JSE-listed technology services firm Altron’s revenue slightly declined after it sold its ATM business last year.
However, Altron posted strong interim financial results for the six months ended 31 August, increasing earnings before interest, taxes, depreciation and amortisation (EBITDA) from continuing operations by 49% and operating profit by over 100%.
The board declared an interim dividend of 40c per share, up 60%.
According to Altron, these results were supported by an excellent performance from the platforms segment, benefiting from the operating leverage as it added scale during the period.
Altron Document Solutions (ADS) was reclassified from a discontinued operation to a continuing operation during the period. Altron’s targeted guidance has been updated to accommodate the inclusion of ADS in continuing operations, says the company.
For the period, Altron posted R4.9 billion revenue, down 2%, impacted by the sale of the ATM business of Altron Managed Solutions, which was sold effective 1 July 2023.
The transaction was first announced in October 2022, when Altron revealed its intention to sell the ATM Hardware and Support Business portion of its Altron Managed Solutions division to US-based NCR Corporation.
The Altron and NCR sale of business agreement was capped at around R183 million ($10 million).
Earnings surge
In its results, Altron reported R905 million in EBITDA, up 49%, and R477 million operating profit, up over 100%.
Headline earnings per share (HEPS) was 79c, increasing over 100%, says Altron, adding that earnings per share (EPS) was 75c, increasing over 100%.
Excluding ADS and the ATM business, which management believes reflects the core performance most accurately, Altron points out that revenue grew 4%, EBITDA increased 23% and operating profit increased 29%, with HEPS up 50% and EPS up 84%.
CEO Werner Kapp says: “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.”
Providing group highlights, including discontinued operation Altron Nexus, the company says focused execution on strategy delivered strong results in comparison to H1 FY24, which was negatively impacted by provisions and impairments raised.
It adds that business unit 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 a strong financial performance, with revenue growing 11%, EBITDA improving 34% and operating profit increasing 45%, the company explains.
Altron FinTech grew revenue 10%, EBITDA by 54% and operating profit by 63%, driven by an increase in SME customers and the value of debit orders processed in the collections and payments business, it adds.
Altron HealthTech increased revenue 6% to R201 million, supported by 92% annuity revenue. Its EBITDA increased 4% to R55 million, after expensing a R15 million investment into its platform, up from R5 million last year. Operating profit grew 8% to R54 million.
The IT services segment generated revenue of R2.6 billion, reflecting an 8% decrease, primarily due to the sale of the ATM business, says the firm, noting EBITDA improved from R53 million to R157 million and operating profit increased to R120 million, up from R3 million.
Business integration
It explains that the integration of Altron Systems Integration, Altron Karabina and Altron Managed Solutions into Altron Digital Business is progressing smoothly.
According to the company, key appointments were made during the period and sales incentive plans were adjusted to align with its objectives.
Altron Security experienced a 12% decline in revenue to R247 million. “This decrease was attributed to capex constraints at a large customer and a change in the revenue mix between agency and principal revenue,” says Altron.
“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 the EBITDA margin expanding four percentage points and operating profit increasing 1% to R66 million.”
Altron says it invested R330 million in growth capital expenditure during the period, focused on Netstar, Altron FinTech, and our systems and platforms.
“Altron continues to execute on its strategy to become the leading platform and IT services business in its chosen markets,” says Kapp.
“Despite the tough economic conditions, we have demonstrated our resilience through our customer obsession and innovative solutions, high annuity income base and focus on efficient execution.
“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 FY26.”
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