Adapt IT, which is continuing its strategy of growing through acquisitions, is on the lookout for niche software companies to add to its portfolio, and recently expanded its offerings through two deals.
The company's income growth in the six months to December was mostly thanks to acquisitions, which accounted for 27% of the 38% gain in revenue to R261.3 million. Operating profit grew 85% to R37.9 million, representing an improved operating profit margin of 14.5%, up from 10.8%.
CEO Sbu Shabalala notes the company has been focusing on improving its bottom line instead of moving into verticals, such as infrastructure, that dilute its margins. "In line with our strategic expansion plan, our strong organic growth in tandem with strategic acquisitions have yielded continued positive results for Adapt IT.'
Adapt IT is still looking to acquire new companies, especially those that have developed niche intellectual property, or customised software, says Shabalala. In a few years, Adapt IT wants to be an international exposure platform for local software entrepreneurs, he adds.
During the interim period, Adapt IT bought the AspiviaUnison group of companies, spending R36 million during the first half on the deal, as well as a small foreign education sector business in New Zealand for R7.2 million. AspiviaUnison provides telecommunications management software solutions which add to the listed company's financial services and manufacturing segments.
The bulk of Adapt IT's income, at 78%, is generated in SA, with 10% coming from the rest of Africa and the balance being earned in the US, Australasia and Europe.
Its African plans were marred by last year's Ebola outbreak, which caused the company to scale back on projects to avoid putting staff in danger, says Shabalala. He notes, however, its expansion into the continent will be reconsidered once health issues normalise.
Adapt IT is also still considering large deals, says Shabalala, noting its market capitalisation - of R1.2 billion - makes it possible for the company to fund deals through the issue of shares.
Some 18% of Adapt IT's income comes from financial services, 34% from manufacturing, 20% from the energy sector, and 28% from education. Shabalala notes the group is seeing demand globally for its energy software, and has expanded its reach in New Zealand in education.
"Our outlook remains positive as we continue to build on the strong well-diversified foundation, to create a sizeable leading ICT business that delivers above ICT sector average growth and returns," adds Shabalala.
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