UCS Group announces another solid set of results
Nov 27 2007
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UCS Group, the South African IT business with primary focus on Software, Solutions and Services focused on the retail sector and selected markets, today announced its annual results for the year ended 30 September 2007.

John Bright, CEO of the UCS Group, commented: “The Group has recorded another set of excellent results with all business units performing in line with, or exceeding expectations in terms of trading results for the period. We expect this trend to continue into the new year.”

2007 saw the group revenues exceed R1 billion for the first time with 86 % of revenues derived from the sales of its own products and services rather than the sale of third party products. Organic growth accounted for 16% with the balance attributable to the effect of current year and prior year acquisitions including Lifeworld, DiverseIT, TSSMS and Quadrant.

EBITDA grew significantly by 64% to R249 million whist headline earnings per share grew by 61% to 34,7 cents. Normalised EBITDA margin showed a 43% increase and came in at 16,4% of revenues. Strong cash flows attributable to a focus on the generation of annuity revenue (55% of total revenues) resulted in a 49% increase in the cash generated from operations to R179 million. A final dividend of 5 cents per ordinary share has been declared.

The Solutions & Services Division achieved a top line growth of 48% through a combination of organic growth and corporate activity as a result of the acquisition of controlling interests in the Lifeworld and DiverseIT businesses with effect from March 2007 and the fact that the TSSMS and Quadrant acquisitions contributed for the full 12 months following their entry into the Group in July 2006. It is pleasing to note that the 48% top line growth in this expanded division translated into a 53% increase in normalised divisional PBIT.

On the software front, the strategy to consolidated the businesses acquired historically into a larger, more cohesive unit trading under the UCS Software brand continued to deliver the planned benefits of improving margins, with a 16% top line growth for the 2007 year translating into a 36% increase in normalised PBIT achieved.

On 21 September, the group successfully ’unbundled’ ARgility, a business created to compete in the international markets. This initiative included the sale of the Active Retail and Dolfin product suites.

John Bright said: “It is important to note that it is the IP of these two product suites and not the underlying retail business objects or components that have been sold. The retail business objects and components form part of the IP that is housed within our Software Manufacturing facility.”

The main benefits of this strategy for UCS Group will materialize through a 10% share of future software licence revenues and an outsourced product development service with the Group’s software manufacturing facility. Revenues for UCS from this outsourced product development service will commence immediately, with the impact from the share of licence revenues expected to come through after at least 2 years.

The Group has also signed agreements to acquire 100% of Aquitec for US$6 million. With operations in the UK and US, Aquitec offers an opportunity to acquire IP relevant to a retail specific customer base as well as an established offshore infrastructure with IT skilled personnel through which the Group could leverage its South African based skills, products and IP.

Going forward into the new year, the Group structure will be changed to facilitate more cohesive and efficient domestic customer services, sales and marketing, as well as further consolidation and positioning for international expansion. The new structure will see the business units with similar focus and areas of expertise being grouped together into Retail Solutions, Infrastructure and Investments divisions.

Concluding, John Bright added: “Whilst there are challenges with many major retailers facing a slowdown in consumer spending, we believe that the platform that we have in place will allow us to continue the growth momentum established over the past years. Overall, the Group is well positioned, strategically as well as operationally, to deliver good growth in operating profits and cash flows for our 2008 year.”

About UCS Group

UCS is an IT business with a primary focus on the provision of Software, Solutions and Services for selected markets. UCS has achieved a leadership position in the retail market sector in South Africa and is well positioned for further growth locally and internationally through a number of defined initiatives. The major portion of UCS’ revenues are derived from the provision of its own Software, Solutions and Services, rather than the sale of third party products. UCS is listed in the Software and Computer Services sector of the JSE Securities Exchange South Africa since September 1998