JSE-listed AdaptIT Holdings is looking for acquisitions that will expand its product range and allow it to grow its regional presence.
AdaptIT wants to acquire profitable businesses that can enhance its earning potential, add new products and expand its regional base, says CEO Sbu Shabalala. “We have a very strong base in Durban and Pretoria and are now looking to strengthen our presence in Johannesburg and Cape Town.”
Shabalala says the acquisitions AdaptIT is looking at making may be sizable, and the company could issue shares or raise debt funding, depending on which makes sense at the time. He says the company wants to grow its market capitalisation by half from the current R69 million.
AdaptIT has historically paid for most of its acquisitions through cash, as the company is cash generative. At the end of December, it had R14.7 million cash on hand.
The company has recently bought out minority shareholders in two business units - ITS Holdings and ApplyIT. However, due to accounting rules, the profit from these stakes could not be included in its half-year results.
For the six months to December, the company reported a 40% increase in revenue to R85.1 million. Profit from operations was 12% higher, at R6.5 million.
However, as the company could not include the new stakes, but had to account for the expense of buying minorities out, earnings per share dropped to 3.43c, from 4.73c. Headline earnings per share were 6c higher, at 3.56c.
In November last year, AdaptIT bought the 22.7% of ApplyIT that it did not own, for R720 000. The previous month, AdaptIT said it was buying the 49% of ITS that it did not already own, taking a loan to pay the R19.86 million purchase price.
Shabalala says both these stakes will aid profit growth in the second half of the year, as the company will benefit from the full operating profit of these entities. AdaptIT initially bought into ITS 18 months ago, and acquired its initial stake in ApplyIT in 2007.
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