Allied Technologies (Altech) is to sell its 75 percent stake in Altech West Africa due to losses incurred by the Nigerian business, prompting a 6.7 percent decline in Altech share prices.
Altech-the South African telecoms and IT company listed on the Johannesburg Stock Exchange – yesterday announced that it has agreed to sell its majority stockholding in its Nigerian arm of the company, reporting significant losses for the six-month period ended August 2012.
The company revealed losses of 420 million rand ($51.1 million) in results from operating activities in the six month period, as compared to a profit figure of 283 million rand ($34.4 million) for the same period in 2011.
While revenue figures were positive, showing an increase of 6.8 percent reaching 5.2 billion rand ($634 million) by August, operating profit nonetheless saw a fall of 13.5 percent over the period to 256 million rand ($31.1 million), before capital items. The company pointed to struggling East and West African businesses as the reason for this decrease in profit – prompting the disposal of West African interests in the form of the company known as Altech West Africa (AWA). Altech stated: “Apart from East and West Africa, the operations within Altech performed to expectations”; adding: “AWA has been highly profitable for most of the period since its inception, but became loss-making during the last 18 months”.
AWA produces secure cash recharge vouchers for mobile network operators in Nigeria, but the company reported experiencing a substantial fall in demand over recent months, pointing to the dominance of cheaper non-secure recharge alternatives provided by competing supplies in the market. AWA also recently expanded its offering, manufacturing plastic chip cards for banking and other clients in Nigeria. However, the company also reported a slow initial up-take of the new product.
Altech has also struggled with its East African operations over the past years, with its data unit known as Kenya Data Networks (KDN) seeing a serious decline in profitability in the period up to August 2011. The company acted swiftly in East Africa, appointing a new management team in September 2011 in a push to turn-around the East African business.
The current announcement sees Altech trying to maintain its position in its home market, and dispose of losses stemming from businesses operating outside its core product area. The company did not disclose the amount of the deal, which is still pending regulatory approval.
However, following the announcement yesterday the Johannesburg Stock Exchange witnessed an immediate drop in Altech stock prices, shares sliding 6.67 percent closing at 42 rand ($5.11).
