ADAPT IT HOLDINGS LIMITED - Adapt IT Unaudited Condensed Consolidated Interim Group Results for the six months ended 31 December 2017

Release Date: 25/01/2018 12:10
Code(s): ADI
 
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Adapt IT Unaudited Condensed Consolidated Interim Group Results for the six months ended 31 December 2017

ADAPT IT HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 1998/017276/06
Share code: ADI
ISIN: ZAE000113163
("Adapt IT" or "the Company" or "the Group")

Adapt IT unaudited condensed consolidated
INTERIM GROUP RESULTS
for the six months ended 31 December 2017

FINANCIAL HIGHLIGHTS

UP 46% TURNOVER
UP 29% EBITDA
UP 22% HEPS
UP 11% NORMALISED HEPS

BUSINESS OVERVIEW

Adapt IT is a global software business focusing in the Education, Manufacturing, Energy, Financial Services
and Hospitality sectors, with over 1 000 technology professionals servicing more than 10 000 customers 
in 40 countries. Adapt IT has offices throughout Africa and in Mauritius, Ireland, Australia, and New Zealand.

COMPANY TIMELINE

Adapt IT has deep industry expertise, robust entrepreneurial management teams, and strong annuity income.
It listed on the JSE in 1998 and grew to become the 5th fastest growing African Tech Company by 2014.

Today, Adapt IT ranks second on the 2017 Sunday Times Top 100 companies in South Africa. At its core, the
growth is underpinned by the company's purpose to: grow the business and its people - enabling clients to
achieve more. Adapt IT aims to reach an annualised turnover of R3 billion by year 2020.

OCT 2007                 OCT 2008                    AUG 2009                 OCT 2012                  NOV 2013
InfoWave merges          Adapt IT, specialising in   Education                The Swicon360             Energy sector entry
with Adapt IT creating   manufacturing               specialisation           acquisition extends the   through the Aquilon
a software business      software, moves to the      through the              manufacturing offering    acquisition expands
                         main board of the JSE       acquisition of           with SAP Human            Adapt IT into Africa's
                                                     Integrated Tertiary      Capital                   growing energy sector,
                                                     Software (ITS) -         Management                serving major
                                                     a leader in tertiary     Business Process          oil companies
                                                     education ERP systems    Outsourcing
                                                     expanding the
                                                     company into Europe
                                                     and Australasia

SEPT 2014                OCT 2015                    JUL 2017                 NOV 2017
Added                    Financial Services          Micros South Africa,     The Telecommunications
Telecommunications       Sector is entered           a leader in Hospitality  division expands footprint in
intelligence             through the acquisition     Software, is acquired    Australia, Mauritius and
management software      of CQS                      by Adapt IT              the rest of Africa through
through the                                                                   the acquisition of LGR -
AspiviaUnison acquisition                                                     conditions precedent
                                                                              to be fulfilled

BUSINESS PERFORMANCE

The Adapt IT divisions operate in a sector-focused approach, under a single Adapt IT brand. Adapt IT's software
focus provides investors with a unique quality of earnings that can only be derived in an IP rich, high-annuity
based business, like Adapt IT, diversified across several sectors and geographies. The performance is driven and
reported through its divisions: Manufacturing, Education, Financial Services, Energy, and Hospitality.

Turnover contribution (Industry sectors)

Education 12%
Energy 14%
Financial services 24%
Hospitality 24%
Manufactury 26%

SECTOR OVERVIEW

Education
Education provides a specialised Enterprise Resource Planning (ERP) product, ITS Integrator,
and services to the Higher and further Education sector worldwide

Financial Services
Financial Services provides the auditing and accounting profession with internal and external
auditing and financial software offerings and business intelligence (BI) solutions

Manufacturing
Manufacturing provides Tranquillity ERP and Safety Health Environment and Quality (SHE-Q)
specialist solutions to the sugar and agriculture industries

Energy
Energy provides expert consulting and software solutions to the Oil and Gas, Power,
Renewables and other Energy sectors globally

Hospitality
Adapt IT announced its entry into the Hospitality Software Sector, effective 1 July 2017,
through the acquisition of 100% of the Micros South Africa group (Micros), a leading provider
of integrated software and hardware solutions to the hospitality and retail industries in Africa.

SECTOR PERFORMANCE

Adapt IT is a diversified South African based software solutions provider, which is positioned to take advantage of
specialised technology platforms across the fastest growing market sectors. The company's focus is on improving
the ability of the existing businesses to improve profitability and to develop new capabilities in their key markets.
This approach has assisted in securing more customers, diversifying products and services and the move up the
services value chain.

SECTOR CONTRIBUTION (R'm)
                                                                                                        TURNOVER   EBITDA
                                                                                                           2017      2017
Manufacturing                                                                                               176        38
Education                                                                                                    84        14
Financial Services                                                                                          160        22
Energy                                                                                                       94        20
Hospitality                                                                                                 160        25

GEOGRAPHIC EXPANSION

The company is well diversified across sectors and geographies, and it continues to extend geographic reach
across Africa and the rest of the world. Foreign markets represent 17% of turnover while software and services
are delivered to 24 other African countries. This expansion is a key factor in diversifying market risk and growing
hard currency revenue streams.

