Acquisitions give Adapt IT momentum in stagnant SA market

Acquisitions give Adapt IT momentum in stagnant SA market

Company outlines how strategy has contributed to interim results.

JSE-listed software provider Adapt IT has announced an increase in turnover, earnings before interest, tax, depreciation and amortisation (EBITDA) and cash generated from operations, according to its interim results for the six months ended 31 December 2018.

The company reported a 4% increase in turnover to R667-million, driven predominantly by acquisitive growth it said, while EBITDA increased by 10% to R118 million. Normalised headline earnings per share grew by 5%.

Management said acquisitions concluded in the first half of the year have helped to steady the company in its primary growth market in South Africa.

Sbu Shabalala, Adapt IT CEO, said, "Adapt IT's primary growth market in South Africa was stagnant, therefore slowing project revenue and in turn organic growth, particularly in the energy and hospitality sectors in the first half of the year. However, the acquisitions already concluded in the first half of the year positions Adapt IT favourably to grow in the second half of the year."

On 5 November 2018 Adapt IT announced the acquisition of Conor Solutions, bolstering the communications product offering for a consideration of R80-million.

On 9 January 2019, the company announced the acquisition of Wisenet, extending Adapt IT's education offering in Australasia to the vocational training institutions for a minimum consideration of R53,6-million.

The company plans to use the acquisition as a foundation to establish a fully operational business presence in Australia and secure a foothold in the country's higher education space.

In its announcement Adapt IT's board stated its belief that the company's share remains undervalued "as it is trading at EV/EBITDA multiples which are below the price of comparable quality acquisitive opportunities. "

In response, Adapt IT has, to-date, bought back 12,3 million shares to the value of R95-million and plans to continue with the share buy-back programme.

Cash generated from operations improved 105% to R58-million.

In preparation for the next phase of the growth strategy Adapt IT has secured additional facilities of R350-million to fund acquisitions.

The company's leadership have reiterated its strategy to diversify revenues through the sale and implementation of IP, particularly South African IP, into foreign markets.

"The South African market remains challenging in the short term. However, Adapt IT has built a strong, well-diversified foundation enabling us to target growth in the rest of Africa and Australasia with leading software as we continue to pursue our sustainable growth strategy," concludes Shabalala.