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UCS
UCS
UCS - UCS Group Limited - Reviewed results for the six month period ended 31
March 2010
UCS Group Limited
Incorporated in the Republic of South Africa
Reg No. 1993/002253/06
ISIN ZAE00016150 JSE code UCS
REVIEWED RESULTS FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2010
+9% Revenue
+15% EBITDA
+91% Profit before tax
+97% Continuing HEPS
Strategic initiatives providing improved financial predictability
CEO of UCS Group Limited ("UCS Group"), John Bright, commented: "The Group
experienced a continuation of the same challenging market and trading conditions
as in our previous year albeit that actions taken by management since the onset
of the global financial crisis have been relatively successful in streamlining
the Group and significantly reducing its exposure to large-scale project work
which is of a once-off nature.
Significant strategic milestones were met with the exclusive global
collaboration agreement with Cordys signed in February 2010 and the first
instance of the Cordys stand alone technology sale to a significant tier one
retail customer of the group having already been concluded.
The acquisition of a 56% equity interest in CQuential who offer a software as a
service solution for supply chain and warehouse management that is particularly
affordable for the mid tier retailer represents the second key strategic
highlight. This positions UCS with a complementary product offering to that of
Aquitec who`s World Wide Chain Store product is suitable largely for the tier
one corporate retailer. This has been identified as a key area of investment for
retailers where the enhanced inventory control yields tangible return on
investment through quantifiable margin improvement.
Good progress was made towards the consolidation of the ownership, management,
development and commercial exploitation of the retail software IP that the Group
owns, including the conclusion of the acquisition of a 100% shareholding in
Argility. The Group is on track to have the enlarged software business
structured and operational from the end of the current financial year.
As in previous years, we expect that the 2nd half of our financial year should
be stronger than the first half."
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six month period ended 31 March 2010
Reviewed Restated % Audited 12
6 months 6 months change months
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
Total revenue 643 954 724 882 (11,2) 1 498 787
CONTINUING OPERATIONS
Revenue 643 954 588 442 9,4 1 247 616
Profit from operations 98 564 84 424 16,7 161 464
before interest,
amortisation,
depreciation, foreign
exchange differences,
impairments and research
and development
expenditure
Amortisation of (8 255) (15 375) (46,3) (28 295)
intangible assets
Depreciation of property, (22 794) (19 177) 18,9 (40 948)
plant & equipment
(including rental
equipment)
Foreign exchange (7 030) (3 670) 91,6 (11 564)
differences
Impairment of intangible - (8 027) (100,0) (8 027)
assets (including
goodwill)
Research and development (6 317) (4 098) 54,1 (7 278)
expenditure
Profit before net finance 54 168 34 077 59,0 65 352
charges and taxation
Net finance charges (8 516) (10 144) (16,0) (18 263)
Finance charges (11 612) (13 114) (11,5) (23 125)
Investment revenues 3 096 2 970 4,2 4 862
Profit before taxation 45 652 23 933 90,7 47 089
Taxation (20 928) (18 187) 15,1 (32 216)
Current (16 736) (12 674) 32,0 (33 316)
Deferred (4 192) (5 513) (24,0) 1 100
Profit for the period 24 724 5 746 330,3 14 873
from continuing
operations
DISCONTINUED OPERATIONS
(Loss) profit for the - (711) (100,0) 25 698
period from discontinued
operations
Profit for the period 24 724 5 035 391,0 40 571
Attributable to:
Owners of the Company 20 315 279 7181,4 27 446
Non-controlling interest 4 409 4 756 (7,3) 13 125
24 724 5 035 391,0 40 571
Earnings per share
(cents)
From continuing and
discontinued operations
Basic 7,1 0,1 7 000,0 9,5
