Wrap Text
Annual Results for the year ended 28 February 2022 and final dividend announcement
ALTRON LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1947/024583/06)
Share code: AEL
ISIN: ZAE000191342
("Altron" or "the Company" or "the Group")
ANNUAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2022 AND FINAL DIVIDEND ANNOUNCEMENT
FINANCIAL HIGHLIGHTS - Continuing operations
- Revenue up 5.7% to R7.9 billion
- Operating income was up 34.2% to R498 million
- HEPS increased by 37.8% to 51 cents per share
- Normalised HEPS increased by 82.9% to 75 cents per share
- Working capital decreased by R35 million
Continuing operations February 2022 February 2021** Change %
R millions
Gross Invoiced Income* 8 203 7 802 5.1%
Revenue 7 930 7 505 5.7%
EBITDA 1 140 1 033 10.4%
Operating income before capital items 498 371 34.2%
Net profit after tax 79 94 (16.0%)
Earnings per share 20 cents 29 cents (31.0%)
Headline earnings per share 51 cents 37 cents 37.8%
Normalised Headline earnings per share 75 cents 41 cents 82.9%
Dividend per share 30 cents 2 998 cents*** (99%)
* Gross invoiced income represents the total invoiced revenue to customers, including cloud-based
sales (and related licenses). This differs from statutory reported revenue, because in terms of IFRS 15,
the Group acts as an agent on these transactions and therefore recognises only the margin as revenue.
** The prior year has been restated to account for discontinued operations, namely Bytes UK, Altron
Document Solutions ("ADS"), and Altron Rest of Africa ("AROA"), as well as the investment in Altron
Arrow which is no longer classified as held for sale.
*** 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. The final dividend of 15 cents
per share in the prior year represented the full dividend associated with continuing operations for
FY21, and therefore is a fair comparative to the 30 cents per share declared in the current year
representing a 100% increase.
KEY BUSINESS HIGHLIGHTS ACHIEVED IN FY22
- The acquisition of Lawtrust - a leader in digital security;
- Disposal of ADS to BiAfrica (pending regulatory approval);
- Disposal of Altron People Solutions' ("APS") business process outsourcing business to the
ISON and APS' learning services business to LRMG;
- The turnaround of Altron Karabina and AMS;
- Altron Nexus collecting over R900 million of debtors largely from the public sector in the midst
of the COVID-19 pandemic;
- Altron Arrow becoming a half a billion Rand business; and
- Reducing Head Office costs by R98 million.
Mteto Nyati, Group Chief Executive commented:
This is my final message following the announcement to the market in January 2022 wherein
shareholders were informed of my decision to leave the Group in June 2022. Despite the fact that FY22
was a tough year due to the sustained COVID-19 pandemic, a global shortage of electronic components
/ semiconductor chips and significant cutback on capital expenditure by our large enterprise customers,
we delivered a solid performance growing revenue by 5.7% year on year, with double-digit growth in
operating income and HEPS at 34.2% and 37.8% respectively.
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.
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. Altron Nexus collected over R900 million of debtors during the year, reducing their closing
balance by R263 million compared to the prior year. However, we have not yet finalised the settlement
agreement with the City of Tshwane that will see Altron Nexus collect the outstanding R309 million
worth of debt associated with that contract.
We are progressing with setting up Altron 2.0 by disposing capital heavy and loss-making businesses
and acquiring assets in high growth segments of the market. Altron 2.0 is characterised by the following
financial metrics and key performance indicators across the Group, namely:
- high annuity revenue;
- capital light;
- own Intellectual Property;
- net debt to EBITDA ratio of <1;
- software and high value services; and
- differentiated offerings in cloud, security, data and software application development.
FINANCIAL OVERVIEW
Continuing operations
- The Continuing operations achieved revenue of R7.9 billion, which is R425 million ahead of the
prior year. This is a 5.7% improvement against the comparative and 5.2% against FY20.
Operating income of R498 million exceeded the prior year by 34.2% and 8.9% against FY20.
The Managed Services segment achieved revenue of R2.6 billion, which is 3.3% ahead of the prior
year and 13.3% against FY20.
- Managed Solutions' revenue of R1.8 billion showed strong growth of 21% against the prior year
and 26.3% against FY20. 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.
- Altron Nexus revenue of R803 million fell by R223 million compared to FY21. Revenue is down
by 21.7% against the prior year and 7.5% against FY20. The decline was driven by lower
Broadband revenues. 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.
