Half Year 2027 Altron Ltd Earnings Call

August 31, 2026

Phil Welthagen: Altron's pre-close call for the H1 2027. Today with me, I have our CFO, Carel Snyman. Unfortunately, Werner is ill and couldn't join us today, but he will be at the RMB Morgan Stanley conference in September, so you will have access to chat to him then. You would have seen the voluntary trading update published this morning on SENS. Carel will quickly take you through some of the key takeaways, and then we can open the whole year.

Speaker #1: Altron Q2, Q4, for the half-year 2027. Today with me, I have our CFO, Carlos Neumann, and unfortunately, Werner is ill and couldn't join us today.

Speaker #1: But he will be at the R&B Morgan Stanley Conference in September, so you will have access to chat with him then. You would have seen the voluntary trading update published this morning on Sends.

Speaker #1: Carl will quickly take you through some of the key takeaways, and then we can open the floor—yeah.

Carel Snyman: Well, hi, guys. Good afternoon. I hope everybody can hear us. Thanks very much for taking time to come and listen to us. As Phil said, the voluntary operational update is out. Maybe just as a starting point, many of you attended the Capital Markets Day in June this year, where we laid out our plans for the next three years and the strategy for Altron. So what we've done in the first five months until the end of July, or six months ending today, is execute on that plan. From our side, nothing has changed from a strategic perspective. We still are working towards the leading platform and data ecosystem. This is what we want Altron to become. Overall, I'm quite happy with the first five months of trading. As in business, there's always ups and downs, which I'll go through in a little bit more detail.

Speaker #2: Oh, hi guys. Good afternoon. I hope everybody can hear us. Thanks very much for taking the time to come and listen to us. As Paul said, the voluntary operational update is out.

Speaker #2: Maybe just, you know, as a starting point, many of you attended the Capital Markets Day in June this year, where we laid out our plans for the next few years and the strategy for Altron.

Speaker #2: So, you know, what we've done in the first five months until the end of July—or six months ending today—is execute on that plan. So, from our side, nothing has changed from a strategic perspective.

Speaker #2: We are still working toward becoming the leading platform and data ecosystem. This is what Altron—what we want Altron to become. So, overall, I'm quite happy with the first five months of trading.

Speaker #2: As in business, there are always ups and downs, which I'll go through in a little bit more detail. But overall, I think the business is much stronger and much more resilient than it has been in the time that I've been here over the last three and a half years.

Carel Snyman: Overall, I think, the business is much stronger and much more resilient than what it's been in the time that I've been here over the last three and a half years. That's evidenced through higher growth in revenue, EBITDA, operating profits, margin expansion. That's all driven by this deliberate move to become the multi-platform business that we want to be. That platform portfolio remains the growth engine of the group. You would have seen the metrics that we provided in terms of growth. The business, the platform segment is 45% of our revenue and 95% of our profits. We don't see any reason why that would go backwards going forward. Our aim is to improve that even further. With that also then comes healthier margins and healthier cash conversion. Overall, a more robust business from annuity revenue, profits, cash consideration.

Speaker #2: And that's evidenced through higher growth in revenue, EBITDA, operating profits, margin expansion, and that's all driven by this deliberate move to become the multi-platform business that we want to be.

Speaker #2: That Platform portfolio remains the growth engine of the Group. You would have seen the metrics that we provided in terms of growth, but the business—the Platform segment—is, you know, 45% of our revenue and 95% of our profits.

Speaker #2: And we don't see any reason why that would go backwards, going forward. Our aim is to improve that even further, and with that also comes healthier margins and healthier cash conversion.

Speaker #2: So overall, a more robust business from an annuity revenue, profits, and cash consideration. Having said that, what we do—what we have done in the last five months, and will continue to do this year—is invest behind this growth.

Carel Snyman: Having said that, what we have done in the last five months, and will continue to do for this year, is invest behind this growth. Netstar specifically, we are deliberate in our investment spend into that business, and it is in multiple parts of the business. We need to improve and modernize the systems that the business runs on, because we will find ourselves in a situation where legacy systems can stop you from being able to scale. As all of you know, we are in a very competitive market. So the need for this modernization of the business is critical, and we are currently in that process. On top of that, we are also investing behind customer acquisition, opening new revenue channels, new product sets. That's all because of our conviction in the business and its ability to deliver a high return on capital.

Speaker #2: Netstar specifically, we are deliberate in our investment spend into that business, and it is in multiple parts of the business. You know, we need to improve and modernize the systems that the business runs on, because we will find ourselves in a situation where legacy systems can stop you from being able to scale.

Speaker #2: And as all of you know, we are in a very competitive market, and so the need for this modernization of the business is critical.

Speaker #2: And we are currently in that process. On top of that, we're also investing in customer acquisition, opening new revenue channels, and developing new product sets. That's all because of our conviction in the business and its ability to deliver a high return on capital.

Speaker #2: Similarly, but to a smaller scale, we are investing behind our fintech business. That business continues to deliver very strong results. But we want to be able to manage this growth and to be able to support it and be able to have a sustainable business for the long term.

