The Altium Limited (ASX: ALU) share price will be on watch today after it was announced that it was going to sell the TASKING business for US$110 million.
Why is Altium doing this?
Altium will get US$100 million upfront from buyer FSN Capital, and another US$10 million which is conditional on achieving revenue targets in FY21 after the divestment. It’s expected to close by March 2021, subject to the usual conditions.
Management explained that Altium 365, which is the company’s cloud platform offering, is generating momentum. Altium believes Altium 365 is critical for long term shareholder value. This divestment allows the company to purely focus on its vision and to fast-track the building and acquisition of complementary assets.
Altium CEO Aram Mirkazemi said: “The strategic divestment of TASKING combined with our recent organizational changes and hard pivot to the cloud marks an inflection point for Altium in its pursuit of industry transformation. While TASKING is a great business, it does not play a central role in our design to realisation strategy for the electronics industry, which is being delivered through our new cloud platform Altium 365. The divestment of TASKING will free up organisational capacity and allow Altium leadership to focus on our main game, which is to expand Altium 365 and accelerate its adoption.”
What will the financial impact be?
Altium said the sale will boost profit/earnings per share (EPS) in FY21, which will reflect the profit made. The FY21 first half result will include TASKING because the sale will close in the second half.
The software business said the first half performance remains solid, however the effect of this transaction and ongoing COVID-19 impacts in the US will have an effect on the historic 45/55 revenue split.
However, Altium remains confident of achieving its full year guidance when adjusting for the sale of TASKING where the revenue and profit won’t be generated in the second half.
Summary thoughts
If Altium believes the divestment will help it achieve its main objectives, then this could be a fair move. Management didn’t exactly word this update as a clear profit warning against its guidance, but it did sort of hint at it – we’ll get more info at the half year result in a couple of months.
As long as Altium is successful with its Altium 365 goals, then the longer term should work out. But there are other ASX growth shares I’d prefer to buy for my portfolio including Pushpay Holdings Ltd (ASX: PPH).
