Altron ups interim operating profit

In a major company operation many of the large projects customers typically embark on were either postponed or the capital expenditure cancelled: CEO Mteto Nyati.

FIFI PETERS: You would think that companies would have invested heavily in digitally transforming their businesses over the past year owing to the pandemic-imposed restrictions that forced many companies to work remotely – but that doesn’t seem to be the case. If Altron’s results are anything to go by, the technology group has reported a 2% increase in revenue growth as companies put off spending and as government reprioritised its spending towards PPE [personal protective equipment].

Here to talk to us about the numbers and the road ahead is Altron CEO Mteto Nyati. Mteto, thanks so much for your time, sir. It is good to speak with you again. Just looking at your numbers, while revenue growth was tepid, you did manage to increase your operating profit quite strongly. Just talk to us about what drove profits up so strongly in the period against the backdrop of poor revenue growth.

MTETO NYATI: Yes. Fifi, let’s start at the revenue growth, 2% year on year – which is not something that one can write home about. There is just one operation that drove down those results. This operation, unfortunately, has a sizeable revenue; last year it did just over a billion, and this year it was about R800 million. In this operation we experienced a 17% year-on-year decline. Why is that? This operation was impacted by two things.

One, with many of the large projects that our customers typically embark on, they have either postponed them or they’ve cancelled the capital expenditures. So that is the problem, and it’s largely at the back of what we believe is a [lack of] confidence in the country.

But the other driver behind that revenue-growth decline is the global supply chain. Many of the hardware products that we typically used to put together solutions are not available. Those were the key factors driving down that decline.

Down the line, last year during Covid-19 we decided to right-size our business. We took out the cost and now we are benefiting out of that. Eight other operations of ours have grown and anything that comes through typically goes all the way down to the point on line, helping us to improve our Ebit and also our headline endings.

FIFI PETERS: So cost-saving is doing quite a lot of work for the group. But just give us a sense, Mteto, of how may of the revenue projects we’re talking about here were postponed and may eventually come back into the system. And how many in terms of the percentage were cancelled completely?

MTETO NYATI: I would say that probably 80% of them were put on hold because, Fifi, in the IT space you cannot put on hold protecting your environment from cyber attacks. It’s something that you’ve just got to do at some point, otherwise your whole business is going to be vulnerable. You cannot put on hold improving how you interact with your customers digitally, and creating channels that make them to connect with you in different ways. You cannot put that on hold. You cannot put on hold creating a website to help customers do e-commerce with you – that you cannot put on hold forever. So those are things that will happen.

But of course there are many other [issues] where we find that companies are deciding to shut their doors, to leave South Africa – and those we’ve seen disappearing. But that’s only about 20%.

FIFI PETERS: Okay. But if we are delaying the digital transformation Mteto, where does that leave South Africa in terms of its competitiveness in the fourth industrial revolution, in your view?

MTETO NYATI: We live in quite an interesting country where we have industries and sectors that are world class. Look at our financial services, some of our retail sectors and also telecommunication sectors – these are leaders and these companies are typically investing.

But you also have laggards. Many of these are found in the agricultural sector, in the mining sector and also in manufacturing. It does not put us in a good position. We do need to invest in technology, we do need to innovate, to improve productivity, to improve even our competitiveness in terms of serving customers because in some cases we have great products, but the problem is how we present those products to our customers. Our customers are not necessarily interested because [those products] do not appeal to them. So we do need to make this shift to digital and help ourselves combine our product capability with customer experience so that we can be up there with the best.

FIFI PETERS: One of your customers or your clients is the government. Just how much business do you have with them, and what can you tell us about how government is thinking about digitising itself based on orders?

MTETO NYATI: About 15% of our revenue comes from the public sector, which [involves] these areas: For example, here in the Gauteng Province, where we are, we are helping the Gauteng government to put together what is called a Gauteng broadband network. What they have done here is they are connecting schools, connecting hospitals, and connecting clinics with broadband to make sure that there’s Wi-Fi connectivity. This is probably one of the biggest and the most successful projects of government we saw during Covid-19. This is one of those provinces that was least affected when it comes to education because it had the foresight of investing in the broadband infrastructure. This is what we want to see happening in other provinces.

The other area where we are were helping, for example, in with the signalling systems for trains, helping them not to collide with each other. [There are] signalling systems for the Gautrain also, for Prasa and the communication infrastructure for our colleagues and for the Defence Force – these are the kinds of projects that we do.

Unfortunately because of Covid-19 some of these projects have been delayed and are not being implemented. It’s unfortunate, because our country needs to have a South African Police Service that is world-class, able to communicate and able to investigate properly using the latest technology – and that is not the case today.

FIFI PETERS: I’m just reminded of the legal action that your company had with the City of Tshwane which went your way when the High Court ruled in your favour regarding that R1.2 billion contract.

But nonetheless, Mteto, we’re talking about investing and the digital transformation as a whole, what you’re seeing with your clients and what has been happening at national government. What are you doing to make Altron more future-fit? Just give us an indication of the investments you’re making internally to ramp up operations within your own corridors.

MTETO NYATI: For us it’s a key thing. We say we want to be a capital-light business. By that we mean we are going to largely [opt] out of selling hardware. We will be developing our own intellectual property and investing and reselling that intellectual property into other countries and exporting it, and in the process employing people in our own country.

It means people are our most important assets. So we have invested in putting together a new Altron campus that talks to the hybrid type of working that you are talking about. That helps with collaboration, that creates spaces where people can work together across different operations. That can attract some of the best talent that is out there, so we have even changed our work policies to align with the hybrid way of working. Investing in our people is something that is very, very important for us because without them we won’t be able to come up with this technology that we can export into other countries. That’s the stuff that we are doing internally within Altron.

We are also making sure that we [are] aligned into the high-growth areas of the market – things like cloud computing, data security, and the internet of things. We are building capabilities in this area because that’s where our customers want us to be, that’s where we would like to be the trusted advisor to our clients.

FIFI PETERS: All right, Mteto. Thanks so much for your time, sir. That was the CEO of Altron, Mteto Nyati.



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