We [audio distortion] to Altron's half-year results for this period end of August 2025. With me today is Altron CEO, Werner Kapp, and CFO, Carel Snyman, that will be joining us later to basically share the stage. Yeah. And so what I want to say as well is that today's call is basically going to be webcast and recorded for your convenience. If you have any questions, there is a chat box available for you to post your questions, and then we'll get back to them for the Q&A session later. Another thing that's also crucial about this is that, as you might have noticed, this call today is interpreted for the deaf community. So it's kind of like one of our things, a core value that we hold dear to ourselves: inclusion. Yeah, it's a key word.
Now for the Ts and C's, as a reminder—yeah, now for the Ts and C's. Yeah. As a reminder, during the call, a lot of forward-facing and forward-looking statements will be made. Please pay attention to the cautionary language used throughout the presentations because there are certain risks and uncertainties that come with these statements. Please be advised about that. Also, unless stated otherwise, all comparisons during the call are in relation to the previous year's period. Thank you and welcome to Werner because he came off the stage because I think I'm done. Thanks. Thanks. Thanks.
Thanks. Can you hear me? Thanks, [Humboldt]. Thanks for that. Interns, very, very proud of what you've achieved. We had a sort of full board session last week. Part of that, our People Day was actually at the MyRegie Institute in the center of Jo'burg. Really amazing to see. I think I personally and Altron as a company, we're very passionate about rebuilding Johannesburg. Our partnership with Josie My Josie and the Ascent Foundation, that was our BE Education Trust. Really, really nice to see. Sometimes people can lose a little bit of hope, and it's really, really good to see that there's some exciting things happening in the Johannesburg CBD. Welcome, all of you, to members of the asset management community, to our board of directors, Altron executive management team. Thanks to Investec, our sponsor, for having us.
Happy birthday, Lauren, our Group Executive for Legal, and also in his absence, Stewart van Graan, our Chairman. Welcome to our results for the six months ended 31st of August 2025. Let's dive straight into it. I think continued disciplined execution of the strategy, which I'm going to take you through and just remind you of a little bit later, over the last three years has led to a very solid performance by our continuing operations in what continues to be very challenging trading conditions. This is evidenced by the fact that EBITDA is up by 4% and operating profit up by 15% despite a 1% decline in revenue. As you'll see later, it really is largely impacted by challenging conditions in the IT services business. Our platform business is actually achieving double-digit revenue growth.
The difference—Carel will explain that to you a little bit more—the difference between EBITDA and operating profit is we have now changed our depreciation policy in Netstar. It's something that we've been talking about for quite a while, and I think that had a positive impact of about ZAR 65 million to operating income during the period. Very pleasingly, headline earnings per share up by 22%, earnings per share up by 12%, and cash generated from operations are up by 7%. If we turn to our group results, again, consistent improvement here. Just to remind you, this includes our Nexus business, which we disposed of on the 1st of August. That really talks to revenue being down by 4%, EBITDA up by 2%, operating profit up by 11%, headline earnings per share up by 18%. EPS is down by 6%.
That's impacted by a loss of disposal of Nexus, and cash generated from our operations is up by 10%. We're delighted, in line with our dividend policy of paying out at least 50% of headline earnings per share, to announce an interim dividend of ZAR 0.48 per share, which is up by 20%. Right off the bat, before I go into the rest of the presentation, it would be remiss of me not to take this opportunity to really thank our board of directors for their support, my executive team, and the over 4,000 people that work for Altron on a daily basis. The easy part—I mean, everybody kind of wishes you luck with these presentations. I said, this is the easy part.
I mean, the hard work is really put in by these people to service our customers, to give them solutions that are relevant to what they're trying to achieve and to achieve these numbers. So I'm really, really grateful for that. Let's just—I always like to just give a little bit of an update, just remind ourselves. We've actually just gone through, as I said, board season. We're about to go into the next three years of Altron's journey, and I'll touch a little bit on that. A lot of time spent reviewing what works, what doesn't work, what do we have to change, what stays the same, what do we double down on, et cetera, et cetera. I thought it'd be good to just maybe just remind you of that. I mean, for us, this remains our North Star.
We believe that we are exceptionally well positioned in high-growth industries, and our customers are inundated all the time. Artificial intelligence, if you look at the top, sort of probably in bold at this point in time, but it doesn't underplay the difference of consistent technological changes, which results in a growing customer need. Our customers want to use technology to be able to manage their customers better or serve their customers better, to manage their businesses better, drive down their costs, and in many cases, to transform their businesses, enter new markets, have completely different business models. That really informs our mission of being our customer's trusted partner on their digital transformation journey. We believe that we are perfectly positioned through our unique combination of platform, IT services, and distribution business to service those needs.
That informs our strategy of being the leading platform and IT services business in our chosen market. Three key things that we focus on in this strategy to grow revenue, improve our operating leverage, and transformative growth. Today, I want to touch a little bit on transformative growth. Everything that we do, we want to positively impact our environment. Sustainability and running a sustainable business is exceptionally important for us, as is a sustainable society. If you look at some of the work we're doing with Josie, My Josie and the MyRegie Institute, we would like to believe that we hold ourselves to the highest levels of goWernernce and ethical business practices. Customer obsession remains at the center of everything we do. Everything we do is because of our customers.
There are really three key enablers for the strategy: an efficient allocation of our capital, differentiating through collaborating, and at the full year results, spent quite a lot of time unpacking that. How we believe that when we bring the power of all our opcos, in that case, we spoke specifically about the retail vertical, we really think that we can differentiate our solutions to help our customers solve their problems. What that does is drive revenue in these individual opcos for us. Our high-performance culture, like I said, all of this only happens because of people. From a capital allocation perspective, and Carel will take you through some more detail around our capital discipline, our capital allocation framework. Delighted to say that over the last three years, that focus has led to a 12 percentage point increase in our return on invested capital.
