JSE-listed software provider Adapt IT yesterday said that it would continue to focus its attention on growth opportunities beyond South Africa to contend with the weak local market. Photo: Ian Landsberg/African News Agency (ANA)
JSE-listed software provider Adapt IT yesterday said that it would continue to focus its attention on growth opportunities beyond South Africa to contend with the weak local market. Photo: Ian Landsberg/African News Agency (ANA)

Adapt IT pursues growth beyond SA as local market disappoints

By Edward West Time of article published Feb 25, 2020

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CAPE TOWN - JSE-listed software provider Adapt IT yesterday said that it would continue to focus its attention on growth opportunities beyond South Africa to contend with the weak local market.

Adapt IT chief executive Sbu Shabalala said the group had identified opportunities for growth in spite of the tough trading environment.

Shabalala said the group was growing faster in its Pan African and Asia markets as it now made 27percent (2018: 22percent) of the total revenue.

He said the focus would be on growing these markets, as well as on new opportunities locally, such as consulting, which was a new market in South Africa, and growing again in the public services market.

Adapt IT is a provider of specialised software and digital solutions to the education, manufacturing, financial services, energy, communications and hospitality sectors.

The group yesterday reported a 10percent lift in revenue to R721million for the six months to end December with growth driven mainly by acquisitions.

Shabalala said the group experienced strain in a weak local market during the period with organic revenue falling 1percent and acquisitive growth 11percent.

He said Adapt IT previously reduced its presence in the public service (currently 5percent of revenue) due to procurement challenges in that market, but the time was right to grow in that market again.

The acquisitions contributed 11percent to revenue growth from the contributions of Strive Software for two months, Conor Solutions for six months and Wisenet group for six months, and created further geographic diversification of revenue.

Adapt IT strengthened its Pan African footprint, resulting in the region contributing 16percent (14percent) to revenue.

“Weaker trading in South Africa persisted affecting some of the operating segments, most notably the hospitality segment which saw revenue drop 6percent and its earnings before interest tax and depreciation (Ebitda) reducing by R13m,” Shabalala said.

Tourism in the SADC region had declined, fewer new hotels were built, and costs were being cut as an improvement in the tourism sector was not foreseen in the short term.

Annuity revenue remained healthy at 60 percent (58percent).

Ebitda improved 22percent to R129million, and the Ebitda margin was higher at 18percent from 16percent.

The group said its Ebitda before IFRS 16 was flat at R106m with a 15percent margin (2018: 16percent) which Shabalala described as still high for the IT sector.

Cash generated from operations was strong at R74m (R54m).

Headline earnings per share (Heps) fell 35percent to 15.93cents after the impact of IFRS 16.

Normalised Heps, before IFRS 16 fell 10percent to 31.18c.

The dividend was passed and a capital structure review was under way.

Gearing was at 66percent. While this was higher than the target gearing of 50percent, owing to a capital raise that did not proceed due to the share price decline, strong cash flows meant the company was well able to service the debt, and the debt would be reduced, said Shabalala.

Adapt IT shares closed 3.08percent lower at R1.89 on the JSE yesterday.

BUSINESS REPORT 

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