Adapt IT released its financial results for the year ended 30 June 2021, which revealed muted organic revenue growth of 1% and a 10% decline in EBITDA.
The company’s earnings per share (EPS) was down 2% to 50 cents, while normalised headline EPS was up 6% to 82 cents.
Adapt IT said these results showed resilience in a tough climate, with the company facing a particularly turbulent year.
The ICT provider faced headwinds from the Covid-19 pandemic, the weak economy, and the impact of the social unrest.
In 2021 Adapt IT also had an unplanned change of CEO. Sbu Shabalala resigned following a three-month leave of absence and was replaced by Tiffany Dunsdon, who resides in Australia.
The big news was, however, the corporate activity from Volaris and Huge Group.
There was an unsolicited Huge Group share swap offer which closed with 1.9% of Adapt IT shareholders having accepted it. Huge Group subsequently disposed of all these shares.
Volaris, in turn, offered Adapt IT shareholders R7.00 cash for each share. On 30 June 2021, the shareholder vote in favour of the Volaris deal was carried at 87%.
There are several conditions precedent which remain to be fulfilled, and the deal is now in the final regulatory approval processes, which are expected to be implemented in December 2021.
Strange share price trading
Following the results announcement today, Adapt IT traded at R7.00 per share. There were even a few trades at R7.02 per share.
These trades are curious as it means that there is no upside to a buyer when the R7.00 per share cash offer from Volaris is implemented.
MyBroadband asked Richard Cheesman, a senior investment analyst at Protea Capital Management, about the Adapt IT share price.
Cheesman said Volaris is currently in the market buying shares, but he does not think they could pay more than R7.00 per share.
He highlighted that anyone happy to stay in the unlisted entity following the Volaris deal implementation would not be restricted by the offer price.
“I am not sure if there is an option here for dissenting minority shareholders to exercise appraisal rights, but if it is the case, then purchases above R7 could also make sense to those ends,” said Cheesman.
“There may also be some orders put in at the market price that hit the best offer price, and this would be above R7.00 if Volaris is buying everything at R7.00 or below,” he said.
There is also the possibility of traders who are not aware of the offer that results in errant small trades.