In Digital Transformation, revenue of R2.2 billion was down 2.2% compared to the prior year. Customer
capital expenditure spending remains weak with investment projects being delayed or cancelled. The
operating income of R52 million was 16.1% lower than the prior year and 33.3% when analysed against FY20.
- Altron Systems Integration ("ASI") achieved R1.7 billion of revenue which was down by
R254 million or 13.3% against the prior year. Customer decision times are taking longer, and
budgets are being kept tight. The global chip shortage has severely impacted lead times in
getting hardware into the country and fulfilling customer orders. 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 and R85 million compared to FY20. ASI's
infrastructure business performed weakly during the financial year mainly due to customer
budget constraints and the global component shortages, with certain lead times extending over
300 days. When segmenting the business between hardware and services, the services
business performed reasonably well, with Dev Ops growing by low single digits year on year,
and Smart Manufacturing making a good recovery after completing problematic contracts in the
financial year resulting in > 100% growth on operating income. Managed services business
recorded a 10% year on year growth on operating income due to efficiencies implemented.
- Altron Security's revenue of R204 million including Lawtrust is 100% up from the prior year.
On the exclusion of Lawtrust, revenue is ahead by 7.8% year on year. For the original security
business ("Ubusha"), the capital expenditure freeze from financial services customers
impacted software sales. Dev Ops was resilient in FY22 and experienced good revenue growth.
The operating income of R23 million including operating income of R13 million from Lawtrust is
down against the prior year by 20.7%. Ubusha recorded an operating income of
R10 million, R19 million down from the prior year. Profitability was impacted by the set-up costs
incurred during the investment phase of the UK business, whose revenue contribution has been
slower than expected while it develops its reference sites in the UK market.
- Altron Karabina, demonstrated a strong revenue performance of R317 million exceeding the
prior year by 47.4%. Operating income of R16 million is a R32 million improvement from prior
year, and a R37 million improvement from the FY20 loss, demonstrating a strong and sustained
turnaround of the operation.
The Own Platform segment remained resilient, aided by its high annuity revenue profile. The segment's
revenue amounted to R2.9 billion, increased by 6.2% from the prior year. Operating income of
R546 million exceeded the prior year by 16.9% and FY20 by 5.4%.
- Netstar's revenue of R1.7 billion was a 7.8% increase from the prior year (7.0% in South Africa
and 19.4% in Australia). Supported by a strong performance in Australia, the South African
business continues to stabilise operational issues that have placed pressure on its subscriber
churn rates during the period. Netstar South Africa has seen consistent net subscriber growth
since June 2021. The operating income of R262 million is 12.4% is higher than the prior year.
The component shortage has negatively impacted the business in several ways. The ability to
source components has placed pressure on the production of units.
- Altron FinTech's revenue of R854 million exceeded the prior year by 4.5%. Operating income
of R193 million increased on the prior year by 43%. This profitability has been aided by adding
two new insurance products, funeral cover and credit life, and short-term bridging financing for
our customers in the microfinancing space.
- Altron HealthTech's revenue of R323 million is 2.9% up against the prior year. The operating
income of R91 million is R8 million lower than the prior year. With the current investment into
its new platform, Altron HealthTech will be able to capture the next generation of medical
practitioners, which has been a challenge due to the current ageing technology and offerings.
Altron Arrow exceeded its goal of R500 million in revenue by recording R507 million for the year, which
is a 34.5% increase from the prior year. The global components shortage has aided its strong
performance, which has driven up the prices and demand for components. This business is no longer
classified as held-for-sale and has been reclassified by management within continuing operations.
Strong revenue performance, robotics process automation ("RPA") implementation, and further
efficiencies improved overall profitability and achieved an operating income of R23 million, which is a
91.7% improvement from the prior year.
Discontinued operations
ADS revenue of R1.08 billion before any IFRS 5 adjustments for held for sale assets exceeded the prior
year by 7.6%. The operating income of R21 million exceeded the prior year by >200%.
AROA's revenue of R280 million before any IFRS 5 adjustments for held for sale assets exceeded the
prior year by 4.1%. The operating loss of R49 million is R34 million greater than prior year.
As previously reported, APS was disposed of during the current year and generated revenue of
R224 million up to date of disposal (October 2021).
CASH MANAGEMENT
The opening cash balance for the year included a R355 million (net of treasury shares) reserve for the
special dividend that was paid out on the 17 May 2021. Excluding the R355 million from the opening
balance to represent a like for like comparative, the Group increased its cash balance by R150 million
for the financial year, representing a 33.4% improvement against the prior year.
