Altron is on a mission to boost its annuity revenue streams as it sees these as more profitable and a good way to predict future finances.
Annuity revenue refers to a regular stream of income generated from a contractual agreement in which an individual or entity receives a series of payments over a specified period.
On Monday, during an investor presentation of the group’s full-year earnings to February, CEO Werner Kapp and CFO Carel Snyman highlighted efforts to grow this type of turnover in each operating unit, underscoring its strategic importance to the group.
Altron reported that R6.068bn out of R9.588bn (63%) of its revenue was annuity based in the period, 7% higher than the previous year.
Kapp told Business Day: “The nice thing about it is your cash flows are quite predictable, which means you can invest in growth as much as you can ahead of the curve.”
“Second, annuity is typically higher margin business [though] it takes a while to build it out.
“Third, but probably the most important, particularly about the platform segment … it makes us less exposed to the cyclical nature of business.” To illustrate, he pointed to businesses that pull back on some spend in uncertain times because cash flows are unpredictable.
This comes as the technology group delivered an almost 60% jump in annual profit as it focused on higher-margin, quality revenue.
Though revenue was flat at R9.6bn for the year to end-February after the sale of the ATM business, earnings before interest tax, depreciation and amortisation (ebitda) for continuing operation was 27% higher at R1.82bn.
The group said headline earnings per share (HEPS) grew 73% to 178c, while profit after tax was 59% higher at R616m. The board approved a 52% increase in the final dividend to 50c per share.
Continuing operations include Netstar, Altron FinTech, Altron HealthTech, Altron Digital Business, Altron Security, Altron Document Solutions and Altron Arrow, while it excludes Altron Nexus.
Netstar delivered a 17% jump in ebitda to R935m as total subscribers grew 16%, to more than 2-million, supported by double-digit growth in the consumer and enterprise segments.
Altron FinTech’s ebitda was up 38% to R457m, driven primarily by strong growth in the SME customer base and increased volume and value of debit orders processed through its collection and payment platform.
Within IT services, Altron Document Solutions (ADS) was reclassified as a continuing operation after a review of strategic options. While still executing a profit improvement strategy, ADS delivered ebitda of R84m compared with a loss of R74m last year.
“This year’s strong results reflect the disciplined execution of our strategy, despite heightened economic and political uncertainty,” Kapp said.
He said while the group’s strategy and core fundamentals remained sound, the operating environment was expected to remain constrained, with heightened economic uncertainty and market volatility affecting customer spending patterns, particularly in the IT services segment, which may affect Altron’s growth into the 2026 financial year.
Altron remains committed to its medium-term operating profit margin targets of 19% in the platforms segment and 7% in the IT services segment, as well as its dividend policy of paying out at least 50% of HEPS from continuing operations, Kapp said.
Update: May 26 2025
This story has been updated with new information.
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