Adapt IT struggles to grow but sees acquisitions as the way to go
The software provider is being hurt as the economic slowdown in SA starts to take its toll
Software provider Adapt IT, which grew quickly through a series of acquisitions in recent years, has seen its growth grind to a halt as the economic slowdown in SA starts to bite.
“Adapt IT’s primary growth market in SA was stagnant,” said CEO Sbu Shabalala. This led to a slowing in its revenue and, in turn, its organic growth for the first half of the year.
The group, which has grown half-year revenue to end-December to R667m in 2018 from R261m in 2014, saw turnover fall 1% in its latest results. Though the local economy negatively impacted the group, Shabalala said its recent acquisitions positioned the group to grow in the second half of the year.
Adapt IT says it’s looking to make further acquisitions, following its purchase of Melbourne-based Wisenet Group for about R53.6m late in 2018 and telecoms group, LGR Telecommunications for an undisclosed amount in November 2017.
In the past year it also bought a hospitality software firm, Micros SA, as well as Conor Group, a specialist high-performance telecoms and mobile financial service solutions provider, for R80m.
Shabalala said the group has access to a R250m facility to fund an acquisition and is open to buying a company that operates in sectors in which it already operates, such as education, manufacturing, financial services, hospitality, energy and communication.
Shabalala said that though the group sees acquisitions as a key growth strategy, the sluggish SA economy is making finding suitable targets difficult. “Acquisitions are not easy in this market as most businesses are struggling.”
The group is also expanding across the continent and has so far set up offices in Kenya, Botswana, as well as in Mauritius. Shabalala said that while prospects looked promising, he admits that setting up shop across Africa comes with challenges. “It’s going to be a long road and it’s not going easy.”
Despite the sluggish economy, Shabalala said he is happy with the group’s performance because it managed to increase earnings before interest, tax, depreciation and amortisation (ebitda) from continuing operations by 10% to R118m. This was despite only increasing turnover from continuing operations by 4%.