Key investing activities during the year comprised the following items:
- Consideration paid for the acquisition of Lawtrust amounting to R206 million;
- Deferred purchase consideration for both Altron Karabina and Ubusha amounting to R62 million;
- Proceeds received on the disposal of subsidiaries and/or businesses:
- APS of R7 million;
- Powertech Transformers (SGB Smit) of R102 million;
- Acquisition of PPE and intangible assets amounting to R213 million;
- Increase in capital rental devices amounting to R183 million; and
- Proceeds received from SAMRAS amounting to R29 million.
Net finance expenses paid have decreased by R38 million from the prior year due to lower average
debt levels despite interest rate increases.
DIVIDEND
The Board remains committed to maintaining Altron's dividend cover of 2.5 times headline earnings on
continuing operations. The final dividend has been calculated on the current continuing operations
HEPS for the 12 months ended 28 February 2022, adjusted to reverse the impact of the IFRS 2 charge
which relates to the modification of share-based payments, AIMS impairments, and severance costs.
As such, a final cash dividend of 23 cents per share (18.4 cents net of 20% dividend withholding tax)
has been declared for the financial year ended 28 February 2022, payable to shareholders recorded in
the register of the Company at the close of business on the record date appearing below.
The Board has confirmed by resolution that the solvency and liquidity test as contemplated by the
Companies Act, No. 71 of 2008, as amended, has been duly considered, applied and satisfied. This is
a dividend as defined in the Income Tax Act, No. 58 of 1962 and is payable from income reserves. The
income tax number of the Company is 9725149711. The number of ordinary shares in issue at the date
of this declaration is 407 631 713, including 32 287 468 treasury shares.
The salient dates applicable to the final dividend are as follows:
Dividend dates
Last day to trade cum dividend Tuesday, 31 May 2022
Commence trading ex-dividend Wednesday, 1 June 2022
Record date Friday, 3 June 2022
Payment date Monday, 6 June 2022
Share certificates may not be dematerialised or re-materialised between Wednesday, 1 June 2022
and Friday, 3 June 2022.
DIRECTORATE AND COMMITTEE CHANGES
Mr. Andrew Holden, Altron's Chief Operating Officer (and prescribed officer) resigned on
31 May 2021. Mr. Cedric Miller, Altron's Chief Financial Officer and executive director of the Altron
Board resigned on 30 June 2021. Mr. Nicholas Bofilatos was appointed as the Acting Chief Financial
Officer on 1 July 2021. Mr. Bofilatos was subsequently appointed as Altron's Chief Financial Officer,
executive director of the Altron Board and member of the Altron Risk Management Committee effective
from 29 July 2021.
Altron's long-standing Chairman, Mr. Mike Leeming retired following the Company's Annual General
Meeting held on 28 July 2021. Mr. Stewart van Graan was appointed as Chairman of the Altron Board
effective from 28 July 2021. Mr. van Graan resigned as member of Altron's Audit Committee on 28 July 2021
and was appointed as the Chairman of Altron's Nomination Committee on 28 July 2021.
Ms. Alupheli Sithebe was appointed as a non-executive director and member of the Altron Audit
Committee on 28 July 2021.
Ms. Berenice Francis resigned as an independent non-executive director of the Board and member of
the Altron Audit Committee and Altron Risk Committee on 10 September 2021. Mr. Tapiwa Ngara was
appointed as a non-executive alternate director to Mr. Antony Ball on 13 September 2021.
The Board adopted a decision to restructure and streamline its Committees on 13 September 2021
which resulted in the constitution of the following Committees:
- The Altron Audit and Risk Committee ("AARC") initially comprised of Mr. Grant Gelink
(Chairman); Ms. Alupheli Sithebe (Member) and Mr. Robert Venter (Member). Messrs. Nyati
and Bofilatos resigned as members of Altron's erstwhile Risk Committee on 13 September 2021.
- The Altron Remuneration, Social, Ethics and Sustainability Committee ("RemSec") initially
comprised of Dr Phumla Mnganga (Chair); Mr. Antony Ball (Member); Mr. Tapiwa Ngara
(Alternate to Mr. Antony Ball) and Mr. Robert Venter (Member). Messrs. Nyati and van Graan
resigned as member and chairman respectively, from Altron's erstwhile Social, Ethics and
Sustainability Committee on 13 September 2021.
Ms. Sharoda Rapeti was appointed as an independent non-executive director of the Altron Board,
RemSec and AARC on 19 November 2021. Mr. Venter resigned as a member of the AARC on 19 November 2021.
