Altron announces salary freezes, bonus cuts
JSE-listed technology services firm Altron has introduced a raft of measures to save R500 million in costs in anticipation of a dip in revenue as a result of the COVID-19 pandemic.
This morning, Altron released annual results for the year ended 29 February and its final dividend announcement.
The company posted an increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) of 14% to R1.8 billion in the year to end February, while revenue increased 6% to R16.7 billion during the same period.
However, chief executive Mteto Nyati told ITWeb in an interview that COVID-19 is expected to have a negative impact on the year ahead.
“If you look at our current results that we are presenting today, we feel that revenue will reduce more or less by 5%. So if there is a 5% reduction of revenue in the new financial year, we had to save some costs.
“To limit the impact on our profitability, we have implemented a number of cost savings initiatives for the 2021 financial year, which includes reversing all 2020 salary increases for South African employees. Combined, our cost savings initiatives are estimated to save in the region of R500 million,” he said.
According to Nyati, in order to save costs, Altron had to look at all the stakeholders for them to make some sacrifices.
“We have frozen all salary increases and promotions internally, as well as hiring. We have halved the bonuses of all the executives in the company. Our non-executive directors have also contributed by taking a salary cut of 30% for the next three months.
On the dividend side, Altron says, in light of the current economic upheaval from the COVID-19 pandemic and uncertainty thereof going forward, the board has decided it would be prudent to preserve cash at this time and declare a dividend that is 40% less than would otherwise have been declared.
As such, it says, a final cash dividend of 26c per share (20.8c net of 20% dividend withholding tax) has been declared for the financial year ended 29 February, payable to shareholders recorded in the register at the close of business on the record date.
The group’s overall net debt reduced to R1.1 billion (including deferred disposal receipts), against R1.3 billion, as at the end of FY19.
Cash generated from operations before working capital movements totalled R1.9 billion for the year. Net interest paid was R231 million (including right of use interest) while tax and net dividends paid were R169 million and R272 million, respectively, for the year under review.
The group says it utilised a net amount of R270 million on investment activities for the financial year. It explains that included in this amount was R207 million, largely relating to hardware in Netstar, which reflects the continued growth in its subscriber base.
It points out that R208 million related to investment predominantly in capital expenditure, and R50 million in intangible assets. This was offset by R164 million relating to the deferred proceeds from the disposal of non-core assets.
Net outflow from financing activities of R21 million predominantly relates to net long-term borrowings contributing to R433 million positive cashflow. This was offset by R168 million outflow relating to the right of use lease assets and R286 million on finance leases relating to document processing equipment.
Says Nyati: “Three years ago, we created a five-year roadmap called the ‘One Altron strategy’, prioritising revenue growth, improving profitability, transforming the customer experience and employee excellence, with collaboration at its core.
“Over this three-year period, we have strengthened the group through the disposal of non-core assets, the rationalisation of operations and the execution of targeted acquisitions in high-growth areas. Over the same period, we delivered gross invoiced income CAGR of 25.8%, revenue CAGR of 6.5% and EBITDA CAGR of 21.9%.”
He notes the One Altron strategy allowed the group to better service customers through delivering the full breadth of expertise, solutions and product offerings.
This led to sizeable contract awards from Bet 365, Prudential, many local and national government organisations in the UK, Standard Bank, Capitec, Coca-Cola Beverages Africa and Barloworld, he adds.
“Looking forward, with the impact of COVID-19 affecting businesses across the globe, the need for a fully digitised remote workplace is becoming more important,” Nyati says.
“We have seen our customers investing heavily in digital transformation, increased security requirements and hybrid data centres. This is expected to further accelerate the expansion of our remaining growth areas – cloud, data analytics and security – as we tailor products to meet the needs of our customers.”