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ADI
ADI
ADI - Adapt IT Holdings Limited - 2009 Unaudited interim consolidated group
results for the six months ended 31 August 2009
ADAPT IT HOLDINGS LIMITED
(Formerly InfoWave Holdings Limited)
(Registration number 1998/017276/06)
Share code: ADI ISIN: ZAE000113163
("Adapt IT" or "the group")
2009 UNAUDITED INTERIM CONSOLIDATED GROUP RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2009
Interim report to stakeholders for the six months ended 31 August 2009
Results of operations
Revenue grew 60% to R60,6 million (R37,8 million). Net profit attributable to
ordinary shareholders is R4,5 million compared to R4,2 million in the previous
period. The interim earnings per share have increased in line with profits to
4,73 cents from 4,36 cents, representing an 8% increase Adapt IT (Pty) Limited
contributed a profit before tax of R4,8 million (2008: R4,8 million). ITS
Holdings (Pty) Limited, consolidated for two months, contributed a profit before
tax of R0,7 million. ApplyIT (Pty) Limited contributed a profit before tax of
R0,1 million (2008: R2,2 million).
The group incurred non-recurring transaction costs, relating to the acquisition
of ITS Holdings (Pty) Limited, being fully expensed during the period. The tough
market conditions prevailing mainly in manufacturing and mining sectors have
reduced operating profit of the Adapt IT and ApplyIT operating segments.
Dividend
Ordinary dividend number 7 of 1,86 cents per share was paid to shareholders on 3
July 2009. The group has a policy to declare dividends at the end of the
financial year and not at the interim reporting date.
Change of year end
Pursuant to the ITS transaction, the group`s year end will change to 30 June.
The current financial reporting period will thus be extended to 16 months.
Strategy
The group`s strategic objectives remain to increase operational efficiency,
defend current markets, pursue organic growth, and pursue acquisitive growth
into new markets, whilst being cognisant of ensuring sustainable growth in light
of current market conditions.
The board and group structure
On 1 September 2009 the three wholly-owned operating subsidiaries, InfoWave
(Pty) Limited, Adapt-IT (Pty) Limited and Isizinda Consulting (Pty) Limited were
consolidated into one main operating subsidiary Adapt IT (Pty) Limited.
Bruno Lionnet and Cindy von Pannier resigned from the Adapt IT Holdings Limited
board, in aid of formally constituting the main operating subsidiary`s board, in
line with the best practice corporate governance recommendations adopted by the
board. Subsequent to the interim period, Ralph Collis resigned as Chairman of
the company in order to pursue private interests. The board expresses its thanks
to them for their contribution to the holding company board over the years and
wishes them well in their new roles. Dr Bernard Ravno, an independent non-
executive member of the board, has been appointed by the board to act as the
Chairman with effect from 1 October 2009 until a permanent successor is
appointed.
BEE
The Adapt IT Group has been rated by Empowerdex as a Level 3 contributor to
broad-based BEE and a Value Adding Enterprise, which gives our customers 137,5%
recognition of their procurement spend for their BEE scorecard purposes. Adapt
IT remains committed to genuine and sustainable broad-based transformation.
Prospects
Not withstanding the current economic situation, we are positive about the
prospects of the group.
Appreciation
We express our thanks to our longstanding and new customers for their continued
support. We also recognise all employees of the group for their dedication and
hard work in serving our customers.
