Wrap Text
Adapt IT Unaudited Condensed Consolidated Interim Group Results for the Six Months Ended 31 December 2018
ADAPT IT HOLDINGS LIMITED
Incorporated in the
Republic of South Africa
Registration number 1998/017276/06
Share code: ADI
ISIN: ZAE000113163
Adapt IT unaudited condensed consolidated
INTERIM GROUP RESULTS
for the six months ended 31 December 2018
FINANCIAL HIGHLIGHTS
4% Increase in 10% Increase in 1% Increase in 5% Increase in
TURNOVER EBITDA HEADLINE EARNINGS NORMALISED HEADLINE
FROM CONTINUING FROM CONTINUING PER SHARE EARNINGS PER SHARE
OPERATIONS OPERATIONS
TURNOVER
(R'm)
2014 261
2015 310
2016 461
2017 676 642* 34**
2018 667
* From continuing operations
** Business disposed
EBITDA
(R'm)
2014 42
2015 62
2016 90
2017 111 107* 4**
2018 118
* From continuing operations
** Business disposed
HEPS
(cents)
2014 16.82
2015 23.96
2016 24.41
2017 29.70
2018 29.89
NORMALISED HEPS
(cents)
2014 21.38
2015 28.89
2016 33.74
2017 38.73
2018 40.81
BUSINESS OVERVIEW
Adapt IT is a leader in the ICT market through the provision of software solutions to the Education, Manufacturing,
Energy, Financial Services, Communications and Hospitality sectors, employing over 1 000 technology
professionals and servicing more than 10 000 customers in 53 countries.
Adapt IT's South African offices are in Johannesburg, Durban and Cape Town, and international offices in
Mauritius, Botswana, Ireland, Kenya, 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.
At its core, the growth is underpinned by the company's purpose to grow the business and its people - enabling
clients to Achieve more.
OCT 2007 InfoWave merges with Adapt IT creating a software
business.
OCT 2008 Adapt IT specialising in Manufacturing software,
moves to the main board of the JSE.
AUG 2009 Education specialisation through the acquisition
of Integrated Tertiary Software (ITS) - a leader in
tertiary education ERP systems expanding the
company into Europe and Australasia.
OCT 2012 The Swicon360 acquisition extends the
manufacturing offering with SAP Human Capital
Management Business Process Outsourcing.
OCT 2013 Energy sector entry through the Aquilon acquisition
expands Adapt IT into Africa's growing energy,
sector, serving major oil companies.
SEP 2014 Added Telecommunications intelligence
management software through the AspiviaUnison
acquisition.
JAN 2016 Entry into the Financial Services Sector through the
acquisition of CQS.
JUL 2017 Micros South Africa, a leader in Hospitality Software,
is acquired by Adapt IT.
JUN 2018 Acquired LGR Telecommunications, provision and
management of end-to-end data warehouse and
business intelligence systems with presence in
Africa and Australia.
NOV 2018 Adapt IT acquires Conor Group, a specialist in high-
performance telco and mobile financial service
solutions to extend the Telecoms division.
JAN 2019 Adapt IT acquires Wisenet Group, a provider
of Software as a Service Learning Relationship
Management System in the Australasian
education sector.
MILESTONES
2014 2017 2017 2020
5th fastest growing R1 billion 2nd in the Sunday Times R3 billion annualised
African Tech Company annualised turnover Top 100 companies turnover target
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, Communications and Hospitality.
TURNOVER CONTRIBUTION
Education 14%
Energy 10%
Financial Services 22%
Hospitality 23%
Manufacturing 31%
INDUSTRY SECTORS
SECTOR OVERVIEW
Education
The Education division provides a specialised Enterprise Resource Planning (ERP) product, ITS
Integrator, and services to the Higher and further Education sector worldwide.
Manufacturing
The Manufacturing division provides Tranquillity ERP, Safety Health Environment and Quality
(SHE-Q), and EasyRoster specialist solutions to the sugar, resources and security industries.
Financial Services
The Financial Services division is a leading provider of specialised software solutions for
financial professionals, operating for more than 22 years.
Energy
The Energy division provides subject matter experts that design, implement and support
SAP(TM) and supply chain solutions in the Oil and Gas sector globally.
Communications
The Communications division is a leading provider of cloud-based communication
intelligence technology and expense management solutions, servicing over 1 000 corporate
customers across multiple sectors.
Hospitality
With over 22 years' industry experience, the Adapt IT Hospitality division is a leader in the
hospitality, and food and beverage industries - specialising in the resale, support, and
deployment of software and hardware products.
