ALTRON’S share price increased by 8.9% to R8.99 yesterday even though group headline earnings fell by more than 100% to a headline loss per share of 63 cents, following significant restructuring write-downs.
The interim dividend, however, was up 56% to 25 cents per share, supported by an increase in the dividend payout ratio from at least 40% to at least 50% of headline earnings from continuing operations.
“We are in the early phases of our journey, however, the successful profit improvement strategies in Altron Systems Integration and Netstar, with focused execution on our growth levers, delivered pleasing results,” said the CE Werner Kapp. He said their aim was to be the leading platform and IT Services business in their markets.
The operating loss before capital items came to R106 million in the six months to August 31 from a profit of R248m at the same time a year before.
Provisions and impairments were raised in two non-core subsidiaries: Altron Nexus of R334m, in relation to a restructuring process necessitated by the loss of the Gauteng Broadband Network contract and the City of Tshwane exposure, and Altron Document Solutions of R95m, which included a goodwill impairment raised at Altron Group level of R33m in relation to Altron Nexus.
Headline earnings per share of continuing operations rose 19% to 50 cents.
Revenue of continuing operations increased 4% to R4.3 billion. Earnings before interest tax depreciation and amortisation increased by 21% to R724m. Operating profit of continuing operations improved 25% to R362m. Earnings per share of continuing operations was flat at 38 cents.
Altron Managed Solutions sold the ATM Hardware and Support Business in July this year.
Netstar grew the number of subscribers by 26% to over 1.5 million. During the six months, Netstar achieved over 80% of the total subscriber growth it generated for the full 12-month period in 2023.
A profit improvement strategy in Altron Systems Integration delivered operating leverage with a 5% rise in revenue and a 127% increase in earnings before interest tax depreciation and amortisation (EBITDA) to R34m.
Altron Karabina increased EBITDA by 29%, underpinned by an 8% increase in revenue and improved margins.
Altron Arrow delivered strong revenue growth of 32% to R424m and EBITDA growth of 65% to R38m.
From March 1, 2024, Altron intended to simplify its operating model by combining Altron Systems Integration, Altron Karabina and Altron Managed Solutions into a new Altron Digital Business.
Kapp said the positive momentum of the 25% increase in operating profit from core operations was yielding improved cash-flow generation, which combined with a strong balance sheet, allowed them to positively adjust the dividend payout to improve distributions to shareholders.
“Our discontinued operations have been restructured, management has been strengthened and profit improvement strategies implemented to return these businesses to profitability while we manage them for value through their disposal process,” said Kapp.
He said strong execution drove pleasing results from continuing operations, but the group results were negatively impacted by the non-cash adjustments.
“The Altron Group continues to be highly cash-generative and is sufficiently capitalised, providing a solid platform to execute immediate strategic initiatives,” said Kapp.
The benefits from the envisaged restructured operations include improved cross-selling, collaboration, removing cost duplication and providing an integrated value proposition with improved solutions for customers.
The Altron Digital Business, together with Altron Security, would together form part of the new IT Services segment.
Netstar, Altron FinTech and Altron HealthTech would operate as part of the Own Platforms segment. Altron Arrow would operate separately under a new Distribution segment.
BUSINESS REPORT