JSE Tech Firm Altron To Focus On Organic Growth After Selected Buys Boost 2018 Profits

"I am pleased we are paying a dividend for the first time since 2016. "

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Mteto Nyati CEO Altron
Mteto Nyati CEO Altron

South Africa’s technology group Altron said on Thursday it would focus on organic growth after delivering a 25%r rise in 2018 earnings, boosted by organic growth, partnerships and selected acquisitions.

Altron’s shopping spree has sharply increased its scale in the past year.

The group acquired iS Partners for R225million in June 2018. The deal included the acquisition of Karabina Solutions, a Microsoft solutions business, and Zetta Business Solutions, which provides data advisory services. iS Partners adds to Altron’s existing Microsoft business offerings and will be integrated into the group in building a cloud and data analytics business of scale.

Altron reported a 24% rise in normalised headline earnings per share (HEPS) to 71 cents for the year to end-August 2018. HEPS is South Africa’s main profit gauge.

“Our great performance continues to be driven by the One Altron strategy which is anchored on organic growth, partnerships and selected acquisitions,” chief executive officer Mteto Nyati said in a statement on Thursday.

“We are committed to partner with our customers in their digital transformation journey and provide end-to-end technology solutions and services that solve their business challenges.”

Nyati added that the group has delivered on its stated goal of double-digit EBITDA (earnings before interest, tax, depreciation and amortisation) growth with the majority of its operations producing EBITDA in excess of 20%.

Altron’s EBIDTA came in at 16% higher to R686 million and revenue rose 44% to R9.8 billion.

Altron logo
Altron logo

The company added that it remains well-positioned for continued growth and execution of its One Altron strategy of offering end-to-end solutions to its extensive customer base.
“We continue to focus on organic growth, supplemented by selective acquisitions.”

In particular, Altron will fully integrate Altron Karabina, build stronger Cloud and Data Analytics capabilities, operationalise the Huawei and Altron Internet of Things partnership, establish a presence in India through Netstar; and conclude a debt refinancing package.

From a cash management perspective, Altron’s overall net debt position of R1.4 billion was a significant improvement on the 28 February year-end position of R1.9 billion due to increased cash generated from operations (R720 million compared to R598 million for the prior period), as well as better working capital management.

This resulted in a 220% increase in free cash flow to R295 million, which enabled the group to allocate R249 million towards repaying its long term loans during the period.
Turning to Netstar, Nyati said under new leadership the operations is driving customer centricity and cost reductions, backed by strong revenue and EBITDA growth at an organic level.

Netstar in total reported an 11% increase in revenue and 14% improvement in EBITDA, with improved growth in its subscriber base, particularly in stolen vehicle recovery, with churn and retentions under close control.

Its most recent Australian acquisition, EZY2C, is performing well ahead of the prior year, with Altron’s total market share in Australia now at 9%.

Most recently, Netstar concluded a joint venture with an in-country equity partner to offer insurance and fleet telematics in India, which further adds to our global expansion plans for Netstar and will diversify offshore earnings.

Altron Bytes Secure Transaction Solutions (BSTS) continued to perform well, growing revenue by 15% and EBITDA by 22% to R134 million, driven by profit margins of 23% and a number of new contracts secured during the period.

Bytes UK had an exceptional half year, growing revenue by 109% and EBITDA by 90% to R207 million.

The performance of the business was positively impacted by our acquisition of Phoenix Software in the last financial year, which added scale to Bytes UK, making it a significant player in the UK software market. Bytes UK further secured a five-year, £150 million contract with the UK’s National Health Service.

Furthermore, the cross-selling of Altron’s South African CyberTech offering into the UK market is gaining traction.

“I am pleased we are paying a dividend for the first time since 2016. Our international businesses continue to deliver growth with 57% of our revenue and 35% of our EBITDA realised from off-shore operations,” said Nyati.

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