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UCS
UCS
UCS - UCS Group Limited - Reviewed results for the six month period ended 31
March 2011
UCS Group Limited
Incorporated in the Republic of South Africa
Registration number 1993/002253/06
ISIN: ZAE00016150
JSE code: UCS
("UCS" or "the Company" or "the Group")
REVIEWED RESULTS for the six month period ended 31 March 2011
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six month period ended 31 March 2011
Reviewed Restated % change Restated
6 months 6 months 12 months
2011 2010 2010
R`000 R`000 R`000
CONTINUING OPERATIONS
Revenue 190 604 170 109 12,0 327 848
Profit from operations before 21 046 29 080 (27,6) 43 741
interest, amortisation,
depreciation, foreign
exchange differences,
research and development
expenditure and restructuring
costs
Amortisation of intangible (13 516) (1 275) 960,1 (12 842)
assets
Depreciation of property, (10 205) (8 605) 18,6 (17 705)
plant and equipment
(including rental equipment)
Foreign exchange differences (1 801) (4 399) (59,1) (5 278)
Profit on disposal of equity - - - 176
interest in a subsidiary
company
Research and development (3 197) (2 818) 13,4 (6 222)
expenditure
Restructuring costs (17 375) - 100,0 -
(Loss) profit before net (25 048) 11 983 (309,0) 1 870
finance charges and taxation
Net finance charges (1 407) (2 965) (52,5) 1 355
Finance charges (2 333) (4 784) (51,2) (4 287)
Investment revenues 926 1 819 (49,1) 5 642
(Loss) profit before taxation (26 455) 9 018 (393,4) 3 225
Taxation (1 240) (7 722) (83,9) (10 843)
Current (1 470) (6 101) (75,9) (10 307)
Deferred 230 (1 621) (114,2) (536)
(Loss) profit for the period (27 695) 1 296 (2 237,0) (7 618)
from continuing operations
DISCONTINUED OPERATIONS
Profit for the period from 40 179 23 428 71,5 57 225
discontinued operations
Profit for the period 12 484 24 724 (49,5) 49 607
Attributable to:
Owners of the Company 9 612 20 315 (52,7) 39 642
Non-controlling interest 2 872 4 409 (34,9) 9 965
12 484 24 724 (49,5) 49 607
Earnings (loss) per share
(cents)
From continuing and
discontinued operations
Basic 3,3 7,1 (53,5) 13,9
Diluted 3,3 7,0 (52,9) 13,7
From continuing operations
Basic (10,6) (0,3) 3 433,3 (3,7)
Diluted (10,6) (0,3) 3 433,3 (3,6)
Dividends paid per share 5,0 5,0 - 9,0
(cents)
Net asset value per share 168,4 167,6 0,5 170,3
(cents)
Ordinary shares in issue net 288 911 284 574 1,5 285 356
of treasury shares held
(`000)
Weighted average number of 287 129 284 486 0,9 284 653
ordinary shares in issue
(`000)
Diluted weighted average 289 656 289 472 0,1 289 731
number of ordinary shares
(`000)
Additional information
Headline earnings (loss) per
share (cents)
From continuing and
discontinued operations
Basic 3,4 7,1 (52,1) 16,2
Diluted 3,4 7,0 (51,4) 16,0
From continuing operations
Basic (10,6) (0,3) 3 433,3 (7,5)
Diluted (10,6) (0,3) 3 433,3 (7,4)
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six month period ended 31 March 2011
Reviewed Reviewed % change Audited
6 months 6 months 12 months
2011 2010 2010
R`000 R`000 R`000
Profit for the period 12 484 24 724 (49,5) 49 607
Other comprehensive income
for the period after
taxation:
Exchange differences on 983 1 929 (49,0) 4 881
translation of foreign
operations
Other comprehensive income 983 1 929 (49,0) 4 881
for the period after taxation
Total comprehensive income 13 467 26 653 (49,5) 54 488
for the period
Total comprehensive income
attributable to:
Owners of the Company 10 595 22 244 (52,4) 44 523
Non-controlling interest 2 872 4 409 (34,9) 9 965
13 467 26 653 (49,5) 54 488
CONDENSED SEGMENTAL ANALYSIS
for the six month period ended 31 March 2011
Reviewed Restated % change Restated
6 months 6 months 12 months
2011 2010 2010
R`000 R`000 R`000
Revenue and results from
continuing operations by
reportable segment
Revenue 190 604 170 109 12,0 327 848
Software 109 758 94 587 16,0 181 588
Investments 80 846 74 822 8,1 144 535
Corporate - 700 (100,0) 1 725
