Bid for Adapt IT validates strategy
• Specialised software group has been approached about an R800m bid
Sbu Shabalala, CEO of specialist software group Adapt IT — once seen as the best performing tech company in SA — has said a recent offer to buy out the firm he founded in 2007 is a validation of the business model and strategy working well enough to attract investment.
Sbu Shabalala, CEO of specialist software group Adapt IT — once considered the best performing tech company in SA — has said a recent offer to buy out the firm he founded in 2007 is a validation of the business model and strategy working well enough to attract investment.
The Johannesburg-based company, which provides software solutions to the education, manufacturing, energy, financial services, communications and hospitality sectors, is subject to an R800m takeover bid from tech peer Huge Group.
“It is pleasing to see companies in other parts of the ICT sector looking at [Adapt IT] and feeling it is attractive to them, so the offer received from Huge is simply a vindication of what we’ve set out to do as a business,” said Shabalala.
“If we’re attractive to Huge it means we’ve done phenomenally well to get our strategy and implementation to where it is.”
Shabalala said part of the strategy is growing international revenues, which now account for 27% of the total.
This “is a feat not a lot of companies have achieved in the SA environment, therefore we’re well on the journey to creating an international business”.
Adapt IT’s share has rocketed 116.8% over the past 12 months. On Tuesday it closed 3.06% down at R4.75.
The bid from Huge, which has subsidiaries operating in the telecoms, media, technology and software industries, values Adapt IT at R800m, while its market cap stood at R688.2m on Tuesday.
However, “that the offer is unsolicited is something we have to think about. There’ sa process for that and we’ve communicated it”, Shabalala said. Adapt IT has commissioned an independent expert to determine whether the offer is fair and reasonable.
Adapt IT said on Tuesday the diversity of its operations paid off in the midst of Covid-19, with growth in online education helping offset pressure on other parts of the business negatively affected by the SA economy.
Cost-cutting and lower interest rates helped the group grow profits and improve cash generation in its six months to end-December 2020, when revenue fell 2% to R707.4m, while headline earnings rose 43.6% to R28.4m. Net debt fell 30% to R324m.
A boost to e-learning saw revenue from its education segment rise 15% to end-December, contributing 19% of group revenue from 16% in the prior comparative year.
Revenue from customers in the financial services industry rose 8%. Revenue from hospitality customers fell 14% and manufacturing 7%. The revenue contribution from financial services rose to 20% from 19% previously, while revenue from hospitality fell two percentage points to 18%.
SA remains Adapt IT’s primary market, constituting 73% of total revenue, and the pandemic caused repeated shutdowns or slowdowns in certain of its client segments, resulting in project volume decline and delays.
Overall, Adapt IT said it is satisfied with its management of the effects of the pandemic, cutting operational costs, which “regrettably included the retrenchment of approximately 6% of employees”.
At the end of June, Adapt IT had 1,117 employees, with a presence in Mauritius, Botswana, Kenya and Nigeria.
A secondary focus is on the Asia-Pacific market, with a presence in Australia, New Zealand and Singapore. The group also has a presence in Ireland.
IF WE’RE ATTRACTIVE TO HUGE IT MEANS WE ’ VE DONE PHENOMENALLY WELL TO GET OUR STRATEGY TO WHERE IT IS