Shares in Altron took a knock on Monday, as the technology group said it expects a drop in headline earnings in its 2023 results despite higher sales as it felt the pressure on the margins of two of its large segments by revenue: Netstar and Altron Systems Integration (ASI).
The group’s performance in the period may come as a bitter pill given the huge turnaround Altron has undergone over the past decade.
The former Venter family business is barely recognisable, having staked its future on a relationship with software giant Microsoft, the growth of cloud services and partnerships in the automotive sector.
“Both businesses are implementing their accelerated performance improvement strategies, which are gaining positive momentum in the 2024 financial year,” the company, valued at R3.6bn on the JSE, said in an operational and trading update on Monday for the year to end-February.
Altron sees its headline earnings per share (Heps), a common profit measure in SA that excludes certain items, falling 14%-32% to 25c-32c; core earnings remaining the same or decreasing up to 10% to R990m-R1.11bn; and revenue improving 9%-19% to R10.38bn-R11.33bn.
As a result, Altron’s share price fell the most since May, down 4.89% to R8.75. Over the past 12 months the stock price has risen more than 15%.
To deal with Netstar’s headwinds, Grant Fraser was appointed MD on January 1 to implement a strategy to increase profit.
“Netstar is an exciting business for the group and the refocus will open key opportunities in the big data space, as it continues to digitalise mobile assets for its customers,” the company said.
Altron has shifted its focus over the past few years — including selling ATM hardware and support business units in 2023 as part of a series of disposals to streamline operations — to growth areas such as the cloud, data analytics, the internet of things, and security.
After separately listing its biggest money-spinner, Bytes Technology, in 2020, Altron’s business in the rest of Africa was billed as the focus for growth, but the strategy has since changed given the reliance of these operations on hardware.
In 2023 ASI and Netstar were affected by one-off adjustments that hampered group earnings such as the auditor-general identifying material uncertainties in the City of Tshwane’s 2022 financial statements, resulting in Altron’s management taking a conservative approach and providing R134m for Altron Nexus’ exposure to the metro.
This relates to a long-running dispute over a contract worth R1.2bn awarded by the city to Thobela Telecoms, in which Altron is a minority shareholder, in 2015. The constitutional court ruled in 2021 that the contract was lawful but both parties signed an arbitration agreement earlier in April and the process started on Wednesday.
“This provision is raised for Altron’s accounting purposes and does not constitute any waiver, nor does it mean that Altron is abandoning its rights and claim. On a successful outcome of recovery greater than the carrying amount, the respective provision will be reversed in the relevant financial results,” the company said.
The sale of Altron Document Solutions to Bi-Africa also fell through at the end of February, despite obtaining the necessary regulatory approval, as a distribution agreement could not be reached.
“An assessment of Altron’s assets held for sale resulted in a provision on inventory held of R74m and an impairment of R30m on an outstanding receivable,” the company said on Monday.
The company’s final results are expected on May 15.
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