SBU SHABALALA The CQS acquisition will bolster the financial services segment of Adapt IT
JSE-listed specialist software and services firm Adapt IT increased revenue by 19% and operating profit by 50% during the interim period to December 31, 2015, and had wholly acquired audit, financial and risk management software services firm CQS.
The acquisition was included in the company’s reporting only from December 31, 2015, and did not contribute to the interim results, says Adapt IT CEO Sbu Shabalala.
“We have been consistent in pursuing diversification through an organic and acquisitive growth strategy, which has contributed to this positive set of results. Organic growth contributed 13% and acquisitive growth 6% to overall revenue growth.”
CQS provides niche audit, financial and risk management software services and solutions for financial professionals, corporates and the public sector in South Africa and the rest of Africa; the CQS purchase price of R216,8-million was funded through a combination of debt of R160-million and the issue of seven-million Adapt IT shares, he explains.
Shabalala further adds that CQS has more than 20 years’ experience in providing international best-of-breed and unique niche services and solutions, ranging from practice management software to financial reporting, as well as risk and compliance management and data analysis. CQS is a software-as-a-service solutions business and will bolster the financial services segment of Adapt IT, he highlights.
Revenue during the interim period increased to R310-million and operating profit to R53-million, with headline earnings a share having increased 42% to 23.96c. Adapt IT’s turnover came from South Africa (72%), other African countries (10%) and international customers (18%).
Black economic transformation remains a strategic imperative for the group, as demonstrated by the achievement of a Broad-Based Black Economic-Empowerment Level 2 certification of the South African operating entity. Adapt IT intends to enhance its black ownership status further through funding arrangements for future acquisitive growth, notes Shabalala.
“Adapt IT is well diversified across the four major sectors (education, manufacturing, energy and financial services) in which it operates, improving resilience to adverse economic cycles in the manufacturing and oil industries. Adapt IT’s strong annuity income provides long-term sustainability.
“Despite the challenging market conditions, our outlook remains positive as we continue to build on the strong well-diversified foundation to create a sizeable, leading ICT (information and communication technology) business that delivers above-average ICT sector growth and returns,” concludes Shabalala.