Altium hints at plan to address US-China threat

Altium says its financial results will continue to be buffeted by the pandemic in the near term but the electronic circuitry design group has hinted it has plans to address a far greater threat – the trade battle between its two most significant markets, the US and China.

The company's software designs the electronic circuitry at the heart of a growing range of everyday goods that are being connected to the internet and it wants to become the unifying platform for the fragmented $US2 trillion ($2.8 trillion) electronics industry.

But Altium and the electronics industry as a whole straddle the key geopolitical fault line between the US and China and its plan requires dominance of both markets.

Altium needs to dominate both the US and China’s electronics industries if it wants to become the industry’s unifying platform for electronics design. Credit:Bloomberg

“We are very respectful of both cultures,” Altium chief executive Aram Mirkazemi told analysts and investors on Monday when asked about the risks posed by the growing rift between the two countries.

He said plans are afoot to help allay fears of its future in China where he said Altium's software was "interwoven into the fabric of the industry".

“We are working on a plan in China and that’s an exciting plan that I would be very happy to share when we are in a position to be able to share,” Mr Mirkazemi said without offering further detail.

Altium announced its 2020 financial results on Monday and beat earnings expectations, but flagged that the tough pandemic conditions, which has triggered downgrades in recent months, could see it miss earnings and margin targets for the current financial year.

As previously flagged, Altium missed its aspirational target for revenue of $US200 million for the year ending June 30 with sales of $US194.2 million. But it managed to increase its subscription base to more than 51,000 while reporting earnings before interest, tax, depreciation and amortisation a better than expected $75.6 million.

Mr Mirkazemi said the strong result allowed the company to lift its final dividend to 19¢ per share compared to an 18¢ final dividend last year.

“This is the hallmark of a company that is financially strong and a market leader,” he said.

Net profit dropped 42 per cent to $30.9 million as it sacrificed earnings to hit its subscriber target of more than 50,000 users for 2020.

RBC analysts said guidance for the 2021 financial year looks like it is below market consensus with mid points for sales expectations in a range of 5 to 7 per cent below the market and EBITDA is 2 to 7 per cent below.

Mr Mirkazemi said the company was on track to reach 100,000 subscribers by 2025, but it may take six to 12 months to achieve its 2025 revenue goal of $US500 million due to the COVID-19 impact.

Mr Mirkazemi also warned that the continuing impact of COVID this year meant it may not meet its rule of 50 where the company commits to ensuring revenue growth plus EBITDA margin is greater than 50.

While the company will strive to meet this goal in a pre-vaccine environment Mr Mirkazemi said Altium will need to contend with the evolving conditions.

Shares were up 1.8 per cent to $34.07 Monday afternoon.

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