Altron Limited Class A · JSE:AEL
Altron Limited Class A — FY2020 Earnings Presentation
45 slides from Altron Limited Class A's earnings presentation, May 2020
Slide 1: Annual Results for the year end 29 February 2020
ANNUAL RESULTS for the year end 29 February 2020
Slide 2: Highlights and Challenges
MTETO NYATI HIGHLIGHTS AND CHALLENGES 2
Slide 3: Disclaimer
DISLAIMER 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 4: Highlights
HIGHLIGHTS REVENUE EBITDA BYTES UK EBITDA OPERATING PROFIT R16.71bn R1.84bn R611m R1.09bn +6% +14% +66% +5% +23%* +2%* +65%* +4%* HEPS WORKING CAPITAL DEBT : EBITDA ROCE 182cps R959m 0.5x 20.1% +2% R500m 0.2x -90 bps +6%* Release from H1 improvement FINAL DIVIDEND: 26cps (40% reduction) * normalised
Slide 5: Delivering on our guidance from HY2020
DELIVERING ON OUR GUIDANCE FROM HY2020 MD • 2nd half EBITDA profit of R49m vs 1st half ALTRON NEXUS R24m loss of R25m EBITDA FD • Working capital: +R350m collected WORKING CAPITAL R500m • 82% Debtors: 30 days or less MANAGEMENT Release from H1 • Debtor day reduction STRENGTHEN 4 • Focused on top 44
Slide 6: COVID-19 headwind
COVID-19 HEADWIND COVID-19 Altron’s business • Accelerated digitilisation IMPACT 80% in Cloud • New opportunities Staff fully • Strengthened relationships: 100% productive 150 Two-way radios donated 62% annuity 2021 estimated revenue income Solidarity fund donation impact: mid single digit reduction
Slide 7: COVID-19 headwind (continued)
COVID-19 HEADWIND (CONTINUED) COVID-19 IMPACT Cost savings initiatives: • Postponing cash absorbing projects • Decreasing variable costs Salary and employee initiatives: • Reversing FY2020 salary increases • Freezing salary increases and head count • FY2020 top management bonuses halved Combined ini
Slide 8: Delivering on our Strategy
MTETO NYATI DELIVERING ON OUR STRATEGY 8
Slide 9: Altron strategic focus areas
ALTRON STRATEGIC FOCUS AREAS Revenue Improve Transform Employee Sustainability Evolution Growth Profitability Customer Excellence Experience • % Revenue • % EBITDA • Customer • Employee • CSI spend • Growth areas: increase increase NPS engagement % Revenue index • GHG increase • Revenue • Opex • # c
Slide 10: Delivering on strategy: growth in revenue
DELIVERING ON STRATEGY GROWTH IN REVENUE Gross Invoiced Income (Rm) 23% Organic growth driving gross Gross invoiced income relating 23 333 invoiced income to agency sales not recognised 23% Reported revenue IFRS 15 statutory ONE Grossed invoiced income per head R2.6m +27% 19 041 6 620 Customers inve
Slide 11: Delivering on strategy: improve profitability
DELIVERING ON STRATEGY IMPROVE PROFITABILITY 14% 2%* 2.4ppt R1.60bn R1.84bn 19.6% 17.2% FY19 FY20 FY19 FY20 EBITDA Operating Cost Margin * normalised 11
Slide 12: Transforming the customer experience
DELIVERING ON STRATEGY TRANSFORMING THE CUSTOMER EXPERIENCE CRM system & INNOVATION industry specialists THAT MATTERS 46% customer NPS Understanding 18% customer needs Netstar churn 553 up 55% # top 44 contract wins Expanding # services 12
Slide 13: Delivering on strategy: employee excellence
