| Wed 9 May 2001, 0:00 | | Ucs Group Limited - Interim Results For The Period |
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UCS Group Limited
(Incorporated in the Republic of South Africa)
Reg No: 1993/002253/06
Interim results for the period 31 March 2001
Highlights
* Turnover: +25%
* Annuity revenue: 60% of turnover
* Development costs (work in progress)fully expensed
* Store base set to double
Comment
The results for the 6 months under review reflect another challenging period
for the Group which, largely due to acquisitions, recorded a 24,8% increase in
turnover. CKS, acquired in September last year, accounted for 21,4% and CCS,
acquired in March 2001, accounted for 2,4% of the increased turnover
respectively. A subsidiary, Prism Employee Benefits (Pty) Ltd, which was not
part of the Group's core business, was sold with effect from 1 October 2000.
This subsidiary accounted for 1,3% of turnover in the previous period.
In line with most other international suppliers of enterprise application
software, the core retail solutions business, Universal Computer Services,
continued to be impacted by the delay in the sales of new business caused by
the millennium phenomenon. The result was that new installations during this
financial period were negligible. Importantly, however, the order book for
future implementations grew handsomely from 1,100 to 1,600 stores and these
installations are scheduled to commence in July 2001 and run through to the end
of the second quarter of 2002. This represents a 59% increase on the existing
installed base. The overall store base for the Group, in terms of committed
orders, is set to more than double within the next 12 months, from the 3300
stores installed at 1 October 2000. This projected store base may be
categorised as FMCG 36%, Furniture 33%, Clothing/Speciality 23% and Pharmacy 8%
The costs of developing the customised solutions for this new business have
been fully expensed during the period under review, while the revenue will only
be taken into account once the store systems are implemented. Although this may
be considered as an extremely conservative method of accounting for development
costs, it is consistent with reporting in previous periods. While the annuity
revenue business model protects the company from significant reductions in
profitability during difficult trading periods, it also takes longer for new
business to translate into meaningful operating profits. This, together with
other factors, resulted in a reduction of 2.1% in operating income before
interest, taxation, research and development, depreciation and amortisation.
Another reason for the tightening of margins is the turnover mix of the CKS
acquisition which provides turnkey solutions to the retail pharmaceutical
market. These solutions include the sale of computer hardware, which forms a
significant portion of the value thereof, but which is sold at significantly
lower margins than those of the Group's own technologies (application software)
and services. About 80% (2000: 89%) of the Group's turnover is from the sale of
its own technology and services.
Overall, headline earnings per share declined by 25,7% to 5,2c over the
corresponding period of last year (2000:7,0c). The bulk of this decline arose
from the reduction of finance and investment income earned of R6,48 million
(2000: R10,82 million). This was due to the lower interest rates, surplus funds
being invested tax free and a reduction in investment income.
For the period under review, capital expenditure amounted to R9,1 million
(2000:R3.7 million) while direct research and development costs were R4.8
million (2000:R3.4 million). R&D costs continued to be expensed as incurred.
Headcount at the end of March 2001 was 528 (March 2000: 379).
Prospects
All of the Group's subsidiaries are expected to show improved results and to
trade profitably for the second half of the year. The directors are therefore
optimistic that, provided the scheduled implementations take place on time, the
Group can still achieve an overall growth in headline earnings per share over
the previous year.
INCOME STATEMENT
FOR THE PERIOD ENDED 31 MARCH 2001
Reviewed Reviewed Audited
6 months 6 months Percentage 12 months
31/03/2001 31/03/2000 change 30/09/2000
R'000 R'000 R'000
TURNOVER 78 846 63 158 +24,8 134 869
Operating income before interest,
depreciation and research
and development 19 558 19 982 -2.1 39 928
Depreciation and amortisation (3 919) (3 046) +28.7 (6 379)
Research and development
expenditure (4 799) (3 400) +41.1 (7 411)
Operating income before
interest and investment
income 10 840 13 536 -19.9 26 138
Net interest and investment
income 5 193 10 824 -52.0 16 414
Operating income before
taxation 16 033 24 360 -34.2 42 552
Taxation (2 595) (6 082) +57.3 (10 035)
Minority share of subsidiary
earnings (68) - - -
Goodwill written off (117) (43) +172.1 (100)
Attributable earnings 13 253 18 235 -27.3 32 417
Earnings per share
attributable (cents) 4,9 6,7 -26,9 11,9
Headline earnings per
share (cents) 5,2 7,0 -25,7 12,6
Cash flow per share (cents) 0,6 7,6 -92,1 12,0
Weighted average of ordinary
shares in issue (fully diluted) 271 344 272 700 -0.6 272 700
BALANCE SHEET
AT 31 MARCH 2001
Reviewed Reviewed Audited
6 months 6 months 12 months
31/03/2001 31/03/2000 30/09/2000
R'000 R'000 R'000
Shareholders' interest 168 066 147 142 161 325
Long and medium term loans 415 45 390