Diluted 7,0 0,1 6 900,0 9,3
From continuing
operations
Basic 7,1 1,1 545,5 2,5
Diluted 7,0 1,1 536,4 2,5
Dividends paid per share 5,0 5,0 - 9,0
(cents)
Net asset value per share 167,6 161,1 4,0 165,0
(cents)
Ordinary shares in issue
net of treasury shares
held (`000) 284 574 292 080 (2,6) 284 391
Weighted average number
of ordinary shares
in issue (`000) 284 486 290 734 (2,1) 290 147
Diluted weighted average 289 472 296 067 (2,2) 295 717
number of ordinary shares
(`000)
Additional information
Headline earnings per
share (cents)
From continuing and
discontinued operations
Basic 7,1 5,2 36,5 11,4
Diluted 7,0 5,1 37,3 11,2
From continuing
operations
Basic 7,1 3,6 97,2 5,0
Diluted 7,0 3,6 94,4 4,9
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2010
Reviewed Reviewed Audited
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
ASSETS
Non-current assets 496 269 574 197 456 780
Property, plant & equipment 87 636 97 312 89 775
(including rental equipment)
Intangible assets 87 737 103 129 79 479
Goodwill 240 371 314 321 237 974
Investments and loans 38 694 14 162 9 989
receivable
Finance lease receivables 10 887 3 219 3 422
Deferred taxation assets 30 944 42 054 36 141
Current assets 416 319 426 811 413 312
Inventories 44 549 56 154 47 660
Trade and other receivables 193 980 249 888 181 962
Finance lease receivables 2 951 3 025 2 723
Investments 5 000 - -
Current taxation assets 3 697 1 901 3 203
Cash and cash equivalents 166 142 115 843 177 764
Assets classified as held for - - 109 222
sale
Total assets 912 588 1 001 008 979 314
EQUITY AND LIABILITIES
Capital and reserves 492 387 501 446 497 639
Issued share capital 32 029 45 561 31 763
Reserves 18 701 20 611 17 322
Retained earnings 426 334 404 439 420 217
Equity attributable to owners 477 064 470 611 469 302
of the Company
Non-controlling interest 15 323 30 835 28 337
Non-current liabilities 115 527 148 561 136 102
Borrowings 90 460 132 556 104 530
Deferred taxation liabilities 8 567 16 005 9 572
Deferred revenue 16 500 - 22 000
Current liabilities 304 674 351 001 310 364
Trade and other payables 218 247 252 654 215 742
Borrowings 71 070 76 393 75 008
Current taxation liabilities 4 357 6 427 2 317
Deferrred revenue 11 000 15 527 17 297
Liabilities directly - - 35 209
associated with assets
classified as held for sale
Total equity and liabilities 912 588 1 001 008 979 314
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six month period ended 31 March 2010
Reviewed Reviewed % Audited 12
6 months 6 months change months
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
Cash flows from 49 139 48 485 1,3 168 118
operating activities
Cash generated from 97 137 97 521 (0,4) 233 457
operations before
working capital changes
Working capital changes (27 916) (3 457) 707,5 8 503
Cash generated from 69 221 94 064 (26,4) 241 960
operations
Net finance cost (3 517) (13 141) (73,2) (15 282)
Taxation paid (16 565) (32 438) (48,9) (58 560)
Cash applied to (11 385) (49 525) (77,0) (66 616)
investing activities
Cash utilised in (49 376) (25 772) 91,6 (66 393)
financing activities
Cash and cash
equivalents
- Net (decrease) (11 622) (26 812) 35 109
increase
- At beginning of the 177 764 142 655 142 655
period
- At end of the period 166 142 115 843 43,4 177 764
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six month period ended 31 March 2010
Reviewed Restated % Audited 12
6 months 6 months change months
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
Profit for the period 24 724 5 035 391,0 40 571
Other comprehensive
income for the period
after taxation:
Exchange differences on 1 929 3 710 (48,0) 1 272
translation of foreign
operations
Other comprehensive 1 929 3 710 (48,0) 1 272
income for the period
after taxation
Total comprehensive 26 653 8 745 204,8 41 843
income for the period
Total comprehensive
income attributable to:
Owners of the Company 22 244 3 989 457,6 28 718
Non-controlling interest 4 409 4 756 (7,3) 13 125
26 653 8 745 204,8 41 843
CONDENSED SEGMENTAL ANALYSIS
