BYTES READY TO SPEND ITS CASH HERE AND ABROAD

Mergers, Acquisitions and Financial Results

Solid results from Bytes Technology are laying the foundation for a year of strong acquisitive growth. The group plans to beef up its core skills locally and to expand abroad.

Bytes has already made three acquisitions since its financial year end, and is further depleting its cash pile by paying a 45c dividend to shareholders.

Results issued yesterday show revenue of R3,47bn to February 28, up 19% from R2,9bn. Its R181m profit was a massive turnaround from last year's loss of R38m, which had mainly been inflicted by poor performance from its UK division. Its UK operation recovered to report an operating profit of R18m. Headline earnings a share of 127,7c were 48% up from 86,4c, and its cash pile stood at R98m.

Since Bytes' share price had risen by 70% in the past year, its dividend has been increased to ensure the yield was still acceptable, said CEO Dave Redshaw. The handout of 45c is up from 32c, and will cost R70m.

When the company reported its interim results in September, Redshaw said it was looking to expand locally and in the UK as all its divisions were on track and profits were rolling in.

That plan has begun, with Bytes spending £4m to buy a Xerox company in the UK, and spending R7m and R3m on local companies offering e-learning software and telephone management technologies.

Bytes was looking to buy general information technology players, possibly in the field of medical aid switching, where a handful of players are competing for limited business. Its healthcare technology division, DHS, is also negotiating in the Middle East to supply a technology system that links medical practitioners with medical aid schemes.

Redshaw's plan for the UK is to become the biggest partner for Xerox, which it could achieve by acquiring two or three companies.

"With Xerox UK, we have a good relationship. Xerox is very happy to have us as a significant player there because it's a very fragmented market."

Bytes' Xerox division contributes about a third of its overall revenue and, since it dominated the market in SA, the only way to capitalise on those skills was to expand abroad, he said.

Bytes was also assessing opportunities to acquire other UK technology companies, including a systems integration player.

"I think the time is right. The exchange rate is as good as it's going to be and the UK economy is pretty reasonable."

Redshaw said he was happy that its recent acquisitions had seen the company borrow money, as it also generated cash rapidly through its operations.

"We generate cash quickly and spend it as fast as we get it. My aim is not to have a cash pile.

"Our cash flow in the coming year will be seriously positive unless we make a really major acquisition so I'm happy to borrow as long as I can pay it back."

Further local acquisitions of both private and listed companies are being negotiated, though none is at a sufficiently advanced stage for Bytes to issue a cautionary notice.