IT services and solutions provider Adapt IT expects its recent acquisition to aid growth during the second half of the year, after bolstering revenue 51% in the six months to December.
CEO Sbu Shabalala says there is potential for further deals as the market is consolidating on the back of the move towards convergence. He adds that Adapt IT has scratched the surface in the financial services sector and is looking to grow this so that it can make a "significant" contribution.
Africa continues to be a growth area for the group, with around 30% of its R135.9 million in revenue coming from the continent, up from about 22% a year ago. Shabalala says the group has not really invested in local offices, which it is considering, especially in the east and in the Southern African Development Community.
Headline earnings per share increased 35%, from 6.19c to 8.35c, with profit before tax gaining 54%, to R14.3 million, and operating profit grew 61%, to R11.7 million. Shabalala explains the difference in growth in revenue and headline earnings is due to the costs associated with acquisitions. He says the company's operating margin is "at the right level".
For the first half of the year, the education sector contributed 41% to revenue, mining and manufacturing added 42%, while financial services accounted for 17%. The group's shares closed 8.57% or 15c higher to a new 52-week high of 190c.
Expanding reach
During the first half, Adapt IT concluded one acquisition, spending R11.7 million to buy Swicon360, which bolsters its SAP capabilities. Shabalala says Swicon360 added about R10 million to the top line, and around R1 million to its net profit.
"The acquisition is extending value-added services to our existing customer base in the mining and manufacturing industries, and has greatly aided to remove barriers of entry into new sectors, while strengthening our presence in Gauteng."
Shabalala adds that the revenue addition was only for the first three months of the first half of the financial year and that Swicon360 will contribute more in the second half, which will aid growth. Adapt IT's second half is traditionally stronger than the first six months of the year.
"We anticipate a successful second half of the year," says Shabalala. "The economic and trading environment is improving both in SA and globally. Adapt IT is better positioned to take advantage of future software and services opportunities due to our increased service diversity and sector reach."
For the past five years, the group's strategy has been to grow organically and through acquisitions, says Shabalala. He adds that this will continue. "We definitely have a very active merger and acquisition department."
Shabalala notes that Adapt IT is also looking to expand its presence geographically within SA. The company has 350 staff throughout SA and serves its African customers from within the country.
The group has also strengthened its board with the appointment of Oliver Fortuin, as an independent non-executive board member. Fortuin is the lead independent non-executive director of Ellies Holdings, and served as a director and chairman for IBM SA.
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