| Mon 9 May 2005, 16:38 | | UCS Group Limited - Interim report for the six mon |
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UCS Group Limited - Interim report for the six months ended 31 March 2005
UCS Group Limited
Registration Number: 1993/002253/06
Share Code: UCS
ISIN Code: ZAE000016150
Interim Report
For the 6 months from 1 October 2004 to 31 March 2005
* 12% growth in annuity revenue
* 6.5% growth in revenue
* 2 cents interim dividend per share declared
* Anticipation of a stronger performance for second half of the year to
September 2005
Commentary
The results for the 6 month period under review represent a mixed performance by
the Group`s operating business units, with most achieving or exceeding budget
targets but with disappointing results recorded in the recently consolidated UCS
Software business unit. The UCS Solutions business delivered a strong
performance trading ahead of budget in terms of both revenues and margins
achieved. During the period several major contracts were successfully completed
and additional new opportunities secured.
As reported in our results announcement for the year ended 30 September 2004,
management expected the first half of the 2005 financial year to be very
challenging. This was on the basis that the Group`s focus on the generation of
sustainable annuity streams means overhead structures grow in advance of new
business billings and delays on installations have a short-term negative impact
on margins. The delays with certain large customer software projects at that
time meant that the related roll-outs would only get under way after the peak
retail trading season in December. `It was also reported that the benefits of
the Software business consolidation strategy should begin to bear fruit this
year in terms of improved margins, although it must be reiterated that the first
half of the year is expected to be very challenging in this regard`.
Overall, turnover grew by 6.5% to R262m (2004 R246m), while annuity revenues
grew by 12% to R159m (2004 R142m), representing 61% of total revenues (2004
58%).
R & D expenditure was reduced by 16% compared to the first half of last year
although the total for the year is expected to exceed last year. The full
synergistic benefits of consolidating the retail software businesses in the
Group into a single operating entity are expected to flow through to the bottom
line over the next 24 months. R & D costs continue to be fully expensed as
incurred, except in the new UCS Software Manufacturing unit, where product
development costs are capitalised until the product is released for sale in the
market. During the period under review software development costs of R5m and
factory set-up costs of
R2m were capitalised.
EBITDA at R33.3m (2004 R33.6m), reflects the pressures on margins caused by the
project delays experienced in the consolidated Software business. Depreciation,
amortisation and goodwill write-offs increased by 3.4% to R19.5m (2004 R18.9m)
whilst interest and investment income was almost totally offset by interest
paid. Although interest paid reduced by 17% to R5.2m, interest earned was down
by 67% to R0.9m (2004 R2,7m) as a result of reduced bank balances and falling
interest rates.
These factors contributed to an overall decrease of 11% in net income before tax
to R13.8m (2004 R15.5m). Taxation charges increased by 48% to R2.1m (2004 R1.4m)
leading to a 17% reduction in profit after tax to R11.7m (2004 R14.1m). A small
increase in the minorities` share of subsidiary earnings caused net profit to be
18% lower at R11,4m (2004 R13.9m).
A 1% increase in the weighted average of ordinary shares in issue to 239.5m
(2004 237.5m) contributed to an 18.6% drop in earnings per share to 4.8c (2004
5.9c), whilst headline earnings per share fell 14.9% to 5.7c (2004 6.7c).
Cash generated from operations was almost static at R33.0m (2004 R33.6m). A
substantial outflow from `working capital changes` was abnormal and largely
related to the settlement of significant creditors in the six month period under
review. This together with the additional cash applied to investing activities
was the main reason for the decline in bank balances during the period.
The Groups commitment to the sale of its own technology and services remains
strong, with the sales of 3rd party products and services accounting for only
15% of total revenues (2004 18%).
For the period under review, cash applied to investing activities amounted to
R30.7m (2004 R22.8m).
Headcount at the end of March 2005 was 1132 (March 2004 1006), a growth of
12.5%.
