Technology firm Altron has put a for-sale sign on one of its subsidiaries after it lost a lucrative Gauteng broadband network contract to MTN, and warned that the dire finances of the City of Tshwane puts in doubt its ability to pay suppliers.
The share price of Altron shed more than 5% on Wednesday after it warned investors to expect a plunge in earnings of up to 288% in the six months to end-August.
The group said it will have to let go of workers after losing out on the next phase of the lucrative Gauteng Broadband Network (GBN) to provide fibre connectivity across the province. The firm, valued at about R3.2bn, has had the contract since 2014. It said that having implemented phase one and two of the project, there was an expectation it would also be awarded the third phase of the project.
The technology firm’s Altron Nexus subsidiary was first awarded a R1.2bn contract in 2014 to build a 1,600km high-speed fibreoptic network in Gauteng as part of the national government’s broadband target to achieve full connectivity in the province by 2030, but confirmed on Wednesday that it did not receive the contract for the third phase of the project.
“The fact that GBN phase 3 was not awarded to Altron Nexus has necessitated ... a full business review, including the associated operating model of Altron Nexus,” the firm said.
Altron has set aside R11m for costs associated with the retrenchments.
Business Day reported on Tuesday that MTN was awarded the R1.7bn contract to provide wireless internet and other telecom services to the provincial government, citing a source with direct knowledge of the matter.
Altron said it had taken a decision to classify Altron Nexus and its sister company Altron Document Solutions as held-for-sale in its books as it looks for buyers for the entities.
The group also has to contend with the poor finances of the City of Tshwane, where it is subcontracted under a company called Thobela Telecom (TT).
The company said the municipality’s growing debt burden has cast doubt on its ability to pay its suppliers.
Tshwane is in dispute with the main contractor, Thobela, and the matter has gone to arbitration. Altron has made a R200m provision in its books in case the city is not able to pay it.
“The raising of the City of Tshwane provision is purely for accounting purposes and does not impact on the arbitration proceedings by TT against the City of Tshwane, which are progressing well but will take some time, possibly several years, to finalise,” it said.
“These proceedings are, by their nature, confidential. Even if the arbitration proceedings are finally determined against City of Tshwane, there is no certainty as to whether City of Tshwane will be able to discharge an adverse arbitral award, and current indications are to the contrary.”
Altron has shifted its focus over the past few years — including the sale of its ATM hardware and support business units in 2023 — to growth areas such as the cloud, data analytics, the internet of things, and security. Its Netstar unit has lost ground to competitors such as MiX Telematics and Cartrack.
Altron said on Wednesday its strategies to improve profit are making headway, especially at Netstar and Altron Systems Integration, its largest businesses.
CEO Werner Kapp said management is reviewing all operations to ensure they are “strategically aligned and have performance optimisation plans in place. Unfortunately, this process together with recent market developments has resulted in further provisions in Altron Nexus and Altron Document Solutions, which are accounted for in discontinuing operations.”
The company’s shares, which were down as much as 12% after the announcement, were trading 7.26% lower at R7.15 in afternoon trade. With Mudiwa Gavaza
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