for the six month period ended 31 March 2010
Reviewed Restated % Audited 12
6 months 6 months change months
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
Revenue and results from
continuing operations by
reportable segment
Revenue 643 954 588 442 9,4 1 247 616
Retail Solutions 454 100 432 921 4,9 913 448
Investments 189 153 154 271 22,6 331 659
Corporate 701 1 250 (43,9) 2 509
Profit from operations 92 247 80 326 14,8 154 186
before interest,
amortisation,
depreciation, foreign
exchange differences and
impairments ("EBITDA")
Retail Solutions 55 499 55 169 0,6 94 246
Investments 41 464 26 981 53,7 69 590
Corporate and (4 716) (1 824) 158,6 (9 650)
consolidation
adjustments
Profit before net 61 198 45 774 33,7 84 943
finance charges,
impairments, foreign
exchange differences and
taxation
Retail Solutions 34 515 33 036 4,5 49 856
Investments 31 835 15 232 109,0 46 093
Corporate and (5 152) (2 494) 106,6 (11 006)
consolidation
adjustments
Depreciation and 31 049 34 552 (10,1) 69 243
amortisation
Retail Solutions 20 984 22 133 (5,2) 44 390
Investments 9 629 11 749 (18,0) 23 497
Corporate and 436 670 (34,9) 1 356
consolidation
adjustments
Research and development 6 317 4 098 54,1 7 278
expenditure
Retail Solutions 1 175 - 100,0 1 054
Investments 5 142 4 098 25,5 6 224
Assets 912 588 1 001 008 (7,4) 979 314
Retail Solutions 573 731 581 284 (1,3) 527 813
Investments 286 755 245 686 22,4 275 767
Corporate and 52 102 27 096 92,3 66 512
consolidation
adjustments
Assets classified as - 146 942 (100,0) 109 222
held for sale
Note: Comparative figures are reclassified, where necessary, in accordance with
current period classifications.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six month period ended 31 March 2010
Ordinary share Preference Share premium
capital R`000 share capital R`000
R`000
Balance at 1 October 2008 1 448 10 43 255
Profit for the period
(restated)
Other comprehensive income for
the period
Total comprehensive income for - - -
the period
Payment of dividends
Ordinary shares issued at a 1 134
premium net of share issue
costs
Preference shares converted to 10 (10)
ordinary shares
Preference shares repurchased (13)
Net decrease in treasury shares 2 724
held
Fair value adjustments to
treasury share reserve
Increase in equity-settled
employee
benefits reserve
Non-controlling interest in
subsidiary acquired
Foreign currency translation
differences
Balance at 31 March 2009 1 461 - 44 100
Profit for the period
Other comprehensive income for
the period
Total comprehensive income for - - -
the period
Payment of dividends
Ordinary shares issued at a 2 205
premium net of share issue
costs
Ordinary shares repurchased and (24) (8 684)
cancelled
Net increase in treasury shares (17) (5 280)
held
Increase in equity-settled
employee
benefits reserve
Decrease in non-controlling
interest
on disposal of subsidiary
Decrease in non-controlling
interest
on increase of interest in
subsidiary
Balance at 1 October 2009 1 422 - 30 341
Profit for the period
Other comprehensive income for
the period
Total comprehensive income for - - -
the period
Payment of dividends
Net decrease in treasury shares 1 265
held
Increase in equity-settled
employee
benefits reserve
Decrease in non-controlling
interest
on disposal of subsidiary
Decrease in non-controlling
interest
on increase of interest in
subsidiary
Balance at 31 March 2010 1 423 - 30 606
Treasury Equity- Foreign Change in
share settled currency subsidiary
reserve employee translation shareholding
R`000 benefit reserve R`000 reserve R`000
reserve
R`000
Balance at 1 October (1 471) 17 026 (68) -
2008
Profit for the period
(restated)
Other comprehensive 3 710
income for the period
Total comprehensive - - 3 710 -
income for the period
Payment of dividends
Ordinary shares issued
at a premium net of
share issue costs
Preference shares
converted to ordinary
shares
Preference shares
repurchased
Net decrease in (726)
treasury shares held
Fair value adjustments 759
to treasury share
reserve