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
for the six for the six
months ended months ended
31 December 2018 31 December 2018
Manufacturing 207 49
Education 96 17
Financial Services 145 27
Energy 66 10
Hospitality 153 19
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 22% 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
78%
South Africa
14%
Other African countries
1%
The Americas
6%
Australasia
1%
Europe
TURNOVER BY CURRENCY
90%
Rands
4%
US $
1%
Euro
4%
Australian $
1%
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 from continuing operations for the six months ended December 2018 increased by 4% to R667 million.
There was no organic growth from continuing operations due to the challenging economic environment
persisting in the South African market, particularly low project turnover in the Energy and Hospitality sectors.
Acquisitive growth was 4% comprising mainly LGR, which was consolidated effective 1 June 2018. Earnings
before interest, tax, depreciation and amortisation (EBITDA) from continuing operations increased by 10% to
R118 million representing an improvement in EBITDA margin to 18% (2017: 16%).
Annuity turnover is a healthy 58% over the period and the five-year compound annual growth rate for turnover
was 21%.
Headline earnings per share (HEPS) for the six months to December 2018 grew 1% to 29,89 cents from 29,70 cents
and normalised HEPS grew 5% to 40,81 cents (2017: 38,73 cents) as reconciled in note 4.
Ordinary dividend number 16, in respect of the year ended 30 June 2018, of 17,10 cents per share on a four times
dividend cover ratio, was paid to shareholders on 25 September 2018. It is Adapt IT's policy to declare a dividend
after financial year end and not at the interim reporting date.
Adapt IT entered into new facilities with Standard Bank in December 2018 to fund future working capital
requirements and acquisitions. Proceeds from the facility were also applied to settle the Investec facilities.
Cash generated from operations grew by 105% to R58,3 million (2017: R28,5 million).
ACQUISITIONS
Adapt IT Proprietary Limited acquired Strive Software International Proprietary Limited (Strive Software) for
a consideration of R12,5 million, which was consolidated effective 1 September 2018. This serves to augment
the Education division's offerings by facilitating diversification into the private college market. The results from
Strive Software for the four months are included in these interim results. Refer to the business combination
note 10.1.
Adapt IT Proprietary Limited acquired the remaining 30% minority shareholding of CQS Confirmations Proprietary
Limited, a subsidiary originally acquired with the CQS business, for a consideration of R15,7 million, which was
effective 1 December 2018.
Adapt IT Proprietary Limited acquired the business of Conor Solutions Proprietary Limited (Conor), for a total
consideration of R80 million, which provides software solutions to the telecommunications industry focused
on mobile technologies, further bolstering the Communications product offering. Conor was consolidated with
effect from 31 December 2018 and has no contribution to comprehensive income in these interim results. Refer
to the business combination note 10.2.
SHARE REPURCHASE
Adapt IT repurchased 3 million (1,9%) of its issued ordinary shares in the open market, under the general authority
granted by shareholders, for R22,3 million at an average price of 733 cents per share during the reporting period.
10,8 million treasury shares were held at 31 December 2018.
MERGER
On 1 July 2018, Cash Bases South Africa Proprietary Limited merged with Adapt IT to achieve efficiencies and
savings in administrative and operational expenditure.
EVENTS AFTER THE REPORTING DATE
As set out in the announcement released on SENS on 9 January 2019, Adapt IT has entered into agreements to
acquire the Wisenet Group. Wisenet is a leader in providing cloud-based SaaS Learning Relationship Management
platforms to vocational training institutions in Australia. Shareholders will be notified once the last of the
conditions precedent to the acquisition, which is classified as a Category 2 transaction in terms of the JSE Listings
Requirements, has been fulfilled or waived.
No other 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, through a combination of organic growth and strategic acquisitions.
OUTLOOK
Despite the current market conditions, our medium and longer-term outlook is optimistic as we continue to build
upon the strong foundation we have established to create a sizeable, scalable, leading ICT business.
