External
Relationships


HIGHLIGHTS

  • We have centralised our client relationship management, ensuring that relationships with customers remain strong at a group level
  • Investor confidence in the group has improved
  • Our environmental footprint has reduced significantly, as most of our core operations are service-based, producing minimal emissions or waste

CHALLENGES

  • Retaining investor confidence through a difficult period
  • Maintaining predictable and sustainable business relationships with the public sector
  • Aligning our supplier base with B-BBEE procurement requirements

PERFORMANCE SUMMARY

2017 Core Non-core 2016 Core Non-core 2015
GHG emissions (tCO2e) 104 933 29 469 75 465 142 203 28 809 113 394 159 935
Electricity consumption (MWh) 86 196 18 525 67 671 124 221 19 499 104 722 134 934
Water sourced (kl) 276 547 81 025 195 522 409 909 82 320 308 873 507 283
All waste generated (t) 22 412 473 21 939 15 480 524 14 956 13 494
Total municipal waste generated and sent to landfill by group company (t) 1 175 310 866 1 964 319 1 650 2 276

MATERIAL ISSUES

In our rapidly evolving markets, relationships with key external stakeholders help us to gain access to opportunities, mitigate risk and provide the products, services and solutions our customers require.

Maintaining relations with investors, clients and customers, government and parastatals, strategic partners and suppliers is therefore essential to Altron and we prioritise and manage relationships with each of these groups carefully. Our relationships with our investors and external financiers have been particularly important over the recent difficult period and remain so as we move into a prosperous era. Going forward, our strategic partnerships will begin to take on an increasingly critical role in the business as we evolve our new ICT-focused strategy.

Limiting the environmental impact of our operations is also important in retaining our reputation as a good corporate citizen.


OUR APPROACH

Altron depends on its relationships with various external stakeholders. Each group enables us to do our business smoothly and efficiently so that we, in turn, are able to create value for each of them. We prioritise the maintenance of each of these relationships by keeping these stakeholders informed and by gathering their input through a structured, centralised system, which guides us in making our key strategic decisions.

We manage these relationships at an individual, business and at a group level as required, with ultimate accountability as follows:

External stakeholder Relationship accountability
Clients and customers All businesses and employees, in a multi-tiered structure, taking lead from the CE and management
Investors Altron board, CE, CFO, Exco, group secretarial, investor relations
Government and parastatals CE, Exco, key account executives
Strategic partners CE, Exco, business management
Non-strategic suppliers Group procurement
Environmental footprint Group sustainability


FEEDBACK ON 2016/17 COMMITMENTS




KEY RISKS

RISKS KEY MITIGATION STEPS
  • Reputational risk
  • We have worked hard to regain and retain the confidence of our shareholders in the difficult transition period. We have focused on structuring the business around a sustainable core and on creating maximum value for shareholders.
  • The investment in Altron by Value Capital Partners (VCP) and institutional investors such as The Public Investment Corporation and Sanlam Investment Management after year-end has provided significant reassurance to investors.
  • Customer concentration
  • A white space analysis within our most strategic client relationships has uncovered gaps and opportunities within our client base.
  • We are conscious of the need to diversify our client base, particularly in the public sector, and are taking steps to do so.
  • Effectiveness of sales function
  • We have created sales internship and learning programmes that will enable diversification of our service offerings.

CLIENTS AND CUSTOMERS

Business context

Our clients’ satisfaction is paramount to our ability to attract and retain future business. We pride ourselves on anticipating our customers’ diverse needs and on delivering quality, innovative, tailor-made solutions to our clients. The longevity of many of our client relationships speaks to our customers’ satisfaction in this regard. However, we are conscious that these relationships require ongoing investment and continual revision to ensure that we are meeting our clients’ needs.

The rationalisation of the business has positioned us to take a more centralised approach to our client relationship management, both through formal shared services systems, and through enabling and encouraging more informal collaboration and communication within the group.

