I would like to welcome you to the Altron full year financial results presentation for the 12 months ended 28th February 2022. My name is Thabiso Hermanus, and I have the pleasure of being your program director this morning. I trust the session this morning will be informative and give you a full understanding of our company's FY 2022 financial performance. Our presentation this morning is divided into four parts. Our Group Chief Executive, Mteto Nyati, will give a welcome and an overview of our performance. He will then be followed by Nicholas Bofilatos, Group CFO, who will present the financial results. Mteto will then come back to give you the outlook.
We will then close out with our questions- and- answer session, where we will appreciate your participation. Please do type in your questions in the chat box. Without further ado, I would like to hand over to Mteto Nyati.
Thank you, Thabiso. Good morning, ladies and gentlemen. To echo Thabiso, I would also like to welcome you to our full year results presentation for FY2022. A special welcome to our Chairman, Stewart van Graan, who has recently been asked by the Altron Board to step in as the Executive Chairman and Interim Chief Executive from July 1st, 2022. Another special welcome to members of our board who continue to ably guide this organization to achieve its vision of being a highly differentiated technology solutions provider. We have also our managing directors who lead the various operations of Altron. They are passionate about the environment, where they are creating an environment where our employees are able to bring their A game. They lead by example. They live our values every day.
It is this kind of passion and focus that has helped us to navigate a very tough operating environment, both in South Africa and rest of the world. It is here that I would like to focus on highlights at an Altron group level. For the full year, we delivered ZAR 9.5 billion of revenue, representing growth of 5% year-on-year. Our operating income was ZAR 440 million, representing growth of 45% year-on-year. Our net debt to EBITDA is 0.36 x. As you know, our target is one, well below. We are well below that target, which is a good thing. Going now to our continuing operations. Altron 2.0 delivered ZAR 7.9 billion of revenue, representing 6% year-on-year growth. HEPS are at ZAR 0.51 per share, up 38% on last year.
Net working capital improved slightly. We were able to release ZAR 35 million. As you know, we had to make provisions and increase our inventory due to the fact that we had challenges around global supply chain constraints and electronic component shortages. With all of that, we were able to reduce our working capital. The Altron board declared a final dividend of ZAR 0.23 per share. Let us now look at the challenges that we encountered during the year and the highlights in specific operations. We experienced the following three challenges. As I've already indicated, the first one is the global supply chain constraint. The second one, shortage of electronic components. Generally, across our entire portfolio, we saw that CapEx was being reduced by our customers in key segments of the market. Going now to the highlights. I will start with Netstar.
At Netstar, we reached 1.1 million subscribers. This is up 24% year-on-year. The operating income of Netstar is up 12% year-on-year. Altron FinTech. This business, its volumes increased by 27% year-on-year. This is already way above the pre-COVID-19 transaction volumes. The value of these transactions increased by 10% year-on-year. Altron HealthTech. This operation operates in a mature market. They managed to add over 2,000 net new private practices. This means that they are taking market share. Altron Karabina. This is a good turnaround story. Their revenue was up 47% year-on-year and achieved an EBITDA of ZAR 38 million, in line with the business case when we set out to acquire this business. Altron Security. Here, we have successfully integrated LAWtrust.
LAWtrust brings to our organization unique digital capabilities that this business, Altron, needs and that our customers are demanding. Altron Arrow. Here, we achieved operating income of 87%. This was up eighty-seven percent on last year. They also achieved their goal of being a half a billion ZAR operation. At head office, we kept our head office cost below ZAR 150 million, that is after normalization. In an environment of ongoing change, it is absolutely critical that we constantly improve Altron's organizational agility. During the reporting period, we focused on three business initiative. The first one was business optimization, the second one, appropriate and effective response linked to COVID-19, and the third one was executing on our strategy. Starting with the business optimization initiative. Here, there are three operations that we put a special focus on.
It was Altron Managed Solutions, Altron Systems Integration, and Altron Nexus. In Altron Managed Solutions, we transformed and simplified our operations. We also had to take a good look at our cost structure within this business and decided to restructure and rightsize the business. First, to reduce the cost, but at the same time to improve customer experience. The management of this business also invested heavily on upskilling our employees in this business. As a result, we were able to deliver profitable revenue growth in this business. Altron Systems Integration, we experienced a number of challenges here in this business at the back of CapEx reduction and also global component shortages. We exited the year with ZAR 93 million of sales, which we could not deliver because of the global supply chain issues.
