| Tue 25 Nov 2008, 7:30 | | UCS - UCS Group Limited - Reviewed Results for the year ended 30 September 2008 |
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UCS
UCS
UCS - UCS Group Limited - Reviewed Results for the year ended 30 September 2008
UCS Group Limited
Incorporated in the Republic of South Africa
Reg No. 1993/002253/06
ISIN ZAE00016150 JSE code UCS
("UCS" or "the Group")
REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2008
+15% Revenue
+16% Normalised PBIT
+29% Annuity Revenue
22% Return on equity
Commenting on the results, John Bright, CEO of UCS Group, said: "The year under
review has been marked by an extremely volatile global and domestic trading
environment, in particular for speciality retail focused businesses like UCS.
Despite this, we have produced an acceptable trading performance marked by our
Software Division showing solid revenue growth and margins improvement.
"Strategically, good progress was made on the development of a Value Added
Services unit within the Solutions Division through the acquisition of interests
in 4Life Program and Computer Software Consultants. Internationally, the
acquisition of Aquitec into the Software Division provides us with an
established footprint in the UK and US where, despite difficult economic
conditions, we are confident that we`ll be able to leverage our lower cost base
to successfully develop an international Retail Solutions offering.
"Although UCS group is well placed strategically and operationally to continue
its growth momentum, the current global and macro-economic environment, will see
the Group continue and increase its focus on the creation of sustainable annuity
revenue streams during a time when new sales will no doubt come under pressure."
CONDENSED INCOME STATEMENT
for the year ended 30 September 2008
Reviewed Audited
12 months 12 months
2008 2007
R`000 R`000 % change
Revenue 1 225 743 1 070 539 14,5
Profit from operations before 212 060 270 613 (21,6)
interest, depreciation,
amortisation and research and
development expenditure
Amortisation of intangible assets (28 439) (27 954) 1,7
Adjustment to goodwill - (1 270) (100,0)
Depreciation of property, plant (36 510) (34 124) 7,0
and equipment (including rental
equipment)
Research and development (9 102) (21 425) (57,5)
expenditure
Profit before net interest paid 138 009 185 840 (25,7)
and taxation
Finance charges (16 431) (8 281) 98,4
Investment revenues 7 331 6 963 5,3
Profit before taxation 128 909 184 522 (30,1)
Taxation (21 488) (17 916) 19,9
Profit for the year 107 421 166 606 (35,5)
Attributable to:
Equity holders` of the parent 95 809 153 254 (37,5)
Minority interest 11 612 13 352 (13,0)
Earnings per share (cents)
Basic 33,3 57,4 (42,0)
Diluted 32,2 54,1 (40,5)
Dividends paid per share (cents) 9,0 8,0 12,5
Net asset value per share (cents) 165,3 136,5 21,1
Ordinary shares in issue (`000) 289 676 283 841 2,1
Weighted average number of 287 560 267 098 7,7
ordinary shares in issue (`000)
Diluted number of ordinary shares 297 913 283 496 5,1
(`000)
Headline earnings per share
(cents)
Basic 31,9 34,7 (8,1)
Diluted 30,8 32,7 (5,8)
CONDENSED BALANCE SHEET
at 30 September 2008
Reviewed Audited
2008 2007
R`000 R`000
ASSETS
Non-current assets 569 815 430 733
Property, plant and equipment (including 64 869 72 754
rental equipment)
Intangible assets 118 027 65 775
Goodwill 311 660 250 522
Investments and loans receivable 22 362 7 028
Finance lease receivables 4 397 -
Deferred tax assets 48 500 34 654
Current assets 430 185 371 582
Inventory 42 565 28 034
Trade and other receivables 223 847 182 048
Loans receivable - 15 915
Finance lease receivables 5 276 -
Taxation 4 226 762
Assets held for sale 11 616 -
Cash and cash equivalents 142 655 144 823
Total assets 1 000 000 802 315
EQUITY AND LIABILITIES
Capital and reserves 506 589 410 769
Equity attributable to equity holders of 478 927 387 402
the parent
Minority interest 27 662 23 367