Profit from operations before 17 849 26 262 (32,0) 37 519
interest, amortisation,
depreciation, foreign
exchange differences and
restructuring costs
("Normalised EBITDA")
Software 6 641 13 627 (51,3) 17 544
Investments 15 673 17 401 (9,9) 33 978
Corporate and consolidation (4 465) (4 766) (6,3) (14 003)
adjustments
Profit before net finance (5 872) 16 382 (135,8) 6 972
charges, impairments, foreign
exchange differences and
taxation ("Normalised PBIT")
Software (7 645) 11 371 (167,2) 3 651
Investments 6 730 10 212 (34,1) 18 241
Corporate and consolidation (4 957) (5 201) (4,7) (14 920)
adjustments
Depreciation and amortisation 23 721 9 880 140,1 30 547
Software 14 286 2 256 533,2 13 893
Investments 8 943 7 189 24,4 15 737
Corporate and consolidation 492 435 13,1 917
adjustments
Note: Comparative figures are reclassified, where necessary, in
accordance with current year classifications.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six month period ended 31 March 2011
Reviewed Reviewed % change Audited
6 months 6 months 12 months
2011 2010 2010
R`000 R`000 R`000
Cash flows from operating 17 622 49 139 (64,1) 142 324
activities
Cash generated from 67 451 97 137 (30,6) 172 425
operations before working
capital changes
Working capital changes (26 955) (27 916) (3,4) 18 716
Cash generated from operating 40 496 69 221 (41,5) 191 141
activities
Net finance cost (1 383) (3 517) (60,7) (6 036)
Taxation paid (21 491) (16 565) 29,7 (42 781)
Cash flows from investing (28 216) (11 385) 147,8 (78 173)
activities
Cash flows from financing (26 449) (49 376) (46,4) (110 030)
activities
Cash and cash equivalents
- Net decrease (37 043) (11 622) (45 879)
- Classified as held for sale (62 303) - -
- At beginning of the period 131 885 177 764 177 764
At end of the period 32 539 166 142 (80,4) 131 885
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2011
Reviewed Reviewed Audited
31/3/2011 31/3/2010 30/9/2010
R`000 R`000 R`000
ASSETS
Non-current assets 252 709 496 269 563 314
Property, plant & equipment (including 43 029 87 636 86 413
rental equipment)
Intangible assets 106 975 87 737 156 817
Goodwill 27 074 240 371 238 615
Investments and loans receivable 40 184 38 694 41 888
Finance lease receivables 12 147 10 887 6 645
Deferred taxation assets 23 300 30 944 32 936
Current assets 101 901 416 319 369 841
Inventories 6 841 44 549 47 249
Trade and other receivables 53 118 193 980 179 463
Finance lease receivables 4 017 2 951 3 998
Investments - 5 000 -
Current taxation assets 5 386 3 697 7 246
Cash and cash equivalents 32 539 166 142 131 885
Assets classified as held for sale 584 111 - -
Total assets 938 721 912 588 933 155
EQUITY AND LIABILITIES
Capital and reserves 513 993 492 387 513 812
Issued capital 39 158 32 029 33 453
Reserves 17 883 18 701 18 356
Retained earnings 429 476 426 334 434 294
Equity attributable to owners of the 486 517 477 064 486 103
Company
Non-controlling interest 27 476 15 323 27 709
Non-current liabilities 60 705 115 527 114 583
Borrowings 47 944 90 460 88 227
Deferred taxation liabilities 7 261 8 567 15 356
Deferred revenue 5 500 16 500 11 000
Current liabilities 127 168 304 674 304 760
Trade and other payables 87 026 218 247 230 144
Borrowings 20 810 71 070 50 670
Current taxation liabilities 172 4 357 6 390
Deferred revenue 19 160 11 000 17 556
Liabilities directly associated with 236 855 - -
assets classified as held for sale
Total equity and liabilities 938 721 912 588 933 155
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six month period ended 31 March 2011
Ordinary Pre- Share Treasury Equity-
share ference premium share settled
capital share R`000 reserve employee
R`000 capital R`000 benefit
R`000 reserve
R`000
Balance at 1 October 2009 1 422 - 30 341 (1 928) 18 698
Profit for the period
Other comprehensive income
for the period
Total comprehensive income - - - - -
for the period
Payment of dividends
Net decrease in treasury 1 265 74
shares held
