Diver­si­fi­ca­tion ben­e­fits Adapt IT

Finweek English Edition - - INSIDE - BY GUGU LOURIE

Dur­ban-based soft­ware and com­puter ser­vices group Adapt IT con­tin­ues to achieve dou­ble-digit growth in a tough and highly com­pet­i­tive en­vi­ron­ment, which has hurt ri­vals like Gi­jima.

Adapt IT, which re­ported a 35% ri s e in head l i ne ea r ni ngs per s ha r e t o 46.57c in the year to end June, has seen its share price rise 58.1% over the past year.

The com­pany’s or­ganic growth was 18% while ac­quis­i­tive growth added 24% to turnover, bring­ing to­tal turnover to R575m, up 42%. It hiked its div­i­dend by 32% to 10.9c.

De­spite a chal­leng­ing eco­nomic cli­mate, which has seen big­ger ri­val Gi­jima strug­gle and delist from the JSE in May 2014, Adapt IT re­mains keen on buy­ing more f irms to en­sure t hat it s prof it able di­ver­sif icat ion cre­ates more value.

CEO of Adapt I T, Si busi s o Sha­bal­ala, told Fin­week t hat t he com­pany would con­tinue with its strat­egy to fo­cus “on mar­kets where we are dif­fer­en­ti­ated and a l so to con­tinue to seek earn­ings-en­hanc­ing a c qu is i t i ons t hat we ca n buy ”. Sha­bal­ala also be­lieves the tech f irm will con­tinue to de­liver good growth or­gan­i­cally, even though mar­kets are not as buoy­ant as they used to be. The com­pany re­cent l y bought St u d e n t Ma na g e me n t Soft ware So­lu­tions

(SMSS), a New Zealand-based soft­ware firm, to bulkup its prof itable ed­u­ca­tion soft­ware port­fo­lio.

Adapt IT be­lieves SMSS would bring a host of new busi­ness op­por­tu­ni­ties. “They have an in­ter­est­ing piece of soft­ware that man­ages cam­puses that are be­low univer­sity sizes,” ex­plains Sha­bal­ala.

The ac­qui­si­tion gives them ac­cess to soft­ware that looks at the next tier of ed­u­ca­tion, he says. “What we are go­ing to do is lo­calise the soft­ware to the re­gions in which we op­er­ate.”

Adapt IT’s or­ganic growth was boosted by strong de­mand in the higher ed­u­ca­tion sec­tor, a space i n which the IT f irm has pro­vided spe­cialised soft­ware ser­vices for 29 years.

Its ed­u­ca­tion unit of­fers a turnkey en­ter­prise re­source plan­ning prod­uct, ITS in­te­gra­tor, and ser vices to the higher ed­u­ca­tion sec­tor glob­ally. In the year to end June 2015, Adapt IT’s ed­u­ca­tion unit saw op­er­at­ing profit rise to R27m from R15m in the pre­vi­ous year.

Adapt IT is likely to ben­e­fit from pro­vid­ing SMSS ed­u­ca­tion soft­ware in SA and the rest of the con­ti­nent.

“SMSS is al­ready suit­able for the Aus­tralasian mar­ket and we wil l adapt it … ex­cuse the pun … to the South African and African mar­kets to go to next tier of ed­u­ca­tion be­low univer­si­ties,” said Sha­bal­ala.

While the com­pany strat­egy is to fo­cus on or­ganic growth, Sha­bal­ala is keen to make more ac­qui­si­tions – through the is­sue of new shares – when

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