| Mon 19 Oct 2009, 16:03 | | UCS - UCS Group - Notice of general meeting and expanded pro forma financial |
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UCS
UCS
UCS - UCS Group - Notice of general meeting and expanded pro forma financial
effects in terms of the disposal by UCS solutions holdings (PROPRIETARY) limited
of its entire 60% shareholding in TSS managed services (PROPRIETARY) limited
UCS GROUP LIMITED
(Registration number 1993/002253/06)
JSE Code: UCS ISIN: ZAE000016150
(Incorporated in the Republic of South Africa)
("UCS")
NOTICE OF GENERAL MEETING AND EXPANDED PRO FORMA FINANCIAL EFFECTS IN TERMS OF
THE DISPOSAL BY UCS SOLUTIONS HOLDINGS (PROPRIETARY) LIMITED OF ITS ENTIRE 60%
SHAREHOLDING IN TSS MANAGED SERVICES (PROPRIETARY) LIMITED
1 Introduction
Shareholders are referred to the announcement dated 23 September 2009 ("the
23 September announcement") wherein the board of directors of UCS ("the
Board") announced the disposal by UCS Solutions Holdings (Proprietary)
Limited ("UCS Solutions Holdings"), a wholly owned subsidiary of UCS, of
its entire 60% shareholding in TSS Managed Services (Proprietary) Limited
("TSS Managed Services") by way of the following composite transactions
(collectively "the Transaction"):
* the repurchase by TSS Managed Services of 19 ordinary shares in the
issued ordinary share capital of TSS Managed Services with a par value
of R1-00 each ("the Repurchase Shares"), from UCS Solutions Holdings
and constituting 19% of the entire issued share capital of TSS Managed
Services and the subsequent cancellation thereof in accordance with
section 85 of the Companies Act, No 61 of 1973, as amended ("the TSS
Managed Services Repurchase"); and
* the disposal to Tactical Software Systems (Proprietary) Limited
("TSS") of 41 ordinary shares in the issued share capital of TSS
Managed Services with a par value of R 1-00 each ("the Sale Shares"),
by UCS Solutions Holdings and constituting 41% of the entire issued
share capital of TSS Managed Services).
Shareholders are further advised that a circular to shareholders setting
out the full details of the Transaction ("the Circular"), is being posted
to shareholders today.
The Transaction is classified as Category 1 and a related party transaction
in terms of the Listings Requirements of the JSE Limited ("the Listings
Requirements"). Accordingly, shareholder approval for the Transaction is
required as well as a fairness opinion from an independent expert.
KPMG Services (Proprietary) Limited ("KPMG") was appointed by the Board to
provide an independent fairness opinion on the Transaction. KPMG has
considered the terms and conditions of the Transaction and is of the
opinion that the terms and conditions of the Transaction are fair to UCS
shareholders. Their opinion is set out in the Circular.
2 Expanded Pro Forma Financial Effects of the Transaction
Shareholders are referred to the pro forma financial effects set out in the
23 September announcement and are referred to the expanded pro forma
financial effects as set out below.
The table below sets out the unaudited pro forma financial effects of the
Transaction on the earnings, headline earnings, net asset value and
tangible net asset value per UCS share.
The unaudited pro forma financial effects are prepared for illustrative
purposes only, and due to their nature, may not fairly present UCS`s
financial position. The pro forma financial effects are the responsibility
of the directors of UCS.
After the HCL
Published Axon
reviewed Transaction
interim Effects of and Before
Per UCS results 31 the HCL Axon this
share March Transaction Transaction 2 Change After 3 Change
20091
(cents) (cents) (cents) (cents) (cents) (%)
Earnings 0,1 9,1 9.2 (1.3) 7.9 (14.1)
Headline 5,2 - 5.2 (2.0) 3.2 (38.5)
earnings
Net asset 161,1 9.3 170.4 (2.2) 168.2 (1.3)
value
Tangible net 19.7 16.8 36.5 16.6 53.1 45.5
asset value
Ordinary 292,080 -
shares in 292,080 - 292,080 -
issue net of
treasury
shares held
(`000)
Weighted 290,734 -
average
number of 290,734 - 290,734 -
ordinary
shares in
issue (`000)
Notes and assumptions:
1 Based on the published reviewed interim results for the six months ended 31
March 2009.
2 Based on the figures as set out in the "After the Transaction" column in
terms of the announcement released on SENS on 16 July 2009 regarding the
disposal by UCS Solutions (Proprietary) Limited, a wholly owned subsidiary
of UCS Solutions Holdings, of its Enterprise Solutions Business to HCL Axon
(Proprietary) Limited ("the HCL Axon Transaction").