Increase in equity-settled 597
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 (1 854) 19 295
Profit for the period
Other comprehensive income
for the period
Total comprehensive income - - - - -
for the period
Payment of dividends
Fair value adjustments on 938
treasury shares held
Net decrease in treasury 4 1 420 (2 475)
shares held
Decrease in equity-settled (179)
employee benefits reserve
Increase in non-controlling
interest on acquisition of
interest in subsidiary
Increase in non-controlling
interest on decrease of
interest in subsidiaries
Decrease in non-controlling
interest on increase of
interest in subsidiary
Balance at 30 September 1 427 - 32 026 (3 391) 19 116
2010
Profit for the period
Other comprehensive income
for the period
Total comprehensive income - - - - -
for the period
Payment of dividends
Ordinary shares issued at a 2 610
premium
Fair value adjustments on 274
treasury shares held
Net decrease in treasury 15 5 078 (1 337)
shares held
Decrease in equity-settled 205
employee benefits reserve
Decrease in non-controlling
interest on increase of
interest in subsidiary
Balance at 31 March 2011 1 444 - 37 714 (4 454) 19 321
Foreign Change Retained Attri- Non- Total
currency in earnings butable Control- equity
trans- Sub- R`000 to owners ling R`000
lation sidiary of the interest
reserve share- Company R`000
R`000 holding R`000
reserve
R`000
Balance at 1 204 (652) 420 217 469 302 28 337 497 639
1 October 2009
Profit for the 20 315 20 315 4 409 24 724
period
Other 1 929 1 929 1 929
comprehensive
income for the
period
Total 1 929 - 20 315 22 244 4 409 26 653
comprehensive
income for the
period
Payment of (14 198) (14 198) (4 791) (18 989)
dividends
Net decrease in 340 340
treasury shares
held
Increase in equity- 597 597
settled employee
benefits reserve
Decrease in non- 652 652 (13 853)
controlling (14 505)
interest on
disposal of
subsidiary
Decrease in non- (1 873) (1 873) 1 873 -
controlling
interest on
increase of
interest in
subsidiary
Balance at 3 133 (1 873) 426 334 477 064 15 323 492 387
31 March 2010
Profit for the 19 327 19 327 5 556 24 883
period
Other 2 952 2 952 2 952
comprehensive
income for the
period
Total 2 952 - 19 327 22 279 5 556 27 835
comprehensive
income for the
period
Payment of (11 367) (11 367) (2 808) (14 175)
dividends
Fair value 938 938
adjustments on
treasury shares
held
Net decrease in (1 051) (1 051)
treasury shares
held
Decrease in equity- (179) (179)
settled employee
benefits reserve
Increase in non- - 6 404 6 404
controlling
interest on
acquisition of
interest in
subsidiary
Increase in non- (984) (984) 3 234 2 250
controlling
interest on
decrease of
interest in
subsidiaries
Decrease in non- (597) (597) - (597)
controlling
interest on
increase of
interest in
subsidiary
Balance at 6 085 (3 454) 434 294 486 103 27 709 513 812
30 September 2010
Profit for the 9 612 9 612 2 872 12 484
period
Other 983 983 983
comprehensive
income for the
period
Total 983 - 9 612 10 595 2 872 13 467
comprehensive
income for the
period
Payment of (14 430) (14 430) (3 407) (17 837)
dividends
Ordinary shares 612 612
issued at a
premium
Fair value 274 274
adjustments on
treasury shares
held
Net decrease in 3 756 3 756
treasury shares
held
Decrease in equity- 205 205
settled employee
benefits reserve
Decrease in non- (598) (598) 302 (296)
controlling
interest on
increase of
interest in
subsidiary
Balance at 7 068 (4 052) 429 476 486 517 27 476 513 993
31 March 2011
NOTES TO THE CONDENSED FINANCIAL INFORMATION for the SIX MONTH PERIOD ended
31 MARCH 2011
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") and its interpretations adopted by the International
Accounting Standard Board ("IASB") in issue and effective for the Group at
31 March 2011 and the AC500 Standards issued by the accounting practice
board or its successor. The accounting policies are consistent with those
applied in the financial statements for the year ended 30 September 2010.
