JSE-listed Adapt IT, a provider of specialised software and digitally-led business solutions, on Monday (26 October) reported a 3% rise in revenue for the year ended June 2020, to R1.48 billion, comprising muted organic growth of -2% and growth from acquisitions of 5%.
Headline earnings per share (HEPS) increased by 29% to 72.58 cents per share, and earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 9% to R250 million.
“The tough trading conditions in South Africa were a catalyst for Adapt IT to drive operational improvements through significant cost containment measures in segments most impacted by Covid-19. Most operational efficiency projects have been completed, which will result in cost savings in future financial periods,” Adapt IT said.
The board decided to suspend the payment of dividends so as to preserve cash amid the fallout from the Covid-19 pandemic.
“I am pleased to report that in a year dominated by global macroeconomic challenges and the Covid-19 pandemic, Adapt IT proved to be highly resilient, through its sound underlying business model of providing mission critical software to its clients on a long term basis,” said Adapt IT chief executive officer, Sbu Shabalala.
The business cost structures where the market landscape has changed have been right sized for the current market, he said.
- The Education division delivered increased revenue of 8% inclusive of acquisitions, and although it experienced project delays, there was an increasing demand for eLearning solutions. This division contributed 16% to total revenue and delivered EBITDA margin of 16% (2019: 16%).
- The Manufacturing division experienced an 18% decrease in revenue due to project volume declines and delays, achieving an EBITDA margin of 13% (2019: 15%). The Manufacturing division contributed 17% to total revenue.
- Financial Services achieved revenue growth of 12%, contributing 20% to total revenue and delivering a 21% EBITDA margin (2019: 19%).
- The Energy division experienced a 5% decrease in revenue as a result of the drop in project revenue, contributing 8% to total revenue. EBITDA margin improved considerably from 5% to 10% due to the implementation of a revised strategy and the efficiency measures taken. The results support the planned recovery of this division.
- The Communications division grew by 33% inclusive of acquisitive revenue, achieving an EBITDA margin of 30% (2019: 32%) and contributing 21% to total revenue.
- The Hospitality division was significantly impacted by the measures implemented by government in this industry to respond to Covid-19. Consequently, revenue declined by 7%, resulting in 4% EBITDA margin (2019: 9%). This division experienced non-recurring costs during the reporting period mainly due to inventory write-offs of R7 million and retrenchment costs of R2 million with the acceleration of the planned operational efficiency projects to respond to Covid-19. The Hospitality division contributed 18% of total revenue.
“The South African economy has been hard hit by the Covid-19 pandemic and the associated regulations, but the impact on our segments is mixed, with some presenting new opportunities, like increased eLearning and telecommunications use,” Shabalala said.
“Adapt IT continues to take advantage of its underlying diversification. This is done by assisting the current client base more effectively, focusing on sales in a cohesive manner and carefully expanding on the Pan Africa and Asia Pacific strategy.
“Furthermore, by remaining focused on cost containment, capital allocation and working capital, Adapt IT aligns itself with stakeholder expectations.”