Wrap Text
Unaudited Condensed Consolidated Interim Group Results for the six months ended 31 December 2012.
ADAPT IT HOLDINGS LIMITED
Registration number 1998/017276/06
Share code: ADI
ISIN: ZAE000113163
("Adapt IT" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED
INTERIM GROUP RESULTS
for the six months ended 31 December 2012
+ 53% turnover
+ 61% operating profit
+ 35% headline earnings per share
+ 71% dividend per share
INTERIM REPORT
FINANCIAL REVIEW
Turnover for the six-month period to December 2012 increased 53% to R135,9 million
(2011: R88,7 million) whilst profit from operations increased 61% to R11,7 million
(2011: R7,2 million) representing a healthy operating profit margin of 9%.
The interim earnings per share ("EPS") and interim headline EPS ("HEPS") both improved
by 35% to 8,36 cents per share (cps) and 8,35 cps respectively, from 6,19 cps.
Ordinary dividend number 10 of 4,84 cents per share was paid to shareholders on
17 September 2012.
STRATEGY
It is the Adapt IT Group ("the Group") strategy to continue delivering strong organic
and acquisitive growth. Turnover grew 53% compared to the previous period with the
acquisition of Swicon360 (Pty) Ltd ("Swicon360") now part of the manufacturing sector,
contributing 11% to growth.
The Group acquired Swicon360 (Pty) Ltd ("Swicon360"), effective 1 October 2012, in line
with the acquisitive growth strategy, which increases our presence in the manufacturing
sector and provides additional depth and expertise in SAP technology and solutions.
The Group continues to realise synergies between its specialised software businesses to
yield higher organic growth whilst pursuing further strategic, synergistic and earnings
enhancing software business acquisitions.
OUTLOOK
The economic and trading environment is improving, both in South Africa and globally.
Adapt IT is better positioned to take advantage of future software and services
opportunities due to our increased service diversity and sector reach.
The Group will continue to drive organic and acquisitive growth in line with our strategy,
which aims to deliver above ICT sector average growth and returns.
CHANGES IN BOARD
Dr Bernard Ravnö retired as the chairman of the board at the last annual general
meeting and is succeeded by Craig Chambers who was appointed to the board
in May 2011. Mandla Nhlapo resigned to pursue other business opportunities and
is replaced by Oliver Fortuin effective 8 February 2013. We welcome Oliver and wish
both him and Craig well in their new roles. We thank Dr Ravnö and Mandla for their
distinguished service to the Group for over nine and four years respectively and wish
them well in their future endeavours.
APPRECIATION
On behalf of the Group, we take this opportunity to thank our customers, partners and
service providers for their continued support and members of the board and Adapt IT
Group staff for their dedication.
On behalf of the board
Craig Chambers Sbu Shabalala
Independent non-executive Chairman Chief Executive Officer
11 February 2013
ADAPT IT HOLDINGS LIMITED
Registration number 1998/017276/06
Share code: ADI
ISIN: ZAE000113163
("Adapt IT" or "the Group")
Directors
Craig Chambers* (Chairman), Sbu Shabalala (Chief Executive Officer)
T Dunsdon (Commercial Director), Siboniso Shabalala (Financial Director)
B Ntuli*, T Dingaan*, O D Fortuin* *independent non-executive director
Registered office
5 Rydall Vale Office Park, Rydall Vale Crescent, La Lucia Ridge, Durban, 4051
PO Box 5207, Rydall Vale Office Park, La Lucia Ridge, 4019
Transfer secretary
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107
Sponsor
Merchantec Capital (Pty) Ltd
2nd Floor, North Block, Hyde Park Office Tower, Johannesburg, 2196;
PO Box 41480, Craighall, 2024
Auditors
Ernst & Young Inc.
