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Diversification benefits Adapt IT

By Gugu Lourie

Adapt IT’s share price rose more than 1, 960 % in the past five years.


Adapt IT has been a hugely successful software and computer services stock listed on the JSE and it continues to make money in the highly competitive technology market.

Those who invested in Adapt IT three years ago are now benefiting from the rising share price.

The software and computer services firm on Monday posted a 35% rise in headline earnings per share – SA’s true profit gauge – to 46, 57 cents per share in the year to end-June 2015.

The company has seen organic growth rise to 18% and acquisitive growth increasing 24% to turnover, pushing total turnover up by 42% to R575m.

The company has managed to deliver positive growth in a challenging market that has seen the voluntary delisting of a bigger rival Gijima, which was struggling and trying to resuscitate its growth through a turnaround strategy.

On 14 August 2015 the market also saw the disappearance of technology firm Business Connexion (BCX) after it was bought for R2.7bn by Telkom and delisted from the exchange.

Adapt IT Knowledge Centre
Adapt IT CEO, Sbu Shabalala interacts with Rusthof Secondary School students at the opening of the Adapt IT Knowledge Centre

But the Durban-based software firm, which has seen its market value rise to more than R1.3bn up from just R900m in November 2014, is still keen on buying more firms to ensure that its profitable diversification creates more value.

CEO of Adapt IT Sibusiso Shabala told TechFinancials.co.za that the company would continue with the same strategy.

He said Adapt IT “will continue to do similar things that we’ve been doing, focusing on markets where we are differentiated and also to continue to seek earnings-enhancing acquisitions that we can buy”.

Shabalala also believes the tech firm will continue to deliver good growth organically even though markets are not as buoyant as they use to be.

The company recently bought a New Zealand-based software firm Student Management Software Solutions Limited (SMSS) to bulk-up its profitable education software portfolio.

Adapt IT believes SMSS would bring a host of new business opportunities.

“They have an interesting piece of software, which manages campuses that are below university sizes,” explains Shabalala.
“What the acquisition does is to give us software that looks at the next tier of education. What we are going to do is to localise the software to the regions where we operate.”

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

Its education unit offers a turnkey enterprise resource planning product, ITS integrator, and services to higher education sector globally.

In the year to end-June 2015, Adapt IT delivered good earnings and the education unit saw operating profit rose to R27m from R15m in the previous year.

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

“SMSS is already suitable for the Australasian market and we will adapt it … excuse the pun … to the South African and adaptcom700x500African market to go to next tier of education below universities,” said Shabalala.

Shabalala is keen to make more acquisitions through the issue of new shares when it finds a company it is interested in.

The company’s strategy focuses on organic growth. It aims to consolidate the sector focus on education, manufacturing, financial services and energy. Adapt IT also wants to extend its footprint in Africa, where it is on the lookout for acquisitions.

The strategy has been given a nod by the market after Adapt IT delivered a 43% operating compound growth per annum over five years.

It also paid its 13th dividend to its shareholders. The investors will receive a dividend payment of 10, 90 cents per share by September, which represents a four times dividend cover ratio and a 32% increase on the previous year’s dividend.

As a result, the company’s share price rose more than 1, 960 % in the past five years.

The stock continues to be a solid share in a tough technology market. It has gained 24.7% in the past 30 days.

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