Our performance

Our goal is to become a partner to our customers by embracing the same goals, priorities, timelines and expectations. We have taken a deliberate and focused approach this year to building, maintaining and managing our client and customer relationships. New customer acquisition has been a priority, as we drive growth in our customer base. We have succeeded in improving and streamlining our account management competencies, although this will be an ongoing process.

As expected, our rationalisation of the business, together with moving to a shared services model, has encouraged collaboration and communication within the group, which has positively fed our approach to customer engagement. We are moving from reviewing how each separate business within the group is performing vis-à-vis each client, to considering our overall group relationship with each client. This is an important aspect of driving our holistic approach to delivering relevant, integrated product and service offerings (see more information regarding how we have deepened and broadened our approach to understanding our clients’ unique product and service needs here).

The shift to a group-wide client approach will be assisted by the implementation of Salesforce, which Altron will roll out as part of the group’s shared services model. This technology offers a single view of each customer, their history and their unique requirements, and therefore helps to centralise and manage client information and relationships and ensures a primary point of contact with each client. Through this centralised system, and by encouraging collaboration among different teams, we can draw from and tailor expertise from across the group, which we anticipate will contribute to improving the quality of our service delivery.

In 2017 we again conducted client satisfaction surveys at operational level, which enabled us to gauge our customers’ needs and to be more proactive and forward-looking in our relationships with our clients and customers. Most of the Altron business divisions measure the quality of their client relationships using the Net Promoter Score (NPS), which provides an overall measure as to how likely clients and customers are to recommend a business based on their relationship or a recent interaction with a company.

This year we were particularly proud of MediSwitch, which scored a NPS of 85%, and of Altech Netstar, which received a NPS of 81%, a notable improvement from the previous year’s 72%. Bytes Document Solutions (BDS) received a NPS of 54%, down from the previous year’s 63%, which decline is being addressed by the operational management of BDS.


Revenues within key client accounts have increased 4% year-on-year as the result of more targeted client relationship management through our key account executive (KAE) programme.


Going forward, as we move to view and serve our clients from a group rather than a divisional perspective, we hope to measure customer satisfaction in a standardised way at a group level.

This year we also conducted a white space analysis within our most strategic client relationships as part of our key account executive (KAE) programme. This is a strategic market analysis that uncovers unmet needs within our client base to show where there are opportunities for new products and innovations or adjacencies. We use the results of these reviews to maintain an open communication with our key clients regarding their priorities.

INVESTORS

Business context

We have worked hard this year to regain and retain the confidence of our shareholders. The group has undergone a difficult period of change, and as we move onwards towards a period of consolidation and growth it is of the utmost importance to us that our investors continue to trust in Altron – in our management, our company, our sustainability and our strategic vision.

As at year-end the Venter family remained the largest shareholder, with 57% voting position and a shareholding of approximately 18%. Subsequently, the shareholding has been changed by the investment of Value Capital Partners (VCP), which has acquired a 15% stake in the group, but the Venter family has retained all of its shares.

Our performance

This year Altron has placed particular priority on the preservation and creation of overall value for its shareholders. We have begun to analyse each of our businesses’ portfolios with regard to their operating models and their sustainability going forward, to provide a more solid long-term view of the group and enable us to make adjustments in order to create maximum value going forward.

We remain committed to regular, transparent communication with all of our investors as there is still significant work to be done in the period ahead. We engage with investors through our quarterly and annual reports, results presentations, road shows and company visits to provide our current and potential investors an overview of our operations and our performance.

In 2017 we again issued a number of announcements that have affected our shareholders. We ensure that these announcements are always prompt and candid. Of most notable importance this year was the announcement regarding the proposed investment in Altron by VCP, which was concluded after year-end.

Looking forward, while most interaction with investors will remain the ambit of the executive management, we expect that the group chairman will take on a more active role in investor relations management, for example, through attending annual investor road shows.

