Dynamic Visual Technologies Holdings (DVT), which listed on the JSE's AltX on 6 November last year, is involved in talks of an undisclosed nature.
The Cape Town-headquartered software and services company, which was founded in 1999, issued a cautionary notice to this effect yesterday afternoon to warn shareholders that the negotiations, if concluded, may affect DVT's share price.
The company is barred by JSE rules from disclosing more details than those provided in a cautionary notice, but CEO Chris Wilkins indicated in November that the group would make "an acquisition or two" this year.
"If you look at our model, 90% of our rands are generated through services, where there is actually a linear relationship between headcount and turnover. The other nine, 10-odd percent is revenue generated through software licensing and maintenance fees - what people call annuity income. But that's a bit grey because in services there's a lot of annuity income too.
"We would like to grow the percentage of product, or annuity revenue relative to services. And that's why one of our key acquisition criteria is to look for a product or an IP company.
"That's not to say we absolutely will do that first, but that's what we're more interested in at the moment. So acquisition would be to spread the risk of what DVT does."
Wilkins said at the time that while the group had market share in the Western Cape, it had a negligible share of the Johannesburg market.
He has said that five years from now he believes DVT will have a more significant presence in its sector.
"We'll be a player," he said. "We might not be a tier-one player, which is your BCX (Business Connexion), DD (Dimension Data), but I'd certainly like to see us as tier two or tier three. I suppose EOH could be called a tier-two or tier-three player.
"I think measurement is size, because we are so small. Size as a criterion does have to be one of the primary measurements for success over the next four to five years."
The DVT share closed untraded at R1.20 yesterday, 20% above its listing price of R1.
Related story:
DVT debuts on AltX
Share