Prospects
As stated in our annual report, the Group anticipates a stronger performance for
the second half of the year to September 2005. In particular, the `drive for
efficiency` program initiated in the consolidated Software business should
produce short term improvements in margins as well as having long term
beneficial effects on the overhead structure of the business. The previously
delayed projects are either in roll-out phase or are scheduled to roll out over
the next few months. The Solutions business has a healthy order book and some
exciting opportunities for growth. The rest of the operating businesses should
continue to perform in accordance with budgets, although there are still
challenges. For one, the uncertainty in the pharmacy market over regulatory
issues is not expected to be resolved in the short term.
Our international marketing efforts continue to show promise but have not yet
delivered in terms of large orders.
Given these factors, management forecasts give promise of a significant
improvement during the second half of the year and indicate that the Group
should record real growth in earnings for the full year.
Dividend declaration
Notice is hereby given that the board of directors has declared an interim
dividend of 2.0 cents per ordinary share in respect of the 6 months ended 31
March 2005. The dividend will be paid on Monday 8 August 2005.
The last day to trade in the shares for the purpose of entitlement to the
interim dividend is Friday 29 July 2005. The shares will commence trading ex
dividend on Monday 1 August 2005 and the record date will be Friday 5 August
2005.
Share certificates may not be dematerialised or rematerialised between Monday 1
August 2005 and Friday 5 August 2005, both days inclusive.
ACCOUNTING POLICIES AND REVIEW OPINION
Interim results for the period ended 31 March 2005 have been reviewed
by the auditors, Kaplan and Kaplan, and have been prepared on a basis
consistent with the prior year annual financial statement accounting
policies and in compliance with South African Statements of
Generally Accepted Accounting Practice. The review opinion
is available for inspection at the company`s registered offices.
Intangible Assets
Intangible assets include trademarks, goodwill, intellectual property,
factory set-up costs and software development costs.
Contingent liability
In the results announcement and the annual report for the financial year
ended 30 September 2004 it was disclosed that there was a potential
contingent liability of R 20-million in respect of tax that was reassessed
for UCS Solutions. The matter remains unresolved at the end of the period
under review.
Segment report
Easirun Software (Proprietary) Limited has been reallocated to the `software`
segment in the current period and all prior period allocations in the
`solutions & services` segment have been restated accordingly.
Income statement for the period
ended 31 March 2005
Audited
Reviewed Reviewed 12
6 months 6 months Percen months
31/03/05 31/03/04 tage 30/09/04
R`000 R`000 change R`000
Revenue 261890 245855 6.5 486292
Profit from operations before 44212 46515 -5 81297
interest, depreciation and
research and development
Research and development expenditure -10877 -12887 -15.6 -20907
Depreciation and amortisation -19545 -18902 3.4 -35105
Profit before interest and 13790 14726 -6.4 25285
investment income
Net interest and investment income 19 790 -97.6 2113
Dividend and investment income 4350 4350 9152
Interest received 886 2713 4314
Interest paid -5217 -6273 -11353
Profit before taxation 13809 15516 -11 27398
Taxation -2131 -1445 47.5 -2257
Profit after taxation 11678 14071 -17 25141
Minority share of subsidiary earnings -285 -157 81.5 -510
Net profit for the period 11393 13914 -18.1 24631
Earnings per share attributable 4.8 5.9 -18.6 10.4
(cents)
Adjusted for:
Amortisation of goodwill 0.8 0.8 0 1.5
Loss on disposal of property, 0.1 0 100 0
plant & equipment
