JSE-listed Altron on Monday reported strong results across its continuing operations; however, noncash adjustments in its discontinued operations weighed on the company’s overall results for the year ended February 29, 2024.
The company reported earnings before interest, taxes, depreciation and amortisation (Ebitda), including Altron’s ATM Business and discontinued operations, of R985-million, a 6% decrease on the R1.05-billion achieved in the prior year.
Excluding the discontinued operations, the Ebitda of the continuing operations and the ATM business, which has now been sold, increased 20% to R1.5-billion.
Altron’s results were impacted by provisions and impairments raised in two noncore subsidiaries, namely R334-million owing to the restructuring of Altron Nexus following the loss of the Gauteng Broadband Network contract and the City of Tshwane exposure, and R95-million in Altron Document Solutions. A goodwill impairment was raised at Altron Group level of R33-million in relation to Altron Nexus.
“The noncash adjustments raised in the first half of the 2024 financial year negatively impacted Altron Group's results,” said Altron Group CEO Werner Kapp.
Operating profit for the year under review declined 39% to R210-million; however, excluding the discontinued operations, operating profit increased 23% to R739-million.
Overall, Altron posted a headline loss a share of 25c, a more than 100% contraction on the headline earnings per share (HEPS) of 29c achieved in the prior year. Further, the company’s loss per share widened from 1c in 2023 to 43c in 2024.
Excluding the discontinued business, Altron achieved HEPS of 116c, a 36% increase on the prior year, while earnings per share reached 108c, a 46% increase on the prior year.
“We are guided by a clear strategy to become the leading platform and IT services business in our chosen markets. Our execution of this strategy resulted in a pleasing 36% increase in HEPS from our continuing operations,” he continued.
During the year ended February 29, 2024, revenue decreased 5% to R10.3-billion. Excluding the discontinued operations, but including the ATM Business, revenue declined 2% to R8.25-billion, owing to the inclusion of only four months of the ATM Business, compared with a full year in the 2023 financial year.
“Strong operational execution delivered pleasing results from core continuing operations. Continuing operations, adjusted for the sale of the ATM Business, generated revenue of R7.9-billion, up 8%. Annuity revenue increased 9% and contributed 61% to overall revenue. [Excluding the ATM Business,] Ebidta grew 27% to R1.5-billion and operating profit increased 33% to R742-million,” Kapp pointed out.
Meanwhile, Altron’s capital expenditure reached R567-million, of which R463-million was invested for growth to support strategic initiatives.
“The Altron Group's cash-generative capability is reflected in its cash generated from operations increasing 25% to R1.6-billion, supported by a cash release from working capital of R152-million. The Altron Group remains highly cash-generative and is sufficiently capitalised, providing a solid platform to execute its immediate strategic initiatives.
Altron’s Own Platforms segment expanded its revenue to 9% to R3.5-billion, with Ebitda increasing 23% to R1.2-billion and operating profit increasing 18% to R613-million.
The Digital Transformation segment generated revenue of R2.9-billion, an increase of 2%, while Ebitda increased 60% to R243-million and operating profit increased 153% to R195-million.
In the Managed Services segment, Altron reported revenue growth of 37% to R1.1-billion, and adjusting for the sale of the ATM Business, Altron Managed Solutions improved revenue by 9% to R846-million. Ebitda and operating profit, excluding the ATM Business, increased 6% to R54-million and R36-million respectively. Including the ATM Business, Ebitda decreased 56% to R51-million and operating profit decreased 55% to R33-million.
In the discontinued operations, Altron Document Solutions reported revenue of R1.4-billion, an increase of 13%. However, the R95-million in provisions raised in the first half of the 2024 financial year led to a loss before interest, taxes, depreciation and amortisation of R65-million and an operating loss of R65-million.
“The profit improvement strategy for Altron Document Solutions showed promising results in the second half of the 2024 financial year, achieving an operating profit of R53-million, together with positive cash flow generation,” Kapp added.
Altron Nexus' results were negatively impacted by provisions and impairments raised of R334-million, alongside restructuring costs and delays experienced at the port. Revenue decreased 35% to R659-million, and the unit reported a loss before interest, taxes, depreciation and amortisation of R421-million, resulting in an operating loss of R433-million.
“Both businesses are actively being managed for value during their ongoing disposal processes. Altron Document Solutions and Altron Nexus improved their management of working capital through releasing cash of R182-million. Cash generated from discontinued operations increased 26%. Both businesses operate financially independently and do not rely on additional funding from the Altron Group,” he continued.
Altron Nexus and Altron Document Solutions will continue to be classified as held-for-sale in discontinued operations.
In line with its strategy to become the leading platform and IT services business in its chosen markets, effective March 1, 2024, the Altron Group is operating a simplified 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. Altron Digital Business, together with Altron Security, will together form part of the new Information Technology Services segment. Netstar, Altron FinTech and Altron HealthTech will continue to operate as part of the Own Platforms segment. Altron Arrow will operate separately under a new distribution segment.”
The group remains committed to achieving its medium-term guidance.
“By 2026, we are targeting an operating profit margin of +19% for our platforms segment and +7% for our Information Technology Services segment. Additionally, we are targeting operating profit of R1.1-billion from continued operations,” Kapp concluded.
Altron declared a final dividend of 33c a share for the year ended February 29, 2024, a 74% increase on the prior year.