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 the 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
28 January 2019
CONDENSED CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited
Six months Six months Audited
ended ended year-ended Period-
31 December 31 December 30 June on-period
2018 2017* 2018 change
Notes R'000 R'000 R'000 %
Revenue 669 349 678 080 1 353 896 (1)
Turnover 667 211 676 189 1 348 404 (1)
Cost of sales (261 371) (283 641) (533 124) (8)
Gross profit 405 840 392 548 815 280 3
Operating expenses (288 098) (281 308) (545 178) 2
Earnings before interest, tax, depreciation and
amortisation (EBITDA) 117 742 111 240 270 102 6
Depreciation and amortisation (12 555) (8 253) (18 002) 52
Amortisation of intangible assets acquired (18 911) (16 815) (33 895) 12
Profit from operations 86 276 86 172 218 205 -
Finance income 2 2 138 1 891 5 493 13
Finance costs 3 (17 055) (12 969) (28 560) 32
Profit before taxation 71 359 75 094 195 138 (5)
Income tax expense (25 207) (26 159) (65 527) (4)
Profit for the period 46 152 48 935 129 611 (6)
Attributable to:
Equity holders of the parent 45 132 47 531 122 020 (5)
Non-controlling interests 1 020 1 404 7 591 -
Other comprehensive income/(loss)
Items that will not be reclassified to profit and loss - - (2 750)
Devaluation of land and building - - (3 544)
Income tax effect - - 794
Items that may be reclassified subsequently to profit
and loss 4 116 951 534
Exchange differences arising from translation of
foreign operations 4 116 951 534
Total comprehensive income 50 268 49 886 127 395 1
Attributable to:
Equity holders of the parent 49 248 48 482 119 804 2
Non-controlling interests 1 020 1 404 7 591
Headline earnings:
Profit attributable to ordinary shareholders 45 132 47 531 122 020 (5)
Profit after tax on sale of businesses - 253 (17 452)
(Profit)/loss on sale of property and equipment (22) (415) 473
Scrapping of property and equipment - - 385
Headline earnings 45 110 47 369 105 426 (5)
Normalised headline earnings 4 61 590 61 774 137 878 -
Number of ordinary shares in issue (000) 160 540 160 540 160 540 -
Weighted average number of ordinary shares in issue (000) 150 913 159 509 157 415 (5)
Diluted average number of ordinary shares in issue (000) 150 913 159 509 157 415 (5)
Basic earnings per share (cents) 29,91 29,80 77,51 -
Diluted basic earnings per share (cents) 29,91 29,80 77,51 -
Headline earnings per share (cents) 29,89 29,70 66,97 1
Diluted headline earnings per share (cents) 29,89 29,70 66,97 1
Normalised headline earnings per share (cents) 40,81 38,73 87,59 5
Dividend per share (cents) 17,10 13,70 13,70 25
* Refer to note 10.4
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited
Six months Six months Audited
ended ended year-ended
31 December 31 December 30 June
2018 2017* 2018
Notes R'000 R'000 R'000
ASSETS
Non-current assets 1 055 968 929 169 974 154
Property and equipment 107 786 70 855 96 242
Intangible assets 281 382 211 160 239 365
Goodwill 6 616 044 577 013 571 932
Finance lease receivables 23 999 25 797 23 666
Loans receivable 1 250 17 232 15 289
Deferred taxation asset 25 507 27 112 27 660
Current assets 580 832 520 491 413 361
Trade and other receivables 359 421 392 730 272 692
Inventory 23 383 23 258 21 994
Current tax receivable 9 351 2 354 1 633
Finance lease receivables 9 617 13 832 10 987
Loans receivable 500 4 158 4 096
Asset classified as held for sale 15 562 - 15 562
Cash and cash equivalents 162 998 84 159 86 397
Total assets 1 636 800 1 449 660 1 387 515
EQUITY AND LIABILITIES
Equity
Share capital 16 16 16
Treasury shares (1) (1) (1)
Share premium 321 591 370 299 340 278
Equity compensation reserve 21 266 11 789 19 221
Foreign currency translation reserve 7 421 3 722 3 305
Revaluation reserve - 3 544 -
Business combination reserves (15 217) - -
Retained earnings 407 418 312 819 388 102
Equity attributable to shareholders of the company 742 494 702 188 750 921
Non-controlling interest (248) 5 865 2 283
Total equity 742 246 708 053 753 204
Non-current liabilities 541 334 307 672 287 750
Interest-bearing borrowings 7 459 911 216 668 200 794
Financial liabilities 18 837 31 296 33 479
Finance lease liabilities 8 1 209 2 438 1 670
Deferred taxation liability 61 377 57 270 51 807
Current liabilities 353 220 433 935 346 561
Trade and other payables 163 046 155 568 133 860
Provisions 26 684 33 974 51 841
Deferred income 9 129 409 139 245 105 458
Current tax payable 3 611 3 450 1 453
Financial liabilities 19 892 27 588 38 952
Current portion of interest-free borrowings - 8 193 -
Current portion of interest-bearing borrowings 7 9 262 64 572 13 681
