Acquisition target Adapt IT delivers solid interim results

Adapt IT, the software services company that’s the subject of a takeover bid by telecommunications firm Huge Group, delivered a solid set of interim results for the six months to end-December 2020, with normalised headline earnings per share up 16%.

The group, which is headquartered in Midrand, north of Johannesburg, reported attributable profit after tax of R28-million — up 37% — and cash generated from operations of R124-million, up 67% from the same period a year ago.

Net debt reduced year on year by R140-million to R324-million, while its net gearing ratio was down to 42% from 69%. Reducing debt has been a key focus of the management team, led by CEO Sbu Shabalala, after a years-long strategy of growth through acquisitions had to be abandoned due to a collapse in Adapt IT’s share price.

“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,” Shabalala said in a statement on Tuesday.

“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.”

Annuity revenue improved to 66% from 60% in 2019, while offshore revenue remained at 27%.

Ebitda flat

Earnings before interest, tax, depreciation and amortisation – Ebitda is a measure of operational profitability – was R128-million (2019: R129-million). This was affected by reduced project volumes, although an Ebitda margin of 18% was maintained.

On the unsolicited offer from Huge Group to Adapt IT shareholders, the group said it is required to follow a process regulated by the Companies Act and supervised by the Takeover Regulation Panel.

“Adapt IT is duly following this regulated process and the independent expert (Nodus Capital TS) and independent board will in due course advise shareholders of their opinions as to whether or not the share-swap offer from Huge Group is fair and reasonable to Adapt IT shareholders.”

Adapt IT chairman Craig Chambers said: “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. Shareholders are not obliged to respond to the Huge Group offer. If shareholders do not respond they will automatically retain their Adapt IT shares.”

Huge Group launched the takeover bid in January. The all-share bid, at an offer price of R5.52/share, values Adapt IT at R795-million. If all shareholders accept the offer, Huge Group will have to issue about 130 million new shares.

Adapt IT shares were trading at R4.94 at 9.31am in Johannesburg, up 0.8% on Monday’s closing price. – © 2021 NewsCentral Media