DELIVERING ON STRATEGY | EMPLOYEE EXCELLENCE INVESTMENT IN THE DIVERSITY IN DEVELOPMENT OF OUR PEOPLE OUR ORGANISATION >470 GENDER Employee learnerships EQUALITY 38% 42% Total Executive +2ppt to 61% Women Employees Women Employee engagement index -3ppt to 8% EMPLOYMENT Employee turnover rate 74% EQU
Slide 14: Sustainability | ESG
DELIVERING ON STRATEGY SUSTAINABILITY | ESG • CSI spend R6.1m Community • 305 learnerships awarded Social Investment • Skills development: digitisation of government records Reducing Governance environmental impact Move to green rated Campus • Strengthened King IV application • Corporate governanc
Slide 15: Delivering on Strategy (continued)
ANDREW HOLDEN DELIVERING ON STRATEGY (CONTINUED) 15
Slide 16: Evolution: cloud, IoT, data analytics, security
DELIVERING ON STRATEGY EVOLUTION CLOUD SERVICES IOT DATA ANALYTICS SECURITY 16
Slide 17: Unlocking value: potential UK demerger
UNLOCKING VALUE FOR SHAREHOLDERS POTENTIAL UK DEMERGER • Potential LSE listing and share offering of Bytes UK POTENTIAL • JSE Secondary listing of Bytes UK TRANSACTION • Unbundle remaining Altron shareholding in Bytes UK • Increased prominence as a standalone business RATIONALE • Different growth dr
Slide 18: Bytes UK investment thesis
UNLOCKING VALUE FOR SHAREHOLDERS BYTES UK INVESTMENT THESIS Significant TAM with multiple • Delivering into the international digitalisation agenda structural growth trends • Proven expertise in cloud, infrastructure and security Leading player with strong • 20% 10 year revenue CAGR positive momentu
Slide 19: Operating Performance
ANDREW HOLDEN OPERATING PERFORMANCE 19
Slide 20: Significant wins
SIGNIFICANT WINS Value: R339m Value: R160m Value: R2.8bn (GBP150m) over 5yrs Operation involved: Altron BSI, Operation involved: Altron BMS Operation involved: Bytes UK Altron BMS and Altron BPS Value: R152m Value: R110m Value: R310m (GBP16.6m) over 3yrs Operation involved: Altron BSI Operation invo
Slide 21: Digital transformation: Bytes UK
DIGITAL TRANSFORMATION: BYTES UK Gross Invoiced Income (Rm) • +66% EBITDA with margin expansion 43% • +37% GP/head to R976k 59% • Investment in new sales heads, services & technical capabilities • Merger of Bytes Software Solutions & Bytes Security partnership creating UK’s largest security reseller
Slide 22: Smart IoT | Netstar
SMART IOT | NETSTAR CUSTOMER A Grow Base • +16.5% new customer growth B Reduce Churn • 52% NPS (23% FY19) C Segment Base • Consumer vs commercial vs SMB DETECT A Car Jamming • Offer GSM and backup Radio Frequency Performance • Jamming alerts +424% Focus Areas B Early Warning System • 91.9% recovery
Slide 23: Smart IoT | Netstar (continued)
SMART IOT | NETSTAR (CONTINUED) 833.6k R1.54bn R611m ↑ 16.5% ↑ 1% ↑ 5% SUBSCRIBERS REVENUE EBITDA 4 year CAGR 4 year CAGR 40% EBITDA margin 7.1% 7.5% +2% Net connection growth ARPU 4 year CAGR 16.5% R153 10.6% Consumers contribute 79% of the base +4% 23
Slide 24: Altron Nexus turnaround strategy showing results
