JSE-listed software services firm Adapt IT says it prioritised the reduction of borrowing and preserving cash for the financial year ended 30 June, and as a result, no dividend was declared.
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 says the tough trading conditions in SA were a catalyst for it to drive operational improvements through significant cost reduction and containment measures in segments most impacted by COVID-19.
It says most operational efficiency projects have been completed, which will result in cost savings in future financial periods.
“The business cost structures where the market landscape has changed have been right-sized for the current market,” says the organisation.
Adapt IT derives almost three-quarters of its revenue from SA.
Turning to its debt management strategy, it says net gearing was reduced to 43% from 66%, and all debt covenants were met at 30 June.
Dividends have been withheld for the current reporting period, with Adapt IT saying its board has prioritised the reduction of borrowing and has “remained prudent in preserving cash during these unprecedented times”.
In the 2020 financial year, cash generated from operations improved by 27% to R227 million, revenue increased by 3% to R1.5 billion, and earnings per share were up 13% to 57c.
Headline earnings per share were also up 29% to 73c.
The group’s earnings before interest, tax, depreciation and amortisation improved by 9% to R250 million compared to R230 million in 2019.
The Johannesburg-headquartered group provides specialised software and digitally-led business solutions to the education, manufacturing, financial services, energy, communications and hospitality sectors, and has a presence in Mauritius, Botswana, Ireland, Kenya, Australia and New Zealand.
Adapt IT says geographic diversification of revenue has improved from the strengthened Pan-African footprint, with a heightened presence in Kenya.
The 32 African countries in which Adapt IT has a footprint contributed 16% to group revenue; in 2019 it was 15%. Asia Pacific, Europe and the Americas contributed 11% (2019: 9%) to revenue, resulting in an overall improvement in international revenue contribution to 27% (2019: 24%).
The company says annuity revenue remains healthy and an improvement on the previous reporting period to 62% (2019: 61%).
Commenting on the group’s performance for the period under review, Adapt IT CEO Sbu Shabalala says: “I am pleased to report that in a year dominated by global macro-economic challenges and the COVID-19 pandemic, Adapt IT proved to be highly resilient, through its sound underlying business model of providing mission-critical software to its clients on a long-term basis.
“The response of our people to these circumstances has been outstanding, with the business virtualising proactively ahead of the legislated lockdown, minimising impact on service delivery to our customers.
“Additional remote work digital technologies were adopted instantaneously and sustainability. The already advanced state of our migration to cloud platforms was a significant enabler of our success and contributed to the improvement in employee engagement.”
Looking ahead, Shabalala says SA’s economy has been hard hit by the COVID-19 pandemic and the associated regulations, but the impact on Adapt IT’s business units is mixed, with some presenting new opportunities, like increased e-learning and telecommunications use.
“Adapt IT continues to take advantage of its underlying diversification. This is done by assisting the current client base more effectively, focusing on sales in a cohesive manner and carefully expanding on the Pan-Africa and Asia Pacific strategy. Furthermore, by remaining focused on cost containment, capital allocation and working capital, Adapt IT aligns itself with stakeholder expectations.” - ITWeb