When I joined Altron, our return on invested capital was significantly below our weighted average cost of capital, and we are now sitting at 19%. High-performance culture. Besides some of the investments that we are making in Ascent, the MyRegie Institute, we invested about ZAR 16 million in what we call our top 100 leadership in collective leadership development, individual leadership development, coaching, probably about ZAR 70 million altogether across our 4,000 people within Altron. Delighted to say our employee engagement scores came out, Colin, I think about three or four weeks ago. It is something that we take very seriously. We have had record participation levels, which is fantastic, particularly if you consider that some of our businesses are going through really challenging times. We received the highest employee engagement score in our history.
We were delighted last year to be awarded for the first time as one of the top employers in South Africa, and we have been notified that we have once again made that illustrious list this year. These focus areas really allow us, or allowed us, to deliver on our short-term goals, our profit improvement strategy in Netstar and what was then our Altron Systems integration business. In the medium term, we continue to target north of 22% operating profit margin in our platform businesses. I mean, we have actually increased that from 20% - 22%, and I will take you through that a little bit later in our guidance. Despite some of the challenges that we are having in the IT services segment, we committed to targeting north of 7% operating profit margin in that business.
Of course, in the long term, our focus always remains to continue to create value for our shareholders from our portfolio of leading platform and IT services business. Let me give this side of the room a bit of love. We always look at our growth horizons through three lenses, which we call Horizon One, Two, and Three. Horizon One, it is pretty much when I came into the business in October of 2022, is all about foundational growth. At the time, I can't remember the exact number, but I think we had significant revenue growth, which was really mainly a bounce back from COVID. I think it was about 13%, if I remember correctly, but only made 7% operating profit. This really surprised me. It felt that we're not getting enough sense out of every rand's worth of revenue that we make.
Netstar, fantastic business, been around for, at the time, 28 years, now 31 years, really a pioneer in stolen vehicle recovery, but it slid sort of backwards slowly over the last couple of years. Our systems integration business was losing money, and our ADS business was losing a significant amount of money. So we rolled up our sleeves. We instituted profit improvement plans for those businesses and delighted that in the relatively short term, we were able to take profit from ZAR 506 million - ZAR 650 million. That's continued with our accelerated growth, really making a lot of investments both in our platform and our IT services businesses, and delighted to see that we've achieved about 54% compound annual growth in profitability during this period. August, as you can see, this results from a strategy perspective.
For August, for us, the reality of it is we're in November, so we've got four months left. So my executive team, if you guys can, as soon as you're done here, if you can get back to work, I would really appreciate that. Four months left to close out accelerated growth, and then our focus turns to transformative growth, which is something that we do all the time. I mean, the reality of these horizons is that they're not mutually exclusive. You spend a lot of time in today, but you're also building the business of tomorrow. And there, our focus remains to grow out our platform ecosystem. If you look at the Netstar business, you look at the Global Fleet Bureau that we've launched. In fact, we're just about running out of capacity in that now. We're starting to plan for the second one.
The platform solutions that we've expanded in our fintech business, in our credit management and payment and collection business, some of the financial services, value-added services that we're starting to put on that platform, the health tech business, moving from a core private practice managed business into clinical care, oncology. And I think it was last week or two weeks ago that we launched the Patient Oncology App. Some really exciting stuff happening in the way that we're leveraging the group data for growth through our partnerships with companies like Omniscient and Portage, and of course, the AI Factory, which I'm going to touch on for a couple of minutes. And as Carel will show you, we're M&A ready. So we continue to scan the horizon to see if there are opportunities for us to increase our growth through acquisitions.
We always look at that through the lens of, can that acquisition help build out our sustainable competitive advantage in any one of our businesses? This is something extremely exciting. This is transformative growth in action. I think it was about three weeks ago that we launched the first AI Factory on this continent and in South Africa. Why is this important? Because the African continent and South Africa, for as long as I've been in technology, has been a consumer of technology. Our data leaves our shores. I mean, we often consume this technology at quite high cost and at mainly dollar-denominated costs. This is a local cost point. The data does not leave the country, and we've got 800-plus curated models available at launch. I'm going to touch a little bit on what that means.
Really, it's been an incredible partnership with NVIDIA, ASUS, Terraco , HPE, and some of our launch customers, companies like Lalapa AI. What makes that really relevant is that you can now apply in a very quick fashion these curated AI models using intentionality, using local contexts to be able to solve your business problems. Our team of data and AI experts are also ready to help customers to rapidly deploy that. I really want to call out, as I said, our partners, our team, and Doc Annie Mabasso sitting in the back there. From going from conceptualization to taking this to market to customer launch, I think has been exceptional, and this is very, very exciting for us as a business.
Ultimately, as we close out a bit of a review of our strategy, it's been really, really pleasing to see, despite the fact that really market conditions haven't significantly changed and have been particularly challenging over the last three years. If you look there, we've managed to, I mean, even if you take out the impact of depreciation there, I'm scared to do the maths in front of you, of ZAR 65 million, we've more than doubled operating profit over a three-year period, if you look half and half. Very pleasing for me, 15% from the previous period. Very, very pleasing for me is the operating profit margin going from 5% - 11%. Now we make ZAR 0.11 profit for every rand of revenue which we generate. Fantastic.
I think we just about tripled our headline earnings per share during this period and managing to return a lot of value to our shareholders by increasing our dividend. We upped our dividend policy to at least 15% of HEPS, and that's led to an improvement of ZAR 0.25 to a 48% dividend payout during this period. Let's get into the detail around the businesses. Again, just to remind you, the platform and IT services businesses, significantly different customer profiles, significantly different business and operating models, and that really explains, even in a normalized market, the difference in performance between the two. Platform businesses, high annuity revenue, unit economics, great marginal margin that you get in those businesses, and serves a different customer base, much less exposed.
