South Africa’s Altech increases profit by 17%

Mergers, Acquisitions and Financial Results

JSE listed Allied Technologies Limited (Altech) has announced the group’s interim results for the six months ended 31 August 2009. “I am particularly pleased with the strong performance that has been delivered by all of Altech’s operating companies. What is even more impressive is that we have increased our operating profit margin to 10%. This has resulted in a 17% increase in our profits. Altech East Africa is showing exceptional growth and already contributes 18% of the Altech group’s total operating profit, proving that it has been a very successful and sound investment. Altech East Africa, which perfectly complements our existing and successful group of companies, should contribute approximately 45% of Altech’s total profit over the next two to three years. It is definitely the growth engine for the Altech group,” said Altech CEO, Craig Venter.

He continued, “The results were underscored by various strategic acquisitions and alliances with emphasis particularly on the East African region. Annuity revenue remained a strong focus, increasing to 82%, previously 79%, of total revenue, and providing stability and exceptional profit for the group notwithstanding turbulent markets. Working capital management, stringent cost control and improved profit margins resulted in a strong balance sheet and impressive profitability.”

“Although a number of acquisitions were made during the period, Altech’s balance sheet and cash position remain extremely desirable. We conserved cash during the high priced acquisitive boom and have in the past, and are now able in the future, to enter into transactions at much more favorable terms. This strategy has resulted in a competitive market advantage with our group growing to 30 operating entities,” said Venter.

Transactions concluded during the period included the acquisition of the entire share capital of both Fleetcall, South Africa’s leading radio trunking network operator, and internet technology solutions and broad-based IT Company, Technology Concepts. Altech also concluded the purchase of 50% plus 1 share in NuPay, a transaction service provider and switching company.

Altech increased its economic interest in Kenya Data Networks (KDN) from 51% to 60.8% by subscribing for additional non-voting ordinary shares and acquiring a minority shareholder’s voting ordinary shares. KDN is the leading data network infrastructure operator in Kenya, with a terrestrial fibre optic network spanning Kenya, Uganda, Rwanda and soon Tanzania and the DRC. The terrestrial fibre network will link the undersea cables, which land in Mombassa, to the landlocked countries in East and Central Africa.

“Altech was thrilled to increase its stake in KDN as it is our infrastructure pillar and the growth engine of the group. The additional USD39.5 million capital injection will be used to roll out the KDN network, further entrenching KDN as the key provider of broadband in East Africa,” said Venter.

Two East African submarine cables, TEAMS and Seacom, will play a large strategic role at Altech. During the period, KDN acquired an 8.5% overall (10% of the Kenya share) stake in TEAMS, the submarine cable stretching from Kenya to the United Arab Emirates. Altech also entered into a strategic bandwidth alliance with Seacom, the submarine cable which links South and East African countries to their European and Asian counterparts. The alliance saw Altech procuring two STM-16s from Seacom for 20 years, with the option to upgrade, within three years, to double this capacity, to an STM-64. Seacom in turn, purchased significant bandwidth capacity on the Altech East Africa terrestrial backbone network owned by KDN.

“The equity stake owned by KDN in TEAMS equates to an initial capacity of 10.2Gb per second. The addition of the 5Gb per second capacity purchased through the Seacom strategic alliance, results in Altech being one of the largest bandwidth suppliers on the continent. Significant bandwidth customers have already been secured with almost 70% of the Seacom capacity already on-sold. We expect the benefits of these transactions to bare fruit in the next six months and beyond,” said Venter.