Adapt IT earnings slide in tough trading environment

Technology group Adapt IT has published results for the financial year ended June 2019, showing a decline in headline earnings, despite revenue improving by 14% to R1.45 billion.

Chief executive officer, Sbu Shabalala, said: “While the results for the year under review showed moderate top-line growth, I am pleased to say that in a year of global macroeconomic challenges, Adapt IT made great strides in positioning itself for the next growth phase, with a strategic focus on geographic positioning, strengthening sales capabilities and ensuring that all the divisions are streamlined.”

JSE-listed Adapt IT provides specialised software and digitally-led business solutions to the education, manufacturing, financial services, energy, communications and hospitality sectors, with a more recent venture into the public sector.

Earnings before interest, taxes, depreciation, and amortisation from continuing operations improved by 3% to R229 million, while cash generated from operations was R179 million.

Headline earnings per share (HEPS) from continuing operations was down 6% to 57 cents, while normalised HEPS from continuing operations declined 6% to 76 cents, it said.

Earnings per share (EPS) from continuing operations dropped 15% to 51 cents.

Adapt IT said it conducted a strategic review process to facilitate medium and long-term growth in the period under review.

Shabalala said that given the difficult economic climate locally and abroad, the year was used as a period of consolidation, bedding down the operations at the new Johannesburg campus, fortifying the leadership team, and focusing on governance.

“This has realigned the teams, enhanced group culture, will facilitate better cross-selling and standardise processes that are critical for sustainability. Adapt IT has been consolidated in the Johannesburg campus for 16 months and is already experiencing an immensely positive employee engagement across the organisation.”

Segment contributions to revenue were as follows:

  • Education revenue climbed 24%, contributing 15% to total revenue;
  • Manufacturing revenue climbed 26%, contributing 21% to total revenue;
  • Financial Services grew 11% from continuing operations, post the disposal of CQS GRC, contributing 19% to total revenue;
  • Energy declined 30%, contributing 9% to total revenue;
  • Communications grew 69% inclusive of the two acquisitions, contributing 16% to total revenue; and
  • Hospitality remained flat and contributed 20% of total revenue.

Shabalala added that through strategic acquisitions made during the financial year, geographic diversification and attractive technologies assisted the group in achieving 9% acquisitive growth.

Looking ahead, Adapt IT said that the South African market has started to slowly pick up after a prolonged period of uncertainty and remains the largest market that Adapt IT services.

“This presents a flicker of good news as the strong customer focus, sector specialisation, skills and software that the group has at its disposal will assist in ensuring the operations take advantage of these green shoots,” said Shabalala.

The public sector also is an attractive space for Adapt IT as the sector becomes more accountable, the group said.

“Adapt IT is poised to take advantage of its underlying diversification. This can be done by mining the current client base more effectively, focusing on sales in a cohesive manner, carefully expanding on the Pan Africa and Asia Pacific strategy and ensuring that all of this is done bearing good capital allocation in mind,” said Shabalala.


Read: Adapt IT earnings flat in challenging SA economic environment

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Adapt IT earnings slide in tough trading environment