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 2010 income statements have been restated to account for the Group`s
disposal of all the sale shares in and claims held by UCS against certain
of its subsidiaries to Business Connexion Group Limited under the
provisions of IFRS5: Non-Current Assets Held for Sale and Discontinued
Operations. The change has not impacted the comparative statements of
financial position and has thus not been re-presented.
Reviewed Reviewed % change Audited
6 months 6 months 12 months
2011 2010 2010
R`000 R`000 R`000
2 RECONCILIATION OF EARNINGS
TO HEADLINE EARNINGS
Earnings attributable to 9 612 20 315 (52,7) 39 642
owners of the Company
Adjusted for (net of
taxation and non-
controlling interest):
goodwill impairments
discontinued - operations - - 10 402
profit on disposal of - - (10 701)
division
loss on disposal of equity - 50 7 155
in subsidiaries
profit on disposal of 100 (172) (249)
property, plant and
equipment
Basic headline earnings 9 712 20 193 (51,9) 46 249
Reviewed Restated % change Restated
6 months 6 months 12 months
2010 2009 2010
R`000 R`000 R`000
3 RECONCILIATION OF EARNINGS
TO HEADLINE EARNINGS -
CONTINUING OPERATIONS
Earnings attributable to (30 567) (760) 3 922,0 (10 436)
owners of the Company
Adjusted for (net of
taxation and non-
controlling interest):
profit on disposal of - - (10 701)
division
profit on disposal of - - (312)
equity in subsidiaries
profit on disposal of - (134) 57
property, plant and
equipment
Basic headline earnings (30 567) (894) 3 319,1 (21 392)
Contin- Dis- Total
uing continued R`000
opera- Opera-
tions tions
R`000 R`000
4 RECONCILIATION OF
DISCONTINUED OPERATIONS
March 2011 - Reviewed
Revenue 190 604 513 862 704 466
Normalised EBITDA 17 849 86 550 104 399
(Loss) profit for the year (27 695) 40 179 12 484
March 2010 - Restated
Revenue 170 109 473 845 643 954
Normalised EBITDA 26 262 65 984 92 246
Profit for the year 1 296 23 428 24 724
September 2010 - Restated
Revenue 327 848 1 012 527 1 340 375
Normalised EBITDA 37 519 144 486 182 005
(Loss) profit for the year (7 618) 57 225 49 607
Reviewed Reviewed % change Audited
6 months 6 months 12 months
2011 2010 2010
R`000 R`000 R`000
5 BORROWINGS
Interest bearing 59 675 152 413 (60,8) 129 139
borrowings
Non-interest bearing 9 079 9 117 (0,4) 9 758
borrowings
68 754 161 530 (57,4) 138 897
6 CAPITAL EXPENDITURE
Tangible assets 37 219 27 643 34,6 50 135
Intangible assets 7 217 17 396 (58,5) 104 952
44 436 45 039 (1,3) 155 087
Reviewed Restated Restated
6 months 6 months 12 months
2011 2010 2010
R`000 R`000 R`000
7 COMMITMENTS
Capital 22 287 36 589 (39,1) 47 290
Operating leases 46 784 103 080 (54,6) 38 383
8 OPERATING LEASE CHARGES
Premises 7 519 6 682 12,5 14 452
Office equipment 673 221 204,5 404
Vehicles 13 - 100,0 -
8 205 6 903 18,9 14 856
9 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.
COMMENTARY
Results for the six months to 31 March 2011 reflect the assets sold to Business
Connexion Group Limited ("BCX") as discontinued operations and prior year
figures have been restated to reflect this. Trading results for the six months
under review were overall largely in line with expectations, both for continuing
operations as well as the assets sold to BCX with effect from 11th May 2011.
The discontinued operations (the 5 assets sold to BCX) showed strong growth,
particularly in terms of margin improvements. Excluding the unprofitable
Philadelphia based UCS Solutions Inc, which was disposed of in August 2010, the
combined businesses recorded an 11.3% increase in revenues from R461,6 million
to R513,9 million and 23,7% increase in EBITDA from R70 million to R86,6
million.