1 Pencarrow Crescent, Pencarrow Park, La Lucia Ridge, Durban North, 4051;
PO Box 859, Durban, 4000
Company Secretary
Statucor (Pty) Ltd
22 Wellington Road, Parktown, 2193
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended Year-
31 Dec 31 Dec 30 June on-year
2012 2011 2012 variance
R'000 R'000 R'000 %
Revenue 140 123 92 265 224 769 52
Turnover 135 914 88 671 219 614 53
Cost of sales (79 425) (45 436) (115 708) 75
Gross profit 56 489 43 235 103 906 31
Administrative, selling and other costs (46 001) (37 221) (82 607) 24
Sundry revenue 1 190 1 220 908 (2)
Profit from operations 11 678 7 234 22 207 61
Finance income 3 018 2 373 4 247 27
Finance costs (416) (361) (707) 15
Profit before taxation 14 280 9 246 25 747 54
Income tax expense (5 224) (3 160) (7 604) 65
Profit for the period 9 056 6 086 18 143 49
Other comprehensive income 259 300 389 (14)
Exchange differences arising from
translation of foreign operations 259 300 389 (14)
Total comprehensive income 9 315 6 386 18 532 46
Headline earnings:
Profit attributable to ordinary shareholders 9 056 6 086 18 143 49
Profit on sale of property and equipment (9) (1) (17)
Headline earnings 9 047 6 085 18 126 49
Number of ordinary shares in issue (000) 108 226 98 354 108 440 10
Weighted average number of
ordinary shares in issue (000) 108 346 98 354 103 904 10
Basic earnings per share (cents) 8,36 6,19 17,46 35
Headline earnings per share (cents) 8,35 6,19 17,45 35
Fully diluted basic earnings per share (cents) 8,35 6,19 17,46 35
Fully diluted headline earnings per share (cents) 8,34 6,19 17,45 35
Dividend per share (cents) 4,84 2,84 2,84 71
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Share translation Retained Total
capital premium reserve earnings equity
R'000 R'000 R'000 R'000 R'000
Balance at 30 June 2011 10 8 650 116 39 376 48 152
Total comprehensive income
for the period 300 6 086 6 386
Profit for the period 6 086 6 086
Other comprehensive income
for the period 300 300
Net repurchase of shares (120) (120)
Dividend paid (2 794) (2 794)
Balance at 31 December 2011 10 8 530 416 42 668 51 624
Balance at 30 June 2012 11 14 920 505 54 725 70 161
Total comprehensive income
for the period 259 9 056 9 315
Profit for the period 9 056 9 056
Other comprehensive income
for the period 259 259
Net repurchase of shares (294) (294)
Issue of shares for
business combinations 1 300 1 300
Dividend paid (5 226) (5 226)
Balance at 31 December 2012 11 15 926 764 58 555 75 256
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2012 2011 2012
R'000 R'000 R'000
ASSETS
Non-current assets 84 949 45 676 60 050
Property and equipment 23 881 20 796 20 475
Intangible assets 6 187 1 384 1 308
Goodwill 38 010 10 408 25 658
Deferred taxation asset 16 871 13 088 12 609
Current assets 135 725 121 215 86 828
Trade and other receivables 112 428 110 517 61 412
Current tax receivable 2 640 21
Cash and cash equivalents 20 657 10 698 25 395
Total assets 220 674 166 891 146 878
EQUITY AND LIABILITIES
Equity 75 256 51 624 70 161
Share capital 11 10 11
Share premium 15 926 8 530 14 920
Foreign currency translation reserve 764 416 505
Retained earnings 58 555 42 668 54 725
Non-current liabilities 13 323 9 573 4 383
Interest-bearing borrowings 10 664 7 657 642
Deferred taxation liability 2 659 1 916 3 741
Current liabilities 132 095 105 694 72 334
Trade and other payables 28 852 19 472 15 226
Provisions 7 948 4 513 12 730
Deferred income 76 425 70 602 42 462
Current tax payable 529 4 504
Current portion of interest-bearing borrowings 12 854 6 603 1 171
Current portion of non-interest-bearing borrowings 1 770
Bank overdraft 3 717 745
Total equity and liabilities 220 674 166 891 146 878
Net asset value per share (cents) 69,46 52,49 67,52
Liquidity ratio (times) 1,03 1,15 1,20
Solvency ratio (times) 1,52 1,45 1,91
Market price per share
Close (cents) 144 99 122
High (cents) 158 100 122
Low (cents) 102 60 60
Capital expenditure for the period (R'000) 9 707 769 2 009
Capital commitments (R'000) 2 887 3 725 7 266
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2012 2011 2012
R'000 R'000 R'000
OPERATING ACTIVITIES
Cash generated from/(utilised in) operations 149 (13 935) 29 237
Finance income 3 018 2 373 4 247
Finance costs (416) (361) (707)
Dividends paid (5 226) (2 794) (2 794)
Taxation paid (9 652) (4 245) (12 485)
Net cash flow (utilised in)/from operating activities (12 127) (18 962) 17 498
INVESTING ACTIVITIES
Property and equipment acquired (3 991) (769) (1 168)
Intangible assets acquired and developed (5 716) (841)
Proceeds on disposal of property and equipment 9 24