GEOGRAPHIC TURNOVER                                                                                  TURNOVER BY CURRENCY
                                                            
83%                                                                                                                   90%
South Africa                                                                                                        Rands
                                                            
12%                                                                                                                    5%
Other African countries                                                                                              US $
                                                            
2%                                                                                                                     2%
The Americas                                                                                                         Euro
                                                            
2%                                                                                                                     2%
Australasia                                                                                                  Australian $
                                                            
1%                                                                                                                     1%
Europe                                                                                                              Other

While most of the group's revenue is generated from South Africa, the outlook is to continue to diversify the
business into the rest of Africa and global markets.

FINANCIAL HIGHLIGHTS

FINANCIAL SUMMARY
Turnover for the six months to December 2017 increased 46% to R673,6 million (2016: R460,7 million). Organic
growth from continuing operations was 17% and acquisitive growth was 35%. Acquisitive growth comprises
mainly Micros, consolidated effective 1 July 2017, representing entry into the Hospitality segment. Earnings
before interest, tax, depreciation and amortisation (EBITDA) increased 29% to R116,1 million (2016: R89,9 million).
Operating profit increased 24% to R86,1 million (2016: R69,5 million).

Headline earnings per share (HEPS) for the six months to December 2017 grew 22% to 29,70 cents from
24,41 cents, with Normalised HEPS at 38,73 cents (2016: 34,74 cents).

Ordinary dividend number 15, in respect of the year ended 30 June 2017, of 13,70 cents per share, on a four times
dividend cover ratio, was paid to shareholders on 26 September 2017. It is our policy to declare a dividend after
financial year end and not at the interim reporting date.

ACQUISITION
Adapt IT Proprietary Limited acquired Micros effective 1 July 2017, following approval of the Competition
Authority. Micros is a leading provider of Information Technology in the hospitality, retail, and food and beverage
industries. The acquisition of Micros created an entry into the Hospitality industry, a new vertical for the group,
further diversifying the group. Adapt IT is pleased to welcome another very successful team to the group.
The results from Micros for the six months are included in these interim results. Refer to the business combination
note 10 on page 13.

Adapt IT has entered into a Category 2 transaction, in terms of the Listings Requirements of JSE Limited (JSE
Listings Requirements), to acquire the business of the LGR group. LGR is a specialist solutions provider with an
exclusive focus on the global Telecommunications industry providing and managing end-to-end data warehouse
and business intelligence systems at leading international operators. Shareholders will be notified once the last of
the conditions precedent has been fulfilled or waived.

SHARE REPURCHASE
Adapt IT has cumulatively repurchased 5,6 million (3,5%) of its ordinary shares in the open market under the
general authority granted by shareholders for R42,6 million at an average price of 759 cents per share, since
30 June 2017. 1,1 million of the shares repurchased were issued as consideration for the EasyRoster acquisition,
with the remainder of the shares held as treasury shares.

ENTERPRISE DEVELOPMENT DISPOSALS
On 1 July 2017, Uyandiswa Project Management Services Proprietary Limited (Uyandiswa) repurchased all of
Adapt IT Proprietary Limited's shares in Uyandiswa and Adapt IT Proprietary Limited sold the business of
its BI resourcing business to Uyandiswa as part of a three-year Enterprise Development programme to allow
Uyandiswa to become an independent sizeable black women-owned business, which will be a supplier and a
business partner to the group going forward.

AMALGAMATION
In accordance with the company's strategy to build an integrated business, CQS Investment Holdings Proprietary
Limited, CQS Technology Holdings Proprietary Limited, EasyRoster Proprietary Limited, EasyRoster Software
Proprietary Limited and Multimatics Proprietary Limited were amalgamated into Adapt IT Proprietary Limited in
accordance with Sections 113, 115 and 116 of the Companies Act, effective 1 July 2017.

The reasons for the amalgamation were to rationalise the Adapt IT businesses, by reducing the number of
Adapt IT companies, to achieve efficiencies and savings in administrative and operational expenditure thereby
simplifying the group structure.

POST BALANCE SHEET 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.

STRATEGY
Adapt IT continues to pursue a diversified growth strategy aimed at creating a global specialised software
business that has annualised turnover of R3 billion by 2020, through a combination of organic revenue growth
and strategic acquisitions.

OUTLOOK
Our outlook is positive and our longer-term outlook is optimistic as we continue to build on a strong, well-
diversified foundation, to create a sizeable leading specialised software business that delivers above sector
average growth and returns.

BOARD
There have been no changes to the directorate in the period under review.

