Adapt IT debt strategy pays off, cuts debt interest by R8m

Adapt IT debt strategy pays off, cuts debt interest by R8m

News article - Sbu ShabalalaAdapt IT CEO Sbu Shabalala

JSE-listed Adapt IT reduced its net debt by R140 million in the six months to December to R324 million, down from R464 million compared to last year, despite COVID-19 disrupting its operations.

This led to decreasing the net gearing ratio to 42% from 69% at the prior comparative period end, and interest paid on borrowings decreased by R8 million.

The company says it has shown resilience in a year most businesses were affected by the COVID-19 pandemic and other macro-economic factors.

Adapt IT – which provides specialised software and digitally-led business solutions to various sectors, including education, manufacturing and financial services – today announced interim results for the six months ended 31 December 2020.

The company says in the period, it contained the effects of COVID-19, as virtual ways of working during the pandemic, using cloud platforms and collaboration tools, proved highly effective for Adapt IT.

CEO Sbu Shabalala says: “It is pleasing that Adapt IT maintained revenues comparable to those of the previous period, against notably weaker trading conditions caused by the global pandemic.

“We recognise that our people and customers have worked together through this challenging period to ensure delivery and performance of mission-critical systems. This demonstrates our aspiration to achieve more for our customers, and proves our sustainability and commitment to them through all business cycles.”

According to Shabalala: “Annuity revenue improved to 66% from 60% in 2019, while offshore revenue remained at 27%, enabled by Adapt IT’s geographic diversification efforts.”

In the period under review, earnings before interest, tax, depreciation and amortisation (EBITDA) was R128 million (2019: R129 million). This, the company says, was affected by reduced project volumes; however, an EBITDA margin of 18% was maintained.

Cash generated from operations in the six-month period improved significantly by 67% to R124 million (2019: R74 million) as the company focused on effective cash management.

Earnings per share (EPS) and headline earnings per share (HEPS) increased by 37% and 44% to 20.06c and 20.69c, respectively. Normalised HEPS increased by 16% to 32.00c.

Shabalala says: “Adapt IT continues to focus on leveraging its underlying diversification to offer enhanced value to the current client base more effectively, focusing on sales in a cohesive manner, driving efficiencies and carefully expanding on the Pan-Africa and Asia-Pacific diversification strategy.

Turning to the Huge Group takeover proposal, Adapt IT independent non-executive chairman Craig Chambers says: “Adapt IT has cautioned its shareholders to not make any decisions, take any actions or provide any undertakings in relation to the Huge Group offer until they have the benefit of the opinions of the independent expert and the independent board.”

The company appointed a four-member board to assess the R800 million bid offered for all its shares.

Huge Group, whose subsidiaries operate in the telecommunications, media, technology and software industries, is offering a swap ratio of 0.9 of a Huge share for every one Adapt IT share tendered.

The swap ratio is based on a reference price of 613c per Huge share and an implied price of 552c per Adapt IT share.

The technology company made a shock takeover bid earlier this year, offering a 33% premium on the Adapt IT shares.

- IT Web