Diversification helps Adapt IT grow

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Johannesburg - A diversified strategy had contributed towards double-digit growth for Adapt IT business units amid a tough trading environment, chief executive Sbu Shabalala said yesterday.

The developer of custom-made software reported a 39 percent increase in turnover to R189.6 million during the six months to December compared with a year earlier.

Adapt IT provides specialised turnkey IT solutions and services to the education, manufacturing, energy and financial services sectors.

“The whole sector is battling to grow especially if the average growth rate of gross domestic product is 4 percent. We’re saying this is really a tough environment for growth. It is not as easy as it was a few years ago,” Shabalala said.

Rand weakness also resulted in companies being “hard pressed” to buy services, he added. But Adapt IT, which has more than 320 customers globally, gains from foreign currency exchanges for the services it offers outside of South Africa in east Africa, Asia, Australasia, the US and Europe when the local currency is weaker.

Operating profit during the six months to December increased by 75 percent year on year to R20.5m and interim headline earnings a share gained 65 percent to 13.74c. Interim earnings a share grew by 64 percent to 13.71c.

The largest contribution to group revenue was delivered by the manufacturing section, which secured sales of R68.4m followed by R60m from the education section, R33.2m from the financial services sector and R28m from the energy sector, where Adapt IT is just beginning to grow scale.

Late last year the group acquired the Aquilon companies, which provide consulting and systems integration services for the oil and gas sector, for R98m. Aquilon contributed R28m to the group turnover.

“The Aquilon acquisition extended Adapt IT’s services to Africa’s growing energy sector, strengthened the company’s presence in Cape Town and bolstered our SAP solutions expertise,” Shabalala said.

Further acquisitions would be determined by the group’s growth appetite. The group was in discussions with many potential acquisition targets.

“Currently we are well positioned to grow organically,” he added.

The group intended to focus on solutions for financial services and education. It serves 20 further education and training colleges and has been approved as the education software provider for two new universities that the government intends to open.

Sales into the manufacturing industry needed to improve, but most manufacturing businesses were under pressure, Shabalala said.

“The purchasing managers’ index is not showing sufficient growth for me to be bullish,” he said.

Adapt IT was now building critical mass in skills and infrastructure to gear up to service the highly contested public sector, and it intended to gain a foothold in the pharmaceutical and retail industries in future.

The stock gained 3.39 percent to close at R6.10 yesterday on the JSE, after touching R6.20 during intraday trade in a second day of gains. - Business Report


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