| Tue 14 Sep 2010, 17:00 | | ADI - Adaptit Holdings - Preliminary audited results for the year ended 30 June |
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ADI
ADI
ADI - Adaptit Holdings - Preliminary audited results for the year ended 30 June
2010 and final dividend declaration
ADAPTIT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/017276/06)
Share code: ADI ISIN Code: ZAE000113163
("Adapt IT" or "the Company" or "the Group")
PRELIMINARY AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2010 AND FINAL DIVIDEND
DECLARATION
- 166% INCREASE IN TURNOVER
- 71% INCREASE IN PROFIT FROM OPERATIONS
- 44% INCREASE IN PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS
- 45% INCREASE IN EARNINGS PER SHARE
Statements of comprehensive income for the 16 months ended 30 June 2010 and 12
months ended 28 February 2009
GROUP GROUP COMPANY COMPANY
2010 2009 2010 2009
R R R R
Services rendered 183 220 943 68 870 760 1 765 727 2 363 236
Sale of goods 15 765 553 5 994 390 - -
Interest income 5 622 971 2 632 530 368 620 400 637
Dividend income 34 908 - 1 320 328 4 200 000
Other income 3 807 426 - 2 453 293 -
REVENUE 208 451 801 77 497 680 5 907 968 6 963 873
TURNOVER 198 986 496 74 865 150 1 765 727 2 363 236
Cost of sales (107 078 (36 199 - (181 829)
167) 769)
Gross profit 91 908 329 38 665 381 1 765 727 2 181 407
Administrative, selling and (76 820 (27 592 (2 423 (542 310)
other costs 348) 822) 828)
Other income 3 807 426 - 2 453 293 -
Dividend income 34 908 - 1 320 328 4 200 000
Profit from operations (before 18 930 315 11 072 559 3 115 520 5 839 097
interest)
Interest income 5 622 971 2 632 530 368 620 400 637
Finance costs (944 841) (14 444) (15 512) -
(Loss)/Profit from associate (63 625) 137 278 - -
Profit before taxation 23 544 820 13 827 923 3 468 628 6 239 734
Taxation (6 708 942) (3 999 312) (344 175) (1 069
334)
Profit for the period 16 835 878 9 828 611 3 124 453 5 170 400
Other comprehensive loss for (169 155) - - -
the period, net of tax
Exchange differences on (169 155) - - -
translation of foreign
operations
Total comprehensive income for 16 666 723 9 828 611 3 124 453 5 170 400
the period, net of tax
Profit for the period:
Attributable to equity 13 100 081 9 077 243 3 124 453 5 170 400
shareholders of the parent
Attributable to non- 3 735 797 751 368 - -
controlling interests
16 835 878 9 828 611 3 124 453 5 170 400
Total comprehensive income for
the period
Attributable to equity 13 013 812 9 077 243 3 124 453 5 170 400
shareholders of the parent
Attributable to non- 3 652 911 751 368 - -
controlling interests
16 666 723 9 828 611 3 124 453 5 170 400
Weighted average number of 96 084 561 96 212 769
shares
Earnings per share (cents) 13.64 9.44
Fully diluted earnings per 13.64 9.43
share (cents)
Statements of financial position as at 30 June 2010 and 28 February 2009
GROUP GROUP COMPANY COMPANY
2010 2009 2010 2009
R R R R
Assets
Non-current assets 39 765 127 13 525 877 28 400 16 031
565 593
Loan to subsidiary - - 10 737 -
000
Property and equipment 22 719 927 1 974 368 - -
Intangible assets 109 241 347 470 - -
Interest in subsidiaries and - - 17 663 16 031
share trust 565 593
Investment in associate - 137 308 - -
company
Goodwill 10 407 854 10 407 854 - -
Deferred taxation asset 6 528 105 658 877 - -
Current assets 84 975 555 28 591 229 96 699 8 383 266
Accounts receivable 45 848 856 14 035 153 27 957 604 524
Cash and cash equivalents 39 126 699 14 556 076 68 742 7 778 742
Total assets 124 740 682 42 117 106 28 497 24 414
264 859
Equity and liabilities
Share capital 9 570 9 565 9 745 9 745
Share premium 7 196 322 7 186 247 8 112 296 8 112 296
Share-based payment reserve 893 020 802 679 - -
Foreign currency translation (86 269) - - -
reserve
Retained earnings 34 666 074 23 345 179 3 569 509 2 224 153
Equity attributable to 42 678 717 31 343 670 11 691 10 346
ordinary shareholders 550 194
Minority interest 7 825 266 1 415 355 - -
Total equity 50 503 983 32 759 025 11 691 10 346
550 194
Non-current liabilities 4 917 182 - - -
Interest-bearing borrowings 2 447 576 - - -