Dr AB Ravno Sbu Shabalala
Independent non-executive chairman Chief executive officer
Statement of comprehensive income
Unaudited Audited
Unaudited (Reclassified) (Reclassified)
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2009 2008 2009
R`000 R`000 R`000
Revenue 60 567 37 828 77 497
Turnover 59 245 37 253 74 865
Cost of sales (35 780) (18 285) (36 200)
Gross profit 23 465 18 968 38 665
Administrative, selling
and other costs (19 183) (12 603) (27 593)
Other income 1 494 - -
Profit from operations
before interest 5 776 6 365 11 072
Interest received 1 288 575 2 632
Interest paid (338) (3) (14)
(Loss)/Profit from associate (64) 41 137
Profit before taxation 6 662 6 978 13 827
Taxation (1 862) (2 401) (3 999)
Normal tax (1 681) (1 991) (3 586)
Secondary taxation on
companies (181) (410) (413)
Profit for the period 4 800 4 577 9 828
Exchange differences on
translation of foreign
operations 185 - -
Total comprehensive income
for the period, net of tax 4 985 4 577 9 828
Profit for the period
Attributable to minorities 272 361 751
Attributable to equity
holders of the parent 4 528 4 216 9 077
4 800 4 577 9 828
Total comprehensive income
for the period
Attributable to minorities 362 361 751
Attributable to equity
holders of the parent 4 623 4 216 9 077
4 985 4 577 9 828
Headline profit
Profit attributable to
equity holders of the parent 4 528 4 216 9 077
Add loss on sale of
property, and equipment - - 1
Add loss on sale of
investment in listed
preference shares - - 20
Excess of net asset value
over purchase price (1 176) - -
Headline profit 3 352 4 216 9 098
Number of ordinary shares
in issue (`000) 95 650 95 644 95 650
Weighted average ordinary
shares in issue (`000) 95 650 96 747 96 203
Headline earnings per
ordinary share (cents) 3,50 4,36 9,46
Earnings per ordinary
share (cents) 4,73 4,36 9,44
Fully diluted earnings per
share (cents) 4,73 4,35 9,43
Return on equity (%) 14,95 20,21 32,33
Return on assets (%) 4,85 12,49 25,33
Statement of financial position
Unaudited Unaudited Audited
31 August 31 August 28 February
2009 2008 2009
R`000 R`000 R`000
Assets
Non-current assets
Property and equipment 15 970 2 379 1 974
Intangible assets 20 353 348
Goodwill 10 408 10 408 10 408
Investment in associated company 74 41 137
Deferred taxation asset 1 214 255 659
27 686 13 436 13 526
Current assets
Trade and other receivables 38 231 15 523 14 035
Cash resources 27 411 4 808 14 556
65 642 20 331 28 591
Total assets 93 328 33 767 42 117
Equity and liabilities
Equity attributable to equity
holders of the parent
Issued capital 8 8 8
Share premium 7 188 7 003 7 188
Share-based payment reserve 866 757 803
Foreign translation reserve 185 - -
Retained earnings 26 095 18 484 23 345
34 342 26 252 31 344
Minority interests 4 444 1 024 1 415
Total equity 38 786 27 276 32 759
Current liabilities
Trade and other payables 37 219 6 491 9 358
Other loans 17 323 - -
Total equity and liabilities 93 328 33 767 42 117
Net asset value (R`000) 38 786 27 276 32 759
Net asset value per ordinary share
(cents) 40,55 28,52 34,25
Liquidity ratio (times) 1,20 3,13 3,06
Solvency ratio (times) 1,71 5,20 4,50
Market price per share
Close (cents) 45 54 52
High (cents) 58 71 71
Low (cents) 40 10 10
Capital expenditure for the period 546 571 1 245
Capital expenditure authorised 5 249 818 4 614
Statement of cash flows
Unaudited Audited
Unaudited (Reclassified) (Reclassified)
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2009 2008 2009
R`000 R`000 R`000
Cash flows from operating
activities
Profit from operations
before interest and
dividends 5 776 6 365 11 072
Adjustment for:
Provision for leave pay 1 167 1 162 275
Impairment loss - - 20
Non-cash flow items - - 9
Share-based payment expense 63 84 130
Excess of net asset value
over purchase price (1 176) - -
Loss on sale of equipment - - 1
Depreciation and amortisation 848 759 1 799
Cash generated from
operations, before working
capital changes 6 678 8 370 13 306
Increase in receivables (5 416) (2 090) (602)
(Decrease)/Increase in
payables (4 832) (1 828) 1 866
Cash (utilised)/generated
from operations (3 570) 4 452 14 570
Taxation paid (2 072) (2 138) (3 948)
Net interest income 950 572 2 618
Dividend paid to
shareholders (1 778) (4 317) (4 317)
Net cash (outflow)/inflow
from operating activities (6 470) (1 431) 8 923
Cash flow from investing
activities
Acquisition of equipment (546) (571) (1 245)
Proceeds on disposal of
property and equipment 62 - 41
Increase in investment in
associate - - (137)
Acquisition of subsidiary (16 000) - (20)
Net cash outflow from
investing activities (16 484) (571) (1 361)
Cash flow from financing
activities
Repurchase of company`s shares - (1 110) (926)
