Adapt IT raises dividend 23%
Diversification through organic and acquisitive growth strategy pays off as group weathers tough conditions
Information technology conglomerate Adapt IT has shrugged off tougher trading conditions to raise its gross dividend 23%, to 13.7c.
In the results to end-June released on Monday, Adapt IT CEO Sbu Shabalala said the group had been consistent in pursuing diversification through an organic and acquisitive growth strategy. "This has contributed to this positive set of results in the face of challenging market conditions."
The dividend was covered a conservative four times by headline earnings of 59c per share, which hints that Adapt IT — which services the education, manufacturing, energy and financial services sectors — may still have more acquisitions or growth opportunities to pursue.
Commentary accompanying the year-end figures noted the group wished to retain a substantial proportion of its profit for growth activities.
Shabalala said that while market conditions were tough, Adapt IT’s outlook remained positive. Its strategy was aimed at creating a global specialised software business with annualised turnover of R3bn by 2020 through organic revenue growth and acquisitions.
Acquisitive growth in the period under review was bolstered by the R87m acquisition of EasyRoster in August 2016. In July 2017, the group acquired Micros SA, which provides software, hardware, systems integration, consulting and support to the hospitality industry.
Shabalala said Micros would chip in meaningfully to Adapt IT’s earnings in the year ahead.
In the period under review, Adapt IT’s turnover jumped 25%, to R994m, with Shabalala reporting that annuity flows comprised a chunky 66%.
Adapt IT derives just more than three-quarters of turnover from the domestic market. Shabalala said it was not surprising that organic growth had contributed 6% to turnover growth with this primary market still under pressure. The group generates 14% of its revenues from other African countries and 10% from the Americas, Australasia and Europe.
Shabalala said Adapt IT would continue its global diversification and he hoped to have a 70:30 local to international split by 2020. Growth opportunities in East Africa and Australasia looked promising, he said.
Encouragingly, Adapt IT held its earnings before interest, tax, depreciation and amortisation margin at 20%, which Shabalala said was sustainable in a tough trading environment.
The market, however, marked down Adapt IT’s shares more than 2%, to 876c — close to its 12-month low of 871c and well off the 12-month high of R16.56 seen in October 2016.