ON THE SPOT
New Altron chief makes strides in turnaround plan
Former MTN SA CEO Mteto Nyati has ridden a wave of fresh investor optimism in Altron, which he joined in April and which this week posted a 16% rise in interim headline earnings.
The company has set out to deliver consistent double-digit profit growth as it repositions itself to go large in information and communications technology (ICT). Business Day asked Nyati where Altron was in its turnaround plan.
We’d like to make sure we are consistently delivering double-digit ebitda (earnings before interest, tax, depreciation and amortisation) growth at least for the next five years. We do not want to be disrupted by the noncore assets, so we’d like to make sure that the disposal of those assets is behind us as we enter the next financial year.
We’ve also identified operations which should be leading us in terms of growth: one of them being Bytes UK. Altech Radio Holdings [is] another operation where we see huge potential; we see opportunity in broadband, in the internet of things and smart cities — we want to prepare the company for that.
How many businesses still need to be sold?
There are only three businesses to be sold: Powertech Transformer, Altech UEC and CBI Telecoms. The two key ones really that are a drag to our earnings are Transformers and UEC — those are my priorities. We’d like to make sure we have closed [the sale] of those by the end of the financial year.
Do you have any buyers lined up?
Look, what I’m saying we have communicated publicly that we’d like to see those disposed by the end of the year so where we are now is in discussions with buyers, at varying stages.
Would it be a train smash if you don’t get a buyer? Especially as market nervousness has now ramped up after Wednesday’s disastrous mini-budget?
If it were not to happen we would manage like we’re managing today: if you look at the performance over the first half, our teams in those operations did a fantastic job to limit losses, they’ve come down drastically, and it’s because of the good work our teams are doing. We have great people, once they’ve been provided the right leadership, they are doing the right thing. So I’m not worried.
How difficult — or easy — has it been to change Altron’s management culture? You were an outsider, it’s been a family business — has it been a big mindshift for managers?
The turnaround of Altron I would characterise as a culture turnaround. And by that I mean it’s linked to the soft side of the business, to people — things like values, how people work. They typically have been working in silos, when in reality our customers would like to buy end-to-end solutions. To change people from working in silos to collaborating with one another is not an easy thing. So we see this as an ongoing drive over the next two or three years.
And that’s going to help our company set itself apart: you will find that some of our competitors have not even started to address this issue, and we have decided to tackle it.
Have you butted heads with people? Have there been any casualties?
I would not call them casualties. We have made decisions that needed to be made and one of those, for example, was [cutting down] the head office. To have a big head office, with so many people that maybe are doing the same thing that operations are doing, was not [something] I felt we could live with so we reduced the number.
The minute you do that, it’s not … popular, but you have to do it because that’s what the business demands. And in some of the operations you’ll find that the cost structures were way out of line and we had to take tough decisions when it came to a company like Bytes Document Solutions.
As Altron repositions itself in ICT, who are your main competitors?
Companies like Datacentrix, Dimension Data, T-Systems, companies like EOH. We are now an ICT company but we do more than most of them because Altech Radio Holdings does an element of communication infrastructure, so it’s not a good comparison.
EOH recently mentioned its market share was as small as 2%, implying huge opportunity to grow.
It depends on how you define your market.
So what is the potential for growth for Altron, based on your current share of the market in SA?
[In] SA we feel we can grow by mid-single digits. Growth will be through taking market share, and we believe we are going to be able to take that market share because, for example, just in SA we have 15,000 customers — and in those, we are only offering one or two of our services, when in reality we should be offering them so much more. That is why I am driving this One Altron [concept], breaking down the silos. It’s going to be easier because the customers are cutting down on suppliers — it’s called supplier consolidation.
You must be fairly chuffed about buying UK business Blenheim when you did, considering how the rand has now blown out against the pound?
We can never be excited about a rand that is going in the wrong direction. The bulk of our business is in rand, we import quite a lot, so it is not something that we celebrate. At the same time it is playing in line with our strategy — that we needed to diversify for these reasons.
Are the recent acquisitions you’ve made enough for now? Or are have you got more deals lined up?
We are repositioning the company for growth but at the same time we are integrating businesses. For me it’s important that we do not bite off more than we can chew. After maybe nine-12 months we’ll be thinking differently. If I see an opportunity and I feel that it will add value to the businesses, nothing will stop us from pursuing that.