Shares in technology group Altron soared as much as 20% on Thursday to their highest level in more than four years after reporting a rise in half-year earnings. The company declared an interim dividend at a time when firms are choosing to hold on to cash.
The group reported that revenue for the six months to August was 7% higher at R9.125bn compared to R8.531bn seen at the same time last year. Earnings before interest, tax, depreciation and amortisation rose 17% during the period to R883m.
On Thursday, Altron’s stock jumped 20.05%, its biggest one-day rise since July 2016, to R26.29 a share, giving the company a market capitalisation of R10.5bn.
In an interview, Altron CEO Mteto Nyati said despite the reporting period coinciding with the hardest part of the lockdown, some of their business units had benefited from increased demand driven by remote working trends.
He said Altron’s Bytes UK operations “were net beneficiaries of an elevated need for remote connectivity”, while the Karabina unit “also benefited from accelerated cloud adoption as customers transitioned from on-premise data centres to cloud hosting and computing”.
The security unit, which includes the recently acquired Ubusha business, “assisted customers in addressing the increased security vulnerabilities as a result of elevated remote working”, Nyati said.
Despite the uptick in demand for the Altron group’s services, Nyati said he was worried about the long-term effects of the pandemic on clients. For now, there is demand for technologies such as cloud and connectivity, but if the economic pressure continues, clients may not be in a position to continue consuming these services.
As a result of the lockdown and in an effort to manage costs, Altron has seen major capital expenditure projects placed on hold or delayed. This “widely impacted hardware sales across the group”, said Nyati.
Adrian Saville, CEO of Cannon Asset Managers, noted that much of the revenue growth seen by the group during the period could be attributed to a weakening of the rand. For example: of the 23% revenue growth in Bytes, 19% is from a translation benefit, as the local currency weakened from R18/£ to R22/£.
Having earned R4.77bn during the period, Bytes UK contributed 52.3% to group revenue.
Saville said he liked Altron’s core focus of being a “capital light businesses”, its plans to keep and expand the group’s international operations, developing its own intellectual property and products, and that 65% of revenue was based on annuity income.
Altron has also shed some light on the demerger of its Bytes UK business.
Altron announced in April that it would spin off Bytes, which provides software, cybersecurity and cloud services, after a strategic review of its portfolio that found that the value of the subsidiary was not reflected in the group’s share price and that its growth trajectory was different from the rest of the businesses.
Management has now put a minimum listing value of £450m (about R9.6bn) on the UK business, a transaction expected to be completed by the end of the year.
Saville is positive the listing could fetch even more. “They [management] believe this is the absolute minimum. However, we believe the value is more than this, naturally.”
After the listing of Bytes UK and the sale of the noncore assets, the group will be left with what it calls Altron 2.0, a largely SA-focused business which management believes has the capability to grow.
Covid-19 has assisted, as companies require digital transformation. The largest headwind they face that will limit growth is “lack of skills”, Nyati said.
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