Deferred taxation liability 2 469 606 - - -
Current liabilities 69 319 517 9 358 081 16 805 14 068
714 665
Interest-bearing borrowings 1 793 103 - - -
Non-interest-bearing 10 315 036 - - -
borrowings
Accounts payable 19 864 212 6 825 210 111 283 485 053
Provisions 7 243 852 1 596 754 - -
Deferred income 25 844 741 - - -
Loans from subsidiaries - - 16 552 12 959
292 243
Taxation payable 4 258 573 936 117 142 139 624 369
Total equity and liabilities 124 740 682 42 117 106 28 497 24 414
264 859
Number of ordinary Shares in 95 697 028 95 650 378
issue
Net asset value per Share 52.77 34.25
(cents)
Tangible net asset value Per 35.21 22.17
share (cents)
Statements of changes in equity for the 16 months ended 30 June 2010 and 12
months ended 28 February 2009
SHARE-
SHARE SHARE RETAINED BASED
CAPITAL PREMIUM EARNINGS PAYMENT
R R R RESERVE
R
GROUP
Balance at 29 February 2008 9 745 8 112 296 18 585 346 672 384
Profit for the period - - 9 077 243 -
Total comprehensive income - - 9 077 243 -
for the period
Treasury shares re-purchased (180) (926 049) - -
and cancelled during the
period
Recognition of share-based - - - 130 295
payment
Dividend paid - - (4 317 -
410)
Balance at 28 February 2009 9 565 7 186 247 23 345 179 802 679
Acquisition of subsidiary - - - -
Profit for the period - - 13 100 081 -
Other comprehensive income - - - -
for the period
Total comprehensive income - - 13 100 081 -
for the period
Shares issued during the 5 10 075 - -
period
Recognition of share-based - - - 90 341
payment
Dividend paid - - (1 779 -
186)
Balance at 30 June 2010 9 570 7 196 322 34 666 074 893 020
FOREIGN ATTRIBUTAB
CURRENC LE NON-
Y TO EQUITY CONTROLLI
TRANSLA HOLDERS OF NG TOTAL
TION THE PARENT INTEREST R
RESERVE R R
R
GROUP
Balance at 29 February 2008 - 27 379 771 663 987 28 043 758
Profit for the period - 9 077 243 751 368 9 828 611
Total comprehensive income - 9 077 243 751 368 9 828 611
for the period
Treasury shares re-purchased - (926 229) - (926 229)
and cancelled during the
period
Recognition of share-based - 130 295 - 130 295
payment
Dividend paid - (4 317 - (4 317
410) 410)
Balance at 28 February 2009 - 31 343 670 1 415 355 32 759 025
Acquisition of subsidiary - - 2 757 000 2 757 000
Profit for the period - 13 100 081 3 735 797 16 835 878
Other comprehensive loss for (86 (86 269) (82 886) (169 155)
the period 269)
Total comprehensive (86 13 013 812 6 409 911 19 423 723
(loss)/income for the period 269)
Shares issued during the - 10 080 - 10 080
period
Recognition of share-based - 90 341 - 90 341
payment
Dividend paid - (1 779 - (1 779
186) 186)
Balance at 30 June 2010 (86 42 678 717 7 825 266 50 503 983
269)
SHARE SHARE RETAINED
CAPITAL PREMIUM EARNINGS TOTAL
R R R R
COMPANY
Balance at 29 February 2008 9 745 8 112 296 1 371 163 9 493 204
Profit for the period - - 5 170 400 5 170 400
Total comprehensive income - - 6 541 563 14 663 604
for the period
Dividend paid - - (4 317 (4 317
410) 410)
Balance at 28 February 2009 9 745 8 112 296 2 224 153 10 346 194
Total comprehensive income - - 3 124 453 3 124 453
for the period
Dividend paid - - (1 779 (1 779
097) 097)
Balance at 30 June 2010 9 745 8 112 296 3 569 509 11 691 550
Statements of cash flows for the 16 months ended 30 June 2010 and 12 months
ended 28 February 2009
GROUP GROUP COMPANY COMPANY
2010 2009 2010 2009
R R R R
Cash flows from operating
activities
Profit from operations (before 18 895 407 11 072 559 1 795 192 1 639 097
interest and dividends)
Adjustment for:
Provision for leave pay and 1 463 368 274 007 - -
bonus
Impairment loss 73 683 20 086 61 489 20 086
Non-cash flow items (1 169 9 154 - -
145)
Share-based payment expense 90 341 130 295 - -
(Profit)/loss on sale of (318 802) 1 016 - -
equipment
Depreciation and amortisation 3 013 510 1 799 481 - -
Cash generated from operations, 22 048 362 13 306 598 1 856 681 1 659 183
before working capital changes
Working capital changes
(Increase)/decrease in (12 311 (602 317) 576 567 (581 974)
receivables 884)
Increase/(decrease) in payables 11 597 627 1 866 076 (373 770) 303 524
