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ICT company continues to deliver on growth plans in H1

Altron group CE Mteto Nyati

Altron group CE Mteto Nyati

25th October 2018

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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Information and communications technology (ICT) provider Allied Electronics (Altron) continued to deliver on its growth plans and reduce its debt, and completed the divestment of noncore assets in the six months to August 31.

During a conference call on Thursday, the JSE-listed company noted that its financial performance continued to improve significantly with revenue from continuing operations having risen by 44% to R9.8-billion, while earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 16% to R686-million on a normalised basis.

This double-digit growth was in line with predictions made in September, when the company said it expected group revenue from continuing operations to increase by between 42% and 46% year-on-year.

The same did not apply to Ebitda growth, which was forecast to increase by between 24% and 28%.

Nevertheless, normalised headline earnings increased by 26% from R210-million to R264-million, while normalised earnings a share grew by 25% to 71c.

Overall net debt of R1.4-billion as at August 31 showed a meaningful improvement on the February 28 year-end position of R1.9-billion owing to higher cash generated from operations, as well as better working capital management.

This resulted in a 220% increase in free cash flow to R295-million, which enabled the group to allocate R249-million towards repaying its long-term loans during the period.

Altron group CE Mteto Nyati said the group’s international businesses continued to deliver growth, contributing 57% of the company’s revenue, while 35% of its Ebitda was realised from offshore operations, including operations in Australia.

Commenting on Altron’s UK operations, Nyati said it had had “an exceptional year”, and grew revenue by 109% and Ebitda by 90%, to R207-million.

“The performance of the business was positively impacted on by our acquisition of Phoenix Software in the last financial year, which added scale to Bytes UK, making it a significant player in the UK software market.”

Bytes UK further secured a five-year, £150-million contract with the UK’s National Health Service.

Altron’s South African CyberTech offering into the UK market is also gaining traction, Nyati said on Thursday.

Meanwhile, Netstar, a vehicle tracking company, is driving customer centricity and cost reductions, backed by strong revenue and Ebitda growth at an organic level, he added. Netstar is also under new leadership.

In total, the business reported an 11% increase in revenue and 14% improvement in Ebitda, with improved growth in its subscriber base, particularly in stolen vehicle recovery, with churn and retentions under close control.

Altron’s most recent Australian acquisition, EZY2C, is performing ahead of the prior year, with Altron’s total market share in Australia now at 9%.

Most recently, Netstar concluded a joint venture with an in-country equity partner to offer insurance and fleet telematics in India, which, according to Nyati, further adds to Altron’s global expansion plans for Netstar and will diversify offshore earnings.

Altron Bytes Secure Transaction Solutions (BSTS) also achieved double-digit growth in the period, with revenue up 15% and Ebitda 22%, driven by profit margins of 23% and a number of new contracts secured during the period.

The HealthTech side of the business continues to grow its ecosystems and platforms to deliver higher-value services to healthcare professionals, as well as the public health sector.

FinTech, meanwhile, is advancing its new product offerings into the unbanked environment, which presents a significant growth opportunity for this division, while the CyberTech division is seeing gains from the completion of its technology centre to provide security for customer networks.

Altron Bytes Systems Integration, Altron Bytes Document Solutions and Altron Bytes People Solutions achieved increases of more than 20% in Ebitda.

Altron Bytes Managed Solutions reported revenue and Ebitda largely in line with the prior year, while Altron Arrow reported a decline in Ebitda, primarily as a result of lower gross margin levels and overall market pricing pressure, together with exchange rate fluctuations and supply chain delays.

“In challenging economic conditions, the business maintained its leading component distributor position in this market and continues to work on key new lines of business, including driving its e-commerce solutions. It is well placed to deliver in the second half of the financial year through a strong order book on hand and sizeable new business opportunities,” Nyati said.

Additionally, also under the Altron umbrella, is Altron ARH, which experienced a challenging first half of the financial year. Altron ARH experienced a number of delays in public sector contracts, but continues to win and deliver on current broadband network opportunities, Nyati said.

Some of these network opportunities included, but were not limited to, the Phase 2 Gauteng broadband network contract – which is valued at R2.8-billion over three years – and builds on its momentum of evolving into the preferred safe city solution provider for the smart city evolution.

Referring to Altron’s disposal of noncore assets, Nyati on Thursday stated that the company had concluded the disposal of all controlled noncore assets.

“This allows us to fully focus the business on ICT services and solutions, and enabled us to position Altron as a trusted adviser for our customers’ digital transformation journey.”

On the acquisition front, the group acquired iS Partners for R225-million in June. The deal included the acquisition of Karabina Solutions, a Microsoft solutions business, and Zetta Business Solutions, which provides data advisory services. iS Partners adds to Altron’s existing Microsoft business offerings and will be integrated into the group in building a cloud and data analytics business of scale. 

“Our great performance continues to be driven by the One Altron strategy, which is anchored on organic growth, partnerships and selected acquisitions. We are committed to partnering with our customers in their digital transformation journey and providing end-to-end technology solutions and services that solve their business challenges,” Nyati concluded.

As a result of the positive results during the period, Altron, for the first time since May 2016, announced a dividend of 28c a share.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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