LISTEN | Adapt IT withholds dividend as it focuses on reducing debt levels
Net gearing rose to 65% at the end of the company’s year to end-June, although new acquisitions boosted revenue
Listed technology business Adapt IT said on Monday it would focus on bringing down its debt levels in coming months, withholding its dividend for the year to end-June after its net gearing ratio rose to 65%.
The company had breached its debt service cover covenant during the period, although Standard Bank has waived this breach for a period of a year.
Interest-bearing borrowings jumped 134% to R501m as a result of the covenant breach, which prompted it to treat its liability to Standard Bank as payable within a year. The company said it would defer a dividend decision until after its interim period, when cash flows were generally stronger.
The company completing a series of acquisitions during the period, including R53m for Melbourne-based education group Wisenet in January. These acquisitions were funded through cash.
Net gearing of above 50% is considered high, with the company saying it was targeting a level closer to this during the course of its current financial period.
Adapt IT, which also acquired ICT-focused Conor Group in December for R80m, increased its revenues 8% to R1.4bn in its year to end-June, partially as a result of its new acquisitions.
Adapt IT, which provides software solutions to the education, manufacturing, energy, financial services, communications and hospitality sectors, also has operations in Mauritius, Botswana, Ireland, Kenya, Australia and New Zealand.
The company said earnings before interest, tax, depreciation and amortisation (ebitda) from continuing operations improved 3% to R229m over the previous period’s R223m.
Adapt IT’s education and manufacturing businesses saw the most growth. Education saw a 24% increase in revenue, contributing 15% to total revenue, with manufacturing growing 26% year on year to contribute 21% to total revenue, the company said.
“While the results for the year under review showed moderate top-line growth, I am pleased to say that in a year of global macroeconomic challenges, Adapt IT made great strides in positioning itself for the next growth phase, with a strategic focus on geographic positioning, strengthening sales capabilities and ensuring that all the divisions are streamlined,” CEO Sbu Shabalala said in a statement.
Notwithstanding the growth in revenues, the company saw a significant drop in earnings for its bottom line, reporting a 29% decrease in earnings per share (EPS) to 51.32c from 2018’s 72.77c.
The trend continued with its headline earnings per share (HEPS), which decreased 8% to 57.27c compared to the previous year's 62.08c.
The company said its energy business experienced a 30% decrease in revenue, owing to a decrease in project revenue after several years of strong project revenue, contributing 9% to total revenue.
Adapt IT said its board had deferred a dividend decision until after the December 2019 interim reporting date, to reduce the net gearing ratio in the short-term. In 2018, this was at 17.10c.
Shares in Adapt IT ended last week on a high note, closing 3.77% up at R4.40.