Net cash flow on acquisition of subsidiary (7 165) 4 199
Net cash (outflow)/inflow from investment activities (16 863) (769) 2 214
FINANCING ACTIVITIES
Proceeds from borrowings 23 917 12 462 9
Repayment of borrowings (2 602) (1 011) (1 004)
Share repurchases (294) (2 378)
Net cash flow on disposal of investment properties 153
Repayment of vendor loans (10 909)
Net cash inflow/(outflow) from financing activities 21 021 11 451 (14 129)
Net (decrease)/increase in cash resources (7 969) (8 280) 5 583
Exchange differences on translation 259 300 389
Cash and cash equivalents at beginning of period 24 650 18 678 18 678
Cash and cash equivalents at end of period 16 940 10 698 24 650
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The unaudited condensed consolidated interim financial statements of the Group for the
six months ended 31 December 2012 were prepared in accordance with IAS 34 Interim
Financial Reporting, the Companies Act No 71 of 2008 of South Africa and the Listings
Requirements of the JSE Limited. The accounting policies applied in the preparation of these
unaudited condensed consolidated interim financial statements are in accordance with
International Financial Reporting Standards and are consistent with those applied in the
annual financial statements for the year ended 30 June 2012.
The unaudited condensed consolidated interim financial statements do not include all the
information and disclosure required in the annual financial statements and should be read
in conjunction with the Group's annual financial statements as at 30 June 2012.
The condensed consolidated interim Group results have not been audited or reviewed by
the Group auditors, and have been prepared under the supervision of Siboniso Shabalala,
CA (SA), Financial Director of Adapt IT Holdings Limited.
2. SUBSEQUENT EVENTS
No matters have occurred between the reporting date and the date of approval of the interim
financial statements which would have a material effect on these financial statements.
3. DIVIDENDS
Ordinary dividend number 10 of 4,84 cents per share was paid to shareholders on
17 September 2012. It is Group policy to consider declaration of dividends at the end of the
financial year and not at the interim reporting date.
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2012 2011 2012
R'000 R'000 R'000
4. Goodwill
Carrying amount at beginning of period 25 658 10 408 10 408
Acquisition of BI Planning Services (Pty) Ltd 15 250
Acquisition of Swicon360 (Pty) Ltd 12 352
Carrying amount at end of period 38 010 10 408 25 658
Comprising:
Cost 38 010 10 408 25 658
Goodwill is allocated as follows:
Adapt IT (Pty) Ltd 10 349 10 349 10 349
ApplyIT (Pty) Ltd 59 59 59
BI Planning Services (Pty) Ltd 15 250 15 250
Swicon360 (Pty) Ltd 12 352
Total 38 010 10 408 25 658
The Group tests goodwill for impairment. As at 31 December 2012, the carrying amount of
goodwill was considered not to require impairment.
The recoverable amount of goodwill has been determined based on a value in use calculation
using cash flow projections from financial forecasts approved by senior management
covering a five-year period. Cash flow projections take into account past experience and
external sources of information. The valuation method used is consistent with the prior year.
There have been no accumulated impairment losses recognised to date.
The key assumptions used in the testing of goodwill are:
Discount rate of 12% (2012: 12%) (weighted average cost of capital); and
Projected cash flows for the five years based on a 5% (2012: 5%) growth rate.
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2012 2011 2012
R'000 R'000 R'000
5. Interest-bearing borrowings
Non-current borrowings 10 664 7 657 642
Investec Private Bank Limited 10 664 6 416
IBM Global Finance 1 241 642
Current borrowings 12 854 6 603 1 171
Investec Private Bank Limited 11 612 5 525 15
IBM Global Finance 1 241 1 078 1 156
Total 23 518 14 260 1 813
A further R13 million loan from Investec Private Bank Limited was obtained for working capital
subsequent to the acquisition of Swicon360 (Pty) Ltd. The loan is secured by 100% of ITS
Holdings (Pty) Ltd, cession of book debts held by Adapt IT Holdings Limited and its subsidiaries.
The interest rate is fixed at 8,5% per annum.
Excess cash resources are used from time to time to reduce the facilities.
6. BUSINESS COMBINATIONS
Acquisition of subsidiary
On 1 October 2012, the Group acquired the entire issued share capital of Swicon360 (Pty) Ltd
(Swicon360), a South African registered company.
