Altron shares fell in Johannesburg on Wednesday after the technology group warned of weaker-than-expected growth in interim earnings.
From continuing operations, half-year headline earnings per share (Heps) for the period ending 31 August will be between 5% and 24% higher than the same six-month period a year ago. However, group Heps, which includes assets held for sale, will plunge into the red – it will report a headline loss of between 57c and 64c/share, a decrease of up to 288%.
At the same time, it has taken “material and decisive actions” to address challenges at two subsidiaries that are deemed non-core: Altron Nexus and Xerox agent Altron Document Solutions.
Results for the reporting period will be negatively impacted by provisions raised within two non-core subsidiaries, namely Altron Nexus of R336-million and Altron Document Solutions of R95-million, together with a provision raised at a group level of R33-million in relation to goodwill held on the group balance sheet for Altron Nexus.
“Altron Nexus and Altron Document Solutions will be classified as held-for-sale and will be reported in discontinued operations. These two entities contributed 21% to the group’s revenue at year-end. However, both subsidiaries were loss-making and therefore did not contribute to the group’s profit.”
Altron said its board no longer regards Nexus as core to its operations and strategy and “will actively explore opportunities to sell the business”. It will be accounted for as a discontinued operation in future financial reports.
As for Altron Document Solutions, the group said there is no change its non-core status and the business remains held for sale. Multiple potential bidders have expressed an interest in buying the company, the group said.
“Following the unsuccessful sale of Altron Document Solutions to Bi-Africa Investment Holdings, Altron Document Solutions appointed Warren Mande, the previous MD of Altron Managed Solutions, to restructure the business with a focus on cost optimisation, cash generation and working capital management.”
“However, an assessment of all the assets of Altron Document Solutions post the unsuccessful sale, together with challenging market conditions that led to two large customers facing financial difficulties, has culminated in the provisions which will negatively impact the reporting period in discontinuing operations.” These are R15-million related to accounts receivable, R68-million from finance lease assets and R12-million related to inventory.
On continuing operations, Altron said a review has been completed that aims to ensure each of the group’s operations is aligned to the new strategy devised under the leadership of CEO Werner Kapp, who took the reins last year from Mteto Nyati.
“Pursuant to these business reviews, targeted operating models are being executed in each operation, with early leading indicators highlighting strong year-to-date performance, with all operations on track to achieve their growth objectives,” Altron said.
“The profit improvement strategies are starting to show meaningful benefits, particularly in Netstar and Altron Systems Integration, the largest businesses in the group. Netstar’s profit improvement strategy is progressing well, with benefits already flowing from enhanced operational efficiencies and growing software as a service,” it added.
Despite the challenges at Document Solutions and Nexus, group CEO Kapp said he is “confident” the group is “now at a point where we have a stable base for Altron Group to grow from. The group maintains a very healthy balance sheet, remains strongly cash generative and is committed to maintaining its dividend policy.”
Altron shares were trading nearly 8% down on the JSE on Wednesday as investors digested the operational and trading update. They later recovered considerable ground, closing down 2.7% at R7.50. — © 2023 NewsCentral Media