Finance lease liabilities 8 1 316 1 345 1 316
Total equity and liabilities 1 636 800 1 449 660 1 387 515
Net asset value per share (cents) 462,34 441,04 469,17
Tangible net asset value per share (cents) (33,57) 26,72 56,26
Liquidity ratio (times) 1,64 1,20 1,19
Solvency ratio (times) 1,83 1,95 2,19
Market price per share
Close (cents) 590 645 900
High (cents) 900 1 009 1 099
Low (cents) 588 560 560
Capital expenditure for the period (R'000) 23 783 40 069 99 717
Capital commitments (R'000) 10 386 55 264 34 169
* Refer to note 10.4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
Six months Six months Audited
ended ended ear-ended
31 December 31 December 30 June
2018 2017* 2018
Notes R'000 R'000 R'000
Operating activities
Cash generated from operations 58 305 28 461 257 709
Finance income 2 1 378 1 754 3 958
Finance costs 3 (14 938) (10 671) (23 403)
Dividends paid (28 906) (24 492) (34 971)
Taxation paid (34 221) (32 333) (68 951)
Net cash flow (utilised in)/generated from operating activities (18 382) (37 281) 134 342
Investing activities
Property and equipment acquired (21 018) (30 122) (90 684)
Intangible assets acquired and developed (2 765) (2 633) (9 034)
Proceeds on disposal of property and equipment - 2 110 2 066
Proceeds from loans receivable 17 635 2 879 5 753
Finance lease assets receipts/(payments) 1 037 (2 816) (2 160)
Settlement of contingent purchase consideration (44 054) (14 198) (22 391)
Net cash outflow on acquisition of subsidiaries (79 057) (65 934) (108 734)
Net cash outflow on acquisition of minority interest 10.3 (12 519) - -
Proceeds from disposal of subsidiary - - 42 027
Net cash flows utilised in investment activities (140 741) (110 714) (183 157)
Financing activities
Proceeds from borrowings 625 236 236 929 323 000
Repayment of borrowings (370 538) (90 786) (242 823)
Share repurchases (22 297) (42 645) (72 666)
Repayment of vendor loans - (6 724) (6 724)
(Repayment)/proceeds of/from finance lease (461) 1 082 285
Issue of shares for cash - 35 298 35 297
Net cash inflow from financing activities 231 940 133 154 36 369
Net increase/(decrease) in cash resources 72 817 (14 841) (12 446)
Exchange differences on translation 3 784 951 794
Cash and cash equivalents at beginning of period 86 397 98 049 98 049
Cash and cash equivalents at end of period 162 998 84 159 86 397
* Refer to note 10.4
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign Attributable
Other Equity Asset currency Business to equity Non-
Share Treasury Share capital compensation revaluation translation combination Retained holders of controlling
capital shares premium reserves reserve reserve reserve reserves earnings the parent interest Total
Unaudited R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at
30 June 2017 (audited) 15 - 336 226 17 155 14 585 3 544 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) - (2 608)
Shares issued during the year 1 - 69 136 - (188) - - - - 68 949 - 68 949
Net repurchase of shares - (1) (42 644) - - - - - - (42 645) - (42 645)
Issue of treasury shares - - 7 581 (7 581) - - - - - - - -
Settled in cash - - - (9 574) - - - - - (9 574) - (9 574)
Dividend paid - - - - - - - - (21 994) (21 994) (2 498) (24 492)
Balance at 31 December 2017 16 (1) 370 299 - 11 789 3 544 3 722 - 312 819 702 188 5 865 708 053
Balance at
30 June 2018 (audited) 16 (1) 340 278 - 19 221 - 3 305 - 388 102 750 921 2 283 753 204
Total comprehensive income
for the period - - - - - - 4 116 - 45 132 49 248 1 020 50 268
Profit for the period - - - - - - - - 45 132 45 132 1 020 46 152
Other comprehensive income
for the period - - - - - - 4 116 - - 4 116 - 4 116
Share-based payments - - - - 2 045 - - - - 2 045 - 2 045
Acquisition of minority interest - - - - - - - (15 217) - (15 217) (461) (15 678)
Net repurchase of shares - - (18 687) - - - - - - (18 687) - (18 687)
Dividend paid - - - - - - - - (25 816) (25 816) (3 090) (28 906)
Balance at 31 December 2018 16 (1) 321 591 - 21 266 - 7 421 (15 217) 407 418 742 494 (248) 742 246
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The unaudited condensed consolidated interim results for the six months ended 31 December 2018 have been prepared
in accordance with and containing the information required by the JSE 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 except as stated below:
The group has applied both IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers using the
modified retrospective approach. Under this approach the cumulative effect of initially applying IFRS 9 and IFRS 15 are
adjusted to the opening balance of equity.
