Software solutions and outsourcing services group UCS has reported a 3.5% decline in headline earnings per share for what it says is its most challenging year since listing on the JSE in 1998.
<B>Salient figures</B>
UCS Group results for the year to 30 September 2002.
Previous year`s figures in parentheses, move in square brackets:
Revenue: R218.75m (R176.57m) [+23.9%]
Profit from operations before interest, depreciation, R&D and impairment: R49.76m (R45.76m) [+8.7%]
Profit before tax: R19.46m (R34.61m) [-43.8%]
Profit after tax: R17.99m (R28.34m) [-36.5%]
Net profit: R18.12m (R28.17m) [-35.7%]
HEPS: 10.9c (11.3c) [-3.5%]
NAV per share: 74.4c (68.9c)
Cash generated from operations: R33.15m (R33.94m)
Current assets: R114.69m (R129.85m)
Cash and equivalents: R63.08m (R88.2m)
Current liabilities: R29.01m (R24.31m)
"Local market conditions remained extremely difficult with several customers closing stores, some postponing scheduled installations and others delaying buying conditions," says CEO John Bright.
"In addition, certain large customers servicing the lower-income retail market experienced extreme financial difficulties, with one going into liquidation and two others being forced to recapitalise.
"For the second successive year, pricing for both product and services came under intense pressure."
However, Bright says the group continued to increase its footprint in southern Africa through organic and acquisitive growth.
"On the international front, the group is in the process of establishing a new channel for its products and hopes to report positively in this regard during the first half of next year."
He says annuity revenue now makes up 58% of total turnover.
"Financial results for the period, viewed against this backdrop, are considered to be acceptable in terms of overall revenue growth and annuity revenue growth, but disappointing at the earnings level. Growth of 29% in cash flow from operating activities was particularly pleasing."
Margins were squeezed mainly by pricing pressures and the emphasis on annuity rather than one-off revenue generation, contributing to the decline in headline earnings per share from 11.3c to 10.9c.
Bright says the "challenging and turbulent" market conditions are expected to continue for some time, and this in turn is expected to lead to further consolidation among UCS`s competitors.
This will give rise to acquisition opportunities "as well as a more profitable marketplace for the 'survivors` when conditions improve".
He says management has adopted a conservative view for new sales prospects in the year ahead and as a result budgets show only a modest growth in earnings per share.
The group has declared a final dividend of 1.8c a share.
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