Carel Snyman: Similarly, but to a smaller scale, we are investing behind our fintech business. That business continues to deliver very strong results. We want to be able to manage this growth and to be able to support it and be able to have a sustainable business for the long term. So investment is also going into the fintech business. This is also all in line with what we said to you when we saw you at the Capital Markets Day, and this is the strategy that we've set out for the next 3 years. I think the business, if you look at it from an H1 to H2 perspective, H2 will look like last year. It will be stronger than our H1 results, as you would expect from a platform business where you keep on adding to the subscriber base.

Speaker #2: And so, investment is also going into the fintech business. But this is all in line with what we—what we said to you when we saw you at the Capital Markets Day.

Speaker #2: And this is the strategy that we've set out for the next 3 years. I think the business, if you look at it from an H1 to an H2, from an H1 to H2 perspective, H2 will look like last year.

Speaker #2: It will be stronger than our H1 results, you know, as you would expect from a platform business where you keep on adding to the subscriber base.

Speaker #2: And that puts us in good stead, you know, going forward—for Platform specifically. If I—maybe just switch over to our IT Services business quickly.

Carel Snyman: That puts us in good stead going forward for platforms specifically. If I maybe just switch over to our IT services business quickly. Our Altron Digital Business, as you might recall, turned profitable in H2 last year, and that has continued into this year. What is most promising to me for that business is that we've seen revenue growth come through. You would have seen in the last couple of reporting periods, it was a turnaround plan where we've taken deliberate corrective action costs out of the business. We've stepped away from non-profitable contracts. Now that revenue growth is starting to come through, which is very promising and which should put the business in good stead going forward. Revenue growth for us overall is now a very critical measure. We've done all of the fixing and growing, if you will, over the last couple of years.

Speaker #2: Our ADB business, as you might recall, turned profitable in H2 last year, and that has continued into this year. But what is most promising to me for that business is that we've seen revenue growth come through.

Speaker #2: You would have—you would have seen in the last couple of reporting periods, it was a turnaround plan where we've taken deliberate corrective action, costs out of the business, we've stepped away from non-profitable contracts, but now that revenue growth is starting to come through.

Speaker #2: Which is very promising, and which should put the business in good stead going forward. Revenue growth for us overall is now a very critical measure.

Speaker #2: We've done all of the, you know, the fixing and growing, if you will, over the last couple of years. But if we don't get the top line to move now, you know, that would be problematic for the future.

Carel Snyman: If we don't get the top line to move now, that would be problematic for the future. So that's a very strong drive for us. Some of the KPIs for our Managing Directors in the business is all behind revenue growth. When we talk about revenue growth, this is profitable, high quality revenue. This is what we're after. I think, having said all of this on the business, the IT services component of security is not performing the way that we want it to perform. Whereas the platform side of the security business in signing in digital identity, that part of the business is doing well, even though there is a shift in some of the revenue recognition from H1 to H2. So on a like-for-like basis, that will come through later in the year.

Speaker #2: And so, that's a very strong drive for us. Some of the KPIs for our MDs in the business are all behind revenue growth.

Speaker #2: And when we talk about revenue growth, this is profitable, high-quality revenue. This is what we're after. I think, you know, having said all of this on the business, the IT services component of security is not performing the way that we want it to perform.

Speaker #2: Whereas the platform side of the security business, in signing and digital identity, that part of the business is doing well, even though there is a shift in some of the revenue recognition from H1 to H2.

Speaker #2: So, on a like-for-like basis, that will come through later in the year. On IT services, we're not happy with the performance, and, you know, we are currently going through corrective action in that business.

Carel Snyman: On IT services, we are not happy with the performance and we are currently going through corrective action in that business. It's a much smaller part of the security business, but still one that we want to perform better than what it currently is. Andrew and his team is busy looking at that business. This is just par for the course, I guess. Sometimes something goes for you, and other times it goes against you. It's the speed at which you can take corrective action that's important. I think, after all is said and done, the business is still financially very healthy. The balance sheet is strong. Post paying out the special dividend of about ZAR 750 million, the business is still in a net cash positive position, and the balance sheet is ungeared.

Speaker #2: It's a much smaller part of the security business, but still one that we want to perform better than what it currently is. Andrew and his team are busy looking at that business.

Speaker #2: But this is, you know, this is just par for the course, I guess. You know, sometimes something goes for you and other times it goes against you.

Speaker #2: It's the speed at which you can take corrective action that's important. I think, you know, after all is said and done, the business is still financially very healthy.

Speaker #2: The balance sheet is strong. After paying out the special dividend of about 750 million rand, the business is still in a net cash positive position, and the balance sheet is ungeared.

Speaker #2: So, even though we are investing into the business and even though we see top-line growth coming through, what's important to us is to maintain the discipline around capital the way we have for the past three years.

Carel Snyman: Even though we are investing into the business and even though we see top-line growth coming through, what is important to us is to maintain the discipline around capital the way we have in the past three years. One item that I just want to point out again, we have mentioned it before, but in this year, our tax rate will normalize to 27% for the full year. That will have an impact on the numbers that we report. We have said it before, but I just thought it is worthwhile calling it out again. The last thing is, the change in the depreciation in Netstar is now in the numbers, so there is no more normalization for that. The numbers that we will report will reflect that on a like-for-like basis. I think overall, we are sticking to our plan.