Proceeds from borrowings 13 000 - -
Repayment of borrowings (4 316) - -
Net cash inflow/(outflow)
from financing activities 8 684 (1 110) (926)
Net (decrease)/increase in
cash resources (14 270) (3 112) 6 636
Exchange differences on
translation 185 - -
Cash resources at
beginning of period 14 556 7 920 7 920
Cash resources on
acquisition of subsidiaries 26 940 - -
Cash resources at end of
period 27 411 4 808 14 556
Statement of changes in equity
Share Share Retained
capital premium earnings
R`000 R`000 R`000
Balance at 29 February 2008 10 8 112 18 585
Profit for the period - - 4 216
Total comprehensive income 10 8 112 22 801
Treasury shares repurchased during
the period (2) (1 109) -
Recognition of share-based payment - - -
Dividends - - (4 317)
Balance at 31 August 2008 8 7 003 18 484
Balance at 28 February 2009 8 7 188 23 345
Profit for the period - - 4 528
Total comprehensive income 8 7 188 27 873
Recognition of share-based payment - - -
Recognition of foreign currency -
translation - - -
Acquisition of subsidiary - - -
Dividends - - (1 778)
Balance at 31 August 2009 8 7 188 26 095
Foreign Attributable
Share-based currency to equity
payment translation holders of
reserve reserve the parent
R`000 R`000 R`000
Balance at 29 February 2008 673 - 27 380
Profit for the period - - 4 216
Total comprehensive income 673 - 31 596
Treasury shares repurchased
during the period - - (1 111)
Recognition of share-based payment 84 - 84
Dividends - - (4 317)
Balance at 31 August 2008 757 - 26 252
Balance at 28 February 2009 803 - 31 344
Profit for the period - - 4 528
Total comprehensive income 803 - 35 872
Recognition of share-based payment 63 - 63
Recognition of foreign
ccurrency - translation - 185 185
Acquisition of subsidiary - - -
Dividends - - (1 778)
Balance at 31 August 2009 866 185 34 342
Minority
interest Total
R`000 R`000
Balance at 29 February 2008 663 28 043
Profit for the period 361 4 577
Total comprehensive income 1 024 32 620
Treasury shares repurchased during the period - (1 111)
Recognition of share-based payment - 84
Dividends - (4 317)
Balance at 31 August 2008 1 024 27 276
Balance at 28 February 2009 1 415 32 759
Profit for the period 272 4 800
Total comprehensive income 1 687 37 559
Recognition of share-based payment - 63
Recognition of foreign currency - translation - 185
Acquisition of subsidiary 2 757 2 757
Dividends - (1 778)
Balance at 31 August 2009 4 444 38 786
Notes to the financial statements
Corporate information and basis of preparation
The interim condensed consolidated financial statements of the group for the six
months ended 31 August 2009 were prepared in accordance with IAS 34 Interim
Financial Reporting, the Companies Act, 1973, (Act 61 of 1973) as amended and
the Listing Requirements of the JSE Limited.
The interim condensed financial statements do not include all the information
and disclosures required in the annual financial statements and should be read
in conjunction with the group`s annual financial statements as at 28 February
2009.
The interim results have not been audited or reviewed by the group`s auditors.
The Adapt IT group is incorporated and domiciled in South Africa.
Change in accounting policy
The accounting policies adopted in the preparation of the interim condensed
financial statements are in accordance with International Financial Reporting
Standards (IFRS) and are consistent with those followed in the preparation of
the annual financial statements for the year ended 28 February 2009, except for
the adoption of the following new standards that have an effect on disclosure:
IFRS 8 Operating Segments
This standard requires disclosure of information about the group`s operating
segments.
Adoption of this Standard does not have any effect on the financial position or
performance of the group. Disclosure on the newly identified operating segments
are shown in the relevant note, including comparative information.
IAS 1 Revised Presentation of Financial Statements
The revised Standard separates owner and non-owner changes in equity. The
statement of changes in equity includes only details of transactions with
owners, with non-owner changes in equity presented as a single line.
In addition, the Standard introduces the statement of comprehensive income: it
presents all items of recognised income and expense, either in one single
statement, or in two linked statements.
As a result of the above changes, certain figures have been reclassified where
appropriate.
Subsequent events
The directors are not aware of any material matter or circumstance arising since
the end of the financial period up to the date of this report.
