Altron reports 22% FY22 HEPS decline

Altron, a leading technology company in South Africa, reported a 22% decline in fully-year headline earnings per share. The company's Chief Executive Officer, Werner Kapp, shed light on the impact of government-related contracts on their profits during an interview with CNBC Africa. Kapp addressed the challenges faced by Altron, including provisions raised for contracts with the City of Zora and the broadband contract. Despite the obstacles, Kapp remained upbeat about the company's future prospects. The long-standing legal dispute with the City of Zora has been a key point of contention for Altron. The company is confident that they will receive their dues, especially after a favorable ruling in the constitutional court last year. However, the wheels of justice turn slowly, and Altron has made provisions based on concerns raised by the Auditor General. Regarding the halting contract, Kapp highlighted the termination of the contract after 10 years of service to the government. Altron had to make provisions for the inventory they held, which was not utilized due to a contract not being renewed. The company is exploring ways to leverage this stock within their business. Kapp emphasized Altron's commitment to the public sector while also acknowledging the need to diversify their revenue streams. The company aims to reduce its exposure to the public sector gradually while staying competitive in the private sector. One of Altron's key businesses, Netstar, has shown promising revenue growth, but profits have been declining. Kapp attributed this to challenges faced by the business in recent years and highlighted the implementation of profit improvement strategies. The company is focused on enhancing cost efficiency and reclaiming lost market share. In response to tough trading conditions, Kapp underscored the importance of delivering value to customers while maintaining competitiveness in pricing. Altron's strategy includes bundling more value into their offerings and prioritizing customer satisfaction. Looking ahead, Kapp expressed optimism about the digital transformation journey and identified growth opportunities in segments such as cybersecurity and telematics. Altron remains committed to increasing its operating income by 2026, despite external challenges like load shedding. When asked about the risks associated with load shedding, Kapp acknowledged the potential impact on consumer behavior and business operations. However, he reassured stakeholders that Altron is focused on managing costs and margins effectively to mitigate these risks. Lastly, Kapp discussed the pace of digital transformation in the public sector and emphasized the importance of collaboration between the government and tech companies. Altron is actively engaged in initiatives to accelerate digital transformation in South Africa. In conclusion, despite the profit decline reported by Altron, Werner Kapp's confidence in the company's resilience and growth prospects signals a positive outlook for the future.