In a nutshell
Intec Microsystems specialises in the global distribution of branded IT hardware and software.
The business stocks millions of pounds worth of branded IT products with access to hundreds of millions of more items.
Intec Microsystems currently supplies over 2500 clients in the UK and Europe, trading with over 50% of the top 100 UK value added resellers (VARs).
Privalgo provides Intec Microsystems with expert guidance in the foreign exchange (FX) markets and flexible hedging solutions. The relationship helps the company protect its profit margins from FX volatility and remain competitive in the global IT hardware space.
“We’re able to make the most of opportunities as they arise, allowing us to make informed decisions on how to protect and move the business forward effectively.”
Andy Russell, Managing Director, Intec Microsystems
The Challenges
FX market volatility
Intec Microsystems is UK-based, but many of its imports come from Europe and further afield.
A significant proportion of its imports are paid for using United States dollars (USD), but its products are sold in pounds sterling (GBP).
Any shift in the value of GBP/USD can have a sizeable impact on its pricing structures and profit margins.
Like many importers, the challenge for Intec Microsystems is how to limit the risk of such movements and capitalise on any opportunities they create.
Competition
In a rigid, inflexible FX environment, if the business were to forecast a set amount of USD needed for their imports and GBP/USD were to improve, Intec Microsystems would struggle to remain competitive due to pressure on their margins.
Intec Microsystems can anticipate the amount of USD they will need but can’t predict how much GBP they will bring in.
The Solutions
Privalgo effectively acts as Intec Microsystems’ outsourced treasury function
Privalgo provides the business with regular market updates, specifically targeting factors affecting GBP/USD.
Based on these factors, as well as the business’s cash flow and risk appetite, Privalgo assists with forecasting – offering suggestions on how much and how far forward to hedge – whilst also setting budget FX rates for the business.
Privalgo effectively acts as Intec Microsystems’ outsourced treasury function.
Contracts are then created to provide a completely flexible solution. Intec Microsystems can use their forward contracts at any point between agreement and the point of booking, allowing them to optimise their return on the deal.
Also, the business can take advantage of a contract with any leftover USD as we can adjust our strategy to extend the contract at no extra cost, and Intec Microsystems can benefit from:
- Delivery of a contract when it suits the business’ cash flow.
- Delivery of a contract at the most favourable rate of exchange.
The Results
Bringing certainty to Intec Microsystems’ costs and pricing strategy
Privalgo’s real-time market updates, personal relationship with the client team and open lines of communication help Intec Microsystems make informed, timely decisions about its GBP/USD requirements.
With an established hedging strategy in place, the company can manage with more certainty, reducing the time and effort spent on its FX management. This allows Intec Microsystems to take advantage of opportunities as they arise without having to consider related FX implications on an ad-hoc basis.
In 2022, swift decision making, paired with a targeted hedging strategy, helped the business pay a consistent price for its FX. As a result, Intec Microsystems protected its profit margins from dramatic GBP/USD movements during an especially turbulent period.