Non-current liabilities 157 334 65 406
Long term loans 139 017 55 277
Deferred tax liabilities 18 317 10 129
Current liabilities 336 077 326 140
Trade and other payables 222 711 205 980
Current portion of long term loans 76 541 93 543
Revenue received in advance 11 780 7 408
Taxation 25 045 19 209
Total equity and liabilities 1 000 000 802 315
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2008
Preference Treasury
Share share Share share
capital capital premium reserve
R`000 R`000 R`000 R`000
Balance at 1 246 25 69 767
1 October 2006
Exchange differences arising
on translation of foreign
operations
Net income recognised directly
in equity
Profit for the year
Total recognised income and
expense for the year
Ordinary shares issued at a 167 84 457
premium net of share issue
costs
Fair value adjustments for 37 337
equity instruments issued or
to be issued
Preference shares converted to 6 (6)
ordinary shares
Preference shares repurchased (1) (35)
Treasury shares held (9) (8 076)
Increase in share based
payment reserve
Argility Limited unbundling (158 448)
dividend in specie
Dividend paid
Minority acquired share of
equity in subsidiaries
Minorities share of equity
acquired
Balance at 1 410 18 25 002 -
30 September 2007
Exchange differences arising
on translation of foreign
operations
Net income recognised directly
in equity
Profit for the year
Total recognised income and
expense for the year
Ordinary shares issued at a 27 12 384
premium net of share issue
costs
Preference shares converted to 8 (8)
ordinary shares
Transfer to treasury share 467 (467)
reserve
Net decrease in treasury 3 5 402
shares
Fair value adjustments on (1 004)
treasury shares held
Increase in share based
payment reserve
Dividend paid
Minority increase in share of
equity in subsidiary
Minorities share of equity
acquired in subsidiaries
Balance at 1 448 10 43 255 (1 471)
30 September 2008
Share Foreign
based currency
payment translation Accumulated
reserve reserve profit
R`000 R`000 R`000
Balance at 1 October 2006 8 093 (340) 222 205
Exchange differences arising on 99
translation of foreign operations
Net income recognised directly in 99
equity
Profit for the year 153 254
Total recognised income and 99 153 254
expense for the year
Ordinary shares issued at a
premium net of share issue costs
Fair value adjustments for equity
instruments issued or to be
issued
Preference shares converted to
ordinary shares
Preference shares repurchased
Treasury shares held
Increase in share based payment 4 246
reserve
Argility Limited unbundling (5 224)
dividend in specie
Dividend paid (21 361)
Minority acquired share of equity
in subsidiaries
Minorities share of equity
acquired
Balance at 30 September 2007 12 339 (241) 348 874
Exchange differences arising on 173
translation of foreign operations
Net income recognised directly in 173
equity
Profit for the year 95 809
Total recognised income and 173 95 809
expense for the year
Ordinary shares issued at a
premium net of share issue costs
Preference shares converted to
ordinary shares
Transfer to treasury share
reserve
Net decrease in treasury shares
Fair value adjustments on
treasury shares held
Increase in share based payment 4 687
reserve
Dividend paid (25 956)
Minority increase in share of
equity in subsidiary
Minorities share of equity
acquired in subsidiaries
Balance at 30 September 2008 17 026 (68) 418 727
Attributable
to equity
holders of Minority Total
the parent interest equity
R`000 R`000 R`000
Balance at 1 October 2006 300 996 38 448 339 444
Exchange differences arising 99 99
on translation of foreign
operations
Net income recognised 99 99
directly in equity
Profit for the year 153 254 13 352 166 606
Total recognised income and 153 353 13 352 166 705
expense for the year
Ordinary shares issued at a 84 624 84 624
premium net of share issue
costs
Fair value adjustments for 37 337 37 337
equity instruments issued or
to be issued
Preference shares converted - -
to ordinary shares
Preference shares (36) (36)