Swicon360 is an unlisted company and a SAP service partner that specialises in providing business
outsourcing (BPO) services for the SAP ERP Human Capital Management (SAP ERP HCM) solution to clients
across diverse sectors, deployed in a cloud environment.
The acquisition was concluded for a purchase consideration of R11,7 million. The purchase
consideration consists of R9,35 million cash paid on 31 October 2012 and R1,05 million
payable on the 1 October 2013, disclosed under non-interest-bearing liabilities. The balance
of R1,30 million of the purchase consideration, will be funded from the issue of 1 000 000
Adapt IT shares valued at R1,30 per share on 1 October 2013. The R1,30 million new shares
have been disclosed under share capital and share premium.
The fair value of the net liabilities acquired amounted to R0,65 million, resulting in goodwill of
R12,35 million at acquisition. The consideration paid for the combination effectively included
amounts in relation to the benefit of the expected synergies, revenue growth, new market
penetration and future market development.
The acquisition provides Adapt IT additional depth and expertise in SAP technology and solutions
required to extend value-added services to existing customers in mining and manufacturing.
The fair values of the identifiable net assets and liabilities of Swicon360 as at the date of
acquisition were:
Fair value
recognised on
acquisition
R'000
Assets
Property and equipment 728
Intangible assets 29
Deferred taxation 3 005
Trade and other receivable 9 555
Cash and cash equivalents 2 185
Total assets 15 502
Liabilities
Non-interest-bearing borrowings 1 110
Trade and other payables 13 672
Provisions 1 372
Total liabilities 16 154
Total identifiable net liability (652)
Goodwill arising on acquisition 12 352
Fair value of consideration transferred 11 700
Share issue 1 October 2013 1 300
Non-interest-bearing liability 1 050
Settled in cash 9 350
Cash outflow on acquisition:
Net cash acquired with the subsidiary 2 185
Cash paid (9 350)
Net cash outflow on acquisition (7 165)
Fair value of the assets acquired approximates their carrying value at the acquisition date.
From the date of acquisition, Swicon360 has contributed R0,82 million to the profit after tax
and R10 million to the turnover of the Group.
Acquired receivables represent the gross contractual amounts which approximates fair value
and which is further estimated to be fully recoverable.
Goodwill recognised is not deductible for tax purposes.
Acquisition related costs of R0,8 million have been expensed and are included in
administrative, selling and other costs in the statement of comprehensive income.
7. SEGMENT ANALYSIS
For management purposes, the Group is organised into the following segments:
Education;
Manufacturing;
Financial Services; and
Other includes Group head office activities.
Management monitors the operating results of its business units separately for the purpose
of making decisions about resource allocation and performance assessment. Monthly
management meetings are held to evaluate segment performance against budget and
forecast.
The following tables present revenue and profit information regarding the Group's operating
segments for the six months ended 31 December 2012 and 31 December 2011, respectively:
Adjust
ments
and
Edu- Manu- Financial elimi-
cation facturing Services Other nations Total
R'000 R'000 R'000 R'000 R'000 R'000
Six months ended
31 December 2012
Revenue* 56 610 60 101 23 535 (123) 140 123
Third party 56 610 60 101 23 535 (123) 140 123
Inter-segment
Segment profit/(loss)
before tax 7 240 6 693 2 575 143 (2 371) 14 280
Six months ended
31 December 2011
Revenue* 48 946 43 436 2 580 (2 697) 92 265
Third party 48 946 43 319 92 265
Inter-segment 117 2 580 (2 697)
Segment profit/(loss)
before tax 6 905 2 631 (186) (104) 9 246
* Revenue includes sales and services rendered to customers, interest income and dividends
received.
The following table presents segment assets and liabilities of the Group's operating segments
as at 31 December 2012 and 31 December 2011, respectively:
Adjust
ments
and
Edu- Manu- Financial elimi-
cation facturing Services Other nations Total
R'000 R'000 R'000 R'000 R'000 R'000
Six months ended
31 December 2012
Total assets 149 033 121 642 11 136 57 491 (118 628) 220 674
Total liabilities 83 428 81 365 4 780 42 619 (65 473) 146 718
Six months ended
31 December 2011
Total assets 144 642 83 771 44 000 (105 522) 166 891
Total liabilities 89 745 53 648 30 796 (58 922) 115 267
Date: 11/02/2013 04:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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