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UCS - UCS Group Limited - Reviewed results for the six month period ended 31

Release Date: 30/05/2011 09:50
Code(s): UCS
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UCS - UCS Group Limited - Reviewed results for the six month period ended 31 March 2011 UCS Group Limited Incorporated in the Republic of South Africa Registration number 1993/002253/06 ISIN: ZAE00016150 JSE code: UCS ("UCS" or "the Company" or "the Group") REVIEWED RESULTS for the six month period ended 31 March 2011 CONDENSED CONSOLIDATED INCOME STATEMENT for the six month period ended 31 March 2011 Reviewed Restated % change Restated
6 months 6 months 12 months 2011 2010 2010 R`000 R`000 R`000 CONTINUING OPERATIONS Revenue 190 604 170 109 12,0 327 848 Profit from operations before 21 046 29 080 (27,6) 43 741 interest, amortisation, depreciation, foreign exchange differences, research and development expenditure and restructuring costs Amortisation of intangible (13 516) (1 275) 960,1 (12 842) assets Depreciation of property, (10 205) (8 605) 18,6 (17 705) plant and equipment (including rental equipment) Foreign exchange differences (1 801) (4 399) (59,1) (5 278) Profit on disposal of equity - - - 176 interest in a subsidiary company Research and development (3 197) (2 818) 13,4 (6 222) expenditure Restructuring costs (17 375) - 100,0 - (Loss) profit before net (25 048) 11 983 (309,0) 1 870 finance charges and taxation Net finance charges (1 407) (2 965) (52,5) 1 355 Finance charges (2 333) (4 784) (51,2) (4 287) Investment revenues 926 1 819 (49,1) 5 642 (Loss) profit before taxation (26 455) 9 018 (393,4) 3 225 Taxation (1 240) (7 722) (83,9) (10 843) Current (1 470) (6 101) (75,9) (10 307) Deferred 230 (1 621) (114,2) (536) (Loss) profit for the period (27 695) 1 296 (2 237,0) (7 618) from continuing operations DISCONTINUED OPERATIONS Profit for the period from 40 179 23 428 71,5 57 225 discontinued operations Profit for the period 12 484 24 724 (49,5) 49 607 Attributable to: Owners of the Company 9 612 20 315 (52,7) 39 642 Non-controlling interest 2 872 4 409 (34,9) 9 965 12 484 24 724 (49,5) 49 607 Earnings (loss) per share (cents) From continuing and discontinued operations Basic 3,3 7,1 (53,5) 13,9 Diluted 3,3 7,0 (52,9) 13,7 From continuing operations Basic (10,6) (0,3) 3 433,3 (3,7) Diluted (10,6) (0,3) 3 433,3 (3,6) Dividends paid per share 5,0 5,0 - 9,0 (cents) Net asset value per share 168,4 167,6 0,5 170,3 (cents) Ordinary shares in issue net 288 911 284 574 1,5 285 356 of treasury shares held (`000) Weighted average number of 287 129 284 486 0,9 284 653 ordinary shares in issue (`000) Diluted weighted average 289 656 289 472 0,1 289 731 number of ordinary shares (`000) Additional information Headline earnings (loss) per share (cents) From continuing and discontinued operations Basic 3,4 7,1 (52,1) 16,2 Diluted 3,4 7,0 (51,4) 16,0 From continuing operations Basic (10,6) (0,3) 3 433,3 (7,5) Diluted (10,6) (0,3) 3 433,3 (7,4) CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME for the six month period ended 31 March 2011 Reviewed Reviewed % change Audited
6 months 6 months 12 months 2011 2010 2010 R`000 R`000 R`000 Profit for the period 12 484 24 724 (49,5) 49 607 Other comprehensive income for the period after taxation: Exchange differences on 983 1 929 (49,0) 4 881 translation of foreign operations Other comprehensive income 983 1 929 (49,0) 4 881 for the period after taxation Total comprehensive income 13 467 26 653 (49,5) 54 488 for the period Total comprehensive income attributable to: Owners of the Company 10 595 22 244 (52,4) 44 523 Non-controlling interest 2 872 4 409 (34,9) 9 965 13 467 26 653 (49,5) 54 488 CONDENSED SEGMENTAL ANALYSIS for the six month period ended 31 March 2011 Reviewed Restated % change Restated 6 months 6 months 12 months 2011 2010 2010
R`000 R`000 R`000 Revenue and results from continuing operations by reportable segment Revenue 190 604 170 109 12,0 327 848 Software 109 758 94 587 16,0 181 588 Investments 80 846 74 822 8,1 144 535 Corporate - 700 (100,0) 1 725 Profit from operations before 17 849 26 262 (32,0) 37 519 interest, amortisation, depreciation, foreign exchange differences and restructuring costs ("Normalised EBITDA") Software 6 641 13 627 (51,3) 17 544 Investments 15 673 17 401 (9,9) 33 978 Corporate and consolidation (4 465) (4 766) (6,3) (14 003) adjustments Profit before net finance (5 872) 16 382 (135,8) 6 972 charges, impairments, foreign exchange differences and taxation ("Normalised PBIT") Software (7 645) 11 371 (167,2) 3 651 Investments 6 730 10 212 (34,1) 18 241 Corporate and consolidation (4 957) (5 201) (4,7) (14 920) adjustments Depreciation and amortisation 23 721 9 880 140,1 30 547 Software 14 286 2 256 533,2 13 893 Investments 8 943 7 189 24,4 15 737 Corporate and consolidation 492 435 13,1 917 adjustments
