Altron Limited Class A · JSE:AEL
Altron Limited Class A — H1 FY2022 Earnings Presentation
35 slides from Altron Limited Class A's earnings presentation, October 2021
Slide 1: Interim Results for the six months ended 31 August 2021
INTERIM RESULTS for the six months ended 31 August 2021
Slide 2: Disclaimer
DISCLAIMER This report contains forward-looking statements that relate to Altron’s future operations and performance. Such statements are not intended to be interpreted as guarantees of future performance, achievements, financial or other results. They rely on future circumstances, some of which are
Slide 3: Welcome & Overview
MTETO NYATI WELCOME & OVERVIEW
Slide 4: Highlights | Group
HIGHLIGHTS | GROUP REVENUE* OPERATING INCOME* HEPS* R4.6bn R163m 6cps +5% +>100% +>100% NET DEBT : EBITDA WORKING CAPITAL* ROIC** Special Dividend 0.25x R1.6bn 5.9% 96cps -0.65x -446m +103bps +100% ** Prior year restated to remove the impact of Bytes UK ** Calculated on the last 12 months and restat
Slide 5: Highlights | Continuing Operations
H I G H L I G H T S | C O N T I N U I N G O P E R AT I O N S REVENUE* OPERATING INCOME* HEPS* R3.5bn R173m 11cps +2% +71% +>100% c CAPEX OPERATING FREE WORKING CAPITAL* ROIC** CASH FLOW* R125m R81m R815m 7.25% -R4m +>100% -R347m -139bps INTERIM DIVIDEND : 7cps ** Prior year restated to remove the im
Slide 6: Highlights & Challenges
HIGHLIGHTS & CHALLENGES HIGHLIGHTS CHALLENGES Lean Head Office Altron Fintech Operational • HC reduction 36% • Debicheck transition • ASI slow to transition into • FY22 costs < R150m (PY R235m) • Massmart onboarding high value services • Global competition – War for talent Netstar Altron Shared Serv
Slide 7: Organisational Agility: Right-sizing Overheads, COVID-19, Executing on Strategy
O R G A N I S AT I O N A L A G I L I T Y RIGHT-SIZING COVID-19 EXECUTING OVERHEADS IMPACTS ON STRATEGY 7
Slide 8: Right-sizing Overheads
EXECUTION RIGHT-SIZING OVERHEADS OI Q1 vs Q2 (Rm) ALTRON ALTRON MANAGED SOLUTIONS SYSTEMS INTEGRATION 29 Banking unit (NCR) under Simplify, right size and focus on 7 pressure Cloud, Data, DevOps & Security (12) (32) • 64 Headcount reduction • 37 Headcount reduction • R2.7m pm saving • R3.3m pm savin
Slide 9: COVID-19 Impacts
EXECUTION COVID-19 IMPACTS ELECTRONIC GLOBAL HYBRID EMPLOYEE COMPONENT SUPPLY CHAIN WORK WELLBEING SHORTAGE • Working capital • Netstar impact The War for Talent • Estimated workforce realisation in H1 • Arrow being a • Implemented hybrid vaccination status was positive beneficiary from work policy
Slide 10: Executing on Strategy
EXECUTION EXECUTING ON STRATEGY GROUP WORKING DISPOSAL BOLT ON CAPITAL OF NON-CORE ASSETS ACQUISITIONS APS: Sold iSON & LRMG LAWtrust effective 1st October R446m* • Within Security growth area • High annuity income >65% ADS: Binding offer 22% • Own IP – Signing Hub and Advanced Digital Signature IMP
Slide 11: Strategy Execution (cont)
EXECUTION STRATEGY EXECUTION (cont) NETSTAR Net Promoter Score Business Transformation Programme (SA) Consistent improvement in customer satisfaction • Milestone 1m subscribers (18% YoY) 53,7% o Customer call response time o Abandonment Rate 31,3% o Lead to Contract o Contract to Fitment 2018 2021 •
Slide 12: Revenue: Own Platforms
