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Altron H1 results dragged by discontinued operations, continuing operations shine

Altron CEO Werner Kapp discusses the financial results for the six months to August 31, 2023

13th November 2023

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

     

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JSE-listed Altron has reported a 54% decrease in group earnings before interest, taxes, depreciation and amortisation (Ebitda) to R268-million during the six months to August 31, 2023.

While the company’s core continuing operations delivered strong results for the period under review, Altron’s group results were impacted by provisions and impairments, collectively non-cash adjustments, in two noncore subsidiaries.

This included Altron Nexus, with R334-million in relation to the restructuring of Altron Nexus owing to the loss of the Gauteng Broadband Network contract and the City of Tshwane exposure, and R95-million for Altron Document Solutions.

Altron Nexus and Altron Document Solutions remain classified as held-for-sale in discontinued operations.

During the period under review, Altron posted an operating loss of R106-million, down from a profit of R248-million in the comparative period last year.

Group revenue, including discontinued operations, increased by 3% to R5.5-billion during the first half of the year.

However, the group’s core continuing operations, which exclude Altron Documents Solutions, Altron Nexus and Altron Rest of Africa, continued to deliver strong results in the period under review.

Excluding Altron’s ATM Hardware and Support Business, which was sold on July 1, 2023, Ebitda improved 26% to R709-million and operating profit increased 32% to R352-million.

Including the ATM business, Ebitda increased 21% to R724-million and operating profit increased 25% to R362-million.

Revenue from the continuing operations, adjusted for the sale of the ATM business, increased 11% from R3.6-billion in the first half of 2022 to R4-billion during the current first-half and, including the ATM business, increased 4% year-on-year from R4.1-billion to R4.3-billion.

Headline earnings a share increased by 19% to 50c, with earnings a share flat at 38c apiece, negatively impacted by a goodwill impairment raised at the Altron Group level of R33-million in relation to Altron Nexus, during the six months to August 31, 2023.

“We are executing on our strategy to become the leading platform and information technology (IT) services business in our chosen markets. We are in the early phases of our journey, however, the successful profit improvement strategies in Altron Systems Integration and Netstar, together with focused execution on our growth levers, have delivered pleasing results. Operating profit in our core operations increased 25%,” said Altron Group CEO Werner Kapp.

“This positive momentum, which is yielding improved cash flow generation, combined with our strong balance sheet, allowed us to positively adjust our dividend payout [by 56% to 25c a share] to improve distributions to shareholders,” he added.

He further explained that the company’s discontinued operations had been restructured, management had been strengthened and profit improvement strategies implemented to return these businesses to profitability while managing them for value through their disposal process.

In the first half of the year, Netstar achieved subscriber growth of 26% to more than 1.5-million, achieving over 80% of the total subscriber growth it generated for the full 12-month period in 2023, with net customer additions improving 91% to 187 273.

“Netstar surpassed the billion-rand revenue mark for the first time in a six-month period, with revenue growing 12% to R1-billion and Ebitda growing 21% to R364-million.”

Altron Systems Integration achieved a 5% increase in revenue and a 127% increase in Ebitda to R34-million, with its operating profit generated of R31-million amounting to 80% of the total operating profit earned cumulatively over the past three years.

Altron Karabina delivered an increase in Ebitda of 29%, underpinned by an 8% increase in revenue and improved margins, while Altron Arrow delivered strong revenue growth of 32% to R424-million and Ebitda growth of 65% to R38-million.

Meanwhile, effective March 1, 2024, the Altron Group will simplify its operating model through combining the businesses of Altron Systems Integration, Altron Karabina and Altron Managed Solutions into a new unified Altron Digital Business.

The benefits include improved cross-selling, collaboration, removing cost duplication and providing an integrated value proposition with improved solutions for customers, said Kapp, noting that the Altron Digital Business, together with Altron Security, will together form part of the new IT Services segment.

Netstar, Altron FinTech and Altron HealthTech will continue to operate as part of the Own Platforms segment and Altron Arrow will operate separately under a new Distribution segment.

Edited by Creamer Media Reporter

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