Altron to pursue acquisitions
New CEO seeks to turn company around by boosting technology business and disposing of noncore assets
Allied Electronics (Altron) is looking for acquisitions to strengthen its technology operations in areas such as biometrics and healthcare.
The group planned to use the R400m investment from its strategic shareholder Value Capital Partners for acquisitions, new Altron CEO Mteto Nyati said on Thursday.
Altron is repositioning itself as an information and communications technology business. Its remaining assets include Bytes group of businesses, which provides software and hardware products and services, and Altech businesses operating in the telecoms space.
Nyati said the group wanted to "play big" in safety and security, healthcare management, and also microlending and other financial services.
Cratos Capital portfolio manager Ron Klipin said Nyati, who had been at the helm as CEO for a month, aimed to change Altron from a company operating in silos into one offering end-to-end solutions with cross-selling potential.
Altron’s revenue for the year to February had fallen 26% to R19.7bn and earnings before interest, tax, depreciation and amortisation increased 123% to R840m, the company said.
Basic earnings per share decreased to a loss of 54c from one of 259c reported a year earlier. Headline earnings per share improved to a profit of 71c from the loss of 145c the prior year.
The continuing sale of non-core assets had resulted in a 42% reduction in debt from R3.5bn.
Nyati said Altron’s core businesses delivered a "credible performance in a challenging economic environment".
Revenue from the telecommunications division was down 12% to R4.2bn.
The Bytes group reported a muted performance with a 1% increase in revenue to R9.6bn. Bytes would also diversify its services to reduce reliance on one product, said Nyati.
"A transition from a family run company to an independent management operation with new requisite skills could have the potential to hasten a turnaround," said Klipin.
In addition, the major downsizing of the business should help change the business into a less capital-intensive one.
Mvunonala equity analyst Matthew Zunckel said Altron’s performance was "decent" and indicated that progress was being made with its stra-tegic goals.
However, he said, the key hurdle remaining was the sale of the remaining Powertech operations as that would "degear the balance sheet further and allow management to focus on obtaining some growth from the core operations".
It could also lead to a stock rerating as the core operations were better-quality businesses than Powertech, he said.
Nyati said the group planned to conclude the disposal of non-core business in 2017.