Note: Comparative figures are reclassified, where necessary, in accordance with current year classifications. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS for the six month period ended 31 March 2011 Reviewed Reviewed % change Audited 6 months 6 months 12 months 2011 2010 2010 R`000 R`000 R`000
Cash flows from operating 17 622 49 139 (64,1) 142 324 activities Cash generated from 67 451 97 137 (30,6) 172 425 operations before working capital changes Working capital changes (26 955) (27 916) (3,4) 18 716 Cash generated from operating 40 496 69 221 (41,5) 191 141 activities Net finance cost (1 383) (3 517) (60,7) (6 036) Taxation paid (21 491) (16 565) 29,7 (42 781) Cash flows from investing (28 216) (11 385) 147,8 (78 173) activities Cash flows from financing (26 449) (49 376) (46,4) (110 030) activities Cash and cash equivalents - Net decrease (37 043) (11 622) (45 879) - Classified as held for sale (62 303) - - - At beginning of the period 131 885 177 764 177 764 At end of the period 32 539 166 142 (80,4) 131 885 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 31 March 2011 Reviewed Reviewed Audited 31/3/2011 31/3/2010 30/9/2010 R`000 R`000 R`000
ASSETS Non-current assets 252 709 496 269 563 314 Property, plant & equipment (including 43 029 87 636 86 413 rental equipment) Intangible assets 106 975 87 737 156 817 Goodwill 27 074 240 371 238 615 Investments and loans receivable 40 184 38 694 41 888 Finance lease receivables 12 147 10 887 6 645 Deferred taxation assets 23 300 30 944 32 936 Current assets 101 901 416 319 369 841 Inventories 6 841 44 549 47 249 Trade and other receivables 53 118 193 980 179 463 Finance lease receivables 4 017 2 951 3 998 Investments - 5 000 - Current taxation assets 5 386 3 697 7 246 Cash and cash equivalents 32 539 166 142 131 885 Assets classified as held for sale 584 111 - - Total assets 938 721 912 588 933 155 EQUITY AND LIABILITIES Capital and reserves 513 993 492 387 513 812 Issued capital 39 158 32 029 33 453 Reserves 17 883 18 701 18 356 Retained earnings 429 476 426 334 434 294 Equity attributable to owners of the 486 517 477 064 486 103 Company Non-controlling interest 27 476 15 323 27 709 Non-current liabilities 60 705 115 527 114 583 Borrowings 47 944 90 460 88 227 Deferred taxation liabilities 7 261 8 567 15 356 Deferred revenue 5 500 16 500 11 000 Current liabilities 127 168 304 674 304 760 Trade and other payables 87 026 218 247 230 144 Borrowings 20 810 71 070 50 670 Current taxation liabilities 172 4 357 6 390 Deferred revenue 19 160 11 000 17 556 Liabilities directly associated with 236 855 - - assets classified as held for sale Total equity and liabilities 938 721 912 588 933 155 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six month period ended 31 March 2011 Ordinary Pre- Share Treasury Equity- share ference premium share settled capital share R`000 reserve employee R`000 capital R`000 benefit
R`000 reserve R`000 Balance at 1 October 2009 1 422 - 30 341 (1 928) 18 698 Profit for the period Other comprehensive income for the period Total comprehensive income - - - - - for the period Payment of dividends Net decrease in treasury 1 265 74 shares held Increase in equity-settled 597 employee benefits reserve Decrease in non-controlling interest on disposal of subsidiary Decrease in non-controlling interest on increase of interest in subsidiary Balance at 31 March 2010 1 423 - 30 606 (1 854) 19 295 Profit for the period Other comprehensive income for the period Total comprehensive income - - - - - for the period Payment of dividends Fair value adjustments on 938 treasury shares held Net decrease in treasury 4 1 420 (2 475) shares held Decrease in equity-settled (179) employee benefits reserve Increase in non-controlling interest on acquisition of interest in subsidiary Increase in non-controlling interest on decrease of interest in subsidiaries Decrease in non-controlling interest on increase of interest in subsidiary Balance at 30 September 1 427 - 32 026 (3 391) 19 116 2010 Profit for the period Other comprehensive income for the period Total comprehensive income - - - - - for the period Payment of dividends Ordinary shares issued at a 2 610 premium Fair value adjustments on 274 treasury shares held Net decrease in treasury 15 5 078 (1 337) shares held Decrease in equity-settled 205 employee benefits reserve Decrease in non-controlling interest on increase of interest in subsidiary Balance at 31 March 2011 1 444 - 37 714 (4 454) 19 321 Foreign Change Retained Attri- Non- Total currency in earnings butable Control- equity trans- Sub- R`000 to owners ling R`000
