Adapt IT produces sound results
Adapt It Holdings Limited published its unaudited condensed consolidated interim group results for the six months ended 31 December 2016.
- ERP Implementation
- Human Capital Management Services
- Development and Integration Services
- SHEQ Solutions
- Operational Management Solutions
- Rostering Optimisation Software Services
- Education Management Systems
- Development and Integration Services
- Support Services
- Business Advisory Services
- Technical Advisory Services
- SAP IS-OIL
- Utilities Management
- Audit and Risk Management Software
- Business Intelligence and Analytics
- Project Management
- Recruitment Services
Turnover for the six months ended 31 December 2016 increased 48% to R460,7 million (2015: R310,4 million), organic growth was 4% and acquisitive growth was 44%. Organic growth was muted due to ongoing pressure in several industries, particularly the higher education, manufacturing, resources and banking segments. Acquisitive growth was boosted in the period by the inclusion of the CQS group (CQS) which was consolidated with effect from 31 December 2015 and had no contribution to turnover in the prior interim results. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 44% to R89,9 million (2015: R62,3 million). Operating profit increased 32% to R69,5 million (2015: R52,5 million).
Adapt IT has disclosed normalised headline earnings per share (HEPS) for the first time as a result of the high non-cash expenses in terms of International Financial Reporting Standards (IFRS) due to our acquisitions. Non-cash acquisition-related expenses are mainly amortisation of intangible assets (such as internally developed software and customer relationships) and notional interest on deferred purchase considerations, which is based on the achievement of profit warranties.
Non-cash amortisation costs of R13,5 million and notional interest costs of R5,3 million, which totalled R18,8 million (2015: R7,8 million) were expensed for the half year. As acquisitions of this nature will be an ongoing hallmark of Adapt IT in line with its growth strategy, normalised headline earnings will be reported on an ongoing basis, as we believe this will add value to the reader. Normalised HEPS grew 20% to 34,74 cents (2015: 28,89 cents). By comparison, HEPS grew 2% after taking into account the non-cash expenses described above, together with higher bank interest paid on the higher level of borrowings to fund the CQS acquisition.
Cash utilised in operations was primarily affected by an increase in trade receivables due by slow payments to debtors due to market conditions. In December 2016, Adapt IT utilised the general authority granted by its shareholders at the latest Annual General Meeting to issue shares for cash, raising R84,0 million of fresh equity in support of its acquisitive growth strategy. These funds have been temporarily offset against borrowings until they are applied in due course.
Ordinary dividend number 14, in respect of the year ended 30 June 2016, of 13,40 cents per share, on a four times dividend cover ratio, was paid to shareholders on 19 September 2016. It is our policy to declare a dividend after financial year-end and not at the interim reporting date.
Adapt IT Proprietary Limited acquired the EasyRoster group of companies (EasyRoster) effective 1 August 2016, in line with our acquisitive growth strategy. EasyRoster is the leading provider of rostering optimisation software services to staffing solutions businesses in South Africa and the rest of Africa. EasyRoster is a software-as-a-service (SaaS) solutions business, and bolsters the manufacturing services segment of Adapt IT. Adapt IT is pleased to welcome another very successful team to the Group. EasyRoster's results for the five months are included in these interim results.
Ordinary dividend number 14 of 13,40 cents per share was paid to shareholders on 19 September 2016. It is Group policy to consider declaration of dividends at the end of the financial year and not at the interim reporting date.