It is probably only the health tech business that is significantly exposed to the enterprise segment in South Africa. You are serving over 2 million subscribers in Netstar, over 4,500 SME customers in our fintech business, and over 20,000 physicians in our health tech business. Very high recurring revenue, very high EBITDA margins. In Netstar, three years ago, there were really three things that we wanted to do, and I am actually going to touch on the second one first. I mean, the first one is kind of fix the operational inefficiencies in the business, plug the leaks in the bucket. Particularly challenging for us, we had pre-fitment conversion ratios, which really impacted our profitability, hovering on around 30% back then, if I remember correctly. Our contact fulfillment ratios, and we really wanted to make sure that we expand our distribution channel.
We wanted to make sure, whilst we are doing that, that we continue to grow market share. Very importantly, we wanted to future-proof the Netstar business by building out our big data as a service offering and also adding value to that key enterprise segment. If we look at the half, from an operational efficiency perspective, we have managed to keep, after fixing the pre-fitment conversion ratios, we managed to keep that at over 60%. Contact fulfillment ratios remaining north of 90%. We have added another 70 fitment centers in our partnership, and we have launched two new products during this period. Having said all of that, I always say strategy just looks so great in PowerPoint. It is probably just in PowerPoint where everything just happens linearly.
The reality is this stuff is messy, and we all know the cliché that everybody has a plan until they get punched in the face. When we talk about our operating environment, it would be remiss of me. You may or may not have heard about this. Certainly, if you are a Netstar customer, it would have been communicated to you. We had a cybersecurity incident at Netstar, I think about three months ago. As you know, customer obsession, it is at the heart of what we do. We take our duty of care to our customers exceptionally seriously. We continue to engage our customers as we sort of remediate and understand the situation.
In fact, I know the team's been working on this during the weekend, and we will continue to make sure that all our stakeholders are kept up to breath with the latest information as we have it. Market share, I am delighted to continue to be able to grow market share, 11% growth in subscribers. The StarTag 590 device that we spoke about, new products that we launched last year, has now been installed in 450 vehicles. That really improves our stolen vehicle recovery rates. 8% growth in consumer business, 16% growth in our enterprise business. Our retention rate remains above 90%. Churn slightly higher than we wanted to be. It was at 17% in the preceding period. At the end of full year last year, it was 19%, particularly because of some of the challenges in our Australian business.
We are happy that we have managed to get that back to 18%, and we continue to drive our big data as a service offering. I mean, it is just incredible. If you look at, I know we always talk about the amount of data that we have actually processed by the time you get here on a Monday morning, it is in the millions. I believe that this business, as it now kind of comes out of its profit improvement strategy, is exceptionally well positioned for growth. We continue to invest in that growth. We continue to invest in new products. We continue to invest in our Global Fleet Bureau, and we are also allocating capital to the modernization of some of our internal systems to be able to run the business better and to be able to service our customers better.
If you look at that, I mean, despite ongoing challenges in Australia, that turnaround plan is progressing. We are targeting that business to break even for the year. I see Grant is looking quite fresh. He is just back from a two-week trip through Australia and Malaysia and some of the international, the OEM markets retreating. Some of the manufacturers cutting back some of their production capacity in response to market conditions. Very, very strong. South African performance leading to revenue being up by 8%. As you can see, annuity revenue holding at 90%. EBITDA is up by 10%. I mean, fantastic EBITDA expansion for us there, about 8 percentage point improvement over a three-year period. We have also launched two new products, which is our video and what we think is an industry-leading asset tracking product has been launched, and we are already planning our second fleet bureau.
Well done to the Netstar management team for getting really good results and positioning us well for continuing growth in this business. We turn to our fintech business. That is really the business that has got four solutions: credit management, payment and collection, our personal issuance card business, and then our integrated transaction solution business. There you can see the makeup of those businesses. At the top, of course, the credit management business really kind of driving the payments and collection business. This business, for me, is a fantastic example of not only good execution, but also transformative growth. We focus specifically, we targeted—I cannot exactly remember the number, Yohan, but I think we were about 50% annuity or 55% annuity revenue in this business when we started, or certainly when I started at Altron. The team had a specific goal of turning this into more of a platform business.
The momentum in this business continues unabated. As you can see, 24% revenue growth, and that is on the back of significant revenue growth in the past, and that has resulted in 18% EBITDA growth at 37% EBITDA margin. Fantastic margin improvement there. Again, 10 percentage point improvement over a three-year period. We are not fast at all about the 1% contraction in EBITDA margin. In fact, that is really on the basis of investments that we have made in our people, our distribution channel. I mean, it is super important for us, this informal economy. You really have to build trust. You really have to walk the streets. You really have to understand your customers. Of course, we continue to invest in our platform to be able to support growth and sustainability. This is really driven by continued growth in our SME customers.
We also spoke about how we are starting to see a shift in the consumption of POS devices from outright purchases to that sort of rental model. We have seen over 100% growth in there. As you can see, 40% growth in our collection and payment customers and our credit management solution subscribers up by 28%. Congratulations and really well done to the management team of the FinTech business for yet another sterling performance. If we turn to our HealthTech business, this is the first business where, like I said, you are starting to see a little bit of the impact now of constrained customer spending and slower decision-making in the enterprise segment. Remember, four solutions also in this business: the private practice management, occupational health, which really services corporate customers, our switch, and then our new sort of platforms and data solutions.
Having said that, this is why we love annuity business, because what that really does, and as you can see, there is really pleasing growth in our private practice business. We signed up over 1,000 new physicians. Even in the slower corporate segment, seven new customer logos added, and really, really pleased. A key measure for us in this business, same as churn is in Netstar, is customer acquisition to churn ratio. For us, for that to be at 1.5, which means we are adding one and a half customers for every customer that we are churning, is really, really positive. We have managed to keep revenue flat despite some of the challenges in the corporate sector because of the annuity business and EBITDA up by 21%, about over a three-year period, a 5 percentage point improvement in EBITDA margin.