Continuing operations recorded a 12% increase in revenues from R170,1
million to R190,6 million but EBITDA declined by some 27,6% from R29,1 million
to R21,0 million largely due the impact of the unprofitable Argility and
Cquential operations acquired during the 2nd half of 2010 financial year.
Restructuring costs associated with the required head count reduction in the
enlarged Argility business amounted to R17,4 million. At an operational level,
good progress was made in both the software as well as the investment divisions
and further details are provided in the divisional reviews below.
Overall, combining the discontinued and continuing operations, the Group showed
revenue growth of 9,4% from R644 million to R704,5 million, with normalised
EBITDA showing growth of 13,2% from R92,2 million to R104,4 million.
DIVISIONAL REVIEW
Discontinued Operations
The businesses sold to BCX performed well for the period irrespective of the
continued tough trading conditions with the major improvement coming from UCS
Solutions, which delivered an anticipated solid performance. All the businesses
continued to gain market share and are continuously innovating with service
delivery.
Investment Division
The investment division enjoyed two successes in the six month period under
review. wiWallet signed a three year agreement with MXit whereby MXit will
utilise wiWallet technology to launch a full transaction engine within the MXit
application that enables MXit users to complete a range of mobile payment
transactions. Innervation Value Added Services went live on the first phase
integrated value added services platform for in-store retail within a tier 1
retail client. These two achievements bode well for the VAS units on an
aggregated basis moving towards a net cash generative position by the end of the
financial year.
However, from a financial perspective for the period under review, the impact of
the consolidation of the Group`s investment in wiWallet for the full period (two
months in the prior comparable period) together with the planned additional
investment in Mobiliti and the ramp up in capacity within Innervation (the go to
market VAS vehicle) has resulted in margin deterioration for the division.
Overall the division realised an 8,1% revenue growth from R74,8 million to R80,8
million of which R3,3 million was acquisitive and it saw EBITDA decrease from
R17,4 million to R15,7 million.
Software Division
Much work was done in reorganising and streamlining the new enlarged Argility
business, including the closing of our UK sales office as well as a voluntary
severance offering accepted by 48 employees which reducedpermanent headcount
from 229 in October 2010 to 188 by the end of April 2011. The costs of the
voluntary severance offering amounted to some R17,4m but will result in a
reduction of monthly overhead costs of approximately R2 million. Management
believes that this will position the enlarged Argility business to be cash flow
positive on a monthly basis by the end of the current year.
In addition, progress has been made with the development of the new Retail
Operations Platform ("ROP") product line in Argility, including the launch of a
unique ``collaboration`` offer for retailers with urgent project requirements.
This offer provides participating retailers the potential to recoup up to 100%
of their software project development costs through a revenue share in future
licence sales.
On the international front, Aquitec has also adopted the use of Cordys
technologies within its product offerings and is busy with initial customer
sales.
Cquential continues to implement new customers on its SaaS model and has made
significant progress towards the target of achieving profitability by the end of
this financial year.
Overall, the division recorded results much in line with expectations. Revenue
showed a 16% increase from R94,6 million to R109,8 million whilst normalised
EBITDA declined by 51,3% from R13,6 million to R6,6 million primarily as a
result of the inclusion of the Argility and Cquential acquisitions for the full
six months.
FINANCIAL REVIEW
As a consequence of the conclusion of an agreement between UCS and BCX in terms
of which UCS disposed of its shares in and claims against certain of its
subsidiaries to BCX and which transaction became effective 11 May 2011, the
prior six month period ended 31 March 2010 and twelve month period ended 30
September 2010 have been restated to exclude the operating results of the
disposed operations of Accsys (Pty) Ltd ("Accsys"), CEB Maintenance Africa (Pty)
Ltd ("CEB Maintenance"), Destiny Electronic Commerce (Pty) Ltd ("Destiny E-
Commerce"), UCS Solutions (Pty) Ltd ("UCS Solutions") and UCS Technology
Services (Pty) Ltd ("UCS Technology Services"). The earnings results of the
aforementioned operations as well as UCS Solutions Inc disposed of in August
2010 are included, net of tax, as `profit from discontinued operations` in the
income statement in the comparable periods.
The Group`s total revenues grew by 9,4% to R704,5 million (2010: R644 million)
of which 7,7% represents organic growth.
