Posted: 2008-10-07 23:56 Altron profit up 26%  Presenter: Giulietta Talevi Guest(s): Robbie Venter - Click here to listen to the interview Summit TV speaks to Robbie Venter from Altron about their interim results that include revenue up 19% but a cautious note for their outlook Giulietta Talevi: Welcome Face to Face. In studio with me now is Robbie Venter chief executive of Altron out with their interim results on Tuesday. Robbie, the interim results if you look at the numbers look pretty good - revenue was up 19%, operating profits moved up 26% - but you sounded a very cautious note in your outlook. Perhaps you can tell us why? Robbie Venter: I think obviously we are operating in a very volatile global environment. This last week has seen situations that none of us could have predicted, in fact the last year - but more so this last week. We are cautious. I think any manager who is naive enough to think that it won’t have some impact - we are unable to quantify it - but saying it won’t have some impact on the South Africa environment and the markets we serve would be wrong. So we are taking a cautious approach - we are saying we do believe there will be some fallout. The exchange rate has moved - which isn’t all bad news for us - but it is very volatile which presents some risks. The commodities have come off - we are a major player in terms of purchasing products such as copper that’s come off quite dramatically - so we need to manage those situations. For us as Altron yes, we are very happy with the first six months performance - building on the very strong growth we had last year and the year before - but it’s really a phase of consolidation looking forward. We have spent a lot of money on acquisitions - we need to get a return on those acquisitions, and really the next six months is going to be one of focus, internal efficiencies, cost control, working capital management - and just a general belt tightening and consolidation approach. Giulietta Talevi: The acquisitions and the money that you spent on those acquisitions - are you already seeing business conditions becoming more difficult? Robbie Venter: We saw some deterioration particularly in the building and construction sector - in the residential portion of that market. The commercial side is holding up okay - but the residential side is certainly showing some weakness, and we saw that towards the end of the period under review. The second quarter was certainly weaker than the first quarter… Giulietta Talevi: That affects your Powertech division presumably? Robbie Venter: Yes, we’ve got some businesses within Powertech on the low voltage cable side, the electrical accessories side, and to a lesser degree distribution transformers - those areas would be impacted by the building and construction industry. Giulietta Talevi: Are you seeing that downturn offset by the government’s infrastructure roll out? You scooped a massive contract with Eskom fairly recently. Will that not alleviate to some extent the weakness that we are seeing in residential building? Robbie Venter: Very much so. We are certainly seeing what we would call the traditional infrastructure spend outside of building and construction - that is customers such as Eskom, the municipalities, the mines, other parastatals - that segment is still strong, and it seems like it has some good prospects looking forward. Visibility is reasonably strong notwithstanding what’s happening in the global environment. I think residential building and construction has been impacted by interest rates and the consumer is feeling the pressure - we don’t see that necessarily improving in the next six months, or at least until the interest rate cycle starts moving in the other direction. Giulietta Talevi: We might see interest rates coming down sooner rather than later if we are going to follow the example of economies around the world. Just moving into the spending I think it’s probably the first time that you have been at Summit TV where your cash balance has diminished quite considerably. Tell us about the acquisitions and the money spent over the period... Robbie Venter: From an investment perspective we always look to build our business for the long term. We take a long-term view - in fact as you correctly say we have been fortunate enough to have very strongly cash generative businesses. We never wanted to do acquisitions just for the sake of doing acquisitions - but it so turns out that during this period of time with prices having come down quite dramatically there’s been some great opportunities to invest in businesses that are very solid at reasonable prices, so in fact over the lat 18 months we have invested almost R3.5billion in terms of acquisitions. Giulietta Talevi: Those acquisitions - you’re going into a consolidation phase where you will basically bed those down for the foreseeable future? Robbie Venter: Yes. I think we will still keep our eyes open - if there are good strategic acquisitions at the right price we are not going to say no to them, or turn our minds away from those opportunities - but I think that’s fair to say certainly for the next six months. Some of these acquisitions have been in the fold for 18 months, others have just come into the fold - such as our East African Altech acquisition on the telecommunication side. Also some of the Bytes acquisitions have just come in - and even in Powertech on the transformer side the 50% that we bought of that joint venture - those are businesses that have just been acquired in the last six months. So we think the timing is right - but it’s really a phase of consolidation looking forward… Giulietta Talevi: You are very fortunate that you have such a good strong balance sheet - especially with what has been happening in the credit market - I think you said at the year-end stage your target was to have about a quarter of your revenues coming from international operations. Might that be scaled back slightly given what we are seeing in global markets - with the market turmoil - or is that still your objective in the fairly near term? Robbie Venter: Yes, it is our objective. In fact at the half year for the six month reporting period 26% of revenues coming from international operations and exports - so that was pretty much in line. We are going to get a full year of our East African acquisition - which we didn’t have previously - so that is helping our percentage. Certainly the international markets - our Iberian operations in Spain and Portugal - the Spanish market is going through challenges so we may see a bit of softness in that particular area. Contrary to that the UK IT side is going very well which will help offset that - so we are still looking at around the 25% target. Giulietta Talevi: You were successful in taking over Bytes - but your offer to Altech minorities was rejected - are you going to have another stab at gaining full control of Altech? Robbie Venter: I think our long-term view is that it’s not something we absolutely positively have to do. I personally believe that our group structure would be better served by having one entry point. We have an opportunity to consider all of our options in that area - but obviously entering into a phase of consolidation I think we have got a number of issues to deal with internally, and we wouldn’t want to be too distracted by corporate action or looking at kind of structural issues. We will focus internally on making the businesses work… www.summit.co.za Transcripts: 082 962 2772 tue/met Comments Related to this transcript: Comment on this transcript... Name : Email : Comments :