repurchased
Treasury shares held (8 085) (8 085)
Increase in share based 4 246 224 4 470
payment reserve
Argility Limited unbundling (163 672) (163
dividend in specie 672)
Dividend paid (21 361) (3 292) (24 653)
Minority acquired share of - 3 067 3 067
equity in subsidiaries
Minorities share of equity - (28 432) (28 432)
acquired
Balance at 30 September 2007 387 402 23 367 410 769
Exchange differences arising 173 173
on translation of foreign
operations
Net income recognised 173 173
directly in equity
Profit for the year 95 809 11 612 107 421
Total recognised income and 95 982 11 612 107 594
expense for the year
Ordinary shares issued at a 12 411 12 411
premium net of share issue
costs
Preference shares converted - -
to ordinary shares
Transfer to treasury share - -
reserve
Net decrease in treasury 5 405 5 405
shares
Fair value adjustments on (1 004) (1 004)
treasury shares held
Increase in share based 4 687 4 687
payment reserve
Dividend paid (25 956) (12 426) (38 382)
Minority increase in share - 2 390 2 390
of equity in subsidiary
Minorities share of equity - 2 719 2 719
acquired in subsidiaries
Balance at 30 September 2008 478 927 27 662 506 589
CONDENSED CASH FLOW STATEMENT
for the year ended 30 September 2008
Reviewed Audited
12 months 12 months
2008 2007
R`000 R`000 % change
Cash received from operating 82 358 118 850 (30,7)
activities
Cash generated from operations 199 350 178 720 11,5
Working capital changes (31 521) (18 533) 70,1
Cash generated from operating 167 829 160 187 4,8
activities
Net investment revenues and (8 567) 433
finance charges
Taxation paid (37 614) (17 463)
Dividends paid (39 290) (24 307)
Cash applied to investing (162 794) (69 055) 135,7
activities
Cash received from (applied to) 78 268 (1 804)
financing activities
Cash and cash equivalents
- Net (decrease) increase (2 168) 47 991
- At beginning of the year 144 823 96 832
- At end of the year 142 655 144 823 (1,5)
CONDENSED SEGMENTAL ANALYSIS
for the year ended 30 September 2008
Reviewed Audited
12 months 12 months
2008 2007
R000 R000 % change
Revenue 1 225 743 1 070 539 14,5
Software 475 346 376 927 26,1
Solutions & services 747 897 693 612 7,8
Corporate 2 500 - 100,0
Profit from operations before 202 958 249 188 (18,6)
interest and depreciation and
amortisation (EBITDA)
Software 90 960 124 451 (26,9)
Solutions & services 119 843 133 778 (10,4)
Corporate and eliminations (7 845) (9 041) (13,2)
Profit before interest and 138 009 185 840 (25,7)
taxation (PBIT)
Software 66 060 98 086 (32,7)
Solutions & services 80 244 98 540 (18,6)
Corporate and eliminations (8 295) (10 786) (23,1)
Normalised adjustments applicable 8 184 73 990
to EBITDA and PBIT*
Normalised EBITDA 194 774 175 198 11,2
Software 82 776 58 726 41,0
Solutions & services 119 843 125 513 (4,5)
Corporate and eliminations (7 845) (9 041) (13,2)
Normalised PBIT 129 825 111 850 16,1
Software 57 876 32 361 78,8
Solutions & services 80 244 90 275 (11,1)
Corporate and eliminations (8 295) (10 786) (23,1)
Depreciation and amortisation 64 949 63 348 2,5
including goodwill adjustments
Software 24 900 26 365 (5,6)
Solutions & services 39 599 35 238 12,4
Corporate and eliminations 450 1 745 (74,2)
Research and development 9 102 21 425 (57,5)
expenditure
Software 5 132 17 707 (71,0)
Solutions & services 3 970 3 718 6,8
Note : Comparative figures have been reclassified, where necessary, in
accordance with current year classifications. In the current year, Destiny
Electronic Commerce was re-classified from the Software division to the
Solutions and Services division.
* Normalisation adjustments in the current year relate to the negative goodwill
and foreign loan adjustments realised on the acquisition of Aquitec. Comparative
year normalisation adjustments relate to the profit on creation and unbundling
of Argility Limited and the profit on sale of the network division to Internet
Solutions of R65,725 million and R8,265 million respectively.
