Publications
Partners
When finweek arrives at Adapt IT’s gigantic new offices in Midrand to sit down with CEO Sbu Shabalala, it finds him flanked by chief financial officer (CFO) Nombali Mbambo and commercial director Tiffany Dunsdon.
“I believe that the reason you want to talk to me is because of the business,” he says. “Adapt IT is not about me, it’s about the team.”
Dunsdon became the commercial director after the merger of InfoWave Holdings and Adapt IT in 2007, and Mbambo was appointed CFO in 2016.
Due to the consolidation of eight offices into one head office in Midrand earlier this year, Shabalala and his management team are now all living in Johannesburg.
The move to Johannesburg from his and Adapt IT’s home city of Durban has been great, he says, even if to him Adapt IT will always be a Durban company.
“We started from there,” says Shabalala, who originally founded Adapt IT as a black-owned SME in the IT sector.
Having everyone under one roof will help drive one Adapt IT culture, says Shabalala.
Quizzed about what that culture entails, Shabalala answers that it’s the “ethical nature” of how the company does business.
To him Adapt IT is a company that upholds values such as honesty, transparency and mutual respect.
He also believes the move will spur on innovation and create synergies within the company.
“As a business, our strategy is to integrate all of our businesses into one brand – one company,” he says. “So part of moving all these businesses into one building was just that, the final step in our integration strategy.
“We have businesses that look after the same markets, so we need one strategy in approaching those markets,” he says. “We can sometimes duplicate the same work in different units, so having everyone working together we can spur on the innovation cycle and get new products to market sooner.”
Shabalala’s previous experiences in companies in the broadcasting and sugar sectors helped him understand how software talks to the way a business is run, and how to turn software into revenue.
“At Adapt IT we need to understand the impact that software has in a company,” he says. “It’s a huge responsibility we have to our clients.”
Positive results
Together Shabalala, Mbambo and Dunsdon run operations across the education, manufacturing, energy, financial services, communications and hospitality sectors.
Their results for the year to June 2018, released mid-August, show that the team has delivered a 36% increase in turnover, up to R1.35bn.
Their revenue target for 2020 is R3bn.
While Adapt IT always has an eye open for an interesting acquisition, Shabalala is quick to point out that 13% of the company’s growth was organic and 30% was acquisitive.
“We are certainly pleased with the growth,” he says. “We are coming off a year where we had single-digit growth, so we are back with double-digit organic growth.”
Shabalala points out that 81% of Adapt IT’s business is in South Africa, where economic conditions have been flat.
“So for us to deliver growth through our existing businesses tells you we are not ex-growth. We are geared for growth in a low-growth environment,” he says.
Adapt IT wants to be the “de facto player in the sectors we are currently in before we start looking at new ones”, says Shabalala.
He believes though that, while the local market is consolidating, there are still opportunities in SA.
ICT shares are currently under pressure in SA, he says, and therefore the company “mostly pays cash for our acquisitions”.
“We have made sure our cash generation is high, so we can apply that cash to investing activities.”
Mbambo says that the devalued ICT share prices in SA is also the reason Adapt IT has bought back 9.3m shares during the recent financial year.
“We’ve been buying back our shares as we feel the share is undervalued at the moment,” says Mbambo.
The company used some of the shares in acquisitions, but still holds 8.2m shares as treasury shares for future acquisitions.
Building a diversified global software company
Apart from local growth, the company is also building a “worldwide software business”, says Shabalala.
The word diversification is like a mantra at Adapt IT, and for them diversification can be measured by three metrics: sector, product and geography.
He points to the acquisition of hospitality business Micros South Africa as an example of sector and geographic diversification, and the acquisition of telecoms business LGR as an example of product and geographic diversification.
The LGR acquisition adds depth to what Adapt IT has been doing in the telecoms sector and gives it a presence in Australia.
Further geographical diversification will come from Adapt IT’s push into East and West Africa. It already has an office in Nairobi, Kenya and is actively looking at future acquisitions in the country.
“Kenya has always been the technology hub of East Africa,” says Shabalala. “The growth in the economy and increase in GDP there is happening quite fast and they are leapfrogging South Africa in terms of technology in financial services.”
He says these regions are “high-growth markets that are untapped in terms of the markets we operate in”.
“True growth is going to come from regions like East Africa,” he says, adding that they find it best to work with local partners.
Adapt IT is also looking to further invest in Nigeria, where the company is currently operating in the financial services sector, says Shabalala.
“We have to carefully ensure we start building a client base in Nigeria. So we are looking at high-growth areas and will start creating a diversified portfolio of services we can offer through local partners.”
This article originally appeared in the 30 August edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
