Altron — On track for FY25

Altron (JSE: AEL)

Last close As at 25/02/2025

ZAR21.16

0.29 (1.39%)

Market capitalisation

ZAR8,719m

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Research: TMT

Altron — On track for FY25

Altron’s pre-close update confirmed that FY25 headline EPS from continuing operations would be at least ZAR1.44 (+40% y-o-y), broadly in line with our forecast. Overall, the Platforms segment saw a strong performance, the IT Services and Distribution segments traded in line with previous guidance and the company is talking to a potential buyer for Nexus. We expect a further trading update when Altron has more certainty over the expected EPS range.

Katherine Thompson

Written by

Katherine Thompson

Director

Software and comp services

FY25 trading update

26 February 2025

Price ZAR21.16
Market cap ZAR8,041m

Net cash/(debt) at end H125

ZAR(312.0)m

Shares in issue

380.0m
Free float 35.7%
Code AEL
Primary exchange JSE
Secondary exchange N/A
Price Performance

Business description

Altron is a South African provider of platforms and IT services. The company operates via three divisions: IT Services, Platforms and Altron Arrow. In FY24, 89% of revenue was generated in South Africa and annuity revenue made up 60% of total revenue.

Analyst

Katherine Thompson
+44 (0)20 3077 5700

Altron is a research client of Edison Investment Research Limited

Note: Revenue is for continuing operations. PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items, and are for continuing operations. HEPS = basic continuing headline EPS. FY24 has been restated to include ADS.

Year end Revenue (ZARm) PBT (ZARm) EPS (ZAR) HEPS (ZAR) DPS (ZAR) P/E (x) Yield (%)
2/23 8,445.0 482.0 0.88 0.85 0.35 24.0 1.7
2/24 9,603.0 570.0 1.04 1.03 0.58 20.4 2.7
2/25e 9,770.5 821.1 1.45 1.45 0.70 14.6 3.3
2/26e 10,518.9 960.0 1.72 1.75 0.85 12.3 4.0

For the year ending 28 February 2025 (FY25), Altron is confident that financial results will improve by more than 20% compared to FY24. Continuing HEPS is expected to be at least ZAR1.44 (+40% y-o-y), which compares to our ZAR1.45 forecast. Group HEPS will be more than 100% higher than the -ZAR0.29 reported in FY24 (our forecast ZAR1.19). Continuing EPS will be at least ZAR1.24 (+30% y-o-y), compared to our ZAR1.40, and group EPS will be more than 100% higher than the -ZAR0.45 reported in FY24 (our forecast ZAR1.12). Adjusting for the sale of the ATM business, continuing operations grew year-to-date (11 months to 31 January) revenue by low single digits and EBITDA and operating profit by strong double digits.

The Platforms segment maintained a strong year-to-date (ytd) performance. Netstar, now with more than two million subscribers, generated revenue growth and double-digit growth in EBITDA and operating profit, despite weaker trading in Australia, where higher churn from the 3G to 4G transition resulted in a loss for the Australian operations (which make up less than 4% of subscribers). Altron Fintech saw double-digit growth in revenue, EBITDA and operating profit, driven by growth in the SME market. Altron Healthtech grew revenue and generated double-digit growth in EBITDA and operating profit, helped by growth in private practice management and the corporate sector.

In the IT Services segment, after adjusting for the ATM sale, Altron Digital Business maintained flat revenue y-o-y, with EBITDA and operating profit down y-o-y as previously guided, due to the delay of two projects into FY26 and non-recurring project expenses relating to historic contracts. The corrective actions taken in Altron Security helped it to achieve modest ytd growth in EBITDA and operating profit, despite lower revenues, which declined due to lower spending by a large customer and the effect of net revenue accounting for some software sales. Altron Document Solutions saw stable revenue ytd and strong EBITDA and operating profit growth.

In the Distribution segment, as guided, Altron Arrow revenue is down due to the normalisation of the supply chain but the business is aiming to maintain its operating margin. The sole remaining discontinued operation, Nexus, saw weaker trading in H225 but still generated a smaller loss ytd than in FY24. The company is in active discussions with a potential buyer.

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