 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.

Further, Altech also exchanged its 51% stake in the historically profitable Altech East Africa operation and paid $16.5-million for an 8.6% stake in telecommunications group Liquid Telecommunications.

Under the terms of the transaction, Liquid now owned an 80% stake in Altech Kenya Data Networks and Altech Infocom and 75% of Altech Stream Rwanda, as well as 100% of Altech Swift Global, Africa Digital Networks and Altech Data International.

The terms also noted that any holding company of Liquid could buy out Altech’s 8.6% minority shareholding for $50-million or R460-million.

The exchange deal would see Altech hold 10% voting rights, have board representation and open possible future opportunities to increase shareholdings. The group would participate in dividends from August 2014.

Combining Liquid’s existing Southern and Central African network and Altech’s East African network created what Venter believed was Africa’s largest terrestrial communications network.

The East African operations, which were shifted to discontinued operations during the 2013 financial year, recorded a capital loss of R730-million and a property, plant and equipment impairment of R328-million.

Venter previously 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 disposals would remove about R204-million – R39-million in the West African and R165-million in the East African operations – of the operating losses going forward, as well as refocus management’s attention to the performing units.

The group recorded a loss of R1.27-billion for the year to February, on the back of a R1.6-billion loss from its discontinued operations, under which Altech’s former East African operations were shifted.

This was compared with a group loss of R502-million in the previous financial year, as the two underperforming operations weighed on the group’s overall performance.

The profit from continuing operations reached R357-million during the 2013 financial year, up from the R206-million reported a year earlier.

Headline earnings a share fell from 347c in 2012 to 268c in 2013. Altech’s total basic loss a share fell further into the red at 961c in 2013, a significant drop from the loss of 283c in 2012.

Group revenue rose by 4.7% from R10-billion in the prior year to R10.4-billion in the year under review.