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UCS weathers storm, buys CSC

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Despite tough trading conditions in the retail market, UCS has reported growth in both revenue and EBIDTA for the six months ended March 2008. It has also opened negotiations to add to its acquisitions with Computer Software Consultants (CSC). 

CSC provides secure payment technologies, services and solutions at point of sale. Its business is primarily focused on the development of software relating to card-based transactions and it has been supplying, delivering and servicing high speed secure terminals to the sub-Saharan African market for over 15 years.
CSC is a VeriFone International Partner (“VIP”) and has developed and implemented a number of integrated payment solutions utilising VeriFone devices for leading banks and retailers in Sub-Saharan Africa. The business currently supports and services in excess of 50 000 terminals.
The proposed transaction represents a strategic positioning for UCS in the value-added services arena and the commencement of a specific focus on servicing a portion of the financial services sector to complement and assist in diversifying the UCS Group’s current software, solutions and services offerings to the retail and government sectors.
The acquisition is expected to be concluded before the end of June 2008.
UCS recently acqired Aquitec acquisition, with effect from 1 March 2008.
Trading conditions for UCS Group for the six months were very challenging, with the retail market in particular under considerable pressure as consumers felt the impact of rising interest rates, rapidly escalating fuel costs and the tightening of credit availability.
Some retail customers postponed or cancelled projects planned for the period, a statement says.
"In addition, the effects of national load shedding caused significant productivity drops, particularly in field service operations. This improved once the scheduled cuts were introduced and were able to schedule our calls more effectively."
The software division continued its drive for improved efficiencies with a 16,7% increase in turnover leading to a 35,2% increase in normalised EBITDA.
The ongoing achievement of margin improvements in this division is in line with management expectations following the unbundling of the Argility unit in September 2007 and the continued commercialisation of the UCS Software Manufacturing (UCSSM) facility.
The Solutions & Services division recorded a modest 7,7% increase in turnover and a 5,2% decline in normalised EBITDA. The SAP consulting and implementation practice, in particular, was severely impacted by projects being delayed or cancelled by retailers due to the challenging retail environment.
Field service operations were disrupted by unscheduled load shedding.
The group as a whole achieved a 11,2% increase in turnover for the period to R568-million with 4,6% due to current and historic acquisition activity and the balance of 6,6% reflecting organic growth.
Annuity revenues grew strongly by 24,6% to R349-million, representing 61% of total revenue. Sales of third-party products and services amounted to R97-million or 17,1% of total revenues.
The Aquitec acquisition could only be implemented with effect from 1 March 2008 due to the delayed fulfilment of the outstanding condition precedent in respect of the South African Reserve Bank approval, and therefore contributed one month of revenue in the period under review.
The group expects trading conditions in its target retail markets, both domestic as well as international, to remain turbulent and challenging for the foreseeable future. This will have a negative impact on organic growth potential but will also present opportunities for growth through innovation and acquisitions.
The market for specialist IT services to government, which the group addresses through its investment in the TSSMS business, remains robust and the outlook for this unit for the remainder of this year is positive.