Altron earnings jump in first-half

JSE-listed Altron on Monday posted significant increases during the six months ended August 31, 2024.

On a group level, including discontinued operations, revenue declined 6% to R5.1-billion; however, earnings before interest, taxes, depreciation and amortisation (Ebitda), operating profit, earnings per share (EPS) and headline earnings per share (HEPS) all increased by more than 100% during the half-year under review.

Group Ebitda increased to R891-million, operating profit to R463-million and net profit to R276-million, while EPS and HEPS increased to 70c and 74c respectively during the six months ended August 31, 2024.

Revenue from continuing operations declined 2% to R4.9-billion, impacted by the sale of the ATM Business, while Ebitda increased 49% to R905-million.

The continuing operations’ EPS and HEPS increased by more than 100% to 75c and 79c apiece, respectively, as did operating profit, which reached R477-million, and net profit after tax, which reached R298-million, during the half-year under review.

“In management's view, the most meaningful comparison is the performance of continuing operations, adjusted for the sale of the ATM Business and excluding Altron Document Solutions (ADS),” the company said in its interim results, published on Sens on Monday.

Excluding ADS and the ATM Business, continuing operations’ revenue grew 4% to R4.2-billion, Ebitda increased 23% to R870-million, operating profit increased 29% to R452-million, and HEPS increased 50% to 72c, with EPS up 84% to 68c.

“I am pleased with our overall financial results, evidencing strong growth in profitability and a 60% increase in our interim dividend. The leverage in our platform businesses led to excellent segmental performance as we continued to add scale. Our customer-centric focus and higher margin annuity revenue mix, are laying a strong foundation for future performance,” commented Altron CEO Werner Kapp.

During the six months under review, the positive momentum from the successful implementation of the profit improvement strategies and target operating models in Altron's operations continued.

The strong growth in profitability was primarily driven by the performance of the Platforms segment, which includes Netstar, Altron FinTech and Altron HealthTech.

The Platforms segment delivered a 37% increase in Ebitda to R776-million and a 47% increase in operating profit to R415-million, with revenue growing 10% to R1.9-billion.

Netstar continued its growth trajectory, growing connected devices 26% to 2.4-million and increasing subscribers by 21% to 1.9-million.

This translated to strong financial performance, with revenue growing 11% to R1.1-billion, Ebitda improving 34% to R489-million and operating profit increasing 45% to R146-million during the six months ended August 31, 2024.

Altron FinTech grew revenue by 10% to R607-million off a high comparative base, supported by an increase in higher-margin annuity revenue from 69% to 82%. Ebitda increased 54% to R232-million, while operating profit increased 63% to R215-million.

With the Altron HealthTech division, revenue increased 6% to R201-million, while Ebitda increased 4% to R55-million and operating profit grew 8% to R54-million.

The IT Services segment generated revenue of R2.6-billion, a decrease of 8%, mostly owing to the sale of the ATM Business, while Ebitda improved to R157-million and operating profit to R120-million.

Excluding ADS and the ATM Business, revenue increased 2% to R1.9-billion, Ebitda decreased 21% to R127-million and operating profit declined 22% to R100-million.

Meanwhile, the integration of Altron Systems Integration, Altron Karabina and Altron Managed Solutions into Altron Digital Business is progressing smoothly, and key appointments were made during the period.

“A solid foundation has been established for Altron Digital Business to focus on revenue growth, customer engagement and operational excellence. Leading indicators are positive, with the benefits of the integration targeted to be realised primarily in the 2026 financial year,” the company noted.

“However, the profitability of Altron Digital Business was disappointing, negatively impacted by nonrecurring project expenses relating to historic contracts that have now been closed, and three material project delays that have subsequently commenced in the second half. In addition, two large customers reduced spend.”

Excluding the ATM Business, revenue increased 5% to R1.6-billion, emerging from the early benefits of Altron’s integrated sales model; however, Ebitda decreased 42% to R47-million, with operating profit down 46% to R34-million.

Revenue from Altron Security declined 12% to R247-million, mostly owing to capital expenditure constraints at a large customer and a change in the revenue mix between agency and principal revenue.

“The corrective actions implemented last year are having a positive impact, shifting revenue to higher annuity business, with annuity revenue growing from 69% to 84%. Despite the decline in revenue, gross margin expanded seven percentage points. Ebitda remained stable at R80-million, with Ebitda margin expanding four percentage points and operating profit increasing 1% to R66-million.”

ADS, reclassified as a continuing operation following a review of strategic options, made a positive Ebitda contribution of R30-million, from a loss of R123-million in the comparative six-month period last year. Operating profit increased to R20-million, while revenue increased 11% to R731-million.

In the Distribution segment, Altron Arrow reported a 7% decrease in Ebitda to R35-million with operating profit down 5% to R35-million. However, its margins were stable at 9%, in line with guidance. Revenue declined 11% to R376-million.

“As previously guided, the electronic component distribution industry is entering a global cyclical downturn to pre-Covid levels, which is anticipated to affect performance this financial year. Despite a contraction in the market of 5.7%, we estimate our market share has increased by over 3 percentage points.”

Further, Altron Arrow launched its Inventory Management-as-a-Service offering towards the end of the half-year under review, which is targeted to grow annuity revenue.

With Altron’s discontinued operations, Altron Nexus is progressing with its profit improvement strategy, under a new management team appointed last year.

Altron Nexus reported revenue of R236-million, compared with R463-million last year. Ebitda and operating profit improved from a loss of R332-million and R343-million respectively, to a loss of R14-million. A focus on working capital led to a R35-million improvement.

“Altron continues to execute on its strategy to become the leading platform and IT services business in its chosen markets. We remain on track to achieve our medium-term targets of +19% operating margin in our Platforms segment and +7% in our IT Services segment. With the inclusion of ADS in continuing operations, together with its successful profit improvement strategy, we have increased our operating profit target for continuing operations to R1.15-billion by the 2026 financial year," Kapp concluded.

Altron declared a half-year dividend of 40c a share, a 60% increase on the comparative period last year.