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Altron revenue falls in turbulent times

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 26 Oct 2017
Altron group CEO Mteto Nyati.
Altron group CEO Mteto Nyati.

Altron saw interim revenue drop by almost 24%, going from R11.4 billion last year to almost R8.7 billion this year, in what the company calls "turbulent times".

This as the JSE-listed group this morning published its interim results for the six months ended 31 August.

In terms of continuing operations, revenue was down 10%, with a big impact from currency volatility. When looking at continuing operations revenue on a constant currency basis, it was 5% higher at R6.8 billion.

Earnings before interest, tax, depreciation and amortisation (EBITDA), from continuing operations on a constant currency basis, was up 19% to R501 million. Headline earnings per share from total operations were up 29% to 40cps.

"We are working on our goal to deliver consistent double-digit growth rates at the EBITDA level," says CEO Mteto Nyati.

"Central to this is our approach to how we sell to our customers. We are placing more emphasis on cross-selling and upselling as one Altron. Furthermore, we want to build on our innovation heritage and leverage our R&D capabilities to deliver solutions that have a positive and meaningful impact on society," he says.

During the period under review, the group divested some of its non-core assets and continued to reduce its exposure to the manufacturing sector. It says net debt is expected to reduce to R1.1 billion on conclusion of all these disposals.

"The disposal of the remaining non-core assets remains a priority for the business in order to release further capital to strengthen the balance sheet and enable further investment in the core ICT assets,"

Altron's Powertech Industries disposed of its 100% interest in the Auto X group (Powertech Battery Group) on 1 July for R324 million. Powertech Industries also sold Webroy for R11 million effective 1 March. As of 1 August, Power Technologies sold 100% of its equity interest in Powertech System Integrators for R30 million.

The Altech Netstar business also acquired vehicle tracking and fleet management firm EZY2C in Australia, effective 1 July. EZY2C was acquired for a maximum purchase price of AU$15.9 million (R173 million), of which AU$8.7 million (R95 million) was paid upfront. The remainder is payable on the achievement of certain earn-out targets over the next two years.

Altron says the acquisition contributed revenue of R15 million and a net profit after tax of R5 million to the group. It also helped bolster Altech Netstar's strong performance during the period under review, with revenue rising 12% and EBITDA up 6%. Consumer gross connections grew by 32% and commercial gross connections by 9%.

Subsidiary Bytes' UK operations had another strong six months, growing revenue by 25% in local currency terms and EBITDA by 21%, with the business benefiting from increased market share as well as price increases linked to the weaker British pound.

As part of Altron's "strategic intention to geographically diversify earnings and decrease risk", Bytes acquired Blenheim Group and its largest subsidiary Phoenix Software in the UK for £35.9 million (R675 million) in September.

While Altron has a significant footprint on the African continent, it says it is looking to expand further and is appointing a new MD for Africa to drive this growth.

"Altron continues to make good progress on its strategy to turn the group into a leading ICT player and growing its international footprint in selected markets. Focus areas for growth going forward are learning and development, health tech, safety and security, and fintech," the group adds.

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