lation sidiary of the interest reserve share- Company R`000 R`000 holding R`000 reserve
R`000 Balance at 1 204 (652) 420 217 469 302 28 337 497 639 1 October 2009 Profit for the 20 315 20 315 4 409 24 724 period Other 1 929 1 929 1 929 comprehensive income for the period Total 1 929 - 20 315 22 244 4 409 26 653 comprehensive income for the period Payment of (14 198) (14 198) (4 791) (18 989) dividends Net decrease in 340 340 treasury shares held Increase in equity- 597 597 settled employee benefits reserve Decrease in non- 652 652 (13 853) controlling (14 505) interest on disposal of subsidiary Decrease in non- (1 873) (1 873) 1 873 - controlling interest on increase of interest in subsidiary Balance at 3 133 (1 873) 426 334 477 064 15 323 492 387 31 March 2010 Profit for the 19 327 19 327 5 556 24 883 period Other 2 952 2 952 2 952 comprehensive income for the period Total 2 952 - 19 327 22 279 5 556 27 835 comprehensive income for the period Payment of (11 367) (11 367) (2 808) (14 175) dividends Fair value 938 938 adjustments on treasury shares held Net decrease in (1 051) (1 051) treasury shares held Decrease in equity- (179) (179) settled employee benefits reserve Increase in non- - 6 404 6 404 controlling interest on acquisition of interest in subsidiary Increase in non- (984) (984) 3 234 2 250 controlling interest on decrease of interest in subsidiaries Decrease in non- (597) (597) - (597) controlling interest on increase of interest in subsidiary Balance at 6 085 (3 454) 434 294 486 103 27 709 513 812 30 September 2010 Profit for the 9 612 9 612 2 872 12 484 period Other 983 983 983 comprehensive income for the period Total 983 - 9 612 10 595 2 872 13 467 comprehensive income for the period Payment of (14 430) (14 430) (3 407) (17 837) dividends Ordinary shares 612 612 issued at a premium Fair value 274 274 adjustments on treasury shares held Net decrease in 3 756 3 756 treasury shares held Decrease in equity- 205 205 settled employee benefits reserve Decrease in non- (598) (598) 302 (296) controlling interest on increase of interest in subsidiary Balance at 7 068 (4 052) 429 476 486 517 27 476 513 993 31 March 2011 NOTES TO THE CONDENSED FINANCIAL INFORMATION for the SIX MONTH PERIOD ended 31 MARCH 2011 1 BASIS OF PREPARATION This abridged report complies with International Accounting Standard 34 - Interim Financial Reporting as well as with Schedule 4 of the South African Companies Act and the disclosure requirements of the JSE Limited`s Listings Requirements. The abridged report has been prepared using accounting policies that comply with International Financial Reporting Standards ("IFRS") and its interpretations adopted by the International Accounting Standard Board ("IASB") in issue and effective for the Group at 31 March 2011 and the AC500 Standards issued by the accounting practice board or its successor. The accounting policies are consistent with those applied in the financial statements for the year ended 30 September 2010. The adoption of the interpretations as issued by the International Financial Reporting Interpretations Committee, which are effective for the current period, has not led to any changes in the Group`s accounting policies. The 2010 income statements have been restated to account for the Group`s disposal of all the sale shares in and claims held by UCS against certain of its subsidiaries to Business Connexion Group Limited under the provisions of IFRS5: Non-Current Assets Held for Sale and Discontinued Operations. The change has not impacted the comparative statements of financial position and has thus not been re-presented. Reviewed Reviewed % change Audited 6 months 6 months 12 months 2011 2010 2010 R`000 R`000 R`000
2 RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS Earnings attributable to 9 612 20 315 (52,7) 39 642 owners of the Company Adjusted for (net of taxation and non- controlling interest): goodwill impairments discontinued - operations - - 10 402 profit on disposal of - - (10 701) division loss on disposal of equity - 50 7 155 in subsidiaries profit on disposal of 100 (172) (249) property, plant and equipment Basic headline earnings 9 712 20 193 (51,9) 46 249 Reviewed Restated % change Restated 6 months 6 months 12 months 2010 2009 2010
