Altech Profits from Diversification
The group’s diversified interests in a range of electronic, technology and telecommunications applications has proved to be a successful strategy to ensure growth in both good and bad economic times.
Altech released half-year results today, revealing a 17% increase in operating profit and a 13% growth in adjusted headline earnings per share over the comparable period last year. The most telling performance came from its stake in Kenya Data Networks, where operating profit nearly doubled, growing from R52 million to R97 million.
“This year it has been interesting to see Altech really direct a key focus on its East African operations,” says Frost & Sullivan senior ICT industry analyst Lindsey Mc Donald. “While the East African region has felt the impact of the economic crisis, combined with recent bouts of political uncertainty in the last 18 months, Altech has adopted a pragmatic approach and has prepared for the inevitable recovery.”
Altech has taken a greater stake in Kenya Data Networks and now has a controlling share of 60.8%. In addition to this, the group recently announced a strategic partnership with SEACOM that will see the companies provide connectivity. Mc Donald believes this will maximise the opportunity for revenue generation and reduce the investment required to gain greater representation.
“East Africa remains a compelling proposition for the company and it is expected to continue to invest into this region,” Mc Donald adds. “Altech will need to ensure that it realises maximum value from its clients and this can be achieved by cross-selling within its large customer base.”
Interestingly, the company chose not to invest in infrastructure in South Africa. This has been something of a surprise, given that it campaigned so diligently for the conversion of VANS licenses to ECNS licenses.
“Frost & Sullivan believes that the main reasons for this are the glut of infrastructure investment currently underway in South Africa and the current economic circumstances,” Mc Donald states. “It is possible that Altech could re-evaluate this decision in the next 24 months if the South African market shows a sufficient demand for additional infrastructure.”
Spending by companies on telecommunications is slightly down as cost saving initiatives take centre stage in this tough economic climate. Competition in the South African market is also intense in the provision of broadband and cellular services. The market has experienced a degree of consolidation in the last two years and this has impacted on the manner in which companies are able to offer their services into the market.
“Altech’s main challenges are therefore the high level of competition that it faces in the South African market and the economic uncertainty that could slow the rate of its increased investment into the East African region,” Mc Donald concludes.
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