We also had issues linked to the retention of our skills and also the shortage of skills in the market. We've spent quite a lot of initiatives here making sure that we're creating an organization that is able to attract and retain talent, and also are able to build skills from within Altron. In Altron Nexus, here, the business focus on what we call getting back to basics. Focusing on the things where we are the best, our core competencies. These areas are critical communication and broadband infrastructure, building and running of those. The two key areas of focus, critical comms and broadband infrastructure. That's where the big focus of this business is. At the same time, just like Managed Solutions, we decided to reduce the headcount there to rightsize because this business depends largely on the public sector.
Almost 90% of the revenue that we get here comes from the public sector. What we saw because of COVID-19, that public sector spend went significantly down in the last financial year. What we also liked with regards to this business, is the fact that they focus on the things that they have got control over, which is data collections. They did an amazing job in that regard. Looking now at how we responded to COVID-19, it impacted us in a number of areas. I've already highlighted some of them. The global supply chain, electronic component shortage, the implementation of hybrid work, and also the well-being of our employees. On the global supply chain, we had to increase the inventories across a number of our businesses there. That negatively impacted our working capital.
Electronic component shortage, we experienced that in Nexus, Systems Integration, FinTech, and Altron Document Solutions. However, Altron Arrow had a positive, had a benefit out of the component shortage, where we saw the prices going up of the components that we're able to sell. The hybrid work. We have implemented this, the fact that we as a company over the years have invested significantly on digital platforms, it was easy for our employees to be able to work remotely. But the negative part of that is that now we see that we have a lot of space within our Altron campus, and we have decided to make sure that we make the necessary impairment to align with the size of space that we'll require going forward within the Altron campus. The employee well-being.
The last time about three months ago, in fact, even more, about four months ago, when we did the survey on where we are around vaccination, we realized that our employees at the time, 58% of them were vaccinated, which was about 20 points ahead of the national average at the time. We continue to encourage within Altron that our employees should vaccinate, but we also give them the choice. Executing on strategy. As I've already indicated here, we bought and also integrated Altron Security. We have divisionalized it and migrated this business into our platforms. In the first five months of the year, the first five months of the previous year, we were able to see the performance of this business. They performed in line with the business case.
We are so excited about what they are able to add to our operation to Altron Group. We have also disposed of a number of businesses. Document Solutions, we have sold this business to Bi-Africa. In the rest of Africa, two of the operations in the rest of Africa, we have received binding offers and also accepted those offers. Altron Arrow, I just want to highlight, we have brought it back into continued operation as we have made the decision to, in the short to medium term, to keep this business, and we've struggled to find a buyer for this operation. Nexus. At Nexus, in the last time that we presented here, we indicated that there is a strong focus in this business. We've got business transformation that we are doing within Nexus, and we are seeing the results.
There's been a consistent growth of subscribers, in particular here in South Africa since June 2021. We also see that the churn has come down to be very much in line with the industry average. Our objective, our goal is to make sure that we continue to improve and reduce the churn through the platform approach that we are implementing within Nexus. Now, just briefly on the performance of the various segments. The Own Platforms segment is the one that truly helped us during this very challenging time that we've just come out of, you know, where we had global supply chain constraints, where we had shortage of electronic components. This segment performed exceptionally well. Overall, this segment delivered an operating income growth of 17% and the top-line growth of 6%.
The next segment that I would like to focus on here is Digital Transformation. It's a mixed performance within this segment. The first two operations, which is Altron Systems Integration and Altron Security, were negatively impacted by some of the challenges that I've indicated. As a result, the growth was negative for both of them, both the top line and bottom line. Altron Karabina was a positive, very positive turnaround in this business, and they were able to grow operating income well in excess of 199%, and the revenue grew above 40% year-on-year. Managed Services. Again, we had mixed performance within this segment. Altron Managed Solutions, on the back of the business transformation initiatives that we've done in that business, they were able to execute and perform and deliver profitable revenue growth. However, Altron Nexus experienced challenges linked to the public sector.