R`000 R`000 R`000 3 RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS - CONTINUING OPERATIONS Earnings attributable to (30 567) (760) 3 922,0 (10 436) owners of the Company Adjusted for (net of taxation and non- controlling interest): profit on disposal of - - (10 701) division profit on disposal of - - (312) equity in subsidiaries profit on disposal of - (134) 57 property, plant and equipment Basic headline earnings (30 567) (894) 3 319,1 (21 392) Contin- Dis- Total uing continued R`000 opera- Opera-
tions tions R`000 R`000 4 RECONCILIATION OF DISCONTINUED OPERATIONS March 2011 - Reviewed Revenue 190 604 513 862 704 466 Normalised EBITDA 17 849 86 550 104 399 (Loss) profit for the year (27 695) 40 179 12 484 March 2010 - Restated Revenue 170 109 473 845 643 954 Normalised EBITDA 26 262 65 984 92 246 Profit for the year 1 296 23 428 24 724 September 2010 - Restated Revenue 327 848 1 012 527 1 340 375 Normalised EBITDA 37 519 144 486 182 005 (Loss) profit for the year (7 618) 57 225 49 607 Reviewed Reviewed % change Audited 6 months 6 months 12 months 2011 2010 2010 R`000 R`000 R`000
5 BORROWINGS Interest bearing 59 675 152 413 (60,8) 129 139 borrowings Non-interest bearing 9 079 9 117 (0,4) 9 758 borrowings 68 754 161 530 (57,4) 138 897 6 CAPITAL EXPENDITURE Tangible assets 37 219 27 643 34,6 50 135 Intangible assets 7 217 17 396 (58,5) 104 952 44 436 45 039 (1,3) 155 087 Reviewed Restated Restated 6 months 6 months 12 months
2011 2010 2010 R`000 R`000 R`000 7 COMMITMENTS Capital 22 287 36 589 (39,1) 47 290 Operating leases 46 784 103 080 (54,6) 38 383 8 OPERATING LEASE CHARGES Premises 7 519 6 682 12,5 14 452 Office equipment 673 221 204,5 404 Vehicles 13 - 100,0 - 8 205 6 903 18,9 14 856 9 REVIEW REPORT These results have been reviewed by independent external auditors, Deloitte & Touche, and their unmodified review report is available for inspection at the Company`s registered office. The review was performed in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. COMMENTARY Results for the six months to 31 March 2011 reflect the assets sold to Business Connexion Group Limited ("BCX") as discontinued operations and prior year figures have been restated to reflect this. Trading results for the six months under review were overall largely in line with expectations, both for continuing operations as well as the assets sold to BCX with effect from 11th May 2011. The discontinued operations (the 5 assets sold to BCX) showed strong growth, particularly in terms of margin improvements. Excluding the unprofitable Philadelphia based UCS Solutions Inc, which was disposed of in August 2010, the combined businesses recorded an 11.3% increase in revenues from R461,6 million to R513,9 million and 23,7% increase in EBITDA from R70 million to R86,6 million. Continuing operations recorded a 12% increase in revenues from R170,1 million to R190,6 million but EBITDA declined by some 27,6% from R29,1 million to R21,0 million largely due the impact of the unprofitable Argility and Cquential operations acquired during the 2nd half of 2010 financial year. Restructuring costs associated with the required head count reduction in the enlarged Argility business amounted to R17,4 million. At an operational level, good progress was made in both the software as well as the investment divisions and further details are provided in the divisional reviews below. Overall, combining the discontinued and continuing operations, the Group showed revenue growth of 9,4% from R644 million to R704,5 million, with normalised EBITDA showing growth of 13,2% from R92,2 million to R104,4 million. DIVISIONAL REVIEW Discontinued Operations The businesses sold to BCX performed well for the period irrespective of the continued tough trading conditions with the major improvement coming from UCS Solutions, which delivered an anticipated solid performance. All the businesses continued to gain market share and are continuously innovating with service delivery. Investment Division The investment division enjoyed two successes in the six month period under review. wiWallet signed a three year agreement with MXit whereby MXit will utilise wiWallet technology to launch a full transaction engine within the MXit application that enables MXit users to complete a range of mobile payment transactions. Innervation Value Added Services went live on the first phase integrated value added services platform for in-store retail within a tier 1 retail client. These two achievements