Bytes Technology Group (BTG), in line with expectations, recorded acceptable results for the six months ended 31 August 2003 with headline earnings per share increasing by 4.8% despite a significant drop in earnings from its UK operations and in particular from its recent acquisition, Plato.
Notwithstanding this, the performance by the African operations both in SA and elsewhere was most encouraging. Operating profit declined by 2.4% to R77 million (2002: R79 million) as a result of the downturn in the performance from the UK operations which showed a reduction in revenue of approximately R515 million, resulting in an overall drop in revenue for BTG of 25%.
David Redshaw, Chief Executive Officer, said: "A large part of this fall was foreseen due to the change by Microsoft in licence billing procedures and the adverse trading environment. Excluding abnormal revenues generated by Bytes UK during the first half of last year, the group`s total first half revenues increased 11% from R1.26 billion to R1.4 billion."
Redshaw said the group recorded profit before tax and goodwill amortisation of R69.5 million compared to R83.2 million for 2002. Increased net finance costs of R13.5 million were the main contributor to this reduction of R13.7 million (16.5%). However, offsetting the increased finance costs was the reduction in profits attributable to outside shareholders (Xerox). This enabled BTG to post headline earnings per share of 24.67c (2002: 23.55c), an improvement of almost 5%.
Notwithstanding the challenging conditions encountered in the UK, an acceptable cash generation was achieved. Net borrowings increased by R196 million during the six month period to end August, despite acquisition costs on Bytes Document Solutions of R238 million being incurred as well as dividend and tax payments of R48 million. Satisfactory cash generation is expected to continue for the second half.
"We have taken steps to rectify the situation at our UK acquisition, Plato, and at a trading level, a break-even position has now been established in this operation and we envisage an improved second half," said Redshaw, who added that the board was confident that headline earnings growth over the 53.51c reported in the prior year would be achieved for the full year.
According to Dr Bill Venter, who has been appointed non-executive chairman of BTG, it is the group`s strategic intent to introduce a major black empowerment partner with a significant equity holding. Discussions in this regard have commenced. He said there is little doubt that further consolidations in the South African IT industry are inevitable and the BTG board continues to examine opportunities in this area.
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