UCS Group has reported a decline in profits after increasing research and development costs by 86% in the six months to 31 March. However, it says it is poised to take advantage of IT sector consolidation.
<B>Salient figures</B>
UCS Group results for the six months to 31 March 2003.
Figures for the year-earlier period in parentheses:
Turnover: R140.47m (R100.66m)
Profit from operations before interest, depreciation and R&D: R28.93m (R22.06m)
Profit before tax: R11.35m (R13.58m)
Profit after tax: R9.38m (R12.15m)
Net profit: R9.35m (R12.37m)
HEPS: 6c (5.4c)
EPS: 4c (4.8c)
Current assets: R110.99m (R130.15m)
Cash: R52.73m (R82.72m)
Current liabilities: R38.24m (R29.22m)
Cash generated by operations: R15.07m (R15.55m)
The software group`s revenue for the period increased by 39.5% from R100.66 million to R140.37 million. Annuity revenue saw a 37% rise.
"Organic growth came in at just over 11%, with the balance of the growth being attributable to acquisitions," says CEO John Bright.
"The focus on the generation of sustainable annuity revenue streams remains key to our strategy with annuity revenue as a percentage of total revenue approximating its previous reported level of 57% and with growth in rand terms of some 37% to R80.4 million."
Operating income before depreciation, amortisation and interest increased by 8% although this included research and development costs of R12.1 million compared with R6.5 million in the prior-year period.
Bright says UCS Software, acquired as Ultimate Connection in May last year, contributed 48% to the increase in research and development.
He says "harsh and volatile conditions in the IT market" and the group`s primary trading markets continued during the period.
"The group will continue to focus on growth of market share in its chosen markets and will continue to avail itself of appropriate acquisition opportunities that arise as the consolidation in the South African IT market gathers momentum."
UCS is consolidating some of its retail-focused subsidiaries, which Bright says is being done to maximise efficiencies, eliminate duplication, increase capacity for growth and improve quality of services and products.
"This project is expected to significantly enhance the group`s ability to generate above average returns for its shareholders in the medium and longer term," he says.
"The outlook for the remainder of the year remains challenging, but the group has sufficient work in the pipeline to be optimistic of acceptable results for the full financial year."
The board has declared an interim dividend of 2c a share, to be paid on 17 June.
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