bode well for the VAS units on an aggregated basis moving towards a net cash generative position by the end of the financial year. However, from a financial perspective for the period under review, the impact of the consolidation of the Group`s investment in wiWallet for the full period (two months in the prior comparable period) together with the planned additional investment in Mobiliti and the ramp up in capacity within Innervation (the go to market VAS vehicle) has resulted in margin deterioration for the division. Overall the division realised an 8,1% revenue growth from R74,8 million to R80,8 million of which R3,3 million was acquisitive and it saw EBITDA decrease from R17,4 million to R15,7 million. Software Division Much work was done in reorganising and streamlining the new enlarged Argility business, including the closing of our UK sales office as well as a voluntary severance offering accepted by 48 employees which reducedpermanent headcount from 229 in October 2010 to 188 by the end of April 2011. The costs of the voluntary severance offering amounted to some R17,4m but will result in a reduction of monthly overhead costs of approximately R2 million. Management believes that this will position the enlarged Argility business to be cash flow positive on a monthly basis by the end of the current year. In addition, progress has been made with the development of the new Retail Operations Platform ("ROP") product line in Argility, including the launch of a unique ``collaboration`` offer for retailers with urgent project requirements. This offer provides participating retailers the potential to recoup up to 100% of their software project development costs through a revenue share in future licence sales. On the international front, Aquitec has also adopted the use of Cordys technologies within its product offerings and is busy with initial customer sales. Cquential continues to implement new customers on its SaaS model and has made significant progress towards the target of achieving profitability by the end of this financial year. Overall, the division recorded results much in line with expectations. Revenue showed a 16% increase from R94,6 million to R109,8 million whilst normalised EBITDA declined by 51,3% from R13,6 million to R6,6 million primarily as a result of the inclusion of the Argility and Cquential acquisitions for the full six months. FINANCIAL REVIEW As a consequence of the conclusion of an agreement between UCS and BCX in terms of which UCS disposed of its shares in and claims against certain of its subsidiaries to BCX and which transaction became effective 11 May 2011, the prior six month period ended 31 March 2010 and twelve month period ended 30 September 2010 have been restated to exclude the operating results of the disposed operations of Accsys (Pty) Ltd ("Accsys"), CEB Maintenance Africa (Pty) Ltd ("CEB Maintenance"), Destiny Electronic Commerce (Pty) Ltd ("Destiny E- Commerce"), UCS Solutions (Pty) Ltd ("UCS Solutions") and UCS Technology Services (Pty) Ltd ("UCS Technology Services"). The earnings results of the aforementioned operations as well as UCS Solutions Inc disposed of in August 2010 are included, net of tax, as `profit from discontinued operations` in the income statement in the comparable periods. The Group`s total revenues grew by 9,4% to R704,5 million (2010: R644 million) of which 7,7% represents organic growth. On a continuing basis, revenues grew by 12% to R190,6 million (2010 restated: R170,1 million). Excluding the acquisitions concluded in the second six months of 2010 namely Argility (Pty) Ltd, Cquential Solutions (Pty) Ltd and Volume and Affinity Risk Management (Pty) Ltd, organic revenues grew by 5,5%. Annuity revenues grew by 24,7% to R105,5 million (2010 restated: R85 million), representing 55,4% of total revenues (2010 restated: 50%). Profit from operations before interest, depreciation, amortisation, foreign exchange differences and restructuring costs ("Normalised EBITDA") decreased by 32% to R17,8 million (2010 restated: R26,2 million) representing a margin of 9,3% (2010 restated: 15,4%). As previously mentioned, the restructuring costs incurred relate to the voluntary retrenchment offer implemented by Argility in the first quarter. The total settlement provision in respect of the retrenchment amounts to R17,4 million. The Argility and Cquential acquisitions in the prior year represented significant Intellectual Property and Software investments on the Group`s statement of financial position , which resulted in the 960,1% growth in