I think Carel might touch on it a bit later. We are now capitalizing our platform investments where historically we expensed, and we are also getting to the end now of that investment cycle with the launch of our Patient Oncology App. I am really enthusiastic, really excited about some of the opportunities that we are seeing in data in this business, in lending, insurance, and in retail markets. I think this is a perfect example of. A highly predictable, highly cash-generative, highly annuitized business, but also a management team which uses that money to reinvest in transformative growth, which I think will stand us in good stead in the future. That is the platform businesses where things are going really well. Let's go to our IT services businesses where things aren't going as well as we'd planned.
This really is as a result of three things, mainly continued constrained spend. This is a business that really counts on 30-50 clients for spending and very much linked to GDP growth. I mean, we see capital expenditure increase in businesses when there's policy and political certainty and when there's GDP growth. The business most impacted by this is our ADB . They had a really tough, really disappointing first half of the year. That really is, in fact, quarter one, which for us is March until May, probably the worst order intake I reckon I've seen in IT in a really, really long time. Customers' decision-making seemed to almost come to a standstill because of the VAT, the contentious VAT hike debate at that point in time. The challenge with a business like this, low annuity, three-month order to billing cycles.
The minute that happens, you're immediately in trouble, unfortunately, for the whole year. Having said all of that, I think, as I'd like to think we always do, management rolled their sleeves up. They responded to this, immediately put a profit improvement strategy in place, most of which has been executed. The cost out part of it already, about ZAR 150 million with a cost annualized taken out of the business. Tough decisions to make. It's got to get done. About ZAR 50 million of that will actually contribute to this year. Having said all of that, what's really, really important for us is that this isn't just a cost out strategy. Yes, you have to respond to the market. You've got to make sure your cost base is appropriate.
We put this business together and we launched it in March of last year because we believe that we can grow market share even in a market that's not growing as much as we wanted to. We can do so by really servicing our customers better and by combining the solution sets that we had in our Caribina managed solutions and ASI business and cross-selling into our customers. We are committed. We are committed to it. I'm biased, but I think we put the strongest sales leadership team in the country together. We believe that we are well positioned for a turnaround in IT spend when it comes. Having said that, really tough half for the business, 10% decline in revenue. In fact, this annuity revenue is a bit of a misnomer. Annuity revenue hasn't improved. That's just because revenue has gone down.
Our annuity revenue percentage kind of still remains and hovers around the 50%. The business, unfortunately, lost ZAR 32 million in H1. As I said, having said all of that, I think credit to Craig and the ADB team. They have kept focus. They responded to this, and they continue to stay focused on the most important thing, which is serving our customers and growing our business. If I turn to our security business, now here you really see the benefit of annuity revenue, right? Operates in the same market. Look, to be fair, probably 40% of this business operates in the same market. Sixty percent, which is our identity and signature business, is still very much also a platform business. That business does not just serve corporate South Africa, serves law firms, etc., for anybody to which identity and digital signature is important.
There you can see how high annuity revenue really, really cushions the blow of a tough environment. I think a very solid result by this business. Revenue is up about 2%, and we have managed to keep our EBITDA more or less flat, down by 2%, and we have managed to keep our EBITDA margins. I think these are fantastic margins for an IT services business. We have managed to keep them relatively flat over a three-year period. We see digital identity as a key, key opportunity for us on the African continent. I mean, you are probably hearing and reading a lot about that. We are also seeing a lot of modernization of the payment ecosystem in South Africa and the continent. These are longer-term opportunities because they are really driven by legislation and deregulation that never happens overnight.
We think we are very well positioned to be able to assist governments with this change. Really well done to the security team for what I think is a very solid result in a muted environment. Last but not least in our IT services segment, before I turn to Arrow Document Solutions, this continues to be a fantastic performance by a business that, if you will recall, really came from a loss of ZAR 123 million. I mean, today, in this environment, despite a revenue decline of 5%, to be able to deliver ZAR 46 million EBITDA, that is a 53% increase at 7% EBITDA margin, which I think must be close to class leading for these types of businesses. How has the business done that? A couple of years ago, when we kept the business, we decided we are going to manage it for value over time.
Took some tough decisions, took costs out of the business. Now what we are seeing is quite a shift in our sales mix. That is really improving the margin mix in that business. I think an incredible focus by the team on service channel modernization, really leading to a lot of self-service adoption by our customers. I have said many times before that you cannot save yourself to profit all the time. So it's important for us to remain relevant in this market. I think the team has done a fantastic job. We're seeing a lot of AI digital sort of solutions in the markets. In other words, customers not just doing physical printing, but trying to use the information in their documents, which is stored. Also an improvement in our entry-level A3 and A4 printing range.
Again, still early days, but I just think it's a phenomenal effort by the management team and ADS. Last but not least, if we go to our Arrow business in distribution. There, the cyclical downturn continues. It's not something we like, but it wasn't unpredictable to us. I think we spoke about that last time around. We also see this coming quite a long way because of our JV partner, Arrow, which is pretty much the biggest electronic components distributor globally. In fact, we've actually managed to decline less than they have. We think we've grown our market share by about 4 percentage points in South Africa. The market is currently in a cyclical downturn, which has led to a 23% contraction in revenue. Having said that, again, if you think of a business, this business has no annuity revenue.
For the management team to be able to contain the damage, we still make ZAR 19 million, apologies, EBITDA at 7% EBITDA margins, I think is really tribute to, as you can see there, 20% reduction in operating expenses and really, really tight management. The team has been in this business for a long time. They understand it really, really well. Having said that, again, you've got a plan. You've got to firstly try and turn the cycle yourself, and you've got a plan for that cycle to turn. I think very exciting is the relationship that we've got with NVIDIA through ASUS. In fact, it really is. That was a large part of the reason why we were able to get the software factory up and running in record times is because of Arrow's relationship with NVIDIA through ASUS. I get asked this question a lot.
