Altron expects big jump in full-year earnings - Werner Kapp — Altron Group CEO Werner Kapp

Altron Group has declared a R500-million special dividend and lifted its final ordinary dividend by 44% to 72c/share, returning a substantial chunk of cash to shareholders as its three platform businesses – Netstar, Altron FinTech and Altron HealthTech – now account for almost all of the group’s operating profit.

Headline earnings per share from continuing operations rose 34% to R2.39 in the year to end-February, while operating profit grew 25% to R1.2-billion. The special dividend, paid from cash reserves, takes total cash returns to shareholders for the 2026 financial year to R2.40/share, up from 90c in FY25.

FY26 caps a three-year strategic overhaul that CEO Werner Kapp set out in 2023. Over those three years, group operating profit has compounded at 34%/year, headline earnings per share at 48% – effectively tripling – and dividends at 51%. Return on invested capital has risen from 7% in FY23 to 22.7% in FY26. Altron has invested more than R1.8-billion in growth-focused capital expenditure over the period, predominantly into the platforms ecosystem.

The size of the cash return signals management’s view that Altron is over-capitalised relative to near-term investment opportunities. Kapp said the group enters its next strategic phase with “an ungeared balance sheet and a higher-quality, annuity-driven earnings base”, though the absence of any disclosed acquisition target leaves the special dividend as the most direct use of the group’s R1.3-billion cash pile.

The annual results show an increasingly stark divergence inside Altron between its platforms segment and its legacy IT services businesses. Platforms generated 46% of group revenue but contributed 91% of earnings before interest, tax, depreciation and amortisation (Ebitda) and 95% of operating profit. IT services – made up of Altron Digital Business, Altron Security and Altron Document Solutions – saw revenue fall 5% to R4.8-billion, Ebitda decline 17% to R255-million and operating profit shrink 15% to R195-million.

Platforms, platforms, platforms

Altron, once a sprawling South African IT conglomerate, has effectively become a platforms business with a smaller, struggling IT services tail.

Within platforms, Netstar crossed the R1-billion Ebitda mark for the first time. The vehicle tracking business has grown its subscriber base from 1.38 million in FY23 to 2.21 million in FY26, a 17% compound annual growth rate over the period. It added 189 000 net subscribers in FY26, with enterprise customer growth of 19% and churn, excluding original equipment manufacturer partnerships, falling from 19% to 16%. South African Ebitda margins reached 49%.

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But the headline operating profit growth of 78% to R453-million was flattered by a change in depreciation policy. Netstar extended the useful life of its capital rental devices from three to an average of five years at the start of the year, reducing the depreciation expense by about R136-million. Stripped of that accounting change, Netstar’s operating profit grew by 24%.

Altron FinTech was the standout, with operating profit up 33% to R561-million on revenue of R1.5-billion. Annuity revenue now represents 88% of the FinTech business, with point-of-sale device rentals more than doubling to over 30 000 during the year. Operating profit at FinTech has more than doubled over three years from R233-million in FY23.

HealthTech grew operating profit 19% to R143-million on largely flat revenue, with annuity revenue rising to 96% of the total.

The IT services segment told a different story. Altron Digital Business, the largest unit in the segment, saw revenue fall 8% to R3-billion and reported operating profit of just R7-million for the full year, recovering from a R42-million operating loss in the first half after what the company described as a profit-improvement strategy involving cost cuts and the renewal of annuity contracts.

Altron Security delivered modest growth, with operating profit up 5% to R90-million. Altron Document Solutions was the one bright spot in the segment, with operating profit up 61% to R98-million – a sharp turnaround from an operating loss of R97-million two years ago.

Two once-off items affected the group result. The Netstar depreciation change added R136-million to operating profit, while a R74-million pension fund expense – linked to a non-cash decision to distribute a portion of the pension fund surplus to members – reduced it. Excluding both, group operating profit grew 19% to R1.15-billion rather than the headline 25%.

Altron’s effective tax rate for the year was 21.5%, but the group warned this would normalise upwards as the benefit of prior-year assessed losses, now fully utilised, falls away. That has implications for FY27 earnings forecasts.

Kapp described FY26 as the conclusion of Altron’s “accelerated growth” phase, with the group now entering what he called a “transformative growth” phase. The focus will remain on continued investment in the platforms businesses, with selective acquisitions.