Increase in equity-
settled employee
benefits reserve 1 381
Non-controlling
interest in subsidiary
acquired
Foreign currency
translation
differences
Balance at 31 March (1 438) 18 407 3 642 -
2009
Profit for the period
Other comprehensive (2 438)
income for the period
Total comprehensive - - (2 438) -
income for the period
Payment of dividends
Ordinary shares issued
at a premium net of
share issue costs
Ordinary shares
repurchased and
cancelled
Net increase in (490)
treasury shares held
Increase in equity-
settled employee
benefits reserve 291
Decrease in non-
controlling interest
on disposal of
subsidiary
Decrease in non-
controlling interest
on increase of (652)
interest in subsidiary
Balance at 1 October (1 928) 18 698 1 204 (652)
2009
Profit for the period
Other comprehensive 1 929
income for the period
Total comprehensive - - 1 929 -
income for the period
Payment of dividends
Net decrease in 74
treasury shares held
Increase in equity-
settled employee
benefits reserve 597
Decrease in non-
controlling interest
on disposal of 652
subsidiary
Decrease in non-
controlling interest
on increase of (1 873)
interest in subsidiary
Balance at 31 March (1 854) 19 295 3 133 (1 873)
2010
Retained Attributable Non- Total
earnings to owners of controlling equity
R`000 the Company interest R`000
R`000 R`000
Balance at 1 October 418 727 478 927 27 662 506 589
2008
Profit for the period 279 279 4 756 5 035
(restated)
Other comprehensive 3 710 3 710
income for the period
Total comprehensive 279 3 989 4 756 8 745
income for the period
Payment of dividends (14 567) (14 567) (1 590) (16 157)
Ordinary shares issued 135 135
at a premium net of
share issue costs
Preference shares - -
converted to ordinary
shares
Preference shares (13) (13)
repurchased
Net decrease in - -
treasury shares held
Fair value adjustments 759 759
to treasury share
reserve
Increase in equity-
settled employee
benefits reserve 1 381 1 381
Non-controlling - 11 11
interest in subsidiary
acquired
Foreign currency - (4) (4)
translation
differences
Balance at 31 March 404 439 470 611 30 835 501 446
2009
Profit for the period 27 167 27 167 8 369 35 536
Other comprehensive (2 438) - (2 438)
income for the period
Total comprehensive 27 167 24 729 8 369 33 098
income for the period
Payment of dividends (11 389) (11 389) (2 292) (13 681)
Ordinary shares issued 207 207
at a premium net of
share issue costs
Ordinary shares (8 708) (8 708)
repurchased and
cancelled
Net increase in (5 787) (5 787)
treasury shares held
Increase in equity-
settled employee
benefits reserve 291 291
Decrease in non-
controlling interest
on disposal of - (6 403) (6 403)
subsidiary
Decrease in non-
controlling interest
on increase of (652) (2 172) (2 824)
interest in subsidiary
Balance at 1 October 420 217 469 302 28 337 497 639
2009
Profit for the period 20 315 20 315 4 409 24 724
Other comprehensive 1 929 1 929
income for the period
Total comprehensive 20 315 22 244 4 409 26 653
income for the period
Payment of dividends (14 198) (14 198) (4 791) (18 989)
Net decrease in 340 340
treasury shares held
Increase in equity-
settled employee
benefits reserve 597 597
Decrease in non-
controlling interest
on disposal of 652 (14 505) (13 853)
subsidiary
Decrease in non-
controlling interest
on increase of (1 873) 1 873 -
interest in subsidiary
Balance at 31 March 426 334 477 064 15 323 492 387
2010
NOTES TO THE CONDENSED FINANCIAL INFORMATION
for the six month period ended 31 March 2010
1 Basis of preparation
This abridged report complies with International Accounting Standard 34 -
Interim Financial Reporting as well as with Schedule 4 of the South African
Companies Act and the disclosure requirements of the JSE Limited`s Listings
Requirements. The abridged report has been prepared using accounting policies
that comply with International Financial Reporting Standards ("IFRS"). The
accounting policies are consistent with those applied in the financial
statements for the year ended 30 September 2009, except as noted below.
