Mergers, Acquisitions and Financial Results

Software developer UCS believes it can more than double profit margins in coming years, having consolidated six units into one and set up a software factory in Centurion.

Consolidation has allowed UCS to recover from disappointing interim figures and post a healthier performance for the year to September 30.

UCS CEO John Bright said more benefits were still to come, and that he hoped to push the profit margin of 14,5% up to 30% for UCS's software development division.

Bright said UCS's second major division -- which supplies international software and related services -- could achieve a profit margin of 20%.

Revenue hit R517m, up 12,6% from R459m, while after-tax profit was R35,5m, up from R25,2m. Headline earnings a share stood at 14,5c, up from 11,9c, and this enabled UCS to declare a dividend of 3c, which added to its 2c dividend at the interim stage.

He said the year had been for consolidation and investment, with progress in improving efficiencies via acquisitions and internal streamlining. At the interim stage, UCS was down 15% from the previous year, as four major projects caused problems. "Large-scale, customised software solutions are a complex business."

UCS had not delivered on time in some cases, while in others customers had not been ready to receive systems. But the four projects had been completed and paid for in the second half, putting figures back on track.

Bright was "more than optimistic" about continuing the more than 20% growth in headline earnings a share established over the past few years.

The company earns 60% of its business from home-grown software and 40% from its solutions division. The balance is likely to switch after the R48m acquisition of CEB Maintenance to bulk up services operations.

UCS seeks a black hi-tech firm that can merge with its operating divisions to create an empowerment profile that adds skills and growth. "It was complicated to put together a merger or acquisition as there aren't enough black technology companies."

Business Day