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UCS Group Limited - Audited financial results for the year ended 30 September
2002
ISIN ZAE000016150
Share code: UCS
* Cash flow from operating activities + 29%
* Revenue + 24%
* Annuity revenue + 27%
* Headline earnings - 3.5%
Comments
Overview
The year to September 2002 proved to be the most challenging yet for the Group
since its listing in 1998.
Local market conditions remained extremely difficult with several customers
closing stores, some postponing scheduled installations and others delaying
buying decisions. In addition, certain large customers servicing the lower-
income retail market experienced extreme financial difficulties, with one going
into liquidation and two others being forced to recapitalise. For the second
successive year, pricing for both product and services came under intense
pressure.
Despite these adverse trading conditions, the Group continued to increase its
footprint in Southern Africa through organic growth and strategic acquisitions.
On the international front, the Group is in the process of establishing a new
channel for its products and hopes to report positively in this regard during
the first half of next year.
Financial results for the period, viewed against this backdrop, are considered
to be acceptable in terms of overall revenue growth and annuity revenue growth,
but disappointing at the earnings level. Growth of 29 percent in cash flow from
operating activities was particularly pleasing.
Revenues grew by 24 percent to R219-million, while annuity revenues grew by 27
percent to R127 million, representing 58 percent of total turnover. Operating
income (before research and development, depreciation, amortisation, impairment
and interest) grew by nine percent to R50 million.
This margin contracted, however, from 25.9 percent in 2001 to 22.7 percent in
2002 due largely to pricing pressures and the emphasis on annuity rather than
once-off revenue generation. These factors contributed to the 3.5% decline in
headline earnings per share from 11.3c in 2001 to 10.9c in 2002.
The balance sheet remains strong, with a quick ratio of 4:1 and with cash
resources at R63-million at 30 September 2002.
Share buy-backs
During the year, the Group bought back a total of 23,162,411 shares at an
average price of 71.62c. Of these shares, 17,962,911 were bought by a subsidiary
and are being held as treasury shares, while 5,199,500 were cancelled. At year-
end 878,400 of the treasury shares bought back in the 2001 financial year were
cancelled. The board has authority to buy back up to 20 percent of the shares in
issue, representing a further 29,488,629 shares.
Acquisitions
During the year the Group successfully concluded two strategic acquisitions in
its focused retail solutions operations.
Effective 1 February 2002, the Group acquired a 51 percent interest in GAAP
Point-of-Sale from GAAP IT Solutions (Proprietary) Limited. GAAP is focused on
the provision of software solutions and services used primarily by the
restaurant and hospitality markets and commands a large share of the KwaZulu-
Natal market.
Effective 1 May 2002 the Group acquired 93 percent of the issued share capital
and shareholder loans of Ultimate Connection (Proprietary) Limited. This
transaction introduces a suite of award-winning, internationally recognised
Microsoft products into the Group under the ActiveRetail brand. Ultimate
Connection has since changed its name to UCS Software (Proprietary) Limited.
Effective 1 April 2002 the Group increased its shareholding in CCS Software
(Proprietary) Limited from 51 percent to 62.76 percent through a cash payment of
R 1 400 000.
Post balance sheet acquisition
Effective 1 October 2002 the Group acquired the going concern business of
Virtual Systems Technology (VST) from Softline Holdings (Proprietary) Limited
for R13-million settled in cash.
VST consolidates the Group`s position in the Western Cape and strengthens its
focus in the fashion retail industry. The business has an attractive list of
annuity-based customers and a strong team of management and staff.
Research & development
The Group`s ongoing commitment to research and development continues to provide
a strong and differentiated platform for future growth. R&D investments are
focused on ensuring a constant flow of new proprietary application software
solutions and are directed primarily into the five subsidiaries concentrated on
the retail market as well as the Accsys integrated payroll and human resource
management solution.
Prospects & forecast
The extremely challenging and turbulent market conditions are expected to
continue for some time. This environment is expected to cause further
consolidation among the Group`s competitors, giving rise to further acquisition
opportunites as well as a more profitable market place for the "survivors" when
conditions improve. Given this scenario, management has adopted a conservative
view for new sales prospects in the year to September 2003. Consequently, our
budgets show only a modest growth in earnings per share.
Dividend declaration
Notice is hereby given that the board has declared a final dividend of 1.8 cents
per ordinary share in respect of the year ended 30 September 2002. The dividend
will be paid on Monday 13 January 2003. To comply with the procedures of STRATE,
the last day to trade in the shares for the purpose of entitlement to the final
dividend is Friday 3 January 2003. The shares will commence trading ex dividend
on Monday 6 January 2003 and the record date will be Friday 10 January 2003.
Share certificates may not be dematerialised or rematerialised between
Monday, 6 January 2003 and Friday, 10 January 2003, both days inclusive.
Accounting policy
The financial statements have been prepared on the historical cost basis.