In the current period, the Group has complied with the requirements of the
revised IFRS 3: Business Combinations which was issued in January 2008 and is
effective for reporting periods beginning on or after 1 July 2009.
The adoption of the interpretations as issued by the International Financial
Reporting Interpretations Committee, which are effective for the current period,
has not led to any changes in the Group`s accounting policies.
The restated 2009 results are as a consequence of certain disposals of major
lines of business by the Group in the second half of the prior year through the
application of IFRS 5, Non-current Assets Held For Sale and Discontinued
Operations.
Reviewed 6 Restated 6 % Audited 12
months months change months
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
2 RECONCILIATION OF
EARNINGS TO HEADLINE
EARNINGS
Earnings attributable 20 315 279 7 181,4 27 446
to owners of the
Company
Adjusted for (net of - 6 179 6 179
taxation and non-
controlling interest):
goodwill impairments
- continuing
operations
- discontinued - 7 371 19 649
operations
intangible asset - 1 330 1 330
impairments
profit on disposal of - - (26 007)
division
loss on disposal of 50 - 4 930
interest in subsidiary
profit on disposal of (172) (85) (384)
property, plant &
equipment
Basic headline 20 193 15 074 34,0 33 143
earnings
3 RECONCILIATION OF
EARNINGS TO HEADLINE
EARNINGS - CONTINUING
OPERATIONS
Earnings attributable 20 315 3 168 541,3 7 326
to owners of the
Company
Adjusted for (net of
taxation and non-
controlling interest):
goodwill impairments - 6 179 6 179
intangible asset - 1 330 1 330
impairments
loss on disposal of 50 - -
interest in subsidiary
profit on disposal of (172) (85) (384)
property, plant &
equipment
Basic headline 20 193 10 592 90,6 14 451
earnings
Reviewed Reviewed % Audited
6 months 6 months change 12 months
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
4 BORROWINGS
Interest bearing 152 413 197 817 (23,0) 173 202
borrowings
Non-interest bearing 9 117 11 132 (18,1) 6 336
borrowings
161 530 208 949 (22,7) 179 538
5 CAPITAL EXPENDITURE
Tangible assets 27 643 42 454 (34,9) 74 228
Intangible assets 17 396 8 711 99,7 14 224
45 039 51 165 (12,0) 88 452
Reviewed Restated % Audited
6 months 6 months change 12 months
31/3/2010 31/3/2009 30/9/2009
R`000 R`000 R`000
6 OPERATING LEASE
CHARGES
Premises 17 422 14 504 20,1 32 438
Office equipment 616 544 13,2 1 262
Vehicles 549 370 48,4 922
18 587 15 418 20,6 34 622
7 COMMITMENTS
Capital 36 589 23 347 56,7 65 906
Operating leases 103 080 115 752 (10,9) 99 894
8 REVIEW REPORT
These results have been reviewed by independent external auditors, Deloitte &
Touche, and their unmodified review report is available for inspection at the
Company`s registered office. The review was performed in accordance with
International Standard on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity.
Company Secretary:
Corporate Governance CC
Registered office:
20th Floor, 209 Smit Street, Braamfontein, 2001
PO Box 31266, Braamfontein, 2017
Transfer secretaries:
Link Market Services South Africa (Proprietary) Limited
11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000
Sponsors:
Barnard Jacobs Mellet Corporate Finance (Proprietary) Limited
Ground Floor, Illovo Corner, 24 Fricker Road, Illovo, 2196
COMMENTARY
The Group experienced a continuation of the same challenging market and trading
conditions experienced in our previous year.
Fortunately, actions taken by management since the onset of the global financial
crisis have been relatively successful in streamlining the Group and
significantly reducing its exposure to large-scale project work which is of a
once-off nature.
Although these actions, which related predominantly to the disposals of
businesses or business units, have a negative effect on growth, the end result
has given the Group improved visibility and control of future cash flows and the
ability to continue the reduction of Group debt.