NOTES TO THE FINANCIAL STATEMENTS
1 Basis of preparation
This preliminary report complies with International Accounting Standard 34 -
Interim Financial Reporting as well as with Schedule 4 of the South African
Companies Act (No. 61 1973), as amended, and the disclosure requirements of the
Listings Requirements of the JSE Limited. The preliminary report has been
prepared using accounting policies that comply with International Financial
Reporting Standards. The accounting policies are consistent with those applied
in the financial statements for the year ended 30 September 2007.
In the current year, the Group adopted IFRS7 - Financial Instruments
Disclosures, which is effective for annual reporting periods beginning on or
after 1 January 2007 and the consequential amendments to IAS 1 - Presentation of
Financial Statements. The impact of the adoption of IFRS7 and changes to IAS 1
will be to expand the disclosure provided in the annual financial statements for
the year ending 30 September 2008 regarding the Group`s financial instruments
and management of capital. The adoption of the interpretations as issued by the
International Financial Reporting Interpretations Committee, which are effective
for the current year, has not led to any changes in the Group`s accounting
policies.
For a better understanding of the Group`s financial position, the results of its
operations and cash flows for the year, this summarised preliminary report of
annual results should be read in conjunction with the annual financial
statements from which this announcement was derived.
Reviewed Audited
12 months 12 months
2008 2007
R`000 R`000 % change
2 Reconciliation of earnings to
headline earnings
Earnings attributable to equity 95 809 153 254 (37,5)
holders` of the parent
Preference share entitlement 17 28
Basic earnings 95 792 153 226 (37,5)
Adjusted for:
goodwill adjustment - 1 270
assessed losses not previously - (1 270)
recognised at acquisition
negative goodwill realised (3 316) -
profit on sale of a division by a - (5 368)
subsidiary company
profit on sale of equity in subsidiary (664) -
profit on sale of Intellectual - (54 809)
Property and Software Products to
Argility Limited (Product Co)
profit on disposal of property, plant (195) (503)
& equipment
Basic headline earnings 91 617 92 546 (1,0)
3 Commitments
Capital 36 012 13 642
Operating leases 55 433 57 051
4 Borrowings
Interest bearing borrowings 204 624 126 942
Non-interest bearing borrowings 11 456 21 878
216 080 148 820
5 Capital expenditure
Tangible assets 52 073 62 254
Intangible assets 82 272 19 593
134 345 81 847
6 Operating lease charges
Premises 26 677 21 242
Office equipment 1 274 573
Vehicles - 37
27 951 21 852
7 REVIEW OPINION
The annual financial statements from which this financial information has been
derived have been reviewed by Deloitte & Touche whose unmodified review opinion
is available for inspection at the registered office of the company.
COMMENTARY
Overview
UCS Group is an investment holding company for IT businesses with a primary
focus on Software, Solutions and Services for selected markets. The Group has
achieved a leadership position in its domestic retail market and is currently
expanding certain of its retail offerings and services into selected
international markets. More than 75% of the permanent staff of over 2 500 people
are employed in servicing the retail client base.
The year to September 2008 was a challenging one for UCS Group.
The strength of our underlying annuity business model, our focus on selected
market segments where we add genuine value for our customers together with
effective talent management and retention programs have ensured that we are able
to report a set of results that build on the past and grows the foundation for
the future.
The SA economy itself has thus far been relatively isolated from direct exposure
to the fallout in global credit markets largely due to exchange control
legislation but the indirect consequences of the global economic crisis are
clearly evident in the recent dramatic volatility of the Rand against most major
currencies, the substantial reduction in the market capitalization of most
companies listed on the JSE as well as the futures pricing for most of SA`s key
natural resources.
These factors, combined with the existing pressures on SA consumers caused by
high domestic interest rates, rapidly escalating fuel and food costs and the
general tightening of consumer credit availability, have put the Group`s
predominantly retail customer base under significant pressure and in particular
caused the delay or cancellation of certain large-scale consulting projects as
reported at our interim stage.
We also reported at interim stage that the power crisis that caused national
load shedding during the first quarter of the calendar year had resulted in
significant productivity declines, particularly in our field service operations.
