| Tue 13 Apr 2010, 15:35 | | ADI - AdaptIT - Reviewed Interim Consolidated Group Results |
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ADI
ADI
ADI - AdaptIT - Reviewed Interim Consolidated Group Results
ADAPTIT HOLDINGS LIMITED
(Registration number 1998/017276/06)
ISIN: ZAE000113163
Share code: ADI
("AdaptIT" or "the group")
Reviewed interim consolidated group results
RESULTS OF OPERATIONS
Revenue grew by 89% to R146.2 million (2009: R77.5 million), representing 22%
organic growth plus R53.7 million in revenue due to the acquisition of 51% of
ITS Holdings (Proprietary) Limited ("ITS Holdings") on 30 June 2009 ("the ITS
Holdings acquisition"). Net profit attributable to ordinary shareholders
increased by 17.6% to R10.7 million compared with R9.1 million in the previous
year. Earnings per share increased by 18.6% to 11.20 cents from 9.44 cents in
the prior year. Adapt IT (Proprietary) Limited ("Adapt IT (Pty) Ltd")
contributed a profit before tax of R11.2 million (2009: R8.0 million),ITS
Holdings, consolidated for eight months, contributed a profit before tax
of R2.5 million. ApplyIT (Proprietary) Limited ("ApplyIT") contributed a loss
before tax of R0.3 million, previously a profit of R3.8 million to the group.
The group incurred non-recurring transaction costs, relating to the ITS
Holdings acquisition, which were fully expensed in the period. The difficult
market conditions prevailing mainly in the manufacturing and mining sectors
have adversely impacted the results of certain operations exposed to these
sectors, notably ApplyIT. There are however indications that these market
conditions are improving. The improved market diversification of the group
pursuant to its acquisitive strategy has mitigated some of the impact of the
economic environment, enhancing the sustainability of the group.
Change of year-end
Pursuant to the ITS Holdings acquisition, the group`s financial year-end was
changed to 30 June. The current financial reporting period has therefore been
extended to 16 months.
Dividend
Ordinary dividend number 7 of 1.86 cents per share was paid to shareholders on
6 July 2009. This represented a five times dividend cover. The group has a
policy to declare dividends at the end of the financial year and not at the
interim reporting date. A dividend will be considered at the financial
year-end.
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
The board appointed Messrs PCM September and M Nhlapo as additional
independent non-executive directors on 1 January 2010 and 11 March
2010 respectively. The board looks forward to their contribution over the
coming years. These appointments form part of the group`s ongoing
commitment to improving corporate governance and enhancing the
strategic leadership of the group. W Mann resigned as company secretary
of the group on 19 February 2010 and was replaced by RL Moodley.
RP Collis resigned as non-executive chairman on 30 September 2009 and
was replaced by Dr AB Ravno.
Relocation
In January, Adapt IT (Pty) Limited relocated to a new office in La Lucia Ridge,
which is also the registered office of all group companies.
The office is a green building and includes a new technical infrastructure,
which enhances the efficiency, security and reliability of our operations and
allows for future growth.
Prospects
Notwithstanding the current economic situation, we are positive about the
prospects of the group going forward, as the group is able to offer a more
comprehensive service offering which will position us for growth within our
target markets.
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
REVIEWED CONDENSED INTERIM CONSOLIDATED RESULTS FOR THE TWELVE MONTHS ENDED
28 FEBRUARY 2010
Condensed interim statement of comprehensive income
Reviewed Audited
28 February 28 February
2010 2009
R`000 R`000
Revenue 146 150 77 497
Turnover 139 190 74 865
Cost of sales (81 394) (36 200)
Gross profit 57 796 38 665
Administrative, selling and other costs (46 176) (27 593)
Other income 2 235 -
Profit from operations before interest 13 855 11 072
Interest received 4 725 2 632
Interest paid (1 159) (14)
(Loss)/Profit from associate (64) 137
Profit before taxation 17 357 13 827
Taxation (4 689) (3 999)
Normal tax (4 508) (3 586)
Secondary taxation on companies (181) (413)
Profit for the period 12 668 9 828
Exchange differences on translation
of foreign operations (110) -
Total comprehensive income for the period,
net of tax 12 558 9 828
Profit for the period
Attributable to minorities 1 958 751
Attributable to equity holders of the parent 10 710 9 077
12 668 9 828
Total comprehensive income for the period
Attributable to minorities 1 904 751
Attributable to equity holders of the parent 10 654 9 077
12 558 9 828
Headline profit
Profit attributable to equity holders
of the parent 10 710 9 077
Less (profit)/loss on sale of property
and equipment (37) 1
Add impairment loss 62 20
Excess of net asset value over purchase price (1 176) -
Headline profit 9 559 9 098
Number of ordinary shares in issue (`000) 95 650 95 650
Weighted average ordinary shares
in issue (`000) 95 650 96 203
Headline earnings per ordinary share (cents) 9.99 9.46