Significant strategic progress was made during the period, the two main
highlights being:
1.?The exclusive collaboration agreement for international retail markets
between UCS and Jan Baan`s Cordys operation, headquartered in the Netherlands,
signed on 2 February 2010. This agreement enables UCS to leverage the Cordys
multi-billion Rand Service Orientated Architecture ("SOA") related platform
investment with our deep domain expertise in retail, to develop and evolve both
on-premise and off-premise retail solutions. Their comprehensive Business
Operations Platform ("BOP"), inclusive of the robust enterprise-ready SOA-Grid,
will be embedded within our software solutions, to be introduced to the retail
application software market globally.
2.?The acquisition of a 56% interest in Cquential Solutions (Proprietary)
Limited ("CQuential"), a Software as a Service ("SaaS") based solution for
warehouse and distribution operations with effect from 1 April 2010. This
acquisition positions UCS with a complementary product offering to that of
Aquitec. The product is commercially attractive to customers and channel
partners due to the leveraging of a rental styled SaaS commercial model. This
model reduces the sale cycle and positions the application to be accessible to a
broader retail community where previously only major tier 1 corporate retailers
could afford the large upfront capital investment required to deploy a warehouse
management application.
In addition, good progress was made towards the consolidation of the ownership,
management, development and commercial exploitation of the retail software
Intellectual Property ("IP") that the Group owns, including the conclusion of
the acquisition of a 100% shareholding in Argility. This initiative also
involved the creation, with effect from 1 October 2009, of UCS Technology
Services, a services business separated from the software business.
It is anticipated that the structuring of the enlarged software business, which
will incorporate UCS Software (excluding the services component as mentioned
above referred to now as UCS Technology Services), UCS Software Manufacturing
and Argility businesses, will be completed by the end of the current financial
year. The anticipated benefits associated with the consolidation of the software
assets, IP, research and development activities as well as the management
function thereof are therefore expected to be more material in the new financial
year.
DIVISIONAL REVIEW
Retail Solutions Division
This division enjoyed good growth linked to food retailers with additional
contribution from key projects, including the Regulation of Interception of
Communications Act ("RICA") roll out and ongoing support. Extremely difficult
market conditions, however, continued to be experienced within our predominant
speciality, non-food retail customer base where new project work declined and
negotiations remain tough as a consequence of price sensitivity.
The international pipeline of opportunities has improved materially but few
buying decisions were made in the first six months. International operations
therefore continue to negatively impact the profitability of the division as a
whole. In spite of this, UCS Solutions Incorporated ("UCS Solutions Inc") is
currently delivering its third project and growing its referenceability in the
United States.
The division recorded revenue growth of 4,9% of which 2,5% is organic, excluding
the contributions by UCS Solutions Inc, in which we converted our convertible
loan funding into 92,5% equity on 1 March 2009. Excluding foreign exchange and
translation effects, EBITDA grew by 0,6% to R55,5 million.
Investments division
The investments division showed solid growth on an aggregated basis but
performances across the division were mixed. GAAP Point-of-Sale, which
specialises in hospitality software, enjoyed an exceptional six months with the
preparation and run up to the FIFA World Cup being the key driver. UCS Software
Manufacturing failed to deliver on its revenue forecast, essentially due to the
lack of international sales where material buying decisions within the
international markets continued to be deferred.
Revenue from the combined VAS units remained flat year on year. The focus in the
first half of the year was on the appropriate structure and unified "go-to-
market" strategy. This activity included the investment in certain key software
or service offerings, including Radical, a call centre and member management
software application, to underpin administration of loyalty programmes and the
introduction of insurance product offerings and the associated administration
thereof for retail.
Other investments recorded satisfactory performance. Overall, the division
recorded revenue growth of 22,6% while EBITDA grew by 53,7%.
FINANCIAL REVIEW
Consistent with the 2009 year end presentation of the financial results, the
prior six month period ended 31 March 2009 has been restated to exclude the
operating results of the disposed operations of DiverseIT (Proprietary) Limited,
the Enterprise Solutions division of UCS Solutions (Proprietary) Limited and TSS
Managed Services (Proprietary) Limited ("TSSMS"), which operations were disposed
of in the second half of the 2009 financial year. The earnings results of the
aforementioned operations are included, net of tax, as `loss from discontinued
operations` in the income statement in the comparable period.