APPRECIATION
We thank our customers, partners and service providers for their continued support and members of the board of
directors and Adapt IT group employees for their dedication, which underpins our success.

On behalf of the board

Craig Chambers                               Sbu Shabalala                     Nombali Mbambo
Independent Non-executive Chairman           Chief Executive Officer           Chief Financial Officer

25 January 2018

CONDENSED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
                                                                      Unaudited       Unaudited     Audited
                                                                     Six months      Six months        Year
                                                                          ended           ended       ended       Period-
                                                                    31 December     31 December     30 June     on-period
                                                                           2017            2016        2017      variance
                                                           Notes          R'000           R'000       R'000             %
Revenue                                                                 675 450         462 985     996 425            46
Turnover                                                                673 559         460 691     993 671            46
Cost of sales                                                         (277 060)       (198 314)   (420 420)            40
Gross profit                                                            396 499         262 377     573 251            51
Operating expenses                                                    (280 447)       (172 508)   (378 925)            63
Earnings before interest, tax, depreciation
and amortisation (EBITDA)                                               116 052          89 869     194 326            29
Depreciation and amortisation                                          (13 105)         (6 892)    (14 238)            90
Amortisation of intangible assets acquired                             (16 815)        (13 501)    (29 105)            25
Profit from operations                                                   86 132          69 476     150 983            24
Finance income                                                 2          1 891           2 294       2 754          (18)
Finance costs                                                  3       (12 969)        (15 292)    (25 605)          (15)
Share of profits of equity accounted investment after tax                     -             829        (88)         (100)
Profit before taxation                                                   75 054          57 307     128 044            31
Income tax expense                                                     (26 119)        (20 251)    (35 498)            29
Profit for the period                                                    48 935          37 056      92 546            32
Attributable to:
Equity holders of the parent                                             47 531          35 489      88 133            34
Non-controlling interests                                                 1 404           1 567       4 413             -
Items that may be reclassified subsequently
to profit and loss                                                          951           (665)       (438)
Exchange differences arising from translation
 of foreign operations                                                      951           (665)       (438)
Total comprehensive income                                               49 886          36 391      92 108            37
Attributable to:   
Equity holders of the parent                                             48 482          34 824      87 695            39
Non-controlling interests                                                 1 404           1 567       4 413   
Headline earnings:   
Profit attributable to ordinary shareholders                             47 531          35 489      88 133            34
Profit on the sale of Uyandiswa Project Management
Services (Pty) Ltd and BI resourcing business                              (84)               -           -
Tax on the profit of business disposals                                     337               -           -
Loss/(profit) on sale of property and equipment                           (415)              26          16
Headline earnings                                                        47 369          35 515      88 149            33
Normalised headline earnings                                   4         61 774          50 535     118 461            22
Number of ordinary shares in issue                (000)                 160 540         152 355     153 597             6
Weighted average number of
ordinary shares in issue                          (000)                 159 509         145 476     150 028            10
Diluted average number of
ordinary shares in issue                          (000)                 159 509         145 476     150 046            10
Basic earnings per share                        (cents)                   29,80           24,40       58,74            22
Diluted basic earnings per share                (cents)                   29,80           24,40       58,74            22
Headline earnings per share                     (cents)                   29,70           24,41       58,76            22
Diluted headline earnings per share             (cents)                   29,70           24,41       58,75            22
Normalised headline earnings per share          (cents)        4          38,73           34,74       78,96            11
Dividend per share                              (cents)                   13,70           13,40       13,40             2

