Accounting and payroll software developer Softline says a focus on core business and a recurring revenue model improved its cash generation for the 2002 financial year.
<B>Salient figures</B>
Softline results for the year to 31 March 2002
Previous year's figures in parentheses:
Revenue: R486.83m (R412.46m)
Gross profit: R413.73m (R406.13m)
Profit before tax: R55.25m (R67.25m)
Profit after tax: R37.7m (R37.08m)
Attributable profit: R37.7m (R22.6m)
HEPS: 21.3c (16.3c)
Current assets: R188.16m (R107.7m)
Current liabilities: R122.82m (R134.02m)
NAV per share: 140.3c (119.4c)
Cash flows from operating activities: R87.4m (R66.98m)
The group's balance sheet at 31 March showed a significant improvement, with a net current asset position of R65 million compared with a net current liability position of R26 million at the end of the previous financial year.
The cash position increased from R39 million to R108 million. More than 60% of the group's cash resided offshore at the end of the period.
"The group has improved its cash-generative ability by focusing on implementing a recurring revenue model across all operations, facilitating greater customer loyalty which in turn enhanced our ability to convert sales to cash," says Softline CEO Ivan Epstein.
A focus on tighter cash management also contributed to an improved cash conversion ratio, he adds.
Despite the healthy cash generation, the operating margin fell from 27.7% to 17.3%. Epstein says there was a large increase in selling, general and administration costs mainly because of the consolidation of international acquisitions.
Softline now derives 42% of its revenue offshore, with Australia contributing 13% and North America 29%.
Maintenance and services accounted for 66% of total revenue, up from 62% in the previous year, which Epstein says was because of the continued concentration on shifting business models across the group to build an increasingly solid base of recurring revenue to underpin profitability.
"Conditions in the software industry remain challenging," Epstein says. "However, the crucial role of the accounting, payroll and tax software applications provided by Softline in the day-to-day operations of small and medium-size businesses ensures that demand for these applications remains firm.
"Softline continues to take advantage of the opportunities presented by an ever-changing technology landscape, new government legislation, penetration into vertical markets, the existing base of customers and the sustained growth of the SME [small and medium enterprise] market."
The Softline share was trading at 120c on the JSE this morning, up 5c or 4.35% from yesterday's close.
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