Cash generated from operations 21 334 105 14 570 357 2 059 478 1 380 733
Taxation paid (5 536 (3 948 (826 405) (641 240)
564) 135)
Interest income 5 622 971 2 632 530 368 620 400 637
Finance costs (944 841) (14 444) (15 512) -
Dividend income from 34 908 - 1 320 328 4 200 000
associate/subsidiary
Dividend paid to shareholders (1 779 (4 317 (1 779 097) (4 317
186) 410) 410)
Net cash inflow from operating 18 731 393 8 922 898 1 127 412 1 022 720
activities
Cash flows from investing
activities
Acquisition of assets on (9 606 (1 243 - -
expansion 777) 952)
Proceeds on disposal of 437 802 40 898 - -
equipment
Decrease/(increase) in 63 625 (137 308) - -
investment in associate
Acquisition of (16 000 (20 086) (16 000 3 637 721
subsidiary/increase in 000) 000)
investment in subsidiary
Repayment of shareholder loan - - 3 570 389 -
Net cash outflow from investing (25 105 (1 360 (12 429 3 637 721
activities 350) 448) 611)
Cash flows from financing
activities
Proceeds from borrowings 17 114 820 - 3 592 199 -
Repayment of borrowings (11 304 - - -
603)
Issue/(re-purchase) of 10 080 (926 229) - -
company`s shares
Elimination of pre-acquisition (1 430 - - -
loan from ITS 000)
Net cash inflow/(outflow) from 4 390 297 (926 229) 3 592 199 -
financing activities
Net (decrease)/increase in cash (1 983 6 636 221 (7 710 000) 4 660 441
resources 660)
Exchange differences on (169 155) - - -
translation
Cash resources at beginning of 14 556 076 7 919 855 7 778 742 3 118 301
period
Cash resources on acquisition 26 723 438 - - -
of subsidiaries
Cash resources at end of period 39 126 699 14 556 076 68 742 7 778 742
Segment analysis
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;
Apply IT - 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 periods ended 30
June 2010 and 28 February 2009 respectively:
Adapt IT ITS Apply IT
Sixteen months ended 30 June R R R
2010
Revenue*
Third party 106 337 670 84 685 603 14 028 162
Intersegment 644 801 374 120 293 060
Total revenue 106 982 471 85 059 723 14 321 222
Segment profit/(loss)before tax 12 159 818 10 337 144 102 079
Twelve months ended 28 February
2009
Revenue*
Third party 61 758 263 - 13 357 537
Intersegment 789 591 - -
Total revenue 62 547 854 - 13 357 537
Segment profit before tax 7 979 261 - 3 808 928
Adjustments
and
Sixteen months ended 30 June Other eliminations Total
2010 R R R
Revenue
Third party 3 400 366 - 208 451 801
Intersegment 2 507 602 (3 819 583) -
Total revenue 5 907 968 (3 819 583) 208 451 801
Segment profit/(loss)before tax 2 148 300 (1 202 521) 23 544 820
Twelve months ended 28 February
2009
Revenue*
Third party 2 381 880 - 77 497 680
Intersegment 706 053 (1 495 644) -
Total revenue 3 087 933 (1 495 644) 77 497 680
Segment profit before tax 2 039 734 - 13 827 923
*Revenue includes sales and services rendered to customers, interest income and
dividends received.
The following table presents segment assets of the Group`s operating segments as
at 30 June 2010 and 28 February 2009:
Adapt IT ITS Apply IT
Segment assets R R R
30 June 2010 50 635 585 108 669 621 4 493 498
28 February 2009 33 610 463 - 6 903 751
Adjustments
Other and Total
Segment assets R eliminations R
R
30 June 2010 29 180 345 (68 238 367) 124 740 682
28 February 2009 25 098 838 (23 495 946) 42 117 106
Adapt IT ITS Apply IT
Geographic information R R R
Revenues from external customers
South Africa 69 639 906 62 444 460 12 635 794
Other African countries 37 342 565 11 039 056 -
Europe - 4 688 886 -
Australasia - 6 887 321 1 685 428
Total revenue per consolidated
statements of comprehensive 106 982 471 85 059 723 14 321 222
income
Adjustments
Other and Total
Geographic information R eliminations R
R
Revenues from external customers
South Africa 5 907 968 (3 819 583) 146 808 545
Other African countries - - 48 381 621
Europe - - 4 688 886
Australasia - - 8 572 749
Total revenue per consolidated
statements of comprehensive 5 907 968 (3 819 583) 208 451 801
income
The revenue information above is based on the location of the customer.