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                                   Unaudited        Unaudited     Audited
                                                                                  Six months       Six months        Year
                                                                                       ended            ended       ended
                                                                                 31 December      31 December     30 June
                                                                                        2017            2016*        2017
                                                                        Notes          R'000            R'000       R'000
ASSETS            
Non-current assets                                                                   926 724          773 367     730 781
Property and equipment                                                                95 310           37 120      35 285
Intangible assets                                                                    208 484          196 487     180 875
Goodwill                                                                    6        575 250          515 596     500 347
Finance lease receivables                                                              1 375                -           -
Loan to Uyandiswa Project Management Solutions (Pty) Ltd                              17 232                -           -
Equity accounted investment                                                                -            2 633           -
Deferred taxation asset                                                               29 073           21 531      14 274
Current assets                                                                       508 144          377 959     355 666
Trade and other receivables                                                          392 730          284 681     228 362
Asset held for sale                                                                        -                -      16 966
Inventory                                                                             23 258                -           -
Current tax receivable                                                                 2 346            6 854      12 289
Finance lease receivables                                                              1 493                -           -
Loan to Uyandiswa Project Management Solutions (Pty) Ltd                               4 158                -           -
Cash and cash equivalents                                                             84 159           86 424      98 049
Total assets                                                                       1 434 868        1 151 326   1 086 447
EQUITY AND LIABILITIES            
Equity            
Share capital                                                                             16               15          15
Treasury shares                                                                          (1)                -           -
Share premium                                                                        370 299          319 922     336 226
Other capital reserves                                                                     -           32 580      17 155
Equity compensation reserve                                                           11 789            7 207      14 585
Foreign currency translation reserve                                                   3 722            2 544       2 771
Revaluation reserve                                                                    3 544            3 544       3 544
Retained earnings                                                                    312 819          234 638     287 282
Equity attributable to shareholders of the company                                   702 188          600 450     661 578
Non-controlling interest                                                               5 865            7 839       6 959
Total equity                                                                         708 053          608 289     668 537
Non-current liabilities                                                              305 289          253 145     193 178
Interest-bearing borrowings                                                 7        216 668          160 449     101 487
Financial liabilities                                                                 31 296           39 986      43 815
Finance lease liabilities                                                   8          2 438                -           -
Deferred taxation liability                                                           54 887           52 710      47 876
Current liabilities                                                                  421 526          289 892     224 732
Trade and other payables                                                             155 568          102 179     110 668
Provisions                                                                            33 974           17 101      24 921
Deferred income                                                             9        139 245          109 116      71 222
Current tax payable                                                                    3 450                -       1 762
Financial liabilities                                                                 15 179           38 789      14 198
Current portion of interest-free borrowings                                            8 193            2 221       1 380
Current portion of interest-bearing borrowings                              7         64 572           20 486         581
Finance lease liabilities                                                   8          1 345                -           -
Total equity and liabilities                                                       1 434 868        1 151 326   1 086 447
Net asset value per share                                             (cents)         438,11           399,26      435,25
Tangible net asset value per share                                    (cents)          48,87            26,99       67,99
Liquidity ratio                                                       (times)           1,21             1,30        1,58
Solvency ratio                                                        (times)           1,97             2,12        2,60
Market price per share            
Close                                                                 (cents)            645            1 598         968
High                                                                  (cents)          1 009            1 699       1 699
Low                                                                   (cents)            560            1 163         885
Capital expenditure for the period                                    (R'000)         40 069            5 779      11 594
Capital commitments                                                   (R'000)         55 264            7 305      67 333
* Refer to note 10.2

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                    Unaudited       Unaudited     Audited
                                                                                   Six months      Six months        Year
                                                                                        ended           ended       ended
                                                                                  31 December     31 December     30 June
                                                                                         2017            2016        2017
                                                                        Notes           R'000           R'000       R'000
    
Operating activities    
Cash generated from/(utilised in) operations                                           33 273         (8 056)     139 325
Finance income                                                              2           1 754             968       1 601
Finance costs                                                               3        (10 671)         (9 993)    (16 249)
Dividends paid                                                                       (24 492)        (19 634)    (23 359)
Taxation paid                                                                        (32 333)        (25 816)    (42 102)
Net cash flow (utilised in)/generated from operating activities                      (32 469)        (62 531)      59 216
Investing activities    
Property and equipment acquired                                                      (37 436)         (4 044)     (6 681)
Intangible assets acquired and developed                                              (2 633)         (1 735)     (4 913)
Proceeds on disposal of property and equipment                                          2 110             138         129
Proceeds from loan to Uyandiswa Project Management Solutions (Pty) Ltd                  2 879               -           -
Finance lease receipts                                                                  (314)               -           -
Cash outflow on warranty achievements                                                (14 198)        (24 860)    (48 000)
Net cash (outflow)/inflow on acquisition of subsidiaries                 10,1        (65 934)           4 779        (22)
Net cash flows utilised in investment activities                                    (115 526)        (25 722)    (59 487)
Financing activities    
Proceeds from borrowings                                                              236 929         201 500     313 500
Repayment of borrowings                                                              (90 786)       (189 392)   (376 597)
Share repurchases                                                                    (42 645)               -           -
Repayment of vendor loans                                                             (6 724)               -           -
Proceeds from finance lease                                                             1 082               -           -
Issue of shares for cash                                                               35 298          84 000      84 000
Net cash inflow from financing activities                                             133 154          96 108      20 903
Net (decrease)/increase in cash resources                                            (14 841)           7 855      20 632
Exchange differences on translation                                                       951             845       (307)
Cash and cash equivalents at beginning of period                                       98 049          77 724      77 724
Cash and cash equivalents at end of period                                             84 159          86 424      98 049