amortisation in the period. Finance charges, net of interest and investment revenues decreased by 52,5% to R1,4 million (2010 restated: R3,0 million) and is attributable to the decreased borrowings in the Group as a consequence of debt repayments in line with repayment terms. After the above, the Group incurred a loss before taxation of R26,5 million (2010 restated: profit R9 million). Taxation charges (including capital gains tax, STC and withholding taxes) decreased by 83,9% to R1,2 million (2010 restated: R7,7 million) with the reduction attributable to the incurring of tax losses, which, in terms of IFRS, the Group is not able to account for deferred taxation assets at this time. The prior period charge also includes a once-off R3,4 million charge related to the redemption of a preference share investment in a subsidiary company. Profit for the period from discontinued operations, which comprises in the current period the companies referred to above disposed of to BCX with effect from 11 May 2011, increased by 71,5%. On a comparable basis, excluding UCS Solutions Inc in the prior period and the costs associated with the BCX transaction in the current period, discontinued operations delivered 62,4% growth in profit after tax for the period from R27,4 million to R44,5 million. After taking into account the profit from discontinued operations, the profit attributable to UCS shareholders of R9,6 million, after minority interests, represents a decrease of 52,7% from the comparable prior period. Earnings per share, including discontinued operations in the current and prior years, decreased by 53,5% to 3,3 cents (2010: 7,1 cents) whilst continuing operations incurred a loss per share of 10,6 cents down from 0,3 cents (restated) loss per share in the prior period on a comparable basis. There are no material reconciling items between earnings and headline earnings per share. The reclassification in the current period of the assets and liabilities associated with the subsidiary companies sold to BCX separately, as assets and liabilities held for sale on the statement of financial position, account for the material movements in the Group`s statement of financial position when compared with 30 September 2010. Discontinued operations represent R66,2 million or 47,7% of the Group`s borrowings as at 30 September 2010 comprising financial institution debt which balance as at 31 March 2011, is classified as held for sale. On a continuing basis, total borrowings amount to R68,8 million of which R41,4 million represents external financial institution debt. The non-bank debt component is substantially represented by profit warranty obligations payable on the achievement of pre-defined targets in 2013. Net debt (total borrowings net of cash) at the end of the period amounts to R36,2 million. The Group`s normalised current ratio, on a continuing basis, is an acceptable 1,4:1 compared with 0,8:1 as presented on the statement of financial position. The normalised adjustments relate to R52,8 million due from the businesses sold to BCX (R7,9 million of which was received post balance sheet date and the balance representing the face value of the sale claim in Destiny Electronic Commerce, payable by BCX as part of the VeriFone transaction referred to in the post balance sheet note below) as well as the exclusion of the R19,2 million deferred revenue liability which does not have an associated cash effect. The cash generated by operations before working capital changes, including discontinued operations, reduced by 30,6% to R67,5 million (2010: R97,1 million). The reduction is attributable to the unprofitable Argility and Cquential operations and continued net operating costs in certain business units forming part of the Group`s Value Added Services initiative. The Group`s working capital lock-up improved marginally compared with the prior period whilst capex remained consistent with the previous period`s expenditure. Cash flows from investing activities in the prior period includes the receipt of the upfront cash consideration on the disposal of TSSMS reported on previously. Total staff compliment at the end of March 2011, for continuing operations, was 579 (Sep 2010 restated: 597). POST BALANCE SHEET EVENTS 1. On 15 December 2010, UCS announced that BCX and UCS had entered into a sale of shares and claims agreement, as amended, ("the Agreement"), in terms of which UCS would, subject to the fulfillment and/or waiver of certain conditions precedent, dispose of all the shares owned by UCS in Accsys, CEB