Speaker #2: One item that I just want to point out again—we have mentioned it before—but this year, our tax rate will normalize to 27% for the full year.

Speaker #2: And that will have an impact on the numbers that we report. We've said it before, but I just thought it was worthwhile calling it out again.

Speaker #2: And then, the last thing is the change in the depreciation in Netstar is now in the numbers. So there's no more normalization for that.

Speaker #2: The numbers that we will report will reflect that on a like-for-like basis. So, I think overall, you know, we are sticking to our plan.

Speaker #2: We are transitioning the business into a multi-platform, high-profitability, high cash-conversion business. We are careful in how we allocate capital. We want to have the conviction that, when we deploy it, we have a high degree of certainty around the return on that money.

Carel Snyman: We are transitioning the business into a multi-platform, high profitability, high cash conversion business. We are careful in how we allocate capital. We want to have the conviction that when we deploy it, that we have a high degree of certainty around return on that money. Our IT services business is now having a return to profitability. It puts us in good stead going forward. Overall, I think we are happy with the performance for the first five months. But, as always, there will be improvements that we would want to get out of it. Carel, have I missed anything?

Speaker #2: And then our IT services business now having returned to profitability puts us in good stead going forward. So overall, I think we're happy with the performance for the first five months, but, you know, as always, there will be improvements that we would want to get out of it.

Speaker #1: Philip, I missed anything?

Speaker #3: No, I think we're good. In the interest of time, I think we're going to open up—sorry, guys—for questions now. Participants on the call, should you wish to ask a question, please raise your hand.

Phil Welthagen: No. I think we are good. In the interest of time, I think we are going to Sorry, guys. For questions now. Participants on the call, should you wish to ask a question, please raise your hand. You will be unmuted and requested to remain unmuted until Carel has answered the question. Alternatively, you are welcome to type your questions into the Q&A chat on the call. Are there any raised hands? Katherine Thompson from Edison.

Speaker #3: You will be unmuted and requested to remain unmuted until Carl has answered the question. Alternatively, you are welcome to type your questions into the Q&A chat.

Speaker #3: Are there any raised hands? Catherine Thompson from Edison.

Speaker #4: Hi there. Yeah, get ready for my questions. Okay, yeah, I've got a few. I just wanted to get my head around the revenue and profit movements within the IT services segment.

Katherine Thompson: Hi there.

Carel Snyman: Hi, Katherine.

Katherine Thompson: Yeah. You're ready for my questions? Okay. Yeah, I've got a few. I just wanted to get my head around the kind of the revenue and the profit movements within the IT services segment. I think you didn't explicitly comment on the revenue progression in Security or Document Solutions. So I'm assuming that a big factor was a revenue decline in Security. And I'm not sure what happened with Document Solutions, whether we were kind of broadly flat there.

Speaker #4: So I think you didn't explicitly comment on the revenue progression in Security or Document Solutions. So, I'm assuming that a big factor was a revenue decline in Security.

Speaker #4: And I'm not sure what happened with Document Solutions, whether we were kind of broadly flat there.

Speaker #1: Yeah, Catherine, maybe I can—maybe I can talk about that. So Document Solutions specifically, revenue is very close to flat, but as you will recall from that business, transitioning to higher-margin services and support and maintenance, we're seeing that change the shape of the business.

Carel Snyman: Yeah, Catherine, maybe I can talk about that. Document Solutions specifically, revenue is very close to flat. But that, as you will recall from that business transitioning to higher margin services and support and maintenance, we're seeing that changing the shape of the business. So from a profitability perspective, the business continues to deliver profits. It continues to improve the margin, even though the revenue is flat or flattish. So that's Document Solutions, specifically. Security, we are under pressure with the IT services part of Security. So that's not grown as much as we wanted it to.

Speaker #1: So, from a profitability perspective, the business continues to deliver profits. It continues to improve the margin, even though the revenue is flat or flattish.

Speaker #1: So that's document solutions specifically. Security—we are under pressure with the IT services part of security, so that's not grown as much as we've wanted it to.

Speaker #3: And I just said both of them. They're not enormous contributors, in terms of composition, to revenue.

Phil Welthagen: I'll just say both of them, they're not an enormous contributor in terms of composition to revenue.

Speaker #1: No. Now, security—in the IT services segment, the security part is the smallest part of the group. Digital Business, ADB, is the largest. It's about more than twice the size of ADS.

Carel Snyman: No. Security in the IT services segment, the security part is the smallest part of the group. Altron Digital Business, ADB, the largest. It is about more than twice the size of Altron Document Solutions, then Altron Document Solutions, and then Security.

Speaker #1: Then ADS, and then security.

Speaker #4: And within ADB, could you kind of characterize what you're hearing from customers now? Are there any specific verticals that are improving? Any particular product lines or areas that are more popular than others?

Katherine Thompson: And within ADB, could you kind of characterize what you are hearing from customers now? Are there any specific verticals that are improving? Any particular product lines, areas that are more popular than others?

Speaker #3: Yeah, no, I just—I want to say, you know, something that we've noticed on our side is, just in the value proposition to our actual customers, when we sort of leverage the benefits of AI Factory into the offering, it's really something that they find beneficial and, you know, supports the ongoing growth of the business with that customer or the renewal of the contract.

