Specialised software and digitally-led business solutions provider, Adapt IT on Monday reported a 35% drop in headline earnings per share for the six months ended December 2019.
This is despite a 10% rise in revenue for the reporting period, to R721 million (2018: R657 million), which Adapt IT chief executive officer, Sbu Shabalala, attributed to “the contribution from strategic acquisitions made in the previous financial”.
However, he said that weaker trading conditions in South Africa continued to weigh on the organic growth for some divisions reliant on Adapt IT’s primary market.
Adapt IT said that organic revenue declined by 1% and acquisitive growth was 11%.
Earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 22% to R129 million, while cash generated from operations was R74 million, up from R54 million before.
HEPS decreased by 35% to 15.93 cents, and earnings per share (EPS) decreased by 34% to 16.18 cents per share.
Adapt IT said that its board has decided not to declare a dividend, adding that a review of the company’s capital structure is underway.
The acquisitions contributed a positive 11% to revenue growth from the contributions of Strive Software for two months, Conor Solutions for six months and Wisenet group for six months and created additional geographic diversification of revenue, it said.
Adapt IT strengthened its Pan African footprint, resulting in this region contributing 16% (2018: 14%) to revenue with a heightened presence in East Africa. Asia Pacific contributed 8% (2018: 6%) strengthened by the acquisition of the Australian-based Wisenet group.
As a result of this diversification strategy, international revenue for the six months improved to 27% (2018: 22%), the company said.
“Weaker trading conditions in South Africa persisted affecting some of the operating segments, most notably the hospitality segment which saw revenue dropping 6% and EBITDA reducing by R13 million. Annuity revenue improved to a healthy 60% (2018: 58%), aiding the businesses in defending the underlying revenue to remain static at -1% (2018: 0%) organic growth,” said Shabalala.
Looking ahead, Shabalala said that the local market remains challenging, “however, Adapt IT continues to focus on leveraging its underlying diversification to offer more value to the current client base more effectively, focusing on sales in a cohesive manner, driving efficiencies and carefully expanding on the Pan Africa and Asia Pacific diversification strategy”.