Maintenance, Destiny E-Commerce, UCS Solutions and UCS Technology Services (collectively "the Disposal Entities") together with all claims held by UCS against the Disposal Entities, save for the claims against Destiny E-Commerce, to BCX ("the Disposal"). The purchase consideration pertaining to the Disposal was up to R614 320 488 ("the Purchase Consideration") and would be settled by a combination of new BCG shares ("Consideration shares") and cash. UCS would subsequently unbundle the consideration shares received from BCX ("the Unbundling"). Following the approval by UCS and BCX shareholders at general meetings held on 31 March 2011 and the fulfillment of all other conditions precedent on 29 April 2011, the Disposal became effective on 11 May 2011 ("the Effective Date"), being the business day preceding the last day to trade for the Unbundling. The Unbundling of the consideration shares to UCS shareholders recorded in the share register of UCS on the 20 May 2011, took place on 23 May 2011. 2. On 24 May 2011 BCX, VeriFone Singapore PTE Limited ("VeriFone") and the management shareholders in Destiny E-Commerce entered into a sale and purchase agreement in terms of which, inter alia, BCX will, subject to the fulfillment of certain suspensive conditions, dispose of its 70% shareholding in and all claims held by it against Destiny E- Commerce, to VeriFone ("the Disposal"). In terms of the agreement between UCS and BCX ("the Agreement") and as disclosed in the circular to UCS shareholders dated 9 March 2011, should a sale of one of the Disposal Entities be implemented at any time during the period commencing on the Effective Date and ending twelve months thereafter ("the Potential Sale"), UCS shall be entitled, at its election in writing, to 70% of the net proceeds of such Potential Sale which is in excess of R144 000 000, realised and actually received by BCX, up to R100 000 000, and, thereafter 100% of the balance of such net proceeds exceeding the aforesaid R100 000 000 threshold. Furthermore, in terms of the Agreement, BCX agreed to acquire the claims held by UCS against Destiny E-Commerce ("Destiny E-Commerce Sale Claims") from UCS for an amount equal to the face value thereof, being R44 896 337. Accordingly, in accordance with the provisions of the Agreement, UCS has exercised its election to share in the proceeds of the Disposal, and based on the total consideration to be received by BCX for the Disposal, being an amount of R255 000 000, UCS will be entitled to receive an amount of R26 554 684 of the net proceeds (after taking into account the settlement by BCX of the Destiny E-Commerce Sale Claims) if the Disposal is implemented. 3. Following the successful disposal of the majority of the business operations of UCS to BCX, as more fully described above, and thereafter the unbundling of the BCG Consideration Shares received pursuant to the disposal, the board of directors of UCS ("the Board") has considered the viability of continuing the listing of UCS on the JSE. Accordingly, shareholders are referred to the further cautionary announcement released simultaneously with this announcement. CONTINGENT LIABILITY As disclosed in the Group`s 2010 Annual Report, a claim for repudiation of contract and damages against a subsidiary company remains unresolved. PROSPECTS Conditions in global financial markets continue to be of concern in terms of stability and predictability. Management, therefore, remains cautious in terms of forecasting future trading conditions. Given that the Group has disposed of the bulk of its profitable services offerings, the focus going forward is largely on the growth of the software and VAS offerings. Overhead reductions carried out in the first half of the year in the Software division, are expected to contribute positively to the future financial performance of the Software division, whilst existing growth opportunities in the VAS business unit should continue to fuel above inflation growth in the Investment division. The board of directors have reviewed the requirements of the business going forward and concluded that it is no longer appropriate to retain a listing on the JSE. We therefore draw your attention to a separate announcement released simultaneously with this results announcement. The information contained in this prospects paragraph has not been reviewed or reported on by the Group`s auditors. DIVIDEND In accordance with the Group`s current dividend policy, based on the continued operations performance for the six month period, the Board has not proposed a