Phil Welthagen: Yeah. No, I want to say something that we have noticed on our side is just in the value proposition to our actual customers. When we sort of leverage the benefits of AI Factory into the offering, it is really something that they find beneficial and supports the ongoing growth of the business with that customer or the renewal of the contract.

Speaker #4: Okay.

Katherine Thompson: Okay.

Speaker #1: Catherine, I don't think that the broader market out there in South Africa has changed significantly from what it's been. I think it's still tough.

Carel Snyman: Katherine Thompson, I do not think that the broader market out there in South Africa has changed significantly from what it has been. I think it is still tough. But as Phil was saying, our ability to deliver our services more efficiently, a lot of that sits behind the growth that we are seeing. And we have done some interesting work on AI Factory. It is too early to mention specific contracts, but they are in one or two POCs at the moment. And the only thing I can tell you is whenever you take a product like that to a blue-chip customer, the decision-making process around wanting to move to POC is significantly faster than anything else. So clearly they see the value in it. We think there is value in it. So that is going to be interesting to see how that plays out.

Speaker #1: But as Phil was saying, our ability to deliver our services more efficiently—a lot of that sits behind the growth that we're seeing.

Speaker #1: And we've done some interesting work on AI Factory. It's too early to mention specific contracts, but they are in, you know, one or two POCs at the moment.

Speaker #1: And the only thing I can tell you is, whenever you take a product like that to a blue-chip customer, the decision-making process around wanting to move to POC is significantly faster.

Speaker #1: ...than anything else. So, clearly, they see the value in it. We think there's value in it, so that's going to be interesting to see how that plays out.

Speaker #4: Okay, and then can I just ask a question on Netstar? We're talking about modernization of the systems. I'm just trying to understand what that's going to entail.

Katherine Thompson: Okay. Could I just ask a question on Netstar? Talking about modernization of the systems, just trying to understand what that is going to entail.

Speaker #1: So, we are putting a whole new system in place—an ERP system, D365. We've been busy with it for about 12 months already.

Carel Snyman: We are putting a whole new ERP system in place, Dynamics 365. We have been busy with it for about 12 months already. You can imagine a business like that is 20, 30 years old, the systems are creaking. A lot of it is not able to cope with the amount of data and detail that we put through it. We have been careful about not going about it too quickly because we most certainly want to make sure that we plan the process correctly. It is required to make sure that we can actually scale the business. The subscriber base has grown significantly over the last three years. The number of data points flowing through that business is chalk and cheese to what it was.

Speaker #1: And, you know, you can imagine a business like that that’s 20 or 30 years old—the systems are creaking. And a lot of it, you know, it's not able to cope with the amount of data and detail that we put through it.

Speaker #1: So, you know, we have been—we have been careful about not going about it too quickly, because we most certainly want to make sure that we plan the process correctly.

Speaker #1: But it is required to make sure that we can actually scale the business. The subscriber base has grown significantly over the last three years.

Speaker #1: The number of data points flowing through that business is, you know, chalk and cheese compared to what it was. So we now have to invest behind that to be able to extract the value that we think is in the business.

Carel Snyman: We now have to invest behind that to be able to extract the value that we think is in the business. Because at this stage, our visibility on that data and how difficult it is to get it is too slow.

Speaker #1: Because at this stage, you know, our visibility on that data and how difficult it is to get it—it's just too slow.

Speaker #3: So, it's about the data intelligence—being able to utilize it to make better decisions in growing your subscriber base going forward. And it's about integrating all of that into one system.

Phil Welthagen: It is about the data intelligence, being able to utilize it to make better decisions in growing your subscriber base going forward. It is about integrating all of that into one system.

Speaker #4: Right. Okay, thanks. I'll pass the mic over to someone else now, so someone else can have a chance.

Katherine Thompson: Great. Okay, thanks. I will pass the mic over to someone else now. Let someone else have a chance.

Speaker #3: Thanks, Catherine. Next up, we have Anthony Pierre from Investec Securities. Could you please unmute yourself, and we'll take your questions.

Phil Welthagen: Thanks, Katherine. Next up we have Anthony Pierre from Investec Securities. Anthony, unmute yourself and we will take your questions.

Speaker #1: Sure. Thanks, Phil. Thanks, Carl. Can you hear me all right?

Anthony Pierre: Sure. Thanks, Phil. Thanks, Carel. Can you hear me all right?

Anthony Geard: Sure. Thanks, Phil. Thanks, Carel. Can you hear me all right?

Speaker #2: Yeah, good.

Speaker #1: Great, great. So can you just help me a little bit with the maths? So you're saying the group EBITDA and operating profit are up low to mid-teens, and then we go through all the divisions, you're talking mid-teens or high-teens. You've spoken about the services segment being a little bit disappointing.

Carel Snyman: Yeah. Good.

