JSE-listed Altron has delivered an improved financial performance during the six months to August 31, 2021, as it continues to navigate a challenging environment.

During the first half of the year, the company achieved a 238% increase in headline earnings a share to 11c and an operating profit growth of 71% to R173-million.

Net profit after tax increased 159% to R34-million, while cash generated from operations increased 79% to R527-million and operating free cash flow of R81-million was up by more than 742% during the six months to August.

Revenue during the six months under review increased 2% to R3.5-billion.

“During the first half of the year, our business delivered a very resilient performance in the face of a challenging operating environment, demonstrating the benefits of our diverse and high-quality portfolio of businesses operating across the Own Platforms, Digital Transformation and Managed Services segments,” said Altron Group CEO Mteto Nyati.

The Own Platform segment performed well, generating R1.4-billion in revenue, up 6% from the corresponding period last year, while operating income expanded 27% to R251-million.

“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 produced revenue of R836-million, a 9% growth on the prior year, supported by the strong performance of Australia, while the South African business continues to focus on its transformation programme.

During the first half of the year, Altron FinTech recorded revenue of R400-million, with its operating profit of R77-million a 75% improvement on the prior year, while 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.”

The Digital Transformation segment recorded revenue of R1.1-billion, an 11% decline on the corresponding period last year.

Altron Systems Integration, which was still highly aligned to hardware sales and infrastructure integration, reported revenue of R863-million, down by R186-million on the prior year as customers held onto capital expenditure (capex) for larger projects owing to future uncertainties and protecting their liquidity, and 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,” he said.

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

Further, the finalisation of the LawTrust acquisition in October 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, he added.

During the first six months of 2021, Altron Managed Solutions’ banking segment came under pressure and the business embarked on a Section 189 restructure to address operational issues, while Altron Nexus encountered challenges owing to the freezing of capex and diversion of funds by its government customers to Covid-19 personal protective equipment and social development programmes.

The Managed Services segment incurred an operating loss of R9-million compared with the prior corresponding period’s profit of R21-million.

Meanwhile, Altron operations currently held for sale include Altron People Solutions (APS); Altron Document Solutions (ADS); Altron Rest of Africa (AROA); and Altron Arrow.

“We have been able to split the APS business and sell the business process outsourcing and customer experience technology business to iSON Xperiences, a global organisation with headquarters in Dubai which is looking to expand their African footprint. The Learning Solutions part of the business was acquired by South African management consultancy LRMG,” Nyati said.

“In respect of ADS and Altron Arrow, management are in discussion with prospective buyers and we are positive on the disposal of these operations in the short to medium-term.”

Further, after assessing its strategic footprint in Africa, Altron decided to disinvest from the AROA operations; however, the company will retain a presence in Africa through a partnership operating model.

Altron plans to continue its focus on the Altron 2.0 strategy 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,” Nyati added.

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.

In addition, the finalisation of the LawTrust acquisition will allow Altron to focus on driving security services in jurisdictions outside of South Africa and the board is considering potential acquisitions aligned to the Own Platform and Digital Transformation segments.