Geographic information Adapt IT ITS Apply IT
R R R
Non-current assets
South Africa 9 616 767 44 833 196 580 712
Other African countries - - -
Europe - 33 459 -
Australasia - 62 925 -
Total 9 616 767 44 929 580 580 712
Adjustments
Other and Total
Geographic information R eliminations R
R
Non-current assets
South Africa 29 037 354 (44 399 286) 39 668 743
Other African countries - - -
Europe - - 33 459
Australasia - - 62 925
Total 29 037 354 (44 399 286) 39 765 127
Directors` report to the stakeholders
for the 16 months ended 30 June 2010 and 12 months ended 28 February 2009
FINANCIAL RESULTS
Turnover grew by 166% over the prior year to R199 million. Operating profit grew
by 71% with profit attributable to ordinary shareholders growing by 44% to R13,1
million (R9,1 million). Earnings per share grew by 45% to 13,64 (9,44) cents per
share.
HEADLINE EARNINGS PER SHARE GROUP GROUP
2010 2009
R R
Reconciliation between earnings and headline
earnings:
Earnings attributable to equity shareholders 13 100 081 9 077 243
Less excess of fair value of net assets over (1 176 398) -
purchase price on business combination
Less (profit)/loss on sale of property and (318 802) 1 016
equipment
Add impairment on investment 73 683 20 086
Headline earnings 11 678 564 9 098 345
Headline earnings per share (cents) 12,15 9,46
Fully diluted headline earnings per share 12,15 9.46
(cents)
ACCOUNTING POLICIES
The accounting policies applied in the preparation of these provisional
financial statements, which are based on reasonable judgments and estimates, are
in accordance with International Financial Reporting Standards ("IFRS") and are
consistent with those applied in the annual financial statements for the year
ended 28 February 2009. These provisional financial statements as set out in
this report have been prepared in terms of IAS 34 - Interim Financial Reporting,
the Companies Act, 1973 (Act 61 of 1973), as amended, and the Listings
Requirements of JSE Limited.
AUDIT REPORT
The annual financial statements for the period ended 30 June 2010 have been
audited by Ernst & Young Inc. and their unqualified audit report is available
for inspection at the Company`s registered office.
DIVIDENDS
Ordinary dividend number 7 of 1,86 (4,43) cents per share was paid to
shareholders on 6 July 2009.
The Company has declared an eighth annual ordinary dividend of 3.41 cents per
share which will be payable to shareholders on 25 October 2010.
POST BALANCE SHEET EVENTS
There are no material events between the period end and the date of this report.
FINANCIAL PERFORMANCE
Adapt IT delivered a sound financial performance and significant sustainability
advancements, in spite of the prevailing tough market conditions associated with
the world-wide economic slump. The Group`s solid business performance was
especially marked by strong improvements in revenues, good cash flow and a very
healthy balance sheet, positioning Adapt IT well going forward. The acquisition
of ITS Holdings (Proprietary)Limited ("ITS Holdings") precipitated a decision to
change Adapt IT`s financial year-end from 28 February to 30 June in order to
align the reporting periods and selecting a June year-end as it results in a
more efficient annual reporting calendar. Accordingly, the results reflected in
the 2010 Annual Report are in respect of a 16-month period.
OPERATIONS
Adapt IT enjoys a leading position within the markets in which it operates. The
Group, through its subsidiaries, has the ability to create robust solutions,
tailored to customers` operating environments. Organic growth is vigorously
pursued through operational excellence, customer intimacy and advancements on
the technological frontier.
ACQUISITION
On 1 July 2009 Adapt IT acquired 51% of ITS Holdings, which resulted in material
growth and diversification of Group revenues and profit, significant additional
exposure to the Public Sector, a regional presence in Gauteng and
internationally, and the ability to add strategic value to an acquiree through
Adapt IT`s own Broad-Based Black Economic Empowerment credentials and
experience.
