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Altron delivers strong interim results

24th October 2022

By: Natasha Odendaal

Creamer Media Senior Deputy Editor


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JSE-listed technology firm Altron on Monday reported a significant surge in earnings during the six months ended August 31, performing well in a competitive industry despite South Africa’s economic challenges.

During the first half of the year, Altron reported a 467% increase in headline earnings per share (HEPS) to 34c, from 6c in the corresponding period the year before, with continuing operations HEPS increasing 240% to 41c apiece.

Earnings a share increased 340% to 24c from a loss a share of 10c reported during the six months ended August 2022.

Operating profit before capital items increased 57% to R255-million, while net profit after tax increased 420% to R96-million during the half-year under review.

Revenue increased by 15% to R5.3-billion.

“As a group, we delivered 15% revenue growth, operating income growth of 57%, while decreasing our net working capital by R47-million,” said Altron Group CEO Werner Kapp.

The group’s continuing operations achieved revenue growth of 21% to R4.6-billion, while the continuing operations’ net profit after tax increased more than 240% to R144-million during the period under review.

Altron’s Own Platforms segment reported a 16% year-on-year improvement in revenue to R1.63-billion.

Despite a change in sales mix and increased GSM costs to counter the impact of loadshedding, which had had an adverse impact on profitability, Netstar achieved revenue of R909-million, an 8.7% increase on the corresponding period last years.

Altron FinTech achieved a 35.5% surge in revenue to R542-million, with operating profit increasing 71.4% to R132-million, while Altron HealthTech increased its revenue by 9.3% to R176-million during the six months ended August 31.

“A reduction in switching transaction volumes owing to lower patient visits to doctors and pharmacies, as well as the adverse impact of loadshedding on doctors' operating hours, both contributed to a broadly flat operating profit of R43-million for the HealthTech business,” Kapp commented.

Meanwhile, the Digital Transformation segment recorded revenue of R1.37-billion, increasing 25.7% – inclusive of Lawtrust, which the company acquired on October 1, 2021 – with operating profit of R71-million representing a growth of nine times compared with the prior year.

In the first half of the year, Lawtrust recorded an earnings before interest, taxes, depreciation and amortisation contribution in excess of the original business case, showing that it had been successfully integrated into the Altron Security business.

Impacted by customers' reduced capital expenditure, global components shortages leading to prolonged lead times and a backlog in hardware sales, Altron Systems Integration achieved a 6% improvement in revenue to R933-million and a breakeven operating profit of R2-million.

“Altron Karabina's software sales delivered a significant performance contributing to the R171-million revenue and operating income of R11-million, which is an improvement of 11% and 175% respectively compared with the prior year.

“The high licence and software sales attributed to Altron Security's exceptional performance, tripling its revenue to R266-million and growing its operating profit of R58-million six times compared with the prior year,” Kapp continued.

In addition, the Managed Services segment posted revenue of R1.36-billion, which was a 16.6% increase on the prior corresponding period, and generated an operating profit of R21-million during the first half of the year, compared with a R9-million loss in the prior year.

“Altron Managed Solutions' revenue of R900-million is 17% ahead of the prior year and operating income of R19-million is up from its prior year loss of R5-million,” he said, adding that revenue from Altron Nexus increased 15.7% to R458-million, with an operating profit of R2-million.

Revenue from Altron Arrow also increased 26.4% to R321-million, driven by higher component sales created by the global shortages and the Enterprise Computing Solutions software business.

The revenue performance resulted in a 75% increase in operating income to R21-million.

Meanwhile, in the group’s discontinued operations, Altron Documents Solutions, increased its revenue by 11.6% to R558-million, while its operating profit of R10-million was ahead of the prior year's breakeven position.

Altron Rest of Africa's revenue increased 2.8% during the six months under review, while its operating loss of R52-million was a 333.3% decrease on the prior corresponding period owing to operating losses within the region.

“We are not immune to the climate of uncertainty, global supply chain constraints and inflationary pressures that all of us are subjected to daily. The continued global supply chain shortages, which result in longer lead times, inflated prices and a shortage in electronic components, impacted revenue pressure in our digital transformation segment, resulting in margin squeeze owing to increased prices,” he said.

Ongoing challenges, including the global components shortage, national blackouts, inflationary and currency pressures, continue to have an impact on the Own Platform and Digital Transformation segments.

“Despite the anticipated impact of these well documented challenges, we expect a solid second half performance with the majority of our businesses largely continuing to trend positively, with the group's robust balance sheet expected to be further strengthened,” Kapp concluded.

Altron declared a gross interim cash dividend of 16c a share, maintaining its dividend cover of 2.5 times headline earnings on continuing operations.

Edited by Creamer Media Reporter



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