IFRS 9 Financial Instruments (IFRS 9)
The group has applied the expected credit loss method as detailed in IFRS 9 by using the simplified approach. The application
of a provision matrix to the group's trade receivables based on historic default rates with an adjustment for forward looking
events has not resulted in a different position from the previous standard.
The application of IFRS 9 has not resulted in the reclassification of any of the group's financial assets and liabilities.
IFRS 15 Revenue from Contracts with Customers (IFRS 15)
The group has done a thorough assessment of its performance obligations under IFRS 15. The group is satisfied that the
performance obligations are satisfied in line with the group's existing revenue recognition criteria and as result there is no
effect on the timing of revenue being recognised.
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 28 January 2019.
Unaudited Unaudited Audited
31 December 31 December 30 June
2018 2017 2018
R'000 R'000 R'000
2. FINANCE INCOME
Imputed interest 760 137 1 535
Bank interest 786 777 1 749
Other interest 592 977 2 209
Total finance income 2 138 1 891 5 493
3. FINANCE COSTS
Borrowings 14 938 10 671 23 403
Financial liabilities (imputed) 2 117 2 298 5 156
Total finance cost 17 055 12 969 28 559
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 on outstanding contingent purchase considerations.
Unaudited Unaudited Audited
31 December 31 December 30 June
2018 2017 2018
R'000 R'000 R'000
Reconciliation between headline earnings and normalised headline
earnings for the period:
Headline earnings 45 110 47 369 105 426
Amortisation of intangible assets acquired 18 911 16 815 33 895
Deferred taxation on amortisation of intangible assets acquired (4 548) (4 708) (9 491)
Fair value adjustment to financial liability (imputed interest) 2 117 2 298 5 156
Fair value adjustment to financial liability (Micros underpin) - - 2 892
Normalised headline earnings 61 590 61 774 137 878
Weighted average number of ordinary shares in issue (000) 150 913 159 509 157 415
Normalised headline earnings per share (cents) 40,81 38,73 87,59
5. DIVIDENDS
Ordinary dividend number 16 of 17,10 cents per share was paid to shareholders on 25 September 2018.
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 Jun
2018 2017 2018
R'000 R'000 R'000
6. GOODWILL
Carrying amount at beginning of period 571 932 500 346 500 346
Acquisition of EasyRoster - (1 380) (1 380)
Acquisition of Micros - 78 047 78 047
Acquisition of LGR 5 102 - 2 976
Disposal of CQS GRC Solutions - - (8 057)
Acquisition of Strive Software 5 525 - -
Acquisition of Conor 33 485 - -
Carrying amount at end of period 616 044 577 013 571 932
Comprising:
Cost 616 044 577 013 571 932
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
- CQS 187 933 195 990 187 933
- EasyRoster 41 701 41 701 41 701
- Micros 78 047 78 047 78 047
- LGR 8 078 - 2 976
- Strive Software 5 525 - -
- Conor 33 485 - -
Total 616 044 577 013 571 932
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% (2017: 15%) (weighted average cost of capital); and
- Projected cash flows for the five years based on a 5% (2017: 5%) growth rate.
Unaudited Unaudited Audited
31 December 31 December 30 June
2018 2017 2018
R'000 R'000 R'000
7. INTEREST-BEARING BORROWINGS
Non-current borrowings 459 911 216 668 200 794
- The Standard Bank of South Africa Limited 452 018 - -
- Investec Bank Limited - 200 000 189 080
- FirstRand Bank Limited 7 893 16 668 11 714
Current borrowings 9 262 64 572 13 681
- The Standard Bank of South Africa Limited 1 608 - -
- Investec Bank Limited - 53 914 3 282
- FirstRand Bank Limited 7 654 10 658 10 399
Total 469 173 281 240 214 475
Adapt IT Proprietary Limited refinanced its borrowings with The Standard Bank of South Africa Limited in December 2018
as follows:
- Facility A: 60 month term facility for acquisitions at an interest rate of three-month JIBAR plus 2,65% margin.
