NASTASSIA ARENDSE: Another company that published numbers today is software group Adapt IT. They hiked their dividend per share by 23% on the back of a rise in earnings. Their HEPS rose by 2%. They mentioned that they are weathering the tough economic conditions witnessed here in South Africa, and they are looking at lifting organic growth in the new financial year to be above the 6% currently achieved.
I had a conversation with Sbu Shabalala, who is the CEO of Adapt IT.
SBU SHABALALA: What really concerns us is the lack of confidence in the market, particularly when it comes to the purchasing of software. So we require the business to continue its investment in order for us to do well. The investment has actually been quite low, but we are seeing an improvement. It’s really a lack of confidence that worries us. The more the confidence picks up, the better we will do.
NASTASSIA ARENDSE: You speak of confidence – and I assume you are talking about the South Africa context of things, as well as economic growth. For the other regions that you operate in, is it the same tune when it comes to business confidence, or are things slightly better there?
SBU SHABALALA: Things are definitely better in the other geographies that we service. Indeed it is the South African environment where we are seeing really low, if any, growth.
NASTASSIA ARENDSE: And in terms of acquisitions, you mention that when you look at acquisitions and organic growth, your organic growth seems to be slowing a little compared to your acquisitions. What steps do you have in place to be able to see them grow at the same pace, even if acquisitions are growing a little faster than your organic growth?
SBU SHABALALA: Well, last year we achieved 9% organic growth in an environment that wasn’t as tough as the one on which we are just reporting, where we achieved organic growth of 6%. We are pleased with that, because 76% of our business is still in South Africa. So the South African environment has got a major impact on where we end up.
But to the extent that we want to grow at a much higher organic growth level, it is because of the transactions that we are targeting we obviously have grown at 25% – 19% of that being acquisitive growth. But we are looking to do much larger transactions. As we’ve grown bigger our balance sheet also has improved. So we are finding ourselves looking for much higher targets. The acquisitions will always lead organic growth.
NASTASSIA ARENDSE: In terms of your acquisition opportunities, those that are in the rest of Africa, what about those key regions get the team excited?
SBU SHABALALA: Well, we certainly are getting excited about the innovation that we are seeing in the financial services sector and in the likes of the Kenyan environment. And we are doing a lot of work in evaluating the market and looking for partners that will join the Adapt IT group and add value. Our organic growth activities also require us to have a local presence in those markets in order for us to accelerate the growth.
NASTASSIA ARENDSE: Going forward, what will you be focusing on?
SBU SHABALALA: We are focusing on delivering on the strategy that we’ve set as a board. We’ve said we want to build a R3 billion business by 2020. We are at R1 billion, and tracking quite well at that.
To that extent we invested about R120 million in the acquisition of Micros SA, and those numbers are not included in the set of numbers that we have now, so we expect their contribution in the financial year we are now in.
We believe we are certainly on track. We just have to do the same as we are doing now, with us expecting the market to pick up at some point.
NASTASSIA ARENDSE: Sbu, thank you for your time.