GOVERNMENT AND PARASTATALS

Business context

Long-term government contracts represent significant growth opportunity for the group, which is particularly important in tough economic times when other sectors slow their expenditure. In addition, government fills the roles of regulator and influencer through frameworks, policy and legislative direction. We prioritise regular engagement with government, not only as a customer but also to remain abreast of industry developments.

Our performance

As an active corporate citizen in the ICT industry Altron communicates openly and regularly with government regarding the inherent competitiveness of the industry, new technologies and trends, benefits and efficiencies. We engage with government on a formal basis through various bodies such as Business Leadership South Africa (BLSA), Manufacturing Circle and the National Business Initiative (NBI).

As a service provider we remain committed to and focused on government – at a local, metro and municipal level. Altron is strongly positioned to serve government’s unique requirements, particularly to execute plans in connectivity and digitisation through its end-to-end value-add service offerings.

We work hand in hand with public sector clients to address their needs, to enable government to be an efficient consumer of ICT, and most effectively to address the developing digitisation needs of the country. We value our long-term public sector relationships and tend to view these contracts not as transactions, but rather as longer-term value-adding interactions. We do, however, remain conscious of the need to diversify our client base.

We are currently working closely with our government partners in rolling out broadband networks and to provide solutions in the healthtech space. The eHealth@Joburg facility, for example, is an electronic health record system developed by Med‑e-Mass that enables 81 clinics in the City of Johannesburg metro to keep track of their patients efficiently and effectively. The facility conforms to the National Department of Health’s Health Normative Standards Framework (HNSF).

STRATEGIC PARTNERSHIPS

Business context

Through our long-standing relationships with both local and international partners Altron is able to gain access to a diverse array of high-quality products, services and intellectual property. We leverage the IP of our strategic partners to enable us to deliver the most innovative solutions to our customers and clients. In turn, we then add our implementation expertise to enhance and localise these solutions. As a result we place great importance on these relationships with our strategic technology partners.

Our performance

Strategic partnerships and joint ventures with international suppliers and original equipment manufacturers (OEMs) are fundamental to how we do business as a technology-focused group. They give us access to the latest innovations and research and development across the globe, which enables us to remain competitive and to meet our evolving customer requirements in a cost-effective manner. By maintaining a variety of strong, non-exclusive relationships, we open ourselves to opportunities available in the market.

Some of our international technology partners include Cisco, Dell, Huawei, Kronos, Microsoft, NCR, Unisys and Xerox. In 2017 we announced the partnership of Altech Radio Holdings and Bytes Systems Integration with Nokia, which was finalised in December 2016. We are looking forward to the new innovations that this partnership will bring.

For many of our partners we are their largest supplier or reseller. We add value by cultivating their innovations, and through the application, localisation and implementation of their technologies. Many of our strategic partner relationships are long-standing and are given high priority within the group, nurtured by senior leaders – including our chief executive.

This year we have focused on renewing and maintaining our existing international and OEM partnerships, building on an established culture of trust and collaboration. We maintain an “open door” policy with these partners and engage often – both formally and informally – in order to ensure that each of these primary relationships continues to offer mutual benefit and produce tangible outcomes.

SUPPLIERS

Business context

While our primary technology partnerships are important we continue to engage with a significant base of non-strategic suppliers across the group. These suppliers remain critical to our ability to fulfil our obligations to our customers and clients.

Our performance

As we have moved out of our non-core manufacturing operations, our procurement profile has shifted substantially, away from commodities and raw materials, towards more value-adding technology and products. Many of these requirements can be met only by overseas suppliers, specifically as OEMs, although we look for local suppliers wherever possible.

This year we reviewed our supplier groups to determine their strategic value to the group. This process enabled us to establish which relationships should be enhanced, which should be discontinued and gaps where we can look for opportunities to form new supplier relationships. In this way we continue to evolve as a group, ensuring that all our relationships add strategic value to our business.

Subsequent to the amended B-BBEE ICT Sector Code coming into force, procurement is one of our key transformation focus areas, and this consideration will inform our recruitment of new suppliers.