On a continuing basis, revenues grew by 12% to R190,6 million (2010 restated:
R170,1 million). Excluding the acquisitions concluded in the second six months
of 2010 namely Argility (Pty) Ltd, Cquential Solutions (Pty) Ltd and Volume and
Affinity Risk Management (Pty) Ltd, organic revenues grew by 5,5%.
Annuity revenues grew by 24,7% to R105,5 million (2010 restated: R85 million),
representing 55,4% of total revenues (2010 restated: 50%).
Profit from operations before interest, depreciation, amortisation, foreign
exchange differences and restructuring costs ("Normalised EBITDA") decreased by
32% to R17,8 million (2010 restated: R26,2 million) representing a margin of
9,3% (2010 restated: 15,4%).
As previously mentioned, the restructuring costs incurred relate to the
voluntary retrenchment offer implemented by Argility in the first quarter. The
total settlement provision in respect of the retrenchment amounts to R17,4
million.
The Argility and Cquential acquisitions in the prior year represented
significant Intellectual Property and Software investments on the Group`s
statement of financial position , which resulted in the 960,1% growth in
amortisation in the period.
Finance charges, net of interest and investment revenues decreased by 52,5% to
R1,4 million (2010 restated: R3,0 million) and is attributable to the decreased
borrowings in the Group as a consequence of debt repayments in line with
repayment terms.
After the above, the Group incurred a loss before taxation of R26,5 million
(2010 restated: profit R9 million).
Taxation charges (including capital gains tax, STC and withholding taxes)
decreased by 83,9% to R1,2 million (2010 restated: R7,7 million) with the
reduction attributable to the incurring of tax losses, which, in terms of IFRS,
the Group is not able to account for deferred taxation assets at this time. The
prior period charge also includes a once-off R3,4 million charge related to the
redemption of a preference share investment in a subsidiary company.
Profit for the period from discontinued operations, which comprises in the
current period the companies referred to above disposed of to BCX with effect
from 11 May 2011, increased by 71,5%. On a comparable basis, excluding UCS
Solutions Inc in the prior period and the costs associated with the BCX
transaction in the current period, discontinued operations delivered 62,4%
growth in profit after tax for the period from R27,4 million to R44,5 million.
After taking into account the profit from discontinued operations, the profit
attributable to UCS shareholders of R9,6 million, after minority interests,
represents a decrease of 52,7% from the comparable prior period.
Earnings per share, including discontinued operations in the current and prior
years, decreased by 53,5% to 3,3 cents (2010: 7,1 cents) whilst continuing
operations incurred a loss per share of 10,6 cents down from 0,3 cents
(restated) loss per share in the prior period on a comparable basis. There are
no material reconciling items between earnings and headline earnings per share.
The reclassification in the current period of the assets and liabilities
associated with the subsidiary companies sold to BCX separately, as assets and
liabilities held for sale on the statement of financial position, account for
the material movements in the Group`s statement of financial position when
compared with 30 September 2010.
Discontinued operations represent R66,2 million or 47,7% of the Group`s
borrowings as at 30 September 2010 comprising financial institution debt which
balance as at 31 March 2011, is classified as held for sale. On a continuing
basis, total borrowings amount to R68,8 million of which R41,4 million
represents external financial institution debt. The non-bank debt component is
substantially represented by profit warranty obligations payable on the
achievement of pre-defined targets in 2013. Net debt (total borrowings net of
cash) at the end of the period amounts to R36,2 million.
The Group`s normalised current ratio, on a continuing basis, is an acceptable
1,4:1 compared with 0,8:1 as presented on the statement of financial position.
The normalised adjustments relate to R52,8 million due from the businesses sold
to BCX (R7,9 million of which was received post balance sheet date and the
balance representing the face value of the sale claim in Destiny Electronic
Commerce, payable by BCX as part of the VeriFone transaction referred to in the
post balance sheet note below) as well as the exclusion of the R19,2 million
deferred revenue liability which does not have an associated cash effect.
The cash generated by operations before working capital changes, including
discontinued operations, reduced by 30,6% to R67,5 million (2010: R97,1
million). The reduction is attributable to the unprofitable Argility and
Cquential operations and continued net operating costs in certain business units
forming part of the Group`s Value Added Services initiative.
The Group`s working capital lock-up improved marginally compared with the prior
period whilst capex remained consistent with the previous period`s expenditure.