The Group`s revenues, on a continuing basis, grew by 9,4% to R644 million (2009
restated: R588 million), of which 7,7% represents organic growth. The
acquisitive growth is attributable to UCS Solutions Inc, in which the Group,
through its wholly owned UK holding company Universal Computer Software UK
Limited ("UCS UK"), converted its loan funding into a 92,5% equity interest in
February 2009.
Annuity revenues grew by 9,5% to R356 million (2009 restated: R325 million),
representing 55% of total revenues (2009 restated: 55%) and 81% of cash
overheads.
Profit from operations before interest, amortisation, depreciation, impairments
and foreign exchange differences ("EBITDA") increased by 14,8% to R92,2 million
(2009 restated: R80,3 million) representing a margin improvement of 15% to 14,3%
from the reported EBITDA margin as at the 2009 financial year end of 12,4%.
The foreign exchange differences, mainly attributable to the translation of
foreign loan accounts with subsidiary companies, totalled some R7 million
representing a 91,6% increase on the prior comparable loss associated with
translation differences of R3,7 million (restated).
Finance charges, net of interest and investment revenues, decreased by 16% to
R8,5 million (2009 restated: R10,1 million) attributable to the decreased
borrowings in the Group as a consequence of debt repayments in line with
repayment terms as well as the decrease in the prime rate of lending by three
basis points since April 2009.
These factors contributed to an increase of 90,7% in profit before tax to R45,7
million (2009 restated: R23,9 million).
Taxation charges (including capital gains tax, secondary tax on ompanies and
withholding taxes) increased by 32% to R16,7 million (2009 restated: R12,7
million) representing a 45,8% effective tax rate for the period and is expected
to remain consistent for the financial year. Should the deferred tax effect of
the losses incurred
in certain operations of the Group, which in terms of IFRS the Group is not able
to account for at this time, be taken into account, the normalised effective tax
rate approximates the statutory tax rate.
Profit for the period increased by 330,3% to R24,7 million (2009 restated: R5,7
million). After taking into account the loss from discontinued operations in the
prior period, the profit attributable to UCS shareholders of R20,3 million,
after minority interests, represents an increase of 181% from the comparable
prior period.
The material movements in the Group`s non-current assets relate to the disposal
of TSSMS, effective from 1 October 2009 and the sale and leaseback of rental
equipment in GAAP Point-of-Sale.
Since year end, total borrowings decreased by 10% from R179,5 million to R161,5
million of which R131 million (2009: R141 million) represents external financial
institution debt. The non-bank debt reduction relates to the repayment of the
Argility Limited loan in the current period totalling R5,9 million. In line with
the reduced total borrowings, the Group`s debt equity ratio has improved from
36,1% at the year end to 32,8%.
The increase in working capital lock-up is attributable to an increase in trade
and other receivables, where the Group experienced delayed payments over the
interim period, as well as greater payments to suppliers compared with the same
period last year.
Total staff complement at the end of March 2010 was 2 263 (September 2009
restated: 2 301).
ACQUISITIONS
1.?As detailed in the 2009 annual reviewed results announcement post balance
sheet event disclosure, in respect of the loan facility entered into with
wiWallet Mobile Payments (Proprietary) Limited ("wiWallet"), UCS Group Limited
("UCS") exercised its rights in terms of the option agreement whereby the agreed
total start-up facility of R1,76 million was converted into 40% in wiWallet,
taking its total equity ownership to 50% with effect from 27 October 2009.
2.?With effect from 30 November 2009, UCS entered into a Sale of Shares
Agreement whereby it increased its 51% interest in Lifeworld Group (Proprietary)
Limited ("Lifeworld") to 100%, for a nominal consideration. The company has
recently been renamed Innervation Value Added Services (Proprietary) Limited.
