Adapt IT reports on normalised headline earnings as it continues with acquisition strategy
Information technology services provider Adapt IT has, for the first time, disclosed normalised headline earnings per share (HEPS). At 34.74c for the six months to December 31, this was up 20% from the prior year, owing to higher noncash expenses as a result of acquisitions.
Noting that its acquisitive growth had increased by 44% in the six months under review, the company reported a 48% increase in its turnover for the interim period to R460.7-million.
“As acquisitions 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,” the company said in a statement.
Speaking to Engineering News Online, Adapt IT CEO Sbu Shabalala said the maiden disclosure was significant for the company, as the amortisation figure for its acquisitions - about R18-million - was now material for the first time.
In August, Adapt IT acquired the entire issued share capital of South African registered company EasyRoster, for a R1.6-million cash payment on January 12, and R17.1-million in shares to be issued in December this year at 1 595c a share.
Adapt IT further has a consideration of R68.6-million, which is contingent upon the achievement by EasyRoster of earnings before interest, taxes, depreciation and amortisation (Ebitda) performance warranties over 48 months.
The fair value of the net assets acquired amounted to R23-million, resulting in goodwill of R48.4-million.
Meanwhile, the company reported that it had experienced muted organic growth of only 4% owing to ongoing pressure in several industries, particularly the higher education, manufacturing, resources and banking segments.
“We understand why we were not able to achieve much higher growth – we are so used to double-digit growth, but the local market has been really tough, with 73% of our business still from this market,” Shabalala said.
He added that Adapt IT’s customers have, owing to market uncertainty, started deferring their project work. “We had to go out of South Africa to get the growth that we have achieved . . . diversification helps, as our energy business is still going at more than 20% [of turnover] - likewise the telecoms business,” he pointed out.
Shabalala further pointed out that the company had started seeing some improvement in the higher education sector, as there was greater clarity on funding. “The Fees Must Fall campaign brought some uncertainty,” he said.
Despite this muted growth, Shabalala noted that the company was pleased with its performance. Adapt IT’s interim Ebitda increased 44% to R89.9-million, while operating profit was up 32% to R69.5-million.
Currently, 15% of Adapt IT’s turnover is derived from the rest of Africa, which Shabalala pointed out was set to grow in the year ahead. He added that the opening of an office in Botswana will further boost growth outside of South Africa.
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