Altron Group took the bull by the horns at subsidiary Altron Nexus by retrenchments and putting it up for sale, after the subsidiary did not win an anticipated large contract, while R336 million of provisions had to be raised in the last six months as well.
The share price of Altron, one of the largest technology groups on the JSE, slumped more than 9% yesterday morning after it said that it is likely to report an interim group headline loss per share when compared with a profit at the same time last year, much of which was due to the issues at Altron Nexus.
The group said in a trading statement headline earnings a share (Heps) from continuing operations is estimated to increase between 5% and 24% compared to the same time last year for the six months to August 31.
However, group Heps, which includes Altron Nexus, is estimated to be between (64) cents and (57) cents, a decrease of between 288% and 268% compared to group Heps of 34 cents at the same time in 2022.
At the last year-end management said they were reviewing all operations.
Material actions were being taken to streamline two non-core operations, Altron Nexus and Altron Document Solutions.
Group interim results would be negatively impacted by Altron Nexus by R336 million, and Altron Document Solutions by R95m, together with a provision raised of R33m in relation to goodwill held on the group balance sheet for Altron Nexus.
Altron Nexus and Altron Document Solutions had contributed 21% to revenue last year, but did not make a profit, and was classified as held-for-sale.
The group said Altron Nexus did not win the Gauteng Broadband Network Contract for GBN phase 3.
The GBN contract for phase 2 accounted for a material portion of Altron Nexus’ revenue and profit.
“As the incumbent service provider for GBN phase 1 and 2, the personnel and infrastructure had been kept in place to enable Altron Nexus to seamlessly deliver on GBN phase 3, in the event the contract for phase 3 was awarded.
As the contract was not awarded to Altron Nexus, a full business review was conducted, including the associated operating model of Altron Nexus’ three focus areas, namely Critical Communications; Huawei Enterprise Networking and Broadband Network Services,” the group said.
A retrenchment process at Altron Nexus was expected to be finalised in September.
The public sector Broadband Network Services business, had been wound down.
As both Altron Systems Integration and Altron Nexus hold enterprise networking capabilities and key relationships with Huawei, it has been decided to consolidate the Huawei Enterprise Networking operations, into Altron Systems Integration.
The remaining business of Altron Nexus would focus on non- core Critical Communications services. Opportunities to sell the remaining Altron Nexus business would be actively pursued, the group said.
Altron Nexus' indirect exposure to the financially struggling City of Tshwane (CoT) would see it raise a R201m provision. The main contractor is Thobela Telecoms (TT) and Altron Nexus was the EPC contractor. Recoveries by Altron Nexus were dependent upon TT being paid by the CoT.
Several years ago, arbitration proceedings were instituted against Altron Nexus by Aeonova, an erstwhile sub-contractor for the GBN contract.
Legal advice received in the period prior to May 2023 was that prospects of Aeonova succeeding in the arbitration were remote.
Following certain adverse interim awards and judgments, an independent assessment of the matter by Werksmans Attorneys saw the law firm advise that the historic legal opinion about prospects of success should be revised.
BUSINESS REPORT