During the past financial year Allied Electronics (Altron) delivered substantially on its commitment to reposition the company for growth in the ICT sector.
This entailed delivering on a clearly defined One Altron strategy anchored in four strategic pillars, namely improve revenue growth; improve profitability; transform the customer experience; and employee excellence.
According to the company, it has made considerable progress in the continued divestment of non-core assets, lowering debt levels and reducing our exposure to the manufacturing sector. It has also turned the company into a streamlined organisation with the leaders of our business operations joining the Altron Group Executive Committee.
New MDs have been appointed in the hore businesses, including Bytes Systems Integration, Bytes Managed Solutions and Altech Netstar to drive the restructuring of these operations. A leaner head office structure has been created, with 36% fewer employees, and a significant reduction in the corporate cost base.
The group states that it has also delivered on our stated aim of consistent double digit growth at an earnings before interest, tax, depreciation and amortisation (EBITDA) level.
During the period the group’s financial performance improved significantly on a normalised and constant currency basis. Revenue from continuing operations increased by 14% to R14,7-billion; EBITDA from continuing operations increased by 19% to R1,1-billion; headline earning per share (HEPS) from continuing operations increased by 19% to 135 cents; and ROCE from continuing operations was 21%.
During the year, it completed the acquisition of IT solutions provider Phoenix Software in the UK, enhancing its international footprint.
Altron boasts a diverse customer base of about 20 000 individual businesses which span both private and public sectors. To solidify and reduce the complexity of the customer relationship the group embarked on a “One Altron One Customer” sales programme, multi-skilling its sales team to add value to our customers through the provision of our full suite of end-to-end products and service offerings.
An element of the strategy was the disposal of the remaining assets no longer core to the business. The last of the conditions precedent with regards to the disposal of Powertech Transformers is expected to be fulfilled by 31 May 2018. Altron anticipates to complete the disposal of the remaining discontinued operations, CBI Telecom Cables and Altech UEC/Multimedia, in the current financial year. These residual operations traded profitably during the financial year at an EBITDA level.
During the review period the group’s core operations had a satisfactory performance despite the difficult local economy, a strengthening currency and the one-off costs associated with the various restructuring processes.
Revenue for the continuing operations grew by 14% to R14,7-billion, while EBITDA increased by 19% to R1,1-billion on a normalised and constant currency basis. The normalised EBITDA margin in turn improved to 7,6% compared to the prior period’s 7,3%. Organic EBITDA growth was 13,3%, while the inclusion of Phoenix Software in the second half of the year delivered acquisitive growth of 5,5%.
The results of the discontinued operations continued to show a significant improvement from the previous year. EBITDA in the current year improved to a profit of R8-million compared to a prior period loss of R110-million. The main improvement came out of the Powertech Transformers and Altech UEC/Multimedia businesses whichgenerated strong EBITDA growth. The results were further assisted by the reduced costs associated with the closure of the majority of the Powertech group operations.
The group believes it is well-positioned for growth and to execute on its One Altron strategy of offering end-to-end solutions
to its vast customer base.
It will continue to focus on organic growth, supplemented by selective acquisitions, in particular:
* Altech Netstar will make a step change in fleet management and telematics growth on the back of breakthroughs in our routes-to-market;
* It is building a Microsoft practice focusing on cloud computing, data analytics and security. These fourth industrial revolution capabilities are being built organically and through acquisitions;
* Altron has developed a Smart City blueprint in collaboration with key players in the local government space. This blueprint has a strong bias towards safety, security and healthcare. The broadband infrastructure being rolled out by Altech Radio Holdings is a key enabler;
* It will accelerate our cybertech offering, leveraging the competitive advantage where Altron has already had wins both in the South African and UK markets; and
* Where it has a presence in African countries it will add to its range of activities to include the full suite of Altron’s solutions.