By Kathy Gibson – Alviva Holdings has experienced a disappointing six months, with revenue down 4% to R7,4-billion, EBIDTA down 8% to R425-million, headline earnings per share down 36% to 94 cents; profit before tax down 41,6% to R178, 98-million and net profit down 43,9% to R121,92-million.
Presenting the results for the six months to 31 December 2019, chairman Pierre Spies points out that, despite the disappointing results, the group has strong assets and the diversification strategy embarked on a few years ago is paying off.
“Our strategy a couple of years ago was to build a diversified ICT group,” he says. “In 2015, 86% of the business was in distribution; that is down to 46% today. We have diversified the group so we are not only reliant on distribution.”
The core of the group’s business is still distribution which, despite a revenue decline of 9%, still paid 139-million of dividends paid to Alivia, Spies points out.
“Our distribution operations remain competitive and efficient. They are generating cash and giving us a return. Yes, distribution is under pressure, but it is still good business.”
The distribution business continues to diversify as well, shifting its focus from mainly hardware sales to software and services as well.
“Rest assured we have not lost focus on our core business,” Spies says. “It is a critical part of the business.”
Indeed, he points out that while the market as a whole is down significantly, Alviva’s distribution operations have delivered revenues well above market averages.
Axiz is Alviva’s largest subsidiary, and Spies says there has been a lot of focus on mitigating risk and growing opportunities.
The company has moved from using an unsupported ERP system, and successfully implemented Sage X3. Some change control issues have now been addressed and the company will soon embark on the third phase of the installation which will introduce more automation.
Pinnacle plans to start its migration to Sage X3 in May this year.
Digital transformation is also high on the agenda, and Axiz has implemented its bimodal strategy to make this a reality.
“We have done the hard work, and done what needs to be done,” Spies says.
In terms of services into Africa, Tricon Services has now been absorbed into Axiz Services.
Other challenges that have impacted distribution include the exchange rate, which had an impact of R19-million on profit before tax (PBT); and the change in go-to-market strategy of a major vendor – representing about 12% of Axiz’s revenue.
“We had to modify our own go-to-market to mitigate this,” Spies says. “We worked fast, but there has been an impact.”
Obscure, the security division of Axiz, experienced a revenue decline of 12%, leading to a reduction in PBT of R6-million. This is as a result of companies moving away from buying security software licences to managed security services.
VH Fibre experienced a difficult market with a year on year decline of R15-million PBT, and the group is looking to diversify this business.
Financial services had a good year, as did services and solutions. “The diversification strategy is bearing fruit,” Spies says.
Datacentrix revenue was up by 7%, and the value-added reseller has concluded significant agreements with companies that include AB Inbev, Anglo and Afgri. In addition, the Reserve Bank contract has been renewed and extended for three years.
Spies adds that Datacentrix has implemented its own digital strategy with a major ERP upgrade, and extended its security operations centre (SOC), service desk and monitoring centre.
“The company has an enviable depth of skills for the digital economy,” he says. “It is known for its excellent services.”
DG grew profit by 51%, and has a prestigious and growing corporate base of customers.
On the renewable energy front, Solareff has built a positive pipeline and has orders which now need to be executed.
Sintrex had a difficult six months, and lost a few large government contracts. But it has focused on diversification and annuity business, also establishing a new network operations centre (NOC) facility as a business unit.
Merlynn has encountered delays in getting its TOM technology and solutions adopted in the US market. Spies explains that proof of concept trials have primarily been successful and well accepted, but the company has had to change its route to market. Global integrators have now been on-boarded, including Deloitte and HCL.
SynergERP has performed to expectations. It was responsible for implementing the ERP system at Axiz and will do the Pinnacle contract as well.
Spies points out that there is a big drive to automation, and a number of bots have been developed to help customers implement and use the systems.
Overall, he says Alviva has a strategy for moving forward. Over the next months it will continue with digital transformation; repay the preference share, deliver acquisitions to potential; expand efficiencies of ERP implementation; implement ERP at Pinnacle; expand the portfolio; positively manage the impact of Covid-19; continue to implement ethics initiatives; and ensure that all major subsidiaries will be ISO 27001 and PoPI-compliant by December 2020.
Spies doesn’t downplay the impact of the Covid-19 virus. Currently the vendors more affected are the Chinese brands Huawei and Lenovo, but he points out that most vendors will be affected since much of the manufacturing takes place in China.