As a result, they delivered a loss, ZAR 28 million at an operating income level. The last segment I want to touch on is Altron Arrow. Altron Arrow had a fantastic year. Exceptional performance both at the top line and operating income level. 92% growth in operating income level and revenue growth of 34%. To conclude this first section, I would like to just go back to the outlook that we shared with you when we last presented to you. We said that we're going to be looking at the disposal of non-core assets, look at expansion, look at value unlock, and maintaining the performance. Here we have sold ADS, Altron Document Solutions, to Bi-Africa, and two of the countries in Arrow, we have been able to secure buyers for those, and the additional two we are currently in negotiations.
In terms of expansion and building Altron 2.0, we acquired LAWtrust and successfully integrated it, and we continue to build an acquisition pipeline very much aligned to Altron 2.0 strategy of being a capital light business. City of Tshwane, we will talk a little bit about it in more detail. I'm going to skip that. As you can see, Altron Karabina, we managed to turn it around. We also said that we would like our operating income to grow in excess of 30%. We did that. We also said that our operating income for H2 should be 2 x H1. We missed that by 5%. We overall delivered very much in line with the commitments that we made to you six months ago.
It is here now that I would like to hand over to Nicholas, who's going to take us through the numbers. Nicholas.
Thank you, Mteto. As I presented at our interim results, I think it's important to highlight and reaffirm items that have impacted our financial landscape over the financial year. During the period, Altron terminated its agreement with AIMS and waived its BEE vendor loan to the value of ZAR 47 million, and this resulted in Altron being released of certain financial guarantees. As highlighted during our interim results presentation, a modification to the Altron Long Term Incentive Plan was required to compensate and return its participants into the same position that they would have been in before the Bytes U.K. demerger. This modification was purely and directly linked to the Bytes U.K. demerger and has resulted in an additional share-based payment expense to the amount of ZAR 67 million for the full financial year.
As a benefit to our results, we recorded a ZAR 22 million uplift by adjusting for future forfeits resulting from non-market performance conditions. Through several business optimization projects throughout the Altron Group, Managed Solutions, Altron Systems Integration, and Head Office to be specific, to realign and right-size the businesses. We incurred severances to the amount of ZAR 24 million during the financial year. The continuing operations recorded an operating income of ZAR 499 million. This is a 34% improvement against the period, the prior period. When we compare to pre-COVID norms, being our financial year ending February 2020, we achieved growth of 9%. To assess what the core business really achieved through the day-to-day operations, we need to take into account the financial impacts I highlighted on my first slide.
Being the net ZAR 30 million on the share-based payments and a further ZAR 24 million on severance costs. This would represent continuing operations' true operational performance amounting to ZAR 552 million for the year. This is a 40% improvement against the comparative that has been rebased for similar adjustments pertaining to costs that were incurred in the prior year. During our interim results presentation, Mteto gave an outlook that we had hoped to double our half year's normalized operating income of ZAR 193 million during the second half of the year. Unfortunately, the industry challenges we face around customer budget constraints, the global component shortages resulting into extended supply chain lead times have prevented us from reaching this objective, seeing us miss this doubling by under 5%.
Our operating income margins are based on gross invoice income, and in the current year, we returned to our pre-COVID operating margins of 6.1%, which expand to 6.7% on our normalized operating income. Through several cost-saving initiatives, the continuing business achieved an operating cost margin of 30% when expressed over gross invoice income. This is a 180 basis point reduction from the prior year's 31.8%. Once again, assessed against pre-COVID norms, our operating cost margin has been reduced by 240 basis points. When normalizing for the share-based payments and severance costs, as I discussed earlier, the normalized operating cost margin for the core business is 29.4%.
This is a 210 basis point reduction from the rebased prior year and a 300 basis point improvement against pre-COVID norms. Looking at headline earnings, the ZAR 191 million reported in the financial year is not a true representation of what the continuing business has achieved for the period. This waterfall diagram or graph illustrates the material impacts of the headline earnings and bridges the ZAR 199 million, which we reported to what we believe the operations truly performed within the period. When understanding the one-off impacts of the AIMS's loss, the nature of the additional share-based payment expenses, and removal of the benefit we received as a result of the forfeiture of future forfeits, the severance costs, and all net of tax, the continuing operations achieved normalized headline earnings of ZAR 277 million.
