The success of the One Altron strategy has set the base for the Altron 2.0 strategy; however, some “tough” choices had to be made to reposition the company for its new growth path amid economic turmoil and a global pandemic.
The group, which has over the past few years focused on a vision of One Altron, is targeting a growth pace faster than that of gross domestic product (GDP), and has had to structurally adjust the company in order to set itself on a path to achieve its new targets.
Despite the success of the One Altron strategy, the Covid-19 pandemic and its impact, combined with significant economic challenges, has necessitated some “difficult choices” by Altron, said group CEO Mteto Nyati.
“We came to the conclusion that a number of our operations needed to trim down to be much more leaner,” he told delegates during the virtual Altron Capital Markets Day, noting that it had impacted 650 employees.
He pointed out that it was also about the survival of the company, enabling it to emerge out of the challenging operating environment leaner, stronger and much more relevant to its customers.
The structural changes, including a standardised and aligned digital workplace, will save the company some R100-million a year.
Further, the group concluded its restructuring of the head office in February, unveiling a fit-for-purpose operation in line with what is required in the new 2.0 structure and realising further savings of R80-million a year.
“Altron 2.0 is positioned well for the future,” Nyati assured.
Altron will now turn its focus to the tripling of its operating income, delivering leading returns in the information and communication technology (ICT) space, delivering best-in-class customer service, becoming the best place to work, maintaining a net debt to Ebitda of less than 1 and becoming a responsible Environmental, Social and Corporate Governance company.
“Our goal is to triple our operating income over the next five years from a base of R451-million,” said Altron group CFO Cedric Miller.
The company is targeting organic revenue growth in the low double-digits and a reduction in working capital and debt levels.
A core focus will be the exit of identified noncore assets that do not fit with Altron’s three core segments, namely managed services, digital transformation and its own platform.
“We require each and every one of our operations to fit within those three segments,” Nyati commented.
The ambitions of low capital intensity will mean the disposal of Document Solutions, Arrow and People Solutions.
“[The disposal] of those businesses will significantly reduce the amount of capital that is tied up in those businesses,” he explained.
A number of stakeholders have expressed interest in these companies, with five parties interested in Document Solutions, four interested in Arrow and 15 in People Solutions.
The company’s organic growth ambitions will be supplemented by carefully selected bolt-on acquisitions which are aligned to the growth areas in local and international geographies and plug the identified gaps in solution offerings.
In particular, bolt-on acquisitive activities will be narrowed to addition of capabilities and the offerings missing in Altron Security and to build on the offshore contributions of Altron Netstar.
“Our approach to growth is not acquisitive. However, we will continue to choose and make acquisitions that helps us to acquire skills or capabilities in certain areas. But most of our growth is going to be largely organic driven by the potential that we'll continue to have,” Nyati explained.