Against this background, we are pleased to report that UCS Group has recorded
acceptable trading results for the full year to September 2008.
Operational Review
Most of the trading units within the Group achieved results in line with
expectations and budgets, although there were exceptions based largely on market
conditions and other factors beyond the direct control of their management
teams.
Effective execution of our strategy for our software businesses has continued to
deliver the expected margin improvements in the Software Division, which
recorded a 26,1% growth in revenue to R475 million (2007: R377 million), a 41,0%
growth in normalised EBITDA to R83 million (2007: R59 million) representing
17,4% of revenues (2007: 15,6%) and an 78,8% increase in normalised PBIT to R58
million (2007: R32 million) representing 12,2% of revenues (2007: 8,6%). Revenue
growth contributed by the Aquitec aquisition in March was 5,0%, with the balance
of 21,1% revenue growth coming from existing operations. Excluding the effects
of the Aquitec acquisition, normalised EBITDA was up by 36,4% to R80 million
(2007: R59 million) representing 17,6% of revenues (2007: 15,6%) and normalised
PBIT was up by 81,4% to R58 million (2007: R32 million) representing 12,9% of
revenues (2007: 8,6%).
The performance within our Solutions & Services Division this year was mixed,
with most units recording solid results under challenging market conditions, but
with our UCS Solutions business suffering as a result of the postponement or
cancellation of certain large scale retail consulting projects during the first
half of the year. Overall, this division recorded a 7,8% growth in revenue to
R748 million (2007: R694 million), a 4,5% decline in normalized EBITDA to R120
million (2007: R126 million) representing 16,0% of revenues (2007: 18,1%) and an
11,1% decline in normalised PBIT to R80 million (2007: R90 million) representing
10,7% of revenues (2007: 13,0%).
All revenue growth in this division was attributable to the effects of current
year and prior year acquisitions. Excluding the effects of these acquisitions,
the division recorded a 13,1% decline in normalised EBITDA to R109 million
(2007: R126 million) representing 15,6% of revenues (2007: 17,8%) and a 20,1%
decline in normalised PBIT to R72 million (2007: R90 million) representing 10,2%
of revenues (2007: 12,8%).
Financial Overview
Overall, UCS Group recorded a 14,5% growth in revenue to R1,226 million (2007:
R1,071 million), an 11.2% growth in normalised EBITDA to R195 million (2007:
R175 million) representing 15,9% of revenues (2007: 16,4%) and a 16,1% increase
in normalized PBIT to R130 million (2007: R112 million) representing 10,6% of
revenues (2007: 10,4%). Organic revenue growth for the year amounted to 10,1%,
with the balance of 4,4% attributable to current year and prior year
acquisitions. Excluding the effects of these acquisitions, normalised EBITDA
grew 5,8% to R181 million (2007: R174 million) representing 15,4% of revenues
(2007: 16,2%) and normalised PBIT grew 10,9% to R122 million (2007: R110
million) representing 10,4% of revenues (2007: 10,4%).
At Group level, Headline Earnings Per Share declined by 8% to 31,9 cents (2007:
34.7 cents) largely due to the increase in the interest and tax expense as well
as the increase in the weighted average number of shares in issue in comparison
to the prior year. This includes the impact of a net R13,4 million deferred tax
credit (2007: 10,8 million) passed to raise the deferred tax asset in respect of
the accumulated tax losses in the Destiny Electronic Commerce subsidiary company
(2007: UCS Solutions subsidiary). Excluding this deferred tax credit as well as
the profit realized on the loan revaluation relating to the Aquitec acquisition,
headline earnings per share would have come in at 25,5 cents and shown a
decrease of 17.9 percent over the prior year adjusted 31,1 cents.
Our strong cash flows are attributable to our focus on the generation of annuity
revenue streams as well as continuous and effective management of our debtor
books. We are pleased to report an 11.5% increase in our cash generated from
operations to R199 million (2007: 179 million) which represents 102% (2007:
102%) of our normalised EBITDA. This correlation continues to support the
quality of our earnings. Cash and cash equivalent balances, after substantial
investing activities, was relatively flat at R143 million (2007: R145 million)
despite the significant additional working capital requirements of the enlarged
Group.