I mean, touch wood, to date, we've seen limited impact from the US tariffs, but it's obviously something that we keep an eye on all the time. Thank you very much. With that, Carel, I think I'm going to hand over to you.
Thanks, Werner. Morning, everybody. I apologize for my nasal pronunciation, but hopefully the numbers will speak for themselves. As Werner mentioned, overall, I'm happy with the set of results that we've delivered this half year. It's really, as he pointed out, a very strong performance on the platform side compared to a challenging environment on the IT services side. If we look at the income statement just quickly as a snapshot, slightly lower revenue at the top line, and I'll go to that in more detail when we get to the segmental analysis. That's really driven by the slower IT services six months.
What is important to us is that our EBITDA margins continue to expand. Even with the impact of the depreciation change on operating profit, when we exclude all of that, what is important to me is that on an EBITDA level, we are more profitable. Just to talk about the depreciation change, we wanted to lift that out. This has been a matter that's been ongoing for a while. We had to spend quite a bit of work getting this right. There's a base of different units. They have different characteristics, different lifespans. We took our time to make sure that this was properly done. We had it independently verified. The impact this half year is ZAR 65 million. If you exclude that from the operating profit number, your operating profit is in line with the EBITDA number, the growth that you see on EBITDA.
Even with this, I think the disciplined execution in the business, looking after our profitability, making sure costs don't run away with us, that has allowed us to deliver strong cash flows. That's allowed us to continue with our payout of more than 50% of headline earnings from a dividend perspective. I want to spend some time on this slide because I think it's very telling. If you look at, let's start on the left with the revenue growth. Our platform businesses is the only segment in this period that has managed to grow revenues. Werner has pointed out the challenges in the IT services and distribution market. What this has resulted in on the right-hand side is the operating profit profile of the group. The 12% revenue growth in platforms translates to a 32% growth in operating profit. That shows you the dynamics within the platform businesses.
High annuity, very profitable, high margin businesses. Just for interest's sake, if you look at the platforms delivering ZAR 547 million of operating profit in the period, the group operating profit is ZAR 549 million. I've done some stats just on that number. The CAGR on our operating profit growth for the last two years is 39% from the ZAR 283 million to the ZAR 547 million. In this period, as I pointed out, that's up 32%. This is really transforming the business profile for Altron. When I get to the capital allocation part later on, this is also where we're focusing our capital allocation. Having said all of this, what is still very pleasing to me in a tough environment like this is that we managed to grow our gross margin.
Operating expenses is always important because it is critical to keep your eye on those costs, make sure they don't run away with you. If I look at gross margin, the expansion of our gross margin over the last two years from 36% - 42% is an exceptional performance. This is really because of the management teams running these businesses. It is also driven by the fact that the bulk of the results are being delivered by the platform businesses going forward, which operate at a higher margin. When we look at all of this, revenue growth, gross margin expansion. This is a story of a business that is in transition. Operating expenses, for me, that is always something you keep your eye on because, as I said, that can quite easily start running away with you. If I look at our operating profit result by segment.
Werner, in this section, is focused more on EBITDA. I will take you through operating profit. The platforms I mentioned delivered ZAR 547 million, which is up 32%. If I break that down between the three businesses, the Netstar business operating profit was up to ZAR 225 million, growth of 54%, and a 5 percentage point margin expansion. Just once again, I want to point out depreciation did add to this. If you excluded the depreciation impact of ZAR 65 million, that growth would have been 10%. That is through trading performance without the accounting impact. FinTech operating profit, ZAR 257 million. That is 20% up. The operating margin is stable around the 34% level. HealthTech, 20% operating profit growth, 5% margin expansion. Werner did mention in her section about capitalizing versus expensing.
The oncology platform that was just launched, the spend on that was capitalized because it qualifies for capitalization. We had previously expensed some of these costs because it was far too early in the process to be able to really be comfortable about future growth perspective or future growth potential coming out of this. Capitalizing this cost is in line with our group policies, so we will continue to do that. IT services, this is the segment that had a very tough first half. Werner has pointed out some of the factors. ADB specifically reported an operating loss of ZAR 42 million compared to a profit of ZAR 34 million in the prior period. Our IT services segment in total, last comparable period, was ZAR 120 million. That is down to ZAR 61 million. Security and document solutions contributed positively.
Security profit growth to ZAR 70 million, 6% up, and margin expanding by 1%. Document solutions, really very strong performance. The business continues to shift to higher margin annuity type services revenue. That has delivered 65% operating profit growth and a 2 percentage point margin expansion. Very, very strong performance with the document solutions team. Distribution. Operating profit of ZAR 18 million, and that is down from ZAR 35 million in the prior period. This cyclical slowdown in electronic components continues at the moment. When we look at our partner, Arrow, they are experiencing exactly the same thing around the world. This is a cycle where you manage the business as best you can. You keep control of your costs. You manage your cash flows, your working capital. When the cycle turns, you take advantage of it.
Overall, this is the breakdown of how we got from ZAR 477 million - ZAR 549 million in the current period. I want to spend some time just quickly on working capital. Working capital, about ZAR 100 million higher than what it was in the previous period. You will recall that we had spent a lot of time and attention on getting our working capital as clean as possible so that it really reflects the movements in the business. This is what you see here. Maybe on the right-hand side, the discontinued operations, that's Nexus that was sold during the period. That is now out of our system. Platforms, ZAR 116 million. This is pure activity driven. This is increase in sales. This is because of growth in the business. In IT services, we had one anomaly. We had quite a large customer that paid us last year in August.