Accounting policies used in preparing these financial statements comply with
South African Statements of Generally Accepted Accounting Practice and are
consistent with the accounting policies applied in the previous year.
Audit report
These results have been audited by Kaplan & Kaplan and their unqualified audit
report is available for inspection at the Group`s registered office.
For and behalf of the board
Adv RG Goodman (Chairman)*
JD Bright (Managing Director)
Directors
Adv RG Goodman (Chairman)*, JD Bright (Managing), JR Claassen*, DF Coles, Ms RJ
Eliot*, PS Fitzgerald, BP Hattingh*, EB Levenstein*, NA Michelson, DC Sparrow, P
Terblanche*.
* Non-executive
Company Secretary
VM Broadrick
UCS Group Limited
Incorporated in the Republic of South Africa
Reg. No: 1993/002253/06
ISIN Code: ZAE000016150
Share Code: UCS
www.ucs.co.za
Registered office
20th Floor
209 Smit Street
Braamfontein 2001
Transfer secretaries
Computershare Investor Services Limited
70 Marshall Street
Marshalltown
Johannesburg 2001
Income statement
for the year ended 30
September 2002
2002 2001
R`000 R`000 % change
Revenue 218,746 176,573 23.9%
Profit from operations 49,758 45,756 8.7%
before interest,
depreciation, research
and development and
impairment
Research and (16,826) (11,773) 42.9%
development
expenditure
Depreciation and (12,986) (8,632) 50.4%
amortisation
Impairment of loan to (8,115) - 100.0%
staff share trust
Profit before interest 11,831 25,351 -53.3%
and investment income
Net interest and 7,631 9,262 -17.6%
investment income
Profit before taxation 19,462 34,613 -43.8%
Taxation (1,476) (6,269) -76.5%
Profit after taxation 17,986 28,344 -36.5%
Minority shareholders 132 (174) -176.1%
portion of subsidiary
loss (earnings)
Net profit for the 18,118 28,170 -35.7%
period
Earnings per share 7.2 10.5 -31.4%
attributable (cents)
Adjusted for: (net of
taxation)
Amortisation of 1.4 0.8
intangible assets
Impairment of loan 2.3 -
Headline earnings per 10.9 11.3 -3.5%
share (cents)
Dividends per share 1.8 -
(cents)
Net asset value per 74.4 68.9 8.0%
share (cents)
Ordinary shares in 240,093 263,255 -5.0%
issue (excl shares
held in treasury)
Weighted average of 251,478 267,626 -5.3%
ordinary shares in
issue
Cashflow statement
for the year ended 30 September 2002
2002 2001
R`000 R`000 %age
Cash flow from 24,862 19,256 29.1%
operating activities
Cash generated from 33,149 33,939
operations
Working capital (1,756) (11,592)
changes
Cash generated from 31,393 22,347
operating activities
Investment income and 7,631 9,262
net finance cost
Dividend paid (4,478) -
Taxation (9,684) (12,353)
Cash applied to (36,647) (24,641) 48.7%
investing activities
Cash applied to (13,330) (5,929) 124.8%
financing activities
Cash and cash
equivalents
- Net decrease (25,115) (11,314)
- At beginning of the 88,196 99,510
year
- At end of year 63,081 88,196 -28.5%
Statement of changes in equity
for the year ended 30 September 2002
Share capital Preference
share
capital
R`000 R`000
Balance at 30 September 1,317 20
2001
Net movement arising from (116)
share buyback
Dividend paid
Net profit for the year
Balance at 30 September 1,201 20
2002
Share premium Distributable Total
reserves
R`000 R`000 R`000
Balance at 30 September 2001 79,158 101,113 181,608
Net movement arising from (16,473) (16,589)
share buyback
Dividend paid (4,478) (4,478)
Net profit for the year 18,118 18,118
Balance at 30 September 2002 62,685 114,753 178,659
Balance sheet
At 30 September 2002
2002 2001
R`000 R`000
ASSETS
Non current assets 96,696 76,521
Property, plant and 19,308 17,729
equipment
Intangible assets 47,294 28,166
Investments and loans 24,108 29,353
receivable
Deferred taxation 5,986 1,273
Current assets 114,686 129,849
Inventory 4,711 3,505
Trade and other receivables 44,332 38,148
Cash and cash equivalents 63,081 88,196
Taxation 2,562 -
Total assets 211,382 206,370
EQUITY AND LIABILITIES
Capital and reserves
Shareholder`s interest 178,659 181,608
Non current liabilities 3,713 454
Minority interest - 174
Long and medium term loans 3,713 280
Current liabilities 29,010 24,308
Trade and other payables 28,272 22,638
Current portion of long term 17 16
loans
Taxation 721 1,654
Total equity and liabilities 211,382 206,370
Date: 20/11/2002 04:55:00 PM Produced by the JSE SENS Department
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