Altron Limited (AEL) Earnings Call Transcript & Summary

Good morning shareholders and guests. It's always a pleasure to welcome you to Altron's Annual General Meeting held at the Altron campus and electronically. The quorum requirements for this meeting are that at least 3 members entitled to vote are present or represented either by proxy or letter of representation and in terms of the Companies Act that at least 25% of the shares in issue are represented. I can confirm that a quorum is present and I therefore declare the meeting open. I confirm that I hold Chairman's proxy for over 179 million A ordinary shares, representing 45.84% of the voting shares. Attending this AGM are the chairpersons of our committees, members of the board, together with Altron's Group Chief Executive Officer, Mr. Werner Kapp; and the Group Chief Financial Officer, Mr. Carel Snyman, as well as the external audit partners from PricewaterhouseCoopers who are present to answer any questions shareholders may have. I am Stewart van Graan, the chairman of the board. In terms of the company's Memorandum of Incorporation, I am duly authorized to chair this AGM. All questions and comments will be addressed after all the resolutions have been put to the meeting. The results of the poll will be announced before the close of the formal business of the meeting. The notice convening this AGM dated and distributed on 30th of June 2026 is available on the company's website. I will take the notice as read unless there are any objections. There appears none. Please note that in terms of the MOI of the company, resolutions put before this meeting shall be voted on by means of a poll. Only shareholders who are in possession of a valid proxy, which has been filed in accordance with the notice of the meeting, or shareholders who are reflected on the share register or who are in possession of a written letter of representation are entitled to speak and vote at this meeting. For shareholders attending virtually, a meeting guide explaining the procedure for voting and asking questions, written and verbal on the online platform, has been e-mailed before the start of the meeting and is also available in the documents folder on the online platform. Registered shareholders, whether online or in the room, will submit their votes on the online platform. The resolutions and voting options will appear on the screen. To cast your vote, select your voting option shown on the screen. A green tick will appear as confirmation of your vote cast. You may change your vote by clicking on the change your vote link and selecting your new voting option. A green tick again will appear as confirmation of the vote cast. Please note that the meeting will be open to questions after the voting takes place. Computershare, the company's transfer secretaries, will be acting as scrutineer for the purposes of this meeting. Before we proceed with today's formal agenda, I would like to briefly reflect on the year under review and acknowledge what has been achieved by the group. My message in the integrated annual report addresses a number of these matters in greater detail. Today, however, I would like to focus on the progress that has been made and the confidence the board has got in Altron's future. FY '26 marked the successful completion of an important phase in Altron's journey. 3 years ago, the board and management set out to transform Altron into a more focused business underpinned by higher quality earnings, stronger cash generation, and disciplined capital allocation. I'm pleased to say that substantial progress has been made against those objectives. Most importantly, the group has continued to allocate capital towards higher quality growth opportunities and businesses with strong competitive positions, attractive economics and long-term structural relevance within South Africa's digital economy. These platform businesses supported by talented leadership teams and proven execution capability now form the engine of growth for the group as we enter the next phase of our strategy. The board is particularly pleased that this progress has translated into tangible value for all stakeholders. Over the past 3 years, Altron has returned approximately 1.8 billion to shareholders while maintaining a strong balance sheet and investing for the future. I would like to thank Werner, Carel and the broader executive team for their leadership, agility and disciplined execution. They have successfully navigated a challenging operating environment, strengthened the quality of the group, created value for all stakeholders, and position Altron well for the future. What gives me the confidence is not only the quality of the assets we own, but also the quality of the people leading them. Altron today has a strong portfolio of businesses, exposure to attractive long-term growth themes, and an experienced management team with a proven track record of execution and value creation. I am excited about what lies ahead for Altron and believe the group is well positioned for its next phase of growth. Finally, on behalf of the board, I would like to thank all Altron employees for their commitment and contribution throughout the year. Their dedication, professionalism, and focus on our customers are fundamental to our success. I would like to thank my fellow board members, our customers, partners and shareholders for their continued trust and support. With that, let me now hand over to our chief executive officer, Werner Kapp.