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                                      Other         Equity         Assets
                                                    Share   Treasury      Share     capital   compensation    revaluation  
                                                  capital     shares    premium    reserves        reserve        reserve  
Unaudited                                           R'000      R'000      R'000       R'000          R'000          R'000  
Balance at                    
30 June 2016 (audited)                                 14          -    200 831      34 574          5 725          3 544  
Total comprehensive income                   
for the period                                          -          -          -           -              -              -  
Profit for the period                                   -          -          -           -              -              -  
Other comprehensive income                   
for the period                                          -          -          -           -              -              -  
Share-based payments                                    -          -          -           -          2 000              -  
Issue of shares for business                   
combination                                             -          -     34 574    (34 574)              -              -  
Shares issued during the year                           1          -     84 517           -          (518)              -  
Shares to be issued                                     -          -          -      32 580              -              -  
Dividend paid                                           -          -          -           -              -              -  
Balance at 31 December 2016                            15          -    319 922      32 580          7 207          3 544  
Balance                    
30 June 2017 (audited)                                 15          -    336 226      17 155         14 585          3 544  
Total comprehensive income                   
for the period                                          -          -          -           -              -              -  
Profit for the period                                   -          -          -           -              -              -  
Other comprehensive income                    
for the period                                          -          -          -           -              -              -  
Share-based payments                                    -          -          -           -        (2 608)              -  
Shares issued during the year                           1          -     69 136           -          (188)              -  
Net repurchase of shares                                -        (1)   (42 644)           -              -              -  
Issue of treasury shares                                -          -      7 581     (7 581)              -              -  
Settled in cash                                         -          -          -     (9 574)              -              -  
Dividend paid                                           -          -          -           -              -              -  
Balance at 31 December 2017                            16        (1)    370 299           -         11 789          3 544  

                                                                Foreign              Attributable
                                                               currency                 to equity         Non-
                                                            translation   Retained     holders of  controlling
                                                                reserve   earnings     the parent     interest      Total
Unaudited                                                         R'000      R'000          R'000        R'000      R'000
Balance at                    
30 June 2016 (audited)                                            3 209    218 783        466 680        6 008    472 688
Total comprehensive income                   
 for the period                                                   (665)     35 489         34 824        1 567     36 391
Profit for the period                                                 -     35 489         35 489        1 567     37 056
Other comprehensive income                   
for the period                                                    (665)          -          (665)            -      (665)
Share-based payments                                                  -          -          2 000            -      2 000
Issue of shares for business                   
combination                                                           -          -              -            -          -
Shares issued during the year                                         -          -         84 000          264     84 264
Shares to be issued                                                   -          -         32 580            -     32 580
Dividend paid                                                         -   (19 634)       (19 634)            -   (19 634)
Balance at 31 December 2016                                       2 544    234 638        600 450        7 839    608 289
Balance                    
30 June 2017 (audited)                                            2 771    287 282        661 578        6 959    668 537
Total comprehensive income                   
 for the period                                                     951     47 531         48 482        1 404     49 886
Profit for the period                                                 -     47 531         47 531        1 404     48 935
Other comprehensive income                    
for the period                                                      951          -            951            -        951
Share-based payments                                                  -          -        (2 608)            -    (2 608)
Shares issued during the year                                         -          -         68 949            -     68 949
Net repurchase of shares                                              -          -       (42 645)            -   (42 645)
Issue of treasury shares                                              -          -              -            -          -
Settled in cash                                                       -          -        (9 574)            -    (9 574)
Dividend paid                                                         -   (21 994)       (21 994)      (2 498)   (24 492)
Balance at 31 December 2017                                       3 722    312 819        702 188        5 865    708 053

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1.   BASIS OF PREPARATION
     The unaudited condensed consolidated interim results for the six months ended 31 December 2017 have been prepared
     in accordance with the requirements of the JSE Limited Listings Requirements for interim reports, the requirements of
     the Companies Act applicable to condensed financial statements, the SAICA Financial Reporting Guides as issued by the
     Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards
     Council and contain information required by IAS 34 Interim Financial Reporting. The accounting policies applied in
     preparation of these condensed consolidated interim results are in terms of IFRS and are consistent with those applied in
     the previous annual financial statements.

     The report was prepared under the supervision of the Chief Financial Officer, Ms Nombali Mbambo CA(SA), and has not been
     audited by the group's external auditors.

     The unaudited condensed interim results were approved by the board of directors on 25 January 2018.

                                                                               Unaudited        Unaudited         Audited
                                                                             31 December      31 December         30 June
                                                                                    2017             2016            2017
                                                                                   R'000            R'000           R'000
2.   FINANCE INCOME
     Imputed interest                                                                137            1 326           1 153
     Bank interest                                                                   777              968           1 365
     Other interest                                                                  977                -             236
     Total finance income                                                          1 891            2 294           2 754

3.   FINANCE COSTS
     Borrowings                                                                   10 671            9 993          16 249
     Financial liabilities (imputed)                                               2 298            5 299           9 356
     Total finance cost                                                           12 969           15 292          25 605