O W N P L AT F O R M Altron Netstar Altron Fintech Altron Healthtech • 16% against HY21 and HY20 • Operating Income growth of • Dedicated corporate sales 68% and 8% against HY21 • Reached 1m subscriber and HY20 • Product modernisation milestone • Successful transition to • Growth of net new Medical
Slide 13: Revenue: Digital Transformation
D I G I TA L T R A N S F O R M AT I O N Altron Systems Integration Altron Security Altron Karabina • Signings TCV R374m • Altron Security and Old Mutual • Operating Income growth of (6% YoY) won global Identity Excellence 160% and 131% against HY21 Award and HY20 • Huawei Rising Star Partner of the
Slide 14: Revenue: Managed Services
M A N A G E D S E RV I C E S Altron Managed Solutions Altron Nexus • End User Computing unit profitable and • Debtors collected > R240m growth double digit (Rev 11% & OI 13%) • Awarded Huawei South Africa’s Networking • ATM Banking unit (NCR) under pressure Partner of the Year • Negative impact from
Slide 15: FY21 Outlook Feedback
FY21 OUTLOOK FEEDBACK KPI PERFORMANCE APS disposed ADS Advance stages DISPOSAL OF Arrow still held for sale NON-CORE ASSETS AROA divestment plan Acquire LAWtrust EXPANSION HO Cost â FY22 < R150m vs FY21 R235m ROIC á VALUE UNLOCK Karabina turn around MAINTAIN Altron System Integration PERFORMANCE 15
Slide 16: Financial Results
NICHOLAS BOFILATOS FINANCIAL RESULTS
Slide 17: Financial Landscape
EXECUTION FINANCIAL LANDSCAPE DISCONTINUED VENDOR LOAN SHARE-BASED RESTRUCTURING OPERATIONS WAIVER PAYMENTS • Bytes UK forms part • Waiver of AIMS • Modification to • AMS severance of the continued BEE vendor loan existing share cost (R7m) in H1 operations (R47m) as part of a schemes as a result • A
Slide 18: Operating Income Continuing
O P E R AT I N G I N C O M E C O N T I N U I N G OI% OI% OI% OI% 3.7% 2.9% 4.9% 5.4% 11 84% 37% 70% 9 193 173 4 126 101 HY20 HY21 HY22 SBP (Net) Severance HY22 Normalised* Operating Income * Normalised for the cost relating to the modification and forfeitures on the share-based payments, and Severan
Slide 19: Operating Cost Margin Continuing
O P E R AT I N G C O S T M A R G I N C O N T I N U I N G 210bps 0,1% 280bps 320bps 0,2% 0,3% 34,8% 34,2% 32,1% 31,9% 31,6% 31,6% HY20 HY21 HY22 SBP (Net) Severance HY22 Normalised* Operating Cost Margin (Gross Invoiced Income) * Normalised for the cost relating to the modification and forfeitures on
Slide 20: Headline Earnings Normalisation
H E A D L I N E E A R N I N G S N O R M A L I S AT I O N ( R m ) (22) 31 11 (6) 47 101 40 HY22 AIMS SBP Forfeiture adj Severance Tax impact HY22 Normalised 20
Slide 21: Summarised Income Statement
S U M M A R I S E D I N C O M E S TAT E M E N T Continuing Operations Period ending 31 August 2021 Statutory Normalised Statutory Normalised % Change % Change R’million HY22 HY22 HY21** HY21** Statutory Normalised Revenue 3 544 3 673* 3 480 3 571* 2 3 Operating income 173 193 101 105 71 84 Operating
Slide 22: Working Capital Analysis
W O R K I N G C A P I TA L A N A LY S I S ( R m ) Reduction in working capital – R446m 200 Reduction in working capital – R80m 84 82 91 38 20 1 (70) 2 060 c 1 694 1 614 R819m Relating R799m Relating to assets held for sale to assets held for sale Re-presented * HY21 operations Continuing Other opera
Slide 23: Cash Flow Bridge
23 178 HY F22* Cash held-for- (60) sale (9) FCTR (229) Financing CASH FLOW BRIDGE (Rm) activities (239) Investment activities Net dividends (60) paid Taxation (60) (62) c paid Net finance (66) expenses Working 80 capital 447 Cash from operations Balance excludes cash classified as held-for-sale 376