Anthony Pierre: Great. Can you just help me a little bit with the maths? You are saying the group EBITDA and operating profit up low to mid-teens. Then we go through all the divisions, you are talking mid-teen or high teen. You have spoken about the services segment being a little bit disappointing. I am just trying to understand the, make the connection between the narrative and actually what is going on. Digital Business has made a strong improvement. Then there seems to be a little bit of a wobble inside the Security business. Is that where there is a-

Anthony Geard: Great. Can you just help me a little bit with the maths? You are saying the group EBITDA and operating profit up low to mid-teens. Then we go through all the divisions, you are talking mid-teen or high teen. You have spoken about the services segment being a little bit disappointing. I am just trying to understand the, make the connection between the narrative and actually what is going on. Digital Business has made a strong improvement. Then there seems to be a little bit of a wobble inside the Security business. Is that where there is a-

Speaker #1: I'm just trying to understand and make the connection between the narrative and what's actually going on. So, digital business has made a strong improvement.

Speaker #1: And then there seems to be a little bit of a wobble inside the security business. Is that where there's a bit of profit slippage, which has really dragged down the overall group EBITDA growth?

Carel Snyman: Yeah

Anthony Pierre: bit of profit slippage, which has really dragged down the overall group EBITDA growth?

Anthony Geard: bit of profit slippage, which has really dragged down the overall group EBITDA growth?

Speaker #2: Correct, 100%. So, there's three things. It's the security business, as you've pointed out. Now, in platforms, the security business is just a delay in when we can recognize the revenue.

Carel Snyman: Correct, 100%. There are three things. It is the Security business, as you have pointed out now. In platforms, the Security business is just a delay in when we can recognize the revenue that is shifted from H1 to H2. In the IT services part, the Security business is underperforming. Then overall, in our head office section, that is where we put the investment into AI Factory, which is bigger than what it was previously. Those are the three big sort of items bringing down the group number.

Speaker #2: That's shifted from H1 to H2. In the IT services part, the security business is underperforming. And then overall, in our head office section, that's where we put the investment into AI Factory, which is bigger than what it was previously.

Speaker #2: So, those are the three big items bringing down the group number.

Speaker #1: Okay, so part of it is timing, part of it is services where you're taking corrective action, and part of it is costs relating to AI Factory.

Anthony Pierre: Okay. Part of it is timing, part of it is services, where you are taking corrective action, and part of it is costs relating to AI Factory.

Anthony Geard: Okay. Part of it is timing, part of it is services, where you are taking corrective action, and part of it is costs relating to AI Factory.

Speaker #2: Correct.

Speaker #3: Correct.

Speaker #1: Yeah. And then, if I can just press a little bit—you said EBITDA and operating profits are seeing low- to mid-teen growth. Can we assume, because of some leverage in the income statement, that depreciation is not growing quite as quickly as EBITDA, so operating profit is still growing faster than...

Carel Snyman: Correct.

Phil Welthagen: Correct.

Anthony Pierre: Yeah. If I can just press a little bit, you said EBITDA and operating profits, low to mid-teen growth. Can we assume because of some leverage in the income statement that depreciation is not growing quite as quickly as EBITDA, that operating profit is still growing faster than EBITDA?

Anthony Geard: Yeah. If I can just press a little bit, you said EBITDA and operating profits, low to mid-teen growth. Can we assume because of some leverage in the income statement that depreciation is not growing quite as quickly as EBITDA, that operating profit is still growing faster than EBITDA?

Speaker #3: I'd—I'd say, part—I'd say either faster or the same. But the margins, yeah.

Phil Welthagen: I'd say either faster or the same.

Anthony Pierre: Yeah.

Anthony Geard: Yeah.

Phil Welthagen: With the margins. Yeah.

Speaker #1: Because the depreciation obviously steps up inside Netstar as you continue to grow the top line. But for other businesses, it's not—let's say, like fintech—there's not really a reason for depreciation to be stepping up a lot.

Anthony Pierre: Because the depreciation obviously steps up inside Netstar as you-

Anthony Geard: Because the depreciation obviously steps up inside Netstar as you-

Carel Snyman: Correct

Anthony Pierre: continue to grow the top line. But for other businesses, there's not, let's say like Fintech, there's not really a reason for depreciation to be stepping up a lot.

Anthony Geard: continue to grow the top line. But for other businesses, there's not, let's say like Fintech, there's not really a reason for depreciation to be stepping up a lot.

Speaker #2: Anthony, just—sorry, just on that. Fintech—the depreciation is stepping up, because remember their POS rental model is actually picking up quite a bit of steam.

Carel Snyman: Anthony, sorry, just on that. Fintech, the depreciation is stepping up.

Anthony Pierre: Yeah.

Anthony Geard: Yeah.

Carel Snyman: Because remember, their PaaS rental model is actually picking up quite a bit of steam. Whereas last year, this time, you would've had very little of that depreciation in Fintech. Now it's in there. So it's both Netstar and Fintech.

Speaker #2: Whereas last year at this time, you would have had very little of that depreciation in FinTech, and now it's in there. So it's both Netstar and FinTech.

Speaker #1: Okay, understood. Cool, I'm covered. Thank you so much.

Anthony Pierre: Okay. Understood. Cool.

Anthony Geard: Okay. Understood. Cool.

Speaker #3: Yeah, so—and I think just to close off there—I mean, if you look at it from a margin perspective, I think it's fair to say that the EBITDA margin and the operating margin both increased slightly.

Carel Snyman: Yeah.

Anthony Pierre: I am covered. Thank you so much.

Anthony Geard: I am covered. Thank you so much.