Before we work through the detail of the continuing operations' summarized income statement, I would like to highlight the changes since the last year's results. We announced the disinvestment of our Altron Rest of Africa structure during the interim presentation, from which point this operation has been held as held for sale and is no longer reported under the continuing operations. Altron Arrow was announced as a discontinued operation during our interim results back in August 2020. Management has concluded to no longer actively look for a potential buyer for Arrow in the short to medium term. With the criteria to classify as held for sale no longer being met, Arrow has been reclassified to being reported within our continuing operations. Statutory revenue of ZAR 7.9 billion has seen growth of just under 6% on the prior year.
Just to remind everyone, despite it not being as material since the demerger of Bytes U.K., the correct way to look at our revenue is on a gross invoice revenue basis, as this is what drives our margins and our working capital. Gross invoice revenue for the year is recorded at ZAR 8.2 billion. Operating income of ZAR 552 million on a normalized basis is up 34% year-on-year. Our net interest expenses have benefited from lower debt levels, which we were able to reduce with the proceeds from the Bytes U.K. demerger, and we've maintained thereafter. As I touched on in my previous slide, our normalized headline earnings of ZAR 277 million has grown in excess of 39% against the prior year, and a final dividend of ZAR 0.23 per share has been declared by the board.
I must highlight that the interim dividend of ZAR 0.33 declared in the comparative period was based on headline earnings of the Bytes U.K., as the remaining continuing operations was in a loss position at that time, and therefore the final dividend on ZAR 0.15 in the prior year represents the continuing operations' earnings for the full FY2021 financial year, and would be the correct comparative to our dividend of ZAR 0.30 for this full year. At our results last year, we reported working capital of just under ZAR 1.7 billion. Over the year, we saw a strong focus on collections, which reduced the working capital tied up in trade receivables by just under ZAR 320 million. Unfortunately, our inventory requirements have increased as a result of the global supply chain delays, which offset against the collection efforts.
To call out the absorption evidenced in the other pillar, which represents Altron Arrow and head office, there were significant payable balances in the prior year in excess of ZAR 120 million pertaining to group-wide annual license fees, which had a positive impact on working capital at that time. During the current year, we paid the liability and restructured these licenses into a monthly consumption cost, which no longer sits on the balance sheet and is what's driving the majority of this absorption. When we start with our reported cash balance from the prior year's results, we need to understand that we held ZAR 355 million within our cash reserves pertaining to a special dividend that was paid out in May, and therefore inflating our base for the year end.
Once we exclude this cash associated with the special dividend, our rebased cash balances to start the financial year was ZAR 449 million. Our cash generated from operations was just over ZAR 1 billion, and as discussed on my prior slide, there's been a release in working capital for the group of ZAR 38 million. Key investing activities during the year comprise of the following items. There was a consideration paid for the acquisition of LAWtrust amounting to ZAR 206 million, and then there were deferred purchase considerations for both Altron Karabina and Ubusha, totaling ZAR 62 million. This was offset by ZAR 109 million of proceeds we received for the disposals of Powertech Transformers and Altron People Solutions.
Investment into property, plant, and equipment, as well as intangible assets amounted to ZAR 213 million for the year, and an increase in the capital rental devices of ZAR 183 million is driven out of our Netstar business. At our prior year end, the net debt and net debt to EBITDA ratio was lowered by this ZAR 355 million cash reserve that we held for the special dividend. On normalization, the net debt number for FY2021 by deducting this cash reserve would be a comparable net debt of ZAR 108 million for FY2021. This is consistent with the current net debt position, despite the additional facility we took out of ZAR 300 million to facilitate the LAWtrust acquisition.
We've continued to maintain a strong and healthy balance sheet, which places us in a good and agile position to act on potential investments which arise that meet our investment hurdles of being within identified growth areas of cloud, data, DevOps, and security, that have high annuity revenues, own their own IP, and are capital light. With that, I'd like to hand back to Mteto, who will take us through the outlook section of our presentation. Thank you.