They paid us this year the first week in September. That's a snapshot at the end of August. That's been collected. The rest of that is really the difficulty in the rest of the business, specifically ADB at the moment. Just to point out here, it's a small number, but what I said about distribution, when the business is going through a difficult phase and improvement in working capital comes through, that's very important to me because it shows me that the business is continuing to focus on looking after its assets. On CapEx, in total, we've spent ZAR 370 million on CapEx during the period. That's up 3%. What's critical to me here is that our CapEx is behind growth. That's similar to all the prior periods.
We put the money where we can see a return on it, and that return needs to be above our weighted average cost of capital. Vernon pointed out our ROIC is in the order of about 19%. WACC is around 12%. When we deploy capital, we want to make sure that we can beat our WACC comfortably. That's why we deploy capital mainly in our platform businesses. During the period, ZAR 342 million, that was the growth CapEx. It's 92% of our total capital expenditure. The yellow block at the bottom, you'll see this is maintenance CapEx. This we sweat as much as we can. Vernon has asked me 3x for a laptop. The answer will remain no. That's why we managed to keep that number down. If I break down the growth CapEx, Netstar and FinTech capital rental devices, that's a big push for us.
As with Netstar, FinTech has got the same thing. When you deploy that device, on the back of it is a three- to five-year contract for revenue. For me, that's a very good deployment of capital. Then internally, we have created AI Factory, the oncology platform. That's also part of growth CapEx for us. That's also where we put money in. Overall, that's the breakdown of our CapEx. I just want to point out that this platform business will continue to require investment. This is not a one-off event. If you want to see the results and if you want to drive the top line, you have to continue investing behind it. I'm like a stuck record. We invest money where we see the highest chance for a return beating our WACC. That's really the focus area for us. I'm going to walk through the group cash flows.
ZAR 784 million of operating cash flow. Then we have our normal bills to pay, our taxation, ZAR 62 million. I just want to remind everybody that during this year, we will run out of assessed loss credits. Our tax charge towards the end of the year will start to increase as it normalizes. We also repaid the last of our revolving credit facility during the period, ZAR 425 million. Our revolving facility of ZAR 850 million matured at the end of August. We paid back the outstanding portion of it. Subsequent to the half year, we've managed to renegotiate a revolving credit facility of ZAR 1 billion. It was ZAR 850 million previously. We've managed to get a better rate on that. That provides us now with flexibility for the future. I'll talk about that when I get to the capital allocation framework.
We then have gone through our maintenance CapEx, which I discussed in the previous slide. We've paid out ZAR 201 million of dividends in the first half of the year, leaving us with a cash position of about ZAR 511 million. Just to point out, we've just declared an interim dividend of ZAR 0.48. If you add that to this, this year, we will pay out ZAR 400 million to our shareholders. It is critical to us to have a consistent payout ratio of our dividends. It's part of our financial discipline. We want to make sure that we can deliver that return to shareholders as they support us on this journey. Lastly, I just want to spend some time on this. We've had the question before around capital allocation and how we think about it. There are very complicated models. For us, it's a lot more simple.
Starting to the left, the foundation for us is we need to generate the cash out of the businesses we have. Werner pointed out when he started here. Strong top line growth, no profit. No cash, being stuck on the balance sheet. That doesn't allow you the flexibility to move. Where we are now, and we've worked strong, high-growth platform businesses. What we do then is we firstly look at organic investment. These are the businesses we know. We operate them every day. We have management teams running them. For us, if we have an opportunity to deploy capital into businesses like that, that is number one priority for us because we have a strong conviction of where we will get a return because we understand these businesses. 92% of our growth CapEx, or ZAR 311 million, was put back into the platform businesses.
We then look at our shareholder returns. 50%, more than 50% of headline earnings policy. I have just mentioned the ZAR 201 million we paid in the first six months together with the interim dividend. This will be ZAR 400 million of cash to our shareholders this year. We then look at what is left over. We have ZAR 500 million of cash on the balance sheet. We have available facilities of ZAR 1 billion. Our current debt covenant limit is in the order of about ZAR 3.5 billion. It is about a 2x ratio. What this really allows us to do is to now, Werner mentioned it, be M&A ready. We have looked at a lot of opportunities. What we will not do is burn shareholder money on investment opportunities where we cannot with conviction see that it will yield the return that we want.
If we cannot find those opportunities, then we will come back to shareholders and ask them what they would like us to do with their money. This is as simple as it is. We will target platform opportunities. We are not deploying capital into IT services. It is a platform strategy. We would like to get geographic expansion. I think it is important, and we have been looking at it for a while. Also investing for technology capabilities as we shift our businesses to SaaS businesses. Finally, this we execute with financial discipline. We are very serious about looking after shareholder money, and this is the way we think about it. I just thought, let me put that out there so that everybody can understand how we think about their money. That is it. Werner, thank you.
Thank you. He is really not joking about the laptop thing.
I was delighted to celebrate my three-year anniversary at Altron a month ago. In our previous lives, I am used to that comes with a brand new upgraded laptop. I promptly, IT said, "No, no." The CFO changed the useful life of a laptop policy. That includes the CEO. I went and begged IT. Carel said, "Look, if I am going to give a new laptop, it is going to be to our technology people servicing our customers, definitely not to a head office overhead like you." Just as we wrap up from an outlook perspective, just reiterating our medium-term targets, just to point out that we have changed our operating profit margin target for our platform businesses up from north of 20 to north of 22.
That's really on the back of the change in policy in depreciation in Netstar, which I'm sure you're tired of hearing of by now. We want to deliver on Netstar's profit improvement strategy. We are still targeting operating profit margins of north of 18%. In IT services, despite some of the challenges in the market, despite some of the challenges that ADB is going through, we want to stay the course. We are still targeting in the medium term north of 7% operating profit margin. Carel's touched at length about our capital allocation and how that's going into our platform businesses. Even though we're starting to see some green shoots in the South African economy, we're not expecting the operating environment to improve significantly. We want to continue to maintain our dividend policy of paying out at least 50% of headline earnings per share from our continuing operations.