Earnings per ordinary share (cents) 11.20 9.44
Fully diluted headline earnings per
ordinary share (cents) 9.99 9.43
Fully diluted earnings per
ordinary share (cents) 11.20 9.43
Dividends paid per share (cents) 1.86 4.43
Return on equity (%) 29.47 32.33
Return on assets (%) 8.76 25.33
Condensed interim statement of financial position
Reviewed Audited
28 February 28 February
2010 2009
R`000 R`000
Assets
Non-current assets
Property and equipment 23 569 1 974
Intangible assets 153 348
Goodwill 10 408 10 408
Investment in associated company 74 137
Deferred taxation asset 4 998 659
39 202 13 526
Current assets
Trade and other receivables 44 122 14 035
Cash resources 38 910 14 556
83 032 28 591
Total assets 122 234 42 117
Equity and liabilities
Equity attributable to equity
holders of the parent
Issued capital 9 8
Share premium 7 198 7 188
Share-based payment reserve 930 803
Foreign translation reserve (56) -
Retained earnings 32 277 23 345
40 358 31 344
Minority interests 6 076 1 415
Total equity 46 434 32 759
Non-current liabilities
Deferred taxation liability 2 040 -
Interest-bearing borrowings 4 115 -
Current liabilities
Trade and other payables 53 577 9 358
Interest-bearing borrowings 5 752 -
Non-interest-bearing borrowings 10 316 -
Total equity and liabilities 122 234 42 117
Net asset value (R`000) 46 434 32 759
Net asset value per ordinary share (cents) 48.55 34,25
Liquidity ratio (times) 1.19 3,06
Solvency ratio (times) 1.61 4,50
Market price per share
Close (cents) 42 47
High (cents) 58 71
Low (cents) 31 10
Capital expenditure for the period 9 500 1 245
Capital expenditure authorised
but not expended 2 522 4 614
Condensed interim statement of cash flows
Reviewed Audited
28 February 28 February
2010 2009
R`000 R`000
Cash flows from operating activities
Profit from operations before interest
and dividends 13 855 11 072
Adjustment for:
Provisions (818) 275
Impairment loss 62 20
Non-cash flow items 11 9
Share-based payment expense 127 130
Excess of net asset value over purchase price (1 176) -
(Profit)/Loss on sale of equipment (37) 1
Depreciation and amortisation 2 052 1 799
Cash generated from operations,
before working capital changes 14 076 13 306
Increase in receivables (10 586) (602)
Increase in payables 11 448 1 866
Cash generated from operations 14 938 14 570
Taxation paid (4 613) (3 948)
Net interest income 3 566 2 618
Dividend paid to shareholders (1 778) (4 317)
Net cash inflow from operating activities 12 113 8 923
Cash flow from investing activities
Acquisition of equipment (9 500) (1 245)
Proceeds on disposal of property and equipment 37 41
Increase in investment in associate - (137)
Acquisition of subsidiary (16 000) (20)
Net cash outflow from investing activities (25 463) (1 361)
Cash flow from financing activities
Repurchase of company`s shares - (926)
Proceeds from borrowings 17 115 -
Repayment of borrowings (6 241) -
Net cash inflow/(outflow) from
financing activities 10 874 (926)
Net (decrease)/increase in cash resources (2 476) 6 636
Exchange differences on translation (110) -
Cash resources at beginning of period 14 556 7 920
Cash resources on acquisition of subsidiaries 26 940 -
Cash resources at end of period 38 910 14 556
Condensed interim statement of changes in equity
Share-based
Share Share Retained payment
capital premium earnings reserve
R`000 R`000 R`000 R`000
Balance at 29 February 2008 10 8 112 18 585 673
Profit for the year - - 9 077 -
Total comprehensive income - - 9 077 -
Treasury shares
repurchased during the
period (2) (924) - -
Recognition of share-based
payment - - - 130
Dividends - - (4 317) -
Balance at 28 February 2009 8 7 188 23 345 803
Profit for the period - - 10 710 -
Other comprehensive income - - - -
Total comprehensive income - - 10 710 -
Recognition of share-based
transactions 1 10 - 127
Acquisition of subsidiary - - - -
Dividends - - (1 778) -
Balance at 28 February 2010 9 7 198 32 277 930
Foreign Attributable
currency to equity
translation holders of Minority
reserve the parent interest Total
R`000 R`000 R`000 R`000
Balance at 29
February 2008 - 27 380 664 28 044
Profit for the year - 9 077 751 9 828
Total comprehensive
income - 9 077 751 9 828
Treasury shares
repurchased during
the period - (926) - (926)
Recognition of
share-based payment - 130 - 130
Dividends - (4 317) - (4 317)
Balance at 28
February 2009 - 31 344 1 415 32 759
Profit for the period - 10 710 1 958 12 668
Other comprehensive
income (56) (56) (54) (110)
Total comprehensive
income (56) 10 654 1 904 12 558
Recognition of
share-based
transactions - 138 - 138
Acquisition of
subsidiary - - 2 757 2 757
Dividends - (1 778) - (1 778)
Balance at 28
February 2010 (56) 40 358 6 076 46 434
Notes to the financial statements
CORPORATE INFORMATION AND BASIS OF PREPARATION
The interim condensed consolidated financial statements of the group for the
twelve months ended 28 February 2010 were prepared in accordance with IAS 34
Interim Financial Reporting, the Companies Act, 1973, (Act 61 of 1973), as
amended, and the Listings Requirements of 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 been 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
is 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.
