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Altron retrenches 600 employees, pays them R19m

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JSE-listed technology services firm Altron has retrenched 600 employees as the impact of the COVID-19 pandemic takes its toll on the company.

So far, it has paid the retrenched workers a total of R19 million in order to sever ties with them.

This emerged from the group’s unaudited consolidated interim results for the six months ended 31 August and interim dividend announcement today.

Among the major highlights of the results, Altron’s earnings before interest, tax, depreciation and amortisation (EBITDA) for total operations and continuing operations were up 1% and 17% respectively.

The company’s subsidiary Bytes UK delivered a strong performance with EBITDA of R459 million, up 51%, and the group declared an interim dividend of 33c per share, up 14%.

In an interview with ITWeb this morning, Mteto Nyati, Altron group chief executive, said: “We currently have 10 operations in Altron, and out of these, four operations were impacted by the retrenchments.”

In the printing division, he said, 134 employees lost their jobs at Altron Document Solutions.

“During the lockdown, we saw printing volumes coming down. That was at the back of bulk printing for the schools and universities closing down during that period and this affected us a lot.”

ITWeb earlier this month reported that Altron is selling its building that housed subsidiary Altron Document Solutions in Isando, Johannesburg, and is retrenching employees from the business unit.

The other business that was affected was Altron People Solutions, a provider of digital adoption learning solutions and customer engagement offerings, Nyati said.

“In that business we do two things – training and business process outsourcing. The two were affected because in the call centre business, the regulation said we needed to have 33% occupants so we were operating way below capacity, hence our ability to generate revenue was way below than it used to be.

“On the training part, during the lockdown, we could not do any training and the number of people affected in Altron People Solutions is 320,” Nyati said.

The third business to be impacted is Altron Systems Integration, an end-to-end ICT service provider of consulting, implementation and outsourcing services.

“In that business, there were 87 people that were impacted, then a few other people in other divisions to make up the 600.”

The other division that also saw employees leaving is Altron Managed Solutions, a business that is invested in both telecommunications and the information and communications technology sector.

Altron group chief executive Mteto Nyati.
Altron group chief executive Mteto Nyati.

Five-year roadmap

Commenting on the results, Nyati stated: “As communicated before, we have a well laid out five-year roadmap. However, the theme of our H1 results has been dominated by the impact of COVID-19, which coincided with the start of our financial year.”

According to Nyati, management was well-prepared for aspects such as remote working and liquidity management, and was proactive in managing the cost base.

He noted that 80% of Altron’s systems are cloud-based, which enabled a smooth transition from office working to working from home.

“To address liquidity risk, management immediately reviewed all of our non-essential capital expenditure, deferred and reduced executive bonus payments relating to the prior year.”

Nyati added that early discussions were held to secure additional liquidity as a precaution under the volatile economic environment.

To manage the cost base, he said, Altron proactively took the difficult decision to roll back salary increases, in addition to reducing all non-essential expenditure.

“Unfortunately, as the period of lockdown extended beyond the initial three weeks, it became clear that our initial cost interventions were not adequate. Consequently, additional cost reduction measures were required, which led to 600 staff members being impacted across our South African operations.”

Headline earnings per share from continuing operations were up 28% to 83c while basic earnings per share increased by 27% to 85c.

“Despite the economic upheaval from the COVID-19 pandemic, the board decided to pay an interim dividend of 33c per share, up 14% from the previous interim period.”

Several operations were negatively impacted during the period under review, such as Altron People Solutions, which could not carry out classroom-style training during the lockdown.

Business Process Outsourcing also operated with reduced staff, negatively impacting revenue, which led to an EBITDA loss.

However, Nyati pointed out that several operations had benefited, including the Bytes UK operations, which were net beneficiaries of the elevated need for remote connectivity. “Altron Karabina also benefited from accelerated cloud adoption as customers transitioned from on-premises data centres to cloud hosting and computing. Altron Security, comprising of the new Ubusha acquisition, assisted customers in addressing the increased security vulnerabilities as a result of elevated remote working.”

The company says severance pay as a result of Section 189 retrenchments amounted to R19 million, while the initiative to roll-back salary increases came into effect in May, resulting in two months of higher salary charges, amounting to R20 million.

In addition, it says, losses of R35 million were incurred as a result of the volatility in currency due to the global pandemic.

“Despite the difficulty of conducting business during COVID-19, we are very proud to have increased most of our key metrics year-on-year,” said Nyati.

Altron Nexus’s turnaround strategy implemented last year has seen the subsidiary return to profitability, reporting EBITDA of R56 million.

“In the litigation matter between the City of Tshwane and Nexus, we are pleased with the unanimous verdict earlier this month where the Supreme Court of Appeal overturned, with costs, a previous judgement which set aside the contract on the basis of primarily internal processes not having been followed by the city.”

Nyati said Altron Nexus would recover all costs and any amounts outstanding under the contract, while engaging with its partners and the city regarding the way forward.

Resilient performance

Altron’s fintech operation performed resiliently in recent years, says the company, noting it was, however, affected during levels five and four of lockdown, as unsecured lending was not deemed an essential service in those phases.

Subsidiary Netstar, which grew its subscriber base 16.6% year-on-year to 860 000, proved remarkably resilient in the face of a poor operating environment with depressed new vehicle sales, says Altron.

It points out that Netstar generated revenue at similar levels to the prior year on the back of a strong annuity revenue base, coupled with the turnaround in the Australian operation, yielding revenue of R764 million and EBITDA of R297 million.

Altron Managed Solutions reported strong revenue growth of 23% to R690 million, biased to lower margin hardware sales.

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