ALTRON NEXUS TURNAROUND STRATEGY SHOWING RESULTS IDENTIFYING EBITDA THE ISSUES PROFITABILITY STRONG MGMT Strong financial Invoicing discipline discipline STRONG GOVERNANCE Executive engagement Customer satisfaction with customers One Altron values Employee values instilled FOCUSED TEAM Procurement p
Slide 25: Segmental performance
SEGMENTAL PERFORMANCE 13% Performance of the rest of Group 6% 9% 1% 8% 66% 27% 80% 5% 24% 14% 13% 7 203 611 868 24 1 541 611 2 627 153 3 322 201 1 230 327 Bytes UK Altron Smart IoT Rest of Digital Managed Services HealthTech Nexus Netstar Transformation /FinTech Revenue FY20 * EBITDA FY20 * * Exclud
Slide 26: Financial Results
CEDRIC MILLER FINANCIAL RESULTS 26
Slide 27: Results impacted by accounting changes
RESULTS IMPACTED BY ACCOUNTING CHANGES IFRS 16 : LEASE ADOPTION IAS 17 IFRS 16 EFFECT • Lease smoothing • Recognise right of use asset • R575m Balance sheet receivable / payable • Recognise lease liability • R592m • Operating lease on • Right of use asset - Depreciation • EBITDA R203m straight line
Slide 28: Summarised income statement (continuing operations)
SUMMARISED INCOME STATEMENT (CONTINUING OPERATIONS) Year ended 29 February 2020 Statutory Normalised Statutory Normalised % change % change Rm FY20 FY20** FY19 FY19** (statutory) (normalised) Revenue 16 713 23 333* 15 723 19 041* 6% 23% EBITDA 1 835 1 632 1 607 1 607 14% 2% EBITDA margin (%) 10.9 6.
Slide 29: Segments contributing to revenue growth
29 16 713 23 333 Gross invoiced 6 620 income FY20 16 713 FY20 SEGMENTS CONTRIBUTING TO REVENUE GROWTH (Rm) IFRS15 revenue (52) Other IFRS Reported revenue 342 Translation FX Healthtech/ 89 Fintech Smart IoT 17 Netstar Gross invoiced income 199 Managed Services Rest of Digital Transformation 207 Digi
Slide 30: Segments contributing to EBITDA growth
SEGMENTS CONTRIBUTING TO EBITDA GROWTH (Rm) Digital Transformation 1 835 30 (36) 216 (100) 38 26 24 28 28 30 1 607 8 38 611 368 1 193 1 168 FY19 Bytes Altron Nexus Rest of Managed Smart IoT Healthtech/ Translation FX Other FY20 Technology Digital Services Netstar Fintech Group UK Transformation Sout
Slide 31: Normalised EBITDA margin analysis
NORMALISED EBITDA MARGIN ANALYSIS Bytes Technology Group UK 2.8% 10.9% 10.2% 1.8% 1.3% (1.7%) 8.4% (0.7%) 1.2% (0.4%) 6.9% FY19 FY19 Impact FY19 UK Margin UK Dilutive Altron Nexus Rest of Altron FY20 IFRS 16 FY20 Impact FY20 Statutory on Gross Normalised Expansion Impact on Normalised on Gross Statu
Slide 32: Working capital analysis
WORKING CAPITAL ANALYSIS (Rm) Movement in working capital – R269m 769 1 459 384 26 85 28 (23) 959 690 FY19 Cash absorbed H1FY20 Digital Managed Smart IoT Healthtech/ Other FY20 H1FY20 Transformation Services Netstar Fintech 32
Slide 33: Cash flow bridge
CASH FLOW BRIDGE (Rm) Increased focus on working capital management 1 949 (269) had a positive impact on cash flow (231) (169) (272) (270) (21) 39 956 200 28 Feb 19 Cash from Working Net finance Taxation paid Dividends paid Investment Financing Other 29 Feb 20 operations capital expenses activities
Slide 34: Healthy debt levels
HEALTHY DEBT LEVELS Rm FY20 FY19 FY18 Net debt as reported 1 336 1 623 1 940 Less: Net asset value of disposal group (55) (55) (249) Less: Deferred disposal receipts* (150) (305) (201) Adjusted net debt (including deferred disposal receipts) 1 131 1 263 1 490 Covenant ratios Covenant Net debt : Attr