Thank you, Mr. Chairman. Good morning, everybody. Can everybody hear me? Over the past few months, we've engaged extensively with our shareholders through our FY '26 results presentation, our Capital Markets Day and also our integrated annual report. Those materials, the representations and the recordings are available on our Investor Relations website and I would really encourage our shareholders to refer to them and to engage with them if you want more detailed information about the company, our performance and our strategy. As the chair said, it was probably over 3 years ago that we set out to transform Altron into a more focused, higher-quality, annuity revenue-driven business through portfolio simplification, disciplined capital allocation and consistent execution. I would like to think that we've materially improved the quality of our earnings, our returns, our cash generation and also very importantly, the service we deliver to our customers. Over this period, operating profit has increased from ZAR 506 million to more than ZAR 1.2 billion. Very importantly, our return on invested capital has increased to approximately double our cost of capital. And as the chairman mentioned, we've returned over ZAR 1.8 billion to shareholders whilst maintaining an ungeared balance sheet. Today, approximately 90% of group operating profit is generated by our platform businesses with more than 90% of that platform revenue very importantly being annuity revenue which is one of our key strategic imperatives and lead indicators in our business. Altron has transformed into a multiplatform technology company that we believe is uniquely positioned within South Africa's digital economy with leading positions in mobility, payments, and identity, supported by decades of investment, a very strong distribution system, embedded infrastructure, and deep ecosystem expertise. Whilst this is not intended to be an operational update, I am pleased to report that overall trading and operational performance remains broadly in line with our expectations. FinTech has maintained its strong momentum. Netstar continues to progress through its planned investment and modernization phase and HealthTech continues to deliver solid profitability and cash generation. Within our IT services segment, I'm particularly encouraged by the turnaround and now continued profit momentum in the Altron Digital business as well as a great performance or continued good performance by Altron Document Solutions. The IT services component of our security business, as was the case in FY '26, remains under pressure and progress at Netstar Australia remains below our expectations and ambitions. And I can assure you that as a leadership team, we are continually working actively to address these issues. I just want to remind you, it's important to note that in FY '26, we benefited from certain non-recurring items that will not repeat in FY '27. And in addition, headline earnings growth in FY '27 will be affected by the normalization of our tax rate as our utilization of our assessed losses have now run out that we've used in prior years. In FY '27, we expect a similar trading pattern as we had in FY '26 with a stronger second half just because of the nature of the business and based on performance to date. FY '27 remains on track and in line with our expectations. Just as a reminder, our definition of success really is in our platform business, particularly high single-digit revenue growth and double digit to medium-teen growth in the medium term. Before closing, just on a personal note, I would like to thank Ms. Mbali Ngcobo, our company secretary. She's attending her last AGM today for her contribution to Altron. Mbali has been here since I arrived. Thank you very much for everything you've done for the company, Mbali, and best of luck for the future. As we stand here today, Altron is a fundamentally different business with a unique position in South Africa's digital economy and multiple opportunities for future growth. We remain focused on disciplined execution, investing behind our platform business and creating sustainable long-term value for our shareholders. Thank you very much from my side as well to our chair, our board, our shareholders, our people, our executive team and very importantly our customers and our partners for their support, and we really look forward to continuing to work with you for many years to come. Thank you very much, Mr. Chairman.

Thank you, Werner. I appreciate the kind words. We will now proceed to the business of the meeting. The first item of business is to present the company's audited annual financial statements which include the consolidated financial statement, the Audit and Risk Committee report for the year ended 28th February 2026. The following reports are also available on the company's website. The integrated annual report including the remuneration policy, the remuneration report, Social, Ethics and Sustainability Committee report, the King IV application register and the notice of the annual general meeting. We will now proceed with the resolutions of the meeting. The resolutions will be displayed on the screen. If shareholders online have any questions pertaining to a particular resolution, please pose your question by clicking on the Q&A icon and typing your questions into the box at the bottom of the screen and please press send and they will be answered during the Q&A session. You can also ask verbal questions by selecting the request to speak button located within the Q&A icon. For shareholders in the room, you'll be afforded an opportunity to ask your questions during the Q&A session, please raise your hand and a roaming microphone will be given to you for you to ask your question. Ordinary resolutions 1 to 8 require the support of more than 50% of the votes cast. Special resolutions 1 to 4 require the support of at least 75% of the votes cast. We'll now deal with ordinary resolution #1. I propose ordinary resolution #1, the election of Ms. Siyotula as an independent non-executive director who was appointed to the board on 8 September 2025. Please cast your votes. A slight technical problem. I was hoping that the resolutions would -- okay, there we go. So there's ordinary resolution #1 coming up right now. Thank you for casting your votes. I'll hand over to Phumla for resolutions 2.1 to 2.3.

Thank you, Stewart. I propose as ordinary resolution #2.1 to 2.3, the election of the following non-executive directors by a separate vote: 2.1 Mr. Stewart van Graan; 2.2 Mr. Grant Gelink and 2.3 Mr. Antony Ball. Please cast your votes now. [Voting]

I will now hand back to Stewart.

Thank you. Ordinary resolution 3. This is the election of the Audit and Risk Committee members. I propose as ordinary resolution #3.1 to #3.4, each as a separate vote, the election of the following independent non-executive directors as members of the Audit and Risk Committee: Mr. Grant Gelink as chairman of the Audit and Risk Committee; Ms. Sharoda Rapeti, Mr. Grigoris Kouteris, and Ms. Nonzukiso Siyotula. Please cast your votes now. [Voting]

Thank you. Ordinary resolution #4, election of Social, Ethics and Sustainability Committee members. I propose as ordinary resolution #4.1 to 4.4, each as a separate vote, the election of the following directors as members of the Social, Ethics and Sustainability Committee: Ms. Sharoda Rapeti as chairperson of the Social, Ethics and Sustainability Committee; Dr. Phumla Mnganga, Mr. Grigoris Kouteris and Mr. Werner Kapp. Please cast your votes. [Voting]