4.   NORMALISED HEADLINE EARNINGS
     Normalised headline earnings is calculated by adding back to headline earnings the amortisation of acquired intangible
     assets net of deferred taxation, as a consequence of the purchase price allocations completed in terms of IFRS 3 Business
     Combinations and fair value adjustments to financial liabilities (imputed interest) on outstanding contingent 
     purchase considerations.
                                                                               Unaudited        Unaudited         Audited
                                                                             31 December      31 December         30 June
                                                                                    2017             2016            2017
                                                                                   R'000            R'000           R'000
     Reconciliation between headline earnings and normalised headline
     earnings for the period:
     Headline earnings                                                            47 369           35 515          88 149
     Amortisation of intangible assets acquired                                   16 815           13 501          29 105
     Deferred taxation on amortisation of intangible assets acquired             (4 708)          (3 780)         (8 149)
     Fair value adjustment to financial liability (imputed interest)               2 298            5 299           9 356
     Normalised headline earnings                                                 61 774           50 535         118 461
     Weighted average number of ordinary shares in issue               (000)     159 509          145 476         150 028
     Normalised headline earnings per share                          (cents)       38,73            34,74           78,96

5.   DIVIDENDS
     Ordinary dividend number 15 of 13,70 cents per share was paid to shareholders on 26 September 2017.

     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 December       31 December          30 June
                                                                                  2017              2016             2017
                                                                                 R'000             R'000            R'000
6.   GOODWILL
     Carrying amount at beginning of period                                    500 346           472 515          472 515
     Acquisition of EasyRoster                                                 (1 380)            43 081           43 081
     Acquisition of Micros                                                      76 284                 -                -
     Transferred to assets classified as held for sale                               -                 -         (15 250)
     Carrying amount at end of period                                          575 250           515 596          500 346
     Comprising:
     Cost                                                                      575 250           515 596          500 346
     Goodwill is allocated as follows:
     - Manufacturing                                                            10 408            10 408           10 408
     - HCM                                                                      12 352            12 352           12 352
     - Energy                                                                   95 477            95 477           95 477
     - Telecoms                                                                143 038           143 038          143 038
     - Audit software                                                          195 990           195 990          195 990
     - EasyRoster                                                               41 701            43 081           43 081
     - Micros                                                                   76 284                 -                -
     - BI                                                                            -            15 250                -
     Total                                                                     575 250           515 596          500 346

     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 for each of the cash-generating units
     shown above. 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 15% (2016: 14%) (weighted average cost of capital); and
     - Projected cash flows for the five years based on a 5% (2016: 5%) growth rate.

                                                                              Unaudited         Unaudited         Audited
                                                                            31 December       31 December         30 June
                                                                                   2017              2016            2017
                                                                                  R'000             R'000           R'000
7.   INTEREST-BEARING BORROWINGS
     Non-current borrowings                                                     216 668           160 449         101 487
     - Investec Bank Limited                                                    200 000           148 555         101 487
     - First National Bank Limited                                               16 668                 -               -
     - Sanlam Capital Markets Limited                                                 -            11 894               -
     Current borrowings                                                          64 572            20 486             581
     - Investec Bank Limited                                                     53 914             1 576             581
     - First National Bank Limited                                               10 658                 -               -
     - Sanlam Capital Markets Limited                                                 -            18 910               -
     Total                                                                      281 240           180 935         102 068

     A loan from Investec Bank Limited was obtained in July 2015 to fund future working capital requirements. The loan is a
     60 month credit facility at an interest rate of the three month JIBAR plus 3,2% margin.

     In January 2017 a further facility from Investec Bank Limited was obtained to fund working capital. The facility is a 364 day
     revolving facility at interest rate of Investec Bank Limited's prime rate.

     The Investec Bank Limited facilities are secured by 100% of the shares held in Adapt IT Proprietary Limited and cession of
     book debts held by certain Adapt IT Holdings Limited subsidiaries.

     Excess cash resources are used from time to time to reduce the Investec facilities.

     Micros South Africa Proprietary Limited has a loan with First National Bank Limited. The loan is repayable monthly and
     accrues interest at a rate linked to First National Bank Limited's prime rate. The loan has been secured by the cession of the
     loan with Hospitality Finance Solutions Proprietary Limited, a R15 000 000 general notarial bond over the moveable assets
     and the cession of all the positive balances held in Micros South Africa Proprietary Limited bank accounts.

     CQS Investment Holdings Proprietary Limited had a loan with Sanlam Capital Markets Limited. The interest was charged at a
     fixed rate of 9,22% over a five-year loan period. The loan was settled at 30 June 2017.

     Interest-bearing borrowings are carried at amortised cost and carrying value approximates fair value.

                                                                              Unaudited         Unaudited         Audited
                                                                            31 December       31 December         30 June
                                                                                   2017              2016            2017
                                                                                  R'000             R'000           R'000
8.   FINANCE LEASE LIABILITIES
     Non-current liabilities                                                      2 438                 -               -
     Current liabilities                                                          1 345                 -               -
     Total                                                                        3 783                 -               -

     Micros South Africa Proprietary Limited lease certain motor vehicles and equipment under finance leases. Interest rates
     are linked to prime at the contract date. All leases have fixed repayments and no arrangements have been entered into for
     contingent rent. The finance leases are secured by the lessor's charge over the leased assets.