Cash flows from investing activities in the prior period includes the receipt of
the upfront cash consideration on the disposal of TSSMS reported on previously.
Total staff compliment at the end of March 2011, for continuing operations, was
579 (Sep 2010 restated: 597).
POST BALANCE SHEET EVENTS
1. On 15 December 2010, UCS announced that BCX and UCS had entered into a
sale of shares and claims agreement, as amended, ("the Agreement"), in
terms of which UCS would, subject to the fulfillment and/or waiver of
certain conditions precedent, dispose of all the shares owned by UCS
in Accsys, CEB Maintenance, Destiny E-Commerce, UCS Solutions and UCS
Technology Services (collectively "the Disposal Entities") together
with all claims held by UCS against the Disposal Entities, save for
the claims against Destiny E-Commerce, to BCX ("the Disposal"). The
purchase consideration pertaining to the Disposal was up to R614 320
488 ("the Purchase Consideration") and would be settled by a
combination of new BCG shares ("Consideration shares") and cash. UCS
would subsequently unbundle the consideration shares received from BCX
("the Unbundling").
Following the approval by UCS and BCX shareholders at general meetings
held on 31 March 2011 and the fulfillment of all other conditions
precedent on 29 April 2011, the Disposal became effective on 11 May
2011 ("the Effective Date"), being the business day preceding the last
day to trade for the Unbundling.
The Unbundling of the consideration shares to UCS shareholders
recorded in the share register of UCS on the 20 May 2011, took place
on 23 May 2011.
2. On 24 May 2011 BCX, VeriFone Singapore PTE Limited ("VeriFone") and
the management shareholders in Destiny E-Commerce entered into a sale
and purchase agreement in terms of which, inter alia, BCX will,
subject to the fulfillment of certain suspensive conditions, dispose
of its 70% shareholding in and all claims held by it against Destiny E-
Commerce, to VeriFone ("the Disposal"). In terms of the agreement
between UCS and BCX ("the Agreement") and as disclosed in the circular
to UCS shareholders dated 9 March 2011, should a sale of one of the
Disposal Entities be implemented at any time during the period
commencing on the Effective Date and ending twelve months thereafter
("the Potential Sale"), UCS shall be entitled, at its election in
writing, to 70% of the net proceeds of such Potential Sale which is in
excess of R144 000 000, realised and actually received by BCX, up to
R100 000 000, and, thereafter 100% of the balance of such net proceeds
exceeding the aforesaid R100 000 000 threshold. Furthermore, in terms
of the Agreement, BCX agreed to acquire the claims held by UCS against
Destiny E-Commerce ("Destiny E-Commerce Sale Claims") from UCS for an
amount equal to the face value thereof, being R44 896 337.
Accordingly, in accordance with the provisions of the Agreement, UCS
has exercised its election to share in the proceeds of the Disposal,
and based on the total consideration to be received by BCX for the
Disposal, being an amount of R255 000 000, UCS will be entitled to
receive an amount of R26 554 684 of the net proceeds (after taking
into account the settlement by BCX of the Destiny E-Commerce Sale
Claims) if the Disposal is implemented.
3. Following the successful disposal of the majority of the business
operations of UCS to BCX, as more fully described above, and
thereafter the unbundling of the BCG Consideration Shares received
pursuant to the disposal, the board of directors of UCS ("the Board")
has considered the viability of continuing the listing of UCS on the
JSE. Accordingly, shareholders are referred to the further cautionary
announcement released simultaneously with this announcement.
CONTINGENT LIABILITY
As disclosed in the Group`s 2010 Annual Report, a claim for repudiation of
contract and damages against a subsidiary company remains unresolved.
PROSPECTS
Conditions in global financial markets continue to be of concern in terms of
stability and predictability. Management, therefore, remains cautious in terms
of forecasting future trading conditions.
Given that the Group has disposed of the bulk of its profitable services
offerings, the focus going forward is largely on the growth of the software and
VAS offerings. Overhead reductions carried out in the first half of the year in
the Software division, are expected to contribute positively to the future
financial performance of the Software division, whilst existing growth
opportunities in the VAS business unit should continue to fuel above inflation
growth in the Investment division.
