Adapt IT, Alviva signal drop in earnings

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Two listed technology companies have warned of a large drop in earnings ahead of their half-year results, indicating a depressed trading environment.

On Friday, Adapt IT and Alviva said they are likely to report a decline in earnings of more than 40% and 20% respectively.

In a note to shareholders, Adapt IT said a review by management of the financial results for the six months ended 31 December 2019 indicated “the earnings per share is expected to be between 14.68c and 17.68c, reflecting a decrease of between 40.9% and 50.9% compared to the EPS of 29.91c for the six months ended 31 December 2018”.

It added: “The headline earnings per share (HEPS) is expected to be between 14.44c and 17.42c, reflecting a decrease of between 41.7% and 51.7% compared to the HEPS of 29.89c for the six months ended 31 December 2018.”

Additionally, Adapt IT announced normalised HEPS is expected to be between 26.06c and 30.30c, reflecting a decrease of between 28.6% and 38.6% compared to the normalised HEPS of 42.42c for the six months ended 31 December 2018.

Adapt IT shares were down 5.65% in morning trade.

The listed company, which provides specialised software and digitally-led business solutions to the education, manufacturing, financial services, energy, communications and hospitality sectors, has experienced tough times in the past few months.

In October, Adapt IT announced tougher market conditions were making it difficult to grow to the level of the company’s ambition.

Similarly, ICT products and services provider Alviva announced its headline earnings for the year to December dropped by as much as 46%, from R214 million in the previous financial year.

HEPS are expected to be 86c to 98c, a 33%-41% decrease from the previous year’s 146.2c a share.

In a statement to shareholders, Alviva says: “The company has produced disappointing results for the period, mainly as a result of the performance of the distribution segment.

“This segment has been affected by the tough economic environment, operating challenges with its new ERP system, minor losses on forex positions compared to profits in the prior period, and changes in the go-to-market strategy adopted by a large vendor, all of these in approximately equal measure.”

Furthermore, Alviva says: “The balance of the decrease in profitability has been brought about through the increase in the amortisation charges on intangible assets, further impairment charges on the loan to an associate, and the introduction of IFRS 16.”

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