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Altron ‘disappointed’ with Microsoft-focused unit Karabina

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Grant van der Wal, MD of Altron Karabina.
Grant van der Wal, MD of Altron Karabina.

JSE-listed technology services company Altron says it is disappointed with the performance of its subsidiary Altron Karabina during the past financial year.

This is one of the major takeaways from the group’s integrated report, which was published on Friday.

In its annual results for the year ended 29 February and its final dividend announcement, Altron posted an increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) of 14% to R1.8 billion, while revenue increased 6% to R16.7 billion during the same period.

Altron acquired Karabina, now Altron Karabina, from iSPartners in 2018 in a deal worth R225 million.

The company hoped the strategic acquisition would enable Altron to create a Microsoft-focused business within the group with a special focus on cloud computing and data analytics.

It also expected the acquisition to add scale and a new suite of solutions and capabilities enabling customers to digitally transform their businesses through Microsoft technologies.

Altron Karabina’s opportunity came last year after it signed a software licensing partnership with Microsoft, replacing EOH.

The US-based software giant terminated its contract with EOH after an anonymous whistle-blower filed a complaint with the US Securities and Exchange Commission about alleged malfeasance to do with a R120 million contract with the SA Department of Defence.

However, the integrated report shows Altron’s efforts on Karabina have so far not gone according to plan.

Altron Karabina’s contribution to group revenue missed expectations, with substantial revenue deferred to FY21, the group says.

The group explains that the unit’s performance was impacted by a “significant customer having been adversely affected by the challenging local economic conditions”.

For the period under review, Karabina generated revenue of R177 million and EBITDA of R2 million.

Nonetheless, the company says although these results did not meet expectations, Karabina remains a strategic growth driver in Altron’s cloud services and data analytics capabilities.

“We were disappointed with the performance of Altron Karabina through the year,” Nyati says in the report.

“While there is much opportunity in positioning Karabina as the go-to supplier for Microsoft and cloud computing solutions in South Africa, we have so far been unable to convert this opportunity to revenue.”

The comments come after Altron Karabina recently made key executive appointments to drive the business.

Headed by managing director Grant van der Wal, in November Altron Karabina appointed James Hickman as chief customer officer; Mpho Moseki as territory lead for Tshwane; Ian Wilson as territory lead for Johannesburg; Mauritz Preller, business unit lead for dynamic operations; and Nicole Oliveira to head up the new software services business unit.

During the 2020 financial year, Altron bedded down the two acquisitions it made the prior year – Phoenix Software in the UK and Altron Karabina in South Africa.

“While Phoenix delivered exceptionally well in the cloud computing space and contributed to our substantial growth in the UK, Altron Karabina has not yet lived up to our expectations in its ability to convert cloud computing pipeline projects into revenue in the South African market,” Nyati says.

“We will continue to work with Karabina’s leadership to provide guidance and support in reaching the heights we know the business is capable of.”

Nyati adds: “…our Karabina division’s difficulty in converting pipeline through FY20 belies an enviable schedule of contracts which will begin to reach relevant milestones in FY21 and return stronger revenue growth.”

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