ENVIRONMENTAL MANAGEMENT

Business context

Previously the majority of Altron’s environmental impact emanated from the manufacturing operations within Altron Power, which have been classified as non-core. Now, as a predominantly service-based business, our environmental impact is significantly reduced and as a consequence our environmental footprint has become less material to the group.

Nonetheless, we remain committed to proactive environmental initiatives and we are continuing to strive to make the most efficient use we can of our natural resources. Our aim is to find creative ways to use our technology to become more environmentally responsible – thereby creating cost-saving opportunities for both Altron itself and our clients.

In tracking our environmental data we have begun to separate core and non-core operations, which creates a more accurate baseline for future measurement so that we can set realistic reduction targets in the coming reporting period.

Our performance

Energy and emission management

In 2017 we once again participated on a voluntary basis in the Carbon Disclosure Project’s (CDP) climate change programme. Altron scored a “B-”, which indicates a “Management” score level (the second of four consecutive levels). The industry average score is “C”. Companies at Management level are found by CDP to be taking further steps to effectively reduce emissions, indicating more advanced environmental stewardship. The score is benchmarked against peer companies from the Industrials sector. Going forward Altron will be reclassified into the Information Technology industry.

The group’s carbon footprint, including Scopes one, two and three greenhouse gas (GHG) emissions, declined by 26% in 2017 (2016: -11%). However, this was mainly due to the exit of Powertech Cables from the group in June 2016, as well as the closure of offshore branches within Altech UEC.

Scope two emissions (from electricity purchased) remains the greatest proportion (83%) of the group’s total emissions. In total the group consumed 86 196 MWh during the year, 31% down from the 124 221 MWh consumed in 2016. Again, this reduction is due to the disposal and exit of non-core manufacturing operations.

Water management

South Africa has continued to experience extreme water shortages across the country. While our core operations have not been operationally affected by restrictions, we are conscious that, as a group, we must strive to do our part in conserving this resource. Overall in 2017, the group sourced 276 547 kl of water, 33% less than in 2016. This was again due to the disposal and closure of non-core facilities.

As a result, in 2017 we have started a trial to move away from plastic bottled water and instead installed an atmospheric water generator in our head office, which generates drinking water through condensation. We have calculated an average saving of R8 per litre of water produced through this technology. This trial has been extended to our Cape Town offices, where the drought has been particularly severe. These water-saving measures, while not material to the group’s performance, create greater understanding of the importance of water preservation among our employees, and the broader management of water as a scarce resource within operations.

Waste management

Municipal waste sent to landfill remains a generic waste type across all our operations and reduced 40% in 2017 (due to loss of non-core operations). Since 96% of the group’s total waste is produced by non-core operations, our total waste figure rose in 2017 as a result of Altron Power’s total waste increasing from 14 960 tonnes to 21 422 tonnes. This was mostly due to the business’s disposal of hazardous waste generated through Powertech’s battery recovery activities.

We continue to encourage recycling of waste, especially glass, paper, plastic and metals within our office environments.


LOOKING AHEAD

Going into 2018 we will continue to prioritise our relationships with each of our external stakeholders, communicating with them regularly to understand their needs and continuing to create value through mutual benefit.

Every year, we commit to serving our clients and engaging with our suppliers in the professional, individual, expert manner that they have come to associate with the Altron brand and 2018 will be no different. In the coming year we will continue to pursue new partnerships to enable delivery of cloud services, big data analytics and data visualisation to our customers. Our investors will remain an important priority, and we will continue to prioritise their interests and to engage regularly and openly with them.

In terms of our environmental impacts, we believe that improving our footprint is important to the group, not only as a good corporate citizen, but also because more efficient use of natural resources can be a significant source of cost savings and risk mitigation, for us and our customers.

As we continue to move our focus away from manufacturing and towards our service-based operations, we expect that our footprint will naturally continue to decline and this will become a less material issue to the group as a whole. Going forward we will also be able to explore more relevant and appropriate environmental metrics and indicators within the ICT sector, where we have previously applied generic indicators to obtain a common view across the group.