Change in financial year-end
As previously communicated to shareholders, the group`s financial year-end was
changed from 28 February to 30 June. As a result this second interim
announcement is for the 12 months ended 28 February 2010.
Audited results for the 16 months to 30 June 2010 will be announced on or about
30 September 2010.
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 Holdings
On 30 June 2009, the group acquired 51% of the shares in ITS Holdings, an
unlisted Pretoria-based group of companies. The interim condensed consolidated
financial statements include the results of ITS Holdings for the eight-month
period from acquisition date.
The fair value of the identifiable net assets and liabilities of ITS Holdings
as at the date of acquisition was:
Reviewed Reviewed
Fair value Previous
recognised carrying
on acquisition value
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 value over purchase price (1 176)
Reviewed
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 the acquisition, ITS Holdings has contributed R2.1 million to
the profit after tax of the group.
The excess of the net asset value over the purchase price is included in other
income in the statement of comprehensive income.
Interest/non-interest-bearing borrowings
Current liabilities
Included under current liabilities is an interest bearing borrowing from
Investec Private Bank Limited, which was taken out to fund the business`s
working capital. The non-interest bearing borrowings comprise a shareholders`
loan acquired on acquisition of ITS Holdings.
Non-current liabilities
Included under long-term liabilities is a interest bearing borrowing from IBM
Global Finance to fund certain capital expenditure.
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 implementation 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; and
Other - includes group head office activities.
Management monitors the operating results of its business units separately for
the purpose of making decisions about resource allocation and performance
assessment. Monthly management meetings are held to evaluate segment
performance against budget and forecast.
The following tables present revenue and profit information regarding the
group`s operating segments for the twelve months ended 28 February 2010 and 28
February 2009 respectively:
Adapt IT ApplyIT ITS
12 months ended 28 February 2010 R`000 R`000 R`000
Revenue*
Third party 79 550 9 968 53 706
Intersegment - - -
Total revenue 79 550 9 968 53 706
Segment profit/(loss) before tax 11 181 (284) 4 984
Adjustments
and
Other eliminations Total
R`000 R`000 R`000
Revenue*
Third party 3 719 (793) 146 150
Intersegment - - -
Total revenue 3 719 (793) 146 150
Segment profit/(loss) before tax 3 163 (1 687) 17 357
Adapt IT ApplyIT ITS
12 months ended 28 February 2009 R`000 R`000 R`000
Revenue*
Third party 62 548 13 358 -
Intersegment - - -
Total revenue 62 548 13 358 -
Segment profit before tax 7 979 3 809 -
Adjustments
and
Other eliminations Total
R`000 R`000 R`000
Revenue*
Third party 3 087 (1 496) 77 497
Intersegment - - -
Total revenue 3 087 (1 496) 77 497
Segment profit before tax 2 039 - 13 827
* Revenue includes sales to customers, interest income and dividends received.
The following table presents segment assets of the group`s operating segments
as at 28 February 2009 and 28 February 2010:
Adapt IT ApplyIT ITS
R`000 R`000 R`000
Segment assets
28 February 2010 54 143 4 177 103 562
28 February 2009 33 611 6 904 -
Adjustments
and
Other eliminations Total
R`000 R`000 R`000
Segment assets
28 February 2010 30 803 (70 451) 122 234
28 February 2009 25 099 (23 437) 42 177
INDEPENDENT REVIEW BY THE AUDITORS OF THE CONDENSED INTERIM FINANCIAL
STATEMENTS
The consolidated statement of financial position at 28 February 2010 and the
related consolidated statement of comprehensive income, consolidated statement
of changes in equity and consolidated cash flow statement for the 12 months
ended were reviewed by Ernst & Young Inc. Their unmodified review report is
available for inspection at the registered office of the company.
13 April 2010
Directors
Dr A B Ravno (independent non-executive chairman); Sbu Shabalala (chief
executive officer); T Dunsdon (commercial director); Siboniso Shabalala
(financial director) (appointed 6 April 2009); W Shuenyane (non-executive
director); B Ntuli (independent non-executive director); P C M September
(independent non-executive director) (appointed 4 January 2010);
M Nhlapo (independent non-executive director) (appointed 11 March 2010);
R P Collis (non-executive chairman) (resigned 30 September 2009).
Company secretary and registered office
RL Moodley
4/5 Rydall Vale Park, La Lucia Ridge, Durban, 4051
PO Box 5207, Rydall Vale Park, La Lucia, 4019
Transfer secretary
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Merchantec Capital
2nd Floor, North Block, Hyde Park Office Tower, Johannesburg, 2196
PO Box 41480, Craighall, 2024
Auditors
Ernst & Young Inc.
1 Pencarrow Crescent, Pencarrow Park, La Lucia Ridge, Durban North, 4051
PO Box 859, Durban, 4000
Website
www.adaptit.co.za
Date: 13/04/2010 15:35:01 Produced by the JSE SENS Department.
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