Listed software group UCS is cautiously optimistic that sales, earnings and cash flows will grow in the new financial year.
The company this morning released its year-end results, which show a gradual improvement in trading conditions. UCS says the outlook for the domestic retail market is “favourable” and consumer spending should continue to grow in 2011.
UCS reported revenue up 7.2%, to R1.3 billion, for the year to September, while profit from continuing operations soared 181.7%, to R71 million. Revenue growth was mainly organic, with only 0.2% of the growth attributable to acquisitions.
CEO John Bright says the “drive to streamline the group and reduce its exposure to large-scale once-off project work has ensured a respectable performance, which was supported by a gradual improvement in market and trading conditions”.
The company, which focuses on software, solutions and services for the retail sector, says annuity revenue accounts for 55% of total income, on a par with last year's 55.4%.
Deputy CEO Dean Sparrow explains the company wants annuity revenue to come in between 55% and 65%.
Sparrow says, however, the company has looked at its sources of annuity revenue to cut out higher risk income. As a result, UCS sold its US operation, UCS Solutions Incorporated, to management, but kept the channel open to earn royalties from the customised SAP All-in-One solution, he says.
Sparrow adds that conditions in the non-food retailing sector, such as clothing and furniture, are picking up. He explains this should flow through into new stores and improved orders for UCS.
Bulking up
During the year, UCS made several acquisitions, including taking its stake in WiWallet Mobile Payments to 51%, after swapping a R1.76 million loan for a 40% shareholding and buying another percent for R1.2 million.
UCS also increased its 51% interest in Lifeworld Group to 100%, for a “nominal consideration” and changed the company's name to Innervation Value Added Services. Lifeworld subsequently bought the Radical Business Unit from Dynamic Visual Technologies for R1.5 million.
The company also bought 51% of Volume and Affinity Risk Management for R1 million, but could pay out another R5 million depending on warranties.
UCS also agreed to buy 49% of Cquential Solutions from the Industrial Development Corporation for R12 million, with a further potential upside payment capped at R10 million. UCS also bought another 7% from management.
In addition, the company bought Argility for R44.2 million in aggregate. One of its immediate focuses will be to get the new enlarged, consolidated Argility software business to achieve monthly profitability within the new financial year.
UCS is still trading under cautionary, but hopes to provide some detail to the market in the next few weeks around the discussions it is involved in.
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