Thank you, Nicholas. Over the next six months, we see continued pressure on global supply chain and shortages of electronic components will continue to lift prices. The Own Platforms segment is underpinned by high annuity revenue. The segment is sensitive to volumes of transactions and net subscriber growth. We expect this segment, the Own Platforms segment, to continue its strong performance in the next six months. In the Digital Transformation segment, we expect Altron Systems Integration to break even at a minimum, although it continues to face challenges related to global supply chain and CapEx reduction. Sales backlog, though, from the previous year should help in the first half. Altron Karabina came in this financial year with a strong sales backlog due to significant contracts that they signed in the previous year. As such, we expect that Altron Karabina will continue its strong growth trajectory.
Altron Security will have a very strong first half, with LAWtrust going through its peak cycle, and we also see improvement in software sales in Ubusha. In terms of the disposal of non-core assets, we are in advanced discussions with a potential buyer that is interested in acquiring the banking unit from Altron Managed Solutions. This development is in line with us executing on our strategy of making this company capital light going forward. As this is my last presentation, I would like to use this opportunity to thank the Altron board for their support and guidance over the past five years. I would like to also thank the leaders and the managers of Altron for the disciplined execution of both One Altron strategy and the current Altron 2.0 strategy.
I'd like to also thank our employees who continue to differentiate this company to be the innovation company that stands out, focusing on innovation that matters. Last but not least, I'd like to thank our customers for entrusting us to implement their digital strategies. It has been a great five years. I've enjoyed the experience. I know that I am leaving behind an Altron that is significantly better than the Altron I found. I also leave a better person than the leader who joined this company five years ago. This is how things should be. I wish you the very best. We will now move into the Q&A session after this short video.
Thank you, Nicholas and Mteto, for that very, very informative session. I will now commence with our Q&A. First question: It was recently announced that Stewart van Graan, the board chairman, will be the acting chief executive officer for a period of three months. What is the status of announcing the successor, Mteto?
Yeah, let me take that, Thabiso. Before I dive into answering the question around Stewart, I'd like to just comment on Stewart. Stewart joined the Altron board in 2017. He brought with him huge expertise around IT industry. As we were navigating and executing the One Altron strategy, he was an important part of that agenda, helping and shaping us to execute, and he was guiding us. He also comes from leading many, many IT companies within South Africa and globally. I am comfortable that the interim arrangement that we have, we've got someone who has deep understanding of the IT industry. He's also very, very clear and understanding of our strategy, both One Altron strategy and Altron 2.0 strategy.
To answer the question directly. Our Altron Nominations Committee is currently having discussions with some key candidates, and those discussions are at an advanced stage. I feel that we will be within the period that we have given, the three months, we should be in a position to announce my successor.
Thank you very much, Mteto. It has been several months since the announced court ruling over the City of Tshwane matter. What is the update on this contract?
Thabiso, I'm going to ask Nicholas to go into detail around that because I, even in my presentation, I indicated that we will elaborate around this. Nicholas?
Thanks, Mteto. Discussions are ongoing between the consortium and the city as frequently as weekly. This is personally led by Mteto and the other shareholders of the consortium who are engaging with the senior officials at the city to define the way forward in implementing a network that meets the city's requirements and for us to execute with the current contract that we see ourselves. We are looking forward at progress in this in the next few months, and that's where we currently are. Thanks, Mteto.
Altron Security's revenue has doubled. However, the operating profit has decreased over the period, prior period. These are Altron's two newest acquisitions. How should we look at these businesses going forward after low profitability this year?
To answer this question, I would like us to look at Altron Security as two different companies, LAWtrust and Ubusha. Let me start with LAWtrust. LAWtrust, we have in the previous year's number, five months of its performance. It delivered very much in line with the business case that we had. Looking at this year, we already have one month of LAWtrust, and this performance far exceeded the business case. Our expectation of this business is that it's just going to continue to be doing exceptionally well. It was a great, really great acquisition for Altron. Ubusha also, I have to segment it into two parts. One is a software-based business where we have software sales within Ubusha, and the other is services-based.
When you look at the performance of last year, services did exceptionally well. In fact, they far exceeded the targets that we had given that business. Exceptionally well. The need that the market has of our expertise, of our technical capability continues to be so high in the market. What we saw, though, is that many of the large enterprises in South Africa, they put a freeze or a reduction, a significant reduction in CapEx, and that impacted the software sales within these customers. As a result, it impacted how we performed or Ubusha performed. When you look at where we are now, it looks like the need for this implementation of this project, security-related projects, has gone up. We're seeing a lot of activity related to the software within Ubusha.