Deferred taxation 79 - 5
Minority shareholders in
subsidiary 68 - -
Payables 19 335 27 677 30 706
Total equity and liabilities 187 963 174 864 192 426
Property, plant and equipment 16 979 10 525 11 946
Goodwill/trademarks 29 612 22 725 24 350
Investments and loans 25 646 22 630 23 073
Inventories 2 701 1 050 2 698
Receivables 36 658 24 030 30 849
Cash resources 76 367 93 904 99 510
Total assets 187 963 174 864 192 426
STATEMENT OF CHANGES IN EQUITY
Share Share Distributable
capital premium reserves Total
R'000 R'000 R'000 R'000
Balance at 30 September 2000 1 364 85 125 74 836 161 325
Treasury shares acquired
by subsidiary (41) (6 471) - (6 512)
Attributable earnings for
period - - 13 253 13 253
Balance at 31 March 2001 1 323 78 654 88 089 168 066
CASH FLOW STATEMENT
Reviewed Reviewed Audited
6 months 6 months 12 months
31/03/2001 31/03/2000 30/09/2000
R'000 R'000 R'000
CASH FLOW FROM
OPERATING ACTIVITIES 165 20,606 32,679
Cash generated from operations 14 685 16 537 32 485
Working capital changes (8 295) (2 489) (2 549)
Cash generated from operating
activities 6 390 14 048 29 936
Investment income and net
finance cost 5 193 10 824 16 414
Taxation paid (11 418) (4 266) (13 671)
CASH APPLIED TO
INVESTING ACTIVITIES (16 899) (8 299) (15 136)
CASH APPLIED TO
FINANCING ACTIVITIES (6 409) (8) 362
Cash and cash equivalents
- Net change (23 143) 12 299 17 905
- At beginning of period 99 510 81 605 81 605
- At end of period 76 367 93 904 99 510
For and on behalf of the board
EB Levenstein (Chairman)
JD Bright (Managing Director)
10 May 2001
Directors
EB Levenstein (Chairman), JD Bright (Managing), J Claassen*, DF Coles, R
Eliot*, PS Fitzgerald, R Goodman*, B Hattingh*, NA Michelson (Financial), P
Terblanche*.
* Non-executive
Registered office
UCS Group Limited
20th Floor
209 Smit Street
Braamfontein 2001
Visit: www.ucs.co.za
UCS poised to double retail store installations
PRESS RELEASE
In the face of a challenging reporting period that continued to be negatively
impacted by the effects of the millennium "hang-over", UCS Group Limited has
maintained its conservative accounting and reporting policies for the six
months ended 31 March 2001.
On turnover that rose to R78.8-million, an increase of 25 percent over the same
period last year (R63.2-million), the group has reported headline earnings per
share of 5,2 cents (7.0c).
UCS group managing director John Bright says that while UCS has shared the
prolonged slow-down in new business sales experienced by all international
suppliers of enterprise application software, the group's order book for new
implementations has picked up handsomely.
"The group's core business subsidiary, Universal Computer Services, has signed
enterprise-level contracts that will increase the installed base of in-store
software systems by almost 60 percent by the second quarter of next year.
"Based on our strategy to grow the UCS footprint in retail, the group's
installed base of in-store solutions will more than double to over 7 000
systems by the end of this calendar year. A pleasing aspect of this projected
growth is that we have successfully diversified our own technology offerings
into key sectors of the retail industry.
"Through the acquisition of Computerkit (CKS) in September last year and CCS
Software in March, the group's projected installed based will cover FMCG (36%),
furniture (33%), clothing/speciality (23%) and retail pharmacy (8%)," he says.
Pointing out that work-in-progress costs for confirmed business have been fully
expensed during the period under review, Bright says that revenue from these
developments will only be taken into account once the new store systems have
been implemented.
"While this may be considered an extremely conservative method of accounting
for development costs, it is consistent with reporting in previous periods. It
also falls into line with our annuity revenue business model that helps protect
the company from significant reductions in profitability during difficult
trading periods," says Bright.
"Although the acquisition of CKS and CSS accounted almost entirely for the 25
percent increase in turnover, these companies were not yet aligned with the
group's business model during the period. This resulted in a tightening of
margins due mainly to revenue derived from hardware sales in CKS," he says.
Bright adds that the fall in headline earnings per share can also be attributed
largely to lower interest rates, the investment of surplus funds in tax-free
instruments and a reduction in investment income.
Despite the difficult trading environment, operating income before interest,
tax, research and development, depreciation and amortisation declined by only
two percent.
Forecasting improved results for the second half the year and overall growth in
headline earnings for the full year ended September 2001, Bright says he is
confident all group subsidiaries will trade profitability.
"Our core business in the group's retail solutions division has been
strategically diversified and focussed on growing our footprint throughout the
retail sector of South African economy," says Bright.
Ends
For further information contact:
John Bright
Managing Director
UCS Group Limited
Tel: (011) 712-1460
Fax: (011) 339-3421
e-Mail: jdb@ucs.co.za
Visit: www.ucs.co.za
Issued on behalf of UCS Group Limited by:
Brian Streak
GBS Marketing
Tel: + 27 11 781-2126
Fax: + 27 11 781-2182
e-Mail: brians@gbs.co.za
Visit: www.gbs.co.za
