Semiconductor component shortages are expected to be resolved by later this year, Alviva Holdings said

Technology group Alviva Holdings reported a 17% improvement in headline earnings per share in the six months ended 31 December 2020 but warned of further uncertainty ahead.

Revenue at the group, which owns Pinnacle, Axiz and Datacentrix — and which is in the process of acquiring rival Tarsus Technology Group — rose by 2% to R7.5-billion, while its net asset value per share rose by 13% to R19.44 – or nearly double its current share price of R10.60.

“The group has delivered a satisfactory performance, with all of its operating entities contributing positively,” Alviva said. “Throughout the period, management has maintained the constant but delicate balance of maintaining and refining the execution of the group’s strategy while navigating through the uncertainty created by Covid-19.”

It warned, however, that the outlook for the financial year to 30 June 2021 is “looking uncertain”, with the economy struggling to recover from the effects of Covid-19 and the related lockdowns.

“Nevertheless, the group is well positioned to take advantage of any upturn in commercial activity. Consequently, the board expects that the group should exceed its earnings from those generated in the previous 12-month reporting period ended 30 June 2020.”

The ICT distribution segment grew revenue by 6%, while the services & solutions segment’s revenue declined by 5%. Expenses grew by only 1% due to cost management measures, including a freeze on salary increases implemented in July 2020.

Chip shortages

Two “notable factors” highlighted by Alviva were:

During the last quarter of the 2020 reporting period, extensions of credit terms were granted by Alviva’s significant vendors to aid the businesses through the lockdown period. This resulted in substantial amounts payable to these vendors by 30 June 2020, together with substantial cash holdings at that same date. Repayments to these supportive vendors were made during the early part of the current reporting period.
During November and December, the worldwide shortage of processors and components was felt by the group and many orders to suppliers have been delayed into 2021. This has resulted in the group being unable to meet the local demand for these products. It is expected that this situation will be resolved in the second half of the 2021 reporting period.

In distribution, Axiz delivered “solid profits in a lacklustre trading environment”. Enterprise business slowed dramatically during the reporting period but there was good demand for work-from-home products in the first quarter. “Thereafter, exacerbated by product shortages, activity has diminished.”

Pinnacle’s performance has been the “standout feature” of the distribution segment, with revenue increasing by 18% and profit before tax by 165% on a like-for-like basis. “This was achieved through a few large enterprise deals and strong demand in the first quarter of the reporting period for work-from-home products. In addition, Pinnacle has successfully implemented a new ERP system, allowing it to take advantage of enhanced digital efficiencies and reporting.”