The Group`s total assets as at 30 September 2008 total R1 billion for the first
time with the acquisition of Aquitec and CSC contributing R170 million of
assets, predominantly intangible, during the period under review. Group debt
increased to R216 million (2007: R149 million) essentially due to the R53
million raised as acquisition finance to part fund the R67,5 million upfront
purchase consideration in respect of the CSC acquisition concluded in September
2008 as well as the entering into a sale and leaseback agreement for a portion
of the Group`s rental stock amounting to R9,1 million. Of this total debt
balance at year end R168 million (2007: R42 million) is true bank debt which
amounts to 33,1% (2007: 10,2%) of equity. Total debt came to 42,6% (2007: 36,3%)
of equity. The total level of debt remains within the estimated Group optimal
capital structure of 43% debt to equity and still reflects a comfortable
interest cover ratio of approximately 8 times based on normalised PBIT.
The current ratio showed a slight improvement to 1.3 to 1 (2007: 1.1 to 1), net
asset value per share increased by 21% to 165,3c (2007: 136,5c) and tangible net
asset value per share showed a deterioration of 20% to 23 cents (2007: 28,7
cents).
During the year, the Group issued 7 million new ordinary shares of which 4,6
million were issued to honour staff incentives while R2,4 million were issued in
settlement of the balance of the purchase consideration owed to the vendors of
DiverseIT.
No new market priced options were granted under the UCS Group Limited Staff
Share Trust during the period under review. A total of 5,8 million market priced
options were forfeited during the year either as a consequence of the cessation
of employment or the election by staff to accept zero cost options on the scheme
proposed by the board and approved by shareholders at the general meeting held
on 5 November 2008. After taking this into consideration together with the 2,9
million market priced options exercised during the year, a total of 13,2 million
market priced options were still in issue at year end (2007: 22,0 million) and
2,7 million zero cost options (2007: nil). Taking these factors into account the
Group`s diluted headline earnings per share decreased by 5,8 percent to 30,8
cents (2007: 32,7 cents).
The Group accumulated 1,2 million shares during the 2008 financial year through
a general buy-back initiative. The board has the authority to buy back up to 20
percent of the shares in issue until the next annual general meeting
representing 58,4 million shares.
Strategic Review and Objectives
Strategically, the Group continued the execution of its stated intention to
create a significant Value Added Services (VAS) unit. The two more significant
initiatives concluded in this regard were the decisions to launch the 4Life
multi-vendor loyalty program through our LifeWorld business unit in August and
the acquisition by our Destiny Electronic Commerce unit of a 70% share in the
business of Computer Software Consultants (CSC) with effect from September.
On the international front, the unfolding global financial crisis had an
extremely negative influence on our general sales activities, but we continued
to build for the future with the acquisition of the Aquitec business from March
this year providing us with offices and infrastructure in the UK and Chicago,
USA.
A senior UCS executive has been appointed to manage this offshore business and
assist in positioning it to improve and enhance its warehouse management
software and service offerings to its existing clients as well as to serve as a
platform from which to grow the rest of the international offerings of our
future Retail Solutions Division. This business also provides an infrastructure
from which to support our ongoing international sales efforts for our unique
retail application software manufacturing unit, UCSSM.
In addition, we have provided loan funding which is convertible into equity for
the start-up of a new business unit in Philadelphia, USA. The business has been
positioned to leverage "Ready to Retail", our highly successful SAP All-in-One
Retail framework for the mid-tier USA market, where we have been awarded a SAP
AIO partner status. This unit, which was only officially launched in January
this year, has done well to establish a reasonable sales pipeline during this
time and win its first customer order.
Although market conditions are tough, we are well placed to successfully compete
for business in the US as we utilise the lower cost of SA based consulting and
development resources to service this market.
The creation of a 3 division structure for the Group, as announced last year, is
progressing well and is expected to be implemented during the 2009 financial
year with the management structures for the new division having been defined and
the related incentivisation being linked to this new structure. As planned this
future 3 divisional structure will comprise a Retail Solutions Division, an
Infrastructure Division and an Investments Division.
