Scary di­vi­sional break­down

Finweek English Edition - - COMPANIES & MARKETS -

IT WAS RE­ALLY GOOD tim­ing by Africa Cel­lu­lar Tow­ers (AC­Tow­ers) to co­in­cide the re­lease of news about a large Eskom con­tract with the pub­li­ca­tion of its an­nual re­port. Know­ing AC­Tow­ers has a R64m con­tract for three Eskom power line projects in the bag makes read­ing its lat­est an­nual re­port a slightly less omi­nous ex­er­cise. In­ci­den­tally, the Eskom con­tract is the same value as its trad­ing loss in the year to end-Fe­bru­ary 2010.

What’s clear from the re­port’s di­vi­sional re­view is that things haven’t gone swim­mingly in its main cel­lu­lar tower and equip­ment shel­ter busi­ness in Africa. Not only was turnover down by al­most half to R227m but ad­di­tional com­pe­ti­tion – from China and In­dia, it seems – also saw trad­ing mar­gins pounded. The re­port re­veals that in the year to end-Fe­bru­ary this year around 72% of busi­ness gen­er­ated by AC­Tow­ers was in Africa – most no­tably, Nige­ria (38%), Ghana (11%), Chad (9%), Su­dan (9%), Tan­za­nia (8%) and the Demo­cratic Re­pub­lic of Congo (7%). Not a great geo­graphic spread (SA rep­re­sented just 9%) when you’re billing in US dol­lars dur­ing a time of rand strength.

Its core cel­lu­lar tower seg­ment – which serves mostly African coun­tries – en­dured a hor­ren­dous year, with rev­enue more than halved to R192m and a loss of R47m against a R22m profit the pre­vi­ous year. Its equip­ment shel­ter di­vi­sion – which works hand-in-hand with its tow­ers di­vi­sion – fared even worse. Turnover was down from R75m to R14m.

The per­for­mance of AC­Tow­ers’ “tra­di­tional” busi­nesses would make most in­vestors look hope­fully at its newer sec­tors: power lines and fi­bre op­tics. Be­tween those two busi­nesses turnover was not much more than R20m, with a com­bined loss of around R7m. While its power lines busi­ness will ben­e­fit from its large Eskom con­tracts, Fin­week won­ders whether en­thu­si­asm for this year’s prospects shouldn’t be tem­pered slightly. In the an­nual re­port di­rec­tors note the power line seg­ment re­mains a com­pet­i­tive mar­ket with “im­mense pres­sure on mar­gins when ten­ders are quoted on”.

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