Slide 24: Balance Sheet Strength
BALANCE SHEET STRENGTH 2,0 bn POTENTIAL UPSIDE: LAWtrust EBITDA to be included from 1 Oct 1,0 bn 0,9 x c 0,7 bn Proceeds from 0,4 bn 0,4 x Held for Sale Asset 0,25 x 0.0x HY21 FY21 HY22 HY22 * Outstanding proceeds from Powertech disposal Net Debt/EBITDA (Multiple) Net Debt as Reported (Billions) * A
Slide 25: Outlook
MTETO NYATI OUTLOOK
Slide 26: Altron Strategy
A LT R O N 2 . 0 S T R AT E G Y OUR PURPOSE OUR VISION OUR SEGMENTS Delivering innovation The highly differentiated that matters technology solutions provider Managed Digital Own OUR GOAL ONE SET OF VALUES Services Transformation platforms Triple Operating Income in 5 years • Openness, honesty and i
Slide 27: Embed Altron: HY FY22
E M B E D A LT R O N 2 . 0 HY FY22 • Integration of LAWtrust • Disposal of Altron Document Solutions & Altron Rest Of Africa • Finalisation of City of Tshwane negotiations • Accelerate Altron Karabina growth • Qualify Acquisition Pipeline 27
Slide 28: Outlook
E M B E D A LT R O N 2 . 0 ( C o n t ) Outlook • Operating Income (consistent with past performance) ü H2 > 2.0 x H1 • Operating Income (YoY Growth) ü > 30 % 28
Slide 29: Annexure
ANNEXURE 29
Slide 30: Revenue Movements by Segment
REVENUE MOVEMENTS BY SEGMENT (Rm) Continuing Operations YoY â 11% á 6% á 1% á 52% á 2% á 3% 3 673 3 571 129 91 15 100 (136) 85 3 544 3 544 3 480 3 480 Gross invoiced HY21 * Digital Own Platforms Managed Other HY22 Gross invoiced income IFRS15 Transformation Services IFRS15 income HY21 * revenue reve
Slide 31: Operating Income Movement by Segment
O P E R AT I N G I N C O M E M O V E M E N T B Y S E G M E N T ( R m ) Continuing Operations YoY á >100% á 27% â >100% á 34% á 71% (30) 41 53 8 173 101 HY21* Digital Own Platforms Managed Services Other FY21 Transformation * Restated for the operations classified as held for sale 31
Slide 32: Healthy Debt Levels
H E A LT H Y D E B T L E V E L S Rm HY22 FY21 HY21 Net debt as reported 753 453 1 983 Less: Deferred disposal receipts (89) Add: Ubusha 54 Add: Lawtrust 245 Adjusted net debt (including deferred disposal receipts) 963 Covenant ratios Covenant HY22 FY21 HY21 Net debt : Attributable EBITDA < 2.0x 0.2x
Slide 33: Summarised Group Balance Sheet
SUMMARISED GROUP BALANCE SHEET Period ending 31 August 2021 Statutory Statutory % Change* Normalised Commentary R’million HY22 HY21* (Statutory) • Bytes UK disposal that was effective in Total non-current assets 3 805 4 297 (11) H2FY21 • Bytes UK disposal that was effective in H2FY21 Total Current a
Slide 34: Annuity Percentage by Operating Company
A N N U I T Y P E R C E N TA G E B Y O P E R AT I N G C O M PA N Y Annuity Revenue Altron Managed Services 50% Managed Services Altron Nexus 57% Altron System Integration 42% Digital Transformation Altron Security 52% Altron Karabina 24% Altron Netstar 86% Own Platforms Altron FinTech 74% Altron Hea
Slide 35: Private vs Public Revenue Contribution
P R I VAT E V S P U B L I C R E V E N U E C O N T R I B U T I O N Altron Managed Services 100 Managed Services Altron Nexus 85 15 Altron System Integration 5 95 Digital Transformation Altron Security 1 99 Altron Karabina 6 94 Altron Netstar 5 95 Own Platforms Altron FinTech 3 97 Altron HealthTech 10