Ultimately, this is what it's about for us. Continuing to deliver on our strategy in a disciplined manner, make sure we don't get distracted. We always want to make sure that we explore new opportunities. Things like the AI Factory, I think, is a really good example of that. We want to really be focused. We want to really be prioritized. Through this disciplined strategy execution, focusing on higher margin annuity revenue growth. I mean, annuity now 68% of our overall business, up from 58% or 60% in H1 of FY 2023. We want to continue to grow operating profit and expand our margins. In this process, continue to increase our returns to shareholders. Thank you very much for your time.
Hello. My name is Sakhumzi Maqubela from Sakhumzi Restaurant. Looking back in 2001 when I started, it was all about excitement, new opportunities. I thought, "Oh, it's going to be easy starting a business," as I was nicely located in the famous Vilakazi Street. It was all about what difference can I make in this community where I am, just to create jobs before proper financial systems. I started to find out there must be a better way to do business. There must be a better way to run our stockpiles. When I had to manage that, it was starting to be tough. I needed a system. I needed some fitted technology. I had to Google and find out who can assist. I was fortunate to be in contact with my AD.
Working with entrepreneurs like Sakhumzi. It brings trust and courage that you're not only working with someone that brings change to their community, but brings change and ideas, innovation, and the whole spectrum of what we want to achieve as a FinTech.
It has really assisted us to move with the times, to understand that we need to build capacity more than growing the business.
The platform that we actually offered, Sakhumzi helped solve the problem of having to have HR issues on payments of wages and salaries. What we did there is alleviated those mistakes of paying into the wrong account, not able to track the wages. The platform that he's currently on, it solved all those problems.
The stock that we have, we are able to see what was sold. We are able to see what are the sales for the waiters. Everything is starting to be in order. We are moving forward every day. When I go to sleep, I feel proud. I feel really excited that I'm making a difference in this community.
I think there are very few people who don't know Sakhumzi. Congratulations to Altron for that partnership. Werner Kapp, CEO, Carel Snyman, CFO. If you can join me, gentlemen. I know this is always a reticent joining of me from a stage perspective. He even moves the chairs away, right? That definitely gives you a sense of.
It's just Carel's sick. I don't want to catch whatever he is.
No, exactly. There are questions coming through. Remember, if you're online, there are about 100 viewers online. You can post questions in the chat box. If you're in the room and you'd like to ask a question, just put your hand up. We've got roving mics in the back of the room. You can address your question to either Werner or Carel. I have managed to summarize some of the questions that have been coming through throughout your presentation. I think let's hit this depreciation on the head. People are asking if you look through the boost that the depreciation from Netstar, the change, gave to the group headline earnings per share and you normalize, are you still pleased with the results?
Yeah, I am. I want to be clear. I'm not happy with the results, but I am pleased with the results. I think it speaks really to the diversified nature of our portfolio. You look at the pressure that the IT services business is under. I mean, ADB was, period on period, down ZAR 70 million. Yeah, I think to be able to deliver 4% EBITDA growth, I mean, you saw fantastic growth in the Netstar and the FinTech business. Yeah, I'm pleased with this result. I think the team have rolled their sleeves up. They've responded to where there's challenges. I mean, we don't hide from those. When things go wrong, we own up. We've got to fix them. I think the strength of our platform businesses and really investments we made in those businesses, understanding the economics of those businesses. Yeah, I'm quite pleased, Brent.
The other theme is on Altron Digital Business and whether it still belongs in the Altron Group, given the difference between what you're seeing from platforms and then the cyclicality in Altron Digital Business and the weak metrics.
I think it's not just Altron Digital Business. I mean, just to point out in our entire segment, IT services, I mean, the short answer is yes. We haven't backed away from the rationale of putting those businesses together. I mean, those are kind of the long-cycle businesses. The challenges that we've had, I mean, doesn't help. We don't want to use trading conditions as an excuse. We focus on fixing what we've got to do. I'm sure in the medium term, that'll pay off. That's why we're still sticking to those targets.
You were talking about the acquisition strategy very much in the platform's side of the organization. I know you get tired of me asking you this question, but have we got any progress, any visibility? I suppose the other question is actually from Miles as to whether the recent activity around the likes of Ecoca. Or did you look at Bank Zero or Adumo? Those are all transactions that have been highlighted in the press of late.
Yeah, Bronwyn. No, we do. I think what is very important is not to get swept away or carried away by recent activity in the market. Because it's very easy for that to happen where you get yourself in a situation where everybody's doing acquisitions and you feel that, well, we're being left behind. It comes back to the financial discipline that we have in the group. When we look at an acquisition, firstly, and Werner always points this out, when guys come with opportunities, he says, "Tell me what is the strategic rationale for doing this?" Point number one. If you don't get past strategic rationale, we don't even look at the numbers. Once we have managed to secure that strategic rationale, then we start with a very disciplined process of going through a potential target. We've looked at a number of acquisitions.
We've walked away from a lot of them simply because they don't get through all the stages. For us, when we talk about transformative growth, it is not just acquisitions. I mean, if we look at something like AI Factory, which I'm very excited about, I mean, this is something that came from within Altron and could potentially be a game changer going forward. The oncology platform, it's groundbreaking development. That to us is also transformative growth, and we put money behind it. The short answer is there is a lot of activity. We stick to the discipline we have when we look at opportunities.
Did you look at Ecoca, Adumo, any of those transactions, Bank Zero?
We look at all of these because it's in the FinTech space. As you can see, FinTech is one of our star performers. We look at all of these, but once again, we stick to the discipline that we have in our process.