                                                                              Unaudited         Unaudited         Audited
                                                                            31 December       31 December         30 June
                                                                                   2017              2016            2017
                                                                                  R'000             R'000           R'000
9.   DEFERRED INCOME
     Education segment                                                           95 810            91 020          51 719
     Manufacturing segment                                                        6 930             7 044           5 673
     Energy segment                                                               6 755             6 827           4 062
     Financial segment                                                            5 188             4 225           9 768
     Hospitality segment                                                         24 562                 -               -
     Total                                                                      139 245           109 116          71 222

     The Education segment deferred income relates to annual maintenance fees invoiced in advance for the year and usually
     collected at the end of January and February, the start of the education year.

     The Hospitality Segment deferred income relates to all maintenance, software licences, software as a service (SAAS) and
     hosting pre-invoiced for future periods.

     The deferred income of other segments includes long-term software projects in progress, ongoing upgrades and other
     software-related projects for clients.

10.  BUSINESS COMBINATIONS
     10.1  Acquisition of subsidiary
           On 1 July 2017 the group acquired the entire issued share capital of Micros South Africa Proprietary Limited (Micros),
           a South African registered company.

           Micros conducts business in the Information Technology sector, providing software, hardware, enterprise systems
           integration, consulting, support and solutions to its clients, primarily in the hospitality industry.

           The acquisition of Micros, which is a leader in its vertical market, created an entry into the hospitality industry, a new
           vertical for Adapt IT, further diversifying the group.

           The purchase consideration of R122,5 million consists of R88,9 million in cash, paid on 19 July 2017, and R33,6 million
           in shares issued on 31 July 2017.

           The fair value of the net assets acquired amounted to R46,2 million, resulting in goodwill of R76,3 million at acquisition.
           The purchase 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 fair values of the identifiable net assets and liabilities of Micros as at the date of acquisition were:

                                                                                                               Fair value
                                                                                                               recognised
                                                                                                                       on
                                                                                                              acquisition
                                                                                                                    R'000
           Assets
           Property and equipment                                                                                  31 837
           Intangible assets                                                                                       43 701
           Deferred taxation                                                                                        7 973
           Finance lease receivables                                                                                2 554
           Trade and other receivable                                                                              40 701
           Inventory                                                                                               27 989
           Cash and cash equivalents                                                                               22 955
           Total assets                                                                                           177 710
           Liabilities
           Deferred tax liabilities                                                                                11 726
           Interest-bearing borrowings                                                                             32 230
           Finance lease liabilities                                                                                2 700
           Loans from vendors (previous shareholders)                                                               6 724
           Trade and other payables                                                                                72 216
           Provisions                                                                                               4 162
           Current tax payable                                                                                      1 695
           Total liabilities                                                                                      131 453
           Total identifiable net assets                                                                           46 257
           Goodwill arising on acquisition                                                                         76 284
           Fair value of consideration payable:                                                                   122 541
           Cash paid                                                                                               88 889
           Shares issued in July 2017                                                                              33 652
           Fair value of consideration payable                                                                    122 541
           Cash outflow on acquisition:
           Net cash acquired with the subsidiary                                                                   22 955
           Cash paid                                                                                             (88 889)
           Net cash outflow on acquisition                                                                       (65 934)

           The acquisition is provisionally accounted for in terms of the allowance per IFRS 3 Business Combinations.

           From the date of acquisition, Micros has contributed R10,9 million to the profit after tax of the group. Non-cash
           acquisition related expenses (amortisation of intangible assets) amounted to R1,5 million after tax.

           Cash acquisition related costs of R1,5 million have been expensed and are included in operational expenses on the
           statement of profit or loss and other comprehensive income.

     10.2  Measurement period adjustment
           At 1 August 2016, the EasyRoster acquisition was provisionally accounted for in terms of the allowance per IFRS 3
           Business Combinations. The purchase price allocation valuation was completed by the year ended 30 June 2017 and
           included in the fair value of assets and liabilities recognised on acquisition.

           Consequently, the comparative figures for 31 December 2016 have been adjusted. The effect of the adjustment is
           disclosed in the table below. There is no impact on the profit/loss for the period.