- Facility B: 36 month revolving credit facility at an interest rate of three-month JIBAR plus 2,65% margin.
Facility B was utilised to settle the Investec Bank Limited facilities.
The Standard Bank of South Africa Limited facilities are secured by 100% of the shares held in Adapt IT Proprietary Limited,
cession of book debts held by Adapt IT Proprietary Limited and cession of all the positive balances held in Adapt IT
Proprietary Limited bank accounts.
Micros South Africa Proprietary Limited has a loan with FirstRand Bank Limited. The loan is repayable monthly and accrues
interest at a rate linked to FirstRand Bank Limited's prime rate. The loan has been secured by 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.
A loan from Investec Bank Limited was obtained in July 2015 to fund future working capital requirements. The loan was a
60 month credit facility at an interest rate of the three-month JIBAR plus 3,2% margin. In January 2018, a further facility from
Investec Bank Limited was obtained to fund working capital. The facility was a 12 month revolving facility at interest rate of
Investec Bank Limited's prime rate. The Investec Bank Limited facilities were secured by 100% of the shares held in Adapt IT
Proprietary Limited and cession of book debts held by Adapt IT Holdings Limited and its subsidiaries. The Investec facilities
were settled in December 2018.
Interest-bearing borrowings are carried at amortised cost and carrying value approximates fair value.
Unaudited Unaudited Audited
31 December 31 December 30 June
2018 2017 2018
R'000 R'000 R'000
8. FINANCE LEASE LIABILITIES
Non-current liabilities 1 209 2 438 1 670
Current liabilities 1 316 1 345 1 316
Total 2 525 3 783 2 986
Micros South Africa Proprietary Limited leases 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
2018 2017 2018
R'000 R'000 R'000
9. DEFERRED INCOME
Education segment 89 304 95 810 55 761
Manufacturing segment 17 150 6 930 6 776
Energy segment 3 340 6 755 1 725
Financial segment 7 663 5 188 7 939
Hospitality segment 11 952 24 562 33 257
Total 129 409 139 245 105 458
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 in South Africa.
The Hospitality segment deferred income relates to all maintenance, software licenses, 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 September 2018, the group acquired the entire issued share capital of Strive Software International Proprietary
Limited (Strive Software), a South African registered company.
Strive Software conducts business in the education sector, providing software, consulting and support to its clients.
The purchase consideration of R12,5 million was settled in cash.
The fair value of the net assets acquired amounted to R6,9 million, resulting in goodwill of R5,5 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 Strive Software as at the date of acquisition were:
Fair value
recognised
on
acquisition
R'000
Assets
Property and equipment 4
Intangible assets 8 738
Trade and other receivable 229
Cash and cash equivalents 816
Total assets 9 787
Liabilities
Deferred tax liabilities 2 445
Trade and other payables 343
Current tax payable 53
Total liabilities 2 841
Total identifiable net assets 6 946
Goodwill arising on acquisition 5 525
Fair value of consideration payable: 12 471
Cash paid 12 471
Fair value of consideration payable 12 471
Cash outflow on acquisition:
Net cash acquired with the subsidiary 816
Cash paid (12 471)
Net cash outflow on acquisition (11 655)
The acquisition is provisionally accounted for in terms of the allowance per IFRS 3 Business Combinations.
From the date of acquisition, Strive Software has contributed R0,3 million to the profit after tax of the group. Non-cash
acquisition related expenses (amortisation of intangible assets) amounted to R0,2 million after tax.
Cash acquisition related costs of R0,2 million have been expensed and are included in operational expenses on the
statement of profit or loss and other comprehensive income.
10.2 Acquisition of subsidiary
On 31 December 2018, the group acquired certain assets and liabilities of Conor Solutions Proprietary Limited (Conor)
(South African registered).
Conor Solutions operates in the ICT sector focused on mobile technologies providing turnkey technology solutions to
mobile operators, financial institutions, enterprises, and SMMEs in Africa and South America.
The acquisition will provide the group with access to key proprietary software, customers and markets in the
telecommunications space in South Africa as well as key markets in Africa including DRC, Tanzania, Lesotho and
Namibia.
The purchase consideration of R80,0 million was settled in cash in December 2018.