You mentioned AI Factory. There was a question coming through in terms of CapEx. Can you give us a little more detail on that?
Sure. Yeah, and maybe just to spend some time on this, just to be clear, our AI Factory is not a CapEx-intensive model going into the future. We said from the beginning when Andy came to us with the idea, we said, "We have limited resources. We cannot invest in something that is going to require CapEx for years on end as capacity keeps on rising." We spent in the order of about $20 million on getting this done. And this is really the infrastructure behind it. And this is a SaaS business. This is AI as a service. And the capacity will come from the providers of capacity. And we will get into a commercial arrangement with them. I think that's the beauty of the model. We have a service for small and medium enterprises. Even for the larger enterprises, we will do a bespoke solution for them.
We are not in a continuous CapEx cycle as this grows.
There are a couple of quite detailed questions coming through on Netstar. I will read them out just a little bit later. I think they will require one-on-one.
That's perfectly fine.
Engagement. Werner, if we look at IOCO, previously EOH, their results came out for the six months to the end of July, $250 million EBITDA. Is it a fair comparison? Sorry to keep on the Altron Digital Business side. Is it a fair comparison? And if so, there's a big performance differential here.
Look, same segment. I think there is a fairness in the comparison. I think probably where the difference is, I suspect in solution sets because we actually are kind of over the last 18 months getting into a competitive bidding situation with IOCO, which leads me to believe that their solution sets are different. Look, having said that, they've done a fantastic job, right? I mean, I think credit to the management team. We focus on our business. We have to fix our problems.
Let's look at Netstar Karoo. A lot of people making the same comparison and saying they continue to shoot the lights out. If you look through the numbers from a Netstar perspective, is it not relatively anemic compared to Karoo?
Yeah, I mean, we saw the Karoo numbers. We obviously follow them closely. And it's a phenomenal set of numbers. They run a really good business. Having said that, I think it's also important, back to the comment I made earlier around getting swept away with what's going on in the market, is to be overly focused on your competitors and not on your own business. We go through very stringent business plans for many years on product services to be launched. And it's important to me that we steer the course, that we don't get sidetracked by numbers. We look at them, but our business operates according to the plan that we put in place.
Just on Netstar and the detail that people are looking for, this is electives. A large portion of CapEx is spent on Netstar. What was the ROI estimated on this CapEx on the old and new depreciation policy? I'm assuming that that's going to require an individual answer. I just wanted to go back to the other one. Was Netstar, you have an 18% churn rate. This is from Titanium Capital. Netstar, you have an 18% churn rate, but retention is more than 90%. Please, can you clarify these stats in terms of average length of life of customer?
Yeah, I think that's more straightforward. When we talk about 90% retention, that's in our enterprise space. A customer and a subscriber is not the same. A customer, we retain these customers, but unique subscriber numbers within them, they might downsize their fleet or refleet. That would be a different metric then on the number of subscribers versus the number of customers. That's the disconnect between the numbers.
The outlook for the platform is business. Perhaps just spend a little bit more time considering you have painted this picture of two tails within the group at the moment.
Yeah, I mean, we're obviously very positive about the platform businesses. I mean, the medium-term guidance that we gave, we're still targeting to make north of 22% operating profit margin in those businesses, driving revenue growth, particularly in FinTech and in Netstar. I mean, I think it's 95% of our capital really goes into those businesses. I think the picture we're probably giving is we've got clear plans. We stick to them. We focus on what the rest of the market is doing because I think it's important to understand that. We want to continue to execute on that. Yeah, very positive about those businesses.
Any questions from the audience at this stage? All you need to do is put up your hand. The mic will be deployed. I do not see any takers on that front. You are going to get questions on the economic environment. You have 10 interviews lined up today. You are not going to escape this one. Can you give us a little more in terms of your views on what is happening in South Africa and the level of visibility you have, Werner?
I think. Look, I'm cautiously optimistic that there's some green shoots in the South African economy. For me, it's kind of less about the economy than economic certainty and political stability, right? We've gone through tumultuous changes, the GNU. I spoke about the debate. I think. Eskom, there seems to be some significant progress there. I mean, Transnet, there appears to be some early progress. I think getting off the gray list, I mean, that's a really, really positive thing. For me personally, I would really love to see Johannesburg's fortunes being turned around. I think there's some early green shoots. Business optimism seems to be a little bit on the rise, but still I haven't seen that translate into increased capital expenditure. I'm cautiously optimistic.
From a business plan perspective, I mean, all the stuff that Carel has spoken about, the business plans that we went through, we're not expecting an improvement in the operating environment. We want to be able to achieve those medium-term targets without that. Slight sort of glimmers of hope.
There's been a lot in the press around Johannesburg itself and the remedial action that is needed on behalf of both the private sector and the public sector. It is where Altron is headquartered. Any thoughts on visibility for Johannesburg, given obviously the G20 is upon us almost?
Yeah, look, I mean, for me, I'm glad that Johannesburg has been brought into the national discussion, I think, a couple of months ago because all the focus, like I said, has been on Eskom, Transnet, et cetera. Rightly so. I mean, to me, Johannesburg is the beating heart. It's the beating heart of this economy. We're participating. We've put up our hands. We're doing our best. I mean, ultimately, you need stability, continuity, competent leadership, and accountability. That's what we're really looking forward to seeing in Joeberg.
Always for the CFO, despite the flu, anything else keeping you awake at night to close out, Carel?
Bronwyn, for me, it's always the same. It is us focusing on running our businesses as best we can, looking after our cash. Looking after our market position. If there's an opportunity to grab market position or grow, then be quick about it, but be disciplined about it. For me, it's the same thing.
Werner, Carel, as always, thank you very much for your time. And thank you so much for those of you who joined us online for this interim results presentation. For those of you in the room, there is breakfast outside and the ability to network. So thank you very much for your time.
Thank you.
Thank you.