Mergers, Acquisitions and Financial Results

A third of Altech's profits should be generated from abroad within two years as the technology group explored opportunities for setting up factories and telecoms operations in emerging markets, the company said yesterday.

The aim for global expansion is gaining importance as the group wins more orders from abroad and sets up offshore divisions to handle them. Its R1.1bn war chest would fund those initiatives, CEO Craig Venter said when he announced Altech's results for the year to February. Its revenue of R6.8bn was up 12% from R6bn and its attributable profit of R401m was up from R364m.

Headline earnings a share rose 10% to 418c, and it declared a dividend of 240c a share. Despite the solid figures, its shares shed R2 or almost 3% to trade at R67. Venter has often spoken about growing Altech through acquisitions, but investors are still waiting for any major moves. Some deals were still being explored locally, alongside serious plans to grow offshore, he said.

"We have grown globally quite significantly in the past year and my vision and challenge to the managers in the next two years is for a third of Altech's income to be offshore." One move is to acquire 50% of a Malaysian company that markets the stolen-vehicle tracking systems developed by its Netstar subsidiary. Netstar's equipment is installed in 30000 Proton vehicles each month in Malaysia, and Altech is buying a direct stake in the Malaysian franchise. Netstar is one of Altech's biggest money-spinners and raised its market share for vehicle recovery in SA to serve more than 400000 users.

A second foreign venture could take Altech into the Brazilian telecoms market. "Brazil is an emerging market where we see high growth," Venter said. A deal should be announced soon. India is also on the radar after Altech's UEC division won an order for 250000 digital television set-top boxes. It had opened an office in India and was assessing whether to set up a manufacturing plant to meet the potentially huge demand, especially since UEC in SA did not have sufficient capacity, Venter said.

Altech is also earmarking its cash in anticipation of winning contracts and regulatory approval to set up broadband voice and data networks in several African countries.

In SA it hopes to win a commercial licence to operate a broadband wireless network to offer voice, data and video streaming services to business. It has also bid to set up a broadband network for the City of Johannesburg. Altech's Autopage Cellular subsidiary already sells voice and data services, but purely as an agent for the cellular networks.

Venter wants to push Altech further up the food chain by acting as an operator in its own right.

Another plan is to set up wireless networks in other African countries, where pent-up demand for internet access could make that a "significant" part of Altech's business, Venter said.

"There are some good opportunities in Africa for us to deploy this technology for low-cost broadband data communications," he said. "We have strong broadband initiatives and we have a strong balance sheet and some of that cash will be required to build broadband networks."

Business Day