3.?With effect from 1 December 2009, Lifeworld acquired the going concern
business referred to as the Radical Business Unit from Dynamic Visual
Technologies (Gauteng) (Proprietary) Limited for a total cash consideration of
R1,5 million, net of working capital requirements.
POST BALANCE SHEET EVENTS
1.?On 15 March 2010, UCS announced it had formally submitted to the Argility
Limited ("Argility") board of directors a notice of its firm intention to make
an offer to the Argility shareholders to acquire the issued ordinary shares in
Argility held by them by way of a scheme of arrangement in terms of section 311
of the Companies Act No 61 of 1973, as amended ("Companies Act"). A circular to
UCS shareholders in respect of the offer was posted to shareholders on 27 March
2010 and contained details of the related party transaction, including the
independent fairness opinion from KPMG Services (Proprietary) Limited, as well
as a notice in respect of the general shareholders` meeting to consider and, if
deemed fit, pass the requisite resolutions.
The ordinary resolutions contained in the notice of general meeting on 12 April
2010 were approved by in excess of 90% of the UCS shareholders who were entitled
to vote.
Following the 100% approval of the scheme by Argility shareholders present or
represented by proxy at the general meeting held on 11 May 2010, the Court
granted an order sanctioning the scheme in terms of Section 311 of the Companies
Act on 18 May 2010, which Court order is to be registered at the Companies
Intellectual Property and Registration Office on or about 19 May 2010.
Accordingly, with effect from 1 June 2010, UCS will be the owner of the entire
issued share capital of Argility, which shares were acquired in terms of the
scheme, for a cash purchase consideration of R1,55 per Argility share being
R43,2 million in the aggregate.
2.On 25 March 2010, UCS announced it had entered into a Sale of Shares and
Claims Agreement with the Industrial Development Corporation of South Africa
Limited ("IDC") to aquire 49% of the issued share capital of CQuential and all
claims which the IDC may have against CQuential for a purchase consideration of
R12 million with a further potential upside payment capped at R10 million. UCS
further entered into a Sale of Shares Agreement with the remaining shareholders
of CQuential, being predominantly management, to acquire a further 7% equity
interest in CQuential for a nominal purchase consideration of R28. In addition,
UCS will provide working capital funding limited to a maximum of R15 million.
The acquisition became unconditional on the fulfilment of the suspensive
conditions on 30 April 2010.
3.On 9 April 2010, UCS entered into a Sale of Shares Agreement for the
acquisition of 51% of the issued share capital of Volume and Affinity Risk
Management (Proprietary) Limited for a purchase consideration of R1 million with
a further potential upside payment limited to a maximum of R5 million.
CONTINGENT LIABILITY
As disclosed in the Group`s 2009 Annual Report, a claim for repudiation of
contract and damages against a subsidiary company remains unresolved.
PROSPECTS
The current extremely volatile conditions in global financial markets,
reportedly driven largely by the threat of sovereign (government) debt defaults
by Greece and other Euro zone economies, indicate that financial market
stability, and therefore business confidence, will remain weak with substantial
improvement still some way off. The continued softness is still evident within
the domestic non-food retail market. Despite the substantial reduction in
interest rates, the consumer still appears to be under pressure, which will
continue to depress general retail investment appetite. Under these
circumstances, the Group will continue to operate on the basis that cash flows,
debt reduction and balance sheet strength remain key areas of management focus.
As in previous years, it is expected that the second half of the financial year
should be stronger than the first half. Most retail system implementations and
enhancements are done during the second half of the financial year.
DIVIDEND DECLARATION
Notice is hereby given that the board of directors has declared an interim
dividend of 4 cents per ordinary share in respect of the six month period ended
31 March 2010. The dividend will be paid on Monday 16 August 2010.
To comply with the procedures of Strate, the last day to trade in the shares for
the purpose of entitlement to the interim dividend is Thursday 5 August 2010.
The shares will commence trading ex dividend on Friday 6 August 2010 and the
record date will be Friday 13 August 2010.
Share certificates may not be dematerialised or rematerialised between Friday 6
August 2010 and Friday 13 August 2010, both days inclusive.
Date: 19/05/2010 07:30:01 Produced by the JSE SENS Department.
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