           The effect on 31 December 2016 group results is as follows:
                                                                                              Measurement
                                                                            As originally          period        Restated
                                                                                 reported      adjustment          amount
                                                                                    R'000           R'000           R'000
           ASSETS      
           Non-current assets                                                     771 574           1 793         773 367
           Property and equipment                                                  37 120               -          37 120
           Intangible assets                                                      189 123           7 364         196 487
           Goodwill                                                               520 911         (5 315)         515 596
           Equity accounted investment                                              2 633               -           2 633
           Deferred taxation asset                                                 21 787           (256)          21 531
           Current assets                                                         377 959               -         377 959
           Trade and other receivables                                            284 681               -         284 681
           Asset held for sale                                                          -               -               -
           Current tax receivable                                                   6 854               -           6 854
           Cash and cash equivalents                                               86 424               -          86 424
           Total assets                                                         1 149 533           1 793       1 151 326
           EQUITY AND LIABILITIES      
           Equity      
           Share capital                                                               15               -              15
           Share premium                                                          319 922               -         319 922
           Other capital reserves                                                  32 580               -          32 580
           Equity compensation reserve                                              7 207               -           7 207
           Foreign currency translation reserve                                     2 544               -           2 544
           Revaluation reserve                                                      3 544               -           3 544
           Retained earnings                                                      234 638               -         234 638
           Equity attributable to shareholders of the company                     600 450               -         600 450
           Non-controlling interest                                                 7 839               -           7 839
           Total equity                                                           608 289               -         608 289
           Non-current liabilities                                                251 352           1 793         253 145
           Interest-bearing borrowings                                            160 449               -         160 449
           Financial liabilities                                                   39 986               -          39 986
           Deferred taxation liability                                             50 917           1 793          52 710
           Current liabilities                                                    289 892               -         289 892
           Trade and other payables                                               103 559         (1 380)         102 179
           Provisions                                                              17 101               -          17 101
           Deferred income                                                        109 116               -         109 116
           Financial liabilities                                                   38 789               -          38 789
           Current portion of interest-free borrowings                                841           1 380           2 221
           Current portion of interest-bearing borrowings                          20 486               -          20 486
           Total equity and liabilities                                         1 149 533           1 793       1 151 326

11.  SEGMENT ANALYSIS
     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.

     Management does not monitor assets and liabilities by segment.

     The following tables present turnover and earnings before interest, tax, depreciation and amortisation (EBITDA)
     information regarding the group's operating segments for the six months ended 31 December 2017 and 31 December
     2016, respectively:

                                                   Manu-    Financial
                                  Education    facturing     Services     Energy  Hospitality          Other        Total
                                      R'000        R'000        R'000      R'000        R'000          R'000        R'000   
     Six months ended             
     31 December 2017             
     Turnover                        83 543      176 203      160 393     93 846      159 574              -      673 559
     Segment EBITDA                  13 866       38 369       21 816     20 276       24 998        (3 273)      116 052
     EBITDA margin   (%)                 17           22           14         22           16              -           17
          
     Six months ended             
     31 December 2016             
     Turnover                        84 655      122 315      162 472     91 249            -              -      460 691
     Segment EBITDA                  14 591       29 889       23 648     22 486            -          (745)       89 869
     EBITDA margin   (%)                 17           24           15         25            -              -           20

CORPORATE INFORMATION

ADAPT IT HOLDINGS LIMITED                                          TRANSFER SECRETARY
Incorporated in the Republic of South Africa                       Computershare Investor Services Proprietary Limited
Registration number 1998/017276/06                                 PO Box 61051, Marshalltown, 2107
Share code: ADI                                                    T +27 (0) 11 370 5000
ISIN: ZAE000113163                                                 F +27 (0) 11 688 5200
                                                               
COMPANY SECRETARY                                                  AUDITORS
Statucor Proprietary Limited                                       Deloitte & Touche
22 Wellington Road
Parktown                                                           SPONSOR
2193                                                               Merchantec Capital        
                                                                   2nd Floor, North Block
REGISTERED OFFICE                                                  Hyde Park Corner Office Towers           
5 Rydall Vale Office Park                                          Corner 6th Road and Jan Smuts Avenue
Rydall Vale Crescent                                               Johannesburg
La Lucia Ridge                                                     2196
4019
KwaZulu-Natal                                                      CORPORATE BANKERS
South Africa                                                       The Standard Bank of South Africa Limited
                                                                   ABSA Bank
DIRECTORS                                                          FirstRand Bank Limited
Craig Chambers* (Chairman)                                                                                 
Sbu Shabalala (Chief Executive Officer)                            LEGAL REPRESENTATIVES                   
Tiffany Dunsdon (Commercial Director)                              Michalsons                              
Nombali Mbambo (Chief Financial Officer)                           Garlicke & Bousfield 
Bongiwe Ntuli*                                                     Shepstone & Wylie
Catherine Koffman*                                                 Eversheds Sutherland
Oliver Fortuin*                                                    Read Hope Phillips Thomas Cadman Incorporated
* Independent non-executive director
                                                                   ADAPT IT WEBSITE
                                                                   http://www.adaptit.co.za

REGIONAL OFFICES

JOHANNESBURG                                PRETORIA                       CAPE TOWN
The Braes                                   50 Bushbuck Lane               Great Westerford
Adapt IT House                              Monument Park                  3rd Floor
I93 Bryanston Drive                         0181                           240 Main Road
Bryanston                                   Pretoria                       Rondebosch
Johannesburg                                                               Cape Town
       
T +27 (0) 11 460 5300                       T +27 (0) 12 425 5600          T +27 (0) 21 200 0480
F +27 (0) 11 460 5301                       F +27 (0) 12 460 5377

Adapt IT - Enabling you to achieve more



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