Phil Welthagen: Yeah. I think just to close off there, if you look at it from a margins perspective, I think it is fair to say that the EBITDA margin and the operating margin both increased slightly.

Speaker #1: Okay, cool. Thanks, Phil. I appreciate that.

Anthony Pierre: Okay, cool. Thanks, Phil. Appreciate that.

Anthony Geard: Okay, cool. Thanks, Phil. Appreciate that.

Speaker #3: Any additional questions? Any hands up? Otherwise, I do have a question in the chat. Okay, I'll read that one out. So, we've got a question from Miles Farid.

Phil Welthagen: Any additional questions? Any hands up? Otherwise, I do have a question in the chat. Okay, I will read that one out. So we have got a question from Myles Zirad saying, "Given the group's strong cash generation and completely ungeared balance sheet, what is the current status of your M&A acquisition pipeline, particularly for bolt-on acquisitions in high-margin platform segment?

Speaker #3: Given the group's strong cash generation and completely ungeared balance sheet, what is the current status of your M&A acquisition pipeline, particularly for bolt-on acquisitions in the high-margin platform segment?

Speaker #2: Miles, let me try and answer that. As you know, and as you're well aware, our capital allocation strategy—and our preference—has always been to invest behind the businesses that we currently have, which we know better than anything else, and where we have a much higher conviction about a return on that investment.

Carel Snyman: Miles, let me try and answer that. You are well aware of our capital allocation strategy and our preference always being to invest behind our businesses that we currently have, which we know better than anything else, and where we have a much higher conviction about a return on that investment. We will always be on the lookout for M&A activities and bolt-on acquisitions. We have recently looked at one or two acquisitions in South Africa. But these acquisitions simply do not stack up. They normally start off looking really good from a strategic perspective, giving us additional technology we do not have, giving us reach into markets that we do not have. Then when we start looking at the financials and the quality of earnings versus what the expectation is on valuation, we just cannot get there. Because we simply do not have the conviction that we can make a return on it.

Speaker #2: We will always be on the lookout for M&A activities and bolt-on acquisitions. We've recently looked at one or two acquisitions in South Africa, but these acquisitions simply don't stack up.

Carel Snyman: We have recently looked at one or two acquisitions in South Africa. But these acquisitions simply do not stack up. They normally start off looking really good from a strategic perspective, giving us additional technology we do not have, giving us reach into markets that we do not have. Then when we start looking at the financials and the quality of earnings versus what the expectation is on valuation, we just cannot get there. Because we simply do not have the conviction that we can make a return on it.

Speaker #2: They normally start off looking really good from a strategic perspective, giving us, you know, additional technology we don't have, and giving us reach into markets that we don't have.

Speaker #2: And then, when we start looking at the financials and the quality of earnings versus what the expectation is on valuation, we just can't get there.

Speaker #2: Because we simply don't have the conviction that we can make a return on that. So, you know, from my perspective, if we can't find something that we fully believe in and that we can make the numbers work, we are not going to buy it.

Carel Snyman: From my perspective, if we cannot find something that we fully believe in, and that we can make the numbers work, we are not going to buy it. Because we have no pressure to do acquisitions. All of our businesses are growing healthily. We are investing behind them. The markets that they operate in are not mature. So there is a lot of runway for us. That is going to be our preference. We will stick to the capital allocation strategy that we have. If we find something and it makes sense and it gives us the ability that we do not currently have and we can make the valuation work, well, then we will look at it.

Speaker #2: Because we have no pressure to do acquisitions. All of our businesses are growing healthily. We are investing behind them. The markets that they operate in are not mature.

Speaker #2: So there's a lot of runway for us, and that's going to be our preference. We will stick to the capital allocation strategy that we have.

Speaker #2: If we find something and it makes sense, and it gives us an ability that we don't currently have, and we can make the valuation work, well, then we'll look at it.

Speaker #3: Okay, another question from Miles. "Following the R800 million capex spend in FY26, will the investment rate remain at a similar level for FY27, and what is the current split between growth and maintenance capex across the group?"

Phil Welthagen: Okay. Another question from Myles. "Following the ZAR 800 million CapEx spend in FY26, will the investment rate remain at a similar level for FY27? What is the current split between growth and maintenance CapEx across the group?

Phil Welthagen: Okay. Another question from Myles. "Following the ZAR 800 million CapEx spend in FY 2026, will the investment rate remain at a similar level for FY 2027? What is the current split between growth and maintenance CapEx across the group?

Speaker #2: Yeah, I think, you know, nothing has changed. I mean, the majority of our capex goes to growth. We are very strict on maintenance capex and limiting that to the bare minimum.

Carel Snyman: Yeah, I think nothing has changed. I mean, the majority of our CapEx goes to growth. We are very strict on maintenance CapEx and limiting that to the bare minimum. So, the nice to haves kind of stuff, we do not really want to do that. If you look at growth CapEx, the bulk of our growth CapEx is behind rental devices in Netstar, and now increasingly more in the fintech business. I always remind everybody that those devices are backed by a three to five-year revenue contract once you have signed up and get the customer or put the customer on your base. There, I cannot give a number on CapEx. We will spend as much as we can as quickly as we can, provided that the growth is there. But, I think the shape of our CapEx will always be the same.

