UCS to spread its wings offshore

Johannesburg, 28 Nov 2006

JSE-listed software firm UCS is seeing the results of its investments into the software arena and has plans to diversify its revenue streams geographically.

The company, which this morning presented its year-end results to end-September, says revenue moved up 54% and cash generated from operating activities moved up 85%.

CEO John Bright says the company was "very happy" with the results. However, he pointed out the growth in net profit of 155.3% to R95 million includes a capital profit of R30 million as a result of the acquisition of a 60% stake in TSS Managed Services, which should be stripped out.

Having mostly completed the consolidation of its software assets, the company is now seeing margin improvement. In addition, CEB Maintenance, which it acquired in July 2005, could be included for an entire year and next year bodes well as TSS will see 12 months of input as opposed to the three seen in this financial year, he says.

Other benefits from consolidation include the saving of 1.6% in research and development spend, without crimping the pipeline of projects being developed, he says.

International plans

Moving forward, the company is looking to set up a separate "packaged product" company. Bright says the local market is too small to sustain a fully branded packaged business, but that creating an independent company for the offshore market should give impetus to its international revenue stream.

Its primary focus will be to create a brand and product suite for selected verticals in the global retail industry, to be sold through a global "channel" of appropriately selected and trained dealers. It is planned that this business will make use of in-house intellectual property and will use the services of its subsidiary UCS Software Manufacturing.

While this division will initially be financed by the group, it will later be unbundled from UCS and will allow autonomy and independence for the company's international partners. Still at the planning stage, Bright is confident that the plan will take off and provide "a bit of muscle to spread internationally".

A similar initiative is planned for the group's assemble-to-order capability and the firm has already hosted two international delegations with a view to increasing this division's international channel.

"This year will be the year when we start seeing some success internationally," says Bright.

UCS aims to generate half its revenue in its software division from international orders. Its products division should see 95% of its revenue being generated internationally, while its software factory should see the majority of its revenue coming from overseas. Currently, most of the company's revenue is generated locally.

Locally, the addition of TSS expands the company's possible market from retail into government and the financial services sector.

Bright is optimistic of organic growth in the software division and says there is no reason why its services and solutions division cannot continue to grow through acquisitions.

UCS's shares closed yesterday at R2.60 and, just after 10am, were trading at R2.79, a 7.31% improvement.