Alviva struggles to keep up with demand as global chip shortage kicks in

The financial performance of technology group Alviva, listed on the JSE, has been affected by the global shortage of processors and components.

This came to light when the company announced its financial results for the fiscal year ended June 30, 2021 on Monday.

During the period, Alviva recorded sales of R15 billion, up 1% from the previous year. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to Rand 887 million, up 25%.

The company headed by Pierre Spies said in a statement: “Alviva has shown great resilience in recovering from the effects of the foreclosure suffered during the previous reporting period and in operating in a constrained economic environment throughout. the 2021 reference period due to the impact of COVID-19.

“Unfortunately, the group could not avoid the trauma caused by the pandemic, and five of our employees have died from contracting the virus.”

Revenue for the base period was approximately 1% above 2020, although the increase could have been significantly greater had there been product availability to meet orders placed by customers. customers of the group, the company said.

“As mentioned in Alviva’s interim results announcement, in addition to being well publicized, the global shortage of processors and components has severely constrained the group’s ability to meet customer product demands.

Alviva CEO Pierre Spies.

Alviva CEO Pierre Spies.

Recently, market analyst firm Gartner said The global semiconductor shortage will persist until 2021 and is expected to return to normal levels by the second quarter of 2022.

The research company notes that the ramifications of the COVID-19 crisis have led to chip shortages, starting primarily with devices like power management, display devices and microcontrollers, made on nodes. inherited in 8 inch foundry factories, which have a limited global supply.

“Alviva initially thought this would be short-term in nature, but it is now expected that product availability will return to historical standards only by the next reporting date,” the JSE-listed technology group said.

He noted that the group had managed its currency risks extremely well, which resulted in a currency gain for the reference period of R31 million.

As reported in the mid-stage, he adds, cash flow management has been excellent throughout the reporting period and net finance costs have shown a significant decrease of R41 million compared to the reporting period. previous reference.

The ICT distribution segment recovered well with revenues, before excluding inter-segment revenues, up 3% and EBITDA of 37%.

The ICT distribution segment is made up of Axiz, Obscure, Pinnacle and VH Fiber (VHF). The company says Axiz is the largest company in this segment.

He notes that Axiz delivered solid profits in an environment where product shortages and a substantial drop in demand for corporate products were the main features. Working capital management has been exemplary throughout the process and significant cash flow has been generated, says Alviva.

He points out that Obscure enjoyed a significantly improved performance compared to the previous reporting period, with revenues increasing by 50% and profit before tax rising to R18 million, compared to R10 million in the previous year. previous reference period.

Pinnacle had excellent operating performance thanks to a few transactions and demand from large companies in the first quarter of the reference period for work-from-home products, Alviva said, adding that Pinnacle’s performance has been the main feature of ICT. distribution segment.

In addition, he notes, Pinnacle has successfully implemented a new enterprise resource planning system, allowing it to take advantage of improved digital efficiency and reporting.

He added that a lot of work has been done to restructure VHF’s operations in its available market and that the turnaround has been satisfactory.

“VHF generated a pre-tax profit of R10 million for the reporting period compared to a breakeven point in the previous reporting period.”

According to the company, Datacentrix has had a difficult time of negotiation, although it has lived up to expectations.

“The Digital Business Solutions and Managed Services divisions exceeded their targets, but customers significantly reduced their infrastructure spending, investing in work-from-home products. The tendering activity, however, is at an all time high and hopefully some of it will turn into significant business opportunities in the future.

“DG was unable to repeat the stellar trade he had during the previous reporting period, which had included a number of significant one-off transactions. Turnover declined by 28% and pre-tax profit of 37%. Centravoice and IntDev, the connectivity and managed solutions unit, encountered many challenges throughout the reporting period and managed to remain profitable, albeit slightly lower than to the previous reporting period, ”says Alviva.

On the renewable energy front, the company points out that Solareff increased its turnover by 14% compared to the previous reporting period, although this was largely due to product sales rather than projects.

“Profitability has recovered and the company is well positioned with a good order book. GridCars has completed its deployment of charging stations on the main highways between Johannesburg, Cape Town and Durban. It remains in deficit but the amounts are insignificant.

Regarding applications and intellectual property, the company says that Sitrex saw a significant improvement in its performance with revenue up 14% and profit before tax up 95% over the period. previous reference. Annuity income also increased 16%, supported by long-term contracts with clients from various industries.

“The company’s investment in locally developed products and services continues to meet market demand for visibility products focused on application performance, user experience, software-defined wide area networks, home work and cloud-based technologies.

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