LISTEN | Adapt IT taking lessons from rivals on keeping state tenders clean

LISTEN | Adapt IT taking lessons from rivals on keeping state tenders clean

Listed technology group Adapt IT is improving its governance processes after allegations of tender irregularities have rocked some of its rivals.

The group says it is learning from the mistakes of other companies in the technology industry as it aims to grow its public-sector business.

The local information technology sector has been hit by scandals linked to government contracts. The reputation and share price of embattled. EOH took a beating after revelations of corruption at its EOH Mthombo unit led to the cancellation of a licence with Microsoft. Its stock has almost lost two-thirds of its value so far in 2019.

Adapt IT CEO Sbu Shabalala told Business Day that “with the public-sector business, we’ve learnt from the governance failings of the sector. We've been focused on setting up the governance needed to run the public-service business and it’s taken us a long time.”

He said the biggest issue facing IT companies dealing with the government is a lack of ethics, which they are safeguarding against.

Shabalala said the company had hired external consultants and law to help set up the unit dealing with government contracts.

“As part of our year-end drive, we actually did a thorough audit of this function and we’ve seen it to be in good shape. I think we now have the governance and are focused on driving sales within the sector. We’ve been careful not to step into the shoes of any predecessor, and we have built business from the ground up,” he said.

Acting CFO Tiffany Dunsdon said Adapt IT’s public-sector unit accounted for a very small part of the overall business. The aim is to have this accounting for 10% of the group’s business in the next year, she said.

Adapt IT provides services such as software for financial reporting and project management to the public sector.

Adapt IT said on Monday it would focus on reducing its debt levels in the coming months, withholding its dividend for the year to end-June net gearing ratio rose to 65%.

The company had breached its debt-service cover covenant during the period, though Standard Bank has waived this breach for a period of a year.

The company is targeting a net gearing level of about 50% during the course of its current financial period.

Nitrogen Fund Managers director Rowan Williams said it was sensible to bring down the gearing given the uncertain environment. However , the market will be disappointed that the dividend has been deferred.

“Given the decision to defer the dividend, we do not see the gearing levels as something to be overly concerned with,” said Williams.

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 group's revenue from continuing operations increased by 14% R1.43bn in the year to June. Profit for they year declined to R76.3m from R the 2018 financial year.

gavazam@businesslive.co.za