dividend for the period. DF Coles JD Bright (Chairman) (Chief Executive Officer) 30 May 2011 UCS GROUP LIMITED OVERVIEW - continuing operations SOFTWARE DIVISION Argility (100%) Argility (Proprietary) Limited ("Argility") is a software solutions company that provides merchandising and point-of-sale solutions to world class retailers. Argility designs, develops, sells, integrates, supports and maintains both customised as well as packaged retail software. Aquitec (100%) Aquitec is a provider of supply chain solutions to retailers and distributors. Aquitec, the original pioneer of warehouse management systems in 1969, provides solutions which encompass procurement, forecasting, warehouse management and voice direction. Aquitec has operations in Bagshot, UK and Chicago, USA. Cquential Solutions (59%) Cquential Solutions (Proprietary) Limited ("Cquential") commenced business in 2005 when it initiated the development of its technologically leading edge Warehouse Management System ("WMS"), which is deployed as a hosted web application. The web-based WMS makes it possible for clients to have stock control and visibility across their entire organisation and further extends control and visibility into the inbound and outbound portions of the supply chain. Cquential offers a full suite of services, from hosting and support to training, solution implementation and consulting. INVESTMENTS DIVISION GAAP Point-of-Sale (61%) GAAP Point-of-Sale (Proprietary) Limited ("GAAP") specialises in the provision of point-of-sale and back office solutions in the sit-down and "quick service" restaurant sector of the South African hospitality industry. Ultisales Retail Software (100%) Ultisales Retail Software (Proprietary) Limited ("Ultisales")specialises in marketing and distributing `off the shelf` point-of-sale and retail management software for small to medium sized retailers in the Tier 3 and 4 sectors. The Ultisales product is taken to market and supported by an extensive network of value added resellers. Innervation Value Added Services (100%) Innervation Value Added Services (Proprietary) Limited ("Innervation") focuses on the provision of networking, hosting and switching services, through the Destiny Switch, including the management of the Innervation VAS products and VAS partners and the provision of solution architecture and integration consulting services. This company also specialises in corporate strategic loyalty programme consulting and following the investment in the Radical Business Unit in the 2010 financial year, provides the technology platform for loyalty and CRM management. wiWallet Mobile Payments (51%) wiWallet Mobile Payments (Proprietary) Limited ("wiWallet")offer mobile payment technology, including a mobile payment platform and mobile payment application enabling users to pay for products using their mobile devices. Volume and Affinity Risk Management (51%) Volume and Affinity Risk Management (Proprietary) Limited ("V&A Risk") is the provider of insurance products and administration and management leveraging brand affinity. Fernridge Consulting (51%) Fernridge Consulting (Proprietary) Limited ("Fernridge") assists retailers with the identification of new opportunities for stores, consultancy on rationalisation, relocation, market share, competitor analysis, customer analysis, site evaluations and viability studies for new developments. 4Life Program (51%) 4Life Program (Proprietary) Limited is a multi-vendor lifestage reward and loyalty programme connecting individuals who are experiencing similar life stages and events with relevant advice, products and services, benefits and rewards. Universal Knowledge Software (76%) Universal Knowledge Software (Proprietary) Limited ("UKS") is a leading supplier of integrated library management systems and associated technical and support services to the library industry of South Africa and neighbouring states. The company holds the Southern African distribution rights for a leading international library software product called SIRSI. UCS Dynamics Software Solutions (70%) UCS Dynamics Software Solutions (Proprietary) Limited is a Microsoft Gold Certified Partner that specialises in providing integrated business solutions using the Microsoft DynamicsTrade Mark ERP suite of applications. Services include analysis, design, customisation, implementation, training and support. Johannesburg 30 May 2011 Sponsor One Capital Date: 30/05/2011 09:50:21 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). 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