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COVID-19 derails Adapt IT in full-year results

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Software services group Adapt IT has lamented the impact of COVID-19 on its operations in the year ended June, after recording a muted revenue increase of 1% to R1.503 billion.

The JSE-listed company says some of its divisions were heavily affected by pandemic-related regulations and lockdowns, resulting in projects being postponed or cancelled.

Adapt IT, which will release its year-end results later this month, yesterday issued a voluntary trading update to shareholders, saying it has successfully navigated the financial year despite the economic and social challenges in the markets it serves.

This will be the first time Adapt IT will report its financial performance without founder Sbu Shabalala, who resigned last month.

For the year, Adapt IT’s earnings before interest, tax, depreciation and amortisation (EBITDA) before corporate activity costs and bonus incentives increased by 7% to R319 million, representing improved operational performance compared to the year before (2020: R297 million).

In the period under review, Adapt IT’s business units delivered mixed results, with the education division delivering strong revenue growth of 27% compared to the previous year.

The company says this was driven primarily through increased demand for e-learning solutions.

“This division contributed 20% to total revenue and delivered an EBITDA margin of 17% (2020: 20%),” says Adapt IT.

The group’s manufacturing division delivered revenue similar to the prior period; however, it significantly improved its EBITDA margin to 23% (2020: 16%) as a result of improved operational efficiencies.

“The manufacturing division contributed 17% to total revenue. The financial services division achieved revenue growth of 7%, contributing 22% to total revenue, with an EBITDA margin of 23% (2020: 24%).”

Contrarily, the energy, communications and hospitality divisions had a tough year, as business declined due to the COVID-19 impact.

“The energy division experienced a decrease in revenue of 46%, due to the decrease in project-based revenue, contributing just 4% to total revenue. Its EBITDA margin was -4% (2020: 12%), with further operational efficiency projects currently under way. Business development capability will be maintained to drive the sales pipeline.

“The communications division revenue declined by 3% due to attrition in this team impacting on project delivery, achieving an EBITDA margin of 26% (2020: 34%) and contributing 20% to total revenue. The hospitality division was impacted by the measures implemented by government in response to the COVID-19 pandemic in this industry and consequently revenue declined by 3%.”

Adapt IT has been under the spotlight in the past few months as a tense takeover race pitted Huge Group against Canadian software group Volaris, as they tried to acquire a controlling stake in the JSE-listed software services company.

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