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Press Release

Altron Boosts Continuing Operations Interim Ebitda

Johannesburg, 22 October 2020 – JSE-listed technology company Altron has announced an increase in Continuing Operations EBITDA of 17% to R883 million for the first half of the year through to August 31, while revenue increased 14% to R8.4 billion.

Headline earnings per share from continuing operations were up 28% to 83 cents while basic earnings per share increased by 27% to 85 cents.

“Despite the economic upheaval from Covid-19 pandemic, the Board decided to pay an interim dividend of 33c per share, up 14% from the previous interim period,” said Mteto Nyati, Altron Group Chief Executive.

“The theme of our first half results has been dominated by the impact of Covid-19, which coincided with the start of our financial year. Management was well prepared for aspects such as remote working, liquidity management and was proactive in managing the cost base. Although collectively operations proved to be resilient during the reporting period, as seen by the total group’s overall EBITDA being slightly up from the previous year, as lockdown was extended, we required additional cost reduction measures.”

Several operations were negatively impacted during the period under review, such as Altron People Solutions, which could not carry out classroom-style training during the lockdown. Business Process Outsourcing also operated with reduced staff, negatively impacted revenue which led to an EBITDA loss.

However, Nyati said that several operations had benefited, including the Bytes UK operations, which were net beneficiaries of elevated need for remote connectivity. “Altron Karabina also benefited from accelerated cloud adoption as customers transitioned from on-premise data centres to cloud hosting and computing. Altron Security, comprising of the new Ubusha acquisition, assisted customers in addressing the increased security vulnerabilities as a result of elevated remote working.”

Severance pay as a result of Section 189 retrenchments amounted to R19 million, while the initiative to roll-back salary increases came into effect in May, resulting in two months of higher salary charges, amounting to R20 million. In addition, losses of R35 million were incurred as a result of the volatility in currency due to the global pandemic.

“Despite the difficulty of conducting business during Covid-19, we are very proud to have increased most of our key metrics year-on-year,” said Nyati.

Altron Nexus’ turnaround strategy implemented last year has seen the subsidiary return to profitability, reporting EBITDA of R56 million. “In the litigation matter between the City of Tshwane and Nexus, we are pleased with the unanimous verdict earlier this month where the Supreme Court of Appeal overturned, with costs, a previous judgment which set aside the contract on the basis of primarily internal processes not having been followed by the City.”

Nyati said Altron Nexus would recover all costs and any amounts outstanding under the contract, while engaging with its partners and the City regarding the way forward.

Altron’s Fintech operation has performed resiliently in recent years, but was affected during levels 5 and 4 of lockdown, as unsecured lending was not deemed an essential service in those phases.

Netstar, which grew its subscriber base 16.6% year-on-year to 860,000, proved remarkably resilient in the face of a poor operating environment with depressed new vehicle sales. It generated revenue at similar levels to the prior year on the back of a strong annuity revenue base coupled with the turnaround in the Australian operation, yielding revenue of R764 million and EBITDA of R297 million.

Altron Managed Solutions reported strong revenue growth of 23% to R690 million, biased to lower margin hardware sales.

Nyati said the company’s Executive Committee had identified Altron’s Document and People Solutions businesses as well as Altron Arrow electronic component distribution operation as offerings which, “despite being exciting businesses, did not fit Altron’s future strategy. These businesses are being treated as held for sale as management explores exit opportunities.

“We remain vigilant of a possible second Covid-19 wave and the potential impact thereof on the economy and our people. Nevertheless, our focus shifts to exciting growth opportunities including expanding our security offering and building on the solid performance of our most recent acquisition; Deepening our relationships with Microsoft and Amazon Web Services in sub-Saharan Africa to capture opportunities in the fast-growing Cloud Computing space; Scaling up our own, high margin, IP platforms in HealthTech and Fintech as well as vehicle Telematics in Netstar; and growing our Custom Application Development capabilities.”

Altron 2.0 is currently under development and will be communicated in due course. This new five-year medium-term plan for the Group will guide Altron’s future as it becomes highly differentiated in its offerings.

“Altron 2.0 will still have ‘Delivering Innovation that Matters’ as its core guiding purpose and will include carefully selected acquisitions that are aligned to our growth areas in local as well as international geographies. Margin expansion and a high annuity base will be core objectives, concluded Nyati.”

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