The board of directors have reviewed the requirements of the business going
forward and concluded that it is no longer appropriate to retain a listing on
the JSE. We therefore draw your attention to a separate announcement released
simultaneously with this results announcement.
The information contained in this prospects paragraph has not been reviewed or
reported on by the Group`s auditors.
DIVIDEND
In accordance with the Group`s current dividend policy, based on the continued
operations performance for the six month period, the Board has not proposed a
dividend for the period.
DF Coles JD Bright
(Chairman) (Chief Executive Officer)
30 May 2011
UCS GROUP LIMITED OVERVIEW - continuing operations
SOFTWARE DIVISION
Argility (100%)
Argility (Proprietary) Limited ("Argility") is a software solutions company that
provides merchandising and point-of-sale solutions to world class retailers.
Argility designs, develops, sells, integrates, supports and maintains both
customised as well as packaged retail software.
Aquitec (100%)
Aquitec is a provider of supply chain solutions to retailers and distributors.
Aquitec, the original pioneer of warehouse management systems in 1969, provides
solutions which encompass procurement, forecasting, warehouse management and
voice direction. Aquitec has operations in Bagshot, UK and Chicago, USA.
Cquential Solutions (59%)
Cquential Solutions (Proprietary) Limited ("Cquential") commenced business in
2005 when it initiated the development of its technologically leading edge
Warehouse Management System ("WMS"), which is deployed as a hosted web
application. The web-based WMS makes it possible for clients to have stock
control and visibility across their entire organisation and further extends
control and visibility into the inbound and outbound portions of the supply
chain. Cquential offers a full suite of services, from hosting and support to
training, solution implementation and consulting.
INVESTMENTS DIVISION
GAAP Point-of-Sale (61%)
GAAP Point-of-Sale (Proprietary) Limited ("GAAP") specialises in the provision
of point-of-sale and back office solutions in the sit-down and "quick service"
restaurant sector of the South African hospitality industry.
Ultisales Retail Software (100%)
Ultisales Retail Software (Proprietary) Limited ("Ultisales")specialises in
marketing and distributing `off the shelf` point-of-sale and retail management
software for small to medium sized retailers in the Tier 3 and 4 sectors. The
Ultisales product is taken to market and supported by an extensive network of
value added resellers.
Innervation Value Added Services (100%)
Innervation Value Added Services (Proprietary) Limited ("Innervation") focuses
on the provision of networking, hosting and switching services, through the
Destiny Switch, including the management of the Innervation VAS products and VAS
partners and the provision of solution architecture and integration consulting
services.
This company also specialises in corporate strategic loyalty programme
consulting and following the investment in the Radical Business Unit in the 2010
financial year, provides the technology platform for loyalty and CRM management.
wiWallet Mobile Payments (51%)
wiWallet Mobile Payments (Proprietary) Limited ("wiWallet")offer mobile payment
technology, including a mobile payment platform and mobile payment application
enabling users to pay for products using their mobile devices.
Volume and Affinity Risk Management (51%)
Volume and Affinity Risk Management (Proprietary) Limited ("V&A Risk") is the
provider of insurance products and administration and management leveraging
brand affinity.
Fernridge Consulting (51%)
Fernridge Consulting (Proprietary) Limited ("Fernridge") assists retailers with
the identification of new opportunities for stores, consultancy on
rationalisation, relocation, market share, competitor analysis, customer
analysis, site evaluations and viability studies for new developments.
4Life Program (51%)
4Life Program (Proprietary) Limited is a multi-vendor lifestage reward and
loyalty programme connecting individuals who are experiencing similar life
stages and events with relevant advice, products and services, benefits and
rewards.
Universal Knowledge Software (76%)
Universal Knowledge Software (Proprietary) Limited ("UKS") is a leading supplier
of integrated library management systems and associated technical and support
services to the library industry of South Africa and neighbouring states. The
company holds the Southern African distribution rights for a leading
international library software product called SIRSI.
UCS Dynamics Software Solutions (70%)
UCS Dynamics Software Solutions (Proprietary) Limited is a Microsoft Gold
Certified Partner that specialises in providing integrated business solutions
using the Microsoft DynamicsTrade Mark ERP suite of applications. Services
include analysis, design, customisation, implementation, training and support.
Johannesburg
30 May 2011
Sponsor
One Capital
Date: 30/05/2011 09:50:21 Produced by the JSE SENS Department.
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