Allied Electronics | Back on the front foot
Altron is 18 months into its turnaround strategy and has successfully disposed of eight non-core assets. The latest results show a willingness to re-invest in the key areas of the business, particularly ICT. Encouragingly, normalised HEPS growth increased to 25% y/y in H1'19 from 16% a year earlier. The re-instatement of Altron's dividend (after three years of absence) highlights the progress of the turnaround. Net working capital days has declined 133% since FY'15, while free cash flow has increased 220% y/y in H1'19. Improved cashflow and disposals has enabled Altron to reduce net debt c.60% since FY'15 to ZAR1.4bn in H1'19. We believe management's focus on cross-selling to existing customers expanded EBITDA margins 170bps since FY'15 to 8.9% in H1'19 (excluding margin dilution of Phoenix and NHS in the UK), highlighting the internal focus on execution. Altron is the second-best performing share on the JSE, up c.67% YTD, in 2018.Allied Electronics is an investment holding company. Co. invests in the telecommunications, multi-media, information technology and power electronics industries through its subsidiaries, Allied Technologies Limited, Bytes Technology Group (Pty) Limited and Power Technologies (Pty) Limited. Co.'s products and services are comprised of Powertech Cables, Powertech Transformers, Powertech Batteries, Crabtree, Powertech System Integrators, Turnkey substation projects, Transport and Rail Solutions, Renewable Energy Solutions, and Switchgear.
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