Following the announcement on 11 January 2022 that Mr. Mteto Nyati will step down from his role as
Chief Executive on 30 June 2022, he will also step down as a member of the Altron Investment
Committee from this date. Mr. Stewart van Graan has been appointed as the Executive Chairman and
acting Chief Executive of Altron from 1 July 2022 until 30 September 2022. Dr Phumla Mnganga has
been appointed as the Lead Independent Director of the Board during this period (1 July 2022 until
30 September 2022).
SUBSIDIARY COMPANY DIRECTORATE
Mr. Stewart van Graan resigned as a non-executive director and Chairman from the Netstar Board on
13 September 2021. Mr. Robert Venter was appointed as a non-executive director and Chairman of the
Netstar Board on 14 September 2021. Ms. Alupheli Sithebe was appointed as the Chair of the Netstar
Financial Reporting and Review Committee ("FRARC") on 14 September 2021. Mr. Nicholas Bofilatos
was appointed as a member of the Netstar FRARC on 9 May 2022.
OUTLOOK
We foresee continued pressure on supply chain and pricing due to the global component shortage.
The resilience we have seen from our Own Platform segment will carry through into HY1 of FY23, with Altron
FinTech seeing a strong performance to the start of the new financial year. Within the Digital
Transformation segment, a strong focus will be placed on the turnaround of ASI to improve its
performance. The segment will be strengthened by Altron Security's performance with the addition of
Lawtrust, which goes through its peak cycle during the first half of our financial year. Altron Karabina is
expected to continue its strong growth trajectory against the HY22 performance. 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.
FURTHER INFORMATION
This short form announcement is the responsibility of the directors and is only a summary of the
information contained in the full announcement and does not contain full or complete details. Any
investment decision should be based on the full announcement accessible from Monday, 16 May 2021
on the Company's website at: https://www.altron.com/financial-reporting/#annual_results
and on the JSE website at: https://senspdf.jse.co.za/documents/2022/jse/isse/aele/YE22.pdf
The full announcement is also available at our registered office for inspection, at no charge, during
office hours. Copies of the full announcement may be requested by contacting the Company Secretary,
Ms. Nicole Morgan on email: nicole.morgan@altron.com.
Any forecast financial information contained in this announcement is the responsibility of the directors
and has not been reviewed or reported on by the external auditors.
The independent auditor's audit reports by PricewaterhouseCoopers Inc. do not report on all the
information contained in this announcement/financial results. Shareholders are therefore advised that
in order to obtain a full understanding of the nature of the independent auditor's' engagement they
should obtain a copy of the unqualified independent auditor's audit reports on the summary consolidated
financial statements and the consolidated annual financial statements together with the accompanying
financial information from Altron's registered office or can be downloaded from the Company's website:
https://www.altron.com/financial-reporting/#annual_results
The directors of Altron take full responsibility for the preparation of this preliminary report and the
financial information has been correctly extracted from the underlying audited financial statements.
Any investment decisions made by investors and/or shareholders should be based on consideration of
the full annual financial results as a whole and investors and/or shareholders are encouraged to review
the full annual financial results at https://www.altron.com/financial-reporting/#annual_results
The key audit matters (pursuant to IAS 701) can be viewed via the full independent auditor's audit report
and the annual financial statements at https://www.altron.com/financial-reporting/#annual_results
For and on behalf of the Board.
Mr. Stewart van Graan Mr. Mteto Nyati Mr. Nicholas Bofilatos
Chairman Chief Executive Chief Financial Officer
Registered office:
Altron Campus, 20 Woodlands Drive, Woodlands Office Park, Woodmead, Gauteng, South Africa, 2191
Sponsor:
Investec Bank Limited
Transfer secretaries:
Computershare Investor Services (Pty) Ltd, 1st Floor, Rosebank Towers, 15 Biermann Avenue,
Rosebank, 2196
Directors:
Mr. S van Graan (Chairman), Mr. M Nyati (Chief Executive)*, Mr. N Bofilatos (Chief Financial Officer)*,
Mr. AC Ball, Mr BW Dawson, Ms. AK Sithebe, Mr. GG Gelink, Dr P Mnganga, Mr. S Sithole
(Zimbabwean), Ms. S Rapeti, Mr. RE Venter, Mr. T Ngara (Alternate Director to Mr. AC Ball).
* Executive
Group Company Secretary:
Ms. N Morgan
16 May 2022
Date: 16-05-2022 07:05:00
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