The fair value of the net assets acquired amounted to R33,9 million, resulting in goodwill of R33,5 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 Conor as at the date of acquisition were:
Fair value
recognised
on acquisition
R'000
Assets
Property and equipment 1 099
Intangible assets 47 258
Total assets 48 357
Liabilities
Deferred tax liabilities 13 232
Trade and other payables 1 208
Total liabilities 14 440
Total identifiable net assets 33 917
Goodwill arising on acquisition 33 485
Fair value of consideration payable: 67 402
Working capital cash received (12 598)
Cash paid 80 000
Fair value of consideration payable 67 402
Cash outflow on acquisition:
Working capital cash received 12 598
Cash paid (80 000)
Net cash outflow on acquisition (67 402)
The acquisition is provisionally accounted for in terms of the allowance per IFRS 3 Business Combinations.
10.3 Acquisition of minority interest
On 1 December 2018, the group acquired the 30% minority interest held in CQS Confirmations Proprietary Limited
from Que Dee Trading 35 Proprietary Limited (Que Dee), a South African registered company, for a consideration of
R15,7 million.
The fair values of the net assets and liabilities of Que Dee as at the date of acquisition were:
recognised
on acquisition
R'000
Total identifiable net assets -
Non-controlling interest (461)
Cash paid on 10 December 2018 12 519
Cash due on 10 June 2019 3 159
Business combination reserves 15 217
Cash outflow on acquisition:
Cash received with the acquisition of Que Dee -
Cash paid on 10 December 2018 (12 519)
Net cash outflow on acquisition of minority interest (12 519)
10.4 Measurement period adjustment
At 1 July 2017, the Micros 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 2018 and included
in the fair value of assets and liabilities recognised on acquisition.
Consequently, the comparative figures for 31 December 2017 have been adjusted. The effect of the adjustment is
disclosed in the tables below.
The effect on 31 December 2017 group results is as follows:
Condensed consolidated statement of profit or loss and other comprehensive income
As originally period Restated
reported adjustment amount
R'000 R'000 R'000
Revenue 675 450 2 630 678 080
Turnover 673 559 2 630 676 189
Cost of sales (277 060) (6 581) (283 641)
Gross profit 396 499 (3 951) 392 548
Operating expenses (280 447) (861) (281 308)
Earnings before interest, tax, depreciation and amortisation (EBITDA) 116 052 (4 812) 111 240
Depreciation and amortisation (13 105) 4 852 (8 253)
Amortisation of intangible assets acquired (16 815) - (16 815)
Profit from operations 86 132 40 86 172
Finance income 1 891 - 1 891
Finance costs (12 969) - (12 969)
Profit before taxation 75 054 40 75 094
Income tax expense (26 119) (40) (26 159)
Profit for the period 48 935 - 48 935
Attributable to:
Equity holders of the parent 47 531 - 47 531
Non-controlling interests 1 404 - 1 404
Items that may be reclassified subsequently to profit and loss 951 - 951
Exchange differences arising from translation of foreign operations 951 - 951
Total comprehensive income 49 886 - 49 886
Number of ordinary shares in issue (000) 160 540 - 160 540
Weighted average number of ordinary shares in issue (000) 159 509 - 159 509
Diluted average number of ordinary shares in issue (000) 159 509 - 159 509
Basic earnings per share (cents) 29,80 - 29,80
Diluted basic earnings per share (cents) 29,80 - 29,80
Headline earnings per share (cents) 29,70 - 29,70
Diluted headline earnings per share (cents) 29,70 - 29,70
Condensed consolidated statement of financial position
Measurement
As originally period Restated
reported adjustment amount
R'000 R'000 R'000
ASSETS
Non-current assets 926 724 2 445 929 169
Property and equipment 95 310 (24 455) 70 855
Intangible assets 208 484 2 676 211 160
Goodwill 575 250 1 763 577 013
Finance leave receivables 1 375 24 422 25 797
Loans receivable 17 232 - 17 232
Deferred taxation asset 29 073 (1 961) 27 112
Current assets 508 144 12 347 520 491
Trade and other receivables 392 730 - 392 730