Slide 35: COVID-19 | Balance sheet strength
COVID-19 | BALANCE SHEET STRENGTH 3.8bn 2.5bn Headroom 2x 1.6bn 1.3bn 0.7x 0.5x 2019 2020 Headroom Net Debt (Billions) Net Debt / EBITDA (multiple) 35
Slide 36: Outlook
ALTRON MTETO NYATI OUTLOOK
Slide 37: Focus areas for the year ahead
FOCUS AREAS FOR THE YEAR AHEAD BYTES UK DIGITAL ALTRON NEXUS ALTRON KARABINA TRANSFORMATION DEMERGER AGENDA Potential to unlock Monetise Network Convert cloud computing Capitalise on the digital further value for Operating Centre pipeline projects into transformation agenda to shareholders Increase
Slide 38: Unlocking value for our stakeholders
UNLOCKING VALUE FOR OUR STAKEHOLDER Revenue Improve Transform Employee Sustainability Evolution Growth Profitability Customer Excellence Experience MEDIUM TERM OUTLOOK: DOUBLE 5 YEAR EBITDA BY 2022 DIVIDEND COVER RATIO: 2.5X 38
Slide 39: Annexure
ALIRON °, ANNEXURE
Slide 40: Revenue: Digital Transformation
DIGITAL TRANSFORMATION Reduced revenue from key customer 69% ALTRON Awarded MS LSP in Sept 2019 – won NMMU 177 KARABINA 868 2 076 Appointment of go-to-market leadership team FY20 Total: 3 494 REVENUE (27%) 2% 373 NPS score improvement from 21% to 51% 37% + 56% Data Analysis Revenue 105 + 5% Cloud Re
Slide 41: Revenue: Managed Services
MANAGED SERVICES + 2.6% in # of Customers ALTRON 1 520 1 393 409 Total: 3 322 BYTES + 3.3% in # of devices FY20 REVENUE 1% 19% (11%) DOCUMENT SOLUTIONS + 18.6% in blended average rate charged per click FY19 1 498 1 168 458 Total: 3 124 Capitec collaboration ALTRON win a key BYTES + 19% revenue MANAG
Slide 42: Revenue: Healthtech and Fintech
HEALTHTECH AND FINTECH + 11% value of MediSwitch transactions processed 810 99 321 REVENUE HEALTHTEC FY20 Total: 1 230 + 29% in value of MediServe transactions 6% 24% 7% processed 69% customer NPS FY19 763 79 299 Total: 1 141 NuPay success + 29% NuPay revenue driving performance FINTECH + 18% POS cu
Slide 43: Summarised group balance sheet
SUMMARISED GROUP BALANCE SHEET Year ended 29 February 2020 FY20 FY19 % Change Rm Total non-current assets 4 507 4 171 8% • IFRS 16 related right of use asset Total Current assets 9 118 7 430 23% Total assets 13 625 11 601 17% Total Equity 3 763 3 373 12% • IFRS 16 related right of use liability Tota
Slide 44: Annuity percentage by operating company
ANNUITY PERCENTAGE BY OPERATING COMPANY Annuity % Smart IoT Altron Netstar 87% Healthtech/Fintech Altron Bytes Secure Transaction Solutions 73% Altron Karabina 34% Altron Rest of Africa 20% Digital Transformation Altron Bytes Systems Integration 44% Bytes Technology Group UK 64% Altron Nexus 58% Alt
Slide 45: Private vs public revenue contribution in South Africa
PRIVATE VS PUBLIC REVENUE CONTRIBUTION IN SOUTH AFRICA Smart IoT Altron Netstar 96 4 Healthtech/Fintech Altron Bytes Secure Transaction Solutions 97 3 Altron Karabina 97 3 Altron Rest of Africa 79 21 Digital Transformation Altron Bytes Systems Integration 83 17 Bytes Technology Group UK 35 65 Altron