But the Ven­ters will re­main very in­flu­en­tial Al­tron share­hold­ers, with a strong in­ter­est in the tech group’s strate­gic di­rec­tion

Financial Mail - Investors Monthly - - Contents - LARRY CLAASEN

Ba­ton is passed at Al­tron

In May 2001, Al­lied Elec­tron­ics Corp (Al­tron) was host­ing a re­sults pre­sen­ta­tion for me­dia and an­a­lysts at its Park­town of­fices. The group and the Ven­ters, the fam­ily that owns and runs it, had just pre­sented some im­pres­sive num­bers.

Rev­enue had surged 28% to R9,8bn, op­er­at­ing in­come had risen 16,1% to R627m and head­line earn­ings per share were up 19,2% to 101,5c for the year to Fe­bru­ary 2001.

There was also a gen­er­a­tion shift with founder Bill Ven­ter’s youngest son, Rob­bie, tak­ing over the job of CEO from his fa­ther while Bill stayed on as chair­man. Over the next few years Bill’s old­est son Craig would make a name for him­self run­ning one of the sub­sidiaries, Al­lied Tech­nol­ogy Corp (Al­tech).

Look­ing at the num­bers, one scribe noted the fu­ture of the group looked as though it was in safe hands — which prompted an an­a­lyst to say things were go­ing well then but, if things went badly, “would Bill fire his own sons?”.

That was never go­ing to hap­pen. Al­tron is a listed com­pany but it should be seen more as a fam­ily busi­ness that has out­side share­hold­ers. With Bill Ven­ter hold­ing 56% of the shares, mi­nor­ity share­hold­ers have never been well po­si­tioned to push through an agenda not backed by the fam­ily.

The Ven­ter broth­ers were never go­ing to be forced out but this did not mean they would be run­ning the busi­ness for­ever. Even so, the an­nounce­ment ear­lier this month that Al­tron was look­ing to bring in out­side man­age­ment to even­tu­ally take over from the broth­ers came as a sur­prise.

Rob­bie Ven­ter says there was no spe­cific in­ci­dent that sparked this change, just a recog­ni­tion that there was no one to take over from them.

“Af­ter 50 years, Al­tron is tran­si­tion­ing into a new era and we recog­nise that a tech­nol­ogy com­pany like ours needs to con­tin­u­ally evolve. There is no ready third-gen­er­a­tion fam­ily man­age­ment and as a re­sult we will be tran­si­tion­ing to an in­de­pen­dent man­age­ment struc­ture in a phased ap­proach over time.”

Rob­bie Ven­ter de­clined to give a timeline for the change but stressed it was not im­mi­nent be­cause, as he put it, there were “a few crit­i­cal projects” that needed to be con­cluded and that was its im­me­di­ate pri­or­ity.

With the fam­ily pre­par­ing to give up man­age­ment con­trol, does this mean that it would con­sider re­lin­quish its shareholdi­ng in the group?

“Ab­so­lutely not,” he says. “The Ven­ter fam­ily plans to re­tain its shareholdi­ng in Al­tron and is still very com­mit­ted to the group from a share­holder per­spec­tive.”

He says that given the scale of its in­vest­ment in Al­tron, the fam­ily will still be in­volved in the group but in a more strate­gic as op­posed to an op­er­a­tional way.

It is hard to imag­ine the Ven­ter broth­ers sit­ting by as the com­pany they have been a part of and run for most of their ca­reers is taken over by an­other team. Their pas­sion for the com­pany is leg­endary. There are sto­ries, for in­stance, of Craig check­ing con­tracts that had al­ready been fi­nalised un­til 11pm and then tak­ing work home.

Though they are known for their com­mit­ment to the cause, Irnest Ka­plan, MD of Ka­plan Eq­uity An­a­lysts, points out that they cur­rently have more of an over­sight role and are not as op­er­a­tionally in­volved.

Even so, Ka­plan notes: “It re­mains to be seen if they can do it.”

News that they were look­ing to bring in out­side man­agers to run the group did come as a sur­prise to Ka­plan, but when he spoke to them it be­came clear that with­out a fam­ily mem­ber ready to take con­trol, this step “ba­si­cally looked in­evitable”.

Since Rob­bie be­came CEO in 2001, rev­enue has grown from just un­der R10bn to R27,6bn and the share price has risen from around R8 to R13,60.

The num­bers, how­ever, do not tell the full story. The group has also taken a few knocks un­der the broth­ers’ con­trol.

Its at­tempt to run a fi­bre net­work in Kenya cost it mil­lions and its video-on-de­mand ser­vice has run into prob­lems.

Its lat­est re­sults il­lus­trate the dif­fi­culty it has been go­ing through. Rev­enue was down 1%, it in­curred a R26m loss for the year and its share price has tum­bled from a year high of R27,75.

But this does not mean there is no value. At a PE of 14,89 there is a lot of value for a com­pany that has a record of pro­duc­ing good earn­ings — re­gard­less of who runs it.


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