Inventory 23 258 - 23 258
Current tax receivable 2 346 8 2 354
Finance lease receivables 1 493 12 339 13 832
Loans receivable 4 158 - 4 158
Asset classified as held for sale - - -
Cash and cash equivalents 84 159 - 84 159
Total assets 1 434 868 14 792 1 449 660
EQUITY AND LIABILITIES
Equity
Share capital 16 - 16
Treasury shares (1) - (1)
Share premium 370 299 - 370 299
Equity compensation reserve 11 789 - 11 789
Foreign currency translation reserve 3 722 - 3 722
Revaluation reserve 3 544 - 3 544
Retained earnings 312 819 - 312 819
Equity attributable to shareholders of the company 702 188 - 702 188
Non-controlling interest 5 865 - 5 865
Total equity 708 053 - 708 053
Non-current liabilities 305 289 2 383 307 672
Interest-bearing borrowings 216 668 - 216 668
Financial liabilities 31 296 - 31 296
Finance lease liabilities 2 438 - 2 438
Deferred taxation liability 54 887 2 383 57 270
Current liabilities 421 526 12 409 433 935
Trade and other payables 155 568 - 155 568
Provisions 33 974 - 33 974
Deferred income 139 245 - 139 245
Current tax payable 3 450 - 3 450
Financial liabilities 15 179 12 409 27 588
Current portion of interest-free borrowings 8 193 - 8 193
Current portion of interest-bearing borrowings 64 572 - 64 572
Finance lease liabilities 1 345 - 1 345
Total equity and liabilities 1 434 868 14 792 1 449 660
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 amoritisation (EBITDA)
information regarding the group's operating segments for the six months ended 31 December 2018 and 31 December
2017, 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 2018
Turnover 96 108 206 712 144 579 66 549 153 263 - 667 211
Segment EBITDA 17 404 49 042 26 608 10 449 18 902 (4 663) 117 742
EBITDA margin (%) 18 24 18 16 12 - 18
Six months ended
31 December 2017
Turnover 83 543 176 203 160 393 93 846 162 204 - 676 189
Segment EBITDA 13 866 38 369 21 816 20 276 20 186 (3 273) 111 240
EBITDA margin (%) 17 22 14 22 12 - 16
CORPORATE INFORMATION
COMPANY SECRETARY
Statucor Proprietary Limited
22 Wellington Road
Parktown
2193
REGISTERED OFFICE
Adapt IT Johannesburg Campus
152 14th Road
Noordwyk
Midrand
South Africa
DIRECTORS
Craig Chambers* (Chairman)
Sbu Shabalala (Chief Executive Officer)
Tiffany Dunsdon (Commercial Director)
Nombali Mbambo (Chief Financial Officer)
Bongiwe Ntuli*
Catherine Koffman*
Oliver Fortuin*
* Independent non-executive director
TRANSFER SECRETARY
Computershare Investor Services
Proprietary Limited
PO Box 61051, Marshalltown, 2107
T +27 (0) 11 370 5000
F +27 (0) 11 688 5200
AUDITORS
Deloitte & Touche
SPONSOR
Merchantec Capital
2nd Floor, North Block
Hyde Park Office Towers
Corner 6th Road and Jan Smuts
Avenue
Hyde Park
2196
CORPORATE BANKERS
The Standard Bank of South Africa
Limited
ABSA Bank
FirstRand Bank Limited
LEGAL REPRESENTATIVES
Garlicke & Bousfield Incorporated
Michalsons
ADAPT IT WEBSITE
http://www.adaptit.co.za
SOUTH AFRICAN OFFICES
GAUTENG
Adapt IT Johannesburg Campus
152 14th Road
Noordwyk
Midrand
South Africa
T +27 (0)10 494 0000
KWAZULU-NATAL
Rydall Vale Office Park
5 Rydall Vale Crescent
La Lucia Ridge
Durban
T +27 (0) 31 514 7300
F +27 (0) 86 602 8961
WESTERN CAPE
Great Westerford
3rd Floor
240 Main Road
Rondebosch
Cape Town
T +27 (0) 21 200 0480
INTERNATIONAL OFFICES
MAURITIUS
Building 10
Clarens Field Business Park
Riviere Noire Road
Bambous, 90203
Mauritius
T +230 452 9349
IRELAND
City Junction Business Park
1st Floor, Chase House
Northern Cross, Malahide Rd
Dublin 17
Ireland
T +353 1 687 3732
AUSTRALIA
Adapt IT Australia
5/15 Queen Street
Melbourne
VIC 3000
Australia
T +61 38 611 5401
KENYA
Adapt IT Solutions Limited
Kilimani Court
No 8 Kilimani Road
Nairobi
T +254 713 088 068
BOTSWANA
Fairscape Precinct
Plot 70667
Fairgrounds Office Park
Building 2 Floor 5
Gaborone
Botswana
T +267 316 7456
F +267 316 7457
NEW ZEALAND
Level 6
Grand Annexe Tower One
84 Boulcott Street
Wellington, 6011
New Zealand
T: +64 4 931 1480
Date: 29/01/2019 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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