Altron Limited has announced an operational update and trading statement for the six months ending 31 August 2023. The company has disclosed that it expects a significant variance in its financial results compared to the same period last year. This announcement comes as Altron undergoes a strategic realignment of its operations and addresses the impact of discontinuing non-core businesses.
Financial Projections and Performance:
Altron’s trading statement revealed various financial projections for the reporting period. The company estimates that headline earnings per share (HEPS) from continuing operations will be between 43 cents and 51 cents, representing a potential increase of 5% to 24% compared to the previous year. However, Group HEPS is projected to be between (64) cents and (57) cents, indicating a potential decrease of 268% to 288% compared to the same period last year. Similarly, earnings per share (EPS) from continuing operations are estimated to be between 33 cents and 40 cents, signalling a potential decrease of 11% to an increase of 8% compared to the previous year. Group EPS is expected to be between (86) cents and (81) cents, signifying a potential decrease of 437% to 457% compared to the same period in the previous year.
Amidst the financial fluctuations, Altron’s continuing operations have demonstrated robust performance. The company has been actively reviewing all its operations, both continuing and discontinuing, to ensure they align with the Group’s newly defined strategy. Early indicators suggest that the operations are on track to achieve their growth objectives. Notably, Netstar and Altron Systems Integration, the Group’s largest businesses, have shown promising results from profit improvement strategies. The implementation of these strategies has led to enhanced operational efficiencies and notable growth in Software as a Service (SaaS).
Impact of Discontinuing Operations:
Altron has made decisive efforts to streamline and divest two non-core subsidiaries, Altron Nexus and Altron Document Solutions. As a result of these actions, the overall financial performance of the Group will be affected during the Reporting Period. Provisions have been raised within these subsidiaries, contributing to their classification as held-for-sale and subsequent reporting in discontinued operations. Altron Nexus and Altron Document Solutions collectively contributed 21% to the Group’s revenue at Year End. However, due to their loss-making status, they did not contribute to the Group’s profit.
The following table provides an overview of the provisions raised in relation to Altron Nexus:
| Provision Raised | Amount (in R million) | Reason |
|---|---|---|
| Accounts Receivable | 34 | Pertains to outstanding payments |
| Property, Plant, and Equipment | 30 | Adjustment of asset value after review |
| Inventory | 71 | Adjusted valuation after restructuring |
| Restructuring Costs | 11 | Costs incurred during the restructuring process |
Furthermore, an additional provision of R33 million was raised against goodwill accounted for on the Group’s balance sheet for Altron Nexus. While these provisions are expected to impact the financial performance of Altron, the company remains confident in its strong cash generation capabilities and well-capitalized position, which provide a solid foundation for executing its strategic initiatives.
CEO’s Perspective:
Werner Kapp, the CEO of Altron, expressed his dedication to establishing a stable platform for the Group’s growth. He highlighted that the ongoing realignment of operations and recent market developments contributed to the provisions raised in Altron Nexus and Altron Document Solutions. Nevertheless, Kapp emphasized the company’s strong financial position, cash generation abilities, and commitment to maintaining its dividend policy. He is optimistic about the continuing operations, which have shown strong performance year-to-date.
Outlook:
Altron shareholders are advised to carefully consider the provided financial projections and the potential impact of discontinuing operations on the Group’s financial performance. As the company proceeds with its strategic realignment, investors will eagerly await the half-year results in October for a comprehensive update on Altron’s progress and execution of its new strategy.
