BTG reports excellent results despite market pressures

Bytes Technology Group (BTG) has reported excellent results for the year ended 28 February 2003 despite the continued slack demand for IT products and services. BTG managed to effectively mitigate these factors through market share gains, greater efficiencies and cost reductions, reporting revenue growth of 29% and increase in operating margin to 5.5% of sales.

David Redshaw, Executive Chairman of BTG, said: "Our growth in revenue is somewhat inflated due to the conversion to rand from sterling revenues at a higher average rate compared to the previous year. The accelerated spend by major corporates in the UK following changes in licensing policy imposed by Microsoft, also played a role. Consequently, we expect revenue to grow at a slower rate in the year ahead."

He said the substantial and unexpected strengthening of the rand, particularly during the second half of the year, made the achievement of their financial targets particularly gratifying. BTG reported an increase in revenue of almost 30% from R2.34 billion to R3.03 billion, a rise in operating profit from continuing operations of 42% to R166 million (up from R117 million the previous year) and a 55% growth in profit before goodwill amortisation, exceptional items and refund of Benefit Fund contributions from R112 million to R174 million.

Adjusted headline earnings per share reached 53.5 cents (R81.1 million), representing a rise of more than 32% from the 40.3 cents (R60.8 million) recorded for the year before.

Redshaw said he is satisfied with the group`s cash performance which increased to R185 million from operating activities against R80 million the previous year. These increased cash resources were offset by expenditure on acquisitions of R348 million, leaving the group with net borrowings of R50 million at year end compared with positive balances of R130 million a year earlier. "The greatest improvements were achieved by Xerox South Africa and Enterprise Solutions (UK) with increases of 40% and 70% respectively. The gains realised by Software Products and Solutions, Managed Networking Services and Digital Healthcare Solutions were particularly satisfying. Losses on discontinuing operations reduced to a negligible R0.1 million against R6.8 million in the 2002 financial year," said Redshaw.

Redshaw said Plato Computer Services, an IT services company in the UK that was acquired at the end of November 2002 for an amount of lb22.5 million, is expected to deliver low returns over the short term due to the current rand strengthening and the depressed IT services market in the UK.

"Notwithstanding these factors, the strategic rationale for the acquisition remains valid," he said. Post year-end, BTG has also concluded, subject to certain suspensive conditions being met, the acquisition of 50% plus one share in Xerox South Africa for R235 million from Xerox Limited.

"We expect the rand/sterling exchange rate to continue to have a negative impact on our reported earnings from offshore and on some of our local operations, particularly during the first half of the current financial year. However, we anticipate a good performance from our South African operations. The ongoing rationalisation in our industry ensures that the group will not lack potentially profitable expansion opportunities," said Redshaw.

The BTG board declared a dividend of 16c per ordinary share.