Altron delivers solid performance in challenging environment

25 October 2021, Johannesburg – JSE-listed technology company Altron has announced its interim results for the six months ended 31 August 2021, which saw revenue up by two percent to R3.5 billion. The company saw cash generated from operations up 79% to R527 million and an interim dividend of seven cents per share declared.

Headline earnings per share increased 238% to 11 cents per share, while operating free cash flow of R81 million was up by more than 742%.

Altron Group Chief Executive Mteto Nyati described the half year results as “a very resilient performance in the face of a challenging operating environment”.

“The benefits of our diverse and high-quality portfolio of businesses operating across the Own Platforms, Digital Transformation and Managed Services segments resulted in Altron delivering an operating profit growth of 71%.”

Business unit wins

The Own Platform segment performed well, generating R1.4 billion in revenue, up six percent against the prior year, while the operating income of R251 million grew by 27%.

“Our Business Transformation Programme within Netstar South Africa yielded positive operational improvements which saw the brand reach one million subscribers, representing an 18% growth year on year,” said Nyati. Netstar’s revenue of R836 million was a 9% growth on the prior year, supported by the strong performance of Australia. Altron FinTech achieved revenue of R400 million, with its operating profit of R77 million a 75% improvement on the prior year. Altron HealthTech’s revenue of R161 million and operating profit of R44 million remained stable.

“The acceleration to digital transformation benefited Altron Security and Altron Karabina, as they aided customers to migrate their platforms into cloud-based solutions and offered enhanced digital security protection in mitigating the increased threat from what we see as our new way of working.”

Nyati said Altron Systems Integration’s revenue of R863 million, down by R186 million on the prior year due to customers holding onto capital expenditure, had adversely impacted the entire digital transformation segment for the financial period. “This business has been realigned to simplify its offerings to its customers, and right-sized to focus on the identified high growth areas of Cloud, Data, DevOps and Security. This has set the business up to focus on achieving its second half expectations.”

Altron Karabina’s revenue growth at 43% was tracking well and the operation continued to leverage the strong relationship it had built with Microsoft.

This month’s finalisation of the LawTrust acquisition will enhance the digital security growth area and contribute to a high-annuity base for Altron Security go to market with their own IP offering in respect of the Signing-Hub and advanced digital signatures.

Altron Managed Solutions’ banking segment came under pressure during the half, and the business has embarked on a Section 189 restructure to address operational issues.

Altron Nexus encountered challenges due to the freezing of capital expenditure and diversion of funds by its government customers to COVID-19 PPE and social development programmes.

The Altron People Solutions business was split and has been sold. Commenting on other discontinued operations, Nyati said the disposal of Altron Document Solutions and Altron Arrow operations would happen in “the short to medium-term”.

Business impact of COVID-19

Nyati said that 53% of the workforce had been vaccinated and a further 19% were planning to do so in the near future. “We have chosen to encourage our staff to vaccinate instead of going the mandatory route.”
Pressure on the global supply chain will impact order lead times, affecting operations such as Altron Managed Services, Altron Systems Integration, Netstar and Altron FinTech. “This may have an adverse impact on increasing inventory levels, and management will mitigate this risk accordingly.”

Key focus areas

Looking ahead, Nyati said that the Altron 2.0 strategy would continue to be embedded for the remainder of the financial year. “We are positive about the Group’s growth in automation, cloud computing, data and security aligned with the segments in which we operate. We are focused on driving high annuity revenue, ownership of intellectual property and capital light operations. The finalisation of the LawTrust acquisition will allow us to focus on driving security services in jurisdictions outside of South Africa. The Board is considering potential acquisitions which are aligned to the own platform and digital transformation segments.”

Having assessed its strategic footprint in Africa, the Board decided to disinvest from Altron Rest of Africa operations and at the end of H1, Altron will retain a presence in Africa through a partnership operating model.

Nyati said key focus areas for the second half of the year included the acceleration of profitable revenue growth for Altron Systems Integration, and building and qualifying the acquisition pipeline, while disposing of Altron Document Solutions and Altron Arrow.

“We will continue to focus on attraction and retention of key and critical skills to drive our business and its future success.”

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