For purposes of the calculations, the weighted average number of shares,
the diluted weighted average number of shares and the actual number of UCS
shares in issue (net of treasury shares) at 31 March 2009 are 290.7
million, 296.1 million and 292.1 million, respectively;
The pro forma financial effects in respect of the HCL Axon Transaction are
based on the following assumptions:
* The reversal of the Enterprise Solutions Business contribution to
earnings and headline earnings for the six months ended 31 March 2009
of R0.3 million;
* R56.8 million net purchase consideration comprising the upfront
purchase consideration of R62.1 million assuming no upward
adjustments, on the basis the Enterprise Solutions Business does not
achieve or exceed the defined growth revenue targets, after funding
the settlement of working capital of R5 million and share incentive
obligations of R0.34 million;
* The realisation of the applicable profit on sale of the going concern
business which amounts to R34.7 million pre-tax and transaction costs;
* The inclusion of a once-off license fee of R2.5 million for the
perpetual license to use the pre-configured SAP template;
* Restructuring costs associated with lease premises and other
infrastructure related commitments post the transaction amounting to
R1.8 million;
* Transaction costs of R0.8 million incurred in relation to the HCL Axon
Transaction; and
* The net tax effect of the preceding adjustments totals R 7.9 million
of which the once off component specific to the profit on sale of the
going concern business amounts to R 8.4 million. This includes the
realisation of estimated tax losses, on which deferred tax assets have
historically been realised, in UCS Solutions which amounts to R24.7
million at 1 October 2008. UCS Solutions (Proprietary) Limited will
now as a consequence be in a fully taxable position moving forward.
3 Based on the assumption that the Transaction was effected on 1 October 2008
for income statement purposes and on 31 March 2009 for balance sheet
purposes.
4 Included in the "After" earnings and headline earnings are the following
adjustments and related assumptions:
* The reversal of the TSS Managed Services contribution to earnings and
headline earnings for the six months ended 31 March 2009 of R8.2
million comprising:
- earnings from TSS Managed Services of R7.2 million of which minorities
allocation is R3.3 million;
- earnings contribution of R5.8 million as a consequence of the
accounting for the management fee payable to TSS as deferred purchase
consideration;
- reversal of amortization of intangible assets associated with the
acquisition of TSS Managed Services in June 2006 of R2 million net of
deferred tax and minorities interest; and
* earnings of R0.5 million on the reversal of intercompany transactions.
Estimated R65 million transaction proceeds comprising:
- upfront R25 million cash consideration for the repurchase of the
Repurchase Shares;
- upfront R10 million cash consideration in respect of the disposal of a
portion of the Sale Shares; and
- deferred R30 million in respect of the balance of the Sale Shares
representing the assumed redemption of 600 redemption shares on the
achievement of the performance criteria defined for the financial
years 2012 and 2013 respectively. Consequently, the remaining number
of preference shares with a face value of R15 million is assumed
redeemed at the amount equal to their par value of R1 while the R45
million Adjustment Amount has also been excluded for the purposes of
the pro forma financial effects on the assumption the performance
criteria defined in respect of this amount is not achieved.
* After the realisation of R45.2 million goodwill and intangible assets
of R6 million (net of deferred taxation and minorities interest), the
applicable profit on sale of the 60% interest in TSS Managed Services
by UCS Solutions Holdings amounting to R5.8 million pre tax;
* Investment income on the upfront cash consideration of R1.1 million at
an average call deposit rate of 6%;
* Estimated transaction costs of R0.8 million;
* Dividend income on the redeemable preference shares at the annual
coupon rate, currently 7.6%; and
* The net tax effect of the preceding adjustments of R4.1 million.
5 The net asset value per share and tangible net asset value per share were
calculated to demonstrate the effect of the Transaction as if it had taken
place on 31 March 2009. Consequently, due the growth in TSS Managed
Services net asset value and the growth in goodwill associated with the
deferred purchase consideration in respect of the acquisition of TSS
Managed Services in June 2006, the applicable loss on the sale of the 60%
interest in TSS Managed Services by UCS Solutions Holdings net of tax
amounts to R6.5 million.
6 The net asset value per share and tangible net asset value per share in
terms of the announcement released on SENS on 16 July 2009 regarding the
HCL Axon Transaction has been restated however, the effects of the
Transaction as disclosed on 23 September 2009 has as a consequence not
significantly changed.
Notice of general meeting
Notice is hereby given that a general meeting of shareholders will be held at
10h00 on Tuesday, 3 November 2009 at the registered office of UCS, being 20th
Floor, 209 Smit Street, Braamfontein, Johannesburg, 2001 in order to vote on the
ordinary resolutions necessary to implement the Transaction, as set out in the
Circular.
The salient dates and times for the general meeting are as follows:
2009
Circular posted to UCS shareholders on Monday, 19 October
Last day to lodge forms of proxies in respect Friday, 30 October
of the general meeting by 10h00 on
General meeting of UCS shareholders to be held Tuesday, 3
at 10h00 on November
Results of the general meeting released on SENS Tuesday, 3
on November
Results of the general meeting published in the Wednesday, 4
press on November
Notes:
These dates and times are subject to change. Any such change will be published
on SENS and in the press. Any reference to time is a reference to South African
time.
Johannesburg
19 October 2009
Sponsor Independent Transaction Attorneys Independent
BJM Corporate Reporting advisor to Glyn Marais Professional
Finance Accountants TSS Group Incorporated Expert
(Proprietary) to UCS, UCS Ian Dry KPMG Services
Limited Solutions (Proprietary)
Holdings and Limited
TSS Managed
Services
Deloitte &
Touche
Date: 19/10/2009 16:03:02 Produced by the JSE SENS Department.
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