Headline earnings per share (cents) 5.7 6.7 -14.9 11.9
Fully diluted earnings per share 4.3 5.1 -15.7 9.3
Fully diluted headline earnings 5.2 5.8 -10.3 10.7
per share
Dividend per share 2.3 2 15 4.3
Net asset value per share (cents) 85.2 80.7 5.6 82.7
Ordinary shares in issue
(excl shares held in treasury) 239627 237497 0.9 239453
Weighted average of ordinary shares 239540 237497 0.9 237909
in issue
Balance sheet
at 31 March 2005
Reviewed Reviewed Audited
6 months 6 months 12 months
31/03/05 31/03/04 30/09/04
R`000 R`000 R`000
ASSETS
Non current assets 194686 169929 182098
Property, plant and equipment 52117 47220 42494
Intangible assets 119847 102172 117586
Investments and loans 5734 6186 5635
Deferred taxation 16988 14351 16383
Current assets 122478 128770 137797
Inventories 8367 6780 6816
Receivables 81477 59331 79474
Cash 31829 62659 51015
Taxation 805 0 492
Total assets 317164 298699 319895
EQUITY AND LIABILITIES
Capital and reserves
Shareholders` interests 204147 191764 198109
Non current liabilities 30714 30631 25860
Minority shareholders in subsidiary 978 2894 810
Long and medium term loans 11155 1467 2625
Revenue in advance 18581 26270 22425
Current liabilities 82303 76304 95926
Payables & accruals 58880 62283 79678
Revenue in advance 12123 12300 12341
Current portion of long term loans 5391 1475 2735
Bank overdraft 5454 0 0
Taxation 455 246 1172
Total equity and liabilities 317164 298699 319895
Statement of changes in
equity for the period
ended 31 March 2005
Share Prefe- Foreign Share Distri-
capi- rence Currency premium butable Total
tal share Trans- reser-
capital lation ves
R`000 R`000 R`000 R`000 R`000 R`000
Balance at 30 Sept 04 1197 40 0 61876 134996 198109
Shares issued 1 0 0 104 0 105
Net profit for the 0 0 0 0 11393 11393
period
Foreign currency 0 0 49 0 0 49
translation
reserve surplus
Cash dividend paid 0 0 0 0 -5509 -5509
Balance at 31 March 05 1198 40 49 61980 140880 204147
Segmental information
for the period ended
31 March 2005
Business segments
Reviewed Reviewed Percen- Audited
6 months 6 months tage 12 months
31/03/2005 31/03/2004 change 30/09/2004
R`000 R`000 R`000
Revenue 261890 245855 6.5 486292
Software 146263 133340 9.7 264201
Solutions & Services 115627 112515 2.8 222091
Profit before interest 13790 14726 -6.4 25285
and investment income
Software 833 5832 -85.7 11726
Solutions & Services 12323 9043 36.3 14991
Corporate & eliminations 634 -149 -525.5 -1432
Cash flow statement
for the period ended
31 March 2005
Reviewed Reviewed Percen Audited
6 months 6 months tage 12 months
31/03/05 31/03/04 31/09/04
R`000 R`000 R`000
Cash flow from -5253 27475 -119.1 40485
operating activities
Cash generated from operations 33035 33628 -1.8 60209
Working capital changes -28944 339 -6681
Cash generated from 4091 33967 53528
operating activities
Investment income and 19 790 2113
net finance cost
Taxation paid -3736 -2532 -4943
Dividend paid -5627 -4750 -10213
Cash applied to -30679 -22821 34.4 -45016
investing activities
Cash received from (applied 11291 -15903 171 -18361
to) financing activities
Cash and cash equivalents
- Net change -24641 -11249 119.1 -22892
- At beginning of period 51015 73908 31 73908
- At end of period 26374 62659 -57.9 51016
BOARD OF DIRECTORS
Richard Goodman SC (Chairman)*, John Bright
(Chief Executive Officer),
Joseph Claasen*, Duncan Coles, Rebecca Eliot*+,
Patrick Fitzgerald,
Bryan Hattingh*, E.B. (Bert) Levenstein*, Neil
Michelson (Chief Operating Officer), Dean Sparrow
(Chief Financial Officer), Peter Terblanche*.
* Non-Executive
+ British
Company Secretary
Duncan Coles
Registered Office
20th Floor
209 Smit Street
Braamfontein 2001
PO Box 31266
Braamfontein
2017
Transfer Secretaries
Ultra Registrars (Proprietary) Limited
11 Diagonal Street
Johannesburg 2001
PO Box 4844
Johannesburg 2000
For and on behalf of the board
Adv RG Goodman SC (Chairman)*
JD Bright (Chief Executive Officer)
Johannesburg
9 May 2005
Date: 09/05/2005 04:00:28 PM
Produced by the JSE SENS Department