Which is why in our outlook for this segment, we feel that it is going to continue to perform very well as a segment. Altron Security is going to be performing exceptionally well in the next six months.
Thank you for that very comprehensive response. Can you elaborate on the company's current acquisition pipeline?
You know, we've got a very clear strategy as a business. Our strategy is what we call Altron 2.0, and it looks at a number of things. We are giving preference to targets that have got their own intellectual property. We are also giving priority to targets that have got high annuity revenue and significant, very low demand of working capital. That is the profile of companies that we're looking for. We have a number of companies, both locally and elsewhere, that meet that criteria. We have this as a pipeline, and we'll continue to build this pipeline.
Whatever we're going to do, whatever we do, it needs to talk to the Altron 2.0 strategy, where we are focusing on making sure that we build our cloud capabilities, we build our data capabilities, we build our security capabilities, and we also build our DevOps or software development capabilities. As you can see, LAWtrust fits 100% this, the criteria that we have set for ourselves. These are the kind of companies that you're going to continue to see us signing up and closing going forward.
Thank you. What were the revenues and OI of the AMS banking unit up for sale in FY2022? I'd like to ask Nicholas to dive and explain that to, for us.
Thanks, Mteto. The revenue and OI on the AMS banking business, it's a fair split. I think what we need to take into account in the current year, they will definitely benefit from the damages due to the rioting that we experienced last year. They did have a bumper in the current year. I think what we need to look at is this business is very capital intensive. If you can understand all the equipment that goes into the ATMs and spare parts, and that is the key focus there is unlocking that working capital that is directly associated to this component of AMS.
What will be the impact for the various segments of Altron of the recent spectrum auction, and when will the benefits start to be realized?
Let's look at the benefits first. Although it has been announced that the spectrum has been allocated, it's going to take some time for the migration to take place. But it's going to certainly have a significant impact and a positive impact on the Altron group, albeit maybe indirectly. What we are going to be seeing is that there will be more and more devices that are going to be out there that are capturing data. Our data practice, already today we're seeing many companies having to manage data. Now, as we move into 5G and having even more information coming through and data being stored, that will require our services and Systems Integration together with Karabina and also maybe Security will benefit out of that.
Again, as we have more and more of these devices that are out there talking to one another, they require protection. This is where our organization like LAWtrust comes in, making sure that those environments are highly protected. To us as an entity serving the telecommunications industry, that is certainly going to continue to grow because of this spectrum. It is a good thing that we are already in many of these customers, and we believe that our share of revenue within these customers will continue to improve. Operations like systems integration should benefit Altron Karabina and Altron Security.
Thank you. Netstar has grown its subscribers by 60% since 2019's reported subscribers of circa 715,000, but its revenue has only grown by 10%. Can you please explain?
Yeah. Nicholas.
Thanks, Mteto. I think it's a very good question, and I think we need to split it in two. There's two factors that we need to consider is this revenue profile is it's an annuity revenue. Our contracts run over three years. In principle, if you're gonna add 10 devices onto a base, and let's say it's from the very first day of the year, you're only gonna recognize one third effectively of that revenue stream within the year. You'll have a growth of 10%, but you'll only have a revenue impact of 3.3, and that gets even watered down because it averages out over the year. That is one element to always consider in this type of annuity subscription business. The other factor is the Toyota contract that we signed.
It is a high subscriber add-on contract that we have, but it is at a lower margin base. The idea with the Toyota is it's a project on its own, and we deliver services to Toyota. However, that device is then converted into an SVR contract going forward. Once that conversion rate picks up, you'll start seeing the ARPU's increase as well on the revenue line. That's why there's a bit of a mismatch in terms of the growth on subscribers versus the revenue growth.
Thank you, Nicholas. If LAWtrust is performing ahead of expectations, is there incentives available to accelerate the deferred purchase consideration payable in exchange for a discount?
Can you take that again, Nicholas?
Currently, that contract obligation is deferred. There isn't any clauses in for acceleration based on performance, so at this point it's not something that we've considered, so no.
What will be the impact for the various segments of Altron of the recent spectrum auction, and when will the benefits start to be realized?
Thabiso, we have already handled that question.