JSE-listed Altron on Monday reported an 82.9% rise in normalised headline earnings per share (Heps) to 75 cents for the year ended February 28 2022, despite facing a tough year marked by the global shortage of electronic components and reduced capital expenditure by enterprise customers.
The software and computer services company said group revenue for the period rose 5.7% to R7.9 billion, while operating income grew 34.2% to R498 million.
Making his final comments on the group’s full-year performance before officially handing over the reins as group CEO at the end of June, Mteto Nyati commended the group for producing a solid set of results.
“This performance was driven by the resilience of our Own Platform segment that is characterised by high annuity revenue, the turnaround of Altron Karabina and Altron Managed Solutions (AMS), exceptional performance of Altron Arrow and a strong focus on cost reduction at the centre,” he said.
“Our net working capital slightly improved on the previous year, in an environment where we tactically increased inventory in Altron Arrow, Altron Fintech, AMS and Netstar to counter global component shortages.”
The group’s digital transformation division saw a 2.2% decline in revenue to R2.2 billion. It noted that the decline was driven by weak capital expenditure by its customers, leading to the delay or cancellation of investment projects.
Global chip shortage
Altron Systems Integration (ASI) – a business falling under this division – saw its revenue slide R254 million to R1.7 billion during the period. This 13.3% slide it said is due to customers taking longer to decide [on purchases] and keeping their budgets tight, as well as the shortage of technological components which tech companies around the world have been battling with.
“The global chip shortage has severely impacted lead times in getting hardware into the country and fulfilling customer orders,” the company says.
“Hardware deals closed but on backlog due to lead times amount to R93 million. The operating income result of R13 million was R36 million lower compared to the prior year.”
However, the group’s Managed Services segment saw much better numbers, with the division reporting a 3.3% increase in revenue to R2.6 billion.
The improved performance was driven mainly by its Altron Managed Solutions (AMS) business which recorded a 21% growth in revenue to R1.8 billion.
“After a challenging start to the year, management’s agility to course correct the business resulted in a R34 million operating income being achieved, representing a 30.8% improvement against the prior year.”
This segment’s performance was however hampered by that of the Altron Nexus business, which saw a R223 million revenue decline to R803 million. The group says this was due to lower broadband revenues in the period.
“This combined with once-off items over and above the R19 million provision raised against the City of Tshwane and Thobela Telecoms resulted in an operating loss of R28 million, a R46 million reduction from the prior period.”
The group’s Own Platform division showed resilience with revenue 6.2% higher at R2.9 billion and operating income 16.9% stronger at R546 million in the period.
Dividend off a high base
Shareholders of the company can for the current reporting period expect a 99% drop in dividends to 30 cents. This sharp drop in dividends can be explained by the special dividend the group issued in the previous year.
“The dividend comprises of a final dividend of 15 cents per share, interim dividend of 33 cents per share, a dividend in specie of 2 854 cents per share and a special dividend of 96 cents per share. The dividend in specie and special dividend relates to the Bytes UK transaction.”
When comparing the final dividend declared in the previous year of 15 cents per share to that declared in the current period of 30 cents per share, a fair comparison shows a 100% growth in shareholder reward.
Forecasting the group’s performance for the next financial year, Altron says it expects to see supply chain and pricing pressures to continue as global component shortages persist.
It further expects the trend of resilience to remain among its business segments, adding that it plans to place significant focus on returning its ASI business back to profit.
The group further announced plans to dispose of its banking business under AMS, as it continues its pursuit of realising a capital light organisation.
“Management is in advanced discussions with a potential buyer to acquire the banking business from AMS in moving towards our strategic objective of being a capital-light organisation.”