Business combinations
Acquisition of ITS Group
On 30 June 2009, the group acquired 51% of the shares in ITS Group ("ITS"), an
unlisted Pretoria-based group of companies. The interim condensed consolidated
financial statements include the results of ITS for the two-month period from
acquisition date.
The fair value of the identifiable net assets and liabilities of ITS as at the
date of acquisition were:
Fair value recognised Previous
on acquisition carrying value
Unaudited Unaudited
R`000 R`000
Property, plant and equipment 14 033 14 033
Deferred taxation 494 494
Loans to group companies 5 000 5 000
Trade receivables 17 122 17 122
Cash 26 940 26 940
Total assets 63 589 63 589
Taxation 604 604
Shareholders` loans 28 052 28 052
Trade payables 29 306 29 306
Total liabilities 57 962 57 962
Net assets 5 627
Purchase consideration 16 000
Portion of consideration
applicable to shareholders loan
acquired 14 307
Portion of consideration
applicable to net asset value 1 693
51% of net assets above 2 869
Excess of net asset value over
purchase price (1 176)
Unaudited
R`000
Cash inflow on acquisition:
Net cash acquired with the
subsidiary 26 940
Cash paid (16 000)
Net cash inflow 10 940
From the date of acquisition, ITS has contributed R262 411 to the profit after
tax of the group.
Segment information
For management purposes, the group is organised into the following segments:
* Adapt IT - implementation and maintenance of ERP and niche software,
systems integration and information management solutions
* ApplyIT - design, development and implemention of safety, health,
environment, quality and plant operations management software solutions
* ITS - design, development and implementation of higher education and
further education and generic software solutions
* Other - includes group head office activities
Management monitors the operating results of its business units separately for
the purpose of making decisions about resource allocation and performance
assessment. Monthly management meetings are held to evaluate segment performance
against budget and forecast.
The following tables present revenue and profit information regarding the
group`s operating segments for the six months ended 31 August 2009 and 31 August
2008 respectively:
Six months ended Adapt IT ApplyIT ITS Other
31 August 2009 R`000 R`000 R`000 R`000
Revenue*
Third party 42 885 5 482 11 979 894
Intersegment - - - -
Total revenue 42 885 5 482 11 979 894
Segment profit/(loss) before tax 4 819 86 717 (136)
Six months ended
31 August 2008
Revenue*
Third party 30 793 7 192 - 478
Intersegment - - - -
Total revenue 30 793 7 192 - 478
Segment profit before tax 4 838 2 153 - 187
Adjustments
and
Six months ended eliminations Total
31 August 2009 R`000 R`000
Revenue*
Third party (673) 60 567
Intersegment - -
Total revenue (673) 60 567
Segment profit/(loss) before tax 1 176 6 662
Six months ended
31 August 2008
Revenue*
Third party (635) 37 828
Intersegment - -
Total revenue (635) 37 828
Segment profit before tax (200) 6 978
*Revenue includes sales to customers, interest income and dividends received.
The following table presents segment assets of the group`s operating segments
as at 31 August 2009 and 28 February 2009:
Adapt IT ApplyIT ITS Other
R`000 R`000 R`000 R`000
Segment assets
31 August 2009 45 645 6 004 86 701 34 439
28 February 2009 33 610 6 904 - 25 099
Adjustments
and
eliminations Total
R`000 R`000
Segment assets
31 August 2009 (79 461) 93 328
28 February 2009 (23 496) 42 117
Corporate information
Directors
Dr A B Ravno (independent non-executive chairman)
Sbu Shabalala (chief executive officer)
T Dunsdon (executive director)
Siboniso Shabalala (financial director)
W Shuenyane (non-executive director)
B Ntuli (independent non-executive director)
R Collis (previous chairman - resigned 30 September 2009)
Registered office
Gleneagles Park, 10 Flanders Drive, Mount Edgecombe, 4300
PO Box 2225, M.E.C.C.
Mount Edgecombe, 4301
Transfer secretary
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Merchantec (Proprietary) Limited
2nd Floor, North Block, Hyde Park Office Tower, Johannesburg, 2196
PO Box 41480, Craighall, 2024
Website
www.adaptit.co.za
Date: 05/10/2009 16:54:01 Produced by the JSE SENS Department.
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