Alaris Holdings holds steady, despite Covid-19 challenges

22nd September 2020 By: Simone Liedtke - Writer

Alaris Holdings holds steady, despite Covid-19 challenges

Alaris executive finance director Elsie Müller

Radio frequency (RF) technology group Alaris Holdings’ financial results for the year ended June 30, were severely impacted by the Covid-19 pandemic and subsequent hard lockdown, leading to a 24% decrease in headline earnings per share (HEPS) to 25.8c.

“There would have been some growth, had it not been for the hard lockdown,” Alaris executive FD Elsie Müller lamented in a virtual presentation on September 22.

The results of the combined operations showed a decrease versus the comparative period, she noted, adding that revenue decreased by 1% to R242.8-million and profit after tax (PAT) decreased by 25% to R31-million.

The group’s cash position at the end of the period was R110.3-million, with about 48% of the funds located in South Africa − the country most hard-hit by the pandemic and subsequent restrictions from the countries Alaris operates in.

Late invoicing in June 2019 resulted in the recovery of funds in the first half of the 2020 financial year and additional cash, and this surplus cash will continue to support the group’s intention to expand its global footprint through “suitable acquisitions”.

Total revenue for subsidiary Alaris Antennas decreased by 3% to R126-million, and PAT decreased by 22% to R23.1-million. The cross-selling of products increased to R21.2-million, while the primary contributor to the decrease of sales was the Covid-19 hard lockdown.

Other obstacles emerged as a result of the pandemic, Müller said, noting that these included supply chain challenges, the issue of export permits and limited flights to ship orders to customers globally.

This resulted in unaudited revenue of about R27-million, and earnings before interest, taxation, depreciation and amortisation (Ebitda) of about R21-million being deferred to July and August, post-period end.

Although the financials reflect a decrease in revenue, Müller said “the company still provided a satisfactory result” amid the Covid-19 storm and the continuously increasing challenging market conditions in South Africa.

Meanwhile, Alaris’ Cojot subsidiary’s efforts fell short, with total revenue having decreased by 11% to R76.1-million, while PAT decreased by 32% to R16-million.

The cross-selling of Cojot products increased from R1.4-million to R7.1-millon, and while this subsidiary experienced a strong first half, it did not thrive in the second half of the year.

Müller attributed this to Covid-19, which she said delayed decisions on projects for customers and end-customers.

As per regulations on physical distancing, less testing was done since this requires physical contact between staff members and sometimes even customers.

Another project was also delayed owing to the implementation of US policies relating to foreign entities dealing in that country. Though, since its acquisition of Cojot, Alaris has expanded and its staff complement has outgrown its current premises.

This led to the Cojot premises being expanded during the second half of the year.

Subsidiary mWAVE, meanwhile, contributed for a full year, compared with nine months in the prior financial period. It achieved revenue of R68.9-million and a PAT of R2.9-million.

As with Cojot, the pandemic impacted decision-making processes in the US, which resulted in a few projects being delayed. Manufacturing also slowed owing to the impact of the pandemic, Müller said.

Jim Detert was appointed as mWAVE’s new MD, effective from June 1.

With Detert at the helm of the subsidiary, the focus will shift to aligning technical capability with commercial competence which will support growth and new business development, according to the company’s results announcement.

PROSPECTS

With the demand for smart antennas increasing, Alaris noted that it had secured several switched beam antenna (SBA) sales projects, making the outlook for growth in this field “encouraging”.

The use of SBA can enhance the usability, performance and spectrum management of complex communication networks in various ways by combining the advantages of higher gain directional antennas with mobility and directional selectivity.

Additionally, Cojot is seeing several new opportunities that have been created, which the company said would contribute to future organic growth for the company.

Alaris said it would continue focusing on improving margins and customised product sales in order to increase profits, as well as the alignment of important operational processes and best practices within the group.

Considering that the US represents strategic growth opportunities for Alaris Holdings, effective coverage of key states is necessary, the company said, noting that it would be increasing its footprint through representation on the East coast by an agent while the West coast was covered by a sales channel representative.

Sales representation in the Midwestern states is under review to ensure adequate coverage in the US to capitalise on every opportunity.

“The entities in the group are strongly focused on research and development, and they hold invaluable, exploitable technologies that can be monetised into the future,” the company said, adding that cross-selling opportunities and processes were in place to further capitalise on synergies between the subsidiaries.

Sustainable organic growth will remain a strategic priority for the group, while operational activities are continuously aligned as the operations expand.