Alviva earnings tank 50% as lockdown sends its customers into business rescue

Listed ICT services group Alviva has reported a 50% drop in headline earnings for the year ended 30 June 2020, off the back of a strained operating environment.

The company on Monday (28 September) published its annual financial results, calling the results “disappointing”, but noting that it managed to navigate the challenges presented by the economic fallout of the Covid-19 pandemic and national lockdown, as well as load shedding during the period.

“Although the financial results are disappointing when compared to those in prior periods, a great deal has been achieved despite the enormous challenges,” the company said.

The group said that the second half of its financial year was most affected by the Covid-19 pandemic, which saw product supplies from China delayed by the closing of borders, which ensured that there would be no chance of the group recovering lost ground in financial performance.

“The distribution businesses then had to cope, using reduced resources, with handling April and May’s order load in one month, when stage 4 was declared at the beginning of May. Notwithstanding these obstacles, May and June were reasonable trading periods,” the company said.

Other impacts were felt in credit losses amounting to R28 million, and write offs of approximately R45 million on customers who found lack of income during lockdown to be too much of a burden.

“Some customers are either in business rescue, have ceased trading, or are considered unlikely to survive,” it said.

With the economy expected to be slow to recover, the group has made substantial write-downs in the carrying value of goodwill amounting to R50 million.

Salient features:

  • Revenue dropped by 7% to R14.8 billion;
  • Earnings before interest, tax and amortization (EBITA) decreased by 18% to R708 million;
  • Headline earnings per share were down 50% to 149.4 cents;
  • Earnings per share plummeted by 59% to 112.7 cents;
  • The group declared a dividend of 15 cents per ordinary share, down 50% from the prior year.

ICT segment

Alviva is the parent of IT distribution companies Axiz and Pinnacle, and has other IT related businesses in Obscure and VH Fibre.

Alviva’s IT distribution business had a “tough” with revenue dropping by 11% and EBITDA by 25%, it said.

Axiz has implemented Gartner’s Bimodal IT model, being the practice of managing two separate coherent models of IT delivery, one focused on stability and the other on agility.

To achieve this, Axiz needed to modernise its IT systems and processes to be digitally ready and to ensure delivery of cloud products and services to the channel in a more digital manner, it said.

It is setting up and implementing an offshore distribution company Alviva International, based in Mauritius and trading as Axiz, to expand its distribution and services in more African countries.

The Covid-19 pandemic particularly affected Pinnacle with approximately R35 million of expected credit losses recognised at the end of the reporting period.

The group noted that South Africa’s fibre market has seen a sharp contraction, and its fibre business VH Fibre has seen a marked slowdown in demand.

Metro areas have reached saturation points, and uptake has been slower as they expand to lower-market areas. The fibre business reported a R500,000 loss, compared tot he R14.2 million profit in the prior period.

Read: Alviva reports below par results – points to uncertain outlook

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Alviva earnings tank 50% as lockdown sends its customers into business rescue