Speaker #2: So, you know, the nice-to-haves kind of stuff—we don't really, we don't really want to do that. And if you look at growth capex, the bulk of our growth capex is behind rental devices in Netstar.

Speaker #2: And now, increasingly more in the fintech business. I always remind everybody that those devices are backed by a three- to five-year revenue contract.

Speaker #2: Once you have signed up and kept the customer, or put the customer on your base, there, you know, I can't give a number on capex.

Speaker #2: We will spend as much as we can, as quickly as we can, provided that the growth is there. But I think the shape of our capex will always be the same.

Speaker #2: Our preference is toward growth and not maintenance, and that’s not going to change.

Carel Snyman: Our preference is towards growth, not maintenance. That's not going to change.

Speaker #3: And the last question from Miles: "With your Black-owned status rising significantly from 38% to 63%, which operating businesses should benefit the most from these improved procurement credentials over the next 12 to 24 months?"

Phil Welthagen: The last question from Myles Zirad. "With your black-owned status rising significantly from 38% to 63%, which operating businesses should benefit the most from this improved procurement credentials over the next 12 to 24 months?

Speaker #2: I think it really—it affects all of our businesses to some or other extent. You know, we do business with blue-chip, listed companies. We do business with government entities.

Carel Snyman: I think it affects all of our businesses to some or other extent. We do business with blue-chip listed companies. We do business with government entities. Across the board, your improved BEE credentials and your BEE rating is critically important. It's difficult to say that one business will benefit more than that, because it's only one element of procurement. Obviously, you still need to bid, you still need to go through tender, and you still need to win the bid. But we are very happy about our BEE rating. I think it now fairly reflects our black ownership in the company after the work that was recently done.

Speaker #2: And, you know, across the board, your improved BE credentials and your BE rating are critically important. And so, it's difficult to say that one business will benefit more than another.

Speaker #2: Because it's only one element of procurement, obviously. You still need to bid, and you still need to go through tender, and you still need to win the bid.

Speaker #2: But, you know, we are very happy about our BEE rating. I think it now fairly reflects our Black ownership in the company after the work that was recently done.

Speaker #3: Okay, we've got five minutes left. I just want to check if there are any other raised hands, or if I've got two more questions in the Q&A chat.

Phil Welthagen: Yeah. We've got five minutes left. I just want to check any other raised hands, or I've got two more questions in the Q&A chat. Okay. Let me read those out. Okay. "With Altron Document Solutions performing better, is it available for sale again?" This is from Sven Sorensen from Anchor Securities.

Speaker #3: Okay, let me read those out. Okay, so: "With ABS performing better, is it available for sale again?" This is from Spence Thordson from Anchor Securities.

Speaker #2: No, you know, we've said this previously. I mean, we look at the portfolio every six to eight or twelve months, and we have a look at what's on the table.

Carel Snyman: No. We have said this previously. We look at the portfolio every six to eight or 12 months, and we have a look at what is on the table, and we run the businesses for long-term growth. We do not have the idea of turning something around to put it back on the market. Altron Document Solutions is part of the group until such time that it is not. There are no plans at this stage for us to change that.

Speaker #2: And we run the businesses for long-term growth. You know, we—we don't have the idea of turning something around to put it back on the market.

Speaker #2: So, ADS is part of the group, you know, until such time that it's not. There are no plans at this stage for us to change that.

Speaker #3: Okay, and then the last question is Kaku from Nitrogen Fund Managers: "Are you able to speak to the revenue and EBITDA composition of Altron Security in terms of IT services and platforms?" And I would say it's predominantly platforms.

Phil Welthagen: Okay. The last question is Kahu from Nitrogen Fund Managers. "Are you able to speak to the revenue and EBITDA composition of Altron Security in terms of IT services and platforms?" I would say it is predominantly platforms.

Speaker #2: No, I don't think we can go into that much detail now.

Speaker #3: So, we won't give you the detail, but, you know, in terms of contribution—platforms.

Carel Snyman: No, I do not think we can go into that much detail now.

Phil Welthagen: We will not give you the detail, but in terms of contribution, platform.

Speaker #2: Yeah, the platform side is the bigger part of the security.

Speaker #3: And that was actually mentioned in the full year '26 results.

Carel Snyman: The platform side is the bigger part of the security business.

Phil Welthagen: That was actually mentioned in the FY26 results.

Speaker #2: Yeah, that remains the case.

Phil Welthagen: That was actually mentioned in the FY 2026 results.

Carel Snyman: That remains the case.

Speaker #3: Okay, and then one last question. I think that will have to be the last question. We've got Sihle—you can unmute yourself first.

Phil Welthagen: One last question. I think that will have to be the last question. We've got Sihle. You can unmute yourself from Fortress.

Speaker #4: Hi guys, I'll begin.

Speaker #2: Hi there.

Speaker #4: Yeah, all good. Just to speak about Netstar quickly. So could you just give us a sense as to within the SA business, I know you spoke about some strong performance there.

[Analyst] (Fortress): Hi, guys. Hope you can hear me.

[Analyst]: Hi, guys. Hope you can hear me.

Carel Snyman: Hi, there.

Phil Welthagen: Hi.

Carel Snyman: Yeah, all good.

