Altron on the way to achieving 2.0 strategy, despite challenging operating environment
CFO Nicholas Bofilatos explains that the group had been negatively impacted by two of its operations.
Altron’s 2.0 strategy is starting to reap rewards as the company delivered a resilient performance in the face of a challenging operating environment, reporting an operating profit growth of 71 percent.
However CFO Nicholas Bofilatos believes that the group could have achieved a stronger performance had it not been negatively impacted by two of its operations, Altron System Integration and Altron Nexus. “Infrastructure integration was negatively impacted as clients continued to hold onto their CAPEX spend for larger projects due to future uncertainties and liquidity protection,” he explains. “Management realigned the business to simplify its offerings to clients and right-sized the business to focus on the identified high growth areas of cloud, data, DevOps and security.”
This, he adds, resulted in a positive turnaround between the first and second quarter, which has set the business up to focus on achieving its half-year expectations.
“Altron Managed Solutions’ operational issues within its banking unit have resulted in management restructuring the business, which has improved its second quarter performance against the first quarter, and will secure a foundation for improved half-year performance,” Nicholas says.
He adds that Altron Nexus’ high dependency on the public sector with low annuity income and high need for invested working capital is an area the group needs to focus and improve on. “As a result, a new managing director has been appointed and tasked with ensuring the long-term stability of Altron Nexus.”
Despite the various challenges, the group still reported some strong results.
“The Own Platforms segment, which contains Altron Netstar, Altron FinTech and Altron HealthTech, performed well within the first six months, demonstrating the strength of its annuity revenue which has continued to deliver stability to the Group, while the segment delivers high ROIC accretive returns,” Nicholas says, adding that the segment generated R1.4 billion in revenue, which is up 6 percent against the prior year, resulting in operating income improving by 27 percent.
“Altron Karabina’s revenue growth at 43 percent is tracking well, and the operation continued to leverage the strong relationship it has built with Microsoft, and Altron Security has performed well against expectations,” he adds.
Altron Netstar has seen an 18 percent year-on-year growth in its subscriptions, enabling it to reach a milestone 1 million subscribers.
The group has also reduced its working capital by R446 million during the last 12 months, which Nicholas says demonstrates management’s drive to become a capital-light business, as per the Altron 2.0 Strategy.
“We continued to have a strong and healthy balance sheet, which places us in a good and agile position to act on potential investments which arise in our identified growth areas of cloud, data DevOps and security, that have annuity revenues, own their IP and are capital-light,” he explains.
Nicholas adds that Altron is “very interested in gaining exposure to hard currencies again post the successful demerger of Bytes UK at the end of last year and are looking at potential acquisition targets both locally and internationally.”
He says that management will continue to drive and embed the Altron 2.0 strategy for the remainder of this financial year. “We are optimistic about the prospects for the second half of the year after several non-operational costs impacted the half-year results. Traditionally, we experience a trend of elevated results in the latter part of the financial year, which has been consistent over the last several years. We are optimistic about the group's growth in automation, cloud computing, data and security aligned with the segments in which the group operates in.”