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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
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