[Analyst] (Fortress): Just to speak about Netstar quickly. Could you just give us a sense as to within the SMS, I know you spoke about there was some strong performance there. Can you just give us a sense as to which customers contributed to the strong performance? Is it the consumer side? Is it the OEM or the enterprise side? Also, just maybe give me the sense as to whether there was some margin improvements above this period. If there was, are you just seeing it more from a GP margin perspective or there's some cost savings that were offsetting those investments into modernization of systems? Over.

[Analyst]: Just to speak about Netstar quickly. Could you just give us a sense as to within the SMS, I know you spoke about there was some strong performance there. Can you just give us a sense as to which customers contributed to the strong performance? Is it the consumer side? Is it the OEM or the enterprise side? Also, just maybe give me the sense as to whether there was some margin improvements above this period. If there was, are you just seeing it more from a GP margin perspective or there's some cost savings that were offsetting those investments into modernization of systems? Over.

Speaker #4: Can you just give us a sense as to which customers contribute to the strong performance? Is it the consumer side, the OEM side, or the enterprise side?

Speaker #4: And yeah, also, just maybe give us a sense as to whether there were some margin improvements over this period. And if there was, are you just seeing it more from a GP margin perspective, or were there some cost savings that were offsetting those investments into modernizing the systems?

Speaker #2: Maybe from where the growth is coming from. We have seen a strong performance from the OEM side. But remember, that is low margin because, you know, we sell the device, we get paid upfront, you know, and then it's up to us to convert that to a subscriber later on.

Carel Snyman: Maybe from where the growth is coming from. We have seen a strong performance from the OEM side. But remember that is low margin, because we sell the device, we get paid upfront. Then it is up to us to convert that to a subscriber later on. But that has been a strong contribution to the business. Then I think in enterprise, we have also seen some good growth. Not all the go-to-markets in enterprise. Some of them we are still a little bit behind. Our digital and direct, it is not yet at the levels where we want it to be at this stage. But overall, enterprise is doing well. Then, for us on the consumer side, we have done quite a bit on the retention side on consumers. So from a churn perspective, keeping people on the base, keeping them active, there has been quite a bit of work that has gone into that.

Speaker #2: But that's been a—that's been a strong contribution to the business. Then I think in enterprise, we've also seen some good growth—though not all the go-to-markets in enterprise.

Speaker #2: Some of them were still a little bit behind. Our digital and direct—we, it's not, you know, at the levels where we want it to be at this stage.

Carel Snyman: Our digital and direct, it is not yet at the levels where we want it to be at this stage. But overall, enterprise is doing well. Then, for us on the consumer side, we have done quite a bit on the retention side on consumers. So from a churn perspective, keeping people on the base, keeping them active, there has been quite a bit of work that has gone into that. Which is together with new customers, that is always my focus area because you have already invested behind this customer. You want them to stay on the base for as long as possible. So that is sort of the spread between the lot. I do not know if, Carel, you got.

Speaker #2: But overall, enterprise is doing well. And then, you know, for us on the consumer side, we've done quite a bit on the retention side for consumers.

Speaker #2: So from a churn perspective, keeping people on the base, keeping them active—there's been quite a bit of work that's gone into that. Together with new customers, that is always my focus area, because you've already invested behind this customer; you want them to stay on the base for as long as possible.

Carel Snyman: Which is together with new customers, that is always my focus area because you have already invested behind this customer. You want them to stay on the base for as long as possible. So that is sort of the spread between the lot. I do not know if, Carel, you got.

Speaker #2: So that's sort of the spread between the lot. I don't know if you guys—

Speaker #3: Yeah, I mean, I think we said that the margins expanded, and I'd say it's more so the EBITDA margin than the operating profit margin, but they both have expanded.

Phil Welthagen: Yeah. I think we said that the margins expanded, and I would say it is more so the EBITDA margin than the operating profit margin, but they both have expanded year to date.

Speaker #3: Year to date.

Speaker #4: Okay, understood. Was it more so just getting some cost savings on the OPEX line, or maybe some shift from the GP margin perspective? If you could just give us a sense?

[Analyst] (Fortress): Okay, understood. Was it more so just getting some cost saving on the OpEx line or, maybe something except from a GP margin perspective that you just give us a sense?

[Analyst]: Okay, understood. Was it more so just getting some cost saving on the OpEx line or, maybe something except from a GP margin perspective that you just give us a sense?

Speaker #2: No, it's the ramp-up in depreciation. That's the only—that's the only difference there.

Carel Snyman: No, it is the ramp-up in depreciation. That is the only difference there.

Speaker #3: Yeah.

Speaker #4: Okay.

Speaker #3: Okay, and then I think that's it. Thank you so much for your time. Thank you, Carl.

Phil Welthagen: Yeah.

[Analyst] (Fortress): Over.

[Analyst]: Over.

Speaker #2: Sure.

Phil Welthagen: Yeah. Then I think that is it. Thank you so much for your time. Thank you, Carel.

Speaker #3: If there are any other questions, or if you need any additional information, please feel free to reach out to me. Thank you. That's it.

Carel Snyman: Sure.

Phil Welthagen: If there are any other questions or you need any additional information, please feel free to reach out to me. Thank you. That is it.

Carel Snyman: Thanks, everybody. Have a good afternoon.

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