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ADAPT IT HOLDINGS LIMITED - Adapt IT Unaudited Condensed Consolidated Interim Group Results for the Six Months Ended 31 December 2018

Release Date: 29/01/2019 07:30
Code(s): ADI     PDF:  
 
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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



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