Adapt IT Holdings releases interim results
Adapt IT Holdings Limited released its interim group results for the six months ended 31 December 2018.
FINANCIAL HIGHLIGHTS 4% Increase in 10% Increase in 1% Increase in 5% Increase in TURNOVER EBITDA HEADLINE EARNINGS NORMALISED HEADLINE FROM CONTINUING FROM CONTINUING PER SHARE EARNINGS PER SHARE OPERATIONS OPERATIONS
MILESTONES 2014 2017 2017 2020 5th fastest growing R1 billion 2nd in the Sunday Times R3 billion annualised African Tech Company annualised turnover Top 100 companies turnover target
BUSINESS PERFORMANCE The Adapt IT divisions operate in a sector-focused approach, under a single Adapt IT brand. Adapt IT's software focus provides investors with a unique quality of earnings that can only be derived in an IP rich, high-annuity based business, like Adapt IT, diversified across several sectors and geographies. The performance is driven and reported through its divisions: Manufacturing, Education, Financial Services, Energy, Communications and Hospitality. SECTOR PERFORMANCE Adapt IT is a diversified South African based software solutions provider, which is positioned to take advantage of specialised technology platforms across the fastest growing market sectors. The company's focus is on improving the ability of the existing businesses to improve profitability and to develop new capabilities in their key markets. This approach has assisted in securing more customers, diversifying products and services and the move up the services value chain.
GEOGRAPHIC EXPANSION The company is well diversified across sectors and geographies, and it continues to extend geographic reach across Africa and the rest of the world. Foreign markets represent 22% of turnover while software and services are delivered to 24 other African countries. This expansion is a key factor in diversifying market risk and growing hard currency revenue streams.
FINANCIAL HIGHLIGHTS FINANCIAL SUMMARY Turnover from continuing operations for the six months ended December 2018 increased by 4% to R667 million. There was no organic growth from continuing operations due to the challenging economic environment persisting in the South African market, particularly low project turnover in the Energy and Hospitality sectors. Acquisitive growth was 4% comprising mainly LGR, which was consolidated effective 1 June 2018. Earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations increased by 10% to R118 million representing an improvement in EBITDA margin to 18% (2017: 16%). Annuity turnover is a healthy 58% over the period and the five-year compound annual growth rate for turnover was 21%. Headline earnings per share (HEPS) for the six months to December 2018 grew 1% to 29,89 cents from 29,70 cents and normalised HEPS grew 5% to 40,81 cents (2017: 38,73 cents) as reconciled in note 4. Ordinary dividend number 16, in respect of the year ended 30 June 2018, of 17,10 cents per share on a four times dividend cover ratio, was paid to shareholders on 25 September 2018. It is Adapt IT's policy to declare a dividend after financial year end and not at the interim reporting date. Adapt IT entered into new facilities with Standard Bank in December 2018 to fund future working capital requirements and acquisitions. Proceeds from the facility were also applied to settle the Investec facilities. Cash generated from operations grew by 105% to R58,3 million (2017: R28,5 million). ACQUISITIONS Adapt IT Proprietary Limited acquired Strive Software International Proprietary Limited (Strive Software) for a consideration of R12,5 million, which was consolidated effective 1 September 2018. This serves to augment the Education division's offerings by facilitating diversification into the private college market. The results from Strive Software for the four months are included in these interim results. Refer to the business combination note 10.1. Adapt IT Proprietary Limited acquired the remaining 30% minority shareholding of CQS Confirmations Proprietary Limited, a subsidiary originally acquired with the CQS business, for a consideration of R15,7 million, which was effective 1 December 2018. Adapt IT Proprietary Limited acquired the business of Conor Solutions Proprietary Limited (Conor), for a total consideration of R80 million, which provides software solutions to the telecommunications industry focused on mobile technologies, further bolstering the Communications product offering. Conor was consolidated with effect from 31 December 2018 and has no contribution to comprehensive income in these interim results. SHARE REPURCHASE Adapt IT repurchased 3 million (1,9%) of its issued ordinary shares in the open market, under the general authority granted by shareholders, for R22,3 million at an average price of 733 cents per share during the reporting period. 10,8 million treasury shares were held at 31 December 2018. MERGER On 1 July 2018, Cash Bases South Africa Proprietary Limited merged with Adapt IT to achieve efficiencies and savings in administrative and operational expenditure. EVENTS AFTER THE REPORTING DATE As set out in the announcement released on SENS on 9 January 2019, Adapt IT has entered into agreements to acquire the Wisenet Group. Wisenet is a leader in providing cloud-based SaaS Learning Relationship Management platforms to vocational training institutions in Australia. Shareholders will be notified once the last of the conditions precedent to the acquisition, which is classified as a Category 2 transaction in terms of the JSE Listings Requirements, has been fulfilled or waived. No other matters have occurred between the reporting date and the date of approval of the interim financial statements which would have a material effect on these financial statements. STRATEGY Adapt IT continues to pursue a diversified growth strategy aimed at creating a global specialised software business, through a combination of organic growth and strategic acquisitions. OUTLOOK Despite the current market conditions, our medium and longer-term outlook is optimistic as we continue to build upon the strong foundation we have established to create a sizeable, scalable, leading ICT business. BOARD There have been no changes to the directorate in the period under review.
Adapt IT is a leader in the ICT market through the provision of software solutions to the Education, Manufacturing, Energy, Financial Services, Communications and Hospitality sectors, employing over 1 000 technology professionals and servicing more than 10 000 customers in 53 countries. Adapt IT's South African offices are in Johannesburg, Durban and Cape Town, and international offices in Mauritius, Botswana, Ireland, Kenya, Australia and New Zealand.