Technology group 4Sight Holdings says its well on its way to having just over three quarters of revenues being recurring or annuity based.
4Sight, traditionally invested in technology, telecommunication and media sector companies, had a board shake-up in October 2019, with four directors resigning and seven new ones appointed.
The public fight and the JSE suspension of the company for late results led to reputational damage that the new executive team is fighting to repair. Its stock fell to a low of 16c per share at the time for the AltX-listed company, but it has since recovered somewhat and has a R165m market capitalisation.
With 4Sight having turned a corner over the past three years, CEO Tertius Zitzke and his team are now focused on growing the company.
“4Sight’s go-to-market strategy remains on track to achieve the group’s strategic revenue mix objective, which aims to generate 70% in annuity-based revenue and 30% from new sales through a continued focus on creating ‘as a service’ solutions,” said Zitzke.
Traditionally, IT companies have become vendors and support units for large technology companies such as Microsoft, Oracle or SAP, which entails paying licensing fees or a share of profits to the software provider. To buck this trend, firms like 4Sight have developed a number of proprietary platforms and solutions — as part of its strategy — for industries such as healthcare management, financial services and fleet management.
Once a software program or solution has been built, it can be repurposed or used many times in different contexts. An example is Microsoft Office, which is used by millions of people across sectors in homes, schools, government and enterprise.
The shift to subscription and annuity business models means technology can also secure reliable recurring revenue streams.
These proprietary software systems and solutions are usually referred to as ‘own-IP’ [intellectual property].
“Each cluster is focused on targeted industries and leveraging unique IP-based solutions, while bolstering delivery with deep domain skills that enable and sustain significant sector-specific growth,” said Zitzke.
The company’s business is made up of four units: operational technologies, which grew operating profit by 53% for the period; IT, which grew 49%; business environment, said to be growing “strongly”, and the data and modern digital enterprise division, which is up 12%.
Zitzke attributes “the robust performances across every business cluster to the continued acceleration in digital transformation and cloud adoption on the African continent”, as more companies look to the convergence of operational and information technologies, with the business environment to ultimately embrace artificial intelligence (AI) to enhance productivity.
He told Business Day in April that the group has taken a big bet on AI, incorporating features like ChatGPT into some of its platforms for enterprise clients.
This comes as the group reported a 37.1% rise in revenue for the six months to June, reaching R451.3m, compared to R329.2m for the prior comparable period in 2022, with revenue growth experienced from all business clusters.
Operating profit rose 121.1% to R26.8m, while headline earnings per share (HEPS) — which strip the effect of one-off financial events — increased from 1.288c to 3.828c, an increase of 197.2%.
Cash balances stood at R93.4m, up 33% compared to the same time last year.
The company’s maiden dividend declared at 2.5c per share is another milestone achieved by the 4Sight team.
Last month, the technology group appointed Douglas Ramaphosa, the brother of President Cyril Ramaphosa, to its board as an independent non-executive director from the start of August.
The company recently received final approval from shareholders to conclude a share repurchase that will see just over 125.5-million shares, or 19% of total equity, taken out of circulation.
The company planned to fund the R16m repurchase with cash reserves.
4Sight is a little-traded stock, and management expects the move will help it achieve a R1bn valuation that would put it in contention for a listing on the JSE’s main board.
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