Altron boosts EBITDA 14 percent as revenue gains six percent

JSE-listed technology company Altron has announced an increase in EBITDA of 14% to R1.8 billion in the year to end February, while revenue increased 6% to R16.7 billion during the same period.

Headline earnings per share from continuing operations were up 2% to 182 cents while basic earnings per share increased by 4% to 184 cents.

In light on the current economic upheaval from the Covid-19 pandemic and uncertainty thereof going forward, the company has decided that it would be prudent to preserve cash at this time and to declare a final dividend that is 40% less than would otherwise have been declared.

Altron’s medium-term guidance to double five-year EBITDA by 2022 remains unchanged. Group Chief Executive Mteto Nyati said the Group’s One Altron strategy is a winning formula and continues to be a success for Altron which is now a stronger company.

“My executive team and I have continued to embed the culture of collaboration across all our operations which has enabled us to better service our customers through delivering the full breadth of our expertise, solutions and product offerings. This has led to sizeable contract awards from Bet 365, Prudential, many local and National Government organisations in the UK, Standard Bank, Capitec, Coca-Cola Beverages Africa and Barloworld. Our overall customer Net Promoter Score improved to 46% up 10ppt,” said Nyati.
Three years ago, the company created a five-year roadmap under One Altron strategy with the focus being to prioritise revenue growth, improve profitability, transform the customer experience, and employee excellence.

“We have made good progress on One Altron’s goals. We have strengthened the group through the disposal of non-core assets, the rationalisation of operations and the execution of targeted acquisitions in high-growth areas.”

Despite low economic growth in South Africa and Brexit concerns in the UK, Altron’s operations continued to deliver growth. Bytes UK, which Altron is potentially unbundling to unlock value for shareholders, outperformed the market, with an EBITDA up by 66% to R611 million.

Netstar delivered strong customer growth of 16.5%. During the year, Netstar announced the launch of its global connected-car partnership with Toyota and Vodacom, rolling-out connectivity features and in-car WiFi on all new Toyota and Lexus models. This partnership positions the business well to grow further in the Smart IoT space.

The Digital transformation segment (excluding Bytes UK and Nexus) grew statutory EBITDA by 24.1%, Managed Services by 13.3% and the Healthtech and Fintech business delivered growth of 13.3%.

Altron Nexus was negatively impacted by the City of Tshwane Municipal Broadband Network judgement handed down against Thobela Telecoms. The new Nexus management team returned the business to profitability, delivering an EBITDA of R24 million from a loss of R25 million in the first half.

“Altron has implemented digital technology to keep its staff safe during the pandemic while allowing them to keep working throughout the lockdown,” said Nyati.

“We have seen an increase in interest from customers for more resilience in their remote information technology capabilities. As a key supplier of IT services into a market that needs greater security, resilient remote working capabilities and hybrid cloud, together with a revenue base that is 62% annuity income, this will provide a defensive platform to weather the Covid-19 storm.”

Despite Altron’s resilience, with 62% of its income being annuity based, Covid-19 is expected to have a negative impact of mid-single digit on last financial year revenues. To limit the impact on profitability, a number of cost savings initiatives have been implemented for the 2021 financial year which include cancelling all cash absorbing projects, freezing recruitment, promotions, and salary increases as well as halving all bonuses for Group Executive Officers, Managing Directors and First Line Managers for the 2020 financial year.

For the current financial year, Nyati said Altron would focus on converting the cloud computing pipeline projects of Altron Karabina into revenue in South Africa, improving the profitability of Altron Nexus, integrating Ubusha into the group, and capitalising on the digital transformation agenda to meet customer needs through offering a One Altron solution.

“We will also assess prevailing market conditions to forge ahead with the unbundling of Bytes UK at the most opportune time.”