Acquisitions
During the period under review UCS concluded the following acquisitions:
- Aquitec which comprised the purchase of the entire equity and sale claims in
Aquitec UK Limited and via UCS USA Inc. the going concern business of Aquitec
USA Inc. with effect from 1 December 2007 as disclosed in the 2007 year end
results announcement and updated in the 2008 interim results announcement. The
acquisition was accounted for in the Group`s results from 1 March 2008 once the
final condition precedent relating to South African Reserve Bank approval was
obtained.
- A 51% interest in 4Life Program (Proprietary) Limited with effect from 1 April
2008 at a cost of R1,5 million of which R0,95 million has been settled to date
and the balance is due on 31 March 2009. The acquisition was executed during the
business plan validation and test phase which was concluded in August 2008 when
the plan was signed off and officially operationalised.
- The going concern business of CSC with effect from 1 June 2008 and accounted
for in the Group`s results from 1 September 2008 following the fulfilment of the
conditions precedent to the transaction. The detailed terms announcement related
to this transaction was released to the market on 14 August 2008.
Contingent Liability
Management is aware of the following contingent liabilities as at the financial
year end:
- In terms of the management agreement entered into with Tactical Software
Systems (Proprietary) Limited, there is a management incentive fee that is
payable annually for a 3 year period ending 30 June 2009. This incentive fee
equates to that which exceeds the predetermined warranted profits as agreed by
the parties. This fee has been provided for as could be determined with
reference to existing contracts.
- In accordance with the sale of business agreement entered into with the
vendors of Computer Software Consultants (Proprietary) Limited (CSC), additional
amounts are payable to the vendors of CSC to the extent the CSC business
achieves or exceeds certain growth profit targets over the next two years. The
additional purchase price payments have been provided for to the extent the
profitability milestones have been deemed achievable. In addition to the amounts
provided for, a maximum of R12,9 million could become payable.
DIVIDEND DECLARATION
Notice is hereby given that the board of directors has declared a final dividend
of 5 cents per ordinary share in respect of the financial year ended 30
September 2008. The dividend will be paid on Monday 9 February 2009.
To comply with the procedures of STRATE, the last day to trade in the shares for
the purpose of entitlement to the final dividend is Friday 30 January 2009. The
shares will commence trading ex dividend on Monday 2 February 2009 and the
record date will be Friday 6 February 2009.
Share certificates may not be dematerialised or rematerialised between Monday 2
February 2009 and Friday 6 February 2009, both days inclusive.
PROSPECTS
Although UCS Group is well placed, strategically as well as operationally, to
continue the growth momentum established over the past 6 years, it would be
irresponsible, given the current macro-economic scenario, to be overly
optimistic about the Group`s prospects for the year ahead.
We have prepared "business as usual" budgets which show good growth in most
operating units in the Group, but we are also preparing contingency plans for
"business unusual" scenarios which will allow us to react quickly to changes in
our various environments.
We have already seen many major international businesses announcing cut-backs in
production as well as expenditure. UCS Group is possibly better placed than some
of our competitors to ride out what could become an extremely difficult trading
environment. More than 80% of our turnover comes from the provision of our own
products and services, rather than the sale of third party products, which gives
us some protection from currency volatility. More than 60% of our turnover
emanates from monthly and annual annuity revenue streams which provide us with
predictable cash flows during times when new sales are under pressure.
For and on behalf of the Board
DF Coles JD Bright
(Chairman) (Chief Executive Officer)
25 November 2008
Company Secretary
Corporate Governance CC
Registered office Transfer secretaries
20th Floor, 209 Smit Street, Link Market Services South Africa
Braamfontein 2001 (Pty) Ltd
11 Diagonal Street, Johannesburg
2001
PO Box 31266, PO Box 4844,
Braamfontein 2017 Johannesburg 2000
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Ltd
There is more to UCS than meets the eye. www.ucs.co.za
Date: 25/11/2008 07:30:01 Produced by the JSE SENS Department.
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