UCS Group`s profits fall

UCS Group has reported a decline in profits for the year to 30 September 2001, mainly because of a sharp drop in interest received and investment income.

"The extremely challenging business environment faced by all customers in our major markets, together with the continued effects of the pre-millennium buying spree, placed enormous pressure on margins," says MD John Bright.

UCS provides software solutions and outsourcing services, with its six subsidiaries operating in retail solutions, payroll and human resources management, and other solutions.

"Almost without exception, retailers were forced to implement dramatic cost-saving exercises. Many of the larger retailers cut back on store openings and several had no option but to close a number of outlets," Bright says.

"Viewed against this backdrop, the group`s results for the period are considered to be acceptable, albeit short of our expectations."

Although turnover increased 30.9%, operating income before interest, depreciation, research and development rose only 14.6%.

Bright says the margin contracted chiefly because of the change in revenue mix as a result of recent acquisitions.

The fall in attributable earnings was blamed mainly on a 43.6% drop in net interest received and investment income. That was as a result of lower interest rates, smaller cash balances and a greater emphasis in tax-efficient instruments.

He says the achievement of other objectives offset the disappointment at not meeting financial targets.

Achievements during the year included good progress in increasing its footprint in chosen retail markets, the establishment of a business partner agreement in the UK, the establishment of another international distribution agreement, and an acquisition by wholly owned subsidiary CCS Software.

Bright says the group is committed to aggressive earnings growth, over time, by creating sustainable revenue streams, including hard currency earnings from its proprietary application software solutions.

"Unfortunately global events triggered by the terrorist atrocities in the US make it extremely difficult to deal with the future with any real confidence," he adds.

"However, taking into account current market conditions, there are positive indications of potentially good growth in headline earnings per share in the coming year."

He says the forecast will be updated when the group releases its interim results in April next year.

The UCS share, which closed 3c down at 67c on the JSE yesterday, was untraded this morning.

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