BOARD CHANGES
Ralph Collis, Chairperson and one of the Company`s founding Directors 14 years
ago, resigned in September 2009 after an 11-year tenure as Chairperson and Dr
Bernard Ravno was appointed as Chairman in his stead. During the financial year
Bruno Lionnet and Cindy von Pannier stepped down from the Board in line with a
Governance restructure, to allow them to better focus on subsidiary executive
duties. It is envisaged that this step change will be pivotal in further
strengthening operations. The Board also appointed two new Independent Non-
Executive Directors, Patrick September and Mandla Nhlapo on 1 January 2010 and
11 March 2010 respectively. Their appointments form an integral part of the
Company`s ongoing commitment to improving Corporate Governance and enhancing the
strategic leadership of the Group. The new Directors bring extensive experience
and insights and their contributions will improve the overall strength of the
Board.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT ("B-BBEE")
Adapt IT is committed to transformation as both a moral and a business
imperative. At its last rating, the Group scored 75,08 points and was rated as a
Level-3 Contributor. In its annual survey, the Financial Mail ranked Adapt IT
5th in the ICT sector and in the top 40 most empowered companies on the JSE. The
Group strives to remain ahead of competitors in terms of B-BBEE, in the
knowledge that this will create a competitive advantage for the Company.
STRATEGY
Adapt IT`s strategy is to grow the Group aggressively through the organic growth
of its existing subsidiaries and through acquisitive growth at the Holding
Company level. Adapt IT focuses on improving core competencies, protecting and
developing niche software intellectual property, enhancing and leveraging target
market knowledge, pursuing large-scale applications outsourcing opportunities,
maintaining strong customer service, customer retention and continuing B-BBEE
transformation. The long-term objective for its investors is clear; Adapt IT
aims to enhance shareholder value through growing profit sustainably.
PROSPECTS
Market indicators and sentiment are beginning to show signs of improvement after
the recent economic turmoil and although continued challenges to the economy are
foreseen, Adapt IT remains confident of its ability to meet such challenges.
Significant progress in line with the Group`s strategy has been made and service
offerings have been improved in readiness to take advantage of the expected
economic recovery. Adapt IT will, however, remain prudent in its approach. Adapt
IT will expand into new high growth IT sectors where it believes it has a
competitive advantage and the requisite competence to succeed.
APPRECIATION
The Board extends its sincere thanks to the Group`s long-standing and new
customers, suppliers, partners, shareholders and service providers for their
ongoing support of Adapt IT. In addition, the Board thanks Adapt IT`s staff,
without whose dedication, hard work, enthusiasm, team spirit, skills and
appetite for growth and change, the Group would not be the industry leader it is
today.
Dr Bernard Ravno Mr Sbu Shabalala
Non-Executive Chairperson Chief Executive Officer
15 September 2010
ORDINARY DIVIDEND NUMBER 8
The Board has set a policy of considering a dividend once annually after the
year end. The Board has declared a dividend on a dividend cover ratio of four
times, as the Group wishes to retain a significant proportion of profits for
future growth activities. Notice is hereby given that a cash dividend of 3,41
cents per share ("the dividend") has been declared, payable to shareholders
recorded in the books of the Company at close of business on 22 October 2010.
The salient dates relating to the cash dividend are as follows:
Last day to trade shares cum dividend Friday, 15 October 2010
Shares trade ex dividend Monday, 18 October 2010
Record date Friday, 22 October 2010
Payment date Monday, 25 October 2010
Share certificates may not be dematerialised or rematerialised during the period
Monday, 18 October 2010 to Friday, 22 October 2010, both days inclusive. This
dividend, having been declared after 30 June, has not been provided for in the
financial statements.
Directors
Dr Bernard Ravno* (Chairman); Sbu Shabalala (Chief Executive Officer); Siboniso
Shabalala (Financial Director); Tiffany Dunsdon; Bongiwe Ntuli*; Mandla Nhlapo*;
Patrick September*; Wanda Shuenyane*
*Independent non-executive director
Registered office
4/5 Rydall Vale Office Park
Rydall Vale Crescent
La Lucia Ridge
KwaZulu-Natal
Postal address
PO Box 5207
Rydall Vale Park
La Lucia Ridge Office Estate
Durban, 4019
Transfer secretary
Computershare Investor Services (Pty) Ltd70 Marshall Street, Johannesburg,
2001(PO Box 61051, Marshalltown, 2107)
Sponsor
Merchantec Capital
Company secretary
R L Moodley
Auditors
Ernst & Young Inc.
Durban
Date: 14 September 2010
Date: 14/09/2010 17:00:07 Produced by the JSE SENS Department.
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